<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 September 30, 1997, there were 94,796,153 shares of the registrant's Class A
Common Stock and 1,506,099 shares of the registrant's Class B Common Stock
outstanding.
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NORTHWEST AIRLINES CORPORATION
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Condensed Consolidated Statements of Income -
Three months and nine months ended September 30,
1997 and 1996. 3
Condensed Consolidated Balance Sheets -
September 30, 1997, December 31, 1996 and
September 30, 1996. 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 1997 and 1996. 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 13
Item 6. Exhibits 13
SIGNATURE 14
EXHIBIT INDEX 14
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHWEST AIRLINES CORPORATION
- -------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
(UNAUDITED, IN MILLIONS EXCEPT SHARE AND PER SHARE AMOUNTS) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Passenger $ 2,449.1 $ 2,421.1 $ 6,718.0 $ 6,585.0
Cargo 200.5 187.2 567.1 543.5
Other 151.8 126.9 449.4 411.9
----------- ----------- ----------- -----------
2,801.4 2,735.2 7,734.5 7,540.4
OPERATING EXPENSES
Salaries, wages and benefits 756.3 660.9 2,258.8 1,953.0
Stock-based employee compensation -- 59.2 -- 244.3
Aircraft fuel and taxes 345.1 370.9 1,055.7 1,007.0
Commissions 236.1 242.9 657.5 668.4
Aircraft maintenance materials and repairs 146.5 146.0 466.8 391.2
Other rentals and landing fees 117.6 117.1 341.3 337.8
Aircraft rentals 93.4 86.4 269.3 258.0
Depreciation and amortization 98.8 95.7 289.4 278.7
Other 503.8 486.7 1,465.8 1,423.5
----------- ----------- ----------- -----------
2,297.6 2,265.8 6,804.6 6,561.9
----------- ----------- ----------- -----------
OPERATING INCOME 503.8 469.4 929.9 978.5
OTHER INCOME (EXPENSE)
Interest expense, net (58.8) (66.0) (175.2) (200.2)
Interest of mandatorily redeemable preferred
security holder (6.3) (6.7) (18.3) (20.6)
Investment income 16.8 17.4 46.7 50.6
Foreign currency gain (loss) 11.0 1.0 (3.9) 12.3
Other 6.4 (4.5) 20.7 8.9
----------- ----------- ----------- -----------
(30.9) (58.8) (130.0) (149.0)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 472.9 410.6 799.9 829.5
Income tax expense 182.6 156.7 308.8 319.4
----------- ----------- ----------- -----------
NET INCOME 290.3 253.9 491.1 510.1
Preferred stock requirements (3.1) (6.2) (13.2) (32.4)
Preferred stock transaction -- 74.5 -- 74.5
----------- ----------- ----------- -----------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 287.2 $ 322.2 $ 477.9 $ 552.2
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per common share:
PRIMARY
Before effect of preferred stock transaction $ 2.75 $ 2.42 $ 4.59 $ 4.75
Preferred stock transaction -- .73 -- .74
----------- ----------- ----------- -----------
Earnings per common share $ 2.75 $ 3.15 $ 4.59 $ 5.49
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
FULLY DILUTED
Before effect of preferred stock transaction $ 2.51 $ 2.20 $ 4.18 $ 4.33
Preferred stock transaction -- .66 -- .67
----------- ----------- ----------- -----------
Earnings per common share $ 2.51 $ 2.86 $ 4.18 $ 5.00
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average shares used in computation:
PRIMARY 104,443,188 102,190,976 104,051,241 100,629,199
FULLY DILUTED 114,448,885 112,611,458 114,477,226 110,474,048
</TABLE>
SEE ACCOMPANYING NOTES.
3
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NORTHWEST AIRLINES CORPORATION
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CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30 December 31 September 30
(UNAUDITED, IN MILLIONS) 1997 1996 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,072.3 $ 559.4 $ 727.8
Short-term investments 194.8 253.1 345.3
Accounts receivable, net 769.9 656.1 739.2
Flight equipment spare parts, net 345.7 262.2 255.3
Prepaid expenses and other 296.2 359.1 338.3
--------- --------- ---------
2,678.9 2,089.9 2,405.9
PROPERTY AND EQUIPMENT
Flight equipment, net 3,866.6 3,616.4 3,549.8
Other property and equipment, net 903.4 924.1 941.6
--------- --------- ---------
4,770.0 4,540.5 4,491.4
FLIGHT EQUIPMENT UNDER CAPITAL LEASES, NET 645.5 671.5 681.9
OTHER ASSETS
International routes, net 733.6 751.4 757.4
Investments in affiliated companies and other 528.2 458.4 505.0
--------- --------- ---------
1,261.8 1,209.8 1,262.4
--------- --------- ---------
$ 9,356.2 $ 8,511.7 $ 8,841.6
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Air traffic liability $ 1,266.2 $ 1,010.7 $ 1,088.8
Accounts payable and other liabilities 1,820.5 1,666.4 1,918.5
Current maturities of long-term debt and
capital lease obligations 218.1 206.1 124.9
--------- --------- ---------
3,304.8 2,883.2 3,132.2
LONG-TERM DEBT 1,958.4 1,916.0 1,830.7
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 664.1 710.5 732.0
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 1,152.4 947.2 944.1
Pension and postretirement benefits 394.9 461.2 786.4
Other 659.2 348.9 340.8
--------- --------- ---------
2,206.5 1,757.3 2,071.3
MANDATORILY REDEEMABLE PREFERRED SECURITY OF
SUBSIDIARY WHICH HOLDS SOLELY NON-RECOURSE
OBLIGATION OF COMPANY 524.7 549.2 567.2
REDEEMABLE STOCK
Preferred 324.4 602.6 596.7
Common 848.5 -- --
COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 1.0 1.0 1.0
Additional paid-in capital 1,224.3 1,151.1 1,145.5
Accumulated deficit (467.3) (945.2) (965.9)
Other (111.6) (114.0) (269.1)
Treasury stock (1,121.6) -- --
--------- --------- ---------
(475.2) 92.9 (88.5)
--------- --------- ---------
$ 9,356.2 $ 8,511.7 $ 8,841.6
--------- --------- ---------
--------- --------- ---------
</TABLE>
SEE ACCOMPANYING NOTES.
4
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NORTHWEST AIRLINES CORPORATION
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended September 30
(UNAUDITED, IN MILLIONS) 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,477.3 $ 1,205.4
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (501.7) (1,063.4)
Net decrease (increase) in short-term investments 70.5 (82.2)
Business acquired (32.6) --
Other, net (6.4) 7.1
---------- ----------
Net cash used in investing activities (470.2) (1,138.5)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common and preferred stock (524.4) --
Proceeds from long-term debt 250.6 7.6
Proceeds from sale and leaseback transactions 126.0 350.0
Payment of long-term debt and capital lease obligations (321.1) (521.1)
Other, net (25.3) (26.5)
---------- ----------
Net cash used in financing activities (494.2) (190.0)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 512.9 (123.1)
Cash and cash equivalents at beginning of period 559.4 850.9
---------- ----------
Cash and cash equivalents at end of period $ 1,072.3 $ 727.8
---------- ----------
---------- ----------
Cash and cash equivalents and unrestricted short-term
investments at end of period $ 1,221.7 $ 961.8
---------- ----------
---------- ----------
Available to be borrowed under credit facilities $ 729.3 $ 477.2
---------- ----------
---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
NORTHWEST AIRLINES CORPORATION
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. The condensed consolidated financial statements of Northwest Airlines
Corporation ("NWAC" 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, 1996 contained in the Company's
Annual Report on Form 10-K for 1996 (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.
3. 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.
4. At September 30, 1997, the Company had no borrowings outstanding under its
revolving credit facility. In addition, the Company has the ability under
another facility to borrow up to $240 million using existing aircraft as
collateral. The $489.3 million available to be borrowed under the
revolving credit facility along with the $240 million facility and the
$1.22 billion of cash, cash equivalents and unrestricted short-term
investments provided the Company with $1.95 billion of available liquidity
at September 30, 1997. Scheduled maturities of long-term debt subsequent
to September 30, 1997 are $14.9 million in 1997, $159.5 million in 1998,
$182.3 million in 1999, $96.0 million in 2000 and $125.9 million in 2001.
5. The Company's aircraft orders as of September 30, 1997, include commitments
to acquire 20 Airbus A320 aircraft, 50 Airbus A319 aircraft, 25 Boeing 757-
200 aircraft, 16 Airbus A330 aircraft and four Boeing 747-400 aircraft.
Committed expenditures for these aircraft and related equipment, including
estimated amounts for contractual price escalations and predelivery
deposits, will be approximately $18 million in 1997, $518 million in 1998,
$828 million in 1999, $318 million in 2000, $430 million in 2001 and $879
million in 2002.
In October 1997, the Company exercised an option to purchase 24 additional
Avro Regional Jet aircraft. The Company now has on order 30 aircraft with
two scheduled for delivery in 1997, ten each in 1998 and 1999 and eight in
2000. Committed expenditures for these aircraft, including contractual
price escalations, are approximately $700 million. The Company will
lease six of the 30 aircraft to Mesaba Aviation, Inc. ("Mesaba") (in
addition to the six currently leased to Mesaba) under its Regional Jet
Services Agreement. The Company intends to lease the remaining 24 aircraft
to one or more regional commuter airline partners.
6. The Company manages a portion of the price risk of fuel costs utilizing
both regulated exchange traded futures contracts and fuel swap agreements.
The changes in market value of such agreements have a high correlation to
the price changes of the fuel being hedged. Gains or losses on open and
closed hedge contracts are deferred and included in the condensed
consolidated balance sheets as accounts payable and other liabilities or
prepaid expenses, respectively, until the related fuel inventory is
expensed, at which time both the fuel cost and gain or loss on the hedge
instrument are accounted for as fuel expense.
7. As discussed under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Other Information," on September 29,
1997, the Company entered into an agreement to repurchase for $1.12 billion
over four years the NWAC common stock held by KLM Royal Dutch Airlines. On
that date, 6.8 million
6
<PAGE>
shares were repurchased along with all of the Company's Series A and B
Preferred Stock held by KLM and other holders. The remaining 18.2 million
shares of common stock to be repurchased were reclassified to redeemable
common stock from common stockholders' equity (deficit), as required for
such stock transactions. However, earnings per share calculations will
continue to include the 18.2 million shares until actually repurchased.
8. Currently, earnings per share ("EPS") calculations are performed pursuant
to Accounting Principles Board Opinion No. 15. NWAC will be required to
present EPS data in accordance with Statement of Financial Accounting
Standards No. 128 "Earnings per Share" commencing with the fourth quarter
of 1997. While early adoption of Statement No. 128 is not permitted, the
following pro forma supplemental data is presented:
Three months Nine months
ended Sept. 30 ended Sept. 30
--------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
Earnings per common share using
Statement No. 128 approach:
Basic $ 2.80 $ 3.26 $ 4.69 $ 5.68
Diluted $ 2.52 $ 2.86 $ 4.19 $ 5.00
9. In accordance with Rule 1-02 (bb) of Regulation S-X, the following summary
data is presented for Northwest Airlines, Inc., the principal indirect
operating subsidiary of the Company.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Operating revenues $ 2,714.1 $ 2,688.2 $ 7,471.3 $ 7,354.9
Operating expenses 2,223.1 2,227.5 6,581.7 6,411.6
---------- ---------- ---------- ----------
Operating income 491.0 460.7 889.6 943.3
Other income (expense) (42.0) (56.2) (167.6) (145.3)
---------- ---------- ---------- ----------
Income before income taxes 449.0 404.5 722.0 798.0
Income tax expense 169.1 149.6 275.9 297.7
---------- ---------- ---------- ----------
Net income $ 279.9 $ 254.9 $ 446.1 $ 500.3
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
CONDENSED CONSOLIDATED BALANCE SHEET DATA
September 30 December 31 September 30
1997 1996 1996
------------ ----------- -----------
Current assets $ 2,130.6 $ 1,626.8 $ 1,864.8
Noncurrent assets 6,045.8 5,818.3 5,829.8
Current liabilities 3,153.3 2,832.2 2,681.5
Long-term debt and obligations
under capital leases 2,123.1 2,103.9 2,040.0
Deferred credits and other liabilities 1,167.3 935.7 1,256.3
Mandatorily redeemable preferred
security of subsidiary 524.7 549.2 567.2
See also Note P of the Notes to Consolidated Financial Statements in the
Annual Report.
7
<PAGE>
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 acquired Express Airlines I, Inc.
("Express") on April 1, 1997 and the operating results of Express are included
in the consolidated financial statements commencing on that date. See also
"Other Information - EXPRESS AIRLINES." 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 September 30, 1997, the Company reported net income of
$290.3 million and operating income of $503.8 million. Primary earnings per
common share were $2.75 ($2.51 fully diluted), an increase of $.33 ($.31 fully
diluted) excluding the effect of the July 1996 acquisition of a portion of the
Company's preferred stock which increased net income applicable to common
stockholders $74.5 million ($.73 primary and $.66 fully diluted).
Information with respect to the Company's operating statistics follows (1):
<TABLE>
<CAPTION>
THREE MONTHS ENDED % NINE MONTHS ENDED %
SEPTEMBER 30 CHG. SEPTEMBER 30 CHG.
--------------------- ----- ------------------------ ------
1997 1996 1997 1996
-------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Scheduled service:
Available seat miles (ASM) (millions) 25,782.2 25,142.0 2.5 73,062.0 70,787.6 3.2
Revenue passenger miles (millions) 20,028.0 19,311.1 3.7 54,762.5 52,449.1 4.4
Passenger load factor (percent) 77.7 76.8 0.9pts. 75.0 74.1 0.9pts.
Revenue passengers (thousands) 14,743 14,368 2.6 41,267 39,959 3.3
Revenue yield per passenger mile (cents) 12.05 12.54 (3.9) 12.13 12.55 (3.3)
Passenger revenue per scheduled ASM (cents) 9.36 9.63 (2.8) 9.10 9.30 (2.2)
Operating revenue per total ASM (cents) (2) 10.12 10.30 (1.7) 9.82 9.99 (1.7)
Operating expense per total ASM (cents) (2) 8.19 8.47 (3.3) 8.60 8.66 (0.7)
Cargo ton miles (millions) 594.4 581.8 2.2 1,640.8 1,624.1 1.0
Cargo revenue per ton mile (cents) 33.68 32.18 4.7 34.53 33.46 3.2
Fuel gallons consumed (millions) 530.8 519.5 2.2 1,497.0 1,463.4 2.3
Average fuel cost per gallon (cents) 60.08 67.30 (10.7) 65.58 64.28 2.0
Number of operating aircraft at end of period 402 399 0.8
Full-time equivalent employees at end of period 47,996 46,942 2.2
</TABLE>
(1) All statistics exclude Express Airlines I, Inc.
(2) Excludes the estimated revenues and expenses related to the operation of
Northwest's fleet of eight 747 freighter aircraft and MLT Inc.
RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating income increased $34.4 million to $503.8 million. This increase was
primarily due to an increase in operating revenues of $66.2 million, a decrease
in aircraft fuel of $25.8 million and the conclusion of stock-based employee
compensation offset by increased salaries, wages and benefits of $95.4 million.
OPERATING REVENUES. Operating revenues were $2.80 billion, an improvement of
$66.2 million (2.4%). Consolidated system passenger revenues (which represented
87.4% of total operating revenues) were basically unchanged. A 2.5% increase in
Northwest's scheduled service ASMs and the $36.2 million 1997 revenues of
Express were offset by a 2.8% decrease in Northwest's passenger revenue per
scheduled ASM ("RASM"). The decrease in RASM was due to a 3.9% decrease in
system yield.
8
<PAGE>
Northwest's domestic passenger revenue increased $18.0 million (1.2%) to
$1.53 billion due primarily to a 1.2% increase in scheduled service ASMs.
Domestic RASM was unchanged because passenger load factor increased by 2.9%
(2.1 pts.) and yield decreased by 2.9% due to the reinstatement of
ticket taxes. See also "Other Information - U.S. TRANSPORTATION TAX."
Pacific passenger revenue decreased by $16.6 million (2.4%) to $670.6 million
due to an 8.8% decrease in Pacific RASM which was offset by a 7.0% increase
in scheduled service ASMs related to the initiation of Minneapolis/St.
Paul-Osaka service and additional trans-Pacific frequencies, mainly
Minneapolis/St. Paul-Tokyo. The decrease in Pacific RASM was due to a 7.1%
decrease in yield and a 1.9% (1.6 pts.) decrease in passenger load factor.
Most of the Pacific yield decrease was attributable to a weaker Japanese yen.
The average yen per U.S. dollar exchange rate for the three months ended
September 30, 1997 and 1996 was 118 and 109, respectively, a weakening of the
yen of 8.3%. Atlantic passenger revenue decreased $9.2 million (4.2%) to
$207.9 million due to a 3.7% decrease in scheduled service ASMs and a 0.6%
decrease in RASM which was yield related.
Other revenues were $151.8 million, an improvement of $24.9 million (19.6%).
The improvement was largely due to increased revenue from KLM joint venture
alliance settlements and MLT Inc.
OPERATING EXPENSES. Consolidated operating expenses increased $31.8 million
(1.4%). While operating capacity increased 2.5% to 25.8 billion total service
ASMs, operating expense per total service ASM decreased 3.3%. Salaries, wages
and benefits increased $95.4 million (14.4%) due to an increase in average full-
time equivalent employees of 2.6% and the end of the Wage Savings Period
discussed under "Other Information - LABOR AGREEMENTS." The increase in average
full-time equivalent employees was attributable to increased flying of 2.5% and
increased traffic of 2.6%. Aircraft fuel and related taxes decreased $25.8
million (7.0%) due to a 10.7% decrease in average fuel cost per gallon.
OTHER INCOME AND EXPENSE. Interest expense-net decreased $7.2 million (10.9%)
primarily due to the retirement of debt prior to scheduled maturity and lower
interest rates on debt. The foreign currency gain for the three months ended
September 30, 1997 was attributable to gains related to Japanese yen forward
exchange and collar option contracts and balance sheet remeasurement of foreign
currency-denominated assets and liabilities.
RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating income decreased $48.6 million (5.0%) to $929.9 million. The
favorable impacts of a $133.0 million increase in passenger revenues and the
conclusion of stock-based employee compensation were more than offset by
increases in salaries, wages and benefits of $305.8 million, aircraft
maintenance of $75.6 million and aircraft fuel of $48.7 million.
OPERATING REVENUES. Consolidated operating revenues were $7.73 billion, an
improvement of $194.1 million (2.6%). System passenger revenues (which
represented 86.9% of total operating revenues) increased $133.0 million (2.0%).
The increase was attributable to a 3.2% increase in Northwest's scheduled
service ASMs and the $73.9 million 1997 revenues of Express which were somewhat
offset by a 2.2% decrease in Northwest's RASM. The decrease in RASM was
attributable to a 3.3% decrease in system yield which was partially offset by a
1.2% (0.9 pts.) increase in passenger load factor.
Northwest's domestic passenger revenue increased $118.3 million (2.7%) to
$4.45 billion. A 2.4% increase in scheduled service ASMs and a .4% increase
in RASM resulted in the improved performance. The increase in scheduled
service ASMs resulted primarily from the addition of DC9-30, DC10-30 and
Boeing 757 aircraft since the third quarter of 1996 which has allowed the
Company to increase frequencies to 27 cities and enter five new markets. The
increase in RASM was due to a 2.1% (1.5 pts.) increase in passenger load
factor offset by a 1.8% decrease in yield. See also "Other Information -
U.S. TRANSPORTATION TAX." Pacific passenger revenue decreased by $46.8
million (2.7%) to $1.70 billion due to an 8.5% decrease in Pacific RASM which
was somewhat offset by a 6.4% increase in scheduled service ASMs related to
initiation of Minneapolis/St. Paul-Osaka service and additional trans-Pacific
frequencies, mainly Minneapolis/St. Paul-Tokyo. The decrease in Pacific RASM
was primarily due to a 7.8% decrease in yield which was largely attributable
to a weaker Japanese yen. The average yen per U.S. dollar exchange rate for
the nine months ended September 30, 1997 and 1996 was 120 and 107,
respectively, a weakening of the yen of 12.1%. Atlantic passenger revenue
decreased $11.2 million (2.2%) to $494.0 million primarily due to a 2.3%
decrease in scheduled service ASMs. RASM was basically unchanged.
9
<PAGE>
OPERATING EXPENSES. Consolidated operating expenses increased $242.7 million
(3.7%). While operating capacity increased 3.3% to 73.2 billion total service
ASMs, operating expense per total service ASM decreased .7%. Salaries, wages
and benefits increased $305.8 million (15.7%) due to an increase in average
full-time equivalent employees of 3.3% and the end of the Wage Savings Period
discussed under "Other Information - LABOR AGREEMENTS." The increase in average
full-time equivalent employees was attributable to increased flying of 3.3%.
Aircraft fuel and taxes increased $48.7 million (4.8%). A 2.0% increase in
average fuel cost per gallon caused $19.5 million of the increase with the
balance attributable to increased flying. Aircraft maintenance materials and
repairs increased $75.6 million (19.3%) due primarily to increased flying, an
increased number of engine and airframe overhauls and mandated fleet campaigns.
OTHER INCOME AND EXPENSE. Interest expense-net decreased $25.0 million (12.5%)
primarily due to the retirement of debt prior to scheduled maturity and lower
interest rates on debt. The foreign currency loss for the nine months ended
September 30, 1997 was attributable to balance sheet remeasurement of foreign
currency-denominated assets and liabilities and charges related to Japanese yen
forward exchange and collar option contracts. The foreign currency gain for the
nine months ended September 30, 1996 was primarily attributable to balance sheet
remeasurement of foreign currency-denominated assets and liabilities.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had cash and cash equivalents of $1.07
billion, unrestricted short-term investments of $149.4 million, borrowing
capacity of $489.3 million under its revolving credit facility and the ability
under another facility to borrow up to $240 million using existing aircraft as
collateral, providing total available liquidity of $1.95 billion. Net cash
provided by operating activities for the nine months ended September 30, 1997
was $1.48 billion, a $271.9 million increase compared with the nine months ended
September 30, 1996 largely due to an increase in the sale of frequent flyer
miles to WorldPerks partners of $407.5 million. Investing activities in 1997
consisted primarily of costs to commission aircraft before entering revenue
service, aircraft deposits, DC9-50 interior refurbishment, the purchase of six
RJ85 aircraft, engine hushkitting, ground equipment purchases and the
acquisition of Express. Investing activities in 1996 pertained primarily to the
acquisition of 22 aircraft, the purchase off lease of 21 aircraft and the
refurbishment of DC-9 aircraft. Financing activities for the nine months ended
September 30, 1997, in addition to the repurchase of the Company's common and
preferred stock, included the issuance of $150 million of 8.375% notes due 2004
and $100 million of 8.70% notes due 2007, the sale and leaseback of six RJ85
aircraft and the payment of debt and capital lease obligations. Financing
activities in 1996 pertain primarily to the sale and leaseback of seven of the
thirteen 757 aircraft and the payment of debt and capital lease obligations.
As discussed under "Other Information - KLM AGREEMENTS," on September 29, 1997,
the Company entered into an agreement to repurchase for $1.12 billion over four
years the NWAC common stock held by KLM Royal Dutch Airlines ("KLM") and, on
that date, 6.8 million shares were repurchased for $273.1 million.
Concurrently, all of the Company's Series A and B Preferred Stock held by KLM
and other holders was repurchased for $251.3 million. The 1997 repurchases were
funded using existing cash resources. The funding of subsequent tranches will
be determined based on conditions at the time.
OTHER INFORMATION
LABOR AGREEMENTS. The Company's labor agreements provided for wage and other
cost reductions which aggregated $897 million over 36 to 39 month periods
(depending on the labor group) (the "Wage Savings Period"). The Wage Savings
Period ended on July 31, 1996 for flight attendants, September 30, 1996 for
mechanics, ground personnel and management and October 30, 1996 for pilots. The
Company's agreements with the employee unions provided that wage scales at the
end of the Wage Savings Period snapback to August 1, 1993 levels and snap-up
pursuant to formulae based in part on wage rates and wage rate increases at
other large U.S. airlines. Consequently, at the end of the Wage Savings Period,
salaries and wages increased by approximately $340 million on an annualized
basis including $50 million for snap-ups. Management's Discussion and Analysis
of Financial Condition and Results of Operations and Note B of the Notes to
Consolidated Financial Statements in the Annual Report contain additional
discussion of the labor cost savings agreements, stock issued to employees and
the related accounting treatment.
10
<PAGE>
FOREIGN CURRENCY. The Company's annual yen-denominated revenues exceed its yen-
denominated expenses by approximately 70 billion yen and its yen-denominated
liabilities exceed its yen-denominated assets. 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-denominated liabilities. In recent periods, the
yen has weakened as the yen to U.S. dollar exchange rate has changed from 111
yen to $1 at September 30, 1996 to 116 yen to $1 at December 31, 1996 and 120
yen to $1 at September 30, 1997.
USE OF FINANCIAL INSTRUMENTS. In order to mitigate its exposure to foreign
exchange rate fluctuations, from time to time the Company enters into forward
exchange and collar option contracts to hedge its anticipated yen-denominated
net cash flows. At September 30, 1997, the Company had $122.8 million (14.8
billion yen) in forward exchange and collar option contracts outstanding to
hedge approximately 90% of its remaining 1997 anticipated yen-denominated net
cash flows. 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 September 30, 1997, the Company
had hedged approximately 73% of its remaining 1997 fuel requirements.
U.S. TRANSPORTATION TAX. The United States 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.
These taxes were reinstated for tickets sold subsequent to August 27, 1996 for
travel through December 31, 1996. These taxes lapsed again on December 31, 1996
and were reinstated for tickets sold from March 7, 1997 to September 30, 1997.
The Company estimates that the reinstatement of the transportation taxes had a
$95 million and $153 million adverse impact on passenger revenues for the three
and nine months ended September 30, 1997, respectively.
Congress enacted legislation which revised transportation taxes and
instituted new taxes for tickets for travel on October 1, 1997 to December
31, 2007. The legislation included a reduction in the domestic passenger
ticket tax to 7.5% over three years (the rate decreased to 9% on October 1,
1997) with certain rural airports subject to a 7.5% tax throughout the life
of the bill. The $6 international departure tax increased to $12 and a new
$12 international arrival tax was imposed (both began for tickets sold on or
after August 13, 1997 for travel commencing on or after October 1, 1997).
The departure tax on travel between the U.S. 48 states and Alaska or Hawaii
remained at $6. A new segment fee applicable to domestic travel began at $1
for the period from October 1, 1997 to September 30, 1998 and will gradually
increase to $3 for the calendar year 2002. Rural airports are exempt from
this segment fee, but travel between the U.S. 48 states and Alaska or Hawaii
is subject to this new tax. Both the international departure and arrival
taxes and the segment fee will be indexed each year to the consumer price
index. In addition, a 7.5% tax on the sale of frequent flyer miles was
included in the legislation. The impact of the changes is expected to
increase annualized U.S. transportation taxes collected by Northwest from
current levels by approximately $50 million resulting in an undetermined
dilution of future passenger revenue.
EXPRESS AIRLINES. On April 1, 1997, NWA Inc., a wholly owned subsidiary of the
Company, purchased all of the outstanding stock of Express Airlines I, Inc. and
an affiliate. Express is a regional carrier that provides passenger traffic to
Northwest at Memphis.
AIRBUS A319 ORDER. On September 19, 1997, Northwest entered into an
agreement with AVSA, S.A.R.L. for the purchase by Northwest of 50 firm Airbus
A319 aircraft and up to 100 option Airbus A319/A320 aircraft. The 50 firm
aircraft are scheduled to be delivered ten per year beginning in 1999.
11
<PAGE>
KLM AGREEMENTS. On September 29, 1997, the Company and KLM expanded their
alliance by entering into an enhanced commercial and operational alliance
providing for a minimum term of 13 years. The Company and KLM also entered
into agreements providing for the acquisition by NWAC of all its common and
preferred stock held by KLM, including an additional 3.29 million shares of
common stock that KLM acquired from other stockholders. On September 29,
1997, 6.8 million shares were repurchased along with all of the Company's
Series A and B Preferred Stock held by KLM and other investors for $524.4
million. The remaining 18.2 million shares of common stock to be repurchased
were reclassified to redeemable common stock from common stockholders' equity
(deficit), as required for such stock transactions. However, earnings per
share calculations will continue to include the 18.2 million shares until
actually repurchased.
The Company will repurchase the remaining common shares over three years as
follows: 4.9 million in 1998, 3.22 million in 1999 and 10.05 million in 2000.
The purchase price for the second, third and fourth tranches is $42.87, $45.75
and $48.83 per common share, respectively, subject to adjustment for certain
change in control or equity issuance transactions. Concurrently with the
purchase of the first tranche, all of KLM's existing governance rights under
various stockholder and other agreements were cancelled, the Company and KLM
entered into an agreement containing standstill obligations and KLM withdrew its
pending legal actions. As a result of these transactions, KLM's common stock
voting position in the Company decreased to 17 percent after the sale of the
first tranche and then will decrease to 13 percent in 1998, 10 percent in 1999
and zero percent in 2000 with the sale of the final tranche. The closing of the
third and fourth tranches is subject to the alliance maintaining certain
antitrust immunity and if either tranche does not close, KLM's remaining common
shares will be converted to non-voting Class B Common Stock and Northwest will
have the right to terminate the alliance. In addition, the Company has the
right to accelerate the repurchase of the stock from KLM subject to certain
conditions and limitations.
Under the alliance agreement, the two airlines will expand their current areas
of cooperation to include services between Europe and Canada, India and Mexico.
In addition, the two companies plan to increase the level of cooperation between
their respective cargo divisions and will explore extending their alliance to
include additional partners and to further develop strategies for joint
marketing and product development.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1.
Reference is made to Item 3, "Legal Proceedings" included in the Annual Report.
KLM ROYAL DUTCH AIRLINES V. A. CHECCHI, ET AL. (Delaware Court of Chancery,
New Castle County, Civil Action No. 14764). On September 29, 1997, KLM and
the Company expanded their alliance by entering into an enhanced, long-term
commercial and operational alliance. In connection with the consummation of
this transaction, KLM dismissed this litigation. See Part I, Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Other Information - KLM AGREEMENTS."
NORTHWEST AIRLINES, INC. V. AMERICAN AIRLINES, INC. (U.S.D.C. District of
Minnesota, Civ. No. 4-91-539). A trial date of December 1, 1997 has been set.
In the ordinary course of its business the Company is party to various legal
actions which the Company believes are incidental to the operation of its
business. The Company believes that the outcome of the proceedings to which it
is currently a party (including those described above and in the Annual Report)
will not have a material adverse effect on the Company's consolidated financial
statements taken as a whole.
ITEM 6. EXHIBITS
(a) EXHIBITS:
Exhibit 4.1 - Amendment to Rights Agreement between Northwest Airlines
Corporation and Norwest Bank Minnesota, N.A., as Rights Agent dated as
of September 29, 1997.
Exhibit 10.1 - A319-100 Purchase Agreement between AVSA, S.A.R.L. and
Northwest Airlines, Inc. dated as of September 19, 1997. (The Company
has applied to the Commission for confidential treatment of certain
portions of this exhibit.)
Exhibit 10.2 - Common Stock Repurchase Agreement between Northwest
Airlines Corporation and Koninklijke Luchtvaart Maatschappij N.V.
dated as of September 29, 1997.
Exhibit 10.3 - Preferred Stock Repurchase Agreement between Northwest
Airlines Corporation and Koninklijke Luchtvaart Maatschappij N.V.
dated as of September 29, 1997.
Exhibit 10.4 - BTNY Preferred Stock Repurchase Agreement between
Northwest Airlines Corporation and Bankers Trust New York Corporation
dated as of September 29, 1997.
Exhibit 10.5 - Blum Preferred Stock Repurchase Agreement between
Northwest Airlines Corporation and Richard C. Blum & Associates - NWA
Partners, L.P. dated as of September 29, 1997.
Exhibit 10.6 - Standstill Agreement between Koninklijke Luchtvaart
Maatschappij N.V. and Northwest Airlines Corporation dated as of
September 29, 1997.
Exhibit 10.7 - Amendment to Second Amended and Restated Investor
Stockholders' Agreement dated as of September 29, 1997.
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.
13
<PAGE>
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: November 13, 1997 By: /s/ Rolf S. Andresen
-------------------------
Rolf S. Andresen
Vice President - Finance and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1 Amendment to Rights Agreement between Northwest Airlines
Corporation and Norwest Bank Minnesota, N.A., as Rights
Agent dated as of September 29, 1997.
10.1 A319-100 Purchase Agreement between AVSA, S.A.R.L. and
Northwest Airlines Inc. dated as of September 19, 1997.
(The Company has applied to the Commission for confidential
treatment of certain portions of this exhibit.)
10.2 Common Stock Repurchase Agreement between Northwest Airlines
Corporation and Koninklijke Luchtvaart Maatschappij N.V.
dated September 29, 1997.
10.3 Preferred Stock Repurchase Agreement between Northwest
Airlines Corporation and Koninklijke Luchtvaart Maatschappij
N.V. dated September 29, 1997.
10.4 BTNY Preferred Stock Repurchase Agreement between Northwest
Airlines Corporation and Bankers Trust New York Corporation
dated September 29, 1997.
10.5 Blum Preferred Stock Repurchase Agreement between Northwest
Airlines Corporation and Richard C. Blum & Associates - NWA
Partners, L.P. dated September 29, 1997.
10.6 Standstill Agreement between Koninklijke Luchtvaart
Maatschappij N.V. and Northwest Airlines Corporation. dated
September 29, 1997.
10.7 Amendment to Second Amended and Restated Investor
Stockholders' Agreement dated September 29, 1997.
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.
14
<PAGE>
Exhibit 4.1
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of September 29, 1997 (this "AMENDMENT"), to the
Rights Agreement, dated as of November 16, 1995 (the "RIGHTS AGREEMENT"),
between NORTHWEST AIRLINES CORPORATION, a Delaware Corporation (the "COMPANY"),
and NORWEST BANK MINNESOTA, N.A., a New York corporation (the "RIGHTS AGENT").
Capitalized terms used herein without definition shall have the meanings given
to them in the Rights Agreement.
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend distribution of one Right for each share of Class A Common
Stock and Class B Common Stock outstanding as of the close of business on
November 27, 1995, each Right representing the right to purchase one one-
hundredth (subject to adjustment) of a share of Preferred Stock, upon the terms
and subject to the conditions set forth in the Rights Agreement;
WHEREAS, the Rights remain issued and outstanding and the Rights
Agreement remains in effect with respect thereto;
WHEREAS, no Distribution Date, Redemption Date or Final Expiration
Date has occurred;
WHEREAS, the Company and Koninklijke Luchtvaart Maatschappij N.V.
("KLM") are entering into a Common Stock Repurchase Agreement, dated as of
September 29, 1997 (the "COMMON STOCK REPURCHASE AGREEMENT"), pursuant to which,
among other things, on the Initial Closing Date (as defined therein), the
Company has agreed to purchase and KLM has agreed to sell 6,800,000 shares of
Class A Common Stock, on the terms and conditions therein stated (the "INITIAL
KLM REPURCHASE");
WHEREAS, the Company, KLM, Bankers Trust New York Corporation
("BTNY"), Richard C. Blum & Associates - NWA Partners, L.P. ("BLUM") and the
other parties named therein are entering into the Amendment, dated as of
September 29, 1997 (the "STOCKHOLDERS' AMENDMENT"), to the Second Amended and
Restated Investor Stockholders' Agreement, dated as of December 23, 1993 (as
such agreement has been amended, supplemented or otherwise modified from time to
time prior to the date hereof, the "STOCKHOLDERS' AGREEMENT"), pursuant to
which, among other things, KLM will exercise its right to purchase, and will
purchase, pursuant to Section 17 of the Stockholders' Agreement (as such Section
is amended by the Stockholders' Amendment), (i) from Blum, 658,755 shares
<PAGE>
2
of Class A Common Stock and (ii) from BTNY, 2,635,020 shares of Class B Common
Stock, in each case on the terms and conditions therein stated (the "BTNY/BLUM
PURCHASE"); and
WHEREAS, the Company desires to amend the Rights Agreement to provide
that KLM shall be an Exempt Person for purposes of the Rights Agreement during
the period commencing on KLM's purchase of Common Shares pursuant to the
BTNY/Blum Purchase and ending on the consummation of KLM's sale of Common Shares
pursuant to the KLM Initial Repurchase;
WHEREAS, in accordance with Section 27 of the Rights Agreement, the
Company has certified to the Rights Agent that this Amendment is in compliance
with the Rights Agreement and has directed the appropriate officers of the
Company to take all appropriate steps to execute and deliver this Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. AMENDMENTS TO RIGHTS AGREEMENTS. (a) Section 1(k) of the Rights
Agreement is hereby amended by deleting such section in its entirety and
inserting in lieu thereof the following:
"(k) 'Exempt Person' shall mean (i) the Company, (ii) any Subsidiary
(as such term is hereinafter defined) of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company or any
entity or trustee holding Common Shares for or pursuant to the terms of any
such plan or for the purpose of funding any such plan or funding other
employee benefits for employees of the Company or of any Subsidiary of the
Company or (iv) KLM, PROVIDED that KLM shall only be an Exempt Person
during the period commencing on KLM's purchase of Common Shares pursuant to
the BTNY/Blum Purchase and ending on the consummation of KLM's sale of
Common Shares pursuant to the KLM Initial Repurchase."
(b) ADDITIONS TO SECTION 1. The following Sections 1(u) through 1(w)
shall be added to the Rights Agreement:
"(u) 'BTNY/Blum Purchase' shall mean the purchase by KLM from Richard
C. Blum & Associates - NWA Partners, L.P. ("Blum") of 658,755 shares of
Class A Common Stock and from Bankers Trust New York Corporation ("BTNY")
of 2,635,020 shares of Class B Common Stock pursuant to the Amendment,
dated as of September 29, 1997 to the Second Amended and Restated Investor
Stockholders' Agreement, dated as of December 23, 1993, among the Company,
KLM, Blum, BTNY and the other parties named therein."
<PAGE>
3
"(v) 'Initial KLM Repurchase' shall mean the purchase by the Company
from KLM of 6,800,000 shares of Class A Common Stock, on the Initial
Closing Date, pursuant to (and as defined in) the Common Stock Repurchase
Agreement, dated as of September 29, 1997, between the Company and KLM."
"(w) 'KLM' shall mean Koninklijke Luchtvaart Maatschappij N.V., a
Netherlands corporation."
2. EFFECTIVENESS. This Amendment shall be deemed to be in force and
effect immediately prior to the execution and delivery of each of the Common
Stock Repurchase Agreement and the Stockholders' Amendment. Except as amended
hereby, the Rights Agreement shall remain in full force and effect and shall be
otherwise unaffected hereby.
3. GOVERNING LAW. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts made and to be performed entirely within such State.
4. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and each of such counterparts shall together constitute but one and
the same instrument.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By: /s/ Douglas M. Steenland
--------------------------------
Douglas M. Steenland
Senior Vice President,
General Counsel & Secretary
NORWEST BANK MINNESOTA, N.A., as Rights Agent
By: /s/ Ken Swanson
----------------------------------
Ken Swanson
Assistant Vice President
<PAGE>
Exhibit 10.1
AIRBUS 319-100 PURCHASE AGREEMENT
Dated as of September 19, 1997
between
AVSA, S.A.R.L.,
and
NORTHWEST AIRLINES, INC.
<PAGE>
C O N T E N T S
---------------
CLAUSES TITLE PAGE
- ------- ----- ----
0 PURCHASE AGREEMENT 0
1 DEFINITIONS 1
2 SALE AND PURCHASE 6
3 CHANGES 7
4 PRICE 9
5 PRICE REVISION 13
6 PAYMENT TERMS 14
7 PLANT REPRESENTATIVES - INSPECTION 16
8 NORTHWEST'S ACCEPTANCE 19
9 DELIVERY 23
10 EXCUSABLE DELAY 26
11 INEXCUSABLE DELAY 30
12 WARRANTIES AND SERVICE LIFE POLICY 32
13 PATENT INDEMNITY 56
14 TECHNICAL PUBLICATIONS 60
15 FIELD ASSISTANCE 61
16 TRAINING AND TRAINING AIDS 62
17 VENDORS' PRODUCT SUPPORT 63
18 BUYER FURNISHED EQUIPMENT AND DATA 64
-ii-
<PAGE>
C O N T E N T S
---------------
CLAUSES TITLE PAGE
- ------- ----- ----
19 ASSIGNMENT 67
20 DATA RETRIEVAL 69
21 TERMINATION FOR CERTAIN EVENTS 70
22 MISCELLANEOUS PROVISIONS 72
-iii-
<PAGE>
C O N T E N T S
---------------
EXHIBITS
- --------
EXHIBIT A SPECIFICATION
EXHIBIT B CHANGE ORDERS TO STANDARD SPECIFICATION (SCNs)
EXHIBIT C SCN FORM
EXHIBIT D AIRFRAME PRICE REVISION FORMULA
EXHIBIT E POWERPLANTS PRICE REVISION FORMULA
EXHIBIT F CERTIFICATE OF ACCEPTANCE
EXHIBIT G SELLER SERVICE LIFE POLICY AND VENDOR SERVICE LIFE POLICY
-iv-
<PAGE>
C O N T E N T S
---------------
LETTER AGREEMENTS
- -----------------
LETTER AGREEMENT NO. 1 PURCHASE INCENTIVES
LETTER AGREEMENT NO. 2 FLEXIBILITY
LETTER AGREEMENT NO. 3 PREDELIVERY PAYMENTS
LETTER AGREEMENT NO. 4 AIRCRAFT CUSTOMIZATION
LETTER AGREEMENT NO. 5 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}
LETTER AGREEMENT NO. 6 A319-100 GUARANTEES
LETTER AGREEMENT NO. 7 OTHER MATTERS
LETTER AGREEMENT NO. 8 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}
LETTER AGREEMENT NO. 9 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}
LETTER AGREEMENT NO. 10 SPECIAL APPLICATION
LETTER AGREEMENT NO. 11 MISCELLANEOUS MATTERS
-v-
<PAGE>
PURCHASE AGREEMENT
This agreement is made this 19th day of September, 1997
between
AVSA, a societe a responsabilite limitee organized and existing under
the laws of the Republic of France, having its registered office
located at
2, rond-point Maurice Bellonte
31700 BLAGNAC
FRANCE
(hereinafter referred to as "AVSA")
and
Northwest Airlines, Inc., a corporation organized and existing under
the laws of the State of Minnesota, United States of America, having
its principal corporate offices located at
2700 Lone Oak Parkway
Eagan, Minnesota 55121, USA
(hereinafter referred to as "Northwest")
WHEREAS,
a) Northwest wishes to purchase, and AVSA is willing to sell, fifty (50) firm
Airbus Industrie A319-100 model aircraft, upon the terms and conditions
herein provided;
b) AVSA is willing to grant Northwest options to purchase fifty (50) option
and fifty (50) roll-over option Airbus A319-100 / A320-200 model aircraft,
upon the terms and conditions herein provided; and
c) AVSA is a sales subsidiary of Airbus Industrie, G.I.E., and will purchase
the Aircraft from Airbus Industrie, G.I.E., for resale to Northwest.
NOW THEREFORE IT IS AGREED AS FOLLOWS:
<PAGE>
1 - DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, the following terms will have the
following meanings:
A319 PRODUCT SUPPORT AGREEMENT - the Airbus A319 Product Support Agreement
dated as of even date herewith among Northwest, ASCO and AVSA, together
with all exhibits, appendixes and letter agreements thereto. {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
AFFILIATE - with respect to any person or entity, any other person or
entity directly or indirectly controlling, controlled by or under common
control with such person or entity, not including any of the Associated
Contractors. For purposes of the preceding sentence, "control" of a
corporation shall mean the direct or indirect ownership of voting
securities having the power to direct or cause the direction of the
management and policies of such corporation.
AGREEMENT - this Airbus A319-100 Purchase Agreement, including all
exhibits, appendixes and letter agreements attached hereto, as the same may
be amended or modified and in effect from time to time.
AIRCRAFT - any or all of the (i) Firm Aircraft, (ii) Option Aircraft that
have been converted to a firm order, or (iii) Roll-Over Option Aircraft
that have been converted to a firm order, to be purchased by AVSA and sold
to Northwest pursuant to this Agreement, together with all components,
equipment, parts and accessories installed in or on such aircraft and the
Propulsion Systems installed thereon upon delivery.
AIRFRAME - any Aircraft, excluding the Propulsion Systems therefor.
ASCO - Airbus Service Company, Inc., a corporation organized and existing
under the laws of Delaware, having its registered office located at 198 Van
Buren Street, Suite 300, Herndon, VA 20170, or any successor thereto.
ASSOCIATED CONTRACTORS - collectively, the members and, for certain
purposes, subcontractors of the Manufacturer from time to time, which
members presently are:
(1) AEROSPATIALE, SOCIETE NATIONALE INDUSTRIELLE, whose principal office
is at
37, Boulevard de Montmorency
75016 Paris
France
1
<PAGE>
(2) BRITISH AEROSPACE (OPERATIONS) LTD, whose principal office is at
Warwick House
PO Box 87
Farnborough Aerospace Centre
Farnborough
Hants GU14 6YU
England
(3) CONSTRUCCIONES AERONAUTICAS, S.A., whose principal office is at
404 Avenida de Aragon
28022 Madrid
Spain
(4) DAIMLER-BENZ AEROSPACE AIRBUS, GmbH ("Daimler-Benz"), whose principal
office is at
Kreetslag 10
Postfach 95 01 09
21111 Hamburg
Germany
ATA SPECIFICATION 100 - the specification issued by the Air Transport
Association of America relating to manufacturers' technical data.
ATA SPECIFICATION 101 - the specification issued by the Air Transport
Association of America relating to ground equipment technical data.
ATA SPECIFICATION 102 - the specification issued by the Air Transport
Association of America relating to software programs.
ATA SPECIFICATION 200 - the specification issued by the Air Transport
Association of America relating to integrated data processing.
ATA SPECIFICATION 300 - the specification issued by the Air Transport
Association of America relating to the packaging of spare parts shipments.
ATA SPECIFICATION 2000 - the specification issued by the Air Transport
Association of America relating to an industry-wide communication system
linking suppliers and users for the purposes of spares provisioning,
purchasing, order administration, invoicing and information or data
exchange.
2
<PAGE>
ATA SPECIFICATION 2100 - the specification issued by the Air Transport
Association of America relating to the standards for the presentation of
technical information prepared as digital media (magnetic tape or CD ROM).
AVSA-SUPPLIED BUYER FURNISHED EQUIPMENT - as referred to in Subclause 18.7
of this Agreement.
BASE PRICE - for any Aircraft, Airframe or Propulsion Systems, as defined
in Subclause 4.1 of this Agreement.
BUYER FURNISHED EQUIPMENT - for any Aircraft, all the items of equipment
that will be furnished by Northwest and installed in the Aircraft by AVSA,
as defined in the Specification.
DEVELOPMENT CHANGES - as defined in Subclause 3.2 of this Agreement.
EXCUSABLE DELAY - as defined in Subclause 10.1 of this Agreement.
FAA - the U.S. Federal Aviation Administration, or any successor agency
thereto.
FAILURE - as defined in Subclause 12.2.1.2 of this Agreement.
FINAL CONTRACT PRICE - as defined in Subclause 4.2 of this Agreement.
FIRM AIRCRAFT - any or all of the fifty (50) Airbus Industrie A319-100
model aircraft to be purchased by AVSA and sold to Northwest pursuant to
this Agreement, together with all components, equipment, parts and
accessories installed in or on such aircraft and the Propulsion Systems
installed thereon upon delivery.
IN-HOUSE WARRANTY - as defined in Subclause 12.1.7 (i) of this Agreement.
IN-HOUSE WARRANTY LABOR RATE - as defined in Subclause 12.1.7(v) of this
Agreement.
INTERFACE PROBLEM - as defined in Subclause 12.4.1 of this Agreement.
ITEM - as defined in Subclause 12.2.1.1 of this Agreement.
LBA - Luftfahrt-Bundesamt of Germany or any successor agency thereto.
LIBOR - for each stated interest period, the rate determined on the basis
of the offered rates for deposits in US dollars, which appear on the
Reuters Screen LIBO Page as of 11:00 a.m., London time, on the day that is
two (2) days (other than a Saturday, Sunday or a day that is a legal
holiday or a day on which banking institutions are authorized to
3
<PAGE>
close in the City of New York, New York, London, England, or Paris,
France) before the first day of an interest period. If at least two (2)
such offered rates appear on the Reuters Screen LIBO Page, the rate for
that interest period will be the arithmetic mean of such offered rates
(rounded upwards, if necessary, to the nearest one hundred thousandth of
a percentage point). If only one (1) offered rate appears, the rate for
that interest period will be the average (rounded upwards, if necessary,
to the nearest one hundred thousandth of a percentage point) of the
respective rates notified to AVSA by four (4) major banks in the London
interbank market selected by AVSA as the rate at which such bank is
offered deposits in US dollars at or about 11:00 a.m., London time, on
the date that is two (2) days (other than a Saturday, Sunday or a day
that is a legal holiday or a day on which banking institutions are
authorized to close in the City of New York, New York, London, England,
or Paris, France) prior to the first day of such interest period in the
interbank Eurodollar market on such date for that interest period and in
a principal amount equal to an amount of not less than $1,000,000,
provided, however, that if the banks selected as aforesaid are not
quoting as set forth in this sentence, the rate in respect of such
interest period will be determined on the basis of LIBOR in effect for
the previous interest period. "Reuters Screen LIBO Page" means the
display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or any successor to such page or service).
MANUFACTURER - Airbus Industrie, a "Groupement d'Interet Economique"
established under "Ordonnance" No. 67-821 dated September 23, 1967, of the
Republic of France.
MATERIAL BREACH - as defined in Subclause 21.1 of this Agreement.
OPTION AIRCRAFT - any or all of the fifty (50) Airbus Industrie A319/A320
model aircraft for which AVSA has granted Northwest an option to purchase
pursuant to the terms and conditions contained in Letter Agreement No. 2
hereto (excluding the Roll-Over Option Aircraft) together with all
components, equipment, parts and accessories installed in or on such
aircraft and the Propulsion Systems installed thereon upon delivery.
PREDELIVERY PAYMENT - any payment made against the Final Contract Price of
an Aircraft in accordance with Subclause 6.2 of this Agreement.
PRIME RATE - the rate of interest per annum publicly announced from time to
time by Citibank, N.A. in New York, New York, as its prime or base or
equivalent lending rate.
PRODUCT SUPPORT AGREEMENTS - as referred to in Subclause 17.1.1 of this
Agreement.
PROPULSION SYSTEMS - the two (2) CFM56-5A4 powerplants to be installed on
an Aircraft at delivery, each composed of the powerplant (as such term is
defined in Chapters 70-80 of ATA Specification 100 (Revision 22), but
limited to the equipment, components, parts and accessories included in the
powerplant, as so defined), that have been sold to the Manufacturer by CFMI
International, and a nacelle and thrust reverser for each such powerplant.
4
<PAGE>
RFC - as defined in Subclause 3.3.1 of this Agreement.
ROLL-OVER OPTION AIRCRAFT - any or all of the fifty (50) Airbus Industrie
A319/A320 model aircraft which Northwest may obtain an option to purchase
pursuant to the terms and conditions contained in Subclause 2.6 of Letter
Agreement No. 2 hereto, together with all components, equipment, parts and
accessories installed in or on such aircraft and the Propulsion Systems
installed thereon upon delivery.
SCN - as defined in Subclause 3.1 of this Agreement.
SELLER FURNISHED EQUIPMENT - for any Aircraft, all of the items of
equipment that will be furnished by AVSA and installed in the Aircraft by
AVSA, as defined in the Specification.
SERVICE LIFE POLICY - as referred to in Subclause 12.2 of this Agreement.
SPECIFICATION - as defined in Subclause 2.2 of this Agreement.
STANDARD SPECIFICATION - as defined in Subclause 2.2 of this Agreement.
VENDOR - each manufacturer (other than the manufacturer of the Propulsion
Systems) and any successor thereof, of a component, equipment, accessory or
part installed in an Aircraft at its delivery to Northwest under this
Agreement, or any replacement therefor, other than a Warranted Part, and
listed in the Supplier Product Support Agreements manual referred to in
Subclause 12.3.1 of this Agreement.
VENDOR COMPONENT - as defined in Subclause 12.4.3 of this Agreement.
VENDOR PARTS - as defined in Subclause 12.3.1 of this Agreement.
WARRANTED PART - as defined in Subclause 12.1.1 of this Agreement.
WARRANTY CLAIM - as defined in Subclause 12.1.6(v) of this Agreement.
WORKING DAY - with respect to any action to be taken hereunder, a day other
than a Saturday, Sunday or other day designated as a holiday in the
jurisdiction in which such action is required to be taken.
The terms "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement, and not a particular Clause thereof.
Technical and trade items not otherwise defined herein will have the
meanings assigned to them as generally accepted in the aircraft
manufacturing industry.
5
<PAGE>
2 - SALE AND PURCHASE
2.1 GENERAL
AVSA will cause to be manufactured and will sell and deliver, and Northwest
will buy and take delivery of, the Aircraft subject to the terms and
conditions contained in this Agreement.
2.2 SPECIFICATION DOCUMENTS
The Aircraft will be manufactured in accordance with the A319-100 Standard
Specification, Document No. J.000.01000, Issue 3, dated March 29, 1995,
including Temporary Revision 1, dated August 25, 1995. Such Standard
Specification, a copy of which is annexed hereto as Exhibit A to this
Agreement, as amended by the change orders set forth in Exhibit B hereto,
is hereinafter referred to as the "Specification." The Specification may
be further modified from time to time pursuant to the provisions of Clause
3 below.
2.3 CERTIFICATION
Prior to the delivery of the first Aircraft, AVSA will obtain or cause to
be obtained a US FAA Type Certificate (transport category) for the Aircraft
pursuant to Part 21 and in compliance with the applicable provisions of
Part 25 of the US Federal Aviation Regulations.
Each Aircraft will be delivered to Northwest with the Certificate of
Airworthiness for Export issued by the LBA and in a condition enabling
Northwest (or a person eligible to obtain such certificate under then
applicable law) to obtain at the time of delivery a Standard
Airworthiness Certificate issued pursuant to Part 21 of the US Federal
Aviation Regulations permitting Northwest to operate the Aircraft under
Part 121 of the US Federal Aviation Regulations. AVSA will have no
obligation, whether before, at or after delivery of any Aircraft, to
make any alterations to such Aircraft to enable such Aircraft to meet
FAA requirements for non-standard operation on Northwest's routes.
Except as set forth in this Subclause 2.3, AVSA will not be required to
obtain any other certificate or approval with respect to the Aircraft.
2.4 AVSA will deliver each Aircraft with provisions suitable for that equipment
required to be incorporated on such Aircraft to meet those additional
requirements of the US Federal Aviation Regulations which (i) are generally
applicable with respect to transport category aircraft to be used in United
States certificated air carriage and (ii) are required to be complied with
on or before the date of delivery of such Aircraft, provided that any
required amendment to the Specification resulting from such additional
requirements will be set forth in an SCN which will be effected as provided
in Clause 3 hereof. Northwest will cooperate with AVSA in complying with
the foregoing requirements.
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<PAGE>
3 - CHANGES
3.1 SPECIFICATION CHANGE NOTICES
The Specification may be amended from time to time by a Specification
Change Notice (each such Specification Change Notice being herein called an
"SCN" and being in the form of Exhibit C hereto). Each SCN will set forth
in detail the particular changes to be made in the Specification, any
materials to be deleted from the Aircraft by AVSA in connection with such
SCN, and the effect, if any, of such changes on design, performance,
weight, balance, time of delivery, Buyer Furnished Equipment and price of
each Aircraft affected thereby and interchangeability or replaceability of
parts. SCNs will not be binding on either party until signed by persons
duly authorized in writing by Northwest and AVSA, but upon being so signed
will constitute amendments to this Agreement.
3.2 DEVELOPMENT CHANGES
The Specification may also be revised by AVSA without an SCN or Northwest's
consent to incorporate Manufacturer-decided changes that are deemed
necessary or useful to correct defects, improve the Aircraft or its process
of manufacture, prevent delay, or ensure compliance with this Agreement and
that do not increase the price or adversely affect the delivery, overall
dimensions, guaranteed weight, maintenance requirements or performance of
the Aircraft or adversely change the interchangeability or replaceability
requirements of the Specification (hereinafter called "Development
Changes"). AVSA will notify Northwest of all Development Changes prior to
incorporation therein.
3.3 REQUESTS AND APPROVALS
3.3.1 In the event that Northwest requests a change to the Specification,
AVSA will issue a Request for Change (RFC) and carry out a feasibility
study of such change. If AVSA determines that such RFC is feasible to
incorporate, AVSA will produce an SCN and submit such SCN to Northwest
for Northwest's approval. If such SCN is rejected by Northwest, such
RFC and proposed SCN will be canceled without charge to Northwest.
3.3.2 In the event that Northwest requests AVSA in writing to incorporate a
proposed change (excluding Development Changes) in an Aircraft and
AVSA agrees to such request but the change is not subsequently made
the subject of an SCN for any reason (other than AVSA's unreasonable
refusal to sign the SCN or otherwise acting in bad faith), Northwest
will pay AVSA the full cost of design and other work resulting from
such request and incurred by AVSA, provided that in the event AVSA's
reasonable estimate of the cost of developing such proposed change is
higher than US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
7
<PAGE>
TREATMENT}, AVSA shall have notified Northwest in writing
within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} Working Days after AVSA's receipt of
Northwest's request of such cost estimate and secured Northwest's
agreement prior to incurring any such costs.
In the event that Northwest requests AVSA in writing to proceed
with a proposed change before any requisite approval of the LBA and
FAA has been obtained and such LBA or FAA approval is not
subsequently obtained, any SCN executed in connection with such
proposed change will be {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
3.4 SPECIFICATION CHANGES BEFORE DELIVERY
If, pursuant to the promulgation of any applicable law or regulation, any
change in the Specification has to be made before delivery of any Aircraft
to enable Northwest to obtain a Standard Airworthiness Certificate for such
Aircraft referred to in Subclause 2.3, AVSA will make or cause to be made
the required change or modification to the Aircraft. For each such change,
the parties will sign an SCN specifying the effect, if any, of such change
on design, performance, weight, balance, time of delivery, and Buyer
Furnished Equipment of each Aircraft affected thereby and
interchangeability or replaceability of parts. If AVSA anticipates that the
scheduled delivery of any Aircraft will be postponed by reason of such
change, the delivery date of such Aircraft as provided in Subclause 9.1
will be extended to the extent of such postponement.
The effect on price of such a change will be borne {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
3.5 SPECIFICATION CHANGES AFTER DELIVERY
Subclause 3.4 will not require AVSA to make any changes or modifications to
or to make any payments or take any other action with respect to any
Aircraft delivered to Northwest prior to the time any law or regulation
referred to in Subclause 3.4 becomes effective. Any such changes or
modifications made to an Aircraft after its delivery to Northwest will be
at Northwest's expense.
8
<PAGE>
4 - PRICE
4.1 BASE PRICE OF THE AIRCRAFT
The Base Price of each Aircraft is the sum of:
(i) the Base Price of the Airframe, and
(ii) the Base Price of the Propulsion Systems.
4.1.1 BASE PRICE OF THE AIRFRAME
4.1.1.1 The Base Price of the Airframe will be the sum of the Base Prices set
forth below in (i), (ii) and (iii):
(i) the Base Price of the Standard A319 Airframe, as defined in the
Standard Specification set forth in Exhibit A hereto (excluding Buyer
Furnished Equipment, Propulsion Systems and SCNs), at delivery
conditions prevailing in January 1998, which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} and
(ii) the Base Price of any and all SCNs mutually agreed upon prior to the
signature of this Agreement and set forth in Exhibit B, at delivery
conditions prevailing in January 1998, which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}, and
(iii) the Base Price of seats and galleys, at delivery conditions
prevailing in January 1998 in the amount of:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
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<PAGE>
4.1.1.2 The Base Price of the Airframe of each Aircraft will be revised to the
actual delivery date of such Aircraft in accordance with the Airframe
Price Revision Formula set forth in Subclause 5.1 hereto.
4.1.2 BASE PRICE OF THE PROPULSION SYSTEMS
4.1.2.1 The Base Price of the Propulsion Systems is the sum of (i) and (ii)
below:
(i) BASE PRICE OF THE POWERPLANTS
The Base Price of a set of Powerplants and additional standard
equipment at delivery conditions prevailing in January 1998 (cpi
147.77), which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT}.
Said Base Price has been calculated with reference to the
Reference Price indicated by CFM International of US$
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} in accordance with economic conditions
prevailing in September 1990 (cpi 126.54).
Said Reference Price is subject to adjustment to the date of
delivery of the Aircraft in accordance with the CFMI Price
Revision Formula set forth in Subclause 5.2 hereto.
(ii) BASE PRICE OF NACELLES AND THRUST REVERSERS
The Base Price of a set of two (2) nacelles and two (2) thrust
reversers for the Powerplants at delivery conditions prevailing
in January 1998, which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT}.
Said Base Price is subject to adjustment to the date of delivery
of the Aircraft in accordance with the Airframe Price Revision
Formula set forth in Subclause 5.1 hereto.
4.2 FINAL CONTRACT PRICE
The Final Contract Price of an Aircraft will be the sum of:
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<PAGE>
(i) the Base Price of the Airframe constituting a part of such
Aircraft, as adjusted to the date of delivery of such Aircraft
in accordance with Subclause 5.1 of this Agreement;
(ii) the price (as of delivery conditions prevailing in January 1998),
of any SCNs constituting a part of such Aircraft that are entered
into pursuant to Clause 3 (excluding Subclause 3.4) after the
date of execution of this Agreement, as adjusted to the date of
delivery of such Aircraft in accordance with Subclause 5.1 of
this Agreement;
(iii) the Reference Price of the installed Propulsion Systems
constituting a part of such Aircraft, as adjusted to the date of
delivery of such Aircraft in accordance with Subclause 5.2 of
this Agreement;
(iv) the Base Price of the nacelles and thrust reversers constituting
a part of such Aircraft, as adjusted to the date of delivery of
such Aircraft in accordance with Subclause 5.1 of this Agreement;
and
(v) any other amount resulting from any other provisions of this
Agreement and/or any other written agreement between Northwest
and AVSA relating to the Aircraft and specifically making
reference to the Final Contract Price of an Aircraft.
4.3 TAXES, DUTIES AND IMPOSTS
4.3.1 AVSA will bear and pay the amount of any and all taxes, duties,
imposts or similar charges of any nature whatsoever {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} that are
(i) imposed upon Northwest, (ii) imposed upon AVSA with an obligation
on Northwest to withhold or collect the amount thereof from AVSA or
(iii) imposed upon Northwest with an obligation on AVSA to withhold or
collect such amount from Northwest, and that are levied, assessed,
charged or collected for or in connection with the fabrication,
manufacture, modification, assembly, sale, delivery, use of or payment
under this Agreement for any Aircraft, component, accessory, equipment
or part delivered or furnished hereunder, provided such taxes, duties,
imposts or similar charges have been levied, assessed, charged or
collected under laws promulgated and enforceable in Germany
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.3.2 Northwest will bear and pay the amount of any and all taxes, duties,
imposts or similar charges of any nature whatsoever that are (i)
imposed upon AVSA, (ii) imposed upon Northwest with an obligation on
AVSA to collect the amount thereof for Northwest or (iii) imposed upon
AVSA with an obligation for Northwest to withhold such amount
11
<PAGE>
from AVSA, and that are levied, assessed, charged or collected for or
in connection with the fabrication, manufacture, modification,
assembly, sale, delivery or use of or payment under this Agreement for
any Aircraft, component, accessory, equipment or part delivered or
furnished hereunder, provided such taxes, duties, imposts or similar
charges have been levied, assessed, charged or collected under laws
promulgated and enforceable in countries other than Germany
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}. If Northwest is compelled by law to pay such
taxes, duties, imposts or similar charges as a deduction or
withholding , then Northwest will ensure that the sums received by
AVSA under this Agreement will be equal to the full amounts expressed
to be due AVSA hereunder, without deduction or withholding on account
of and free from any and all taxes, levies, imposts, duties or charges
of whatever nature, and Northwest will pay such additional amounts as
may be necessary so that the net amount received by AVSA after such
deduction or withholding will equal the amounts that would have been
received in the absence of such deduction or withholding.
4.3.3 AVSA will in its own name do all things necessary with respect to the
export of the Aircraft from Germany and will pay any customs duties,
taxes and fees required to be paid with respect to such export of the
Aircraft which are imposed under laws promulgated and enforceable in
Germany {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.3.4 It is expressly understood and agreed that AVSA's undertaking in
Subclause 4.3.1 will not apply to taxes, duties, imposts or similar
charges of any nature whatsoever, relating to the use of or payment
for any Aircraft (excluding income, franchise, and doing business
taxes imposed on AVSA), component, accessory, equipment or part
delivered or furnished under this Agreement in the United States of
America.
4.3.5 It is expressly understood and agreed that Northwest's undertaking in
Subclause 4.3.2 will not apply to taxes imposed on AVSA that are based
on or measured by gross or net income or receipts or that are based on
or measured by AVSA's doing business, capital or net worth, or other
taxes, however denominated, in the nature of such taxes.
12
<PAGE>
5 - PRICE REVISION
5.1 AIRFRAME PRICE REVISION FORMULA
The Base Price of each Airframe and the Base Price of a set of two (2)
nacelles and two (2) thrust reversers for each Aircraft will be revised to
the actual delivery date of such Aircraft in accordance with the revision
formula set forth in the Airframe Price Revision Formula attached hereto in
Exhibit D.
5.2 POWERPLANTS PRICE REVISION FORMULA
The Reference Price of the Powerplants Systems will be revised to the
actual delivery date of the Aircraft on which such Propulsion Systems are
installed in accordance with the revision formula set forth in Exhibit E
hereto.
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<PAGE>
6 - PAYMENT TERMS
6.1 Northwest will pay all sums due hereunder in immediately available funds
in United States dollars by credit to Credit Lyonnais, New York Branch,
for transfer by Credit Lyonnais to AVSA's account with Credit Lyonnais
at 1, Esplanade Compans Caffarelli, 31000 Toulouse, France, or to such
other account at any New York Clearing House Member Bank as AVSA will
designate by notice to Northwest.
6.2 PREDELIVERY PAYMENTS
Predelivery Payments will be paid by Northwest to AVSA for each Aircraft
in accordance with the provisions of Letter Agreement No. 3 to this
Agreement.
6.3 PAYMENT OF FINAL CONTRACT PRICE
Concurrently with the delivery of each Aircraft, Northwest will pay to
AVSA the Final Contract Price therefor, less the total amount of the
Predelivery Payments theretofore received by AVSA for such Aircraft
under Subclause 6.2 above. AVSA's receipt of the full amount of such
payments will be a condition precedent to AVSA's obligation to deliver
such Aircraft.
6.4 PAYMENT OF OTHER AMOUNTS
6.4.1 Unless otherwise expressly provided for herein, any payments due
hereunder or in respect of an Aircraft in addition to those referred
to in Subclauses 6.2 and 6.3 above will be paid by Northwest
concurrently with the delivery of the corresponding Aircraft or, if
invoiced after delivery of such Aircraft, within {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} after the
invoice date. AVSA and Northwest agree that with respect to payments
to be made under this Subclause 6.4.1, and for the purposes of Clause
21, Northwest will not be deemed to be in default unless such payment
is not made within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} after invoice date.
6.4.2 Notwithstanding any other rights AVSA may have at contract or at law,
Northwest and AVSA hereby agree that should any amount under this
Agreement become due and payable by Northwest, and not be paid in
full in immediately available funds on the date due (unless contested
by Northwest in good faith), then AVSA will have the right to debit
and apply, in whole or in part, the unused amount of any credit made
available by AVSA to Northwest against such unpaid amount. AVSA will
promptly notify Northwest in writing after such debiting and
application.
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<PAGE>
6.5 OVERDUE PAYMENTS
If any payment due AVSA is not received by AVSA on the date or dates as
agreed upon between Northwest and AVSA, AVSA will have the right to claim
from Northwest, and Northwest will promptly pay to AVSA, upon receipt of
such claim, interest (on the basis of a 365 day year) at a rate per annum
equal to the sum of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} on the amount of such overdue payment, to be
calculated from and including the due date of such payment to (but
excluding) the date such payment is received by AVSA. AVSA's right to
receive such interest will be in addition to any other rights of AVSA
hereunder or at law.
6.6 REFUND OF PREDELIVERY PAYMENTS
Northwest will have no right to any refund of any deposit or Predelivery
Payment received by AVSA, except as provided under Clauses 10, 11, and
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
6.7 PROPRIETARY INTEREST
Northwest will not, by virtue of anything contained in this Agreement
(including, without limitation, any Predelivery Payments hereunder, or any
designation or identification by AVSA of a particular Aircraft as an
Aircraft to which any of the provisions of this Agreement refer), and
notwithstanding any provision of law to the contrary, acquire any
proprietary, insurable or other interest whatsoever in any Aircraft prior
to delivery of and payment in full for such Aircraft as provided in this
Agreement.
6.8 TENDER OF DELIVERY
In addition to any other rights and remedies available to AVSA, AVSA will
not be obligated to tender delivery of any Aircraft to Northwest and will
have no further liability to Northwest with respect thereto, if Northwest
fails to make any Predelivery Payment {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} or if AVSA has terminated this
Agreement pursuant to Clause 21.
6.9 PAYMENT IN FULL
Except as provided for herein, Northwest's obligation to make payments to
AVSA hereunder will not be affected by and will be determined without
regard to any set off, counterclaim, recoupment, defense or other right
that Northwest may have against AVSA or any other person and all such
payments will be made without deduction or withholding of any kind.
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<PAGE>
7 - PLANT REPRESENTATIVES - INSPECTION
7.1 INSPECTION PROCEDURES
7.1.1 All work to be carried out on the Aircraft and all materials and parts
thereof will at all reasonable times during business hours be open to
inspection by duly authorized representatives of Northwest or its
designee at the respective works of the Associated Contractors and, if
possible, at the works of their respective subcontractors, and such
representatives will, to carry out the aforesaid inspection, have
access to such relevant technical data as is reasonably necessary for
this purpose (except that, if access to any part of the respective
works where construction is in progress or materials or parts are
stored is restricted for security reasons, the Associated Contractors
will be allowed a reasonable time to make the items available for
inspection elsewhere). The procedures for such inspections will be
agreed upon between AVSA's and Northwest's representatives prior to
any inspection.
7.1.2 For the purposes of Subclause 7.1.1 above and commencing with the date
of this Agreement until the delivery of the last Aircraft, AVSA will
furnish free-of-charge adequate secretarial assistance and suitable
space, office equipment and facilities in or conveniently located with
respect to Daimler-Benz's works in Hamburg, Germany, for the use of
not more than four (4) representatives of Northwest during the
aforementioned period. {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
7.1.3 All inspections, examinations and discussions with AVSA's, the
Associated Contractors' or their respective subcontractors'
engineering or other personnel by Northwest and its said
representatives will be performed in such manner as not to delay or
hinder the work to be carried out on the Aircraft or the proper
performance of this Agreement. In no event will Northwest or its
representatives be permitted to inspect any aircraft other than the
Aircraft.
7.2 INDEMNITY
SELLER'S INDEMNITY
AVSA WILL INDEMNIFY AND HOLD HARMLESS NORTHWEST, ITS DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES,
DAMAGES, LOSSES, COSTS AND EXPENSES (I) FOR ALL INJURIES TO AND
DEATHS OF PERSONS (EXCEPTING INJURIES TO OR DEATH OF NORTHWEST'S
REPRESENTATIVES PARTICIPATING IN ANY TESTS, CHECKOUTS OR INSPECTIONS
UNDER THIS CLAUSE 7) CAUSED BY NORTHWEST OR ITS REPRESENTATIVES, AND
(II) FOR ANY LOSS OF OR DAMAGE TO PROPERTY (EXCEPTING LOSS OF OR
DAMAGE TO PROPERTY OF NORTHWEST'S SAID REPRESENTATIVES) CAUSED BY
NORTHWEST OR
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<PAGE>
ITS REPRESENTATIVES, IN EITHER CASE WHEN ARISING OUT OF OR IN CONNECTION
WITH ANY SUCH TESTS, CHECKOUTS, OR INSPECTIONS UNDER THIS CLAUSE 7. THIS
INDEMNITY OF AVSA WILL NOT APPLY FOR ANY SUCH LIABILITIES, DAMAGES, LOSSES,
COSTS OR EXPENSES ARISING OUT OF OR CAUSED BY THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF NORTHWEST'S SAID REPRESENTATIVES.
NORTHWEST WILL INDEMNIFY AND HOLD HARMLESS AVSA, THE MANUFACTURER, EACH OF
THE ASSOCIATED CONTRACTORS AND THEIR RESPECTIVE SUBCONTRACTORS AND THEIR
RESPECTIVE OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES,
DAMAGES, LOSSES, COSTS AND EXPENSES (I) FOR INJURIES TO OR DEATHS OF
NORTHWEST'S REPRESENTATIVES PARTICIPATING IN ANY TESTS, CHECKOUTS, OR
INSPECTIONS UNDER THIS CLAUSE 7, (II) FOR LOSS OF OR DAMAGE TO PROPERTY OF
NORTHWEST'S SAID REPRESENTATIVES, AND (III) ARISING OUT OF OR CAUSED BY THE
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF NORTHWEST'S SAID REPRESENTATIVES.
WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE PRECEDING SENTENCE,
NORTHWEST WILL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS AVSA WHERE
THE LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE FROM AVSA'S
NEGLIGENCE OR WILLFUL MISCONDUCT.
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT AGAINST EITHER PARTY
(OR ITS RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES) FOR DAMAGES
FOR DEATH OR INJURY, OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH HAS
BEEN ASSUMED BY THE OTHER PARTY PURSUANT TO THIS SUBCLAUSE 7.2, THE FORMER
(INDEMNITEE) WILL PROMPTLY GIVE NOTICE TO THE OTHER PARTY (INDEMNITOR), AND
THE INDEMNITOR WILL ASSUME AND CONDUCT THE DEFENSE THEREOF, AND WILL HAVE
THE RIGHT TO EFFECT ANY SETTLEMENT WHICH IT, IN ITS OPINION, DEEMS PROPER
AND WHICH IMPOSES NO LIABILITY OR OTHER OBLIGATION ON THE INDEMNITEE.
IN THE EVENT THAT THE INDEMNITOR DOES NOT ASSUME AND CONDUCT THE DEFENSE OF
THE CLAIM OR LAWSUIT, THEN THE INDEMNITEE WILL HAVE THE RIGHT TO PROCEED
WITH DEFENSE OF THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE AND WILL HAVE
AN ACTION AGAINST THE INDEMNITOR FOR ANY JUDGMENTS, SETTLEMENTS, COSTS OR
EXPENSES INCURRED IN CONDUCTING SAID DEFENSE. FOR THE PURPOSE OF THIS
SUBCLAUSE 7.2, A CLAIM OR LAWSUIT AGAINST THE MANUFACTURER OR ANY OF THE
ASSOCIATED CONTRACTORS OR ANY OF THEIR RESPECTIVE SUBCONTRACTORS OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES WILL BE DEEMED TO
BE A LAWSUIT AGAINST AVSA.
17
<PAGE>
8 - NORTHWEST'S ACCEPTANCE
8.1 ACCEPTANCE PROCEDURES
8.1.1 AVSA or any Affiliate thereof acting as AVSA's designee will give to
Northwest not less than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} days prior written notice of the
proposed time when acceptance tests of an Aircraft will be conducted,
and, in the event that Northwest elects to attend such tests,
Northwest will comply with the reasonable requirements of AVSA with
the intention of completing all tests within {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} Working
Days after commencement. The tests will take place at Daimler-Benz's
works in Hamburg, Germany (or at such other facilities of the
Associated Contractors or any Affiliates thereof as AVSA may specify
in its notice to Northwest pursuant to this Subclause 8.1.1) and will
be carried out by the personnel of the Manufacturer (accompanied, if
Northwest so wishes, by representatives of Northwest up to a total of
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} acting as observers, of whom not more than
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} will have access to the cockpit at any one
time). During flight tests, these representatives will comply with
the instructions of the Manufacturer's representatives. The
Manufacturer will not normally be required in the course of such
acceptance tests to fly any of the Aircraft for more than an aggregate
of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} hours.
8.1.2 AVSA will offer to Northwest a briefing prior to acceptance of each
Aircraft and {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} hour simulator session for {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pilots,
prior to acceptance of the first Aircraft. This briefing will provide
specific information related to acceptance flights.
8.1.3 The acceptance tests must demonstrate the satisfactory functioning of
the Aircraft at the time of delivery in accordance with the
Specification (except for immaterial variances from the
Specification). In the event that Northwest, after having received
proper notice in accordance with Subclause 8.1.1, does not attend the
tests scheduled for an Aircraft or fails to so cooperate, AVSA may
complete them in the absence of Northwest, whereupon
18
<PAGE>
Northwest will be deemed to have accepted the tests, if such tests
demonstrate the satisfactory functioning of the Aircraft as aforesaid,
and AVSA will furnish such data with respect to such tests as
Northwest may reasonably request.
8.1.4 If the acceptance tests for an Aircraft are not successfully completed
or there is a defect, Northwest, within {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} Working Days after
such tests, will give notice to AVSA specifying such unsuccessful
completion or defect. Thereafter AVSA will, without hindrance from
Northwest, carry out any necessary changes and, as soon as practicable
thereafter, resubmit the Aircraft for new acceptance tests to
demonstrate the elimination of the defect, such tests to be held and
carried out in accordance with Subclause 8.1, provided, however,
rather than accept a delay in delivery of any such Aircraft, Northwest
and AVSA may agree to deliver such Aircraft with subsequent correction
of the defect by Northwest {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
8.2 USE OF AIRCRAFT
AVSA will be entitled to use any Aircraft prior to its delivery to
Northwest:
(i) without Northwest's prior consent, to the extent necessary to carry
out the normal manufacturing process of the Aircraft (but in no event
for more than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} flight hours in the case of each Aircraft),
(ii) without Northwest's prior consent, to obtain the certificates required
under Clause 2 hereof {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} or
(iii) with Northwest's prior consent (such consent not to be unreasonably
withheld), for the purposes of demonstration flights to third parties
(the "Demonstration Flights").
Such use will not affect either AVSA's obligation to deliver any Aircraft
hereunder or Northwest's obligation to accept delivery of any Aircraft
hereunder. Northwest will have the right, however, to obtain a credit from
AVSA for {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} flight hours accumulated during Demonstration Flights.
{CONFIDENTIAL MATERIAL
19
<PAGE>
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} Such credit will be equal
to the product of (i) the number of flight hours accumulated {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} for
Demonstration Flights and (ii) US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}. Northwest will accept delivery of any
Aircraft used in accordance with this Subclause 8.2 without any reduction
in price for depreciation, or wear and tear resulting from such use.
8.3 CERTIFICATE OF ACCEPTANCE
When the Aircraft is "ready for delivery" as defined below in Subclause
9.2, Northwest will forthwith give to AVSA a signed Certificate of
Acceptance in the form attached as Exhibit F in respect of the relevant
Aircraft. Should Northwest fail to so deliver the said Certificate, then
Northwest will be deemed to be in default as though it had without cause
rejected delivery of such Aircraft when duly tendered to it hereunder and
will thereafter bear all costs and expenses resulting from such delay in
delivery.
8.4 FINALITY OF ACCEPTANCE
Northwest's acceptance of delivery of each Aircraft will constitute waiver
by Northwest of any right it may have under the Uniform Commercial Code as
adopted by the State of New York or otherwise to revoke such acceptance for
any reason, whether known or unknown to Northwest at the time of
acceptance.
8.5 INDEMNITY
8.5.1 SCOPE
IN CONNECTION WITH THE PROVISION OF SERVICES UNDER THIS CLAUSE 8, AVSA AND
NORTHWEST PROVIDE THE INDEMNITIES SET FORTH IN SUBCLAUSES 8.5.2 AND 8.5.3.
8.5.2 AVSA'S INDEMNITY
AVSA WILL INDEMNIFY AND HOLD HARMLESS NORTHWEST, ITS DIRECTORS, OFFICERS,
AGENTS AND EMPLOYEES FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES,
COSTS AND EXPENSES
(I) FOR ALL INJURIES TO AND DEATHS OF PERSONS (EXCEPTING INJURIES TO AND
DEATHS OF NORTHWEST'S REPRESENTATIVES PARTICIPATING IN ANY GROUND OR
FLIGHT TESTS UNDER THIS CLAUSE 8) CAUSED BY NORTHWEST OR ITS
REPRESENTATIVES, AND
20
<PAGE>
(II) FOR ANY LOSS OF OR DAMAGE TO PROPERTY (EXCEPTING LOSS OF OR DAMAGE TO
PROPERTY OF NORTHWEST'S SAID REPRESENTATIVES) CAUSED BY NORTHWEST OR
ITS REPRESENTATIVES,
IN EITHER CASE WHEN ARISING OUT OF OR IN CONNECTION WITH THE OPERATION OF
THE AIRCRAFT DURING ANY GROUND OR FLIGHT TESTS UNDER THIS CLAUSE 8.
THIS INDEMNITY OF AVSA WILL NOT APPLY FOR ANY SUCH LIABILITIES, DAMAGES,
LOSSES, COSTS OR EXPENSES ARISING OUT OF OR CAUSED BY THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF NORTHWEST'S SAID REPRESENTATIVES.
8.5.3 NORTHWEST'S INDEMNITY
NORTHWEST WILL INDEMNIFY AND HOLD HARMLESS AVSA, THE MANUFACTURER, EACH OF
THE ASSOCIATED CONTRACTORS AND THEIR RESPECTIVE SUBCONTRACTORS AND EACH OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST
ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES
(I) FOR INJURIES TO OR DEATHS OF NORTHWEST'S SAID REPRESENTATIVES
PARTICIPATING IN ANY GROUND OR FLIGHT TESTS UNDER THIS CLAUSE 8,
(II) FOR LOSS OF OR DAMAGE TO PROPERTY OF NORTHWEST'S SAID REPRESENTATIVES,
AND
(III) ARISING OUT OF OR CAUSED BY THE WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF NORTHWEST'S SAID REPRESENTATIVES.
WITH RESPECT TO SUBCLAUSES (I) AND (II) OF THE PRECEDING SENTENCE,
NORTHWEST WILL NOT BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS AVSA WHERE
THE LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE FROM AVSA'S
NEGLIGENCE OR WILLFUL MISCONDUCT.
8.5.4 CLAIMS
IN THE EVENT ANY CLAIM IS MADE OR LAWSUIT IS BROUGHT AGAINST EITHER PARTY
(OR ITS RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES) FOR DAMAGES
FOR DEATH OR INJURY OR FOR PROPERTY DAMAGE, THE LIABILITY FOR WHICH HAS
BEEN ASSUMED BY THE OTHER PARTY PURSUANT TO THIS SUBCLAUSE 8.5, THE FORMER
(INDEMNITEE) WILL PROMPTLY GIVE NOTICE TO THE OTHER PARTY (INDEMNITOR),
AND
21
<PAGE>
THE INDEMNITOR WILL ASSUME AND CONDUCT THE DEFENSE THEREOF, AND WILL
EFFECT ANY SETTLEMENT WHICH IT, IN ITS OPINION, DEEMS PROPER AND WHICH
DOES NOT IMPOSE ANY LIABILITY OR OTHER OBLIGATION ON THE INDEMNITEE.
IN THE EVENT THAT THE INDEMNITOR DOES NOT ASSUME AND CONDUCT THE DEFENSE
OF THE CLAIM OR SUIT, THEN THE INDEMNITEE WILL HAVE THE RIGHT TO PROCEED
WITH DEFENSE OF THE CLAIM OR LAWSUIT AS IT DEEMS APPROPRIATE AND WILL HAVE
AN ACTION AGAINST THE INDEMNITOR FOR ANY JUDGMENTS, SETTLEMENTS, COSTS OR
EXPENSES INCURRED IN CONDUCTING SAID DEFENSE {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} FOR THE PURPOSE OF THIS
SUBCLAUSE 8.5, A CLAIM OR LAWSUIT AGAINST THE MANUFACTURER OR ANY OF THE
ASSOCIATED CONTRACTORS OR ANY OF THEIR RESPECTIVE SUBCONTRACTORS OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES WILL BE DEEMED
TO BE A LAWSUIT AGAINST AVSA.
22
<PAGE>
9 - DELIVERY
9.1 DELIVERY SCHEDULE
Subject to the provisions of this Agreement, AVSA will have the Firm
Aircraft ready for delivery at Daimler-Benz's works in Hamburg, Germany,
and Northwest will accept the same, during the months set forth below.
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
<TABLE>
<CAPTION>
Aircraft No. Month/Year of Delivery Aircraft No. Month/Year of Delivery
------------ ---------------------- ------------ ----------------------
<S> <C> <C> <C>
1 {CONFIDENTIAL MATERIAL 26 {CONFIDENTIAL MATERIAL
2 OMITTED AND FILED 27 OMITTED AND FILED
3 SEPARATELY WITH THE 28 SEPARATELY WITH THE
4 SECURITIES AND EXCHANGE 29 SECURITIES AND EXCHANGE
5 COMMISSION PURSUANT TO 30 COMMISSION PURSUANT TO
6 A REQUEST FOR 31 A REQUEST FOR
7 CONFIDENTIAL TREATMENT} 32 CONFIDENTIAL TREATMENT}
8 33
9 34
10 35
11 36
12 37
13 38
14 39
15 40
16 41
17 42
18 43
19 44
20 45
21 46
22 47
23 48
24 49
25 50
</TABLE>
Not later than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} days prior to the date scheduled for
23
<PAGE>
acceptance tests for a particular Aircraft, AVSA will give Northwest
notice of the anticipated date within the relevant month set forth above
on which such Aircraft will be ready for delivery. Not later than
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
days prior to such date notified to Northwest, AVSA will (i) confirm to
Northwest that such anticipated delivery date is firm or (ii) in the
event AVSA cannot confirm such date as being firm, confirm a new date,
which will be no more than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} Working Days in Germany before or
after the originally scheduled date.
9.2 CERTIFICATE OF AIRWORTHINESS
Each Aircraft will for the purpose of this Agreement be deemed to be "ready
for delivery" upon the satisfactory completion of its acceptance tests in
accordance with Clause 8 and the issuance of an LBA Certificate of
Airworthiness for Export in the "Transport Category" with respect thereto
and AVSA's compliance with the other obligations to be performed by it
under Clause 2 hereof.
9.3 TITLE
Title to and risk of loss of and damage to the Aircraft will pass to
Northwest upon delivery following execution of the Certificate of
Acceptance and upon payment of the Final Contract Price for such Aircraft.
AVSA will provide Northwest with such appropriate documents of title or
other documents as Northwest may reasonably request.
9.4 OVERDUE PAYMENT OR FLYAWAY
In the event that:
(i) the delivery of and payment of the Final Contract Price for the
Aircraft is delayed more than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} Working Days after the firm
delivery date established pursuant to Subclause 9.1 due to the fault
of Northwest, or
(ii) within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} days after delivery of the Aircraft Northwest
has failed to remove such Aircraft from the place of delivery for
whatever reason (except for reasons attributable to AVSA)
24
<PAGE>
then Northwest will on demand reimburse AVSA for all reasonable costs and
expenses (including, without limitation, costs and expenses attributable to
storage, preservation and protection, insurance and taxes) actually
sustained by AVSA and resulting from any such delay or failure. Such
reimbursement will be in addition to any other rights that AVSA may have as
a result of any such delay or failure.
9.5 FLYAWAY EXPENSES
Except for expenses to be borne by AVSA as provided in Subclause 4.4 of
this Agreement, all expenses of, and in connection with, fly-away from
Daimler-Benz's works will be borne by Northwest {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
25
<PAGE>
10 - EXCUSABLE DELAY
10.1 SCOPE
Neither AVSA nor the Manufacturer will be responsible for or be deemed to
be in default on account of delays in delivery or failure to deliver or
otherwise in the performance of this Agreement or any part hereof (i) due
to causes reasonably beyond AVSA's, the Manufacturer's or any Associated
Contractor's control (unless such cause is beyond such control due to
AVSA's, the Manufacturer's or the Associated Contractor's fault or
negligence) or (ii) not occasioned by AVSA's, the Manufacturer's or any
Associated Contractor's fault or negligence ("Excusable Delay"),
including, but not limited to: acts of God or the public enemy, natural
disasters, fires, floods, hail storms, explosions or earthquakes;
epidemics or quarantine restrictions; serious accidents; actual total or
constructive total loss; any law, decision, regulation, directive or
other act (whether or not having the force of law) of any government or
of the Council of the European Community or the Commission of the
European Community or of any national, Federal, State, municipal or other
governmental department, commission, board, bureau, agency, court or
instrumentality, domestic or foreign; governmental priorities,
regulations or orders affecting allocation of materials, facilities or a
completed Aircraft; war, civil war or warlike operations, terrorism,
insurrection or riots; failure of transportation; strikes or labor
troubles causing cessation, slow down or interruption of work; delay in
obtaining any airworthiness certification for a previously uncertificated
Aircraft part, component or computer software after due and timely
diligence to procure such certification; inability after due and timely
diligence to procure materials, accessories, equipment or parts; general
hindrance in transportation; or failure of a subcontractor or Vendor to
furnish materials, components, accessories, equipment or parts.
It is expressly understood and agreed that each of (i) any delay caused
by Northwest's negligence or fault, and (ii) delay in delivery or
otherwise in the performance of this Agreement by AVSA due in whole or in
part to any delay in or failure of the delivery of, or any other event or
circumstance relating to, the Propulsion Systems or Buyer Furnished
Equipment, will constitute Excusable Delay for AVSA. AVSA will as soon
as practicable after becoming aware of any delay falling within the
provisions of this Subclause 10.1 (a) notify Northwest of such delay and
of the probable extent thereof and (b) subject to the following
provisions, as soon as practicable after the removal of the cause or
causes for delay, resume,{CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}, the performance of those obligations
affected under this Agreement.
AVSA and Northwest acknowledge that nothing in this Subclause 10.1 shall
be deemed to obligate AVSA to undertake or forego any action with respect
to any strike or labor troubles which AVSA would not otherwise undertake
or forego in the exercise of sound business judgement.
26
<PAGE>
10.2 UNANTICIPATED DELAY
In the event that the delivery of any Aircraft is delayed by reason of an
Excusable Delay for a period of more than {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} months after the end of the
calendar month in which delivery is otherwise required hereunder,
Northwest will be entitled to terminate this Agreement with respect only
to the Aircraft so affected upon written notice given to AVSA within
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
days after the expiration of such {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} month period. In the event such
delay continues for an additional {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} month period after the expiration
of such {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} month period and Northwest has not theretofore terminated this
Agreement with respect to such Aircraft, either party will have the
option to terminate this Agreement with respect to the Aircraft so
affected upon written notice given to the other within {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} days after
the end of such additional {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} month period. Such termination, as
aforesaid, will discharge all obligations and liabilities of the parties
hereunder with respect to such affected Aircraft, except that AVSA will
repay to Northwest all amounts required by {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} with respect to such affected
Aircraft, {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}. Northwest will not be entitled to receive such repayment nor
to terminate this Agreement as to any Aircraft under this Clause 10 by
reason of an Excusable Delay if such delay is caused solely by
Northwest's negligence or Northwest's fault.
10.3 ANTICIPATED DELAY
In respect of any Aircraft, AVSA may conclude, based on a reasonable and
good faith appraisal of the facts, that Excusable Delays will (i) cause
delay in delivery of such Aircraft for a period of more than {CONFIDENTIAL
MATERIAL OMITTED AND
27
<PAGE>
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} months after the end of the calendar
month in which delivery is otherwise required or (ii) prevent delivery of
such Aircraft. In such event, in good faith and in accordance with its
normal scheduling procedures, AVSA will give written notice to Northwest
of either (i) such delay and its related rescheduling reflecting such
delay(s) or (ii) such nondelivery. Within {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} days after Northwest's receipt of
such notice, Northwest (and, {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}, AVSA) may terminate this Agreement as
to such rescheduled or nondeliverable Aircraft by giving written notice to
the other party. Such termination will discharge all obligations and
liabilities of the parties hereunder with respect to such affected
Aircraft, except that AVSA will repay to Northwest all amounts required by
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
with respect to such affected Aircraft {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}. Northwest will not be entitled to
receive such repayment nor to terminate this Agreement as to any Aircraft
under this Clause 10 by reason of an Excusable Delay if such delay is
caused solely by Northwest's negligence or Northwest's fault.
10.4 DELIVERY DATE
If, following notice of an anticipated delay under Subclause 10.3, this
Agreement is not terminated in accordance with the provisions of such
Subclause (with respect to the affected Aircraft), then the date of
delivery otherwise required hereunder will be extended by a period equal to
the delay specified in such notice.
10.5 LOST, DESTROYED OR DAMAGED AIRCRAFT
In the event that prior to delivery any Aircraft is lost, destroyed or
damaged beyond economic repair, AVSA will notify Northwest in writing
within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} days after such event. Such notice will specify the earliest
date, consistent with AVSA's and the Manufacturer's other contractual
commitments and production capabilities, by which AVSA would be able to
deliver a replacement for such Aircraft. This Agreement will terminate as
to such Aircraft unless Northwest gives AVSA written notice, within
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} days
after receipt by Northwest of the notice from AVSA of such loss,
destruction or damage, that
28
<PAGE>
Northwest desires AVSA to deliver to Northwest a replacement for such
Aircraft. If Northwest gives such notice to AVSA, AVSA will deliver to
Northwest, at the earliest date consistent with AVSA's and the
Manufacturer's other contractual commitments and production capabilities,
an aircraft to replace the Aircraft lost, destroyed or damaged beyond
repair, and the parties will execute an amendment to this Agreement to
evidence the delivery date for such replacement aircraft; provided,
however, that nothing herein will obligate AVSA to deliver such
replacement aircraft if its manufacture would require the reactivation of
the Manufacturer's production line for the model of aircraft purchased
hereunder. The terms and conditions of this Agreement applicable to the
Aircraft lost, destroyed or damaged beyond economic repair (including
without limitation, the price and price revision provisions in Clauses 4
and 5 hereof) will apply to the replacement aircraft; {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}. In the
event of termination of this Agreement as to a particular Aircraft as a
result of such loss, destruction or damage the obligations and liabilities
of the parties hereunder with respect to such Aircraft will be discharged.
AVSA will repay to Northwest the amount required pursuant to
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
with respect to such lost, destroyed or damaged Aircraft {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}. Northwest
will not be entitled to receive repayment nor to terminate this Agreement
as to any Aircraft under this Subclause 10.5 if such loss, destruction or
damage is caused by Northwest's or its representatives' gross negligence
or willful misconduct.
10.6 REMEDIES
THIS CLAUSE 10 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} SET FORTH THE SOLE AND EXCLUSIVE REMEDY OF NORTHWEST FOR
EXCUSABLE DELAYS IN DELIVERY OR FAILURE TO DELIVER, AND NORTHWEST HEREBY
WAIVES ALL RIGHTS, INCLUDING WITHOUT LIMITATION ANY RIGHTS TO DAMAGES OR
SPECIFIC PERFORMANCE, TO WHICH IT WOULD OTHERWISE BE ENTITLED IN RESPECT
THEREOF. NORTHWEST WILL NOT BE ENTITLED TO CLAIM THE REMEDIES AND RECEIVE
THE BENEFITS PROVIDED IN THIS CLAUSE 10 TO THE EXTENT THE DELAY REFERRED TO
IN THIS CLAUSE 10 IS CAUSED SOLELY BY THE NEGLIGENCE OR FAULT OF NORTHWEST
OR ITS REPRESENTATIVES.
In the event this Agreement is terminated with respect to an Aircraft
pursuant to the provisions of this Clause 10 {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
29
<PAGE>
11 - INEXCUSABLE DELAY
11.1 LIQUIDATED DAMAGES
Should an Aircraft not be ready for delivery to Northwest within
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} days
after the month of delivery specified in this Agreement (as such month may
otherwise be changed pursuant to this Agreement) for reasons other than as
are covered by Clause 10, Northwest will, in respect of any subsequent
delay in delivery of such Aircraft, have the right to claim and AVSA will
in respect of any subsequent delay pay to Northwest as liquidated damages
for the delay in delivery of such Aircraft US$ {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
11.2 TOTAL LIABILITY
Notwithstanding Subclause 11.1, the total liability of AVSA under this
Clause 11 with respect to any Aircraft will in no event exceed the total
sum of US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
11.3 WRITTEN CLAIM
Northwest's right to recover such damages in respect of an Aircraft is
conditional upon a claim therefor being submitted in writing to AVSA by
Northwest no later than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} days after the date when such Aircraft was
scheduled to have been ready for delivery.
11.4 SIX-MONTH DELAY
In the event that such subsequent delay in delivery exceeds six (6) months,
Northwest will have the further right, exercisable by written notice to
AVSA given after such six (6) month period, to terminate this Agreement in
respect only of the Aircraft that is the subject of such delay, whereupon
AVSA will repay to Northwest hereunder all amounts required by
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} in
relation to such Aircraft {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
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11.5 TWELVE-MONTH DELAY
In the event that such subsequent delay in delivery exceeds twelve (12)
months, AVSA will have the right, exercisable by written notice to
Northwest given no more than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} after such twelve (12) month period, to
terminate this Agreement in respect only of the Aircraft that is subject to
such delay {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} AVSA will repay to Northwest all amounts required by
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} in
relation to such Aircraft {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
11.6 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
11.7 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
11.8 REMEDIES
THIS CLAUSE 11 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} SET FORTH THE SOLE REMEDY OF NORTHWEST FOR DELAYS IN DELIVERY OR
FAILURE TO DELIVER, OTHER THAN SUCH DELAYS AS ARE COVERED BY CLAUSE 10, AND
NORTHWEST HEREBY WAIVES ALL RIGHTS, INCLUDING WITHOUT LIMITATION ANY RIGHTS
TO INCIDENTAL AND CONSEQUENTIAL DAMAGES OR SPECIFIC PERFORMANCE, TO WHICH
IT WOULD OTHERWISE BE ENTITLED IN RESPECT THEREOF. NORTHWEST WILL NOT BE
ENTITLED TO CLAIM THE REMEDIES AND RECEIVE THE BENEFITS PROVIDED IN THIS
CLAUSE 11 WHERE THE DELAY REFERRED TO IN THIS CLAUSE 11 IS CAUSED SOLELY BY
THE NEGLIGENCE OR FAULT OF NORTHWEST OR ITS REPRESENTATIVES.
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12 - WARRANTIES AND SERVICE LIFE POLICY
12.1 STANDARD WARRANTY
12.1.1 Nature of Warranty
12.1.2 Exceptions
12.1.3 Warranty Periods
12.1.4 Buyer's Remedy and Seller's Obligation
12.1.5 Warranty Claim Requirements
12.1.6 Warranty Administration
12.1.7 In-house Warranty
12.1.8 Standard Warranty Transferability
12.1.9 Warranty for Corrected, Replacement or Repaired
Warranted Parts
12.1.10 Good Airline Operation - Normal Wear and Tear
12.2 SELLER SERVICE LIFE POLICY
12.2.1 Definitions
12.2.2 Periods and Seller's Undertakings
12.2.3 Seller's Participation in the Cost
12.2.4 General Conditions and Limitations
12.2.5 Transferability
12.3 VENDOR WARRANTIES
12.3.1 Seller's Support
12.3.2 Vendor's Default
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12.4 INTERFACE COMMITMENT
12.4.1 Interface Problem
12.4.2 Seller's Responsibility
12.4.3 Vendor's Responsibility
12.4.4 Joint Responsibility
12.4.5 General
12.5 EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS OF LIABILITY
12.6 DUPLICATE REMEDIES
12.7 NEGOTIATED AGREEMENT
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12 - WARRANTIES AND SERVICE LIFE POLICY
AVSA, in its capacity as "Buyer" under its arrangements with the
Manufacturer, has negotiated and obtained the following Standard
Warranty, Service Life Policy, Vendor Warranties and Interface
Commitment from the Manufacturer with respect to the Aircraft,
subject to the terms, conditions, limitations and restrictions
(including, but not limited to, the Exclusivity of Warranties and
General Limitations of Liability and Duplicate Remedies provisions)
all as hereinafter set out. AVSA hereby assigns to Northwest, and
Northwest hereby accepts, all of the rights and obligations of AVSA
in its capacity as "Buyer" as aforesaid under the said Standard
Warranty, Service Life Policy, Vendor Warranties and Interface
Commitment, and AVSA subrogates Northwest into all such rights and
obligations in respect of the Aircraft. AVSA hereby warrants to
Northwest that it has all requisite authority to make the foregoing
assignment and effect the foregoing subrogation to and in favor of
Northwest and that it will not enter into any amendment of the
provisions so assigned without the prior written consent of
Northwest. Capitalized terms utilized in the following quoted
provisions have the meanings assigned thereto in this Agreement,
except that the term "Seller" refers to the Manufacturer and the
term "Buyer" refers to AVSA.
QUOTE
12.1 STANDARD WARRANTY
12.1.1 NATURE OF WARRANTY
Subject to the limitations and conditions as hereinafter provided,
and except as provided in Subclause 12.1.2, the Seller warrants to
the Buyer that each Aircraft and each Warranted Part will at the
time of delivery to the Buyer:
(i) be free from defects in material,
(ii) be free from defects in workmanship, including, without
limitation, processes of manufacture,
(iii) be free from defects in design (including, without
limitation, selection of materials) having regard to the
state of the art at the date of such design, and
(iv) be free from defects arising from failure to conform to the
Specification, except as to those portions of the
Specification relating to performance or where it is
expressly stated that such portions of the Specification are
estimates or approximations or design aims.
For the purposes of this Agreement, the term "Warranted Part" will
mean any Seller proprietary component, equipment, accessory or part
that is installed on an Aircraft at the time of delivery of such
Aircraft and that (a) is installed on such Aircraft, (b) is
manufactured to the detail design of the Seller or a subcontractor
of it and (c) bears a part number of the Seller at the time of such
delivery.
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12.1.2 EXCEPTIONS
The warranties set forth in Subclause 12.1.1 will not apply to
Buyer Furnished Equipment, nor to the engine and its associated
parts, nor to any component, accessory, equipment or part purchased
by the Buyer that is not a Warranted Part, provided, however, that:
(i) any defect in the Seller's workmanship in respect of the
installation of such items in the Aircraft, including any
failure by the Seller to conform to the installation
instructions of the manufacturers of such items that
invalidates any applicable warranty from such
manufacturers, will constitute a defect in workmanship
for the purpose of this Subclause 12.1 and be covered by
the warranty set forth in Subclause 12.1.1(ii), and
(ii) any defect inherent in the Seller's design of the
installation, in view of the state of the art at the date
of such design, that impairs the use of such items will
constitute a defect in design for the purposes of this
Subclause 12.1 and be covered by the warranty set forth
in Subclause 12.1.1(iii).
12.1.3 WARRANTY PERIOD
The warranties described in Subclauses 12.1.1 and 12.1.2
hereinabove will be limited to those defects that become apparent
within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} after delivery of the affected Aircraft.
12.1.4 BUYER'S REMEDY AND SELLER'S OBLIGATION
12.1.4.1 The Buyer's remedy and the Seller's obligation and liability under
Subclauses 12.1.1 and 12.1.2 hereinabove are limited to, at the
Seller's expense and option, the repair, replacement or correction of,
or the supply of modification kits rectifying the defect to, any
defective Warranted Part. Alternatively, the Seller may at its sole
option furnish a credit to the Buyer for the future purchase of
Material equal to the price at which the Buyer is then entitled to
acquire a replacement for the defective Warranted Part. Nothing herein
contained will obligate the Seller to correct any failure to conform
to the Specification with respect to components, equipment,
accessories or parts that the parties agree in writing at the time of
delivery of the affected Aircraft are acceptable deviations or have no
material adverse effect on the use, operation or performance of an
Aircraft.
12.1.4.2 In the event a defect covered by Subclause 12.1.1(iii) becomes
apparent within the applicable period set forth in Subclause
12.1.3(ii), and the Seller is obligated to correct such defect, the
Seller will also, if so requested by the Buyer in writing, make such
35
<PAGE>
correction in any Aircraft that has not already been delivered to the
Buyer. However, the Seller will not be responsible nor deemed to be
in default on account of any delay in delivery of any Aircraft or
otherwise, in respect of performance of this Agreement, due to the
Seller's undertaking to make such correction and, rather than accept a
delay in delivery of any such Aircraft, the Buyer and the Seller may
agree to deliver such Aircraft with subsequent correction of the
defect by the Buyer at the Seller's expense, or the Buyer may elect to
accept delivery and thereafter file a Warranty Claim as though the
defect had become apparent immediately after delivery of such
Aircraft.
12.1.5 WARRANTY CLAIM REQUIREMENTS
The Buyer's remedy and the Seller's obligation and liability under
this Subclause 12.1, with respect to each claimed defect, are
subject to the following conditions precedent:
(i) the existence of a defect covered by the provisions of this
Subclause 12.1,
(ii) the defect's having become apparent within the applicable
warranty period, as set forth in Subclause 12.1.3,
(iii) the Buyer's having submitted to the Seller proof reasonably
satisfactory to the Seller that the claimed defect is due
to a matter embraced within this Subclause 12.1, and that
such defect did not result from any act or omission of
the Buyer, including, but not limited to, any failure to
operate and maintain the affected Aircraft or part
thereof in accordance with the standards or any matter
set forth or covered in Subclause 12.1.10,
(iv) the Buyer's having returned as soon as reasonably practicable
the Warranted Part claimed to be defective to such repair
facilities as may be designated by the Seller, except
where the Buyer elects to repair a defective Warranted
Part in accordance with the provisions of Subclause
12.1.7, and
(v) the Seller's having received a Warranty Claim fulfilling the
conditions of and in accordance with the provisions of
Subclause 12.1.6 below.
12.1.6 WARRANTY ADMINISTRATION
The warranties set forth in Subclause 12.1 will be administered as
hereinafter provided:
(i) CLAIM DETERMINATION
Warranty Claim determination by the Seller will be
reasonably based upon the claim details, reports from the
Seller's regional representative, historical data logs,
inspections, tests, findings during repair, defect
analysis and other suitable documents and information.
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(ii) TRANSPORTATION {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
Transportation {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} for
sending a defective Warranted Part to the facilities
designated by the Seller will be borne by the Buyer
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
(iii) RETURN OF AN AIRCRAFT
In the event that the Buyer desires to return an Aircraft
to the Seller for consideration of a Warranty Claim, the
Buyer will notify the Seller of its intention to do so
and the Seller will, prior to such return, have the right
to inspect such Aircraft and thereafter, without
prejudice to its rights hereunder, to repair such
Aircraft, at its sole option, either at the Buyer's
facilities or at another place acceptable to the Seller.
Return of any Aircraft by the Buyer to the Seller
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
(iv) ON-AIRCRAFT WORK BY THE SELLER
In the event that a defect necessitates the dispatch by
the Seller of a working team to repair or correct such
defect at the Buyer's facilities, or in the event that
the Seller accepts the return of an Aircraft to perform
or have performed such repair or correction, then all
related expenses incurred in performing such repair or
correction will be borne {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
Any work performed by the Seller to rectify defects,
which if performed by the Buyer would not be eligible for
a warranty credit under the terms of Subclause 12.1.7
(v), will be at the Buyer's expense. {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
The Seller will perform on-Aircraft work, subject to
either of the following conditions being met:
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(a) in the Seller's opinion, such work must require the technical
expertise of the Seller, or
(b) both of
(i) the downtime of each affected Aircraft would exceed
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} days, not including
any scheduled maintenance downtime, and
(ii) the number of man hours quoted in the Seller's Service
Bulletin or batch of Service Bulletins for their
embodiment on any Aircraft would exceed {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}, it being understood that for
batches of Service Bulletins, the Seller will only count
individual Service Bulletins with more than {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} hours of elapsed time.
If the Seller is requested to perform the work, the Seller and the
Buyer will agree on a schedule and place for the work to be performed.
(v) WARRANTY CLAIM SUBSTANTIATION
In connection with each claim by the Buyer under this Subclause 12.1,
the Buyer will file a claim on the Buyer's form ("Warranty Claim")
within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} days after such defect becomes apparent. Such
form must contain at least the following {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}:
(a) description of defect and action taken, if any,
(b) date of incident and/or of removal,
(c) description of the defective part,
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(d) part number,
(e) serial number (if applicable),
(f) position on Aircraft, according to Catalog Sequence Number (CSN)
of the Illustrated Parts Catalog, Component Maintenance Manual or
Structural Repair Manual (as such documents are defined in the
A319 Product Support Agreement) as applicable,
(g) total flying hours or calendar times, as applicable, at the date
of appearance of a defect,
(h) time since last shop visit at the date of defect appearance,
(i) Manufacturer's serial number of the Aircraft and/or its
registration number,
(j) Aircraft total flying hours and/or number of landings at the date
of defect appearance,
(k) claim number,
(l) date of claim, and
(m) date of delivery of an Aircraft or part to the Buyer.
and in the case of a Warranty Claim under Subclause 12.1.7, the
additional data required under Subclause 12.1.7(iv).
Claims are to be addressed as follows:
Warranty Administration
ASCO
198 Van Buren Street
Suite 300
Herndon, VA, 20170
or any other address of which the Seller provides three (3) Working
Days' notice to the Buyer.
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
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<PAGE>
(vi) REPLACEMENTS
Replacements made pursuant to this Subclause 12.1 will be
made within the lead time defined in the Seller's Spare
Parts Price List. Replaced components, equipment,
accessories or parts will become the Seller's property.
Title to and risk of loss of any Aircraft, component,
accessory, equipment or part returned by the Buyer to the
Seller will at all times remain with the Buyer, except
that (i) when the Seller has possession of a returned
Aircraft, component, accessory, equipment or part to
which the Buyer has title, the Seller will have such
responsibility therefor as is chargeable by law to a
bailee for hire, but the Seller will not be liable for
loss of use, and (ii) title to and risk of loss of a
returned component, accessory, equipment or part will
pass to the Seller upon shipment by the Seller to the
Buyer of any item furnished by the Seller to the Buyer as
a replacement therefor. Upon the Seller's shipment to
the Buyer of any replacement component, accessory,
equipment or part provided by the Seller pursuant to this
Subclause 12.1, title to and risk of loss of such
component, accessory, equipment or part will pass to the
Buyer.
(vii) REJECTION
The Seller will provide reasonable written substantiation
in case of rejection of a claim. In such event the Buyer
will pay to the Seller reasonable inspection and test
charges incurred by the Seller in connection with the
investigation and processing of such claim.
Transportation, insurance, and any other costs associated
with the return of any Warranted Part or any other item,
equipment, component or part for which the Buyer's
warranty claim is rejected by the Seller will be borne by
the Buyer.
(viii) INSPECTION
The Seller will have the right to inspect the affected
Aircraft and documents and other records relating thereto
in the event of any claim under this Subclause 12.1.
12.1.7 IN-HOUSE WARRANTY
(i) AUTHORIZATION
The Buyer is hereby authorized to perform the repair of
Warranted Parts, subject to the terms of this Subclause
12.1.7 ("In-house Warranty"). The Buyer will notify the
Seller's representative of its decision to perform any
in-house repairs before such repairs are commenced,
unless it is not practical to do so, in which case the
Buyer will notify the Seller of the in-house repair as
soon as reasonably practicable.
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<PAGE>
(ii) CONDITIONS OF AUTHORIZATION
The Buyer will be entitled to the benefits under this
Subclause 12.1.7 for repair of Warranted Parts:
(a) only if adequate facilities and qualified personnel are
available to the Buyer,
(b) in accordance with the Seller's written instructions set
forth in documents such as the Aircraft Maintenance
Manual, Component Maintenance Manual (Manufacturer),
Component Maintenance Manual (Vendor) and Structural
Repair Manual, and
(c) only to the extent specified by the Seller, or, in the
absence of such specification, to the extent reasonably
necessary to correct the defect, in accordance with the
standards set forth in Subclause 12.1.10.
(iii) SELLER'S RIGHTS
The Seller will have the right {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} to have any Warranted Part, or
any part removed therefrom, which is claimed to be
defective, returned to the Seller, as set forth in
Subclause 12.1.6(ii), if, in the reasonable judgment of
the Seller, the nature of the defect requires technical
investigation.
The Seller will further have the right {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} to have a representative present
during the disassembly, inspection and testing of any
Warranted Part claimed to be defective.
(iv) IN-HOUSE WARRANTY CLAIM SUBSTANTIATION
Claims for In-house Warranty credit will be filed within
the time period set forth in and will contain the same
information required in, Warranty Claims under Subclause
12.1.6(v) and in addition will include:
(a) a report of technical findings with respect to the
defect,
(b) for parts required to remedy the defect:
- part numbers,
- serial numbers (if applicable),
- description of the parts,
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- quantity of parts,
- unit price of parts,
- total price of parts,
- related Seller's or third party's invoices (if
applicable),
(c) detailed number of labor hours,
(d) agreed In-house Warranty Labor Rate (defined below in
Subclause 12.1.7 (v) (a)), and
(e) total claim value.
(v) CREDIT
The Buyer's sole remedy, and the Seller's sole obligation
and liability, in respect of In-house Warranty claims,
will be a credit to the Buyer's account in U.S. Dollars.
The credit to the Buyer's account will be equal to the
direct labor cost expended in performing a repair and to
the direct cost of materials incorporated in the repair.
Such costs will be determined as set forth below.
(a) To determine direct labor costs, only man hours spent on
disassembly, inspection, repair, reassembly, and
final inspection and test (including flight tests if
flight tests prove necessary to complete a repair
under the In-house Warranty) of the Warranted Part
alone will be counted. Man hours required for
maintenance work concurrently being carried out on
the Aircraft or Warranted Part will not be included.
The man hours counted as set forth above will be
multiplied by an agreed labor rate representing
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} of the
Buyer's composite average hourly labor rate
(excluding all fringe benefits, premium time
allowances, social security charges, business taxes
and similar items) paid to the Buyer's employees
whose jobs are directly related to the performance
of the repair (the "In-house Warranty Labor Rate").
(b) Direct material costs are determined by the prices at
which the Buyer acquired such material, excluding any
parts and materials used for overhaul and furnished free
of charge by the Seller.
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(vi) LIMITATION ON CREDIT
The Buyer will in no event be credited for repair costs
(including labor and material) for any Warranted Part
exceeding {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} of the
Seller's then current catalog price {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} for a replacement of such
defective Warranted Part.
Such cost will be substantiated in writing by the Seller
upon reasonable request by the Buyer.
(vii) SCRAPPED MATERIAL
The Buyer will retain any Warranted Part defective beyond
economic repair and any defective part removed from a
Warranted Part during repair until the earlier of
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} days after submission
of a claim for In-house Warranty credit relating thereto
or the Seller's written advice to the Buyer that such
Warranted Part should be scrapped. Such parts will be
returned to the Seller within CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} days of receipt of the Seller's
request to that effect.
Notwithstanding the foregoing, the Buyer may, with the
agreement of the Seller's Field Representative, scrap any
such defective parts that are beyond economic repair and
not required for technical evaluation.
Scrapped Warranted Parts will be evidenced by a record of
scrapped material certified by an authorized
representative of the Buyer, which will be kept in the
Buyer's file for at least the duration of the warranty
periods set forth in this Subclause 12.1.
(viii) LIMITATIONS ON LIABILITY OF SELLER
THE SELLER WILL NOT BE LIABLE FOR ANY RIGHT, CLAIM OR
REMEDY, AND THE BUYER WILL INDEMNIFY THE SELLER AGAINST
THE CLAIMS OF ANY THIRD PARTIES FOR ANY DEFECT,
NONCONFORMANCE OR PROBLEM OF ANY KIND, ARISING OUT OF OR
IN CONNECTION WITH ANY REPAIR OF WARRANTED PARTS OR
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ANY OTHER ACTIONS UNDERTAKEN BY THE BUYER UNDER THIS
SUBCLAUSE 12.1.7 WHICH WAS NOT IN COMPLIANCE WITH THE
TERMS THEREOF, INCLUDING BUT NOT LIMITED TO: (I)
LIABILITY IN CONTRACT OR TORT, (II) LIABILITY ARISING
FROM THE BUYER'S ACTUAL OR IMPUTED NEGLIGENCE,
INTENTIONAL TORTS AND/OR STRICT LIABILITY, AND/OR (III)
LIABILITY TO ANY THIRD PARTIES.
12.1.8 STANDARD WARRANTY TRANSFERABILITY
The warranties provided for in this Subclause 12.1 for any
Warranted Part will accrue to the benefit of any airline in revenue
service other than the Buyer, if the Warranted Part enters into the
possession of any such airline as a result of a pooling or leasing
agreement between such airline and the Buyer or upon the Buyer's
sale of the Aircraft to any such airline in accordance with
Subclause 19.3, in accordance with the terms and subject to the
limitations and exclusions of the foregoing warranties and to
applicable laws or regulations.
12.1.9 WARRANTY FOR CORRECTED, REPLACEMENT OR REPAIRED
WARRANTED PARTS
Whenever any Warranted Part that contains a defect for which the
Seller is liable under Subclause 12.1 has been corrected, repaired
or replaced pursuant to the terms of this Clause 12, the period of
the Seller's warranty with respect to such corrected, repaired or
replacement Warranted Part, whichever may be the case, will be the
remaining portion of the original warranty in respect of such
corrected, repaired or replacement Warranted Part. In the event
that a defect is attributable to a defective repair or replacement
by the Buyer, a Warranty Claim with respect to such defect will not
be allowable, notwithstanding any subsequent correction or repairs,
and will immediately terminate the remaining warranties under this
Subclause 12.1 in respect of the affected Warranted Part.
12.1.10 GOOD AIRLINE OPERATION - NORMAL WEAR AND TEAR
The Buyer's rights under this Subclause 12.1 are subject to the
Aircraft and each component, equipment, accessory and part thereof
being maintained, overhauled, repaired and operated in accordance
with good commercial airline practice and in general compliance
with all technical documentation and maintenance recommendations of
the Seller (if any), the Manufacturer, the Vendors or the
manufacturer of the Powerplants and its associated parts and all
applicable rules, regulations and directives of the FAA.
The Seller's liability under this Subclause 12.1 will not extend to
normal wear and tear nor to:
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(i) any Aircraft or component, equipment, accessory or part
thereof that has been repaired, altered or modified after
delivery by a party other than the Seller or in a manner
other than that set forth in Subclause 12.1.7 or
otherwise approved by the Seller;
(ii) any Aircraft or component, equipment, accessory or part
thereof that has been operated in a damaged state; or
(iii) any component, equipment, accessory or part from which the
trademark, trade name, part or serial number or other
identification marks have been removed.
This waiver of the Seller's liability by the Buyer will not apply in
the cases of Subclause 12.1.10 (i) and Subclause 12.1.10 (ii) above if
the Buyer submits reasonable evidence that the defect did not arise
from nor was contributed to by either of said cases.
12.2 SELLER SERVICE LIFE POLICY
In addition to the warranties set forth in Subclause 12.1 above,
the Seller further agrees that should a Failure occur in any Item,
then, subject to the general conditions and limitations set forth
in Subclause 12.2.4 below, the provisions of this Subclause 12.2
will apply.
12.2.1 DEFINITIONS
For the purposes of this Subclause 12.2, the following definitions
will apply:
12.2.1.1 "Item" means any of the Seller components, equipment, accessories or
parts listed in Exhibit G hereto which are installed on an Aircraft at
any time during the period of effectiveness of the Service Life Policy
as defined below in Subclause 12.2.2.
12.2.1.2 "Failure" means any breakage of, or defect in, an Item that has
occurred, that can reasonably be expected to occur on a repetitive or
fleetwide basis, and that materially impairs the utility or safety of
the Item, provided that any such breakage of, or defect in, any Item
did not result from any breakage or defect in any other Aircraft part
or component or from any other extrinsic force.
12.2.2 PERIODS AND SELLER'S UNDERTAKING
Subject to the general conditions and limitations set forth in
Subclause 12.2.4 below, the Seller agrees that if a Failure occurs
in an Item within {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} years after the delivery of
said Aircraft to the Buyer, the Seller will, at its own discretion,
as promptly as practicable and for a price that reflects the
Seller's financial participation in the cost as hereinafter
provided, either:
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12.2.2.1 design and furnish to the Buyer a correction for such Item subject to
a Failure and provide any parts required for such correction
(including Seller designed standard parts but excluding industry
standard parts unless a part of an Item), or,
12.2.2.2 replace such Item.
12.2.3 SELLER'S PARTICIPATION IN THE COST
Any part or Item that the Seller is required to furnish to the
Buyer under this Service Life Policy in connection with the
correction or replacement of an Item will be furnished to the Buyer
at the Seller's current sales price therefor, less the Seller's
financial participation, which will be determined in accordance
with the following formula:
C (N - T)
-----------------
P = N
where
P: financial participation of the Seller,
C: the Seller's then current sales price for the required Item or
required Seller designed parts,
T: total time in months, at time of Failure, since delivery of the
particular Aircraft in which the Item subject to such Failure was
originally installed,
N: {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} months.
12.2.4 GENERAL CONDITIONS AND LIMITATIONS
12.2.4.1 Notwithstanding Subclause 12.2.3, the undertakings given in this
Subclause 12.2 will not be valid during the period applicable to an
Item under Subclause 12.1.
12.2.4.2 The Buyer's remedy and the Seller's obligation and liability under
this Service Life Policy are subject to compliance by the Buyer with
the following conditions precedent:
(i) The Buyer will maintain log books and other historical
records with respect to each Item adequate to enable
determination as to whether the alleged Failure is
covered by this Service Life Policy and, if so, to define
the portion of the cost to be borne by the Seller in
accordance with Subclause 12.2.3 above.
<PAGE>
(ii) The Buyer will keep the Seller informed of any significant
incidents relating to an Aircraft, howsoever occurring or
recorded, if the failure to so inform the Seller materially
prejudices the Seller's position.
(iii) The conditions of Subclause 12.1.10 will have been complied
with.
(iv) The Buyer will carry out specific structural inspection
programs for monitoring purposes as may be established from
time to time by the Seller. Such programs will be, to the
extent possible, compatible with the Buyer's operational
requirements and will be carried out at the Buyer's
expense. Reports relating thereto will be regularly
furnished to the Seller.
(v) In the case of any breakage or defect, the Buyer will
report the same in writing to the Seller within
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} days after any breakage
or defect in an Item becomes apparent, whether or not said
breakage or defect can reasonably be expected to occur in
any other Aircraft, and the Buyer will inform the Seller in
sufficient detail about the breakage or defect to enable
the Seller to determine whether said breakage or defect is
subject to this Service Life Policy.
12.2.4.3 Except as otherwise provided in this Subclause 12.2, any claim under
this Service Life Policy will be administered as provided in, and will
be subject to the terms and conditions of, Subclause 12.1.6.
12.2.4.4 In the event that the Seller will have issued a modification
applicable to an Aircraft, the purpose of which is to avoid a Failure,
the Seller may elect to offer to supply to the Buyer the necessary
modification kit free of charge {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT}. If such a kit is so offered
to the Buyer, then, in respect of such Failure and any Failures that
could ensue therefrom, the validity of the Seller's commitment under
this Subclause 12.2 will be subject to the Buyer's incorporating such
modification in the relevant Aircraft, within a reasonable time, as
promulgated by the Seller and in accordance with the Seller's
instructions.
12.2.4.5 THIS SERVICE LIFE POLICY IS NEITHER A WARRANTY, PERFORMANCE GUARANTEE,
NOR AN AGREEMENT TO MODIFY ANY AIRCRAFT OR AIRFRAME COMPONENTS TO
CONFORM TO NEW DEVELOPMENTS OCCURRING IN THE STATE OF AIRFRAME DESIGN
AND MANUFACTURING ART. THE SELLER'S OBLIGATION UNDER THIS SUBCLAUSE
12.2 IS TO MAKE ONLY THOSE CORRECTIONS TO THE ITEMS OR FURNISH
REPLACEMENTS THEREFOR AS PROVIDED IN THIS SUBCLAUSE 12.2. THE BUYER'S
SOLE REMEDY AND RELIEF FOR THE NONPERFORMANCE OF ANY OBLIGATION OR
LIABILITY OF THE SELLER ARISING UNDER OR BY VIRTUE OF THIS SERVICE
LIFE POLICY WILL BE IN MONETARY DAMAGES,
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LIMITED TO THE AMOUNT THE BUYER REASONABLY EXPENDS IN PROCURING A
CORRECTION OR REPLACEMENT FOR ANY ITEM THAT IS THE SUBJECT OF A
FAILURE COVERED BY THIS SERVICE LIFE POLICY AND TO WHICH SUCH
NONPERFORMANCE IS RELATED, LESS THE AMOUNT THAT THE BUYER OTHERWISE
WOULD HAVE BEEN REQUIRED TO PAY UNDER THIS SUBCLAUSE 12.2 IN
RESPECT OF SUCH CORRECTED OR REPLACEMENT ITEM. WITHOUT LIMITING THE
EXCLUSIVITY OF WARRANTIES AND GENERAL LIMITATIONS OF LIABILITY
PROVISIONS SET FORTH IN SUBCLAUSE 12.5, THE BUYER HEREBY WAIVES,
RELEASES AND RENOUNCES ALL CLAIMS TO ANY FURTHER DIRECT, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS AND ALL OTHER
RIGHTS, CLAIMS AND REMEDIES, ARISING UNDER OR BY VIRTUE OF THIS
SERVICE LIFE POLICY.
12.2.5 TRANSFERABILITY
Except as provided in Subclause 19.3, the Buyer's rights under this
Subclause 12.2 will not be assigned, sold, leased, transferred or
otherwise alienated by operation of law or otherwise, without the
Seller's prior written consent.
Any unauthorized assignment, sale, lease, transfer or other
alienation of the Buyer's rights under this Service Life Policy
will, as to the particular Aircraft involved, immediately void this
Service Life Policy in its entirety.
12.3 VENDOR WARRANTIES
12.3.1 SELLER'S SUPPORT
Prior to delivery of the first Aircraft under this Agreement, the
Seller will obtain from all Vendors listed in the Supplier Product
Support Agreements manual enforceable and transferable warranties
and indemnities against patent infringements for all of the
components, equipment, accessories and parts of the Vendors that
are installed in an Aircraft at the time of delivery thereof
("Vendor Parts," it being understood that such term will not
include the Propulsion Systems, Buyer Furnished Equipment or other
equipment selected by the Buyer to be supplied by Vendors with whom
the Seller has no existing enforceable warranty agreements). The
Seller will also obtain enforceable and transferable Vendor service
life policies from landing gear Vendors for structural landing gear
elements. The Seller undertakes to supply to the Buyer such Vendor
warranties, Vendor service life policies and indemnities against
patent infringements substantially in the form summarized in the
Supplier Product Support Agreements manual.
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12.3.2 VENDOR'S DEFAULT
12.3.2.1 In the event that any Vendor under any standard warranty or indemnity
against patent infringements obtained by the Seller pursuant to
Subclause 12.3.1 or Clause 13 hereof defaults in the performance of
any material obligation under such warranty or indemnity against
patent infringements with respect to a Vendor Part, and the Buyer
submits within a reasonable time to the Seller reasonable proof that
such default has occurred, then Subclause 12.1 or Clause 13 of this
Agreement will apply to the extent the same would have been applicable
had such Vendor Part been a Warranted Part except that, for
obligations covered under Subclause 12.1 {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
12.3.2.2 In the event that any Vendor under any Vendor service life policy
obtained by the Seller pursuant to Subclause 12.3.1 hereof defaults in
the performance of any material obligation with respect thereto, and
the Buyer submits within reasonable time to the Seller reasonable
proof that such default has occurred, then Subclause 12.2 of this
Agreement will apply to the extent the same would have been applicable
had such component, equipment, accessory or part been listed in
Exhibit G hereto.
12.3.2.3 At the Seller's request, the Buyer will assign to the Seller, and the
Seller will be subrogated to, all of the Buyer's rights against the
relevant Vendor, with respect to and arising by reason of such default
and the Buyer will provide reasonable assistance to enable the Seller
to enforce the rights so assigned.
12.4 INTERFACE COMMITMENT
12.4.1 INTERFACE PROBLEM
If the Buyer experiences any technical problem in the operation of
an Aircraft or its systems due to a malfunction {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}, the cause of which, after due and reasonable
investigation, is not readily identifiable by the Buyer, but which
the Buyer reasonably believes to be attributable to the design
characteristics of one or more components of the Aircraft (an
"Interface Problem"), the Seller will, if requested by the Buyer,
and without additional charge to the Buyer, except for
transportation of the Seller's personnel to the Buyer's facilities,
promptly conduct or have conducted an investigation and analysis of
such problem to determine, if possible, the cause or causes of the
problem and to recommend such corrective action as may be feasible,
provided, however, that if the Seller determines, after such due
and reasonable investigation, that the Interface Problem was due to
or caused by any default by the Buyer in performance of its
obligations hereunder, the Buyer will pay to the Seller all
reasonable costs and expenses incurred by the Seller during such
investigation. The
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Buyer will furnish to the Seller all data and information in the
Buyer's possession relevant to the Interface Problem and will
cooperate with the Seller in the conduct of the Seller's
investigations and such tests as may be required.
At the conclusion of such investigation the Seller will promptly
advise the Buyer in writing of the Seller's opinion as to the cause
or causes of the Interface Problem and the Seller's recommendations
as to corrective action.
12.4.2 SELLER'S RESPONSIBILITY
If the Seller determines that the Interface Problem is primarily
attributable to the design of a Warranted Part, the Seller will, if
requested by the Buyer, correct the design of such Warranted Part,
pursuant to the terms and conditions of Subclause 12.1.
12.4.3 VENDOR'S RESPONSIBILITY
If the Seller determines that the Interface Problem is primarily
attributable to the design of a component, equipment, accessory or
part other than a Warranted Part ("Vendor Component"), the Seller
will, if requested by the Buyer, reasonably assist the Buyer in
processing any warranty claim the Buyer may have against the
manufacturer of such Vendor Component.
12.4.4 JOINT RESPONSIBILITY
If the Seller determines that the Interface Problem is attributable
partially to the design of a Warranted Part and partially to the
design of any Vendor Component, the Seller will, if requested by
the Buyer, seek a solution to the Interface Problem through
cooperative efforts of the Seller and any Vendor involved. The
Seller will promptly advise the Buyer of such corrective action as
may be proposed by the Seller and any such Vendor. Such proposal
will be consistent with any then existing obligations of the Seller
hereunder and of any such Vendor to the Buyer. Such corrective
action, when reasonably accepted by the Buyer, will constitute full
satisfaction of any claim the Buyer may have against either the
Seller or any such Vendor with respect to such Interface Problem.
12.4.5 GENERAL
12.4.5.1 All requests under this Subclause 12.4 will be directed both to the
Seller and the affected Vendors.
12.4.5.2 Except as specifically set forth in this Subclause 12.4, this
Subclause 12.4 will not be deemed to impose on the Seller any
obligations not expressly set forth elsewhere in this Agreement.
50
<PAGE>
12.4.5.3 All reports, recommendations, data and other documents furnished by
the Seller to the Buyer pursuant to this Subclause 12.4 will be deemed
to be delivered under this Agreement and will be subject to the terms,
covenants and conditions set forth in this Clause 12 and in Subclause
22.4.
12.5 EXCLUSIVITY OF WARRANTIES AND
GENERAL LIMITATIONS OF LIABILITY
THIS CLAUSE 12 (INCLUDING ITS SUBPROVISIONS) SETS FORTH THE
EXCLUSIVE WARRANTIES, EXCLUSIVE LIABILITIES AND EXCLUSIVE
OBLIGATIONS OF THE SELLER, AND THE EXCLUSIVE REMEDIES AVAILABLE TO
THE BUYER, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, ARISING FROM
ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND IN ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY, PART OR SERVICE DELIVERED UNDER
THIS AGREEMENT.
THE BUYER RECOGNIZES THAT THE RIGHTS, WARRANTIES AND REMEDIES IN
THIS CLAUSE 12 ARE ADEQUATE AND SUFFICIENT TO PROTECT THE BUYER
FROM ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND IN THE
GOODS AND SERVICES SUPPLIED UNDER THIS AGREEMENT. THE BUYER HEREBY
WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS,
GUARANTEES AND LIABILITIES OF THE SELLER AND ALL OTHER RIGHTS,
CLAIMS AND REMEDIES OF THE BUYER AGAINST THE SELLER, WHETHER
EXPRESS OR IMPLIED BY CONTRACT, TORT, OR STATUTORY LAW OR
OTHERWISE, WITH RESPECT TO ANY NONCONFORMITY OR DEFECT OR PROBLEM
OF ANY KIND IN ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY, PART
OR SERVICE DELIVERED UNDER THIS AGREEMENT, INCLUDING BUT NOT
LIMITED TO:
(1) ANY IMPLIED WARRANTY OF MERCHANTABILITY AND/OR FITNESS FOR ANY
GENERAL OR PARTICULAR PURPOSE;
(2) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE;
(3) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
(4) ANY RIGHT, CLAIM OR REMEDY FOR TORT, UNDER ANY THEORY OF
LIABILITY, HOWEVER ALLEGED, INCLUDING, BUT NOT LIMITED TO,
ACTIONS AND/OR CLAIMS FOR NEGLIGENCE, GROSS NEGLIGENCE,
INTENTIONAL ACTS, WILLFUL DISREGARD, IMPLIED WARRANTY, PRODUCT
LIABILITY, STRICT LIABILITY OR FAILURE TO WARN;
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(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE UNIFORM
COMMERCIAL CODE OR ANY OTHER STATE OR FEDERAL STATUTE;
(6) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY REGULATIONS OR
STANDARDS IMPOSED BY ANY INTERNATIONAL, NATIONAL, STATE OR
LOCAL STATUTE OR AGENCY;
(7) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY AIRCRAFT, COMPONENT,
EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER THIS AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY AIRCRAFT, COMPONENT,
EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER THIS AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGE.
THE WARRANTIES AND SERVICE LIFE POLICY PROVIDED BY THIS AGREEMENT
WILL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY THE SELLER AND THE BUYER. IN THE EVENT THAT
ANY PROVISION OF THIS CLAUSE 12 SHOULD FOR ANY REASON BE HELD
UNLAWFUL, OR OTHERWISE UNENFORCEABLE, THE REMAINDER OF THIS CLAUSE
12 WILL REMAIN IN FULL FORCE AND EFFECT.
12.6 DUPLICATE REMEDIES
The remedies provided to the Buyer under this Clause 12 as to any
defect in respect of the Aircraft or any part thereof are mutually
exclusive and not cumulative. The Buyer will be entitled to the
remedy that provides the maximum benefit to it, as the Buyer may
elect, pursuant to the terms and conditions of this Clause 12 for
any such particular defect for which remedies are provided under
this Clause 12; provided, however, that the Buyer will not be
entitled to elect a remedy under one part of this Clause 12 that
constitutes a duplication of any remedy elected by it under any
other part hereof for the same defect. The Buyer's rights and
remedies herein for the nonperformance of any obligations or
liabilities of the Seller arising under these warranties will be in
monetary damages limited to the amount the Buyer expends in
procuring a correction or replacement for any covered part subject
to a defect or nonperformance covered by this Clause 12, and the
Buyer will not have any right to require specific performance by
the
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<PAGE>
Seller {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
UNQUOTE
In consideration of the assignment and subrogation by AVSA under
this Clause 12 in favor of Northwest in respect of AVSA's rights
against and obligations to the Manufacturer under the provisions
quoted above, Northwest hereby accepts such assignment and
subrogation and agrees to be bound by all of the terms, conditions
and limitations therein contained, specifically including, without
limitation, the following:
THIS CLAUSE 12 (INCLUDING ITS SUBCLAUSES) SETS FORTH THE EXCLUSIVE
WARRANTIES, EXCLUSIVE LIABILITIES AND EXCLUSIVE OBLIGATIONS OF
AVSA, AND THE EXCLUSIVE REMEDIES AVAILABLE TO NORTHWEST, WHETHER
UNDER THIS AGREEMENT OR OTHERWISE, ARISING FROM ANY DEFECT OR
NONCONFORMITY OR PROBLEM OF ANY KIND IN ANY AIRCRAFT, COMPONENT,
EQUIPMENT, ACCESSORY, PART OR SERVICE DELIVERED UNDER THIS
AGREEMENT.
NORTHWEST RECOGNIZES THAT THE RIGHTS, WARRANTIES AND REMEDIES IN
THIS CLAUSE 12 ARE ADEQUATE AND SUFFICIENT TO PROTECT NORTHWEST
FROM ANY DEFECT OR NONCONFORMITY OR PROBLEM OF ANY KIND IN THE
GOODS AND SERVICES SUPPLIED UNDER THIS AGREEMENT. NORTHWEST HEREBY
WAIVES, RELEASES AND RENOUNCES ALL OTHER WARRANTIES, OBLIGATIONS,
GUARANTEES AND LIABILITIES OF AVSA AND ALL OTHER RIGHTS, CLAIMS AND
REMEDIES OF NORTHWEST AGAINST AVSA, WHETHER EXPRESS OR IMPLIED BY
CONTRACT, TORT, OR STATUTORY LAW OR OTHERWISE, WITH RESPECT TO ANY
NONCONFORMITY OR DEFECT OR PROBLEM OF ANY KIND IN ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY, PART OR SERVICE DELIVERED UNDER
THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO:
(1) ANY IMPLIED WARRANTY OF MERCHANTABILITY AND/OR FITNESS FOR ANY
GENERAL OR PARTICULAR PURPOSE;
(2) ANY IMPLIED OR EXPRESS WARRANTY ARISING FROM COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE;
(3) ANY RIGHT, CLAIM OR REMEDY FOR BREACH OF CONTRACT;
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(4) ANY RIGHT, CLAIM OR REMEDY FOR TORT, UNDER ANY THEORY OF
LIABILITY, HOWEVER ALLEGED, INCLUDING, BUT NOT LIMITED TO,
ACTIONS AND/OR CLAIMS FOR NEGLIGENCE, GROSS NEGLIGENCE,
INTENTIONAL ACTS, WILLFUL DISREGARD, IMPLIED WARRANTY,
PRODUCT LIABILITY, STRICT LIABILITY OR FAILURE TO WARN;
(5) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER THE UNIFORM
COMMERCIAL CODE OR ANY OTHER STATE OR FEDERAL STATUTE;
(6) ANY RIGHT, CLAIM OR REMEDY ARISING UNDER ANY REGULATIONS OR
STANDARDS IMPOSED BY ANY INTERNATIONAL, NATIONAL, STATE OR
LOCAL STATUTE OR AGENCY;
(7) ANY RIGHT, CLAIM OR REMEDY TO RECOVER OR BE COMPENSATED FOR:
(a) LOSS OF USE OR REPLACEMENT OF ANY AIRCRAFT, COMPONENT,
EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER THIS
AGREEMENT;
(b) LOSS OF, OR DAMAGE OF ANY KIND TO, ANY AIRCRAFT,
COMPONENT, EQUIPMENT, ACCESSORY OR PART PROVIDED UNDER
THIS AGREEMENT;
(c) LOSS OF PROFITS AND/OR REVENUES;
(d) ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGE.
THE WARRANTIES AND SERVICE LIFE POLICY PROVIDED BY THIS AGREEMENT
WILL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY AVSA AND NORTHWEST. IN THE EVENT THAT ANY
PROVISION OF THIS CLAUSE 12 SHOULD FOR ANY REASON BE HELD UNLAWFUL,
OR OTHERWISE UNENFORCEABLE, THE REMAINDER OF THIS CLAUSE 12 WILL
REMAIN IN FULL FORCE AND EFFECT.
The remedies provided to Northwest under this Clause 12 as to any
defect in respect of the Aircraft or any part thereof are mutually
exclusive and not cumulative. Northwest will be entitled to the
remedy that provides the maximum benefit to it, as Northwest may
elect, pursuant to the terms and conditions of this Clause 12 for
any such particular defect for which remedies are provided under
this Clause 12; provided, however, that Northwest will not be
entitled to elect a remedy under one part of this Clause 12 that
constitutes a duplication of any remedy elected by it under any
other part hereof for the
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same defect. Northwest's rights and remedies herein for the
nonperformance of any obligations or liabilities of AVSA arising
under these warranties will be in monetary damages limited to the
amount Northwest expends in procuring a correction or replacement
for any covered part subject to a defect or nonperformance covered
by this Clause 12, and Northwest will not have any right to require
specific performance by AVSA {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
12.7 NEGOTIATED AGREEMENT
Northwest and AVSA agree that this Clause 12 has been the subject
of discussion and negotiation and is fully understood by the
parties and that the price of the Aircraft and the other mutual
agreements of the parties set forth in this Agreement were arrived
at in consideration of, INTER ALIA, the provisions of this Clause
12, specifically including the Exclusivity of Warranties and
General Limitations of Liability provisions and the Duplicate
Remedies provisions set forth in Subclause 12.5 and following
Subclause 12.6.
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13 - PATENT INDEMNITY
AVSA, in its capacity as "Buyer" under its arrangements with the
Manufacturer, has negotiated and obtained the following Patent
Indemnity from the Manufacturer with respect to the Aircraft,
subject to the terms, conditions, limitations and restrictions
(including, but not limited to, the waiver, release and
renunciation provision) all as hereinafter set out. AVSA hereby
assigns to Northwest, and Northwest hereby accepts, all of the
rights and obligations of AVSA in its capacity as "Buyer" as
aforesaid under the said Patent Indemnity and AVSA subrogates
Northwest into all such rights and obligations in respect of the
Aircraft. AVSA hereby warrants to Northwest that it has all
requisite authority to make the foregoing assignment and effect the
foregoing subrogation to and in favor of Northwest and that it will
not enter into any amendment of the provisions so assigned without
the prior written consent of Northwest. Capitalized terms utilized
in the following quoted provisions have the meanings assigned
thereto in this Agreement, except that the term "Seller" refers to
the Manufacturer and the term "Buyer" refers to AVSA.
QUOTE
13.1 SCOPE
The Seller will indemnify the Buyer from and against any damages,
costs and expenses including reasonable legal costs (excluding
damages, costs, expenses, loss of profits and other liabilities in
respect of or resulting from loss of use of any Aircraft):
(1) to the extent of {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} thereof in
case of any actual or alleged infringement by any Aircraft or
any Warranted Part or the use thereof of
(a) any British, French, German, Spanish or US patent, or
(b) any patent issued under the laws of any other country in
which Northwest may lawfully operate the Aircraft, provided
that:
(i) from the time of design of such Aircraft, accessory,
equipment or part and until infringement claims are
resolved, such country and the flag country of the
Aircraft is each a party to the Chicago Convention
on International Civil Aviation of December 7, 1944,
and is fully entitled to all benefits of Article 27
thereof, or in the alternative,
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(ii) from such time of design and until infringement
claims are resolved, such country and the flag
country of the Aircraft is each a party to the
International Convention for the Protection of
Industrial Property of March 20, 1883 (known as the
"Paris Convention").
(2) to the extent of {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} thereof in
case of any actual or alleged infringement by any Aircraft or
any Warranted Part or the use thereof of any patent issued
under the laws of any country not covered by (1) above in
which the Buyer is from time to time lawfully operating the
Aircraft.
The Seller's undertaking under this Clause 13 will not apply to
components, accessories, equipment or parts which are not Warranted
Parts.
13.2 SELLER'S ACTION
Should the Buyer be enjoined from using any part of an Aircraft by
reason of infringement of a patent covered by Subclause 13.1, the
Seller will, at its option and expense, either (i) procure for the
Buyer the right to use such part free of any liability for patent
infringement or (ii) as soon as possible replace such part with a
noninfringing substitute otherwise complying with the requirements
of this Agreement.
13.3 SELLER'S OBLIGATION
The Seller's obligation hereunder with respect to any actual or
alleged infringement is conditioned upon commencement of suit
against the Buyer for infringement or the Buyer's receipt of a
written claim alleging infringement, and upon written notice by the
Buyer to the Seller within {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} days after receipt by the
Buyer of notice of the institution of such suit or receipt of such
claim, giving particulars thereof. The Seller will have the option
but not the obligation at any time to conduct negotiations with the
party or parties charging infringement and may intervene in any
suit commenced. Whether or not the Seller intervenes in any such
suit, it will be entitled at any stage of the proceedings to
assume, conduct or control the defense thereof.
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The Seller's obligation hereunder with respect to any actual or alleged
infringement is also conditioned upon (i) the Buyer's promptly furnishing
to the Seller all the data, papers, records and other assistance within the
control of the Buyer material to the resistance of or defense against any
such charge or suits for infringement, (ii) the Buyer's use of diligent
efforts in full cooperation with the Seller to reduce royalties, damages,
costs and expenses involved, (iii) the Seller's prior approval of the
Buyer's payment, assumption or admission of any liabilities, expenses,
costs or royalties for which the Seller is asked to respond and (iv) the
Buyer's not otherwise acting in a manner prejudicial to its or the Seller's
defense of the action.
13.4 WAIVER
THE INDEMNITY PROVIDED IN THIS CLAUSE 13 AND THE OBLIGATIONS AND
LIABILITIES OF THE SELLER UNDER THIS CLAUSE 13 ARE EXCLUSIVE AND IN
SUBSTITUTION FOR, AND THE BUYER HEREBY WAIVES, RELEASES AND RENOUNCES ALL
OTHER INDEMNITIES, WARRANTIES, OBLIGATIONS, GUARANTEES AND LIABILITIES ON
THE PART OF THE SELLER AND RIGHTS, CLAIMS AND REMEDIES OF THE BUYER AGAINST
THE SELLER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE (INCLUDING
WITHOUT LIMITATION ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY
ARISING FROM OR WITH RESPECT TO LOSS OF USE OR REVENUE OR CONSEQUENTIAL
DAMAGES), WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT INFRINGEMENT OR THE
LIKE BY ANY AIRCRAFT, ACCESSORY, EQUIPMENT OR PART, OR THE USE OR SALE
THEREOF, PROVIDED THAT, IN THE EVENT THAT ANY OF THE AFORESAID PROVISIONS
SHOULD FOR ANY REASON BE HELD UNLAWFUL OR OTHERWISE INEFFECTIVE, THE
REMAINDER OF THIS SUBCLAUSE 13.4 WILL REMAIN IN FULL FORCE AND EFFECT.
THIS PATENT INDEMNITY WILL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT BY A
WRITTEN INSTRUMENT SIGNED BY THE SELLER AND THE BUYER.
UNQUOTE
In consideration of the assignment and subrogation by AVSA under this
Clause 13 in favor of Northwest in respect of AVSA's rights against and
obligations to the Manufacturer under the provisions quoted above,
Northwest hereby accepts such assignment and subrogation and agrees to be
bound by all of the terms, conditions and limitations therein contained
(specifically including, without limitation, the waiver, release and
renunciation provision).
THE INDEMNITY PROVIDED IN THIS CLAUSE 13 AND THE OBLIGATIONS AND
LIABILITIES OF AVSA UNDER THIS CLAUSE 13 ARE EXCLUSIVE AND IN SUBSTITUTION
FOR, AND NORTHWEST HEREBY WAIVES, RELEASES
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AND RENOUNCES ALL OTHER INDEMNITIES, WARRANTIES, OBLIGATIONS, GUARANTEES
AND LIABILITIES ON THE PART OF AVSA AND RIGHTS, CLAIMS AND REMEDIES OF
NORTHWEST AGAINST AVSA, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE
(INCLUDING WITHOUT LIMITATION ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR
REMEDY ARISING FROM OR WITH RESPECT TO LOSS OF USE OR REVENUE OR
CONSEQUENTIAL DAMAGES), WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT
INFRINGEMENT OR THE LIKE BY ANY AIRCRAFT, ACCESSORY, EQUIPMENT OR PART,
OR THE USE OR SALE THEREOF, PROVIDED THAT, IN THE EVENT THAT ANY OF THE
AFORESAID PROVISIONS SHOULD FOR ANY REASON BE HELD UNLAWFUL OR OTHERWISE
INEFFECTIVE, THE REMAINDER OF THIS CLAUSE WILL REMAIN IN FULL FORCE AND
EFFECT. THIS PATENT INDEMNITY WILL NOT BE EXTENDED, ALTERED OR VARIED
EXCEPT BY A WRITTEN INSTRUMENT SIGNED BY AVSA AND NORTHWEST.
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14 - TECHNICAL PUBLICATIONS
Technical publications will be supplied to Northwest pursuant to Clause 2
of the A319 Product Support Agreement.
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15 - FIELD ASSISTANCE
Field services will be provided to Northwest pursuant to Clause 3 of the
A319 Product Support Agreement.
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16 - TRAINING
Training and training aids will be provided to Northwest pursuant to Clause
4 of the A319 Product Support Agreement.
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17- VENDORS' PRODUCT SUPPORT
17.1 VENDOR PRODUCT SUPPORT AGREEMENTS
17.1.1 AVSA has obtained product support agreements transferable to Northwest
from Vendors of Seller Furnished Equipment listed in the Specification
("Product Support Agreements").
17.1.2 These Product Support Agreements are based on the "World Airlines and
Suppliers Guide" and include Vendor commitments as contained in the
Supplier Product Support Agreements with respect to warranties and
guarantees (copies of which have been provided to Northwest).
17.2 VENDOR COMPLIANCE
AVSA will monitor Vendor compliance with support commitments defined
in the Product Support Agreements and will take remedial action
together with Northwest if requested by Northwest in writing.
17.3 VENDOR PART REPAIR STATIONS
17.3.1 The Manufacturer has developed with the Vendors a program aimed at
building a comprehensive network of repair stations in North America
for those Vendor Parts originating from outside this territory.
17.3.2 As a result of the above, most Vendor Parts are now repairable in
North America, and corresponding repair stations are listed in a
document, the AOG and Repair Guide, which is issued and regularly
updated by the Manufacturer.
Vendor Parts that have to be repaired outside North America will be
sent by Northwest to {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}. All such Vendor Parts will
be returned to Northwest with all applicable FAA tagging.
17.3.3 AVSA will support Northwest in cases where the agreed repair turn time
of an approved repair station is not met by causing free-of-charge
loans or exchanges (as specified in the relevant Supplier Product
Support Agreements manual) to be offered to Northwest.
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18- BUYER FURNISHED EQUIPMENT AND DATA
18.1 INSTALLATION AND DELIVERY
18.1.1 Without additional charge, and in accordance with the Specification,
AVSA will cause the Manufacturer to provide for the installation of
the Buyer Furnished Equipment.
18.1.2 AVSA will cause the Manufacturer to advise Northwest of the dates by
which, in the planned release of engineering for an Aircraft, the
Manufacturer reasonably requires a written detailed description of the
dimensions and weight of Buyer Furnished Equipment for such Aircraft
and information necessary for the installation and operation thereof,
and Northwest will furnish such detailed description and information
by the dates so specified. Such dimensions and weights will not
thereafter be revised unless mutually agreed and set forth in an SCN.
18.1.3 AVSA will also cause the Manufacturer to furnish in sufficient time to
Northwest a schedule of dates by and locations to which Buyer
Furnished Equipment for such Aircraft must be delivered to the
Manufacturer to permit installation in and delivery of such Aircraft
in accordance with the delivery schedule referred to in Clause 9.
Northwest will furnish such equipment to the Manufacturer at such
locations by such dates. Northwest, at its own expense, will also
furnish or cause to be present at the works where such Buyer Furnished
Equipment is to be installed, when reasonably requested by the
Manufacturer, field service representatives to provide the
Manufacturer technical advice regarding the installation and
calibration of Buyer Furnished Equipment.
18.2 SPECIFICATION AND AIRWORTHINESS APPROVALS
Northwest warrants that all Buyer Furnished Equipment (other than
Buyer Furnished Equipment manufactured by the Manufacturer) will meet
the requirements of the Specification, will comply with applicable LBA
and FAA regulations and will be approved by the LBA and the FAA for
installation and use on an Aircraft at the time of delivery of such
Aircraft. AVSA will bear no expense in connection with adjusting and
calibrating Buyer Furnished Equipment to the extent necessary to
obtain LBA and FAA approval, unless such work is due to an Aircraft
Interface Problem, mishandling or excessive use on the part of AVSA or
the Manufacturer.
18.3 DELAY AND NONPERFORMANCE
Any delay or failure in complying with the warranty in the foregoing
Subclause 18.2, in providing the descriptive information and services
mentioned in Subclause 18.1 hereof, in furnishing the Buyer Furnished
Equipment or in obtaining any required approval of such equipment
under the LBA or FAA regulations will be the responsibility of
Northwest, to the extent that such delay or failure will in turn,
(i) delay the performance of any act to be performed by or on behalf
of AVSA or the Manufacturer, or
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(ii) cause the Final Contract Price of the Aircraft to be increased by
the amount of AVSA's additional reasonable and substantiated costs,
if any, attributable to such delay or failure by Northwest,
including, without limitation, storage, taxes, insurance and costs
of out-of-sequence installation,
and any resulting cost will be borne by Northwest.
Further, in any such event, AVSA shall give written notice to
Northwest and, unless Northwest has cured such noncompliance within
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} Working Days after such notice, AVSA may elect
to take any of the actions set forth below in Subclauses 18.3.2,
18.3.3 or 18.3.4.
18.3.2 At Northwest's request, AVSA will be entitled to cause the
Manufacturer to purchase and install the Buyer Furnished Equipment
involved, in which event the Final Contract Price of the affected
Aircraft will be increased by the purchase price of such Buyer
Furnished Equipment plus reasonable costs and expenses incurred by the
Manufacturer for handling charges, transportation, insurance,
packaging and, if so required and not already provided for in the
Final Contract Price of such Aircraft, for adjustment and calibration.
18.3.3 If (i) delivery of the Buyer Furnished Equipment is delayed by more
than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} days after the date specified by the
Manufacturer for the delivery of such Buyer Furnished Equipment or
(ii) the Buyer Furnished Equipment required to obtain certification of
the Aircraft in accordance with Subclause 2.3 hereof is not approved
by the LBA or the FAA within {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} days after the date specified by
the Manufacturer for the delivery of such Buyer Furnished Equipment,
then, notwithstanding the terms of Subclause 2.3, AVSA will be
entitled to deliver the affected Aircraft where it is then located
with no obligation to install such Buyer Furnished Equipment. Upon
such delivery AVSA will be relieved of all obligations to install such
Buyer Furnished Equipment.
18.3.4 If (i) the Buyer Furnished Equipment is delayed by more than
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} days after the date specified by the
Manufacturer for the delivery of such Buyer Furnished Equipment or
(ii) the Buyer Furnished Equipment is not required for certification
of the Aircraft and is not approved by the LBA or the FAA within
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} days after the
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<PAGE>
date specified by the Manufacturer for the delivery of such Buyer
Furnished Equipment, then AVSA will be entitled to deliver the
Aircraft with no obligation to install such Buyer Furnished
Equipment. Northwest may also elect to have the Aircraft so
delivered, whereupon AVSA will be relieved of all obligations to
install such Buyer Furnished Equipment.
18.4 Any Buyer Furnished Equipment installed on an Aircraft and
subsequently removed due to the fault of Northwest will be removed at
Northwest's expense.
18.5 TAX-FREE ZONES
Northwest will cause all Buyer Furnished Equipment to be delivered at
its own expense to the following address, unless AVSA notifies
Northwest otherwise in writing.
For all Buyer Furnished Equipment
DAIMLER-BENZ AEROSPACE AIRBUS GmbH
Division Hamburger Flugzeugbau
Kreetslag 10
21129 HAMBURG
GERMANY
18.6 RISK OF LOSS
Title to and risk of loss of Buyer Furnished Equipment will at all
times remain with Northwest. When Buyer Furnished Equipment is in the
possession of AVSA, AVSA will have only such responsibility therefor
as is chargeable by law to a bailee for hire, but will not be liable
for loss of use. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
18.7 AVSA-SUPPLIED BUYER FURNISHED EQUIPMENT
If Northwest requests AVSA to cause the Manufacturer to supply
directly certain items that are considered Buyer Furnished Equipment
pursuant to the Specification, and if compliance with such request by
AVSA and the Manufacturer in their judgment will not affect the
delivery date of an Aircraft referred to in Clause 9, then AVSA will
order such items subject to the execution of an SCN reflecting the
effect on price and any other items and conditions of this Agreement.
In such a case, AVSA will be entitled to the payment of a reasonable
handling charge and will bear no liability in respect of product
support commitments assumed by the Vendor of such Buyer Furnished
Equipment. The provisions of Subclauses 18.2 and 18.3 will apply to
Buyer Furnished Equipment covered under this Subclause 18.7 except in
the event of any delay in approval or delivery of such Buyer Furnished
Equipment attributable to the action of AVSA, the Manufacturer or the
Associated Contractor.
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19 - ASSIGNMENT
19.1 SUCCESSORS AND ASSIGNS
Subject to the provisions of this Clause 19, this Agreement shall inure to
the benefit of and be binding upon the successors and assigns of the
parties hereto. This Agreement and/or the rights of either party hereunder
will not be assigned or transferred in any manner whatsoever, in whole or
in part, by either party without the prior written consent of the other
party, such consent not to be unreasonably withheld by AVSA in the case of
any assignment by Northwest of its rights hereunder to one or more
institutions providing financing for the purchase of particular Aircraft
by Northwest hereunder with respect to such Aircraft and to the extent
reasonably required to effect such financing, so long as the duties and
obligations of AVSA hereunder are not changed and Northwest remains
primarily and directly liable for all obligations of the "Buyer"
hereunder. Notwithstanding the foregoing, Northwest may assign its rights
hereunder to any Affiliate of Northwest without the prior written consent
of AVSA if prior to or concurrently with such assignment (x) Northwest
executes and delivers to AVSA an instrument in writing confirming to AVSA
that Northwest remains liable for all obligations, liabilities and
responsibilities of the "Buyer" hereunder and (y) such Affiliate executes
and delivers to AVSA an instrument in writing confirming to AVSA that such
Affiliate assumes all obligations, liabilities and responsibilities of the
"Buyer" hereunder and agrees that it will remain an Affiliate of Northwest
so long as any Aircraft subject to such assignment remains to be delivered
hereunder.
Notwithstanding the definition of Affiliate, for the exclusive purpose of
this Subclause 19.1, the term "Affiliate" shall include any person or
entity in connection with joint venture operations between Northwest and
KLM Royal Dutch Airlines "KLM".
Notwithstanding anything herein to the contrary, AVSA may at any time
without Northwest's consent, assign any of its rights to receive money and
any of its duties to effect the sale and delivery of any Aircraft or any of
its responsibilities, duties or obligations to perform any other
obligations hereunder to the Manufacturer, any of the Associated
Contractor, ASCO or to any Affiliate of the Seller, the Manufacturer or any
Associated Contractor {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
19.2 AVSA'S DESIGNATIONS
AVSA may at any time by notice to Northwest designate particular facilities
or particular personnel of the Manufacturer, ASCO, any of the Associated
Contractors or any Affiliate of the Manufacturer or any Associated
Contractor at which or by whom the services to be performed under this
Agreement will be performed. AVSA may also designate the Manufacturer, any
Associated Contractor or any Affiliate of the Manufacturer or any
Associated Contractor as the party responsible on behalf of AVSA for
providing to Northwest all or any of the services described in this
Agreement.
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<PAGE>
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
19.3 ASSIGNMENT IN CASE OF RESALE OR LEASE
In the event of the resale or lease of any Aircraft by Northwest following
delivery thereof to Northwest, and subject to the delivery to AVSA of
reasonable financial guarantees and protections and other terms as AVSA may
reasonably require, Northwest's rights with respect to such Aircraft solely
under Clauses 12, 13 and 17 and this Subclause 19.3 of this Agreement,
will inure to the benefit of such purchaser or lessee, as the case may be.
Northwest will furnish to AVSA a true copy of such agreement with such
purchaser or lessor, clearly stating that such purchaser or lessor
acknowledges that it is bound by and will comply with all applicable terms,
conditions and limitations of this Agreement. No assignment under this
Subclause 19.3 shall be deemed to increase AVSA's obligations.
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20 - DATA RETRIEVAL
On AVSA's reasonable request, Northwest will provide AVSA with all the
necessary data, as customarily compiled by Northwest and pertaining to
the operation of the Aircraft, to assist AVSA in making an efficient
and coordinated survey of all reliability, maintenance, operational
and cost data with a view to improving the safety, availability and
operational costs of the Aircraft.
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<PAGE>
21 - TERMINATION FOR CERTAIN EVENTS
21.1 Any of the following will be considered a material breach of Northwest's
or AVSA's obligations under this Agreement ("Material Breach"):
(1) AVSA, Northwest or any other party will commence any case,
proceeding or other action with respect to AVSA or Northwest in any
jurisdiction relating to bankruptcy, insolvency, reorganization or
relief from debtors or seeking a reorganization, arrangement,
winding-up, liquidation, dissolution or other relief with respect to
its debts and such case, proceeding or action is not dismissed
within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
(2) An action is commenced seeking the appointment of a receiver,
trustee, custodian or other similar official for AVSA or Northwest
for all or substantially all of its assets and such action is not
stayed or dismissed within {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}, or AVSA or Northwest makes a
general assignment for the benefit of its creditors.
(3) An action is commenced against AVSA or Northwest seeking issuance of
a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets and such action is
not dismissed within {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
(4) AVSA or Northwest is generally unable to pay its debts as they come
due.
(5) There is a liquidation, winding up or analogous event with respect
to Northwest or AVSA.
(6) Northwest fails to make any Predelivery Payment required to be made
pursuant to this Agreement when such payment comes due or fails to
make payment of all or part of the Final Contract Price required to
be made pursuant to Subclause 6.3 of this Agreement.
(7) Northwest defaults on any payment of principal or interest on any
indebtedness or in the payment of any guarantee obligation, to AVSA
or any of its Affiliates.
(8) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
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<PAGE>
(9) Northwest defaults in its obligation to take delivery of an
Aircraft, or AVSA defaults in its obligation to deliver an
Aircraft as provided in this Agreement.
(10) Northwest or AVSA, or any of AVSA's affiliates, defaults in any
material respect in the observance or performance of any other
material covenant or undertaking contained in this Agreement, and
such default continues beyond the applicable grace period (if any).
(11) AVSA or any of its Affiliates defaults in any material respect in
the observance or performance of any material covenant or
undertaking in the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}, and such default continues
beyond the applicable grace period (if any).
21.2 In the event of any Material Breach by either party, the other party
will at its option have the right to resort to any remedy under
applicable law, including, without limitation, the right by written
notice, effective immediately, to (i) suspend its performance under
the Agreement, (ii) in the case of AVSA, reschedule the delivery dates
for Aircraft or for other goods and services, (iii) terminate this
Agreement with respect to any or all Aircraft, services, data and
other items undelivered or unfurnished on the effective date of such
termination {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
71
<PAGE>
22 - MISCELLANEOUS PROVISIONS
22.1 NOTICES
All notices and requests required or authorized hereunder will be given
in writing either by personal delivery to a responsible officer of the
party to whom the same is given or by commercial courier, certified
air mail (return receipt requested), facsimile or other electronic
transmission at the addresses and numbers set forth below. The date
upon which any such notice or request is so personally delivered, or
if such notice or request is given by commercial courier, certified
air mail, facsimile or other electronic transmission, the date upon
which sent, will be deemed to be the effective date of such notice or
request.
AVSA will be addressed at:
2, rond-point Maurice Bellonte
31700 BLAGNAC FRANCE
Attention: Director - Contracts
Telephone: 33 561 30 40 12
Facsimile: 33 561 30 40 11
NORTHWEST WILL BE ADDRESSED AT:
Northwest Airlines, Inc.
5101 Northwest Drive
St. Paul, MN 55111
COURIER:
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, MN 55121
Telephone: (612)727-4882
Facsimile: (612)726-0665
From time to time, the party receiving the notice or request may
designate another address or another person.
22.2 WAIVER
The failure of either party to enforce at any time any of the
provisions of this Agreement, to exercise any right herein provided
or to require at any time performance by the other party of any of the
provisions hereof will in no way be construed to be a present or
future waiver of such provisions nor in any way to affect the validity
of this Agreement or any part hereof or the right of the other party
thereafter to enforce each
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and every such provision. The express waiver by either party of any
provision, condition or requirement of this Agreement will not
constitute a waiver of any future obligation to comply with such
provision, condition or requirement.
22.3 INTERPRETATION AND LAW
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND THE PERFORMANCE
THEREOF WILL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
THE PARTIES HEREBY ALSO AGREE THAT THE UNITED NATIONS CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS WILL NOT APPLY TO THIS
TRANSACTION.
22.4 CONFIDENTIALITY
Subject to any legal or governmental requirements of disclosure, the
parties (which for this purpose will include their employees, agents
and advisors) will maintain the terms and conditions of this Agreement
and any reports or other data furnished hereunder strictly
confidential. Without limiting the generality of the foregoing,
Northwest will use reasonable efforts to limit the disclosure of the
contents of this Agreement to the extent legally permissible in any
filing required to be made by Northwest with any governmental agency
and will make such applications as will be necessary to implement the
foregoing. AVSA agrees to provide to Norwest, no less than fifteen
(15) Working Days prior to the date by which Northwest is required to
make any such filing, provided however that Northwest shall have given
AVSA a minimum of thirty (30) days notice, a redacted version of this
Agreement. Northwest agrees to use such redacted version for filing
of this Agreement with the Securities and Exchange Commission, and
Northwest's filing will include a request for confidential treatment
of this Agreement. Northwest and AVSA will consult with each other
prior to the making of any public disclosure or filing, permitted
hereunder, of this Agreement or the terms and conditions thereof. The
provisions of this Subclause 22.4 will survive any termination of this
Agreement.
22.5 SEVERABILITY
In the event that any provision of this Agreement should for any
reason be held to be without effect, the remainder of this Agreement
will remain in full force and effect. To the extent permitted by
applicable law, each party hereto hereby waives any provision of law
which renders any provision of this Agreement prohibited or
unenforceable in any respect.
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22.6 ALTERATIONS TO CONTRACT
This Agreement, including its Exhibits, Appendixes and Letter
Agreements, contains the entire agreement between the parties with
respect to the subject matter hereof and thereof and supersedes any
previous understanding, commitments or representations whatsoever,
whether oral or written (including, without limitation, that certain
Airbus A319 Memorandum of Understanding dated June 10, 1997 (Reference
AVSA 5192.10, between AVSA and Northwest). This Agreement will not be
varied except by an instrument in writing of even date herewith or
subsequent hereto executed by both parties or by their fully
authorized representatives.
22.7 INCONSISTENCIES
In the event of any inconsistency between the terms of this Agreement
and the terms contained in either (i) the Specification, or (ii) any
other Exhibit or Letter Agreement attached to this Agreement, in each
such case the terms of such Specification, Exhibit or Letter Agreement
will prevail over the terms of this Agreement. For the purpose of
this Subclause 22.7, the term Agreement will not include the
Specification or any other Exhibit or Letter Agreement hereto.
22.8 LANGUAGE
All correspondence, documents and any other written matters in connection
with this Agreement will be in English.
22.9 HEADINGS
All headings in this Agreement are for convenience of reference only and
do not constitute a part of this Agreement.
22.10 COUNTERPARTS
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered will be an
original, but all such counterparts will together constitute but one
and the same instrument.
22.11 OPINION OF COUNSEL
Northwest will, concurrently with the execution of this Agreement,
deliver to AVSA an opinion of counsel for Northwest reasonably
satisfactory to AVSA and dated as of such date to the effect that (i)
the execution, delivery and performance of this Agreement and the A319
Product Support Agreement are within the corporate power of Northwest,
and (ii) this Agreement and the A319 Product Support Agreement have
been duly executed and delivered by and constitute legal, valid and
binding obligations of Northwest enforceable in accordance with their
terms.
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IN WITNESS WHEREOF, these presents were entered into as of the day and
year first above written.
AVSA, S.A.R.L.
By: /s/ M. Lascaux
TITLE: Director Contracts
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Title: Vice President - Finance and Assistant Treasurer
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EXHIBIT A
The A319 Standard Specification is contained in a separate folder.
<PAGE>
EXHIBIT B
- -------------------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTIONS
- -------------------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
Exh B-1
<PAGE>
EXHIBIT B
- -------------------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTION
- -------------------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
Exh B-2
<PAGE>
EXHIBIT B
- -------------------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTION
- -------------------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
Exh B-3
<PAGE>
EXHIBIT B
- -------------------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTION
- -------------------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
Exh B-4
<PAGE> EXHIBIT C
SCN FORM
<PAGE> EXHIBIT D
AIRFRAME PRICE REVISION FORMULA
l. BASE PRICE
The Base Price of the Airframe, and Nacelles and Thrust Reversers, is as
quoted in Paragraph 4 of this Agreement.
2. BASE PERIOD
The above Base Prices have been established in accordance with the averaged
economic conditions prevailing in December 1996/January 1997/February 1997
and corresponding to theoretical delivery conditions prevailing in January
1998, as defined by ECIb and ICb forecast index values indicated in
Paragraph 4 of this Exhibit D.
The Base Price is subject to adjustment for changes in economic conditions
as measured by data obtained from the US Department of Labor, Bureau of
Labor Statistics, and in accordance with the provisions of Paragraphs 4 and
5 of this Exhibit D.
ECIb and ICb index values indicated in Paragraph 4 of this Exhibit D will
not be subject to any revision of these indexes after execution of the
definitive documentation.
3. REFERENCE INDEXES
LABOR INDEX: "Aircraft Manufacturing," Standard Industrial Classification
3721 (hereinafter referred to as "ECI-SIC-3721W"), published quarterly by
the US Department of Labor, Bureau of Labor Statistics, in "News" (Table 6:
WAGES AND SALARIES: Employment Cost Index for wages and salaries only,
private industry workers, by industry and occupational group"). (Base
month and year June 1989 = 100.)
MATERIAL INDEX: "Industrial Commodities" (hereinafter referred to as
"IC-Index"), published monthly by the US Department of Labor, Bureau of
Labor Statistics, in "PPI Detailed Report" (Table 6: Producer price
indexes and percentage change for commodity groupings and individual
items, not seasonally adjusted). (Base year 1982 = 100.)
<PAGE>
4. REVISION FORMULA
Pn = (Pb + F) (0.75 ECIn/ECIb + 0.25 ICn/ICb)
Where
Pn = Revised Base Price of the Airframe at delivery of the Aircraft.
Pb = Base Price of the Airframe (including Nacelles and Thrust
Reversers, if applicable) at economic conditions December
1996/January 1997/February 1997 averaged (January 1998 delivery
conditions).
F = (0.005 x N x Pb) Where N = The calendar year of delivery of the
Aircraft minus 1998.
ECIn = The arithmetic average of the latest published values available
at the date of A319 Aircraft delivery for ECI-SIC-3721W for the
11th, 12th and 13th months prior to the month of delivery of the
Aircraft (1 decimal), where the quarterly value for the third
month of a quarter (March, June, September and December) will be
deemed to apply for the two preceding months.
ECIb = ECI-SIC-3721W for December 1996/January 1997/February 1997
averaged (= 131.6).
ICn = The arithmetic average of the latest published values available
at the date of A319 Aircraft delivery for the IC-Index for the
11th, 12th and 13th months prior to the month of delivery of the
Aircraft (l decimal).
ICb = IC-Index for December 1996/January 1997/February 1997 averaged
(= 126.4).
In determining the Revised Base Price at delivery of the Aircraft, each
quotient shall be calculated to the nearest ten thousandth (4 decimals).
If the next succeeding place is five (5) or more, the preceding decimal
place shall be raised to the next higher figure. The final factor shall be
rounded to the nearest ten thousandth (4 decimals).
After final computation, Pn shall be rounded to the next whole number
(0.5 or more rounded to l).
Exh. D-2
<PAGE>
5. GENERAL PROVISIONS
5.1 SUBSTITUTION OF INDEXES
In the event that:
(i) the US Department of Labor substantially revises the methodology of
calculation of any of the indexes referred to hereinabove, or
(ii) the US Department of Labor discontinues, either temporarily or
permanently, any of the indexes referred to hereinabove, or
(iii) the data samples used to calculate any of the indexes referred to
hereinabove are substantially changed,
the most nearly comparable index published by a recognized financial
institution, financial publication or university shall be used as a
substitute index.
Such substitute index will reflect as closely as possible the actual
variations of the wages or of the material costs, as the case may be, used
in the calculation of the original index.
As a result of this selection of a substitute index, the price revision
formula will be adjusted for the successive utilization of the original
index and of the substitute index.
5.2 FINAL INDEX VALUES
The Revised Base Price at the date of Aircraft delivery will be final and
will not be subject to further adjustments of any kind and for any reason
to the applicable indexes as published at the date of Aircraft delivery.
Exh. D-3
<PAGE>
EXHIBIT E
POWERPLANTS PRICE REVISION FORMULA
l. REFERENCE PRICE
The Reference Price of a set of two (2) CFM International CFM 56-5A4
engines and additional equipment is as quoted in Subclause 4.1.2.1(i) of
this Agreement.
This Reference Price is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of Labor,
Bureau of Labor Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this Exhibit E.
2. REFERENCE PERIOD - REFERENCE COMPOSITE PRICE INDEX
The above Reference Price has been established in accordance with the
economic conditions prevailing in September 1990 (March 1991 theoretical
delivery conditions), as defined, according to CFM International, by the
Reference Composite Price Index of 126.54.
3. REFERENCE INDEXES
LABOR INDEX: "Aircraft Engines and Engine Parts," Standard Industrial
Classification 3724--Average hourly earnings (hereinafter referred to as
"HE SIC 3724"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Employment and Earnings," Establishment Data: Hours and
Earnings (Table B-15: Average hours and earnings of production or
nonsupervisory workers on private nonfarm payrolls by detailed industry).
MATERIAL INDEX (I): "Industrial Commodities" (hereinafter referred to as
"IC-Index"), published by the US Department of Labor, Bureau of Labor
Statistics, in "PPI Detailed Report" (Table 6: Producer price indexes and
percentage change for commodity groupings and individual items, not
seasonally adjusted). (Base year 1982 = 100.)
MATERIAL INDEX (II): "Metals and Metal Products" Code l0 (hereinafter
referred to as "MMP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "PPI Detailed Report" (Table 6: Producer
price indexes and percentage change for commodity groupings and individual
items, not seasonally adjusted). (Base year 1982 = 100.)
ENERGY INDEX: "Fuels and Related Products and Power" Code 5 (hereinafter
referred to as "EP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "PPI Detailed Report" (Table 6: Producer
price indexes and percentage change for commodity groupings and individual
items, not seasonally adjusted).
(Base year 1982 = 100.)
<PAGE>
4. REVISION FORMULA
Pn = Pb x CPIn
----
126.54
Where
Pn = Revised Reference Price of a set of two (2) engines at delivery
of the A319 Aircraft.
Pb = Reference Price as defined above.
CPIn = Composite Price Index for the sixth month prior to the month
of delivery of the A319 Aircraft.
Said Composite Price Index is composed as follows:
CPIn = 0.55 (HEn x 100) + 0.10 ICn + 0.25 MMPn + 0.10 EPn
---
(11.16)
Where
HEn = HE SIC 3724 for the sixth month prior to the month of
delivery of the A319 Aircraft; the quotient HEn/11.16 is
rounded to the nearest third decimal place. The product by
0.55 is rounded to the nearest second decimal place.
ICn = IC-Index for the sixth month prior to the month of delivery
of the A319 Aircraft.
MMPn = MMP-Index for the sixth month prior to the month of delivery
of the A319 Aircraft. The product by 0.25 is rounded to the
nearest second decimal place.
EPn = EP-Index for the sixth month prior to the month of delivery
of the A319 Aircraft.
The Composite Price Index shall be determined to the second decimal place.
If the next succeeding decimal place is five (5) or more, the preceding
decimal figure shall be raised to the next higher figure.
The final factor shall be rounded to the nearest thousandth (3 decimals).
Exh. E-2
<PAGE>
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the A319 Aircraft shall be the
final price and will not be subject to further adjustments in the indexes.
5.2 If no final index value is available for any of the applicable months, the
published preliminary figures will be the basis on which the Revised
Reference Price will be computed.
5.3 If the US Department of Labor substantially revises the methodology of
calculation of the indexes referred to in this Exhibit E or discontinues
any of these indexes, AVSA shall, in agreement with CFM International,
apply a substitute for the revised or discontinued index, such substitute
index to lead in application to the same adjustment result, insofar as
possible, as would have been achieved by continuing the use of the original
index as it may have fluctuated had it not been revised or discontinued.
Appropriate revision of the formula shall be made to accomplish this
result.
5.4 Should the above escalation provisions become null and void by action of
the US Government, the Reference Price shall be adjusted to reflect
increases in the cost of labor, material and fuel which have occurred from
the period represented by the applicable Reference Price Indexes to the
sixth month prior to the scheduled delivery of the A319 Aircraft.
5.5 The Revised Reference Price at delivery of the A319 Aircraft in no event
shall be less than the Reference Price defined in Paragraph 1 of this
Exhibit E.
Exh. E-3
<PAGE>
EXHIBIT F
CERTIFICATE OF ACCEPTANCE
In accordance with the terms of that certain Airbus A319 Purchase Agreement
(the "Purchase Agreement") dated as of September 19, 1997 between AVSA,
S.A.R.L. ("AVSA") and NORTHWEST AIRLINES, INC. ("NWA"), the acceptance
inspection relating to the AIRBUS A319 aircraft (the "Aircraft"),
manufacturer's serial no. ______, FAA Registration No. __________, with two
(2) CFM56-5A4 series propulsion systems installed thereon, serial nos.
_______ (position #1) and ________ (position #2) has taken place at Hamburg,
Germany, on the _____ day of __________, ____.
In view of said inspection having been carried out with satisfactory results,
NWA hereby accepts delivery of the Aircraft as being in conformity with the
provisions of the Purchase Agreement.
This acceptance shall not impair the rights of NWA that derive from the
warranties relating to the Aircraft set forth in the Purchase Agreement.
NWA specifically recognizes that it has waived any right it may have at law
or otherwise to revoke this acceptance of the Aircraft.
RECEIPT AND ACCEPTANCE OF THE
ABOVE-DESCRIBED AIRCRAFT
ACKNOWLEDGED
NORTHWEST AIRLINES, INC.
By: ______________________________
Title: ___________________________
<PAGE>
EXHIBIT G
SELLER SERVICE LIFE POLICY
1. The Items covered by the Service Life Policy pursuant to Subclause
12.2 are those Seller Items of primary and auxiliary structure
described hereunder.
2. WINGS - CENTER AND OUTER WING BOX
2.1 SPARS
2.2 RIBS INSIDE THE WING BOX
2.3 UPPER AND LOWER PANELS OF THE WING BOX
2.4 FITTINGS
2.4.1 Attachment fittings for the flap structure
2.4.2 Attachment fittings for the engine pylons
2.4.3 Attachment fittings for the main landing gear
2.4.4 Attachment fittings for the center wing box
2.5 AUXILIARY SUPPORT STRUCTURE
2.5.1 FOR THE SLATS:
2.5.1.1 Ribs supporting the track rollers on wing box structure
2.5.1.2 Ribs supporting the actuators on wing box structure
2.5.2 FOR THE AILERONS:
2.5.2.1 Hinge brackets and ribs on wing box rear spar or shroud box
2.5.2.2 Actuator fittings on wing box rear spar or shroud box
Exh. G-1
<PAGE>
2.5.3 FOR AIRBRAKES, SPOILERS, LIFT DUMPERS:
2.5.3.1 Hinge brackets and ribs on wing box rear spar or shroud box
2.5.3.2 Actuator fittings on wing box rear spar or shroud box
3. FUSELAGE
3.1 FUSELAGE STRUCTURE
3.1.1 Fore and aft bulkheads
3.1.2 Pressurized floors and bulkheads surrounding the main and nose gear
wheel well and centre wing box
3.1.3 Skins with doublers, stringers and frames from the forward pressure
bulkheads to the frame supporting the rear attachment of horizontal
stabilizer
3.1.4 Window and windscreen attachment structure but excluding
transparencies
3.1.5 Passenger and cargo doors internal structure
3.1.6 Sills excluding scuff plates and upper beams surrounding passenger and
cargo door apertures
3.1.7 Cockpit floor structure and passenger cabin floor beams excluding
floor panels and seat rails
3.1.8 Keel beam structure
3.2 FITTINGS
3.2.1 Landing gear attachment fittings
3.2.2 Support structure and attachment fittings for the vertical and
horizontal stabilizers
Exh. G-2
<PAGE>
4. STABILIZERS
4.1 HORIZONTAL STABILIZER MAIN STRUCTURAL BOX
4.1.1 Spars
4.1.2 Ribs
4.1.3 Upper and lower skins and stringers
4.1.4 Attachment fittings to fuselage and trim screw actuator
4.1.5 Elevator support structure
4.1.5.1 Hinge bracket
4.1.5.2 Servocontrol attachment brackets
4.2 VERTICAL STABILIZER MAIN STRUCTURAL BOX
4.2.1 Spars
4.2.2 Ribs
4.2.3 Skins and stringers
4.2.4 Attachment fittings to fuselage
4.2.5 Rudder support structure
4.2.5.1 Hinge brackets
4.2.5.2 Servocontrol attachment brackets
5. Bearing and roller assemblies, bearing surfaces, bushings, bolts,
rivets, access and inspection doors, including manhole doors,
latching mechanisms, all system components, commercial interior
parts, insulation and related installation and connecting devices
are excluded from this Seller Service Life Policy.
Exh. G-3
<PAGE>
LETTER AGREEMENT NO. 1
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: PURCHASE INCENTIVES
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"), have
entered into an Airbus A319-100 Purchase Agreement, dated as of even date
herewith (the "Agreement"), which covers, among other things, the sale by AVSA
and the purchase by Northwest of certain Aircraft, under the terms and
conditions set forth in said Agreement. Northwest and AVSA have agreed to set
forth in this Letter Agreement No. 1 (the "Letter Agreement") certain additional
terms and conditions regarding the sale of the Aircraft. Capitalized terms used
herein and not otherwise defined in this Letter Agreement will have the meanings
assigned thereto in the Agreement. The terms "herein," "hereof" and "hereunder"
and words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an integral,
nonseverable part of said Agreement, that the provisions of said Agreement are
hereby incorporated herein by reference, and that this Letter Agreement will be
governed by the provisions of said Agreement, except that if the Agreement and
this Letter Agreement have specific provisions that are inconsistent, the
specific provisions contained in this Letter Agreement will govern.
1. CREDIT MEMORANDA
1.1 AVSA will provide to Northwest upon delivery of each A319 Aircraft
the credit memoranda listed below in Subparagraphs {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}, inclusive. Hereinafter, the {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} are
collectively referred to as the "AVSA Credit Memoranda."
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
<PAGE>
1.2 The AVSA Credit Memoranda have been established in accordance with
January 1998 delivery conditions (dollars) and will be revised to
the actual delivery date of each Aircraft in accordance with the
Airframe Price Revision Formula set forth in Exhibit D to the
Agreement.
1.3 Except as otherwise provided in Paragraph 2 of this Letter
Agreement, the AVSA Credit Memoranda will, in each case and at
Northwest's option, be
(i) applied by AVSA against the Final Contract Price of each
Aircraft {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT},
(ii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}, or
(iii) used by Northwest for the purchase of goods and services
from AVSA or any of its Affiliates.
2. FLIGHT TRAINING SUPPORT
2.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.2 ADDITIONAL FLIGHT TRAINING ARRANGEMENTS
2.2.1 Northwest or its Affiliate may purchase from AVSA or its Affiliates
additional flight training equipment and data package upgrades. A
list of such training equipment and services and associated prices is
included in Appendix 1 hereto.
2.2.2 In the event Northwest or its Affiliate order such flight training
equipment or data package upgrades from AVSA or its Affiliates, AVSA
agrees to the following payment by Northwest for such flight training
equipment and data package upgrades, up to a total value of
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} in flight training equipment and data package
upgrade value, in accordance with Appendix 1 hereto, Northwest will
(i) pay to AVSA or its Affiliates {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}, AND, in addition,
LA 1-2
<PAGE>
(ii) provide AVSA or its Affiliates or cause to be
provided{CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
2.2.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.2.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.3 TRAINING SERVICE AGREEMENT
AVSA or its Affiliates and Northwest or its Affiliate will
enter into a separate training agreement covering the different
training services that Northwest or its Affiliate could provide to
AVSA, the Manufacturer, or any of their Affiliates. Under such
agreement, neither AVSA, nor the Manufacturer, nor any of their
Affiliates will be liable for any training provided to their
customers by Northwest or its Affiliate, and Northwest and AVSA, or
their respective Affiliates, will agree on appropriate provisions
prior to execution of such training agreement.
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
3.1 AVSA will provide, or cause to be provided, {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
3.2 AVSA will arrange for the delivery of the {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
LA 1-3
<PAGE>
4. CERTAIN AIRCRAFT EQUIPMENT SUPPORT
4.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
AVSA will provide, {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
4.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
Should Northwest elect to install {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
5. JOINT PROMOTION
5.1 For the promotion of the Aircraft in Northwest's fleet, AVSA will
provide to Northwest {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
5.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
6. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of
the Agreement, this Letter Agreement and the rights and obligations
of Northwest hereunder will not be assigned or transferred in any
manner without the prior written consent of AVSA, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 6 will be void and of no force or effect.
LA 1-4
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 1-5
<PAGE>
APPENDIX 1
FLIGHT TRAINING EQUIPMENT / DATA PACKGE PRICES
The amounts in this table are quoted in US dollars in January 1997 delivery
conditions and will be multiplied by a factor of {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} to provide for a price revision from January
1997 to January 1998. Thereafter, the amounts will be revised annually in
January in accordance with the Airframe Price Revision Formula.
- ------------------------------------------------------------------------------
Total Amount
- ------------------------------------------------------------------------------
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY {CONFIDENTIAL
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT MATERIAL OMITTED
TO A REQUEST FOR CONFIDENTIAL TREATMENT} AND FILED
SEPARATELY WITH
THE SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
- ------------------------------------------------------------------------------
LA 1 app. 1-1
<PAGE>
LETTER AGREEMENT NO. 2
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: OPTION AIRCRAFT AND ORDER FLEXIBILITY
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"), have
entered into an Airbus A319-100 Purchase Agreement, dated as of even date
herewith (the "Agreement"), which covers, among other things, the sale by AVSA
and the purchase by Northwest of certain Aircraft, under the terms and
conditions set forth in said Agreement. Northwest and AVSA have agreed to set
forth in this Letter Agreement No. 2 (the "Letter Agreement") certain additional
terms and conditions regarding the sale of the Aircraft. Capitalized terms used
herein and not otherwise defined in this Letter Agreement will have the meanings
assigned thereto in the Agreement. The terms "herein," "hereof" and "hereunder"
and words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an integral,
nonseverable part of said Agreement, that the provisions of said Agreement are
hereby incorporated herein by reference, and that this Letter Agreement will be
governed by the provisions of said Agreement, except that if the Agreement and
this Letter Agreement have specific provisions that are inconsistent, the
specific provisions contained in this Letter Agreement will govern.
1. ADDITIONAL DEFINITIONS
For the purpose of this Letter Agreement only, the term "Available
Delivery Position(s)" in the singular or plural shall mean any
delivery positions {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
2. OPTION AIRCRAFT
2.1 OPTION TO FIRMLY ORDER
Northwest shall have the right to firmly order up to one hundred
(100) additional Airbus single-aisle aircraft together with all
components, equipment, parts and accessories installed in or on
such aircraft and the propulsion systems installed thereon upon
delivery in accordance with this Paragraph 2.
<PAGE>
2.2 OPTION AIRCRAFT TYPE
2.2.1 Option Aircraft are designated either an Airbus Industrie A319-100
model aircraft (the "A319 Option Aircraft") or an Airbus Industrie
A320-200 model aircraft (the "A320 Option Aircraft") in accordance
with Subparagraph 2.5 below.
2.2.2 The airframe specification of the A319 Option Aircraft shall be as set
forth in Subclause 2.2 of the Agreement and the powerplants shall be
those defined in Clause 1 of the Agreement as Propulsion Systems.
2.2.3 The airframe specification of the A320 Option Aircraft shall be as set
forth in Subparagraph 2.7.1 herein and the powerplants shall be those
defined in Subparagraph 2.7.2 herein.
2.3 OPTION EXERCISE
The option to firmly order an Option Aircraft shall be exercised by
Northwest's written notice to AVSA given no later than
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} months prior to the scheduled month of
delivery of such Option Aircraft in accordance with the Option
Aircraft Delivery Schedule set out in Subparagraph 2.5 below ( the
"Option Exercise"). Each Option Exercise shall only become
effective upon AVSA's receipt from Northwest of the payments
referenced in Subparagraph 2.4 below.
2.4 OPTION FEE AND PREDELIVERY PAYMENT
2.4.1 Upon each Option Exercise, Northwest will pay to AVSA a nonrefundable
option fee of US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} per Option Aircraft for which Northwest has
exercised its option to firmly order such Option Aircraft (the "Option
Fee"). {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.4.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 2-2
<PAGE>
2.4.3 In the event that Northwest fails to (i) invoke an Option Exercise in
accordance with the provisions of Subparagraph 2.3 above and (ii) pay
to AVSA the corresponding Option Fee and (iii) {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT},
Northwest's right to purchase such Option Aircraft shall expire, and
AVSA will have no further obligation under this Letter Agreement or
the Agreement with respect to such Option Aircraft.
2.5 DELIVERY
The Option Aircraft for which Northwest has effected an Option
Exercise will be delivered in Hamburg, Germany (in the case of A319
Option Aircraft) or Toulouse, France (in the case of A320 Option
Aircraft) according to the following schedule (the "Option Aircraft
Delivery Schedule"):
<TABLE>
<CAPTION>
Option Aircraft Month/Year of Delivery Option Aircraft Month/Year of Delivery
--------------- ---------------------- --------------- -----------------------
No./Type No./Type
-------- --------
<S> <C> <C> <C>
{CONFIDENTIAL {CONFIDENTIAL MATERIAL {CONFIDENTIAL {CONFIDENTIAL MATERIAL
MATERIAL OMITTED OMITTED AND FILED MATERIAL OMITTED OMITTED AND FILED
AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE
SEPARATELY WITH THE SECURITIES AND EXCHANGE SEPARATELY WITH THE SECURITIES AND EXCHANGE
SECURITIES AND COMMISSION PURSUANT TO A SECURITIES AND COMMISSION PURSUANT TO A
EXCHANGE COMMISSION REQUEST FOR CONFIDENTIAL EXCHANGE COMMISSION REQUEST FOR CONFIDENTIAL
PURSUANT TO A TREATMENT} PURSUANT TO A TREATMENT}
REQUEST FOR REQUEST FOR
CONFIDENTIAL CONFIDENTIAL
TREATMENT} TREATMENT}
</TABLE>
2.6 ROLL-OVER OPTIONS
2.6.1 Upon each Option Exercise with respect to an A319 Option Aircraft,
AVSA shall grant Northwest the option to purchase an additional Airbus
Industrie A319-100 model aircraft (the "A319 Roll-Over Option
Aircraft"). Further, upon each Option Exercise with respect to an
A320 Option Aircraft, AVSA shall grant Northwest the option to
purchase an additional Airbus Industrie A320-200 model aircraft (the
"A320 Roll-Over Option Aircraft"). The terms and conditions of this
Letter Agreement with respect to the A319 Option Aircraft shall apply
to the A319 Roll-Over Option Aircraft, and the terms and conditions of
this Letter Agreement with respect to A320 Option Aircraft shall apply
to the A320 Roll-Over Option Aircraft, unless otherwise specified
herein, including, but not limited to, the provisions of Subparagraphs
2.3 and 2.4 above. For the purposes of this Letter Agreement, the
terms A319 Roll-Over Option Aircraft and A320 Roll-Over Option
Aircraft are collectively referred to as the "Roll-Over Option
Aircraft."
LA 2-3
<PAGE>
2.6.2 Upon each Option Exercise, AVSA shall notify Northwest in writing of
the delivery date for the Roll-Over Option Aircraft (the "Roll-Over
Option Aircraft Delivery Date"). The Roll-Over Option Aircraft
Delivery Date shall be added to the end of the then-existing Option
Aircraft Delivery Schedule ({CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}, unless otherwise agreed between
AVSA and Northwest), and shall be deemed to amend the Option Aircraft
Delivery Schedule. {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
2.7 A320 OPTION AIRCRAFT MATTERS
The term "A320 Aircraft" shall be defined as any and all of the
A320 Option Aircraft, the A320 Roll-Over Option Aircraft, and any
A320 Aircraft converted from an A319 Aircraft under the terms of
this Letter Agreement.
2.7.1 AIRFRAME CONFIGURATION
The A320 Aircraft will be manufactured in accordance with the
A320-200 Standard Specification, Document No. D.000.02000, Issue 4,
dated March 30, 1995. A copy of such A320-200 Standard
Specification is annexed hereto as Appendix 1 to this Letter
Agreement. Such A320-200 Standard Specification will be amended by
the SCNs set forth in Appendix 2 hereto.
2.7.2 POWERPLANTS
The A320 Aircraft will be delivered with two (2) CFM56-5A1
Powerplants each composed of the powerplant (as such term is
defined in Chapters 70-80 of ATA Specification 100 (Revision 22),
but limited to the equipment, components, parts and accessories
included in the powerplant, as so defined), that have been sold to
the Manufacturer by CFMI International, and a nacelle and thrust
reverser for each such powerplant (the "A320 Propulsion System").
2.7.3 A320 AIRCRAFT PRICE
The base prices and purchase incentives for the A320 Aircraft shall
be as set forth in Appendix 3 to this Letter Agreement.
3. APPLICABILITY OF PURCHASE AGREEMENT PROVISIONS
3.1 When firmly ordered, each A319 Option Aircraft and each A319
Roll-Over Option Aircraft (and each A319 Aircraft converted from an
A320 Option Aircraft or from an A320 Roll-Over Option Aircraft)
shall be an Aircraft for the purposes of the provisions of
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
LA 2-4
<PAGE>
REQUEST FOR CONFIDENTIAL TREATMENT} to the Agreement, except as
provided for in Subparagraph 3.2 hereof. {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
3.2 It is understood that with respect to A319 Aircraft, the Powerplant
prices cited in Subclause 4.1 of the Agreement and the price
revision formula referred to in Subclause 5.2 of the Agreement
concerning the Powerplants and related equipment have been
confirmed by CFM International for A319 Aircraft with deliveries on
or prior to {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT}. Thereafter, such prices and price
revision formula remain subject to modifications that might be
communicated by the Powerplant manufacturer to AVSA, the
Manufacturer and/or Northwest.
3.3 When firmly ordered, each A320 Aircraft shall be an Aircraft for
the purposes of the applicable provisions of {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} to the
Agreement shall apply to the A320 Aircraft. {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
4. FLEXIBILITY RIGHTS
4.1 FLEXIBILITY RIGHTS AND APPLICABILITY
In addition to its offer for Option Aircraft and Roll-Over Option
Aircraft, AVSA grants Northwest the following flexibility rights
(individually and collectively referred to as "Flexibility
Right(s)":
(i) "CONVERSION RIGHT": Northwest shall have the right to
convert
(a) {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} Firm Aircraft scheduled
for delivery commencing with {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}, and
LA 2-5
<PAGE>
(b) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} Option Aircraft that
has been converted to an Aircraft pursuant to Paragraph 2
herein,
into Airbus A319 type aircraft, Airbus A320 type aircraft or
Airbus A321 type aircraft (the "Converted Aircraft") under
the terms and conditions of this Letter Agreement.
(ii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
(iii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
(iv) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2 IRREVOCABLE EXERCISE OF FLEXIBILITY RIGHTS
No Aircraft may be the subject of a successful exercise of a Conversion
Right, {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} more than once.
4.3 FLEXIBILITY LEADTIMES
4.3.1 Northwest may notify AVSA of its exercise of one of the Flexibility
Rights by written notice (the "Request Notice") delivered to AVSA on
or prior to the first day of the month that is {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} months
prior to the month of scheduled delivery of the Aircraft or Option
Aircraft that is subject to such Flexibility Right. {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
4.3.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA2-6
<PAGE>
4.4 FLEXIBILITY RIGHTS EXERCISE PROCEDURE
4.4.1 After receipt of Northwest's Request Notice, AVSA will offer within
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} business days Available Delivery Positions as
follows:
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
4.4.2 Northwest may request from AVSA in writing (the "Reservation Notice")
within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} business days after receipt of AVSA's offer of
the Available Delivery Positions {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
4.4.3 For the {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} business days following the receipt by AVSA of
Northwest's Reservation Notice,
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
Should Northwest fail to enter into an amendment to this Agreement
reflecting the revised delivery schedule (the "Flexibility Amendment")
within {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} days after receipt by AVSA from Northwest of the Reservation
Notice, then Northwest's {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}. AVSA agrees that it will promptly
execute each Flexibility Amendment executed by Northwest pursuant to this
Paragraph 4 within such seven (7) day period.
LA2-7
<PAGE>
5. AVSA'S RESCHEDULING RIGHTS
5.1 AVSA'S RIGHTS
Notwithstanding the provisions of Clause 9 of the Agreement, AVSA and
Northwest agree that AVSA shall have the right to request from Northwest
the rescheduling of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} delivery dates in accordance with the provisions
of this Paragraph 5 ("AVSA's Rescheduling Request"). AVSA's Rescheduling
Request will apply to each {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} (the "Rescheduled Aircraft") and
may be exercised only once with respect to each Rescheduled Aircraft.
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
5.2 AVSA RESCHEDULING REQUEST PROCEDURE
The procedure for AVSA's Rescheduling Request shall be consistent with
the procedures described in Subparagraph 4.4 above {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
6. REVIEW OF DELIVERY POSITION AVAILABILITY
AVSA agrees to review with Northwest on a quarterly basis all Available
Delivery Positions {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
7. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of the
Agreement, this Letter Agreement and the rights and obligations of
Northwest hereunder will not be assigned or transferred in any manner
without the prior written consent of AVSA, and any attempted assignment
or transfer in contravention of the provisions of this Paragraph 7 will
be void and of no force or effect.
LA2-8
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA2-9
<PAGE>
APPENDIX 1
The A320-200 Standard Specification, Document No. D.000.02000, Issue 4, dated
March 30, 1995, is contained in a separate folder.
LA2/App. 1-1
<PAGE>
APPENDIX 2
LIST OF SCNS APPLICABLE TO THEA320 AIRCRAFT
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTIONS
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LA2/App. 2-1
<PAGE>
APPENDIX 2
LIST OF SCNS APPLICABLE TO THEA320 AIRCRAFT
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTIONS
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LA2/App. 2-2
<PAGE>
APPENDIX 2
LIST OF SCNS APPLICABLE TO THEA320 AIRCRAFT
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTIONS
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LA2/App. 2-3
<PAGE>
APPENDIX 2
LIST OF SCNS APPLICABLE TO THEA320 AIRCRAFT
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
RFC DESCRIPTION OF CUSTOMER OPTIONS
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
MATERIAL WITH THE SECURITIES AND EXCHANGE COMMISSION
OMITTED AND PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
FILED
SEPARATELY
WITH THE
SECURITIES
AND EXCHANGE
COMMISSION
PURSUANT TO A
REQUEST FOR
CONFIDENTIAL
TREATMENT}
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
LA2/App. 2-4
<PAGE>
APPENDIX 3
A320 AIRCRAFT PRICES
1. PRICES
The Base Price of each A320 Aircraft is the sum of:
(i) the Base Price of the Airframe as set out in Subparagraph 1.2 below,
and
(ii) the Base Price of the A320 Propulsion Systems as set out in
Subparagraph 1.3 below.
1.2 BASE PRICE OF THE AIRFRAME
1.2.1 The Base Price of the Airframe will be the sum of the Base Prices set
forth below in (i), (ii) and (iii):
(i) the Base Price of the Standard A320 Airframe, as defined in the
A320-200 Standard Specification set forth in Appendix 1 to this
Letter Agreement (excluding Buyer Furnished Equipment, A320
Propulsion Systems and SCNs), at delivery conditions prevailing
in January 1998, which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}, and
(ii) the Base Price of any and all SCNs mutually agreed upon prior
to the signature of the Agreement and set forth in Appendix 2
to this Letter Agreement, at delivery conditions prevailing in
January 1998, which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}, and
(iii) the Base Price of seats and galleys, at delivery conditions
prevailing in January 1998 in the amount of:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
LA2/App. 3-1
<PAGE>
1.2.2 The Base Price of the Airframe of each A320 Aircraft will be revised
to the actual delivery date of such A320 Aircraft in accordance with
the Airframe Price Revision Formula set forth in Subclause 5.1 to the
Agreement.
1.2.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1.3 BASE PRICE OF THE A320 PROPULSION SYSTEMS
The Base Price of the A320 Propulsion Systems is the sum of (i) and
(ii) below:
(i) BASE PRICE OF THE A320 POWERPLANTS
The Base Price of a set of A320 Powerplants and additional standard
equipment at delivery conditions prevailing in January 1998, which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
Said Base Price has been calculated with reference to the Reference
Price indicated by CFMI International of US$ {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} in
accordance with economic conditions prevailing in October 1985 (cpi
108.66).
Said Reference Price is subject to adjustment to the date of delivery
of the A320 Aircraft in accordance with the Powerplants Price Revision
Formula set forth in Appendix 4 to this Letter Agreement.
(ii) BASE PRICE OF NACELLES AND THRUST REVERSERS
The Base Price of a set of two (2) nacelles and two (2) thrust
reversers for the A320 Powerplants at delivery conditions prevailing
in January 1998, which is:
US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
Said Base Price is subject to adjustment to the date of delivery of
the A320 Aircraft in accordance with the Airframe Price Revision
Formula set forth in Subclause 5.1 to the Agreement.
LA2/App. 3-2
<PAGE>
1.4 VALIDITY OF PROPULSION SYSTEMS PRICES
It is understood that the prices cited above and the price revision formula
referred to in Subparagraph 1.3 concerning the A320 Powerplants and related
equipment have been confirmed by CFM International for A320 Aircraft with
deliveries on or prior to {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}. Thereafter, such prices and price
revision formula remain subject to modifications that might be communicated
by the Powerplant manufacturer to AVSA, the Manufacturer and/or Northwest.
2. PURCHASE INCENTIVES
2.1 AVSA will provide to Northwest upon delivery of each A320 Aircraft the
credit memoranda listed below in Subparagraphs {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}, inclusive. Hereinafter,
the {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
are collectively referred to as the "AVSA A320 Credit Memoranda."
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
2.2 The AVSA A320 Credit Memoranda have been established in accordance with
January 1998 delivery conditions (dollars) and will be revised to the
actual delivery date of each A320 Aircraft in accordance with the Airframe
Price Revision Formula set forth in Subclause 5.1 to the Agreement.
2.3 The AVSA A320 Credit Memoranda will, in each case and at Northwest's
option, be
(i) applied by AVSA against the Final Contract Price of each A320 Aircraft
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT},
(ii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}, or
(iii) used by Northwest for the purchase of goods and services from
AVSA or any of its Affiliates.
LA2/App. 3-3
<PAGE>
APPENDIX 4
POWERPLANTS PRICE REVISION FORMULA
l. REFERENCE PRICE
The Reference Price of a set of two (2) CFM International CFM 56-5A1
engines and additional equipment is as quoted in Subparagraph 1.3(i) of
Appendix 3 to this Letter Agreement.
This Reference Price is subject to adjustment for changes in economic
conditions as measured by data obtained from the US Department of Labor,
Bureau of Labor Statistics, and in accordance with the provisions of
Paragraphs 4 and 5 of this
Appendix 4.
2. REFERENCE PERIOD - REFERENCE COMPOSITE PRICE INDEX
The above Reference Price has been established in accordance with the
economic conditions prevailing in October 1985 (April 1986 theoretical
delivery conditions), as defined, according to CFM International, by the
Reference Composite Price Index of 108.66
3. REFERENCE INDEXES
LABOR INDEX: "Aircraft Engines and Engine Parts," Standard Industrial
Classification 3724--Average hourly earnings (hereinafter referred to as
"HE SIC 3724"), published by the US Department of Labor, Bureau of Labor
Statistics, in "Employment and Earnings," Establishment Data: Hours and
Earnings (Table B-15: Average hours and earnings of production or
nonsupervisory workers on private nonfarm payrolls by detailed industry).
MATERIAL INDEX (I): "Industrial Commodities" (hereinafter referred to as
"IC-Index"), published by the US Department of Labor, Bureau of Labor
Statistics, in "PPI Detailed Report" (Table 6: Producer price indexes and
percentage change for commodity groupings and individual items, not
seasonally adjusted). (Base year 1982 = 100.)
MATERIAL INDEX (II): "Metals and Metal Products" Code l0 (hereinafter
referred to as "MMP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "PPI Detailed Report" (Table 6: Producer
price indexes and percentage change for commodity groupings and individual
items, not seasonally adjusted).
(Base year 1982 = 100.)
ENERGY INDEX: "Fuels and Related Products and Power" Code 5 (hereinafter
referred to as "EP-Index"), published by the US Department of Labor,
Bureau of Labor Statistics, in "PPI Detailed Report" (Table 6: Producer
price indexes and percentage change for commodity groupings and individual
items, not seasonally adjusted).
(Base year 1982 = 100.)
LA2/App. 4-4
<PAGE>
4. REVISION FORMULA
Pn = Pb x CPIn
----
108.66
Where
Pn = Revised Reference Price of a set of two (2) engines at delivery
of the A320 Aircraft.
Pb = Reference Price as defined above.
CPIn = Composite Price Index for the sixth month prior to the month
of delivery of the A320 Aircraft.
Said Composite Price Index is composed as follows:
CPIn = 0.55 (HEn x 100) + 0.10 ICn + 0.25 MMPn + 0.10 EPn
---
(11.16)
Where
HEn = HE SIC 3724 for the sixth month prior to the month of
delivery of the A320 Aircraft; the quotient HEn/11.16 is
rounded to the nearest third decimal place. The product by
0.55 is rounded to the nearest second decimal place.
ICn = IC-Index for the sixth month prior to the month of delivery
of the A320 Aircraft.
MMPn = MMP-Index for the sixth month prior to the month of delivery
of the A320 Aircraft. The product by 0.25 is rounded to the
nearest second decimal place.
EPn = EP-Index for the sixth month prior to the month of delivery
of the A320 Aircraft.
The Composite Price Index shall be determined to the second decimal place.
If the next succeeding decimal place is five (5) or more, the preceding
decimal figure shall be raised to the next higher figure.
The final factor shall be rounded to the nearest thousandth (3 decimals).
LA2/App. 4-5
<PAGE>
5. GENERAL PROVISIONS
5.1 The Revised Reference Price at delivery of the A320 Aircraft shall be the
final price and will not be subject to further adjustments in the indexes.
5.2 If no final index value is available for any of the applicable months, the
published preliminary figures will be the basis on which the Revised
Reference Price will be computed.
5.3 If the US Department of Labor substantially revises the methodology of
calculation of the indexes referred to in this Appendix 4 or discontinues
any of these indexes, AVSA shall, in agreement with CFM International,
apply a substitute for the revised or discontinued index, such substitute
index to lead in application to the same adjustment result, insofar as
possible, as would have been achieved by continuing the use of the original
index as it may have fluctuated had it not been revised or discontinued.
Appropriate revision of the formula shall be made to accomplish this
result.
5.4 Should the above escalation provisions become null and void by action of
the US Government, the Reference Price shall be adjusted to reflect
increases in the cost of labor, material and fuel which have occurred from
the period represented by the applicable Reference Price Indexes to the
sixth month prior to the scheduled delivery of the A320 Aircraft.
5.5 The Revised Reference Price at delivery of the A320 Aircraft in no event
shall be less than the Reference Price defined in Paragraph 1 of this
Appendix 4.
LA2/App. 4-6
<PAGE>
LETTER AGREEMENT NO. 3
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: PREDELIVERY PAYMENTS
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319-100 Purchase Agreement, dated as of even
date herewith (the "Agreement"), which covers, among other things, the sale
by AVSA and the purchase by Northwest of certain Aircraft, under the terms
and conditions set forth in said Agreement. Northwest and AVSA have agreed
to set forth in this Letter Agreement No. 3 (the "Letter Agreement") certain
additional terms and conditions regarding the sale of the Aircraft.
Capitalized terms used herein and not otherwise defined in this Letter
Agreement will have the meanings assigned thereto in the Agreement. The
terms "herein," "hereof" and "hereunder" and words of similar import refer to
this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
1. PREDELIVERY PAYMENTS
AVSA hereby agrees to accept and Northwest agrees it will make Predelivery
Payments in the manner set forth in this Letter Agreement.
<PAGE>
2. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}PREDELIVERY PAYMENTS
2.1 FIRM AIRCRAFT
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}PREDELIVERY PAYMENTS
2.2 OPTION AIRCRAFT
2.2.1 In accordance with Subparagraph 2.4.1 of Letter Agreement No. 2 to the
Agreement, Northwest will pay to AVSA an Option Fee upon each Option
Exercise.
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.2.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.2.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.3.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.3.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 3-2
<PAGE>
3. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
3.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.5 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
4.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of
the Agreement, this Letter Agreement and the rights and obligations
of Northwest hereunder will not be assigned or transferred in any
manner without the prior written consent of AVSA, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 5 will be void and of no force or effect.
LA 3-3
<PAGE>
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 3-4
<PAGE>
APPENDIX 1
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
{CONFIDENTIAL {CONFIDENTIAL {CONFIDENTIAL {CONFIDENTIAL
MATERIAL MATERIAL MATERIAL MATERIAL
OMITTED AND OMITTED AND OMITTED AND OMITTED AND
FILED FILED FILED FILED
SEPARATELY SEPARATELY SEPARATELY SEPARATELY
WITH THE WITH THE WITH THE WITH THE
SECURITIES AND SECURITIES AND SECURITIES AND SECURITIES AND
EXCHANGE EXCHANGE EXCHANGE EXCHANGE
COMMISSION COMMISSION COMMISSION COMMISSION
PURSUANT TO A PURSUANT TO A PURSUANT TO A PURSUANT TO A
REQUEST FOR REQUEST FOR REQUEST FOR REQUEST FOR
CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL
TREATMENT} TREATMENT} TREATMENT} TREATMENT}
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
<PAGE>
LETTER AGREEMENT NO. 4
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: AIRCRAFT CUSTOMIZATION
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319-100 Purchase Agreement, dated as of even
date herewith (the "Agreement"), which covers, among other things, the sale
by AVSA and the purchase by Northwest of certain Aircraft, under the terms
and conditions set forth in said Agreement. Northwest and AVSA have agreed
to set forth in this Letter Agreement No. 4 (the "Letter Agreement") certain
additional terms and conditions regarding the sale of the Aircraft.
Capitalized terms used herein and not otherwise defined in this Letter
Agreement will have the meanings assigned thereto in the Agreement. The
terms "herein," "hereof" and "hereunder" and words of similar import refer to
this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
1. AIRCRAFT WEIGHTS
AVSA will increase the maximum take-off weight ("MTOW") of each Aircraft
that is an A319 type Aircraft from 64 metric tonnes as specified in
Subclause 2.2 of the Agreement, to {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} metric tonnes, subject to the
provisions of this Paragraph 1.
LA 4-1
<PAGE>
AVSA and Northwest will enter, as soon as feasible following execution of
the Agreement, into an SCN applicable to all Firm Aircraft that are A319
type aircraft specifying such MTOW upgrade from 64 metric tonnes to
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
metric tonnes (the "MTOW Upgrade SCN"). AVSA will make available the MTOW
Upgrade SCN to Northwest at identical terms as provided in Paragraph 1 of
this Letter Agreement for each Aircraft, other than Firm Aircraft, that is
an A319 Aircraft.
The price for the MTOW Upgrade SCN for each Aircraft that is an A319 model
Aircraft is US$ {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} in January 1998 delivery conditions (dollars),
subject to price revision in accordance with the Airframe Price Revision
Formula. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
2. ENGINE CONVERSION
2.1 ENGINE CONVERSION PRIOR TO DELIVERY
Should Northwest wish to convert the CFM56-5A4 Powerplants into CFM56-5A5
Powerplants, on any of the A319 type Aircraft not yet delivered to
Northwest, then AVSA will perform such conversion, provided that Northwest
executes the associated SCN at least {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} months prior to the month of delivery
of the corresponding A319 Aircraft. Such SCN will identify the price
difference of the Powerplants manufacturer's reference prices of the
CFM56-5A4 Powerplants and the CFM56-5A5 Powerplants. {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
Should Northwest request, on an exceptional basis, to convert the
Powerplants of the Aircraft within {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} prior to the month of delivery of the
corresponding A319 Aircraft, then AVSA will provide a quote for such
Powerplant change upon Northwest's request.
LA 4-2
<PAGE>
2.2 ENGINE CONVERSION AFTER DELIVERY
Should Northwest wish to convert the CFM56-5A4 Powerplants into CFM56-5A5
Powerplants, on A319 type Aircraft already delivered to Northwest pursuant
to the Agreement, then AVSA will provide, upon receipt of Northwest's
purchase order, the asscociated Service Bulletin at a price of US$
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}, such
price being quoted in January 1998 delivery conditions and to be revised in
accordance with the Airframe Price Revision Formula. This Service Bulletin
will cover the Airframe related modifications only, including the update of
the applicable Aircraft Flight Manual as well as the applicable Airframe
data plates. However, any changes in the prices of the Powerplants, and the
Powerplant name plates are excluded from this quotation.
3. CUSTOMIZATION
The Base Prices of SCNs and seats and galleys as listed in Exhibit B to the
Agreement are as stated in Subclauses 4.1.1.1(ii) and (iii) of the
Agreement. Such Base Prices are exclusive of Buyer Furnished Equipment.
4. AVSA FURNISHED EQUIPMENT / BUYER FURNISHED EQUIPMENT
4.1 Exhibit B to the Agreement includes certain BFE that is converted into SFE.
Northwest and AVSA will, as soon as feasible after execution of the
Agreement, enter into applicable SCN's with respect to those BFE to SFE
conversions. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
4.2 At Northwest's election and within the leadtimes quoted in Appendix 1 to
this Letter Agreement, Northwest may specify that certain Seller Furnished
Equipment as listed in Appendix 1 hereto be purchased by Northwest, thus
changing such Seller Furnished Equipment into Buyer Furnished Equipment.
In the event that Northwest elects to change Seller Furnished Equipment
into Buyer Furnished Equipment, AVSA and Northwest will execute an SCN
reflecting Northwest's request and specifying the applicable credit amount
listed in Appendix 1 hereto (the "SFE to BFE SCN"). Upon execution of the
SFE to BFE SCN, AVSA will provide Northwest with a credit as stated in the
SFE to BFE SCN for such change (the "SFE to BFE Credit").
4.3 The SFE to BFE Credit has been established in accordance with January 1998
delivery conditions (dollars) and will be revised to the actual delivery
date of each Aircraft in accordance with the Airframe Price Revision
Formula set forth in Exhibit D to the Agreement.
LA 4-3
<PAGE>
4.4 Upon delivery of each Aircraft, the SFE to BFE Credit will be applied by
AVSA against the Final Contract Price of each Aircraft {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
4.5 AVSA confirms {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} for the provision, installation or handling of Seller Furnished
Equipment converted to Buyer Furnished Equipment in accordance with this
Paragraph 4.
4.6 Unless specified to the contrary herein, the terms of Clause 18 of the
Agreement will apply to Seller Furnished Equipment that is converted to
Buyer Furnished Equipment pursuant to this Paragraph 4.
4.7 The AVSA-Supplied Buyer Furnished Equipment in the Aircraft Customization
as set forth in Exhibit B to the Agreement and in Appendix 3 to Letter
Agreement No. 2 are {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5. SPECIFICATION CHANGES
5.1 Pursuant to the terms contained in this Paragraph 5, Northwest may chose to
cancel certain SCNs listed in Exhibit B to the Agreement. The SCNs that
may be so cancelled and applicable leadtimes for cancellation are listed in
Appendix 2 hereto (the "Cancelable SCN(s)").
5.2 In the event that Northwest chooses to cancel the Cancelable SCN(s),
Northwest will notify AVSA in writing of such request. Northwest and AVSA
will execute an SCN (i) reflecting Northwest's request to eliminate the
Cancelable SCN(s) from the Specification and (ii) specifying the applicable
credit amount listed in Appendix 2 hereto (the "Cancellation SCN").
Further, upon execution of each Cancellation SCN, AVSA will provide
Northwest with a credit for such change as listed in Appendix 2 hereto (the
"Cancellation SCN Credit").
5.3 The Cancellation SCN Credit has been established in accordance with January
1998 delivery conditions (dollars) and will be revised to the actual
delivery date of each Aircraft in accordance with the Airframe Price
Revision Formula set forth in Exhibit D to the Agreement.
LA 4-4
<PAGE>
5.4 Upon delivery of each Aircraft, the Cancellation SCN Credit will be applied
by AVSA against the Final Contract Price of each Aircraft {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
6. CERTAIN REGULATORY CHANGES
Should AVSA be required pursuant to Subclause 3.4 of the Agreement to
incorporate a change in the Specification of the Aircraft before delivery
of an Aircraft to enable Northwest to obtain a Standard Airworthiness
Certificate for such Aircraft by reason of the promulgation of any law or
regulation applicable to the Aircraft {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
7. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of the
Agreement, this Letter Agreement and the rights and obligations of
Northwest hereunder will not be assigned or transferred in any manner
without the prior written consent of AVSA, and any attempted assignment or
transfer in contravention of the provisions of this Paragraph 7 will be
void and of no force or effect.
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 4-5
<PAGE>
APPENDIX 1
SELLER FURNISHED EQUIPMENT TO BUYER FURNISHED EQUIPMENT CREDITS
Notification Leadtime: no later than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT} months prior to delivery of the applicable
Aircraft.
- ------------------------------------------------------------------------------
CREDIT AMOUNT
QUANTITY DESCRIPTION/ VENDOR/ (1/98 DC)
PART NUMBER REMARKS
- ------------------------------------------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL {CONFIDENTIAL {CONFIDENTIAL
MATERIAL MATERIAL MATERIAL MATERIAL
OMITTED AND OMITTED AND OMITTED AND OMITTED AND
FILED FILED FILED FILED
SEPARATELY SEPARATELY SEPARATELY SEPARATELY
WITH THE WITH THE WITH THE WITH THE
SECURITIES SECURITIES SECURITIES SECURITIES
AND EXCHANGE AND EXCHANGE AND EXCHANGE AND EXCHANGE
COMMISSION COMMISSION COMMISSION COMMISSION
PURSUANT TO A PURSUANT TO A PURSUANT TO A PURSUANT TO A
REQUEST FOR REQUEST FOR REQUEST FOR REQUEST FOR
CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL
TREATMENT} TREATMENT} TREATMENT} TREATMENT}
- ------------------------------------------------------------------------------
LA 4/App. 1-1
<PAGE>
APPENDIX 2
CREDITS FOR ELIMINATION OF CUSTOMIZATION ITEMS
Notification Leadtime: no later than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT} months prior to delivery of the applicable
Aircraft
- ----------------------------------------------
CREDIT
RFC NO. TITLE (1/98 DC)
- ----------------------------------------------
{CONFIDENTIAL {CONFIDENTIAL {CONFIDENTIAL
MATERIAL MATERIAL MATERIAL
OMITTED AND OMITTED AND OMITTED AND
FILED FILED FILED
SEPARATELY SEPARATELY SEPARATELY
WITH THE WITH THE WITH THE
SECURITIES SECURITIES SECURITIES
AND EXCHANGE AND EXCHANGE AND EXCHANGE
COMMISSION COMMISSION COMMISSION
PURSUANT TO A PURSUANT TO A PURSUANT TO A
REQUEST FOR REQUEST FOR REQUEST FOR .
CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL
TREATMENT} TREATMENT} TREATMENT}
- ----------------------------------------------
LA 4/App. 2-2
<PAGE>
LETTER AGREEMENT NO. 5
As of September 19, 1997
Northwest Airlines, Inc
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319-100 Purchase Agreement, dated as of even
date herewith (the "Agreement"), which covers, among other matters, the sale
by AVSA and the purchase by Northwest of certain Aircraft, under the terms
and conditions set forth in said Agreement. Northwest and AVSA have agreed
to set forth in this Letter Agreement No. 5 (the "Letter Agreement") certain
additional terms and conditions regarding the sale of the Aircraft.
Capitalized terms used herein and not otherwise defined in this Letter
Agreement will have the meanings assigned thereto in the Agreement. The
terms "herein," "hereof" and "hereunder" and words of similar import refer to
this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
1. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
2. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
<PAGE>
2.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.5 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
3.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.3.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.3.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 5-2
<PAGE>
4. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
4.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
4.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
4.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
5. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
5.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
5.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
6. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
6.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
6.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
6.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
LA 5-3
<PAGE>
7. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
8. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
8.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.5 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
9. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of the
Agreement, this Letter Agreement and the rights and obligations of
Northwest hereunder shall not be assigned or transferred in any manner
without the prior written consent of AVSA, and any attempted assignment or
transfer in contravention of the provisions of this Paragraph 9 shall be
void and of no force or effect.
LA 5-4
<PAGE>
If the foregoing correctly sets forth our understanding, please execute the
original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 5-5
<PAGE>
LETTER AGREEMENT NO. 6
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: A319-100 GUARANTEES
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319-100 Purchase Agreement, dated as of even
date herewith (the "Agreement"), which covers, among other things, the sale
by AVSA and the purchase by Northwest of certain Aircraft, under the terms
and conditions set forth in said Agreement. Northwest and AVSA have agreed
to set forth in this Letter Agreement No. 6 (the "Letter Agreement") certain
additional terms and conditions regarding the sale of the Aircraft.
Capitalized terms used herein and not otherwise defined in this Letter
Agreement will have the meanings assigned thereto in the Agreement. The
terms "herein," "hereof" and "hereunder" and words of similar import refer to
this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
PART A A319-100 PERFORMANCE GUARANTEES
AVSA, under its arrangement with the Manufacturer, has negotiated and
obtained the following performance guarantees from the Manufacturer with respect
to the Aircraft, subject to the terms, conditions, limitations and restrictions
all as hereinafter set out. AVSA hereby guarantees to Northwest the performance
by the Manufacturer of its obligations under these reliability guarantees and
hereby assigns to Northwest, and Northwest hereby accepts, all of AVSA's rights
and obligations as aforesaid under the said performance guarantees, and AVSA
subrogates Northwest into all such rights and obligations in respect of the
Aircraft. AVSA hereby warrants to Northwest that it has all requisite authority
to make the foregoing assignment and effect the foregoing subrogation to and in
favor of Northwest and that it will not enter into any amendment of the
provisions so assigned or subrogated without the prior written consent of
Northwest. Capitalized terms used in the following quoted provisions and not
otherwise defined therein shall have the meanings assigned thereto in the
Agreement, except that the term "Seller" refers to the Manufacturer and the term
"Buyer" refers to AVSA.
<PAGE>
QUOTE
PREAMBLE
A. Assumptions:
The guarantees defined below in this Part A are applicable at the time
of delivery to each A319-100 Aircraft as described in the A319-100
Standard Specification Ref. J.000.01000, Issue 3, dated March 29,
1995, including Temporary Revision 1, dated August 25, 1995, on the
basis of the following assumptions:
(i) Maximum Take Off Weight (MTOW) of {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
(ii) fitting of either
(x) the CFM International CFM56-5A4 engines (22,000 lbs thrust),
or
(y) the CFM International CFM56-5A5 engines (23,500 lbs thrust),
except where otherwise noted.
B. Definitions:
(i) For the purpose of this Part A of this Letter Agreement only, the
term "Aircraft" is defined as any and all of the Airbus A319-100
model aircraft to be acquired by the Buyer under the Agreement.
(ii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1. GUARANTEED PERFORMANCE
1.1. SPEED
The level flight airspeed at an Aircraft gross weight of {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds at a
pressure altitude of 35,000 feet using maximum cruise thrust in ISA
conditions shall not be less than a true Mach number of {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
LA 6-2
<PAGE>
1.2 EN-ROUTE ONE ENGINE INOPERATIVE
Each Aircraft shall meet FAR 25 regulations minimum en-route climb
gradient (currently 1.1%) with one engine inoperative, the other
operating at the maximum continuous thrust available at the
altitude with air conditioning bleeds on, without anti-icing, at a
gross weight of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT} pounds in the cruise configuration in
ISA conditions, at a geometric altitude of {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} feet.
1.3 TAKE-OFF DISTANCE
1.3.1 With respect only to Aircraft delivered with CFM56-5A4 engines, FAR
take-off length at an Aircraft gross weight of {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds at
a start of ground run at sea level pressure altitude at ISA conditions
shall not be more than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} feet.
1.3.2 With respect only to Aircraft delivered with CFM56-5A5 engines, FAR
take-off length at an Aircraft gross weight of {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds at
a start of ground run at sea level pressure altitude at ISA conditions
shall not be more than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} feet.
1.4 TAKE-OFF PERFORMANCE
1.4.1 With respect only to Aircraft delivered with CFM56-5A4 engines, FAR
permissible take-off weight shall not be less than {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds in
the following conditions (assumed representative of {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}):
LA 6-3
<PAGE>
Pressure altitude: {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY
Runway length: WITH THE SECURITIES AND
EXCHANGE COMMISSION
Slope: PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
Obstacles:
1.4.2 With respect only to Aircraft delivered with CFM56-5A5 engines, FAR
permissible take-off weight shall not be less than {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds in
the same conditions as set forth in Subparagraph 1.4.1 of Part A above
(assumed representative of {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}).
1.4.3 With respect only to Aircraft delivered with CFM56-5A4 engines, FAR
permissible take-off weight shall not be less than {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds in
the following conditions (assumed representative of {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}):
Pressure altitude: {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY
Runway length: WITH THE SECURITIES AND
EXCHANGE COMMISSION
Slope: PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
Obstacles:
1.4.4 With respect only to Aircraft delivered with CFM56-5A5 engines, FAR
permissible take-off weight shall not be less than {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds in
the same conditions as set forth in Subparagraph 1.4.3 of Part A above
(assumed representative of {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}).
LA 6-4
<PAGE>
1.5 SECOND SEGMENT CLIMB
Each Aircraft shall meet FAR 25 regulations for one engine inoperative
climb after take-off, undercarriage retracted, at a weight corresponding to
the stated weight at the start of the ground run, at the altitude and
temperature, and in the configuration of flap angle and take-off safety
speed, required to comply respectively with the performance guaranteed in
Subparagraph 1.3 and 1.4 of this Part A.
1.6 CLIMB PERFORMANCE
Each Aircraft shall be capable of climbing from 1,500 feet to pressure
altitude of 35,000 feet at an Aircraft gross weight of {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds in ISA
conditions using a climb profile of 250/280kt CAS/M.076 with a minimum rate
of climb of 300 feet per minute in {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} minutes.
1.7 LANDING DISTANCE
FAR certified landing field length at an Aircraft gross weight of
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
pounds at sea level pressure altitude shall not be greater than
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} feet.
1.8 EXTERNAL NOISE
Each Aircraft will comply with FAR Part 36 Amendment 9 and with ICAO Annex
16 Chapter 3 with cumulative margins from flyover, sideline, and approach
of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
EPNdB.
2. FUEL BURN GUARANTEE
2.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
AIRCRAFT SPECIFIC RANGE
LA 6-5
<PAGE>
The level flight specific range at an Aircraft gross weight of
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
pounds at a pressure altitude of 35,000 feet operating at M.78 at ISA
conditions shall not be less than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} nautical miles per pound of fuel for
each Aircraft (the "Guaranteed {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} Aircraft Specific Range").
2.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
SPECIFIC RANGE
With respect to the {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}, the level flight specific range at an Aircraft
gross weight of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds at a pressure altitude of 35,000 feet
operating at M.78 at ISA conditions shall not be less than {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} nautical miles
per pound of fuel {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} (the "Guaranteed {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} Specific Range").
3. MISSION PAYLOAD RANGE GUARANTEE
3.1 MISSION NO. 1 -{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}
Each Aircraft shall be capable of carrying a guaranteed payload of not less
than
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for Aircraft delivered with CFM56-5A4
engines,
LA 6-6
<PAGE>
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for Aircraft delivered with CFM56-5A5
engines
over an equivalent still air stage distance of {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} nautical miles (assumed
representative of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} for a summer operation) when operated under the
conditions described below.
a) Available takeoff weight is assumed to be
(i) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for Aircraft delivered with
CFM56-5A4 engines, and
(ii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for Aircraft delivered with
CFM56-5A5 engines.
b) The destination airport conditions are such to allow the required
landing weight to be used without performance restrictions and without
exceeding the Maximum Landing Weight as defined in the A319 Standard
Specification referenced in the Preamble.
Profile assumes the following:
c) Allowance of 250 pounds for engine start and taxi out. Take-off and
initial climb to 1,500 feet above airfield elevation with acceleration
to climb speed in ISA conditions (two minutes time and fuel
allowance). No distance credit for takeoff climb to 1,500 feet.
Climb from 1,500 feet above airfield elevation up to a cruise altitude
using maximum climb thrust and cruise at a pressure altitude of 39,000
feet at a fixed Mach number of 0.78 and descent to 1,500 feet above
airfield elevation are conducted in ISA conditions. Climb speeds to
be used should be 250kt/280kt/M76 and descent speeds should be
M76/250kt to 1500 feet. An allowance of 300 pounds of fuel is assumed
for approach and landing at the destination and also includes an
allowance for maneuvering fuel. No distance credit for approach and
landing and maneuvering.
LA 6-7
<PAGE>
d) Stage distance is defined as the distance covered during climb,
cruise, and descent as described in c. above.
e) Trip fuel is defined as the fuel used during take-off and initial
climb, climb, cruise, descent, approach and landing and maneuvering as
described in c. above.
f) Total fuel required shall not exceed {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds. Total fuel
required is defined as taxi out allowance, trip fuel, and fuel on
landing as described in (g) below.
g) At the end of approach and landing {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds of fuel shall remain
in the tanks.
h) The mission payload guarantee is based on an Operating Weight Empty
(OWE) composed of the actual Manufacturer's Weight Empty plus the
following fixed allowances:
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for customer changes
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for operator items
3.2. MISSION NO. 2 -{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}
Each Aircraft shall be capable of carrying a guaranteed payload of not less
than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} pounds over an equivalent still air stage distance of
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
nautical miles (assumed representative of {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} for a winter operation) when
operated under the conditions described below.
LA 6-8
<PAGE>
a) Available takeoff weight is assumed to be {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds.
b) The destination airport conditions are such to allow the required
landing weight to be used without performance restrictions and without
exceeding the Maximum Landing Weight as defined in the A319 Standard
Specification referenced in the Preamble.
Profile assumes the following:
c) Allowance of 250 pounds for engine start and taxi out. Take-off and
initial climb to 1,500 feet above airfield elevation with acceleration
to climb speed in ISA conditions (two minutes time and fuel
allowance). No distance credit for takeoff climb to 1,500 feet.
Climb from 1,500 feet above airfield elevation up to a cruise altitude
using maximum climb thrust and cruise at a pressure altitude of 35,000
feet stepping to 39,000 feet at a fixed Mach number of 0.78 and
descent to 1,500 feet above airfield elevation are conducted in ISA
conditions. Climb speeds to be used should be 250kt/280kt/M76 and
descent speeds should be M76/250kt to 1500 feet. An allowance of 300
pounds of fuel is assumed for approach and landing at the destination
and also includes an allowance for maneuvering fuel. No distance
credit for approach and landing and maneuvering.
d) Stage distance is defined as the distance covered during climb,
cruise, and descent as described in c. above.
e) Trip fuel is defined as the fuel used during take-off and initial
climb, climb, cruise, descent, approach and landing and maneuvering as
described in (c) above.
f) Total fuel required shall not exceed {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds. Total fuel
required is defined as taxi out allowance, trip fuel, and fuel on
landing as described in (g) below.
g) At the end of approach and landing {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} pounds of fuel shall remain
in the tanks.
h) The mission payload guarantee is based on an Operating Weight Empty
(OWE) composed of the actual Manufacturer's Weight Empty plus the
following fixed allowances:
LA 6-9
<PAGE>
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for customer changes
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for operator items
4. WEIGHT GUARANTEES
4.1 MANUFACTURER'S WEIGHT EMPTY
The Seller guarantees that the Manufacturer's Weight Empty (as defined in
the A319-100 Standard Specification set forth in the Preamble) of each
Aircraft, which will be derived from the weighing of each Aircraft, shall
not be more than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for any individual Aircraft and shall not be
more than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} pounds for the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
4.2 STRUCTURAL USABLE LOAD
The Seller guarantees that the excess of the Maximum Zero Fuel Weight (as
defined in the A319 Standard Specification set forth in the Preamble) of
each Aircraft over the Operating Weight Empty (as defined below) of such
Aircraft shall not be less than {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} pounds for any individual Aircraft and
shall not be less than {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for the {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
Operating Weight Empty is the sum of the Manufacturer's Weight Empty (as
defined in the Type Specification set forth in the Preamble) plus the
following fixed allowances:
LA 6-10
<PAGE>
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for customer changes
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds for operator items
5. GENERAL GUARANTEE CONDITIONS
5.1. AIRCRAFT CONFIGURATION
Seller reserves the right to make reasonable and appropriate
adjustments to the guarantees set forth in this Part A for any
configuration change or deviation from the A319-100 Standard
Specification which is agreed between Buyer and Seller subsequent
to the date hereof, provided that any such adjustment is made
contemporaneously with such A319-100 Standard Specification change
or deviation.
5.2. PERFORMANCE DEFINITIONS
5.2.1. Performance and noise certification rules will be those required to
obtain FAR certification under the FAA Airworthiness Code as defined
in the Type Specification.
5.2.2. All performance data is based on the International Standard Atmosphere
and specified variations. Unless otherwise stated all altitudes are
pressure altitudes.
5.2.3. Unless otherwise stated, take-off and landing performance is based
upon a hard, smooth, dry and level runway surface with zero wind.
5.2.4. Take-off and landing performance is based on the brakes and tires as
specified in the aircraft configuration defined in the Preamble.
5.2.5. Devices such as flaps, landing gear, speed brakes, wheel brakes,
anti-skid and engines will be employed in the manner which provides
the best performance standard consistent with approved operations.
5.2.6. All guaranteed performance in this Part A is based upon no air bleed
from the engines for airframe or engine anti-icing.
5.2.7. For take-off and take-off climb performance, landing and landing climb
performance, no air will be bled from the engine for air conditioning.
5.2.8. For en route performance, engine bleeds consistent with normal
operation of the air conditioning system, including recirculation, are
assumed.
LA 6-11
<PAGE>
5.2.9. Normal electrical services will be in use consistent with the typical
load schedule given in the A319 Standard Specification.
5.2.10. All guaranteed performance in this Part A assumes the use of approved
fuel with a Lower Heating Value (the "LHV") of 18,590 BTU/lb. and with
a specific gravity of 6.7 pounds / gallon as such.
5.3. COMPLIANCE
5.3.1. The Seller shall provide to Buyer a guarantee compliance report
providing the compliance data for each Aircraft immediately prior to
acceptance of the Aircraft by the Buyer (the "Guarantee Compliance
Report") {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.3.2. Compliance with the en-route one engine inoperative, takeoff distance,
takeoff performance, second segment climb, landing distance, and
external noise guarantees will be demonstrated with reference to
performance data contained in the approved Flight Manual.
Compliance with climb performance and speed will be demonstrated with
reference to the IFP.
5.3.3. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.3.4. The actual {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} Aircraft specific range, used for determining
compliance with the fuel burn and mission payload guarantees, will be
defined as the IFP performance level corrected by the Correction
Factor.
5.3.5. The actual {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} specific range, used for determining
compliance with the fuel burn guarantee, will be defined upon delivery
of each individual Aircraft as the {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
LA 6-12
<PAGE>
5.3.6. FUEL BURN GUARANTEE COMPLIANCE
Compliance with the fuel burn guarantees shall be determined as
follows:
(i) with respect to each Aircraft, if its actual {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} Aircraft specific range meets the guarantee level
set forth in Subparagraph 2.1 of this Part A.
(ii) with respect to the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}, if, upon
delivery of any Aircraft, the {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
specific range meets the guarantee level set forth in
Subparagraph 2.2 of this Part A. {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
5.3.7 Compliance with the mission payload guarantees will be based on the
actual {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} Aircraft specific range as defined in Section
5.3.4 of this Part A and the actual Manufacturer's Weight Empty of the
applicable Aircraft as determined pursuant to Subparagraph 5.3.8 of
this Part A.
5.3.8 Compliance with the weight guarantees shall be demonstrated with
reference to a weight compliance report.
6. ADJUSTMENT OF GUARANTEES
Should any change be made to any law, governmental regulation or
requirement or interpretation thereof ("Rule Change") by any
governmental agency subsequent to the date of the Agreement, and
should such Rule Change (i) affect the Aircraft configuration or
performance or both, and (ii) be required to obtain the Standard
Airworthiness Certificate, the guarantees set forth herein shall be
appropriately modified to reflect the effect(s) of any such Rule
Change(s).
7. EXCLUSIVE GUARANTEES
The guarantees set forth in this Part A supersede any similar
guarantees from AVSA that may be stated in the A319 Standard
Specification or any other document, except for the guarantees set
forth in Part B to this Letter Agreement.
LA 6-13
<PAGE>
8. REMEDIES
8.1 GENERAL
8.1.1 In the event that the Seller fails to demonstrate compliance by one or
more Aircraft {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}, with any of the guarantees set forth in this
Part A, the Seller shall
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.1.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.1.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.1.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.1.5 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.1.6 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.2 FUEL BURN
The Compensation for failure to comply with either the guarantee
set forth in Subparagraph 2.1 or Subparagraph 2.2 of Part A of this
Letter Agreement shall be {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
LA 6-14
<PAGE>
8.2.1 DEFICIENCY OF {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} AIRCRAFT
In the event that an {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} Aircraft fails to comply with
the guarantee set forth in Subparagraph 2.1 of this Part A, the
amount of Compensation {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.2.2 DEFICIENCY OF {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
In the event that the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} fails to comply with the
guarantee set forth in Subparagraph 2.2 of this Part A, the amount
of Compensation {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT}.
8.3 PAYLOAD
The Compensation for failure to comply with either the guarantees
set forth in Subparagraph 1.3, 1.4, Paragraph 3 or Subparagraph 4.2
of Part A of this Letter Agreement shall be {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.3.1 MISSION PAYLOAD RANGE
In the event that any Aircraft fails to meet either of the mission
payload range guarantees in Paragraph 3 of this Part A, the amount
of Compensation {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT}.
8.3.2 STANDARD USABLE LOAD
In the event that any Aircraft {CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} fail to meet the
guarantee levels specified in Subparagraph 4.2 of this Part A, the
Compensation shall be {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
LA 6-15
<PAGE>
8.3.3 TAKE-OFF
In the event that an Aircraft fails to meet the take-off guarantees
set forth in Subparagraph 1.3 or 1.4 of this Part A, the amount of
Compensation shall be {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}, provided that the Buyer
demonstrates to the Seller that such deficiency adversely impacts
the Buyer's operation of the affected Aircraft. With respect to
Subparagraph 1.4 of this Part A, the amount of Compensation
hereunder shall be {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.3.4 LANDING
In the event that an Aircraft fails to meet the landing guarantee
set forth in Subparagraph 1.7 of this Part A, the amount of
Compensation shall be {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT}, provided that the Buyer
demonstrates to the Seller that such deficiency adversely impacts
the Buyer's operation of the affected Aircraft.
8.4 MANUFACTURER'S WEIGHT EMPTY
In the event that the Manufacturer's Weight Empty (MWE) of an
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} Aircraft or of the {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
exceeds the guarantee levels specified in Subparagraph 4.1 of this
Part A, the amount of Compensation shall be {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
8.5 LIMITATIONS AND CONDITIONS
(i) The Seller shall have the right to review and verify data
collected by the Buyer which is provided to Seller for Seller
to perform the calculations of Compensation due hereunder.
(ii) If at any time following delivery of an Aircraft the Seller
restores the required performance level of an Aircraft which
has initially failed to meet the performance guarantee
requirements of Paragraphs 1, 2, 3, or 4 of this Part A, and
the Seller demonstrates compliance for such specific Aircraft
in accordance with the applicable compliance provisions of
this Part A, all payments of Compensation required under this
Part A with respect to such initial failure shall cease and
the Seller shall have no further obligation to the Buyer under
this Part A for such initial failure in respect of such
Aircraft. Seller shall demonstrate compliance by {CONFIDENTIAL
MATERIAL OMITTED AND FILED
LA 6-16
<PAGE>
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}, gathering
data and producing a Guarantee Compliance Report which
demonstrates compliance for such specific Aircraft in
accordance with the applicable compliance provisions of this
Part A.
The compliance level achieved by such Aircraft shall be taken
into account for all {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} calculations
for the purposes of this Part A.
(iii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
(iv) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
(v) The Seller's maximum liability {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
(vi) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} as aforesaid shall be deemed to settle
any and all claims and remedies of the Buyer against the Seller
under this Part A ({CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT}), but shall not settle
or modify in any respect any other claim or remedy of the Buyer
against the Seller.
UNQUOTE
LA 6-17
<PAGE>
PART B {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
AVSA, under its arrangement with the Manufacturer, has negotiated
and obtained the following performance guarantees from the
Manufacturer with respect to the Aircraft, subject to the terms,
conditions, limitations and restrictions all as hereinafter set out.
AVSA hereby guarantees to Northwest the performance by the
Manufacturer of its obligations under these reliability guarantees
and hereby assigns to Northwest, and Northwest hereby accepts, all
of AVSA's rights and obligations as aforesaid under the said
performance guarantees, and AVSA subrogates Northwest into all such
rights and obligations in respect of the Aircraft. AVSA hereby
warrants to Northwest that it has all requisite authority to make
the foregoing assignment and effect the foregoing subrogation to and
in favor of Northwest and that it will not enter into any amendment
of the provisions so assigned or subrogated without the prior
written consent of Northwest. Capitalized terms used in the
following quoted provisions and not otherwise defined therein shall
have the meanings assigned thereto in the Agreement, except that the
term "Seller" refers to the Manufacturer and the term "Buyer" refers
to AVSA.
QUOTE
PREAMBLE
A. Assumptions:
The guarantees defined below in this Part B are applicable to
A319-100 Aircraft as described in the A319-100 Standard
Specification Ref. J.000.01000, Issue 3, dated March 29, 1995,
including Temporary Revision 1, dated August 25, 1995, on the
basis of the following assumptions:
(i) Maximum Take Off Weight (MTOW) of {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
(ii) fitting of either
(x) the CFM International CFM56-5A4 engines (22,000 lbs
thrust), or
(y) the CFM International CFM56-5A5 engines (23,500 lbs
thrust),
except where otherwise noted.
LA 6-18
<PAGE>
B. Definitions:
(i) For the purpose of this Part B of this Letter Agreement
only, the term "Aircraft" is defined as any and all of the
Airbus A319-100 model aircraft to be acquired by the Buyer
under the Agreement.
(ii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
1. GENERAL PROVISIONS
1.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1.2 The {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} Guarantees in this Part B are contingent
upon:
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1.3. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2. FUEL BURN GUARANTEE
2.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} (expressed as a percentage) determined in
accordance with the In-Flight Performance Program (IFP) to be
supplied by the Seller.
2.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
The Seller guarantees to the Buyer that the {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} shall
not be worse than the IFP {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}:
LA 6-19
<PAGE>
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3. MISSION PAYLOAD GUARANTEE
The {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} as stated in paragraph 2.2 of this part B
shall allow the carrying of a guaranteed payload of not less than:
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
over an equivalent still air stage distance of {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} nautical miles (assumed representative of {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} for a winter operation) when operated under the
conditions described below.
a) In case of the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} as stated in
Subparagraph 2.2 of this Part B is modified according to
Subparagraph 1.3 of this Part B, the above guaranteed payload
shall be modified accordingly, using the following
relationship:
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
b) Available takeoff weight is assumed to be {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} pounds.
c) The destination airport conditions are such to allow the
required landing weight to be used without performance
restrictions and without exceeding the Maximum Landing Weight
as defined in Type Specification referenced in the Preamble.
LA 6-20
<PAGE>
Profile assumes the following:
d) Allowance of 250 pounds for engine start and taxi out.
Take-off and initial climb to 1,500 feet above airfield
elevation with acceleration to climb speed in ISA conditions
(two minutes time and fuel allowance). No distance credit for
takeoff climb to 1,500 feet. Climb from 1,500 feet above
airfield elevation up to a cruise altitude using maximum climb
thrust and cruise at a pressure altitude of 35,000 feet
stepping to 39,000 feet at a fixed Mach number of 0.78 and
descent to 1,500 feet above airfield elevation are conducted in
ISA conditions. Climb speeds to be used should be
250kt/280kt/M76 and descent speeds should be M76/250kt to 1500
feet. An allowance of 300 pounds of fuel is assumed for
approach and landing at the destination and also includes an
allowance for maneuvering fuel. No distance credit for
approach and landing and maneuvering.
e) Stage distance is defined as the distance covered during climb,
cruise, and descent as described in (d) above.
f) Trip fuel is defined as the fuel used during take-off and
initial climb, climb, cruise, descent, approach and landing and
maneuvering as described in (d) above.
g) Total fuel required shall not exceed {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
pounds. Total fuel required is defined as taxi out allowance,
trip fuel, and fuel on landing as described in (h) below.
h) At the end of approach and landing {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
pounds of fuel shall remain in the tanks.
i) The mission payload guarantee is based on an Operating Weight
Empty (OWE) composed of the actual {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}
Manufacturer's Weight Empty (MWE) as demonstrated at delivery
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} (but in no event more than
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} pounds), plus the following fixed
allowances:
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}
LA 6-21
<PAGE>
4. GENERAL GUARANTEE CONDITIONS
4.1. AIRCRAFT CONFIGURATION
Seller reserves the right to make reasonable and appropriate
adjustments to the guarantees in this Part B for any configuration
change or deviation from the A319 Standard Specification which is
agreed between Buyer and Seller subsequent to the date hereof,
provided that any such adjustment is made contemporaneously with
such A319 Standard Specification change or deviation.
4.2. COMPLIANCE
4.2.1. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2.2. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2.3. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2.4. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2.5. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2.6. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2.7. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2.8 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 6-22
<PAGE>
5. REMEDIES
5.1 GENERAL
5.1.1 In the event that the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT} exceeds the guaranteed
levels set forth in Subparagraph 2.2 of this Part B, then the
Buyer and the Seller,{CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
5.1.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.1.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.1.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.2 FUEL BURN-{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
In the event that the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} fails to comply with the
guarantee set forth in Subparagraph 2.2 of this Part
B,{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.3 MISSION PAYLOAD RANGE
In the event that the {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT} fails to meet the mission
payload range guarantee set forth in Paragraph 3 of this Part B,
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 6-23
<PAGE>
5.4 LIMITATIONS AND CONDITIONS
(i) The Seller shall have the right to review and verify data
collected by the Buyer which is provided to Seller for Seller
to perform the calculations of compensation due hereunder.
(ii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
(iii) The Seller's maximum liability{CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
(iv) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
(v) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT} shall be deemed to settle any and all
claims and remedies of the Buyer against the Seller under this
Part B, but shall not settle or modify in any respect any other
claim or remedy of the Buyer against the Seller.
(vi) The intent of Part B of this Letter Agreement is to provide
benefits to the Buyer as a result of the failure of the Buyer's
Aircraft ({CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}) to achieve the performance
level stipulated in the guarantees set forth in this Part B. It
is not the intent, however, to duplicate benefits provided to
the Buyer by the Seller under Part A of this Letter Agreement
as a result of the same failure. {CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT}.
(vii) {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
UNQUOTE
LA 6-24
<PAGE>
PART C GENERAL CONDITIONS
1. NORTHWEST ACCEPTANCE OF PERFORMANCE GUARANTEES
In consideration of the assignment and subrogation by AVSA under
Part A and Part B of this Letter Agreement in favor of Northwest in
respect of AVSA's rights against and obligations to the Manufacturer
under the provisions quoted above, Northwest hereby accepts such
assignment and subrogation and agrees to be bound by all of the
terms, conditions and limitations therein contained.
2. EXCLUSIVE LIABILITIES
SUBJECT TO SUBPARAGRAPH 8.5 (vi) OF PART A OF THIS LETTER AGREEMENT
AND SUBPARAGRAPH 5.4 (v) OF PART B OF THIS THIS LETTER AGREEMENT,
THIS LETTER AGREEMENT SETS FORTH THE EXCLUSIVE GUARANTEES,
WARRANTIES, EXCLUSIVE LIABILITIES AND EXCLUSIVE OBLIGATIONS OF AVSA,
AND THE EXCLUSIVE REMEDIES AVAILABLE TO NORTHWEST, ARISING FROM ANY
FAILURE OF ANY AIRCRAFT {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT} TO DEMONSTRATE COMPLIANCE WITH
ANY OF THE GUARANTEES SET FORTH IN THIS LETTER AGREEMENT, INCLUDING
BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE, ANY OBLIGATION OR LIABILITY OF
AVSA OR ANY RIGHT, CLAIM OR REMEDY OF NORTHWEST IN CONTRACT OR IN
TORT, WHETHER OR NOT ARISING FROM AVSA'S NEGLIGENCE, ACTUAL OR
IMPUTED, INTENTIONAL ACT, OR STRICT LIABILITY AND ANY OBLIGATION OR
LIABILITY OF AVSA OR ANY RIGHT, CLAIM OR REMEDY OF NORTHWEST FOR
LOSS OF OR DAMAGE TO ANY AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY
OR PART, FOR LOSS OF USE, REVENUE OR PROFIT WITH RESPECT TO ANY
AIRCRAFT, COMPONENT, EQUIPMENT, ACCESSORY OR PART, OR FOR ANY OTHER
DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, PROVIDED THAT IN THE
EVENT THAT ANY OF THE AFORESAID PROVISION SHOULD FOR ANY REASON BE
HELD UNLAWFUL OR OTHERWISE INEFFECTIVE THE REMAINDER OF THIS
PARAGRAPH C.2 SHALL REMAIN IN FULL FORCE AND EFFECT. THE
PERFORMANCE GUARANTEES SET FORTH IN THIS LETTER AGREEMENT NO. 6
SHALL NOT BE EXTENDED, ALTERED OR VARIED EXCEPT BY A WRITTEN
INSTRUMENT SIGNED BY AVSA AND NORTHWEST.
LA 6-25
<PAGE>
4. ASSIGNMENT
Notwithstanding any other provisions hereof or of the Agreement,
this Letter Agreement and the rights and obligations of Northwest
hereunder shall not be assigned or transferred in any manner without
the prior written consent of AVSA and any attempted assignment or
transfer in contravention of the provisions of this sentence shall
be void and of no force and effect, PROVIDED however that the
consent of AVSA shall not be necessary for an assignment by
Northwest of its rights hereunder to any Affiliate of Northwest if
prior to or concurrently with such assignment (x) Northwest executes
and delivers to AVSA an instrument in writing confirming to AVSA
that Northwest remains liable for all obligations, liabilities and
responsibilities of the "Buyer" hereunder and (y) such Affiliate
executes and delivers to AVSA an instrument in writing confirming to
AVSA that such Affiliate assumes all obligations, liabilities and
responsibilities of the "Buyer" hereunder and agrees that it will
remain an Affiliate of the "Buyer" so long as any Aircraft subject
to such assignment remains to be delivered under the Agreement.
If the foregoing terms and conditions are satisfactory, please
indicate your acceptance thereof by signing in the place indicated
below.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Agreed and Accepted
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 6-26
<PAGE>
APPENDIX 1
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
LA 6/App. 1-1
<PAGE>
APPENDIX 2
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
LA 6/App. 1-2
<PAGE>
APPENDIX 3
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
LA 6/App. 3-1
<PAGE>
LETTER AGREEMENT NO. 7
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: OTHER MATTERS
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319 Purchase Agreement, dated as of even date
herewith including all exhibits, appendixes and letter agreements thereto
(the "Agreement"), which covers, among other matters, the sale by AVSA and
the purchase by Northwest of certain Aircraft, under the terms and conditions
set forth in said Agreement. Northwest and AVSA have agreed to set forth in
this Letter Agreement No. 7 (the "Letter Agreement") certain additional terms
and conditions regarding the sale of the Aircraft. Capitalized terms used
herein and not otherwise defined in this Letter Agreement will have the
meanings assigned thereto in the Agreement. The terms "herein," "hereof" and
"hereunder" and words of similar import refer to this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
1. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
1.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
<PAGE>
2. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of
the Agreement, this Letter Agreement and the rights and obligations
of Northwest hereunder will not be assigned or transferred in any
manner without the prior written consent of AVSA, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 2 will be void and of no force or effect.
If the foregoing correctly sets forth our understanding, please
execute the original and one (1) copy hereof in the space provided below
and return a copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 7-2
<PAGE>
LETTER AGREEMENT No. 8
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("NWA") and AVSA, S.A.R.L. ("AVSA")
have entered into an Airbus A319-100 Purchase Agreement dated as of even
date herewith (the "Agreement") which covers, among other matters, the
sale by AVSA and the purchase by NWA of certain A319-100 aircraft (the
"Aircraft") as described in the specifications annexed to said Agreement.
NWA and AVSA have agreed to set forth in this Letter Agreement (this
"Letter Agreement") certain additional terms and conditions regarding the
sale of the Aircraft provided for in the Agreement. The terms "herein",
"hereof" and "hereunder" and words of similar import refer to this Letter
Agreement. Capitalised terms used herein and not otherwise defined in
this Letter Agreement will have the meanings assigned thereto in the
Agreement. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT}.
A. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
1.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
1.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
<PAGE>
1.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
4.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
6.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 8-2
<PAGE>
7.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
7.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
7.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
7.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
8.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.5 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
B. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
LA 8-3
<PAGE>
1.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
2.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
4.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
5.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
6.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
7.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
8.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 8-4
<PAGE>
9.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.4 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.5 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.6 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.7 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.8 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
10.9 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
LA 8-5
<PAGE>
10.10 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
10.11 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
10.12 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
11.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
12.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
C. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
1.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4.0 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and
return a copy to AVSA.
LA 8-6
<PAGE>
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 8-7
<PAGE>
EXHIBIT 1
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
<PAGE>
EXHIBIT 2
{CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
<PAGE>
LETTER AGREEMENT NO. 9
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319 Purchase Agreement, dated as of even date
herewith (the "Agreement"), which covers, among other matters, the sale by
AVSA and the purchase by Northwest of certain Aircraft, under the terms and
conditions set forth in said Agreement. Northwest and AVSA have agreed to
set forth in this Letter Agreement No. 9 (the "Letter Agreement") certain
additional terms and conditions regarding the sale of the Aircraft.
Capitalized terms used herein and not otherwise defined in this Letter
Agreement will have the meanings assigned thereto in the Agreement. The
terms "herein," "hereof" and "hereunder" and words of similar import refer to
this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
1. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}
1.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
<PAGE>
1.2.1 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
1.2.2 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
2. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of
the Agreement, this Letter Agreement and the rights and obligations
of Northwest hereunder will not be assigned or transferred in any
manner without the prior written consent of AVSA, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 2 will be void and of no force or effect.
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 9-2
<PAGE>
LETTER AGREEMENT NO. 10
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: A319-100 SPECIAL APPLICATION
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319-100 Purchase Agreement, dated as of even
date herewith (the "Agreement"), which covers, among other things, the sale
by AVSA and the purchase by Northwest of certain Aircraft, under the terms
and conditions set forth in said Agreement. Northwest and AVSA have agreed
to set forth in this Letter Agreement No. 10 (the "Letter Agreement") certain
additional terms and conditions regarding the sale of the Aircraft.
Capitalized terms used herein and not otherwise defined in this Letter
Agreement will have the meanings assigned thereto in the Agreement. The
terms "herein," "hereof" and "hereunder" and words of similar import refer to
this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
1. Airbus Industrie Financial Services ("AIFS") and NWA have entered
into the Restated and Amended Loan Agreement (the "AIFS Term Loan")
dated as of 29 March 1996. AIFS is interested in {CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT} and NWA is interested in {CONFIDENTIAL MATERIAL OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT} before the stated
maturity of the AIFS Term Loan.
2. AVSA agrees to procure that AIFS, or its agent, will meet with NWA
within ninety (90) days of signature of the Agreement with a view to
discussing in good faith how the objectives identified above might
be met. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
<PAGE>
3. {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
4. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of
the Agreement, this Letter Agreement and the rights and obligations
of Northwest hereunder will not be assigned or transferred in any
manner without the prior written consent of AVSA, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 4 will be void and of no force or effect.
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 10-2
<PAGE>
LETTER AGREEMENT NO. 11
As of September 19, 1997
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Re: MISCELLANEOUS MATTERS
Dear Ladies and Gentlemen:
Northwest Airlines, Inc. ("Northwest"), and AVSA, S.A.R.L. ("AVSA"),
have entered into an Airbus A319-100 Purchase Agreement, dated as of even
date herewith (the "Agreement"), which covers, among other things, the sale
by AVSA and the purchase by Northwest of certain Aircraft, under the terms
and conditions set forth in said Agreement. Northwest and AVSA have agreed
to set forth in this Letter Agreement No. 1 (the "Letter Agreement") certain
additional terms and conditions regarding the sale of the Aircraft.
Capitalized terms used herein and not otherwise defined in this Letter
Agreement will have the meanings assigned thereto in the Agreement. The
terms "herein," "hereof" and "hereunder" and words of similar import refer to
this Letter Agreement.
Both parties agree that this Letter Agreement will constitute an
integral, nonseverable part of said Agreement, that the provisions of said
Agreement are hereby incorporated herein by reference, and that this Letter
Agreement will be governed by the provisions of said Agreement, except that
if the Agreement and this Letter Agreement have specific provisions that are
inconsistent, the specific provisions contained in this Letter Agreement will
govern.
1. ADDITIONAL AGREEMENTS ON TAX, DUTIES AND IMPOSTS
With respect to the provisions of Subclause 4.3 of the Agreement,
Northwest and AVSA agree that taxes, duties, tariffs, imposts or
similar charges levied, assessed, charged or collected under the
laws of {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
<PAGE>
2. INEXCUSABLE DELAY
2.1 AVSA hereby agrees to {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
2.2 AVSA hereby agrees to {CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT}.
2.3 {CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT}.
3. ASSIGNMENT
Notwithstanding any other provision of this Letter Agreement or of
the Agreement, this Letter Agreement and the rights and obligations
of Northwest hereunder will not be assigned or transferred in any
manner without the prior written consent of AVSA, and any attempted
assignment or transfer in contravention of the provisions of this
Paragraph 3 will be void and of no force or effect.
If the foregoing correctly sets forth our understanding, please execute
the original and one (1) copy hereof in the space provided below and return a
copy to AVSA.
Very truly yours,
AVSA, S.A.R.L.
By: /s/ M. Lascaux
Its: Director Contracts
Accepted and Agreed
NORTHWEST AIRLINES, INC.
By: /s/ M. D. Powers
Its: Vice President - Finance and Assistant Treasurer
LA 11-2
<PAGE>
Exhibit 10.3
COMMON STOCK REPURCHASE AGREEMENT dated as of September 29, 1997
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 owns 21,684,099 shares (the "CURRENT
SHARES") of NWA Corp.'s Class A Common Stock, par value $.01 per share (the
"CLASS A COMMON STOCK", and together with NWA Corp.'s Class B Common Stock, par
value $.01 per share (the "CLASS B COMMON STOCK"), the "COMMON STOCK"), and in
accordance with the provisions set forth in the Amendment to the Stockholders'
Agreement (as hereinafter defined) will exercise its right to purchase, pursuant
to Section 17 of the Stockholders' Agreement (as hereinafter defined), 3,293,775
additional shares of Class A Common Stock, which will increase to 24,977,874 the
aggregate number of shares of Common Stock owned by KLM; and
WHEREAS, upon the terms and subject to the conditions set forth
herein, KLM wishes to sell to NWA Corp., and NWA Corp. wishes to purchase from
KLM, all 24,977,874 of such Shares according to the schedule 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. Terms not otherwise defined herein shall 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.
"AGREEMENT" means this Common Stock Repurchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"ALLIANCE IMPLEMENTATION AGREEMENT" means a definitive agreement with
respect to commercial cooperation that is entered into by KLM and Northwest
Airlines, Inc. at the Initial Closing.
<PAGE>
2
"AMENDMENT TO THE STOCKHOLDERS' AGREEMENT" means the agreement in the
form of Exhibit A hereto which amends the Stockholders' Agreement and
provides for (i) the acceleration of the vesting of the KLM Option (as
defined in the Stockholders' Agreement) in respect of shares of Class A
Common Stock subject to such option that are held by Blum and BTNY, and the
exercise by KLM of such KLM Option with respect to such shares and the
purchase of such shares concurrently with the Initial Closing Date, (ii)
the termination of the KLM Option with respect to the other Option
Stockholders and the termination of the Put Option (as each such term is
defined in the Stockholders' Agreement) with respect to all of the Option
Stockholders and (iii) immediately following the consummation of the
transactions contemplated by this Agreement on the Initial Closing Date,
the termination of all of KLM's other rights and obligations under the
Stockholders' Agreement.
"ANCILLARY AGREEMENTS" means the Preferred Stock Agreement, the
Amendment to the Stockholders' Agreement and the Standstill Agreement.
"BENEFICIALLY OWN" has the meaning given such term in Rule 13d-3 under
the Exchange Act, as in effect on the date hereof. As used herein, the
phrases "BENEFICIAL OWNERSHIP" and "BENEFICIAL OWNER" have correlative
meanings.
"BLUM" means Richard D. Blum Associates - NWA Partners, L.P.
"BOARD OF DIRECTORS" means the board of directors of NWA Corp. or any
successor corporation.
"BTNY" means Bankers Trust New York Corporation.
"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
Amsterdam, The Netherlands, in New York, New York or in Minneapolis,
Minnesota.
"CASH" means Dollars paid in immediately available funds.
"CHANGE OF CONTROL" means the acquisition by any Person or group
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act, or any successor provision), including any group acting for the
purpose of acquiring, holding or disposing of securities (within the
meaning of Rule 13d-5(b)(1) under the Exchange Act), in a single
transaction or in a related series of transactions, of 50% or more of the
combined voting power of the outstanding shares of Common Stock (assuming
conversion of Class B Common Stock into Class A Common Stock if, and to the
extent, the Class B Common Stock is freely convertible into Class A Common
Stock by the holder thereof), NWA Corp.'s Series C Preferred Stock, par
value $.01 per share (the "SERIES C PREFERRED STOCK"), and any other equity
securities then outstanding and entitled to vote with the Common Stock.
<PAGE>
3
"CLOSING DATE" means each of the Initial Closing Date, the Second
Closing Date, the Third Closing Date and the Fourth Closing Date. If any
Closing Date falls on a date that is not a Business Day, such Closing Date
shall occur on the next succeeding Business Day.
"CONTROL TRANSACTION" means any of the following, but no other
transaction or event: (i) the closing of a tender offer subject to Section
14(d)(1) of the Exchange Act for shares of Class A Common Stock (or any
other class of capital stock of NWA Corp.) or a registered exchange offer
made pursuant to an effective registration statement for shares of Class A
Common Stock (or any other class of capital stock of NWA Corp.) which
results in 50% or more of the combined voting power of the outstanding
shares of Common Stock (assuming conversion of Class B Common Stock into
Class A Common Stock if, and to the extent, the Class B Common Stock is
freely convertible into Class A Common Stock by the holder thereof), Series
C Preferred Stock, and any other equity securities then outstanding and
entitled to vote with the Common Stock being held by the Person or group
(within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act, or any successor provision) making such tender or exchange offer, (ii)
the closing of any merger or consolidation that results in a Change of
Control, or (iii) the closing of any transaction in which NWA Corp. or
Northwest Airlines, Inc. directly or indirectly sells all or substantially
all of its business, property or assets; PROVIDED, in order to constitute a
Control Transaction any such transaction must be consummated prior to June
30, 1999. For purposes of calculating the "Transactional Value Per Share"
pursuant to Section 2.2 in connection with a Control Transaction, such
Control Transaction shall be deemed to include all transactions that are
part of a series of related transactions that comprise such Control
Transaction (e.g., a tender offer or exchange offer followed by a back-end
merger shall be considered as a single Control Transaction comprised of two
related transactions), PROVIDED, that, for purposes of Section 2.2, such
Control Transaction shall be deemed to have been consummated upon the
consummation of the particular transaction with respect to which the
applicable criteria as described above are first satisfied.
"CREDIT AGREEMENT" means the Credit Agreement dated as of December 15,
1995 and as amended and restated as of October 16, 1996 among NWA Corp.,
NWA, Inc., Northwest Airlines, Inc., ABN Amro Bank N.W., as Compliance
Agent, Bankers Trust Company, as Administrative Agent, Chase 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 and any extensions, refinancings or replacements thereof.
"DOLLARS" and "$" mean lawful currency of the United States of
America.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
<PAGE>
4
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or
security interest; or any preference, priority or other arrangement or
preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"PENDING SUITS" means collectively the suits captioned KLM ROYAL DUTCH
AIRLINES V. CHECCHI, ET AL., Civ. Act. No. 14764 (Del. Ch.), and KLM ROYAL
DUTCH AIRLINES V. CHECCHI, ET AL., Index No. 95/600037 (Sup. Ct. N.Y. Co.).
"PER SHARE PRICE" means the price specified as such in Section 2.1(a),
(b), (c) or (d) for the related Closing Date, as the same may be adjusted
pursuant to Section 2.1(e).
"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.
"PREFERRED STOCK AGREEMENT" means the Preferred Stock Repurchase
Agreement dated as of September 29, 1997 between KLM and NWA Corp., entered
into concurrently with this Agreement and in the form of Exhibit B hereto.
"SERIES A PREFERRED" means NWA Corp.'s Series A Preferred Stock, par
value $.01 per share.
"SERIES B PREFERRED" means NWA Corp.'s Series B Preferred Stock, par
value $.01 per share.
A "SHARE" means, as of the date hereof, one share of Class A Common
Stock and thereafter shall consist of such share and/or any cash,
securities or other property into which such share (or such cash,
securities or other property) shall have been converted into, exchanged for
or acquired for (whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification,
recapitalization, stock split, reverse stock split, stock dividend or
otherwise), and any and all amounts paid in respect of such shares or other
cash, securities or other property, as the case may be, or which such
shares or other cash, securities or other property are otherwise entitled
to receive (whether by means of a dividend, distribution, interest payment
or otherwise), in any event net of any applicable U.S. withholding taxes
payable in respect thereof. In the event any cash is received at any time
or from time to time in respect of a Share, such share shall also be deemed
to include interest earned on such cash received at the rate per annum
equal to the average of the offered rates for Dollar deposits having a
maturity of three months that appear on the display designated as Page 3750
on the Telerate System Incorporated Service (or such other page as may
replace such page on such service for the purpose of displaying
<PAGE>
5
the rates at which Dollar deposits are offered by leading banks in the
London interbank deposit market) at approximately 11:00 a.m., London time,
on the date such cash is initially received (and which rate is reset every
three months thereafter), compounded quarterly, in any event net of any
applicable U.S. withholding taxes payable in respect thereof.
"STANDSTILL AGREEMENT" means an agreement in the form of Exhibit C to
be entered into by KLM and NWA Corp. at the Initial Closing Date.
"STOCKHOLDERS' AGREEMENT" means the Second Amended and Restated
Investor Stockholders' Agreement dated as of December 23, 1993, as amended,
supplemented or otherwise modified from time to time, among NWA Corp., KLM
and certain other stockholders of NWA Corp. parties thereto, as in effect
on the date hereof.
"SUPERVISORY BOARD OF KLM" means the supervisory board of KLM or any
successor corporation.
ARTICLE II
DELIVERY AND PURCHASE OF SHARES
2.1 PURCHASE AND SALE OF SHARES. (a) INITIAL CLOSING. On the terms
and subject to the conditions of this Agreement, on September 29, 1997 (or such
earlier date after the date of this Agreement as the parties shall agree, or
such later date as is provided by Section 5.1(a)(v), the "INITIAL CLOSING
DATE"), KLM agrees to transfer, assign and deliver to NWA Corp., against payment
by NWA Corp. to KLM of $273,118,695.20 in immediately available funds
(reflecting a Per Share Price of $40.164514), a certificate or certificates
representing 6,800,000 shares of Class A Common Stock, and NWA Corp. agrees to
purchase such shares and make such payment to KLM against delivery of such
certificates on such Initial Closing Date. Such certificates shall be duly
endorsed in blank or accompanied by stock powers duly executed in blank, with
all necessary stock transfer stamps affixed.
(b) SECOND CLOSING. On the terms and subject to the conditions of
this Agreement, on September 29, 1998 (the "SECOND CLOSING DATE") KLM agrees to
transfer, assign and deliver to NWA Corp., against payment by NWA Corp. to KLM
of $210,051,362.50 in immediately available funds, 4,900,000 Shares (reflecting
a Per Share Price of $42.867625), comprised of (i) a certificate or certificates
representing the Common Stock or other securities included within such Shares,
and (ii) any and all cash or other property, if any, included within such
Shares, and NWA Corp. agrees to purchase the Common Stock and/or other property
comprising such Shares and make such payment to KLM against delivery of the
certificates and/or other property comprising such Shares on the Second Closing
Date. Any certificates included in such Shares shall be duly endorsed in blank
or accompanied by stock powers duly executed in blank, with all necessary stock
transfer stamps affixed.
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6
(c) THIRD CLOSING. On the terms and subject to the conditions of this
Agreement, on September 29, 1999 (the "THIRD CLOSING DATE") KLM agrees to
transfer, assign and deliver to NWA Corp., against payment by NWA Corp. to KLM
of $147,439,727.98 in immediately available funds, 3,222,539 Shares (reflecting
a Per Share Price of $45.752659), comprised of (i) a certificate or certificates
representing the Common Stock or other securities included within such Shares,
and (ii) any and all cash or other property, if any, included within such
Shares, and NWA Corp. agrees to purchase the Common Stock and/or other property
comprising such Shares and make such payment to KLM against delivery of the
certificates and/or other property comprising such Shares on the Third Closing
Date. Any certificates included in such Shares shall be duly endorsed in blank
or accompanied by stock powers duly executed in blank, with all necessary stock
transfer stamps affixed.
(d) FOURTH CLOSING. On the terms and subject to the conditions of
this Agreement, on September 29, 2000 (the "FOURTH CLOSING DATE") KLM agrees to
transfer, assign and deliver to NWA Corp., against payment by NWA Corp. to KLM
of $491,020,690.86 in immediately available funds, 10,055,335 Shares (reflecting
a Per Share Price of $48.831858), comprised of (i) a certificate or certificates
representing the Common Stock or other securities included within such Shares,
and (ii) any and all cash or other property, if any, included within such
Shares, and NWA Corp. agrees to purchase the Common Stock and/or other property
comprising such Shares and make such payment to KLM against delivery of the
certificates and/or other property comprising such Shares on the Fourth Closing
Date. Any certificates included in such Shares shall be duly endorsed in blank
or accompanied by stock powers duly executed in blank, with all necessary stock
transfer stamps affixed.
(e) CHANGE IN CLOSING DATE AND ACCRETION ADJUSTMENT. If the Initial
Closing Date occurs on a date other than September 29, 1997, the Second Closing
Date, Third Closing Date and Fourth Closing Date will be changed to the
respective dates that are on the first anniversary, second anniversary and third
anniversary, respectively, of the Initial Closing Date. The date of such
Closing Dates are also subject to deferral or acceleration as expressly provided
in this Agreement. In the event any Closing Date occurs other than on the
particular applicable date specified in paragraphs (a), (b), (c) or (d) above
for any reason (including without limitation Section 2.1(g) but other than as
provided in Section 2.2), the applicable purchase price will be higher or lower
than the amount indicated based on a 5% per annum accretion factor; PROVIDED,
HOWEVER, that in the event a subsequent Closing Date is deferred because the
condition set forth in Section 5.2(a)(ii) is not satisfied, the accretion factor
during the period of such deferral will be 13% per annum.
(f) CLOSINGS. The closing of the purchase and sale contemplated by
Section 2.1(a) will take place at the offices of Simpson Thacher & Bartlett at
10:00 a.m. New York City time on the Initial Closing Date. The closing of the
purchases and sales contemplated by Sections 2.1(b), (c) and (d) of this
Agreement will take place by means of the requisite deliveries and payments
being made by the parties on the relevant Closing Dates.
<PAGE>
7
(g) ACCELERATION OPTION. (i) NWA Corp. shall have the option, at
any time and from time to time after the Initial Closing Date and on prior
written notice to KLM, to accelerate, either in whole or in part in the manner
specified in the next sentence, the purchase of Shares that would otherwise
occur on subsequent Closing Dates so that the accelerated purchase will occur on
a date (the "ACCELERATION DATE") specified in such notice (such date to be at
least 30 days after the date the notice is provided to KLM), at which date the
purchase and sale of the Shares whose purchase and sale is being accelerated as
designated in the notice referred to above shall be effected at the applicable
Per Share Prices specified in Section 2.1, as adjusted in accordance with
Section 2.1(e). If NWA Corp. elects to accelerate pursuant to this Section
2.1(g) the purchase of only part of the Shares remaining to be purchased, it may
do so only by accelerating the purchase of all of the Shares scheduled to be
purchased on the Third Closing Date and (if the Second Closing Date has not yet
occurred) the Second Closing Date, in which event the Fourth Closing Date will
be accelerated to occur one year after the Acceleration Date. Following any
such acceleration option, the provisions of Sections 2.2 and 2.3 shall continue
in effect as though no accelerated purchase and sale had occurred, as follows:
(a) To the extent an adjustment would otherwise be required pursuant
to Section 2.2 with respect to Shares whose purchase has already occurred
on an accelerated basis pursuant to this Section 2.1(g), on the date (the
"TRANSACTION ACCELERATED DATE") to which such subsequent Closing Date would
have otherwise been accelerated pursuant to Section 2.2(e) or consideration
would otherwise be received by KLM pursuant to Section 2.2(f), NWA Corp.
will make a payment to KLM equal to the product of (A) the number of Shares
whose purchase would have otherwise been accelerated to the Transaction
Accelerated Date but for an earlier acceleration pursuant to Section
2.1(g), times (B) the excess, if any, of (x) the Transactional Value Per
Share over (y) the regularly scheduled Per Share Price at which such Shares
would have been purchased pursuant to Section 2.1(a) through (d) at the
regularly scheduled subsequent Closing Date without giving effect to such
acceleration.
(b) To the extent an adjustment would otherwise be required pursuant
to Section 2.3 with respect to Shares whose purchase has already occurred
on an accelerated basis pursuant to this Section 2.1(g), on the regularly
scheduled subsequent Closing Date on which the higher purchase price would
have otherwise been payable pursuant to Section 2.3, NWA Corp. will make a
payment to KLM equal to the product of (A) the number of Shares previously
purchased on an accelerated basis pursuant to Section 2.1(g) whose purchase
price would have otherwise been increased pursuant to Section 2.3, times
(B) the excess, if any, of the higher weighted average price that would
otherwise apply pursuant to Section 2.3 over the regularly scheduled Per
Share Price at which such Shares would have been purchased pursuant to
Section 2.1(a) through (d) at the regularly scheduled subsequent Closing
Date without giving effect to such acceleration.
(ii) Notwithstanding the foregoing, NWA Corp. may not accelerate any
purchase of Shares pursuant to this Section 2.1(g) if (a) the condition set
forth in Section
<PAGE>
8
5.2(b)(ii)(A) has not been satisfied, or (b) Northwest Airlines, Inc.'s right to
terminate the Alliance Termination Agreement because of the imposition of
restrictions at Schiphol Airport, as set forth in the letter agreement dated as
of September 29, 1997 between Northwest Airlines, Inc. and KLM (the "HUB
RESTRICTIONS LETTER"), has not either expired by the passage of time or been
waived by Northwest Airlines, Inc.
(iii) NWA Corp. shall indemnify and hold harmless KLM, on an
after-tax basis, from any taxes imposed under the laws of The Netherlands in
respect of a payment made to KLM pursuant to Section 2.1(g)(i)(a) or (b) which
would not have been imposed had the purchase and sale of Shares not been
accelerated pursuant to this Section 2.1(g) and had the provisions of Section
2.2 or 2.3, as applicable, applied pursuant to their terms. KLM will seek
indemnity under this Section 2.1(g)(iii) only after attempting in good faith and
failing to achieve the same consequences under the tax laws of The Netherlands
for a payment made to KLM pursuant to Section 2.1(g)(i)(a) or (b) as the tax
consequences that apply to consideration received by KLM under Section 2.2 or
2.3.
2.2 EFFECT OF CONTROL TRANSACTION. (a) NWA Corp. will notify KLM as
promptly as practicable of the pendency of any transaction that is reasonably
likely to constitute a Control Transaction; PROVIDED, that NWA Corp. shall not
be obligated to so notify KLM prior to such transaction having been publicly
announced (except as otherwise specifically provided for in the Standstill
Agreement). Additionally, upon the consummation of a Control Transaction, NWA
Corp. will on the date of such consummation notify KLM thereof.
(b) In connection with any Control Transaction consummated prior to
June 30, 1999, there shall be a determination of the Transactional Value Per
Share. The "TRANSACTIONAL VALUE PER SHARE" is the weighted average
consideration to be received in respect of each Share transferred or sold in, or
otherwise receiving a distribution in connection with, such Control Transaction,
valued, (i) in the case of cash, at the face amount thereof, (ii) in the case of
securities registered under the Exchange Act and as to which there is a
previously established public trading market, (A) if such security is listed on
the New York Stock Exchange or American Stock Exchange, the average of the
closing price during the ten trading days immediately prior to the date of
consummation thereof or (B) if such security is included in the NASDAQ National
Market System, the weighted average price at which all trades of such securities
are reported on the NASDAQ National Market System during the ten trading days
immediately prior to the date of consummation thereof, (iii) in the case of
securities as to which there is a previously established public trading market
on a non-U.S. exchange or automated quotation system, the average of the closing
price (if quoted in a foreign currency, converted into Dollars at the then-
prevailing market Dollar exchange rate) during the ten trading days immediately
prior to the date of consummation thereof, and (iv) in the case of other
securities or property, at the fair market value thereof established in
accordance with Section 2.2(c) as of the date of consummation thereof.
<PAGE>
9
(c) NWA Corp. and KLM will attempt to agree on the value of securities
or other property described in clause (iii) of paragraph (b) above. If they
cannot reach agreement within 15 days after the definitive terms of the Control
Transaction have been publicly announced or, if earlier, 15 days after notice to
KLM, NWA Corp. and KLM will each promptly engage an investment banking firm to
perform valuations of such securities or other property and to attempt to agree
on their value. If such firms are unable to agree on a valuation within 10 days
after they have both been so engaged, such firms shall promptly jointly select a
third nationally recognized investment banking firm to perform its own valuation
of such securities or other property, which valuation shall be determinative.
(d) If any such Transactional Value Per Share (as finally determined
in accordance with this Section 2.2) is higher than the Per Share Price
otherwise payable on Closing Dates scheduled to occur after the consummation of
such Control Transaction, the obligations of the parties under Section 2.1 with
respect to the Shares to be purchased on each such subsequent Closing Date will
be adjusted in accordance with the following provisions.
(e) Subject to the provisions in Sections 2.2(f) and (g) below, if a
Control Transaction is consummated in which the related Transactional Value Per
Share is higher than the Per Share Price for any subsequent Closing Date, then
each such Closing Date that has a lower Per Share Price will be accelerated to
occur on, or as promptly as practicable after, the date of consummation of such
transaction, and the per share purchase price to be paid in Cash for each Share
whose purchase and sale is being so accelerated will be equal to the
Transactional Value Per Share. The obligations of the parties with respect to
any Closing Date scheduled to occur after such consummation date whose Per Share
Price is equal to or greater than the Transactional Value Per Share will remain
unchanged. NWA Corp. shall notify KLM as promptly as practicable of each date,
if any, on which the accelerated payment of the purchase price for Shares will
be made hereunder and its good faith estimate of the related Transactional Value
Per Share (the "ACCELERATION NOTICE"), but in no event later than 20 days prior
to the date of payment.
(f) Notwithstanding the provisions in Section 2.2(e), the effect of
the following Control Transactions in which the related Transactional Value Per
Share is higher than the Per Share Price for any subsequent Closing Date shall
be as follows: (i) if such Control Transaction involves a cash tender offer for
any and all shares of Common Stock, NWA Corp. may elect (which election may be
made as part of the Acceleration Notice and in any event shall be made as
promptly as practicable prior to the consummation of such tender offer, but in
no event later than 20 days prior to the date of payment) to direct KLM to
tender the Shares whose purchase and sale would otherwise be accelerated
hereunder into such tender offer and, upon the consummation date of such tender
offer and the payment for each Share at the Transactional Value Per Share, the
obligations of the parties to purchase and sell Shares on such subsequent
Closing Date or Dates that involve such lesser Per Share Price will be deemed to
have been discharged and no accelerated purchase and sale between the parties
will occur; (ii) if such Control Transaction consists of a merger or
consolidation transaction where all of the outstanding shares of Common Stock
are to be converted into the right to receive cash, upon the consummation of
such Control Transaction and the payment for each Share at the
<PAGE>
10
Transactional Value Per Share, the obligations of the parties to purchase and
sell Shares on such subsequent Closing Date or Dates at such lesser Per Share
Price will be deemed to have been discharged and no accelerated purchase and
sale between the parties will occur; and (iii) subject to the provisions in
Section 2.2(g), if such Control Transaction involves a transaction where part of
the transaction consideration consists of securities or other property, NWA
Corp. may elect (which election may be made as part of the Acceleration Notice
and in any event shall be made as promptly as practicable prior to the
accelerated purchase date on which NWA Corp. would otherwise be required to
purchase the affected Shares pursuant to Section 2.2(e) above, but in no event
later than 20 days prior to the date of consummation) to have KLM, upon the
consummation of such Control Transaction, receive and retain the transaction
consideration that is to be paid in respect of such affected Shares and upon the
payment for each of the Shares at the Transactional Value Per Share and the
obligations of the parties to purchase and sell such affected Shares on such
subsequent Closing Date or Dates at such lesser Per Share Price will be deemed
to have been discharged and no accelerated purchase and sale between the parties
will occur. Absent such election by NWA Corp., the provisions of Section 2.2(e)
shall apply.
(g) Notwithstanding the provisions in Section 2.2(f)(iii), if (i) the
Per Share Price for any subsequent Closing Date is less than the Transactional
Value Per Share for a Control Transaction and (ii) NWA Corp. makes the election
provided for in Section 2.2(f)(iii), then KLM, upon written notice delivered to
NWA Corp. within 10 days after NWA Corp. has provided notice of such election to
KLM, may waive KLM's right to receive and retain the higher Transactional Value
Per Share at the time and in the form provided in Section 2.2(f)(iii) and, in
lieu thereof, KLM will receive the Per Share Price for the affected Shares at
the times and in the amounts scheduled under Section 2.1 for each remaining
Closing Date, without regard to any higher Transactional Value Per Share.
2.3 EFFECT OF CERTAIN ISSUANCES OF COMMON STOCK. If within one year
after the Initial Closing Date NWA Corp. issues new shares of common stock in
one or more primary offerings for cash at a weighted average offering price in
excess of any of the respective Per Share Prices set forth in Section 2.1, then
the purchase price for each Share being purchased on each such subsequent
Closing Date will be increased to such higher weighted average price; PROVIDED,
there will be no adjustments to any subsequent purchase price for Shares
pursuant to this Section 2.3 if the aggregate number of shares of common stock
offered in such primary offerings during such one-year period is less than
6,550,851 shares (as appropriately adjusted in respect of stock splits,
subdivisions and combinations); PROVIDED, FURTHER, that for purposes of this
Section 2.3, the issuance of Common Stock upon the exercise of employee stock
options shall not constitute a primary offering.
<PAGE>
11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF KLM. KLM represents and
warrants to NWA Corp. as of the date hereof and as of the Initial Closing Date
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 the Ancillary Agreements and to perform its
obligations hereunder and thereunder. The execution and delivery by KLM of
this Agreement and the Ancillary Agreements 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 the Ancillary Agreements and the performance of such
transactions. Each of this Agreement and the Ancillary Agreements 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).
(c) Neither the execution and delivery of this Agreement or the
Ancillary Agreements 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 currently owned by it or to be acquired by it
upon exercise of the KLM Option, other than pursuant to this Agreement.
(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 the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby.
<PAGE>
12
(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
the Ancillary Agreements.
(f) KLM has, and on the Initial Closing Date and each subsequent
Closing Date KLM will have, good and valid title to the Shares to be
purchased by NWA Corp. at such Initial Closing or subsequent Closing Date,
as the case may be, free and clear of all Liens, except any Liens created
pursuant to the terms of this Agreement.
(g) KLM is the record and beneficial owner on the date hereof of
21,684,099 shares of Common Stock, 1,308.8 shares of Series A Preferred and
436.2 shares of Series B Preferred, and upon exercise of the KLM Option
pursuant to the Amendment to the Stockholders' Agreement, KLM will be the
record and beneficial owner of 3,293,775 additional shares of Common Stock.
KLM does not own of record or beneficially or otherwise have the right to
acquire any other shares of any series of common or preferred capital stock
of NWA Corp., other than pursuant to the Stockholders' Agreement.
(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 the Ancillary Agreements.
3.2 REPRESENTATIONS AND WARRANTIES OF NWA CORP. NWA Corp. represents
and warrants to KLM as of the date hereof and as of the Initial Closing Date 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 the Ancillary Agreements and to
perform its obligations hereunder and thereunder, subject to the absence of
a determination by the Board of Directors in accordance with Section
5.2(a)(ii) that the purchase of Shares on each subsequent Closing Date
would involve an impairment of capital under applicable law. The execution
and delivery by NWA Corp. of this Agreement and the Ancillary Agreements
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 the Ancillary Agreements
and the performance of such transactions, subject to Section 5.2(a)(ii).
Each of this Agreement and the Ancillary Agreements has been duly executed
and delivered by NWA Corp. and, assuming due
<PAGE>
13
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),
subject to Section 5.2(a)(ii).
(c) Neither the execution and delivery of this Agreement and the
Ancillary Agreements or the performance by NWA Corp. 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 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.
(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 the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby.
(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 the Ancillary 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 the Ancillary Agreements.
(g) Performance by the parties of the transactions referred to herein
or contemplated hereby (including KLM's exercise pursuant to Section 17 of
the Stockholders' Agreement of its right to purchase 3,293,775 additional
shares of Class A Common Stock, and the purchase of such shares) will not
cause KLM to become an "Acquiring Person" for purposes of, and as such term
is defined in, the Rights Agreement of NWA Corp. dated as of November 16,
1995, as amended (the "RIGHTS AGREEMENT").
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14
(h) The "capital" of NWA Corp. is not "impaired" and will not become
"impaired" as a result of the purchase of the Shares from KLM by NWA Corp.
on the Initial Closing Date, within the meaning of Section 160(a) (1) of
the Delaware General Corporation Law, as amended (the "DGCL"). The
"capital" of NWA Corp. would not become "impaired", within the meaning of
Section 160(a) (1) of the DGCL, in the event the obligations of NWA Corp.
to purchase Shares under this Agreement were accelerated and NWA Corp.
purchased all 24,977,874 shares of Common Stock owned by KLM at the
applicable purchase prices specified in Section 2.1 on the date hereof,
after giving effect to (and assuming consummation of) the transactions
contemplated by the Preferred Stock Agreement, the BTNY Preferred Stock
Repurchase Agreement, dated as of September 29, 1997 (the "BTNY PREFERRED
STOCK AGREEMENT", between NWA Corp. and BTNY, and the Blum Preferred Stock
Repurchase Agreement, dated as of September 29, 1997 (the "BLUM PREFERRED
STOCK AGREEMENT"), between NWA Corp. and Blum.
ARTICLE IV
COVENANTS
4.1 NO TRANSFERS, LIENS. (a) KLM hereby unconditionally and
irrevocably agrees that it will not sell, transfer, or assign, or enter into any
equity swap or similar arrangement with respect to, any Shares subject to
purchase by NWA Corp. under this Agreement; PROVIDED, HOWEVER, that the
foregoing shall not apply to Shares that are no longer subject to purchase by
NWA Corp. under this Agreement by reason of early termination or otherwise. KLM
will not create, incur, assume or suffer to exist any Lien on any of the Shares,
including any proceeds or profits therefrom, except as provided in paragraph (b)
below or Liens otherwise created pursuant to this Agreement.
(b) In the event that KLM notifies NWA Corp. of its desire to assign
or pledge to a financial institution, as security for a borrowing proposed to be
made by KLM, any or all of the proceeds to be received from NWA Corp. on any
subsequent Closing Date from the sale of Shares, then KLM and NWA Corp. will
negotiate in good faith with regard to the establishment of mutually acceptable
arrangements whereby the Shares will be placed in escrow with an escrow agent
pending their sale to NWA Corp., and such financial institution will receive a
pledge of KLM's right to receive cash paid by NWA Corp. into such escrow for
Shares on a Closing Date as provided herein. Such assignment and pledge of
proceeds may not be made by KLM until NWA Corp. and KLM have executed and
delivered to each other a mutually acceptable escrow agreement and the Shares
are deposited in escrow with the escrow agent thereunder. This paragraph is
intended to provide a means for KLM to assign or pledge the proceeds to be paid
to KLM upon the sale of Shares pursuant to this Agreement. Under no
circumstances will KLM be permitted to create, incur, assume or suffer to exist
any Lien upon Shares themselves, and such escrow arrangements may not otherwise
affect NWA Corp.'s rights or obligations under this Agreement.
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15
4.2 LEGENDS. In furtherance of the agreements contained in Sections
2.1 and 4.1, KLM hereby agrees that the certificate or certificates representing
the Shares beneficially owned by it shall bear the following legend:
THE SHARES [DESCRIBE ANY OTHER SECURITIES] REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF THE COMMON STOCK
REPURCHASE AGREEMENT DATED AS OF SEPTEMBER 29, 1997 (THE "AGREEMENT")
BETWEEN NORTHWEST AIRLINES CORPORATION (THE "CORPORATION") AND
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V. ("KLM"), WHICH PROVIDES THAT
(I) THE SHARES [SECURITIES] ARE SUBJECT TO REPURCHASE BY THE
CORPORATION AND (II) KLM IS PROHIBITED FROM TRANSFERRING, SELLING,
ASSIGNING, EXCHANGING, MORTGAGING, PLEDGING, HYPOTHECATING OR
OTHERWISE DISPOSING OF THESE SHARES [SECURITIES] EXCEPT TO THE
CORPORATION. IN ADDITION, UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE
AGREEMENT, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
AUTOMATICALLY CONVERTED, WITHOUT ANY ACTION ON THE PART OF KLM, FROM
SHARES OF CLASS A COMMON STOCK INTO SHARES OF CLASS B COMMON STOCK. A
COPY OF THE AGREEMENT IS ON FILE AND AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICES OF THE CORPORATION.
KLM agrees that, concurrently with the execution and delivery of this Agreement
and from time to time as subsequently may be required, it will cooperate with
NWA Corp. in arranging for the replacement of the existing legends with the
foregoing legend on all of the certificates representing the Shares beneficially
owned by KLM. Notwithstanding the foregoing, NWA Corp. agrees to the removal of
the foregoing legend from any Shares which will no longer be subject to this
Agreement (such removal to be effected on or as promptly as practicable after
the date such Shares will no longer be subject to this Agreement), including as
a result of any termination of this Agreement.
4.3 GOVERNANCE AND OTHER AGREEMENTS. Effective upon consummation of
the transactions contemplated by this Agreement on the Initial Closing Date but
subject to the Standstill Agreement, all of KLM's rights and obligations under
the Stockholders' Agreement and any and all other corporate governance rights
involving NWA Corp., including without limitation the agreement (the "BOARD
AGREEMENT") dated as of December 23, 1993 with respect to the designation by KLM
of members of the Board of Directors, will be terminated. Notwithstanding the
foregoing but subject to the Standstill Agreement, KLM will retain the right to
vote with respect to all of the Shares prior to the purchase and sale of such
Shares on a related Closing Date.
4.4 CONSENT OF SERIES A PREFERRED AND SERIES B PREFERRED. KLM
reaffirms its previously delivered consent, delivered in its capacity as a
holder of Series A Preferred and
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16
Series B Preferred, to the repurchase by NWA Corp. of Common Stock, including
pursuant to this Agreement. NWA Corp. agrees to solicit from the other holder
of Series B Preferred its irrevocable consent to the repurchases of Common Stock
contemplated hereby.
4.5 ANTITRUST IMMUNITY AND EUROPEAN COMMUNITY CONDITIONS. Each of KLM
and NWA Corp. hereby agrees to use commercially reasonable efforts to achieve
the satisfaction of the condition set forth in Section 5.2(b)(ii) hereto.
4.6 NO STOCK SPLITS, ETC. Prior to the Initial Closing Date, NWA
Corp. will not subdivide, combine or otherwise reclassify its Common Stock, or
declare or pay any dividend in respect of its Common Stock. After the Initial
Closing Date and until the termination or expiration of this Agreement, (a) NWA
Corp. shall not engage in any of the following transactions unless the Board of
Directors shall have determined reasonably and in good faith, in accordance with
applicable provisions of corporation law, that after giving effect to such
transactions and all related transactions being effected in connection
therewith, and assuming the remaining unfulfilled obligations of NWA Corp. to
purchase Shares under this Agreement were accelerated and NWA Corp. purchased
such Shares at the applicable purchase prices in Section 2.1 on the date of such
determination, the capital of NWA Corp. would not be "impaired" within the
meaning of Section 160(a)(1) of the DGCL: (i) subdivide, combine or otherwise
reclassify its Common Stock; (ii) declare or pay any dividend or make or pay any
other distribution in respect of its Common Stock; (iii) redeem or repurchase
any of its capital stock (other than pursuant to this Agreement, the Preferred
Stock Agreement, the BTNY Preferred Stock Agreement, and the Blum Preferred
Stock Agreement); (iv) directly or indirectly capitalize any surplus; (v) make
any change in the par value of its common stock; or (vi) engage in, or permit
any of its subsidiaries to engage in, any merger, consolidation,
recapitalization, liquidation or other business combination transaction; and (b)
NWA Corp. shall not enter into any agreements containing, or amend any agreement
to include, covenants or other provisions that directly or indirectly prohibit
NWA Corp. from purchasing Shares under this Agreement.
4.7 DISMISSAL OF PENDING SUITS. KLM consents and agrees to the
dismissal with prejudice of all of its claims against all of the other parties
in the Pending Suits, effective on the purchase of the Shares on the Initial
Closing Date, and, at the Initial Closing Date, KLM will file a stipulation of
dismissal in each of the Pending Suits, dismissing all such claims with
prejudice and providing that each party will bear its own costs, including
attorney's fees.
4.8 RELEASE. Each party hereto fully and forever releases and
discharges, effective on the purchase of the Shares on the Initial Closing Date,
the other party hereto and its present and former directors and officers,
predecessors, successors, subsidiaries, parents, affiliates, agents, servants,
employees, attorneys, representatives and assigns from all actions, causes of
actions, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims, and
demands whatsoever, in law, admiralty or equity, whether known or unknown
("CLAIMS"), that such party ever had, now has or
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17
hereafter can, shall or may have, for, upon, or by reason of any matter, cause
or thing whatsoever from the beginning of the world to the date hereof, relating
to, or arising out of in any way (i) the Shareholders' Rights Plan adopted by
the Board of Directors on November 16, 1995, (ii) the Rights Agreement, (iii)
the Board Agreement, (iv) the November 18, 1993 resolution of the Board of
Directors, (v) the Stockholders' Agreement (which shall not include the
Amendment to the Stockholders' Agreement), (vi) KLM's status as a stockholder of
NWA Corp. and (vii) any other claim or allegation that either party did assert
or could have asserted in connection with clauses (i) through (vi) of this
Section 4.8 in the Pending Suits, but not any Claims relating to or arising out
of this Agreement or any of the transactions contemplated hereby.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO INITIAL CLOSING. (a) The obligations of NWA Corp.
to effect the Initial 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 and in the Ancillary
Agreements 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 Initial Closing Date with the same effect as though made at
and as of the Initial 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
and each Ancillary Agreement to be performed or complied with by KLM at or
prior to the Initial Closing Date.
(ii) OFFICER'S CERTIFICATE. NWA Corp. shall have received
an executed certificate, dated the Initial Closing Date, of the President
of KLM to the effect set forth in Section 5.1(a)(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 transactions contemplated by this
Agreement or any Ancillary Agreement.
(iv) ANCILLARY AGREEMENTS. KLM shall have executed and
delivered to NWA Corp. or Northwest Airlines, Inc., as applicable, the
Ancillary Agreements.
(v) ALLIANCE IMPLEMENTATION AGREEMENT. KLM and NWA Corp.
shall conclude, after appropriate consultation with the DOT, that the
effectiveness of the Alliance Implementation Agreement does not require
the prior approval of the DOT and the Alliance Implementation Agreement
shall have been executed and delivered by
<PAGE>
18
KLM and Northwest Airlines, Inc. (concurrently with or prior to the
execution and delivery of this Agreement) and become effective in
accordance with its terms, or if such approval is required, such approval
shall have been obtained and the Alliance Implementation Agreement shall
have been executed and delivered by KLM and Northwest Airlines, Inc.
(concurrently with or prior to the execution and delivery of this
Agreement) and become effective in accordance with its terms.
(vi) REQUIRED FINANCIAL INSTITUTION CONSENTS. The financial
institutions party to the Credit Agreement shall have executed and
delivered to NWA Corp. any and all required consents to the execution,
delivery and performance by NWA Corp. of this Agreement.
(vii) CONSENT OF SERIES B PREFERRED. The holders of all
outstanding shares of Series B Preferred shall have provided their
irrevocable consent to the transactions contemplated by this Agreement, the
Preferred Stock Agreement, the Blum Preferred Stock Agreement or the BTNY
Preferred Stock Agreement.
(viii) PREFERRED STOCK PURCHASE. The closing under the
Preferred Stock Agreement shall occur concurrently with the closing of the
transactions contemplated hereby on the Initial Closing Date.
(ix) RELEASE. NWA Corp. shall have received evidence that
KLM, on the one hand, and each of BTNY, Alfred A. Checchi, Gary L. Wilson,
Frederic V. Malek, Richard C. Blum, Thomas L. Kempner, John H. Dasburg,
George J. Vojta, Duane E. Woerth, Thomas Ducy, Marvin L. Griswold, V. A.
Ravindran, Blum, the A Trust created pursuant to a trust agreement dated
May 23, 1984 with Gary L. Wilson as trustee, the K Trust created pursuant
to a trust agreement dated May 23, 1984 with Gary L. Wilson as trustee, the
Trust created pursuant to a trust agreement dated September 1, 1985 with
Gary L. Wilson as trustee, Derek M. Wilson, Christopher D. Wilson, Frederic
W. Malek, Michelle A. Malek and the Wilson-Thornhill Foundation created
under Trust Agreement dated December 24, 1994 with Gary L. Wilson as
trustee, on the other hand (such parties, the "NON-KLM PARTIES"), shall
have delivered to one another a release in the same form as and
substantially similar to the release between KLM and NWA Corp. pursuant to
Section 4.8.
(b) The obligations of KLM to effect the purchase of Shares on the
Initial Closing Date 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 and in the
Ancillary Agreements 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 Initial Closing Date with the same
effect as though made at and as of the Initial Closing Date. NWA Corp.
shall have performed in all material respects all obligations and shall
have complied in all
<PAGE>
19
material respects with all covenants and other agreements required by this
Agreement and each Ancillary Agreement to be performed or complied with by
NWA Corp. at or prior to the Initial Closing Date.
(ii) OFFICER'S CERTIFICATE. KLM shall have received an
executed certificate, dated the Initial Closing Date, of the President of
NWA Corp. to the effect set forth in Section 5.1(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 transactions contemplated by this
Agreement or any Ancillary Agreement.
(iv) ALLIANCE IMPLEMENTATION AGREEMENT. KLM and NWA Corp.
shall conclude, after appropriate consultation with the DOT, that the
effectiveness of the Alliance Implementation Agreement does not require the
prior approval of the DOT and the Alliance Implementation Agreement shall
have been executed and delivered by KLM and Northwest Airlines, Inc.
(concurrently with or prior to the execution and delivery of this
Agreement) and become effective in accordance with its terms, or if such
approval is required, such approval shall have been obtained and the
Alliance Implementation Agreement shall have been executed and delivered by
KLM and Northwest Airlines, Inc. (concurrently with or prior to the
execution and delivery of this Agreement) and become effective in
accordance with its terms.
(v) PREFERRED STOCK PURCHASE. The closing under the Preferred
Stock Agreement shall occur concurrently with the consummation of the
transactions contemplated hereby on the Initial Closing Date.
(vi) REQUIRED FINANCIAL INSTITUTION CONSENTS. The financial
institutions party to the Credit Agreement shall have executed and
delivered to NWA Corp. any and all required consents to the execution,
delivery and performance by NWA Corp. of this Agreement.
(vii) CONSENT OF SERIES B PREFERRED. The holders of all
outstanding shares of Series B Preferred shall have provided their
irrevocable consent to the transactions contemplated by this Agreement, the
Preferred Stock Agreement, the Blum Preferred Stock Agreement or the BTNY
Preferred Stock Agreement.
(viii) ANCILLARY AGREEMENTS. NWA Corp. and all other parties
thereto (other than KLM) shall have executed and delivered to KLM the
Ancillary Agreements.
(ix) RELEASE. The Non-KLM Parties shall have executed and
delivered to KLM a release in the same form as and substantially similar
to the release between KLM and NWA Corp. pursuant to Section 4.8.
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20
5.2 CONDITIONS TO SUBSEQUENT CLOSING DATES. (a) The obligations of
NWA Corp. to make the payment called for at a particular subsequent Closing Date
shall be subject to the satisfaction (or waiver by NWA Corp.) of the following
conditions:
(i) NO INJUNCTIONS, ETC. No injunction or temporary
restraining order shall have been issued and remain in force which
restrains, prohibits or invalidates the closing at such subsequent
Closing Date.
(ii) NO CAPITAL IMPAIRMENT. The Board of Directors shall not
have determined reasonably and in good faith, in accordance with applicable
provisions of corporation law, that the capital of NWA Corp. is impaired on
such subsequent Closing Date or would otherwise be impaired as a result of
the payment by NWA Corp. for the requisite Shares on such subsequent
Closing Date within the meaning of the DGCL; PROVIDED, HOWEVER, that NWA
Corp. shall purchase the maximum number of the Shares due to be purchased
at such subsequent Closing Date as specified in Section 2.1 which can be
purchased at the applicable Per Share Price provided in Section 2.1 without
impairing its capital; PROVIDED, FURTHER, that in making any such
determination as to a capital impairment, the Board of Directors shall,
consistent with its fiduciary duties, (a) employ the same methods employed
by it at the September 4, 1997 meeting of the Board of Directors (the
"SEPTEMBER 4 MEETING") with respect to the transactions contemplated by
this Agreement, including engaging an independent financial advisor that
regularly engages in rendering opinions to boards of directors concerning
the types of issues which typically arise in the report of Houlihan Lokey
Howard & Zukin referenced below, who shall provide a similar written
presentation and opinion to the Board of Directors, and employ similar
analyses and methodologies, as those provided and employed by Houlihan
Lokey Howard & Zukin in its report delivered at the September 4 Meeting,
and (b) receive such other presentations, opinions, analyses and use
methodologies as such financial advisor or the Board of Directors shall
then deem reasonably appropriate. NWA Corp. shall provide to KLM copies of
the relevant minutes of the Board of Directors' meetings and the written
presentations and opinions of such financial advisor(s) which relate to
each such subsequent determination as to capital impairment for purposes of
subsequent Closing Dates.
(iii) GOOD AND VALID TITLE. KLM shall have and deliver to
NWA Corp. good and valid title to all of the property comprising the Shares
to be purchased by NWA Corp. at such subsequent Closing Date and any later
Closing Date, free and clear of any Liens.
(b) The obligations of KLM to effect the purchase of Shares on a
particular subsequent Closing Date shall be subject to the satisfaction (or
waiver by KLM) of the following conditions:
(i) NO INJUNCTIONS, ETC. No injunction or temporary
restraining order shall have been issued and remain in force which
restrains, prohibits or invalidates the closing at such subsequent
Closing Date.
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21
(ii) ANTITRUST APPROVALS. In the case of the Third Closing
Date and the Fourth Closing Date, (A) the antitrust immunity presently
granted to the Northwest/KLM commercial alliance by the U.S. Department of
Transportation pursuant to Order 93-1-11 shall have been renewed or
otherwise maintained or such antitrust immunity shall have been renewed
and/or modified on terms as favorable in all material respects as the terms
of the antitrust immunity granted to (1) the United-Lufthansa commercial
alliance by the U.S. Department of Transportation pursuant to Order 96-5-27
and (2) the Delta/Swissair/Austrian/Sabena commercial alliance by the U.S.
Department of Transportation pursuant to Order 96-6-33 and (B) the European
Commission shall not have imposed conditions on the Northwest/KLM
commercial alliance equivalent to the conditions proposed with respect to
the pending commercial alliance between British Airways and American
Airlines, the terms of which were reported in the media on or about August
and/or September of 1997 prior to the date hereof such that KLM's and
Northwest Airlines, Inc.'s abilities to operate as contemplated in the
Alliance Implementation Agreement shall have been materially adversely
affected, PROVIDED that, if this condition remains unsatisfied by the 180th
day after the scheduled Third Closing Date or Fourth Closing Date, as the
case may be, KLM shall be required to either (x) waive this condition with
respect to the applicable Closing Date or (y) terminate this Agreement, but
only with respect to the obligations of the parties for the Third Closing
Date and the Fourth Closing Date or the Fourth Closing Date, as the case
may be, pursuant to Section 7.1(b) (assuming in the case of clause (y) that
KLM is not otherwise in material breach of this Agreement and the sole
remaining unsatisfied condition to KLM's obligations hereunder is contained
in this Section 5.2(b)(ii) (except for any injunction or temporary
restraining order referred to in Section 5.2(b)(i) that relates to the same
antitrust immunity or conditions of the European Commission that cause the
condition of this Section 5.2(b)(ii) to remain unsatisfied)).
(iii) HUB RESTRICTIONS. In the case of the Third Closing Date
and the Fourth Closing Date, Northwest Airlines, Inc. shall not have
exercised its right under the Hub Restrictions Letter to terminate the
Alliance Implementation Agreement because of the imposition of restrictions
at Schiphol Airport; PROVIDED, that if this condition remains unsatisfied
by the 30th day after delivery to KLM by Northwest Airlines, Inc. pursuant
to the Hub Restrictions Letter of its written notice of termination of the
Alliance Implementation Agreement, KLM shall be required to either (x)
waive this condition with respect to the Third Closing Date and the Fourth
Closing Date or (y) terminate this Agreement, but only with respect to the
obligations of the parties for the Third Closing Date and the Fourth
Closing Date pursuant to Section 7.1(b) (assuming in the case of clause (y)
that KLM is not otherwise in material breach of this Agreement).
(c) If KLM has delivered to Northwest Airlines, Inc. a notice under
Section 1.04(b) of the Alliance Implementation Agreement of a Material Default
on the part of Northwest Airlines, Inc. (as such term is used in such
Agreement), the parties' obligations to effect the purchase and sale of Shares
on a particular subsequent Closing Date may, at the sole
<PAGE>
22
option of KLM, be deferred pending either (i) Northwest Airlines, Inc.'s cure of
such Material Default or (ii) a determination by the arbitrator(s) appointed
pursuant to Section 9.08 of the Alliance Implementation Agreement that no such
Material Default exists. Immediately upon the occurrence of either of the
events specified in the preceding clauses (i) or (ii), the parties shall be
obligated to effect the purchase and sale of Shares which had been deferred by
reason of this Section 5.2(c). If such arbitrator(s) make a determination that
a Material Default on the part of Northwest Airlines, Inc. exists but KLM does
not thereafter give notice of termination of the Alliance Implementation
Agreement within the three-month period specified in Section 1.04 of such
Alliance Implementation Agreement, then immediately upon the expiration of such
three-month period, the parties shall be obligated to effect the purchase and
sale of Shares which had been deferred by reason of this Section 5.2(c).
ARTICLE VI
WITHHOLDING TAXES
6.1 UNITED STATES FEDERAL WITHHOLDING TAXES. (a) NWA Corp. hereby
agrees that it will not deduct or withhold any United States federal income
taxes that may be imposed under Sections 881(a) and 1442 of the Internal Revenue
Code of 1986, as amended (the "CODE") (or any similar successor provisions)
("UNITED STATES WITHHOLDING TAXES") from any payments made by NWA Corp. to KLM
in respect of the Shares.
(b) Except to the extent provided in Section 6.1(c) below, NWA Corp.
hereby agrees to indemnify and hold harmless KLM from and against any United
States Withholding Taxes that are imposed on KLM on or in respect of any
payments made by NWA Corp. to KLM in respect of the Shares to the extent that
such taxes are imposed on KLM solely as a result of NWA Corp.'s repurchase of
NWA Corp. stock from any person other than KLM or as a result of an increase or
decrease in the number of Shares purchased requested by NWA Corp. pursuant to
Section 6.1(d).
(c) KLM will deliver to NWA Corp., promptly after the date hereof, an
Internal Revenue Service Form 1001 evidencing 4that KLM is entitled to the
benefits of the income tax treaty between The Netherlands and the United States.
KLM also agrees to furnish, to the extent it is legally entitled to do so, NWA
Corp. with such documents and certificates as NWA Corp. may reasonably request
in connection with obtaining a reduction in, or exemption from, the payment of
United States Withholding Taxes imposed on any amount paid by NWA Corp. to KLM
in respect of the Shares. NWA Corp. shall have no obligation to indemnify or
hold harmless KLM for any of the United States federal income withholding taxes
described in Section 6.1(b) above to the extent that such taxes are imposed on
KLM as a result of KLM's failure to provide any form, document or certificate
required to be provided by KLM in accordance with this Section 6.1(c).
(d) KLM agrees to consider in good faith a request by NWA Corp. to
increase or decrease the number of Shares to be purchased on the Second Closing
Date, the Third
<PAGE>
23
Closing Date or the Fourth Closing Date as necessary in order for each purchase
and sale of Shares to qualify as a substantially disproportionate redemption of
stock under section 302(b)(2) of the Internal Revenue Code of 1986, as amended,
on such subsequent Closing Date; PROVIDED, HOWEVER, that in no event shall KLM
be obligated to consider a request to reduce the number of Shares to be
purchased at the final Closing Date below 10% of the then outstanding shares of
common stock of NWA Corp.
(e) KLM hereby agrees to indemnify and hold harmless NWA Corp. from
and against any United States Withholding Taxes imposed on NWA Corp. in respect
of any payments made by NWA Corp. to KLM in respect of the Shares to the extent
that such taxes would not have been imposed but for KLM's acquisition of
additional shares of NWA Corp. stock and/or the attribution of ownership of any
NWA Corp. stock to KLM under Section 318 of the Code (or any similar successor
provision). If KLM's (including its Affiliates) ownership of NWA Corp. stock
for purposes of Section 318 of the Code is accurately described in this
Agreement and the Preferred Stock Agreement, then NWA Corp. acknowledges that it
will have no indemnity claim against KLM pursuant to this Section 6.1(e) with
respect to the attribution of ownership of any NWA Corp. stock to KLM under
Section 318 of the Code.
ARTICLE VII
GENERAL PROVISIONS
7.1 TERMINATION OR ABANDONMENT OF AGREEMENT. (a) This Agreement may
be terminated or abandoned at any time prior to the Initial Closing by mutual
consent of the parties in writing.
(b) By written notice to NWA Corp., this Agreement may be terminated
by KLM, but only with respect to the obligations of the parties for the Third
Closing Date and the Fourth Closing Date or the Fourth Closing Date, as the case
may be, if either (i) the condition set forth in Section 5.2(b)(ii) remains
unsatisfied by the 180th day after the scheduled Third Closing Date or the
Fourth Closing Date, as the case may be (provided that KLM is not otherwise in
material breach of this Agreement), or (ii) the condition set forth in Section
5.2(b)(iii) is unsatisfied, provided that KLM's right to terminate this
Agreement pursuant to this Section 7.1(b)(ii) will lapse if it has not been
exercised prior to 30 days after delivery to KLM by Northwest Airlines, Inc.
pursuant to the Hub Restrictions Letter of its written notice of termination of
the Alliance Implementation Agreement.
(c) By written notice to NWA Corp., this Agreement may be terminated
by KLM with respect to the obligations of the parties for any subsequent Closing
Date scheduled to occur after the date of such notice if, prior to the date of
such notice and after requisite notice and opportunity to cure having been
provided to Northwest Airlines, Inc. in accordance with the terms of the
Alliance Implementation Agreement, KLM has exercised its right under the
Alliance Implementation Agreement to terminate such Alliance Implementation
Agreement
<PAGE>
24
as a result of a Material Default on the part of Northwest Airlines, Inc. (as
such term is defined in such Alliance Implementation Agreement), any arbitration
proceedings under Section 9.08 of such Alliance Implementation Agreement have
been concluded and such Alliance Implementation Agreement has been terminated in
accordance with its terms.
(d) Except as otherwise specified in this Article VII, in the event of
any termination of this Agreement as provided in this Section 7.1, 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 or their
respective directors, officers or stockholders with respect to any obligations
set forth in this Agreement; PROVIDED, HOWEVER, that nothing in this Section 7.1
shall relieve any party from liability for any breach of its representations,
warranties, covenants or agreements contained in this Agreement.
(e) If there is a termination of the obligations of the parties with
respect to the Third Closing Date and the Fourth Closing Date or the Fourth
Closing Date, as the case may be, pursuant to either Section 7.1(b)(i) or
7.1(b)(ii), (i) all Shares held by KLM at such time shall be automatically
converted into Class B Common Stock and shall not be reconverted into Class A
Common Stock so long as such Shares are held or reacquired by KLM or any of its
Affiliates (and KLM shall, concurrently with the execution and delivery of this
Agreement, execute and deliver a separate power-of-attorney in the form of
Exhibit D hereto that irrevocably appoints Douglas M. Steenland, Esq. (with full
power of substitution) as its agent and attorney-in-fact to execute and deliver
on behalf of KLM any and all instruments, agreements and other documents that
are necessary or advisable to permit NWA Corp. to make appropriate notations in
its stock transfer and other ownership records to reflect such conversion), and
(ii) NWA Corp. shall have the right to immediately terminate the Alliance
Implementation Agreement, within 30 days after such termination of the
obligations of the parties with respect to the Third Closing Date and the Fourth
Closing Date or the Fourth Closing Date, as the case may be. Upon any sale or
other transfer by KLM of Class B Common Stock to a party that is not an
Affiliate, agent or nominee of KLM, such shares shall be reconverted into Class
A Common Stock.
(f) In the event of any termination of this Agreement pursuant to
Section 7.1(c) in which the obligations of the parties are terminated for the
Second Closing Date, the Third Closing Date and the Fourth Closing Date, on the
date of the termination of this Agreement NWA Corp. shall pay to KLM in Cash
$30,410,947.82 plus accretion on such amount at the rate of 5% per annum from
September 29, 1998 to the actual date of payment. In the event of any such
termination of this Agreement pursuant to Section 7.1(b) or 7.1(c) in which the
obligations of the parties are terminated for the Third Closing Date and the
Fourth Closing Date, on the date of the termination of this Agreement NWA Corp.
shall pay to KLM in Cash $28,344,658.46 plus accretion on such amount at the
rate of 5% per annum from September 29, 1999 to the actual date of payment. In
the event of any termination of this Agreement pursuant to Section 7.1(b) or
7.1(c) in which the obligations of the parties are terminated for only the
Fourth Closing Date, on the date of the termination of this Agreement NWA Corp.
shall pay to KLM in Cash $24,771,297.10 plus accretion on such amount at the
rate of 5% per annum from September 29, 2000 to the actual date of payment.
Payments made pursuant to
<PAGE>
25
this Section 7.1(f) will be deemed to be additional purchase price payments to
KLM by NWA Corp. in respect of Shares which will have been, by the time of any
such payment, transferred to NWA Corp. hereunder. NWA Corp. shall indemnify and
hold harmless KLM, on an after-tax basis, from any additional taxes for which
KLM becomes liable as a result of payments being made pursuant to this Section
7.1(f). This Section 7.1(f) shall survive any termination of this Agreement and
shall continue in full force and effect until all amounts due from NWA Corp.
have been paid in full. Accretion shall be calculated on the basis of the
actual number of days elapsed divided by 360 for purposes of this Agreement.
7.2 EXPENSES. All fees, commissions and other expenses incurred by
any party hereto in connection with the negotiation of this Agreement, the
Ancillary Agreements 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.
7.3 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.
7.4 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 10017-3954
Attention: Robert L. Friedman, Esq.
Fax: (212) 455-2502
<PAGE>
26
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 or
(iii) on the date received, if sent by fax.
7.5 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.
7.6 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.
7.7 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable by
KLM (other than as expressly stated otherwise in Section 4.1(b)) 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.
<PAGE>
27
7.8 ENTIRE AGREEMENT; NO ORAL WAIVER. This Agreement and the
Ancillary 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 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.
7.9 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.
7.10 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.
7.11 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 7.4; 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.
<PAGE>
28
7.12 REMEDIES. Each of the parties hereto acknowledges that the
rights granted to the other party hereto in this Agreement are of a special,
unique and extraordinary character, and that any breach of this Agreement by the
other party hereto could not be compensated for by damages. Accordingly, in the
event of any failure or refusal by the other party hereto to comply with any
covenant or agreement contained in this Agreement each of the parties hereto
shall be entitled, in addition to any other remedies that such party may have,
to enforcement of this Agreement by a decree of specific performance requiring
the other party hereto to fulfill its obligations under this Agreement.
7.13 INDEMNIFICATION. NWA Corp. agrees to indemnify and hold harmless
KLM, on an after-tax basis, from any Claims, or other losses or liabilities
incurred or borne by KLM in connection with suits, actions or proceedings
instituted by stockholders of NWA Corp. whether directly or on behalf of NWA
Corp., relating to or arising out of any understandings, agreements or other
arrangements or out of any transactions between or among NWA Corp. or any
Affiliate and any of the Checchi Family Trusts, the Checchi Family, the Wilson
Family or the Malek Family (each as defined in the Stockholders' Agreement, and
together, the "EXEMPTED OPTIONEES") in connection with the cancellation of the
option contained in Section 17 of the Stockholders' Agreement in respect of the
Exempted Optionees and the adjustment of the payments to be made by NWA Corp. to
KLM hereunder. This obligation of NWA Corp. shall survive any termination of
this Agreement and shall continue in full force and effect.
7.14 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.
7.15 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.
<PAGE>
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/John H. Dasburg
-----------------------------------
John H. Dasburg
President and Chief
Executive Officer
By: /s/ Douglas M. Steenland
-----------------------------------
Douglas M Steenland
Senior Vice President,
General Counsel and Secretary
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
By: /s/ L.M. Van Wijk
-----------------------------------
L.M. van Wijk
President and Chief
Executive Officer
By: /s/ R.J.N. Abrahamsen
-----------------------------------
R.J.N. Abrahamsen
Managing Director and
Chief Financial Officer
<PAGE>
Exhibit 10.4
PREFERRED STOCK REPURCHASE AGREEMENT dated as of September 29, 1997
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 owns (i) 1,308.8 shares of NWA
Corp.'s Series A Preferred Stock, par value $.01 per share (the "SERIES A
PREFERRED STOCK"), (ii) 436.2 shares of NWA Corp.'s Series B Preferred Stock,
par value $.01 per share (the "SERIES B PREFERRED STOCK"), and (iii) 21,684,099
shares of NWA Corp.'s Class A Common Stock, par value $.01 per share (the "CLASS
A COMMON STOCK", and together with NWA Corp.'s Class B Common Stock, par value
$.01 per share (the "CLASS B COMMON STOCK"), the "COMMON STOCK");
WHEREAS, concurrently with the Initial Closing Date (as defined in the
Common Stock Agreement (as hereinafter defined)), in accordance with the
provisions set forth in the Amendment to the Stockholders' Agreement (as
hereinafter defined), KLM will exercise its right to purchase, and will
purchase, pursuant to Section 17 of the Stockholders' Agreement (as hereinafter
defined), 3,293,775 additional shares of Class A Common Stock in exchange for
818.0003 shares of Series A Preferred Stock and 272.6251 shares of Series B
Preferred Stock, following which purchase KLM will own 490.7997 shares of Series
A Preferred Stock (the "SERIES A PREFERRED SHARES") and 163.5749 shares of
Series B Preferred Stock (the "SERIES B PREFERRED SHARES", together with the
Series A Preferred Shares, the "PREFERRED SHARES"); and
WHEREAS, upon the terms and subject to the conditions set forth
herein, KLM wishes to sell to NWA Corp., and NWA Corp. wishes to purchase from
KLM the Preferred Shares on the Initial Closing Date;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE>
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.
"AGREEMENT" means this Preferred Stock Repurchase Agreement, as
amended, supplemented or otherwise modified from time to time in accordance
with its terms.
"ALLIANCE IMPLEMENTATION AGREEMENT" means a definitive agreement with
respect to commercial cooperation that is entered into by KLM and Northwest
Airlines, Inc. at the Initial Closing Date.
"AMENDMENT TO THE STOCKHOLDERS' AGREEMENT" means the agreement in the
form of Exhibit A to the Common Stock Agreement which amends the
Stockholders' Agreement and provides for (i) the acceleration of the
vesting of the KLM Option (as defined in the Stockholders' Agreement) in
respect of shares of Class A Common Stock subject to such option that are
held by Blum and BTNY, and the exercise by KLM of such KLM Option with
respect to such shares and the purchase of such shares concurrently with
the Initial Closing Date, (ii) the termination of the KLM Option with
respect to the other Option Stockholders and the termination of the Put
Option (as each such term is defined in the Stockholders' Agreement) with
respect to all of the Option Stockholders and (iii) immediately following
the consummation of the transactions contemplated by this Agreement on the
Initial Closing Date, the termination of all of KLM's other rights and
obligations under the Stockholders' Agreement.
"ANCILLARY AGREEMENTS" means the Common Stock Agreement, the Amendment
to the Stockholders' Agreement and the Standstill Agreement.
"BENEFICIALLY OWN" has the meaning given such term in Rule 13d-3 under
the Exchange Act, as in effect on the date hereof. As used herein, the
phrases "BENEFICIAL OWNERSHIP" and "BENEFICIAL OWNER" have correlative
meanings.
"BLUM" means Richard D. Blum Associates - NWA Partners, L.P.
"BOARD OF DIRECTORS" means the board of directors of NWA Corp. or any
successor corporation.
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<PAGE>
"BTNY" means Bankers Trust New York Corporation.
"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
Amsterdam, The Netherlands, in New York, New York or in Minneapolis,
Minnesota.
"CASH" means Dollars paid in immediately available funds.
"COMMON STOCK AGREEMENT" means the Common Stock Repurchase Agreement
dated as of September 29, 1997 between KLM and NWA Corp., entered into
concurrently with this Agreement.
"CREDIT AGREEMENT" means the Credit Agreement dated as of December 15,
1995 and as amended and restated as of December 16, 1996 among NWA Corp.,
NWA, Inc., Northwest Airlines, Inc., ABN Amro Bank N.W., as Compliance
Agent, Bankers Trust Company, as Administrative Agent, Chase 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 and any extensions, refinancings or replacements thereof.
"DOLLARS" and "$" mean lawful currency of the United States of
America.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or
security interest; or any preference, priority or other arrangement or
preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"LIQUIDATION PREFERENCE" means an amount in cash equal to $50,000 for
each share of Series A Preferred Shares or Series B Preferred Shares, as
the case may be, plus an amount in cash equal to all accrued but unpaid
dividends on such applicable share to the Initial Closing Date. Such
amount as of September 29, 1997 equals (i) $79,562.84 with respect to each
share of Series A Preferred Shares and (ii) $69,378.23 with respect to each
share of Series B Preferred Shares, which in each case shall be
appropriately adjusted in the event that the Initial Closing Date occurs on
a date other than September 29, 1997.
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<PAGE>
"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.
"STANDSTILL AGREEMENT" means an agreement, in the form of Exhibit C to
the Common Stock Agreement, to be entered into by KLM and NWA Corp. at the
Initial Closing Date.
"STOCKHOLDERS' AGREEMENT" means the Second Amended and Restated
Investor Stockholders' Agreement dated as of December 23, 1993, as amended,
supplemented or otherwise modified from time to time, among NWA Corp., KLM
and certain other stockholders of NWA Corp. parties thereto, as in effect
on the date hereof.
"SUPERVISORY BOARD OF KLM" means the supervisory board of KLM or any
successor corporation.
ARTICLE II
DELIVERY AND PURCHASE OF SHARES
2.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions of this Agreement, on the Initial Closing Date, (i) KLM agrees to
transfer, assign and deliver to NWA Corp., against payment by NWA Corp. to KLM
of immediately available funds in an amount equal to the aggregate Liquidation
Preference for 490.7997 shares of Series A Preferred Stock (the "SERIES A
PURCHASE PRICE"), a certificate or certificates representing the 490.7997 shares
of Series A Preferred Stock, and NWA Corp. agrees to purchase such shares and
make such payment to KLM against delivery of such certificates on such Initial
Closing Date, and (ii) KLM agrees to transfer, assign and deliver to NWA Corp.,
against payment by NWA Corp. to KLM of immediately available funds in an amount
equal to the aggregate Liquidation Preference for 163.5749 shares of Series B
Preferred Stock (the "SERIES B PURCHASE PRICE"), a certificate or certificates
representing 163.5749 shares of Series B Preferred Stock, and NWA Corp. agrees
to purchase such shares and make such payment to KLM against delivery of such
certificates on such Initial Closing Date. Such certificates shall be duly
endorsed in blank or accompanied by stock powers duly executed in blank, with
all necessary stock transfer stamps affixed.
2.2 CLOSING OF PURCHASE AND SALE OF SHARES. The closing of the
purchase and sale contemplated by Section 2.1 will occur at the time and place
of the Initial Closing Date.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF KLM. KLM represents and
warrants to NWA Corp. as of the date hereof and as of the Initial Closing Date
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 to perform its obligations hereunder. The
execution and delivery by KLM of this Agreement and the performance of the
transactions herein 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 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).
(c) Neither the execution and delivery of this Agreement or the
performance by KLM of the transactions contemplated hereby 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 (A) the shares of
Series A Preferred Stock or Series B Preferred Stock currently owned by it
(except as contemplated by the exercise of the KLM Option pursuant to the
Amendment to the Stockholders' Agreement) or (B) shares of Common Stock
currently owned by it or to be acquired by it upon exercise of the KLM
Option other than liens, encumbrances, equities or claims upon shares
pursuant to the Common Stock Agreement.
(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 and the consummation of the transactions contemplated
hereby.
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<PAGE>
(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.
(f) KLM has, and on the Initial Closing Date KLM will have, good and
valid title to the Preferred Shares to be purchased by NWA Corp. at the
Initial Closing Date, free and clear of all Liens, except any Liens created
pursuant to the terms of this Agreement.
(g) KLM is the record and beneficial owner on the date hereof of
1,308.8 shares of Series A Preferred Stock, 436.2 shares of Series B
Preferred Stock and 21,684,099 shares of Common Stock, and upon exercise of
the KLM Option pursuant to the Amendment to the Stockholders' Agreement,
KLM will be the record and beneficial owner of 490.7997 shares of Series A
Preferred Stock, 163.5749 shares of Series B Preferred Stock and 24,977,874
shares of Common Stock. KLM does not own of record or beneficially or
otherwise have the right to acquire any other shares of any series of
common or preferred capital stock of NWA Corp., other than pursuant to the
Stockholders' Agreement.
(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.
3.2 REPRESENTATIONS AND WARRANTIES OF NWA CORP. NWA Corp. represents
and warrants to KLM as of the date hereof and as of the Initial Closing Date 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 to perform its obligations
hereunder. The execution and delivery by NWA Corp. of this Agreement and
the performance of the transactions herein 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 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
-6-
<PAGE>
creditors' rights generally and general equitable principles (whether
considered in a proceeding at law or in equity).
(c) Neither the execution and delivery of this Agreement or the
performance by NWA Corp. of the transactions contemplated hereby will
(i) 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.
(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 and the consummation of the transactions contemplated
hereby.
(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.
(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.
(g) Performance by the parties of the transactions referred to herein
or contemplated hereby (including KLM's exercise pursuant to Section 17 of
the Stockholders' Agreement of its right to purchase 3,293,775 additional
shares of Class A Common Stock, and the purchase of such shares) will not
cause KLM to become an "Acquiring Person" for purposes of, and as such term
is defined in, the Rights Agreement of NWA Corp. dated as of November 16,
1995, as amended (the "RIGHTS AGREEMENT").
(h) The "capital" of NWA Corp. is not "impaired" and will not become
"impaired" as a result of the purchase of the Preferred Shares from KLM by
NWA Corp. on the Initial Closing Date, within the meaning of Section
160(a)(1) of the Delaware General Corporation Law, as amended.
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<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
4.1 CONDITIONS TO CLOSING. (a) The obligations of NWA Corp. to
purchase the Preferred Shares at the Initial Closing Date 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 and in the Ancillary
Agreements 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 Initial Closing Date with the same effect as though made at
and as of the Initial 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
and each Ancillary Agreement to be performed or complied with by KLM at or
prior to the Initial Closing Date.
(ii) COMMON STOCK AGREEMENT CONDITIONS. All the conditions to closing
in Sections 5.1(a)(ii) through (vii) and (ix) of the Common Stock Agreement
shall have been satisfied (or waived by NWA Corp.).
(iii) COMMON STOCK PURCHASE. The "Initial Closing Date" under and
as defined in the Common Stock Agreement shall occur concurrently with the
closing of the transactions contemplated hereby.
(b) The obligations of KLM to sell the Preferred Shares at the Initial
Closing Date 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 and in the
Ancillary Agreements 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 Initial Closing Date with the same
effect as though made at and as of the Initial 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 and each Ancillary Agreement to be
performed or complied with by NWA Corp. at or prior to the Initial Closing
Date.
(ii) COMMON STOCK AGREEMENT CONDITIONS. All the conditions to closing
in Sections 5.1(b)(ii) through (iv) and (vi) through (ix) of the Common
Stock Agreement shall have been satisfied (or waived by KLM).
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<PAGE>
(iii) COMMON STOCK PURCHASE. The "Initial Closing Date" under and
as defined in the Common Stock Agreement shall occur concurrently with the
closing of the transactions contemplated hereby.
ARTICLE V
WITHHOLDING TAXES
5.1 UNITED STATES FEDERAL WITHHOLDING TAXES. (a) NWA Corp. hereby
agrees that it will only deduct and withhold United States federal income taxes
imposed under Sections 881(a) and 1442 of the Internal Revenue Code of 1986, as
amended (the "CODE") (or any similar successor provisions), ("UNITED STATES
WITHHOLDING TAXES") from the Series A Purchase Price and the Series B Purchase
Price an amount equal to 5% of the amount of such payments that constitutes
accrued dividend income under Section 305(c) of the Internal Revenue Code of
1986, as amended, or analogous provisions.
(b) Except to the extent provided in Section 5.1(c) below, NWA Corp.
hereby agrees to indemnify and hold harmless KLM from and against any United
States Withholding Taxes that are imposed on KLM on or in respect the Series A
Purchase Price and/or the Series B Purchase Price to the extent that such taxes
are imposed on KLM solely as a result of NWA Corp.'s repurchase of NWA Corp.
stock from any person other than KLM.
(c) Prior to NWA Corp.'s payment of such amounts, KLM will deliver to
NWA Corp. an Internal Revenue Service Form 1001 evidencing that it is entitled
to the benefits of the income tax treaty between the Kingdom of The Netherlands
and the United States. KLM also agrees to furnish, to the extent it is legally
entitled to do so, NWA Corp. with such documents and certificates as NWA Corp.
may reasonably request in connection with obtaining a reduction in, or exemption
from, the payment of United States federal income withholding taxes imposed on
or with respect to the Series A Purchase Price or the Series B Purchase Price.
NWA Corp. shall have no obligation to indemnify or hold harmless KLM for any
United States Withholding Taxes (i) actually withheld by NWA Corp. pursuant to
Section 5.1(a) above, or (ii) described in Section 5.1(b) above, to the extent
that such taxes are imposed on KLM as a result of KLM's failure to provide any
form, document or certificate required to be provided by KLM in accordance with
this Section 5.1(c).
(d) KLM hereby agrees to indemnify and hold harmless NWA Corp. from
and against any United States Withholding Taxes imposed on NWA Corp. in respect
of any payments made by NWA Corp. to KLM in respect of the Series A Preferred
Shares and/or the Series B Preferred Shares to the extent that such taxes would
not have been imposed but for KLM's acquisition of additional shares of NWA
Corp. stock and/or the attribution of ownership of any NWA Corp. stock to KLM
under Section 318 of the Code (or any similar successor provision). If KLM's
(including its Affiliates) ownership of NWA Corp. stock for purposes of Section
318 of the Code is accurately described in this Agreement and the
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Common Stock Agreement, then NWA Corp. acknowledges that it will have no
indemnity claim against KLM pursuant to this Section 6.1(d) with respect to the
attribution of ownership of any NWA Corp. stock to KLM under Section 318 of the
Code.
(e) KLM hereby represents and warrants 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 United States Withholding Tax is imposed on any
dividends received by KLM from NWA Corp. Without limiting NWA Corp.'s indemnity
obligations set forth in Section 5.1(b) above, in the event that this
representation is not correct, NWA Corp. will have no indemnity obligation to
KLM in respect of the United States Withholding Taxes described in Section
5.1(a) above.
ARTICLE VI
GENERAL PROVISIONS
6.1 TERMINATION OR ABANDONMENT OF AGREEMENT. (a) This Agreement may
be terminated or abandoned at any time prior to the Initial Closing Date by
mutual consent of the parties in writing.
(b) Except for the provisions in this Article VI, in the event of any
termination of the Agreement as provided in this Section 6.1, 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 or their respective
directors, officers or stockholders with respect to any obligations set forth in
this Agreement; PROVIDED, HOWEVER, that nothing in this Section 6.1 shall
relieve any party from liability for any breach of its representations,
warranties, covenants or agreements contained in this Agreement.
6.2 EXPENSES. All fees, commissions and other expenses incurred by
any party hereto in connection with the negotiation of this Agreement, the
Ancillary Agreements 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.
6.3 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.
6.4 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:
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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 10017-3954
Attention: Robert L. Friedman, 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 or
(iii) on the date received, if sent by fax.
6.5 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
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AND TO BE PERFORMED IN NEW YORK AND WITHOUT REGARD TO THE APPLICATION OF
PRINCIPLES OF CONFLICT OF LAWS.
6.6 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.
6.7 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.
6.8 ENTIRE AGREEMENT; NO ORAL WAIVER. This Agreement and the
Ancillary 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 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.
6.9 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.
6.10 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.
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<PAGE>
6.11 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 6.4; 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.
6.12 REMEDIES. Each of the parties hereto acknowledges that the
rights granted to NWA Corp. in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by KLM could not
be compensated for by damages. Accordingly, in the event of any failure or
refusal by KLM to comply with any covenant or agreement contained in this
Agreement NWA Corp. shall be entitled, in addition to any other remedies that
NWA Corp. may have, to enforcement of this Agreement by a decree of specific
performance requiring KLM to fulfill its obligations under this Agreement.
6.13 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.
6.14 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.
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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/John H. Dasburg
-------------------------------------
John H. Dasburg
President and Chief
Executive Officer
By: /s/Douglas M. Steenland
-------------------------------------
Douglas M Steenland
Senior Vice President,
General Counsel and Secretary
KONINKLIJKE LUCHTVAART
MAATSCHAPPIJ N.V.
By: /s/L.M. van Wijk
-------------------------------------
L.M. van Wijk
President and Chief
Executive Officer
By: /s/R.J.N. Abrahamsen
-------------------------------------
R.J.N. Abrahamsen
Managing Director and
Chief Financial Officer
<PAGE>
Exhibit 10.5
BTNY PREFERRED STOCK REPURCHASE AGREEMENT dated as of September 29,
1997 between NORTHWEST AIRLINES CORPORATION, a Delaware corporation ("NWA
CORP."), and BANKERS TRUST NEW YORK CORPORATION, a New York corporation
("BTNY").
W I T N E S S E T H :
WHEREAS, on the date hereof, BTNY owns 999 shares of NWA Corp.'s Class
A Common Stock, par value $.01 per share (the "CLASS A COMMON STOCK"), and
2,635,020 shares of NWA Corp.'s Class B Common Stock, par value $.01 per share
(the "CLASS B COMMON STOCK");
WHEREAS, concurrently with the Initial Closing Date (as defined in the
Common Stock Agreement (as hereinafter defined)), in accordance with the
provisions set forth in the Amendment to the Stockholders' Agreement (as
hereinafter defined), Koninklijke Luchtvaart Maatschappij N.V., a Netherlands
corporation ("KLM"), will exercise its right to purchase, and will purchase,
pursuant to Section 17 of the Stockholders' Agreement (as hereinafter defined)
(x) from Richard C. Blum & Associates - NWA Partners, L.P. ("BLUM"), 658,755
shares of Class A Common Stock in exchange for 163.6001 shares of Series A
Preferred Stock and 54.5250 shares of NWA Corp.'s Series B Preferred Stock, par
value $.01 per share (the "SERIES B PREFERRED STOCK"), and (y) from BTNY,
2,635,020 shares of Class B Common Stock in exchange for 654.4002 shares of
Series A Preferred Stock and 218.1001 shares of Series B Preferred Stock,
following which purchase BTNY will own (i) 999 shares of Class A Common Stock,
(ii) 654.4002 shares of Series A Preferred Stock (the "SERIES A PREFERRED
SHARES") and (iii) 218.1001 shares of Series B Preferred Stock (the "SERIES B
PREFERRED SHARES", together with the Series A Preferred Shares, the "PREFERRED
SHARES"); and
WHEREAS, upon the terms and subject to the conditions set forth
herein, BTNY wishes to sell to NWA Corp., and NWA Corp. wishes to purchase from
BTNY, the Preferred Shares on the Initial Closing Date;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE>
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.
"AGREEMENT" means this BTNY Preferred Stock Repurchase Agreement, as
amended, supplemented or otherwise modified from time to time in accordance
with its terms.
"AMENDMENT TO THE STOCKHOLDERS' AGREEMENT" means the agreement in the
form of Exhibit A to the Common Stock Agreement which amends the
Stockholders' Agreement and provides for (i) the acceleration of the
vesting of the KLM Option (as defined in the Stockholders' Agreement) in
respect of shares of Class A Common Stock subject to such option that are
held by Blum and BTNY, and the exercise by KLM of such KLM Option with
respect to such shares and the purchase of such shares concurrently with
the Initial Closing Date, (ii) the termination of the KLM Option for the
other Option Stockholders and the termination of the Put Option (as each
such term is defined in the Stockholders' Agreement) for all of the Option
Stockholders and (iii) immediately following the consummation of the
transactions contemplated by this Agreement on the Initial Closing Date,
the termination of all of KLM's other rights and obligations under the
Stockholders' Agreement.
"BENEFICIALLY OWN" has the meaning given such term in Rule 13d-3 under
the Exchange Act (as defined below), as in effect on the date hereof. As
used herein, the phrases "BENEFICIAL OWNERSHIP" and "BENEFICIAL OWNER" have
correlative meanings.
"BOARD OF DIRECTORS" means the board of directors of NWA Corp. or any
successor corporation.
"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.
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"COMMON STOCK AGREEMENT" means the Common Stock Repurchase Agreement
dated as of September 29, 1997 between KLM and NWA Corp., entered into
concurrently with this Agreement.
"DOLLARS" and "$" mean lawful currency of the United States of
America.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or
security interest; or any preference, priority or other arrangement or
preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"LIQUIDATION PREFERENCE" means an amount in Cash equal to $50,000 for
each share of Series A Preferred Shares or Series B Preferred Shares, as
the case may be, plus an amount in Cash equal to all accrued but unpaid
dividends on such applicable share to the Initial Closing Date. Such
amount as of September 29, 1997 equals (i) $79,562.84 with respect to each
share of Series A Preferred Shares and (ii) $69,378.23 with respect to each
share of Series B Preferred Shares, which in each case shall be
appropriately adjusted in the event that the Initial Closing Date occurs on
a date other than September 29, 1997.
"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 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 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.
"STOCKHOLDERS' AGREEMENT" means the Second Amended and Restated
Investor Stockholders' Agreement dated as of December 23, 1993, as amended,
supplemented or otherwise modified from time to time, among NWA Corp., KLM,
Blum, BTNY and certain other stockholders of NWA Corp. parties thereto, as
in effect on the date hereof.
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ARTICLE II
DELIVERY AND PURCHASE OF SHARES
2.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions of this Agreement, on the Initial Closing Date, (i) BTNY agrees to
transfer, assign and deliver to NWA Corp., against payment by NWA Corp. to BTNY
of immediately available funds by wire transfer to an account designated by BTNY
in an amount equal to 99% of the aggregate Liquidation Preference for the Series
A Preferred Shares (the "SERIES A PURCHASE PRICE"), a certificate or
certificates representing the Series A Preferred Shares, and NWA Corp. agrees to
purchase such shares and make such payment to BTNY against delivery of such
certificates on such Initial Closing Date, and (ii) BTNY agrees to transfer,
assign and deliver to NWA Corp., against payment by NWA Corp. to BTNY of
immediately available funds in an amount equal to 99% of the aggregate
Liquidation Preference for the Series B Preferred Shares (the "SERIES B PURCHASE
PRICE"), a certificate or certificates representing the Series B Preferred
Shares, and NWA Corp. agrees to purchase such shares and make such payment to
BTNY against delivery of such certificates on such Initial Closing Date. Such
certificates shall be duly endorsed in blank or accompanied by stock powers duly
executed in blank, with all necessary stock transfer stamps affixed.
2.2 CLOSING OF PURCHASE AND SALE OF SHARES. The closing of the
purchase and sale contemplated by Section 2.1 will occur at the time and place
of the Initial Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF BTNY. BTNY represents and
warrants to NWA Corp. as of the date hereof and as of the Initial Closing Date
as follows:
(a) BTNY is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York.
(b) BTNY has all requisite corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by BTNY of this Agreement and the performance of the
transactions herein contemplated to be performed by BTNY have been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by BTNY and, assuming due authorization, execution
and delivery by NWA Corp., constitutes the legal, valid and binding
agreement of BTNY, enforceable against BTNY in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors'
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<PAGE>
rights generally and general equitable principles (whether considered in a
proceeding at law or in equity).
(c) Neither the execution and delivery of this Agreement or the
performance by BTNY of the transactions contemplated hereby will
(i) violate or conflict with any of the provisions of the charter or other
organizational documents of BTNY, (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 BTNY is a
party or by which any of its property is bound or (iii) result in the
creation of any Liens upon any of the shares of Series A Preferred Stock or
Series B Preferred Stock to be acquired by it upon exercise of the KLM
Option pursuant to the Amendment to the Stockholders' Agreement.
(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 BTNY of
this Agreement and the consummation of the transactions contemplated
hereby.
(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 BTNY, threatened
against BTNY, and BTNY 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 BTNY to consummate the transactions contemplated hereby.
(f) On the Initial Closing Date BTNY will have, good and valid title
to the Preferred Shares to be purchased by NWA Corp. at the Initial Closing
Date, free and clear of all Liens.
(g) BTNY is the record and beneficial owner on the date hereof of 999
shares of Class A Common Stock and 2,635,020 shares of Class B Common
Stock, and upon exercise of the KLM Option pursuant to the Amendment to the
Stockholders' Agreement and the registration in the name of BTNY of the
shares being acquired by BTNY upon exercise of the KLM Option, BTNY will be
the record and beneficial owner (subject to this Agreement) of (i) 999
shares of Class A Common Stock, (ii) 654.4002 shares of Series A Preferred
Stock and (iii) 218.1001 shares of Series B Preferred Stock.
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<PAGE>
(h) Neither BTNY 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 BTNY in connection with the transactions
contemplated by this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF NWA CORP. NWA Corp. represents
and warrants to BTNY as of the date hereof and as of the Initial Closing Date 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 to perform its obligations
hereunder. The execution and delivery by NWA Corp. of this Agreement and
the performance of the transactions herein contemplated to be performed by
NWA Corp. have been duly authorized by the Board of Directors and no
further corporate action on the part of NWA Corp. is necessary to authorize
this 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 BTNY, 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).
(c) Neither the execution and delivery of this Agreement or the
performance by NWA Corp. of the transactions contemplated hereby will
(i) 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.
(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 and the consummation of the transactions contemplated
hereby.
(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
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<PAGE>
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.
(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.
ARTICLE IV
ACKNOWLEDGMENTS
4.1 ACKNOWLEDGMENTS. (a) BTNY hereby acknowledges that KLM, pursuant
to the Share Exchange Agreement, dated as of June 28, 1996 (the "EXCHANGE
AGREEMENT"), between KLM and NWA Corp., has unconditionally and irrevocably
agreed that 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 4.1(a), 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.
(b) BTNY further acknowledges that the agreements and waivers
contained in Sections 6.1(a), (b) and (c) of the Share Exchange Agreement
including the agreement specified in Section 4.1(a) of this Agreement are
applicable to and binding upon BTNY and all subsequent holders of the shares of
Series A Preferred Stock and Series B Preferred Stock that BTNY receives from
KLM upon the exercise of the KLM Option pursuant to the Amendment to the
Stockholders' Agreement.
ARTICLE V
CONDITIONS PRECEDENT
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5.1 CONDITIONS TO CLOSING. (a) The obligations of NWA Corp. to
purchase the Preferred Shares at the Initial Closing Date 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 BTNY 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 Initial
Closing Date with the same effect as though made at and as of the Initial
Closing Date. BTNY 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 BTNY at or prior to the Initial Closing Date.
(ii) OFFICER'S CERTIFICATE. NWA Corp. shall have received an
executed certificate, dated the Initial Closing Date, of a Senior Vice
President of BTNY to the effect set forth in Section 5.1(a)(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 transactions contemplated by this Agreement.
(iv) CONSENT OF SERIES B PREFERRED. The holders of all
outstanding shares of Series B Preferred Stock shall have provided their
irrevocable consent to the transactions contemplated by this Agreement, the
Common Stock Agreement, the Preferred Stock Repurchase Agreement, dated as
of September 29, 1997 (the "PREFERRED STOCK AGREEMENT"), between KLM and
NWA Corp., and the Blum Preferred Stock Repurchase Agreement, dated as of
September 29, 1997 (the "BLUM PREFERRED STOCK AGREEMENT"), between Blum and
NWA Corp.
(v) COMMON STOCK PURCHASE. The "Initial Closing Date" under and
as defined in the Common Stock Agreement shall occur concurrently with the
closing of the transactions contemplated hereby.
(b) The obligations of BTNY to sell the Preferred Shares at the
Initial Closing Date shall be subject to the satisfaction (or waiver by BTNY) 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 Initial
Closing Date with the same effect as though made at and as of the Initial
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 Initial Closing Date.
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(ii) OFFICER'S CERTIFICATE. BTNY shall have received an executed
certificate, dated the Initial Closing Date, of the President of NWA Corp.
to the effect set forth in Section 5.1(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 transactions contemplated by this Agreement.
(iv) CONSENT OF SERIES B PREFERRED. The holders of all
outstanding shares of Series B Preferred Stock shall have provided their
irrevocable consent to the transactions contemplated by this Agreement, the
Common Stock Agreement, the Preferred Stock Agreement and the BTNY
Preferred Stock Agreement.
(v) COMMON STOCK PURCHASE. The "Initial Closing Date" under and
as defined in the Common Stock Agreement shall occur concurrently with the
closing of the transactions contemplated hereby.
ARTICLE VI
GENERAL PROVISIONS
6.1 TERMINATION OR ABANDONMENT OF AGREEMENT. (a) This Agreement may
be terminated or abandoned at any time prior to the Initial Closing Date by
mutual consent of the parties in writing.
(b) Except for the provisions in this Article VI, in the event of any
termination of the Agreement as provided in this Section 6.1, 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., BTNY or their respective
directors, officers or stockholders with respect to any obligations set forth in
this Agreement; PROVIDED, HOWEVER, that nothing in this Section 6.1 shall
relieve any party from liability for any breach of its representations,
warranties, covenants or agreements contained in this Agreement.
6.2 EXPENSES. All fees, commissions and other expenses incurred by
any party hereto in connection with the negotiation of this Agreement 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.
6.3 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.
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6.4 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 10017-3954
Attention: Robert L. Friedman, Esq.
Fax: (212) 455-2502
If to BTNY:
130 Liberty Street
New York, New York 10006
Attention: Joseph T. Wood
Fax: (212) 250-7651
with a copy to:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: General Counsel
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.
6.5 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
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AND TO BE PERFORMED IN NEW YORK AND WITHOUT REGARD TO THE APPLICATION OF
PRINCIPLES OF CONFLICT OF LAWS.
6.6 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.
6.7 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable by
BTNY without the prior written consent of NWA Corp. or by NWA Corp. without the
prior written consent of BTNY; 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 BTNY. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors in interest and assigns.
6.8 ENTIRE AGREEMENT; NO ORAL WAIVER. This Agreement 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 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.
6.9 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.
6.10 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.
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6.11 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 6.4; 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.
6.12 REMEDIES. Each of the parties hereto acknowledges that the
rights granted to NWA Corp. in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by BTNY could not
be compensated for by damages. Accordingly, in the event of any failure or
refusal by BTNY to comply with any covenant or agreement contained in this
Agreement NWA Corp. shall be entitled, in addition to any other remedies that
NWA Corp. may have, to enforcement of this Agreement by a decree of specific
performance requiring BTNY to fulfill its obligations under this Agreement.
6.13 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.
6.14 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.
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<PAGE>
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/John H. Dasburg
-------------------------------------
John H. Dasburg
President and Chief
Executive Officer
By: /s/Douglas M. Steenland
-------------------------------------
Douglas M Steenland
Senior Vice President,
General Counsel and Secretary
BANKERS TRUST NEW YORK
CORPORATION
By: /s/Joseph Wood
-------------------------------------
Joseph Wood
Senior Vice President
<PAGE>
Exhibit 10.6
BLUM PREFERRED STOCK REPURCHASE AGREEMENT dated as of September 29,
1997 between NORTHWEST AIRLINES CORPORATION, a Delaware corporation ("NWA
CORP."), and RICHARD C. BLUM & ASSOCIATES - NWA PARTNERS, L.P., a California
limited partnership ("BLUM").
W I T N E S S E T H :
WHEREAS, on the date hereof, Blum owns 5,396,643 shares of NWA Corp.'s
Class A Common Stock, par value $.01 per share (the "CLASS A COMMON STOCK"), and
1,727 shares of NWA Corp.'s Series B Preferred Stock, par value $.01 per share
(the "SERIES B PREFERRED STOCK");
WHEREAS, concurrently with the Initial Closing Date (as defined in the
Common Stock Agreement (as hereinafter defined)), in accordance with the
provisions set forth in the Amendment to the Stockholders' Agreement (as
hereinafter defined), Koninklijke Luchtvaart Maatschappij N.V., a Netherlands
corporation ("KLM"), will exercise its right to purchase, and will purchase,
pursuant to Section 17 of the Stockholders' Agreement (as hereinafter defined)
(x) from Blum, 658,755 shares of Class A Common Stock in exchange for 163.6001
shares of NWA Corp.'s Series A Preferred Stock, par value $.01 per share (the
"SERIES A PREFERRED STOCK"), and 54.5250 shares of Series B Preferred Stock and
(y) from Bankers Trust New York Corporation ("BTNY"), 2,635,020 shares of Class
B Common Stock, par value $.01 per share (the "CLASS B COMMON STOCK"), in
exchange for 654.4002 shares of Series A Preferred Stock and 218.1001 shares of
Series B Preferred Stock, following which purchase Blum will own (i) 4,737,888
shares of Class A Common Stock, (ii) 163.6001 shares of Series A Preferred Stock
(the "SERIES A PREFERRED SHARES") and (iii) 1,781.5250 shares of Series B
Preferred Stock (the "SERIES B PREFERRED SHARES", together with the Series A
Preferred Shares, the "PREFERRED SHARES"); and
WHEREAS, upon the terms and subject to the conditions set forth
herein, Blum wishes to sell to NWA Corp., and NWA Corp. wishes to purchase from
Blum, the Preferred Shares on the Initial Closing Date;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
<PAGE>
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.
"AGREEMENT" means this Blum Preferred Stock Repurchase Agreement, as
amended, supplemented or otherwise modified from time to time in accordance
with its terms.
"AMENDMENT TO THE STOCKHOLDERS' AGREEMENT" means the agreement in the
form of Exhibit A to the Common Stock Agreement which amends the
Stockholders' Agreement and provides for (i) the acceleration of the
vesting of the KLM Option (as defined in the Stockholders' Agreement) in
respect of shares of Class A Common Stock subject to such option that are
held by Blum and BTNY, and the exercise by KLM of such KLM Option with
respect to such shares and the purchase of such shares concurrently with
the Initial Closing Date, (ii) the termination of the KLM Option for the
other Option Stockholders and the termination of the Put Option (as each
such term is defined in the Stockholders' Agreement) for all of the Option
Stockholders and (iii) immediately following the consummation of the
transactions contemplated by this Agreement on the Initial Closing Date,
the termination of all of KLM's other rights and obligations under the
Stockholders' Agreement.
"BENEFICIALLY OWN" has the meaning given such term in Rule 13d-3 under
the Exchange Act (as defined below), as in effect on the date hereof. As
used herein, the phrases "BENEFICIAL OWNERSHIP" and "BENEFICIAL OWNER" have
correlative meanings.
"BOARD OF DIRECTORS" means the board of directors of NWA Corp. or any
successor corporation.
"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.
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"COMMON STOCK AGREEMENT" means the Common Stock Repurchase Agreement
dated as of September 29, 1997 between KLM and NWA Corp., entered into
concurrently with this Agreement.
"DOLLARS" and "$" mean lawful currency of the United States of
America.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or
security interest; or any preference, priority or other arrangement or
preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"LIQUIDATION PREFERENCE" means an amount in Cash equal to $50,000 for
each share of Series A Preferred Shares or Series B Preferred Shares, as
the case may be, plus an amount in Cash equal to all accrued but unpaid
dividends on such applicable share to the Initial Closing Date. Such
amount as of September 29, 1997 equals (i) $79,562.84 with respect to each
share of Series A Preferred Shares and (ii) $69,378.23 with respect to each
share of Series B Preferred Shares, which in each case shall be
appropriately adjusted in the event that the Initial Closing Date occurs on
a date other than September 29, 1997.
"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 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 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.
"STOCKHOLDERS' AGREEMENT" means the Second Amended and Restated
Investor Stockholders' Agreement dated as of December 23, 1993, as amended,
supplemented or otherwise modified from time to time, among NWA Corp., KLM,
Blum, BTNY and certain other stockholders of NWA Corp. parties thereto, as
in effect on the date hereof.
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ARTICLE II
DELIVERY AND PURCHASE OF SHARES
2.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the
conditions of this Agreement, on the Initial Closing Date, (i) Blum agrees to
transfer, assign and deliver to NWA Corp., against payment by NWA Corp. to Blum
of immediately available funds in an amount equal to 99% of the aggregate
Liquidation Preference for the Series A Preferred Shares (the "SERIES A PURCHASE
PRICE"), a certificate or certificates representing the Series A Preferred
Shares, and NWA Corp. agrees to purchase such shares and make such payment to
Blum against delivery of such certificates on such Initial Closing Date, and
(ii) Blum agrees to transfer, assign and deliver to NWA Corp., against payment
by NWA Corp. to Blum of immediately available funds in an amount equal to 99% of
the aggregate Liquidation Preference for the Series B Preferred Shares (the
"SERIES B PURCHASE PRICE"), a certificate or certificates representing the
Series B Preferred Shares, and NWA Corp. agrees to purchase such shares and make
such payment to Blum against delivery of such certificates on such Initial
Closing Date. Such certificates shall be duly endorsed in blank or accompanied
by stock powers duly executed in blank, with all necessary stock transfer stamps
affixed.
2.2 CLOSING OF PURCHASE AND SALE OF SHARES. The closing of the
purchase and sale contemplated by Section 2.1 will occur at the time and place
of the Initial Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF BLUM. Blum represents and
warrants to NWA Corp. as of the date hereof and as of the Initial Closing Date
as follows:
(a) Blum is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of California.
(b) Blum has all requisite partnership power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by Blum of this Agreement and the performance of the
transactions herein contemplated to be performed by Blum have been duly
authorized and no further partnership action on the part of Blum is
necessary to authorize this Agreement and the performance of such
transactions. This Agreement has been duly executed and delivered by Blum
and, assuming due authorization, execution and delivery by NWA Corp.,
constitutes the legal, valid and binding agreement of Blum, enforceable
against Blum in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or
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affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding at law or in equity).
(c) Neither the execution and delivery of this Agreement or the
performance by Blum of the transactions contemplated hereby will
(i) violate or conflict with any of the provisions of the limited
partnership agreement among the partners of Blum and other partnership
governance agreements, (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 Blum is a
party or by which any of its property is bound or (iii) result in the
creation of any Liens upon any of (A) the shares of Series B Preferred
Stock owned by Blum or (B) the shares of Series A Preferred Stock or Series
B Preferred Stock to be acquired by Blum upon exercise of the KLM Option
pursuant to the Amendment to the Stockholders' Agreement.
(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 Blum of
this Agreement and the consummation of the transactions contemplated
hereby.
(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 Blum, threatened
against Blum, and Blum 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 Blum to consummate the transactions contemplated hereby.
(f) On the Initial Closing Date Blum will have, good and valid title
to the Preferred Shares to be purchased by NWA Corp. at the Initial Closing
Date, free and clear of all Liens.
(g) Blum is the record and beneficial owner on the date hereof of
5,396,643 shares of Class A Common Stock and 1,727 shares of Series B
Preferred Stock, and upon exercise of the KLM Option pursuant to the
Amendment to the Stockholders' Agreement and the registration in the name
of Blum of the shares being acquired by Blum upon exercise of the KLM
Option, Blum will be the record and beneficial owner (subject to this
Agreement) of (i) 4,737,888 shares of Class A Common Stock, (ii) 163.6001
shares of Series A Preferred Stock and (iii) 1,781.5250 shares of Series B
Preferred Stock.
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<PAGE>
(h) Neither Blum 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 Blum in connection with the transactions
contemplated by this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF NWA CORP. NWA Corp. represents
and warrants to Blum as of the date hereof and as of the Initial Closing Date 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 to perform its obligations
hereunder. The execution and delivery by NWA Corp. of this Agreement and
the performance of the transactions herein contemplated to be performed by
NWA Corp. have been duly authorized by the Board of Directors and no
further corporate action on the part of NWA Corp. is necessary to authorize
this 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 Blum, 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).
(c) Neither the execution and delivery of this Agreement or the
performance by NWA Corp. of the transactions contemplated hereby will
(i) 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.
(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 and the consummation of the transactions contemplated
hereby.
(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
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<PAGE>
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.
(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.
ARTICLE IV
ACKNOWLEDGMENTS
4.1 ACKNOWLEDGMENTS. (a) Blum hereby acknowledges that KLM, pursuant
to the Share Exchange Agreement, dated as of June 28, 1996 (the "EXCHANGE
AGREEMENT"), between KLM and NWA Corp., has unconditionally and irrevocably
agreed that 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 4.1(a), 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.
(b) Blum further acknowledges that the agreements and waivers
contained in Sections 6.1(a), (b) and (c) of the Share Exchange Agreement
including the agreement specified in Section 4.1(a) of this Agreement are
applicable to and binding upon Blum and all subsequent holders of the shares of
Series A Preferred Stock and Series B Preferred Stock that Blum receives from
KLM upon the exercise of the KLM Option pursuant to the Amendment to the
Stockholders' Agreement.
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ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO CLOSING. (a) The obligations of NWA Corp. to
purchase the Preferred Shares at the Initial Closing Date 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 Blum 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 Initial
Closing Date with the same effect as though made at and as of the Initial
Closing Date. Blum 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 Blum at or prior to the Initial Closing Date.
(ii) OFFICER'S CERTIFICATE. NWA Corp. shall have received an
executed certificate, dated the Initial Closing Date, of the President of
the general partner of Blum to the effect set forth in Section 5.1(a)(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 transactions contemplated by this
Agreement.
(iv) CONSENT OF SERIES B PREFERRED. The holders of all
outstanding shares of Series B Preferred Stock shall have provided their
irrevocable consent to the transactions contemplated by this Agreement, the
Common Stock Agreement, the Preferred Stock Repurchase Agreement, dated as
of September 29, 1997, between KLM and NWA Corp., and the BTNY Preferred
Stock Repurchase Agreement, dated as of September 29, 1997, between NWA
Corp. and BTNY.
(v) COMMON STOCK PURCHASE. The "Initial Closing Date" under
and as defined in the Common Stock Agreement shall occur concurrently with
the closing of the transactions contemplated hereby.
(b) The obligations of Blum to sell the Preferred Shares at the
Initial Closing Date shall be subject to the satisfaction (or waiver by
Blum) 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 Initial
Closing Date with the same effect as though made at
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and as of the Initial 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 Initial
Closing Date.
(ii) OFFICER'S CERTIFICATE. Blum shall have received an
executed certificate, dated the Initial Closing Date, of the President of
NWA Corp. to the effect set forth in Section 5.1(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 transactions contemplated by this
Agreement.
(iv) COMMON STOCK PURCHASE. The "Initial Closing Date" under
and as defined in the Common Stock Agreement shall occur concurrently with
the closing of the transactions contemplated hereby.
ARTICLE VI
GENERAL PROVISIONS
6.1 TERMINATION OR ABANDONMENT OF AGREEMENT. (a) This Agreement may
be terminated or abandoned at any time prior to the Initial Closing Date by
mutual consent of the parties in writing.
(b) Except for the provisions in this Article VI, in the event of any
termination of the Agreement as provided in this Section 6.1, 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., its directors, officers or
stockholders, or Blum, its members, officers or partners with respect to any
obligations set forth in this Agreement; PROVIDED, HOWEVER, that nothing in this
Section 6.1 shall relieve any party from liability for any breach of its
representations, warranties, covenants or agreements contained in this
Agreement.
6.2 EXPENSES. All fees, commissions and other expenses incurred by
any party hereto in connection with the negotiation of this Agreement 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.
6.3 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.
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<PAGE>
6.4 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 10017-3954
Attention: Robert L. Friedman, Esq.
Fax: (212) 455-2502
If to Blum:
909 Montgomery Street
Suite 400
San Francisco, California 94133
Attention: General Counsel
Fax: (415) 434-3130
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.
6.5 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.
6.6 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.
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<PAGE>
6.7 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable
by Blum without the prior written consent of NWA Corp. or by NWA Corp. without
the prior written consent of Blum; 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 Blum. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors in interest and assigns.
6.8 ENTIRE AGREEMENT; NO ORAL WAIVER. This Agreement 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 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.
6.9 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.
6.10 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.
6.11 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;
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<PAGE>
(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 6.4; 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.
6.12 REMEDIES. Each of the parties hereto acknowledges that the
rights granted to NWA Corp. in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by Blum could not
be compensated for by damages. Accordingly, in the event of any failure or
refusal by Blum to comply with any covenant or agreement contained in this
Agreement NWA Corp. shall be entitled, in addition to any other remedies that
NWA Corp. may have, to enforcement of this Agreement by a decree of specific
performance requiring Blum to fulfill its obligations under this Agreement.
6.13 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.
6.14 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.
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<PAGE>
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/John H. Dasburg
-------------------------------------
John H. Dasburg
President and Chief
Executive Officer
By: /s/Douglas M. Steenland
-------------------------------------
Douglas M Steenland
Senior Vice President,
General Counsel and Secretary
RICHARD C. BLUM & ASSOCIATES - NWA
PARTNERS, L.P.
by: Richard C. Blum & Associates, L.P.,
its General Partner
by: Richard C. Blum & Associates, Inc.,
its General Partner
By: /s/Marc T. Scholvinck
------------------------------------
Marc T. Scholvinck
Chief Financial Officer
<PAGE>
Exhibit 10.7
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT, dated as of September 29, 1997 (this
"AGREEMENT"), between KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a Netherlands
corporation ("KLM"), and NORTHWEST AIRLINES CORPORATION, a Delaware corporation
("NWA CORP.").
W I T N E S S E T H :
WHEREAS, on the date hereof, KLM owns 21,684,099 shares of NWA Corp.'s
Class A Common Stock, par value $.01 per share (the "CLASS A COMMON STOCK", and
together with NWA Corp.'s Class B Common Stock, par value $.01 per share (the
"CLASS B COMMON STOCK"), the "NWA CORP. COMMON STOCK"), and in accordance with
the provisions set forth in the Amendment to the Stockholders' Agreement (as
hereinafter defined) will exercise its right to purchase, pursuant to Section 17
of the Stockholders' Agreement (as hereinafter defined), 3,293,775 additional
shares of Class A Common Stock, which will increase to 24,977,874 the aggregate
number of shares of NWA Corp. Common Stock owned by KLM (referred to as KLM's
"EXISTING STAKE");
WHEREAS, upon the terms and subject to the conditions set forth in the
Common Stock Repurchase Agreement, dated as of September 29, 1997 (the "COMMON
STOCK AGREEMENT"), between KLM and NWA Corp., KLM has agreed to sell to NWA
Corp., and NWA Corp. has agreed to purchase from KLM, all 24,977,874 of such
shares comprising the Existing Stake according to the schedule set forth
therein, which, subject to the terms and conditions contained therein, provides
for the purchase and sale of (i) 6,800,000 shares of NWA Corp. Common Stock on
the Initial Closing Date (as defined in the Common Stock Agreement), (ii)
4,900,000 shares of NWA Corp. Common Stock on or about September 29, 1998, (iii)
3,222,539 shares of NWA Corp. on or about September 29, 1999, and (iv)
10,055,335 shares of NWA Corp. Common Stock on or about September 29, 2000;
WHEREAS, upon the terms and subject to the conditions set forth in the
Alliance Implementation Agreement, dated as of September 29, 1997 (the "ALLIANCE
IMPLEMENTATION AGREEMENT"), between KLM and Northwest Airlines, Inc., a
subsidiary of NWA Corp., KLM and Northwest Airlines, Inc. have agreed on the
terms on which their global alliance will be expanded and extended; and
WHEREAS, KLM and NWA Corp. are entering into this Agreement to
establish certain arrangements with respect to the shares of NWA Corp. Common
Stock owned by KLM following the Initial Closing Date, as well as restrictions
on certain activities in respect of each other's capital stock, corporate
governance and other related corporate matters;
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
Section 1. DEFINED TERMS. Unless otherwise defined herein:
"AFFILIATE" of a Person has the meaning ascribed to such term in the
Common Stock Agreement.
"AMENDMENT TO THE STOCKHOLDERS' AGREEMENT" means the agreement in the
form of Exhibit A to the Common Stock Agreement which amends the
Stockholders' Agreement and provides for (i) the acceleration of the
vesting of the KLM Option (as defined in the Stockholders' Agreement) in
respect of shares of Class A Common Stock subject to such option that are
held by Richard D. Blum Associates -- NWA Partners L.P. and Bankers Trust
New York Corporation, and the exercise by KLM of such KLM Option with
respect to such shares and the purchase of such shares concurrently with
the Initial Closing Date, (ii) the termination of the KLM Option with
respect to the other Option Stockholders and the termination of the Put
Option (as each such term is defined in the Stockholders' Agreement) with
respect to all of the Option Stockholders and (iii) immediately following
the consummation of the transactions contemplated by the Common Stock
Agreement on the Initial Closing Date, the termination of all of KLM's
other rights and obligations under the Stockholders' Agreement.
"BENEFICIAL OWNERSHIP" by a Person of any securities includes
ownership by any Person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares (i)
voting power which includes the power to vote, or to direct the voting of,
such security; and/or (ii) investment power which includes the power to
dispose, or to direct the disposition of, such security; and shall
otherwise be interpreted in accordance with the term "beneficial ownership"
as defined in Rule 13d-3 adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
as in effect on the date hereof, and in addition, "beneficial ownership"
shall include securities which such Person has the right to acquire
(irrespective of whether such right is exercisable immediately or only
after the passage of time, including the passage of time in excess of 60
days) pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise. For purposes of this Agreement, a Person shall be deemed to
beneficially own any securities beneficially owned by its Affiliates or any
Group of which such Person or any such Affiliate is a member.
"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
Amsterdam, The Netherlands, in New York, New York or in Minneapolis,
Minnesota.
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3
"DOLLARS" and "$" mean lawful currency of the United States of
America.
"GROUP" means two or more persons acting as a partnership, limited
partnership, syndicate or other group for the purpose of acquiring,
holding, voting or disposing of securities.
"KLM COMBINED VOTING POWER" at any measurement date shall mean the
total number of votes which could have been cast in a vote at a meeting of
the stockholders of, as applicable, KLM, a KLM Holding Company (as defined
below) or a KLM Partner (as defined below) (or any successor of any of
them) by person or by proxy at such meeting.
"KLM VOTING SECURITIES" shall mean, collectively, (i) KLM's Common
Shares, par value 5 NLG per share, (ii) any other securities entitled, or
that may be entitled, to vote on matters submitted to stockholders for a
vote at a stockholders' meeting of KLM, or any such securities of a holding
company formed by KLM which holds more than 50% of the KLM Combined Voting
Power (a "KLM HOLDING COMPANY"), (iii) any common shares, ordinary shares
or other comparable securities entitled to vote on matters submitted to a
general vote of shareholders of a Person that has entered into a
partnership, joint venture or similar arrangement with KLM pursuant to
which the stockholders of KLM and such Person enjoy substantially
equivalent economic rights as a result of twinning, equalization or other
sharing arrangements between KLM and such Person (a "KLM PARTNER"), and
(iv) any other securities, warrants or options or rights of any nature
(whether or not issued by KLM) that are convertible into, exchangeable for,
or exercisable for the purchase of, or otherwise give the holder thereof
any rights in respect of (whether or not the right to convert, exercise or
exchange is subject to the passage of time, contingencies or contractual
restrictions or any combination thereof), any security described in clauses
(i) through (iii) of this definition; PROVIDED, that rights issued pursuant
to any stockholder rights plan shall not be deemed to be KLM Voting
Securities.
"MANAGEMENT BOARD OF KLM" means the management board of KLM or
equivalent governing body of a KLM Holding Company or a KLM Partner or any
successor of any of them.
"NWA CORP. BOARD OF DIRECTORS" shall mean the board of directors of
NWA Corp. or any successor or Northwest Airlines, Inc.
"NWA CORP. COMBINED VOTING POWER" at any measurement date shall mean
the total number of votes which could have been cast in an election of
members of the NWA Corp. Board of Directors had a meeting of the
stockholders of NWA Corp. (or its successors) been duly held based upon a
record date as of the measurement date if all NWA Corp. Voting Securities
then outstanding and entitled to vote at such meeting were present and
voted to the fullest extent possible at such meeting.
<PAGE>
4
"NWA CORP. VOTING SECURITIES" shall mean, collectively, (i) the Class
A Common Stock, (ii) any other securities entitled, or that may be
entitled, to vote generally for the election of members of the NWA Corp.
Board of Directors, and (iii) any other securities, warrants or options or
rights of any nature (whether or not issued by NWA Corp.) that are
convertible into, exchangeable for, or exercisable for the purchase of, or
otherwise give the holder thereof any rights in respect of (whether or not
the right to convert, exercise or exchange is subject to the passage of
time, contingencies or contractual restrictions or any combination
thereof), any security described in clause (i) or (ii) of this definition;
PROVIDED, that rights issued pursuant to any stockholder rights plan shall
not be deemed to be NWA Corp. Voting Securities.
"PERSON" means any individual, corporation, partnership, trust or
other entity of any nature whatsoever.
"REORGANIZATION TRANSACTION" means (i) any merger, consolidation,
recapitalization, liquidation or other business combination transaction
involving NWA Corp., Northwest Airlines, Inc. or KLM or a KLM Holding
Company or a KLM Partner (or any successors to any of such entities), (ii)
any tender offer or exchange offer for any securities of NWA Corp.,
Northwest Airlines, Inc. or KLM, a KLM Holding Company or a KLM Partner (or
any successors to any of such entities) or (iii) any sale or other
disposition of assets of NWA Corp., Northwest Airlines, Inc. or KLM or a
KLM Holding Company or a KLM Partner (or any successors to any of such
entities) in a single transaction or in a series of related transactions in
each of the foregoing cases constituting individually or in the aggregate
10% or more of the assets of NWA Corp., Northwest Airlines, Inc. or KLM or
a KLM Holding Company or a KLM Partner, as applicable, or 10% or more of
the then outstanding NWA Corp. Voting Securities or KLM Voting Securities,
as applicable, of NWA Corp. or KLM or securities entitled, or that may be
entitled, to vote at a meeting of stockholders of a KLM Holding Company or
a KLM Partner (or any successors to any of such entities), as applicable.
"STANDSTILL PERIOD" shall mean the period commencing on the Initial
Closing Date and continuing until the later of (i) the tenth anniversary of
the Initial Closing Date, and (ii) the termination of the Alliance
Implementation Agreement (PROVIDED, that, if the Alliance Implementation
Agreement is terminated by NWA Corp. in accordance with the provisions set
forth in Section 7.1(e)(ii) of the Common Stock Agreement, then the
operative date for this clause (ii) will be the date on which KLM no longer
beneficially owns any NWA Corp. Voting Securities).
"STOCKHOLDERS' AGREEMENT" means the Second Amended and Restated
Investor Stockholders' Agreement dated as of December 23, 1993, as amended,
supplemented or otherwise modified from time to time, among NWA Corp., KLM
and certain other stockholders of NWA Corp. parties thereto, as in effect
on the date hereof.
<PAGE>
5
"SUPERVISORY BOARD OF KLM" means the supervisory board of KLM or
equivalent governing body of a KLM Holding Company or a KLM Partner or any
successor of any of them.
"UMBRELLA AGREEMENTS" means, collectively, (i) the Commercial
Cooperation and Integration Agreement dated September 9, 1992, (ii) the
Worldwide Pricing and Inventory Control Agreement dated January 15, 1993,
(iii) the Worldwide Sales and Travel Agency Compensation Agreement dated
January 15, 1993, (iv) the Worldwide Strategic Planning and Scheduling
Agreement dated January 15, 1993, (v) the Alliance Implementation
Agreement, and (vi) all other written agreements entered into by KLM and
Northwest Airlines, Inc. relating to the commercial cooperation between
them which relate to the preceding agreements.
"WORKS COUNCIL OF KLM" means the works council of KLM or equivalent
body of a KLM Holding Company or a KLM Partner or any successor of any of
them.
Section 2. COVENANTS WITH RESPECT TO NWA CORP. VOTING SECURITIES AND
OTHER MATTERS.
2.1 ACQUISITION OF NWA CORP. VOTING SECURITIES AND MATERIAL ASSETS.
Except as specifically provided in the Common Stock Agreement, during the
Standstill Period KLM will not, and will cause each of its Affiliates not to,
directly or indirectly, acquire, offer to acquire, agree to acquire, become the
beneficial owner of or obtain any rights in respect of any NWA Corp. Voting
Securities or, except as provided for in the Umbrella Agreements, any material
assets owned directly or indirectly by NWA Corp. or any successor or any
Affiliate thereof, whether by purchase or otherwise, or take any action in
furtherance thereof.
2.2 PROXY SOLICITATIONS, ETC. During the Standstill Period KLM will
not, and will cause each of its Affiliates not to, directly or indirectly,
solicit proxies, assist any other Person in any way, directly or indirectly, in
the solicitation of proxies, or otherwise become a "participant" in a
"solicitation," or assist any "participant" in a "solicitation" (as such terms
are defined in Rule 14a-1 of Regulation 14A under the Exchange Act as in effect
on the date of this Agreement) in opposition to the recommendation or proposal
of the NWA Corp. Board of Directors, or submit any proposal for the vote of
stockholders of NWA Corp., or recommend or request or induce or attempt to
induce any other Person to take any such actions, or seek to advise, encourage
or influence any other Person with respect to the voting of NWA Corp. Voting
Securities. In furtherance of KLM's obligations pursuant to this Section 2.2,
during the Standstill Period KLM shall, and shall cause its Affiliates to, at
any annual or special meeting of stockholders at which members of the NWA Corp.
Board of Directors are to be elected or in connection with a solicitation of
consents through which members of the NWA Corp. Board of Directors are to be
selected, to vote (or give a written consent or proxy with respect to) all NWA
Corp. Voting Securities beneficially owned by them in favor of the election to
the NWA Corp. Board of Directors of the persons recommended by the NWA Corp.
Board of Directors.
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6
2.3 NO VOTING TRUSTS, POOLING AGREEMENTS, OR FORMATION OF "GROUPS".
During the Standstill Period KLM will not, and will cause each of its Affiliates
not to, directly or indirectly, join in or in any other way participate in a
partnership, pooling agreement, syndicate, voting trust or other Group with
respect to NWA Corp. Voting Securities, or enter into any agreement or
arrangement or otherwise act in concert with any other Person, for the purpose
of acquiring, holding, voting or disposing of NWA Corp. Voting Securities.
2.4 LIMITATIONS ON PROPOSALS. During the Standstill Period KLM will
not, and will cause each of its Affiliates not to, directly or indirectly,
initiate, propose or otherwise solicit stockholders for the approval of one or
more stockholder proposals with respect to NWA Corp. or any successor thereof or
any Affiliate thereof or induce or attempt to induce any other Person to
initiate any stockholder proposal or seek election to or seek to place a
representative on the NWA Corp. Board of Directors or equivalent governing body
of any successor thereof or any Affiliate thereof (except to the extent
expressly invited to do so by the NWA Corp. Board of Directors) or seek removal
of any member of the NWA Corp. Board of Directors or equivalent governing body
of any successor thereof or any Affiliate thereof (other than any such member
who may have been previously designated by KLM).
2.5 LIMITATION ON VARIOUS OTHER ACTIONS. During the Standstill
Period, KLM will not, and will cause each of its Affiliates not to, take any
action, alone or in concert with any other Person, (a) to seek to effect a
change in control of NWA Corp., its successors or any of its Affiliates, (b) to
seek to effect a Reorganization Transaction with respect to NWA Corp., its
successors or any of its Affiliates, (c) except as provided for in the Umbrella
Agreements, to seek to effect any control or influence over the management of
NWA Corp., its successors or any of its Affiliates, the NWA Corp. Board of
Directors or the policies of NWA Corp., its successors or any of its Affiliates,
(d) to advise, assist or encourage or finance (or assist or arrange financing to
or for) any other Person in connection with any of the matters restricted by, or
to otherwise seek to circumvent the limitations of the provisions of, Section 2
of this Agreement (any such action described in clause (a), (b), (c) or (d), a
"NWA TRANSACTION PROPOSAL"), (e) to present to NWA Corp., its stockholders or
any third party any proposal that can reasonably be expected to result in a NWA
Transaction Proposal or in an increase in the NWA Corp. Combined Voting Power of
NWA Corp. Voting Securities beneficially owned in the aggregate by KLM and its
Affiliates, (f) to publicly suggest or announce its willingness or desire to
engage in a transaction or group of transactions or have another Person engage
in a transaction or group of transactions that could reasonably be expected to
result in a NWA Transaction Proposal or in an increase in the NWA Corp. Combined
Voting Power of NWA Corp. Voting Securities beneficially owned in the aggregate
by KLM and its Affiliates, (g) to initiate, request, induce, encourage or
attempt to induce or give encouragement to any other Person to initiate, or
otherwise provide assistance to any Person who has made or is contemplating
making, any proposal that can reasonably be expected to result in a NWA
Transaction Proposal or in an increase in the NWA Corp. Combined Voting Power of
NWA Corp. Voting Securities beneficially owned in the aggregate by KLM and its
Affiliates, or (h) to request a waiver, modification or amendment of any of the
provisions of Section 2 of this Agreement; PROVIDED, HOWEVER, that this
subclause (h) shall
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7
not apply to any Private KLM Waiver Request conveyed during the pendency of any
unsolicited Business Combination Proposal made (either publicly or in a
communication to the NWA Corp. Board of Directors) by any Person that is engaged
in the commercial airline business or Group that is engaged in the commercial
airline business or Group that includes a Person engaged in the commercial
airline business (other than KLM and its Affiliates).
For purposes of this Section 2: (i) a "Business Combination Proposal"
means (x) a tender or exchange offer or other bona fide offer to acquire
directly or indirectly any voting securities of NWA Corp. under circumstances
such that, immediately after such acquisition, such Person or Group would
beneficially own voting securities with an aggregate voting power representing
more than 50% of the total voting power of NWA Corp., or (y) a proposal or offer
for a merger, amalgamation or other business combination directly or indirectly
involving NWA Corp. that would result in a change in control of NWA Corp., or a
proposal or offer to acquire directly or indirectly all or substantially all the
assets of NWA Corp.; (ii) a "KLM Business Combination Proposal" means a (A)
Business Combination Proposal made by KLM, (B) a Business Combination Proposal
made by a Group in which KLM is a participant or (C) the formation by KLM of a
Group for the purpose of making a Business Combination Proposal; PROVIDED,
HOWEVER, in each case, in the event of a Business Combination Proposal described
in clause (x) or (y) above, a Business Combination Proposal shall not constitute
a KLM Business Combination Proposal unless consummation of such Business
Combination Proposal would result in KLM (or the Group in which it is a
participant, if applicable) beneficially owning voting securities with an
aggregate voting power representing more than 50% of the total voting power of
NWA Corp.; and (iii) a "Private KLM Waiver Request" means a request conveyed by
the President of KLM to the Chief Executive Officer of NWA Corp. for a waiver of
the provisions of Section 2 of this Agreement solely to permit KLM to submit a
KLM Business Combination Proposal to the Chief Executive Officer of NWA Corp. in
competition with such unsolicited Business Combination Proposal, provided that
neither the fact that such request has been made by KLM, the fact that KLM has
submitted or will be submitting a KLM Business Combination Proposal or any of
the terms of such KLM Business Combination Proposal are publicly disclosed,
directly or indirectly, by or on behalf of KLM or any of its Affiliates.
2.6 VOTING. During the Standstill Period KLM shall, and shall cause
its Affiliates to, be present, in person or represented by proxy, at all
meetings of stockholders of NWA Corp. so that all NWA Voting Securities
beneficially owned by KLM shall be counted for the purpose of determining the
presence of a quorum at such meetings. Except as otherwise provided in Section
2.2, in connection with any matters presented to stockholders of NWA Corp. or
any successor corporation or any Affiliate thereof, KLM shall be permitted to
vote (or give a written consent or proxy with respect to) all NWA Corp. Voting
Securities beneficially owned by KLM in its sole discretion.
2.7 CERTAIN PERMITTED TRANSACTIONS AND COMMUNICATIONS. For clarity,
this Agreement, among other things, does not prohibit (i) the acquisition or
holding in the ordinary
<PAGE>
8
course of business by any employee benefit plan whose trustees, investment
managers or similar advisors are unaffiliated with KLM or its Affiliates of
securities or rights referred to in Section 2.1, (ii) the consummation of any
transaction contemplated pursuant to the Common Stock Agreement, including the
exercise by KLM on the Initial Closing Date of the option to purchase shares
pursuant to Section 17 of the Stockholders' Agreement, any purchase of shares
contemplated by the Common Stock Agreement and any conversion of Class A Common
Stock to Class B Common Stock or Class B Common Stock to Class A Common Stock as
provided for in such Agreement, or (iii) officers and employees of KLM or its
Affiliates from communicating with officers and employees of NWA Corp. or its
Affiliates on matters related to or governed by the Umbrella Agreements, or KLM
or its Affiliates from communicating with the Chairman of the NWA Corp. Board of
Directors or the Chief Executive Officer of NWA Corp., so long as such
communication is conveyed in strict confidence, does not require public
disclosure by KLM or, in the reasonable opinion of KLM's counsel, by NWA Corp.,
and is not intended to elicit, and, in the reasonable opinion of KLM's counsel,
does not require the issuance of, a public response by NWA Corp.
2.8 EXCEPTIONS TO APPLICABILITY OF CERTAIN COVENANTS. Notwithstanding
the foregoing, in the event (i) (x) any Person that is engaged in the commercial
airline business or Group that is engaged in the commercial airline business or
Group that includes a Person engaged in the commercial airline business (other
than KLM and its Affiliates), either publicly or in a communication to the NWA
Corp. Board of Directors, makes on an unsolicited basis a Business Combination
Proposal, (y) the NWA Corp. Board of Directors adopts a resolution recommending
acceptance of such Business Combination Proposal, and (z) such resolution
remains in effect, or (ii) the NWA Corp. Board of Directors shall publicly
announce that it has decided to sell NWA Corp. or Northwest Airlines, Inc. and
will consider proposals for the acquisition of NWA Corp. or Northwest Airlines,
Inc. or has otherwise publicly stated that NWA Corp. or Northwest Airlines, Inc.
is for sale, then the provisions of Sections 2.1 through 2.5, in the case of
clause (i), shall not apply to any KLM Business Combination Proposal commenced
during the pendency of such Business Combination Proposal and, in the case of
clause (ii), shall not apply until the NWA Corp. Board of Directors shall
publicly announce that it has rescinded its decision to sell NWA Corp. or
Northwest Airlines, Inc.; PROVIDED, that in determining whether to adopt any
resolution described in clause (i)(y) of this paragraph that includes approval
of a "break-up" fee, "lock-up" option or other similar arrangement, and in
determining whether to adopt any resolution waiving, rescinding or otherwise
declaring inapplicable the provisions of the Rights Agreement of NWA Corp. dated
as of November 16, 1995, as amended, as it may relate to such Business
Combination Proposal, the NWA Corp. Board of Directors shall give due
consideration to the likelihood that in light of the strategic alliance between
KLM and NWA Corp. as contemplated by the Alliance Implementation Agreement, KLM
may desire to make a competitive KLM Business Combination Proposal.
Section 3. COVENANTS WITH RESPECT TO THE KLM VOTING SECURITIES AND
OTHER MATTERS.
<PAGE>
9
3.1 ACQUISITION OF KLM VOTING SECURITIES OR MATERIAL ASSETS. Except
as specifically provided in the Common Stock Agreement, during the Standstill
Period NWA Corp. will not, and will cause each of its Affiliates not to,
directly or indirectly, acquire, offer to acquire, agree to acquire, become the
beneficial owner of or obtain any rights in respect of any KLM Voting Securities
or, except as provided for in the Umbrella Agreements, any material assets owned
directly or indirectly by KLM or any successor or any Affiliate thereof, whether
by purchase or otherwise, or take any action in furtherance thereof.
3.2 PROXY SOLICITATIONS, ETC. During the Standstill Period NWA Corp.
will not, and will cause each of its Affiliates not to, directly or indirectly,
solicit proxies, assist any other Person in any way, directly or indirectly, in
the solicitation of proxies, or otherwise become a "participant" in a
"solicitation," or assist any "participant" in a "solicitation" (as such terms
are defined in Rule 14a-1 of Regulation 14A under the Exchange Act as in effect
on the date of this Agreement) in opposition to the recommendation or proposal
of the Supervisory Board of KLM or the Management Board of KLM or equivalent
governing body of a KLM Holding Company or a KLM Partner or any successor
thereof or any Affiliate thereof, or submit any proposal for the vote of
stockholders of KLM, a KLM Holding Company or a KLM Partner, or recommend or
request or induce or attempt to induce any other Person to take any such
actions, or seek to advise, encourage or influence any other Person with respect
to the voting of KLM Voting Securities.
3.3 NO VOTING TRUSTS, POOLING AGREEMENTS, OR FORMATION OF "GROUPS".
During the Standstill Period NWA Corp. will not, and will cause each of its
Affiliates not to, directly or indirectly, join in or in any other way
participate in a partnership, pooling agreement, syndicate, voting trust or
other Group with respect to KLM Voting Securities, or enter into any agreement
or arrangement or otherwise act in concert with any other Person, for the
purpose of acquiring, holding, voting or disposing of KLM Voting Securities.
3.4 LIMITATIONS ON PROPOSALS. During the Standstill Period NWA Corp.
will not, and will cause each of its Affiliates not to, directly or indirectly,
make or cause to be made any proposal for a Reorganization Transaction with
respect to KLM, a KLM Holding Company or a KLM Partner or any successor thereof
or any Affiliate thereof or initiate, propose or otherwise solicit stockholders
for the approval of one or more stockholder proposals with respect to KLM, a KLM
Holding Company or a KLM Partner or any successor thereof or any Affiliate
thereof or induce or attempt to induce any other Person to initiate any
stockholder proposal or seek election to or seek to place a representative on
the Supervisory Board of KLM, Management Board of KLM or equivalent governing
body of a KLM Holding Company or a KLM Partner or any successor thereof or any
Affiliate thereof (except to the extent expressly invited to do so by the
Supervisory Board of KLM) or oppose such a proposal of KLM's Management Board or
the Supervisory Board of KLM or seek removal of any member of the Supervisory
Board of KLM or equivalent governing body of a KLM Holding Company or a KLM
Partner or any successor thereof or any Affiliate thereof (other than any such
member who may have been previously designated by NWA Corp.).
<PAGE>
10
3.5 LIMITATION ON VARIOUS OTHER ACTIONS. During the Standstill
Period, NWA Corp. will not, and will cause each of its Affiliates not to, take
any action, alone or in concert with any other Person, (a) to seek to effect a
change in control of KLM or a KLM Holding Company or a KLM Partner or any
successor thereof or any Affiliate thereof, (b) to seek to effect a
Reorganization Transaction with respect to KLM or a KLM Holding Company or a KLM
Partner or any successor thereof or any Affiliate thereof, (c) except as
provided for in the Umbrella Agreements, to seek to effect any control or
influence over the management of KLM, a KLM Holding Company or a KLM Partner, or
any successor thereof or any Affiliate thereof, the Supervisory Board of KLM or
the Works Council of KLM or the policies of KLM, a KLM Holding Company or a KLM
Partner or any successor thereof or any Affiliate thereof, (d) to advise, assist
or encourage or finance (or assist or arrange financing to or for) any other
Person in connection with any of the matters restricted by, or to otherwise seek
to circumvent the limitations of the provisions of, Section 3 of this Agreement
(any such action described in clause (a), (b), (c) or (d), a "KLM TRANSACTION
PROPOSAL"), (e) to present to KLM or a KLM Holding Company or a KLM Partner or
any successor thereof or any Affiliate thereof, its stockholders or any third
party any proposal that can reasonably be expected to result in a KLM
Transaction Proposal or in an increase in the KLM Combined Voting Power of KLM
Voting Securities beneficially owned in the aggregate by NWA Corp. and its
Affiliates, (f) to publicly suggest or announce its willingness or desire to
engage in a transaction or group of transactions or have another Person engage
in a transaction or group of transactions that could reasonably be expected to
result in a KLM Transaction Proposal or in an increase in the KLM Combined
Voting Power of KLM Voting Securities beneficially owned in the aggregate by NWA
Corp. and its Affiliates, (g) to initiate, request, induce, encourage or attempt
to induce or give encouragement to any other Person to initiate, or otherwise
provide assistance to any Person who has made or is contemplating making, any
proposal that can reasonably be expected to result in a KLM Transaction Proposal
or in an increase in the KLM Combined Voting Power of KLM Voting Securities
beneficially owned in the aggregate by NWA Corp. and its Affiliates, or (h) to
request a waiver, modification or amendment of any of the provisions of Section
3 of this Agreement; PROVIDED, HOWEVER, that this subclause (h) shall not apply
to any Private NWA Corp. Waiver Request conveyed during the pendency of any
unsolicited Business Combination Proposal made (either publicly or in a
communication to the Supervisory Board of KLM) by any Person that is engaged in
the commercial airline business or Group that is engaged in the commercial
airline business or Group that includes a Person engaged in the commercial
airline business (other than NWA Corp. and its Affiliates). NWA Corp.
represents and warrants that as of the date hereof it owns no KLM Voting
Securities and its KLM Combined Voting Power is zero.
For purposes of this Section 3: (i) a "Business Combination Proposal"
means (x) a tender or exchange offer or other bona fide offer to acquire
directly or indirectly any voting securities of KLM under circumstances such
that, immediately after such acquisition, such Person or Group would
beneficially own voting securities with an aggregate voting power representing
more than 50% of the total voting power of KLM, or (y) a proposal or offer for a
merger, amalgamation or other business combination directly or indirectly
involving KLM that would result in a change in control of KLM, or a proposal or
offer to acquire directly or
<PAGE>
11
indirectly all or substantially all the assets of KLM; (ii) a "NWA Corp.
Business Combination Proposal" means a (A) Business Combination Proposal made by
NWA Corp., (B) a Business Combination Proposal made by a Group in which NWA
Corp. is a participant or (C) the formation by NWA Corp. of a Group for the
purpose of making a Business Combination Proposal; PROVIDED, HOWEVER, in each
case, in the event of a Business Combination Proposal described in clause (x) or
(y) above, a Business Combination Proposal shall not constitute a NWA Corp.
Business Combination Proposal unless consummation of such Business Combination
Proposal would result in NWA Corp. (or the Group in which it is a participant,
if applicable) beneficially owning voting securities with an aggregate voting
power representing more than 50% of the total voting power of KLM; and (iii) a
"Private NWA Corp. Waiver Request" means a request conveyed by the Chief
Executive Officer of NWA Corp. to the President of KLM for a waiver of the
provisions of Section 3 of this Agreement solely to permit NWA Corp. to submit a
NWA Corp. Business Combination Proposal to the President of KLM in competition
with such unsolicited Business Combination Proposal; provided, that neither the
fact that such request has been made by NWA Corp., the fact that NWA Corp. has
submitted or will be submitting a NWA Corp. Business Combination Proposal or any
of the terms of such NWA Corp. Business Combination Proposal are publicly
disclosed, directly or indirectly, by or on behalf of NWA Corp. or any of its
Affiliates.
3.6 CERTAIN PERMITTED TRANSACTIONS AND COMMUNICATIONS. For clarity,
this Agreement, among other things, does not prohibit (i) the acquisition or
holding in the ordinary course of business by any employee benefit plan whose
trustees, investment managers or similar advisors are unaffiliated with NWA
Corp. or its Affiliates of securities or rights referred to in Section 3.1 or
(ii) officers and employees of NWA Corp. or its Affiliates from communicating
with officers and employees of KLM or its Affiliates on matters related to or
governed by the Umbrella Agreements, or NWA Corp. or its Affiliates from
communicating with the Chairman of the Supervisory Board of KLM or the President
of KLM, so long as such communication is conveyed in strict confidence, does not
require public disclosure by NWA Corp. or, in the reasonable opinion of NWA
Corp.'s counsel, by KLM and is not intended to elicit, and, in the reasonable
opinion of NWA Corp.'s counsel, does not require the issuance of, a public
response by KLM.
3.7 EXCEPTIONS TO APPLICABILITY OF CERTAIN COVENANTS. Notwithstanding
the foregoing, in the event (i) (x) any Person that is engaged in the commercial
airline business or Group that includes a Person engaged in the commercial
airline business (other than NWA Corp. and its Affiliates), either publicly or
in a communication to KLM, makes on an unsolicited basis a Business Combination
Proposal, (y) the Supervisory Board of KLM or the Management Board of KLM has
adopted a resolution recommending acceptance of such Business Combination
Proposal, and (z) such resolution remains in effect, or (ii) the Supervisory
Board of KLM or the Management Board of KLM shall announce that it has decided
to sell KLM and will consider proposals for the acquisition of KLM or has
otherwise publicly stated that KLM is for sale, then the provisions of Sections
3.1 through 3.5, in the case of
<PAGE>
12
clause (i), shall not apply to any NWA Corp. Business Combination Proposal
commenced during the pendency of such Business Combination Proposal and, in the
case of clause (ii), shall not apply until the Supervisory Board of KLM or the
Management Board of KLM shall publicly announce that it has rescinded its
decision to sell KLM; PROVIDED, that in determining whether to adopt any
resolution described in clause (i)(y) of this paragraph that includes approval
of a "break-up" fee, "lock-up" option or other similar arrangement, the
Supervisory Board of KLM shall give due consideration to the possibility that in
light of the strategic alliance between NWA Corp. and KLM as contemplated by the
Alliance Implementation Agreement, NWA Corp. may desire to make a competitive
NWA Corp. Business Combination Proposal.
3.8 INTERPRETATION. The covenants in this Section 3 shall be
interpreted in the light of law and regulations applicable in The Netherlands
from time to time. In particular, terms used in this Section 3 (including,
without limitation, "participant", "solicitation" and terms used in the
definition of "Reorganization Transaction", as defined in Section 1 and as such
term is used in this Section 3) shall have the meanings ascribed to the same or
similar terms as defined under any then applicable law and regulations in effect
in The Netherlands, and shall be interpreted in the light of any such law and
regulations.
Section 4. TERM OF AGREEMENT. Unless this Agreement specifically
provides for earlier termination with respect to any particular right or
obligation, this Agreement shall terminate on the last day of the Standstill
Period; PROVIDED, that, if KLM terminates the Common Stock Agreement pursuant to
Section 7.1(c) of that agreement, KLM shall have the right to terminate this
Agreement by delivering written notice of such termination to NWA Corp. (and the
Standstill Period shall expire for all purposes of this Agreement upon the
delivery of such notice).
Section 5. REMEDIES. KLM and NWA Corp. acknowledge and agree that
(i) the provisions of this Agreement are reasonable and necessary to protect the
proper and legitimate interests of the parties hereto, and (ii) the parties
would be irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to preliminary and permanent injunctive relief to prevent breaches of
the provisions of this Agreement by the other party without the necessity of
proving actual damages or of posting any bond, and to enforce specifically the
terms and provisions hereof and thereof, which rights shall be cumulative and in
addition to any other remedy to which the parties may be entitled hereunder or
at law or equity.
<PAGE>
13
Section 6. GENERAL PROVISIONS.
6.1 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.
6.2 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 10017-3954
Attention: Robert L. Friedman, 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
<PAGE>
14
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 or
(iii) on the date received, if sent by fax.
6.3 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.
6.4 TITLES AND HEADINGS. Titles and headings to 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.
6.5 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. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors in
interest and assigns.
6.6 ENTIRE AGREEMENT; NO ORAL WAIVER; CONSTRUCTION. This Agreement,
the Common Stock Agreement, the Preferred Stock Repurchase Agreement, dated as
of September 29, 1997, between KLM and NWA Corp., the Amendment to the
Stockholders' Agreement 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 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
<PAGE>
14
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. This
Agreement has been negotiated by KLM and NWA Corp. and their respective legal
counsel, and legal or equitable principles that might require the construction
of this Agreement against the party drafting this Agreement will not apply in
any construction or interpretation of this Agreement.
6.7 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.
6.8 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.
6.9 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 6.2; 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.
6.10 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.
<PAGE>
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/John H. Dasburg
-------------------------------------
John H. Dasburg
President and Chief
Executive Officer
By: /s/Douglas M. Steenland
-------------------------------------
Douglas M Steenland
Senior Vice President,
General Counsel and Secretary
KONINKLIJKE LUCHTVAART
MAATSCHAPPIJ N.V.
By: /s/L.M. van Wijk
-------------------------------------
L.M. van Wijk
President and Chief
Executive Officer
By: /s/R.J.N. Abrahamsen
-------------------------------------
R.J.N. Abrahamsen
Managing Director and
Chief Financial Officer
<PAGE>
Exhibit 10.8
AMENDMENT TO SECOND AMENDED AND
RESTATED INVESTOR STOCKHOLDERS' AGREEMENT
AMENDMENT, dated as of September 29, 1997 (this "AMENDMENT"), to the
Second Amended and Restated Investor Stockholders' Agreement, dated as of
December 23, 1993 (as such agreement has been amended, supplemented or otherwise
modified from time to time prior to the date hereof, the "STOCKHOLDERS'
AGREEMENT"), by and among Alfred A. Checchi, the A Trust created pursuant to a
trust agreement dated May 23, 1984 with Gary L. Wilson as trustee, the K Trust
created pursuant to a trust agreement dated May 23, 1984 with Gary L. Wilson as
trustee, the Trust created pursuant to a trust agreement dated September 1, 1985
with Gary L. Wilson as trustee (each such trust collectively known as the
"CHECCHI FAMILY TRUSTS"; the Checchi Family Trusts and Alfred A. Checchi
together known as the "CHECCHI FAMILY"); Gary L. Wilson, Derek M. Wilson,
Christopher D. Wilson (together the "WILSON FAMILY"); Frederic V. Malek,
Frederic W. Malek, Michelle A. Malek (together the "MALEK FAMILY"); the Wilson-
Thornhill Foundation created under Trust Agreement dated December 24, 1994;
Bankers Trust New York Corporation ("BTNY"); Koninklijke Luchtvaart Maatschappij
N.V. ("KLM"); Richard C. Blum & Associates - NWA Partners, L.P., formerly known
as Wings Associates, L.P. ("BLUM" and together with each of the foregoing
parties, the "INVESTOR STOCKHOLDERS"); and Northwest Airlines Corporation, a
Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, under Section 17 of the Stockholders' Agreement, KLM was
granted an option to purchase shares of Common Stock (the "KLM OPTION") from
each of Blum, BTNY, the Checchi Family, the Malek Family, Bright Star
Investments Limited and its affiliate Paracor Finance Inc., the permitted
transferees of Wings Acquisition Investor Limited (collectively, "BRIGHT STAR"),
and the Wilson Family, upon the terms and subject to the conditions set forth
therein;
WHEREAS, KLM has previously exercised the KLM Option granted to KLM by
Bright Star in connection with purchasing Bright Star's shares of Common Stock;
WHEREAS, in connection with entering into the Common Stock Repurchase
Agreement, dated as of September 29, 1997 (the "COMMON STOCK AGREEMENT"),
between KLM and the Company, the parties hereto desire (x) to accelerate the
date of the KLM exercise date for the KLM Option granted to KLM by each of Blum
and BTNY under Section 17 of the Stockholders' Agreement and (y) to cancel the
KLM Option granted to KLM by each of the Checchi Family, the Wilson Family and
the Malek Family under Section 17 of the Stockholders' Agreement;
<PAGE>
2
WHEREAS, on the date hereof, KLM owns (i) 1,308.8 shares of the
Company's Series A Preferred Stock, par value $.01 per share (the "SERIES A
PREFERRED STOCK"), (ii) 436.2 shares of the Company's Series B Preferred Stock,
par value $.01 per share (the "SERIES B PREFERRED STOCK"), and (iii) 21,684,099
shares of the Company's Class A Common Stock, par value $.01 per share (the
"CLASS A COMMON STOCK", and together with the Company's Class B Common Stock,
par value $.01 per share (the "CLASS B COMMON STOCK"), the "COMMON STOCK");
WHEREAS, concurrently with the Initial Closing Date (as defined in the
Common Stock Agreement), upon the terms and subject to the conditions set forth
herein, KLM will exercise its right to purchase, and will purchase, pursuant to
Section 17 of the Stockholders' Agreement (as such Section is amended by this
Amendment) (x) from Blum, 658,755 additional shares of Class A Common Stock in
exchange for 163.6001 shares of Series A Preferred Stock and 54.5250 shares of
Series B Preferred Stock and (y) from BTNY, 2,635,020 shares of Class B Common
Stock in exchange for 654.4002 shares of Series A Preferred Stock and 218.1001
shares of Series B Preferred Stock, following which purchase KLM will own
22,342,854 shares of Class A Common Stock, 2,635,020 shares of Class B Common
Stock (and a total of 24,977,874 shares of Common Stock), 490.7997 shares of
Series A Preferred Stock and 163.5749 shares of Series B Preferred Stock;
WHEREAS, upon the terms and subject to the conditions set forth in the
Common Stock Agreement, KLM has agreed to sell to the Company, and the Company
has agreed to purchase from KLM, all 24,977,874 shares of Common Stock (in four
installments over a three-year period, with all 2,635,020 shares of Class B
Common Stock if not otherwise converted to be sold in the last installment), and
upon the terms and subject to the conditions set forth in the Preferred Stock
Repurchase Agreement, dated as of September 29, 1997 (the "PREFERRED STOCK
AGREEMENT"), between KLM and the Company, all 490.7997 shares of Series A
Preferred Stock (at the Initial Closing Date) and all 163.5749 shares of Series
B Preferred Stock (at the Initial Closing Date); and
WHEREAS, under Section 15(b) of the Stockholders' Agreement, a written
instrument signed by the Required Percentage is required in order to amend the
provisions of the Stockholders' Agreement in the manner contemplated by this
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. AMENDMENT TO SECTION 17 OF THE STOCKHOLDER'S AGREEMENT. Section
17 of the Stockholders' Agreement is hereby deleted in its entirety and
substituted in lieu thereof is the following:
"17. KLM OPTION. (a) Each of Blum and BTNY (the "OPTION
STOCKHOLDERS") hereby grant to KLM the option (the "KLM OPTION"),
exercisable only in connection
<PAGE>
3
with the consummation of the transactions contemplated to occur on the
Initial Closing Date under (and as defined in) that certain Common Stock
Purchase Agreement, dated as of September 29, 1997 (the "COMMON STOCK
AGREEMENT"), between the Company and KLM, to purchase (x) in the case of
Blum, 658,755 shares of the Company's Class A Common Stock, and (y) in the
case of BTNY, 2,635,020 shares of the Company's Class B Common Stock, for
an aggregate of 3,293,775 shares of Common Stock (collectively, the "OPTION
SHARES"), at the exercise price for the Option Shares set forth in Section
17(b) below; PROVIDED, that in each case, in the event that the number of
shares is adjusted by subdivision, combination, reclassification,
recapitalization, stock split or stock dividend, the KLM Option Exercise
Price (as defined below) shall be adjusted proportionately to any such
adjustment in the number of shares. The KLM Option shall be automatically
exercised, in whole and not in part, without any further action by any
party, concurrently with the consummation of the transactions contemplated
to occur under the Common Stock Agreement on the Initial Closing Date (the
date on which the KLM Option is exercised being referred to as the "KLM
OPTION EXERCISE DATE").
(b) The exercise price for the Option Shares subject to the KLM
Option (the "KLM OPTION EXERCISE PRICE") shall be payable by KLM in shares
of Series A Preferred Stock and Series B Preferred Stock that it owns as of
the KLM Option Exercise Date as follows (based on the full exercise of the
KLM Option): (i) Blum shall receive 163.6001 shares of Series A Preferred
Stock and 54.5250 shares of Series B Preferred Stock; and (ii) BTNY shall
receive 654.4002 shares of Series A Preferred Stock and 218.1001 shares of
Series B Preferred Stock. Series A Preferred Stock and Series B Preferred
Stock transferred to the Option Stockholders pursuant to the KLM Option
shall include any accrued and unpaid dividends accruing thereon.
(c) On the KLM Option Exercise Date, (i) each Option Stockholder
agrees to transfer, assign and deliver to KLM a certificate or certificates
representing the Option Shares to be sold by such Option Stockholder, and
KLM agrees to transfer, assign and deliver to such Option Stockholder, as
payment of the applicable KLM Option Exercise Price for such Option Shares,
a certificate or certificates representing the shares of Series A Preferred
Stock and Series B Preferred Stock comprising such KLM Option Exercise
Price. Such certificates shall be duly endorsed in blank or accompanied by
stock powers duly executed in blank, with all necessary stock transfer
stamps affixed. The closing for the purchase and sale of the Option Shares
shall occur at the time and place of the Initial Closing Date referred to
in Section 17(a) above.
(d) Notwithstanding any other provision of this Agreement, upon the
effectiveness of the amendment to this Agreement dated as of September 29,
1997 (the "September 1997 Amendment") (i) the KLM Option previously granted
under this Agreement (prior to the effectiveness of the September 1997
Amendment) with respect to certain shares held by the Checchi Family, the
Malek Family and the Wilson Family will be cancelled on an unexercised
basis without any liability in respect thereof, and
<PAGE>
4
(ii) neither KLM nor any Investor Stockholder shall have any obligations or
rights with respect to any "Put Options" arrangements that were previously
granted under this Agreement (prior to the effectiveness of the September
1997 Amendment), which Put Options shall be deemed cancelled on an
unexercised basis without any liability in respect thereof."
2. ADDITIONAL AMENDMENTS TO STOCKHOLDERS' AGREEMENT. Immediately
following the consummation of all of the transactions contemplated to occur at
the Initial Closing Date under the Common Stock Agreement (including for
purposes of this Section 2, the consummation of the transactions contemplated by
the exercise of the KLM Option in the manner provided by Section 17 of the
Stockholders' Agreement (as amended by this Amendment)), each of KLM, the other
Investor Stockholders and the Company agrees that KLM shall thereupon be deleted
from and shall cease to be a party to the Stockholders' Agreement and KLM shall
have no rights and no obligations thereunder. The Stockholders' Agreement shall
be further amended by deleting therefrom any and all provisions with respect to
obligations owed by, and rights accruing to, KLM under the Stockholders'
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF KLM. KLM hereby represents and
warrants to each of BTNY, Blum and the Company that, as of the date hereof and
at the Initial Closing Date (before giving effect to the exercise of the KLM
Option on such date), KLM has good and valid title to its (i) 1,308.8 shares of
the Series A Preferred Stock, (ii) 436.2 shares of the Series B Preferred Stock,
and (iii) 21,684,099 shares of the Class A Common Stock, free and clear of any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), other charge or security interest or any preference,
priority or other arrangement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing), but other than those established under the Common Stock Agreement
and the Preferred Stock Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BTNY. BTNY hereby represents
and warrants to each of KLM, Blum and the Company that, as of the date hereof
and at the Initial Closing Date (before giving effect to the exercise of the KLM
Option on such date), BTNY has good and valid title to its (i) 999 shares of the
Class A Common Stock and (ii) 2,635,020 shares of the Class B Common Stock, free
and clear of any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or security
interest or any preference, priority or other arrangement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing), but other than those established
under the BTNY Preferred Stock Repurchase Agreement, dated as of September 29,
1997, between BTNY and the Company.
5. REPRESENTATIONS AND WARRANTIES OF BLUM. Blum hereby represents
and warrants to each of KLM, BTNY and the Company that, as of the date hereof
and at the Initial Closing Date (before giving effect to the exercise of the KLM
Option on such date), Blum has
<PAGE>
5
good and valid title to its (i) 5,396,643 shares of the Class A Common Stock and
(ii) 1727 shares of the Series B Preferred Stock, free and clear of any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), other charge or security interest or any preference,
priority or other arrangement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing), but other than those established under the Blum Preferred Stock
Repurchase Agreement, dated as of September 29, 1997, between Blum and the
Company.
6. DEFINITIONS. Capitalized terms used but not otherwise defined
herein are used herein as defined in the Stockholders' Agreement.
7. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN. THE PARTIES TO THIS AMENDMENT
HEREBY AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AMENDMENT.
8. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
9. EFFECTIVENESS. Upon the execution of this Amendment by the
Required Percentage of Investor Stockholders, this Amendment shall become
effective concurrently with the consummation of the transactions contemplated
under the Common Stock Agreement on the Initial Closing Date.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Amendment
to be duly executed on its behalf as of the date first written above.
NORTHWEST AIRLINES CORPORATION
By: /s/Douglas M. Steenland
------------------------------------------
Douglas M. Steenland
Senior Vice President,
General Counsel & Secretary
/s/Alfred A. Checchi
------------------------------------------
Alfred A. Checchi
/s/Gary L. Wilson
------------------------------------------
Gary L. Wilson
K Trust created under Trust Agreement
dated May 23, 1984
/s/Gary L. Wilson
------------------------------------------
Gary L. Wilson
Trustee
/s/Frederic V. Malek
------------------------------------------
Frederic V. Malek
A Trust created under Trust Agreement
dated May 23, 1984
/s/Gary L. Wilson
------------------------------------------
Gary L. Wilson
Trustee
<PAGE>
Trust created under Trust Agreement dated
September 1, 1985
/s/Gary L. Wilson
------------------------------------------
Gary L. Wilson
Trustee
Wilson-Thornhill Foundation created under
Trust Agreement dated December 24, 1994
/s/Gary L. Wilson
------------------------------------------
Gary L. Wilson
Trustee
/s/ Derek M. Wilson
------------------------------------------
Derek M. Wilson
/s/ Christopher D. Wilson
------------------------------------------
Christopher D. Wilson
/s/Frederic V. Malek
------------------------------------------
Frederic W. Malek
Frederic V. Malek, as attorney
in fact for Frederic W. Malek
/s/Frederic V. Malek
------------------------------------------
Michelle A. Malek
Frederic V. Malek, as attorney
in fact for Michelle A. Malek
BANKERS TRUST NEW YORK CORPORATION
By: /s/George J. Vojta
------------------------------------------
George J. Vojta
Vice Chairman of the Board
<PAGE>
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
By: /s/L.M. van Wijk
------------------------------------------
L.M. van Wijk
President and Chief
Executive Officer
By: /s/R.J.N. Abrahamsen
------------------------------------------
R.J.N. Abrahamsen
Managing Director and
Chief Financial Officer
RICHARD C. BLUM & ASSOCIATES - NWA
PARTNERS, L.P.
by: Richard C. Blum & Associates, L.P., its
General Partner
by: Richard C. Blum & Associates, Inc., its
General Partner
By: /s/Marc T. Scholvinck
------------------------------------------
Marc T. Scholvinck
Chief Financial Officer
<PAGE>
EXHIBIT 11.1
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Three months ended September 30 Nine months ended September 30
------------------------------- ------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Reconciliation of net income applicable to common
stockholders:
Net income per consolidated statements of income $ 290.3 $ 253.9 $ 491.1 $ 510.1
Preferred stock requirements (3.1) (6.2) (13.2) (32.4)
------------- -------------- ------------- -------------
Net income applicable to common stockholders
before preferred stock transaction $ 287.2 $ 247.7 $ 477.9 $ 477.7
Preferred stock transaction -- 74.5 -- 74.5
------------- -------------- ------------- -------------
Net income applicable to common stockholders $ 287.2 $ 322.2 $ 477.9 $ 552.2
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
Reconciliation of weighted average number of
shares outstanding to amount used in primary
earnings per share computation:
Weighted average number of common
shares outstanding 102,427,509 100,031,636(1) 101,927,493 98,223,445(1)
Incremental shares that could have been issued for
cash to satisfy its common stock
repurchase obligation 80,914 -- 29,115 --
Stock options reduced by the number of shares
which could have been purchased with
the proceeds from exercise of such options 1,934,765 2,159,340 2,094,633 2,405,754
------------- -------------- ------------- -------------
Weighted average number of common shares
outstanding, as adjusted 104,443,188 102,190,976 104,051,241 100,629,199
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
Primary earnings per common share:
Before effect of preferred stock transaction $ 2.75 $ 2.42 $ 4.59 $ 4.75
Preferred stock transaction -- .73 -- .74
------------- -------------- ------------- -------------
Primary earnings per common share $ 2.75 $ 3.15 $ 4.59 $ 5.49
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
</TABLE>
(1) Includes the weighted average number of common shares earned by employees
since August 1, 1993 due to the February 1994 exercise of the Series C
Preferred Stock special conversion option.
<PAGE>
EXHIBIT 11.2
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Three months ended September 30 Nine months ended September 30
------------------------------- ------------------------------
1997 1996 1997 1996
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Reconciliation of net income applicable to common
stockholders:
Net income per consolidated statements of income $ 290.3 $ 253.9 $ 491.1 $ 510.1
Preferred stock requirements (3.1) (6.2) (13.2) (32.4)
Addback: Series C Preferred Stock requirements 0.2 0.4 0.8 0.4
------------- -------------- ------------- -------------
Net income applicable to common stockholders
before preferred stock transaction $ 287.4 $ 248.1 $ 478.7 $ 478.1
Preferred stock transaction -- 74.5 -- 74.5
------------- -------------- ------------- -------------
Net income applicable to common stockholders, as adjusted $ 287.4 $ 322.6 $ 478.7 $ 552.6
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
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 102,427,509 98,704,028(1) 101,927,493 97,236,539(1)
Weighted average number of shares of Series C
Preferred Stock assumed to be converted to
common stock which were outstanding in 1997 and
earned by employees since August 1, 1993 in 1996 9,840,002 11,748,090 10,238,273 10,813,671
Incremental shares that could have been issued for
cash to satisfy its common stock repurchase
obligation 80,914 -- 29,115 --
Stock options reduced by the number of shares
which could have been purchased with
the proceeds from exercise of such options 2,100,460 2,159,340 2,282,345 2,423,838
------------- -------------- ------------- -------------
Weighted average number of common shares
outstanding, as adjusted 114,448,885 112,611,458 114,477,226 110,474,048
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
Earnings per common share assuming full dilution:
Before effect of preferred stock transaction $ 2.51 $ 2.20 $ 4.18 $ 4.33
Preferred stock transaction -- .66 -- .67
------------- -------------- ------------- -------------
Fully diluted earnings per common share $ 2.51 $ 2.86 $ 4.18 $ 5.00
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
</TABLE>
(1) Includes the weighted average number of common shares earned by employees
since August 1, 1993 due to the February 1994 exercise of the Series C
Preferred Stock special conversion option.
<PAGE>
EXHIBIT 12.1
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- -------------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
EARNINGS:
Income before income taxes $ 472.9 $ 410.6 $ 799.9 $ 829.5
Less: Income from less than 50%
owned investees 4.0 4.5 17.8 15.1
Add:
Rent expense representative of interest (1) 50.5 48.7 147.8 142.4
Interest expense net of capitalized interest 57.5 62.8 171.2 190.5
Interest of mandatorily redeemable
preferred security holder 6.3 6.7 18.3 20.6
Amortization of debt discount 1.4 3.2 4.0 9.7
Amortization of interest capitalized 0.7 0.7 2.2 2.0
-------- -------- ---------- ----------
ADJUSTED EARNINGS $ 585.3 $ 528.2 $ 1,125.6 $ 1,179.6
-------- -------- ---------- ----------
-------- -------- ---------- ----------
FIXED CHARGES:
Rent expense representative of interest (1) $ 50.5 $ 48.7 $ 147.8 $ 142.4
Interest expense net of capitalized interest 57.5 62.8 171.2 190.5
Interest of mandatorily redeemable
preferred security holder 6.3 6.7 18.3 20.6
Amortization of debt discount 1.4 3.2 4.0 9.7
Capitalized interest 2.4 1.5 7.8 5.1
-------- -------- ---------- ----------
FIXED CHARGES $ 118.1 $ 122.9 $ 349.1 $ 368.3
-------- -------- ---------- ----------
-------- -------- ---------- ----------
RATIO OF EARNINGS TO FIXED CHARGES 4.96 4.30 3.22 3.20
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
(1) Calculated as one-third of rentals, which is considered representative of
the interest factor.
<PAGE>
EXHIBIT 12.2
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK
REQUIREMENTS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- ------------------------
1997 1996 1997 1996
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
EARNINGS:
Income before income taxes $ 472.9 $ 410.6 $ 799.9 $ 829.5
Less: Income from less than 50%
owned investees 4.0 4.5 17.8 15.1
Add:
Rent expense representative of interest (1) 50.5 48.7 147.8 142.4
Interest expense net of capitalized interest 57.5 62.8 171.2 190.5
Interest of mandatorily redeemable
preferred security holder 6.3 6.7 18.3 20.6
Amortization of debt discount 1.4 3.2 4.0 9.7
Amortization of interest capitalized 0.7 0.7 2.2 2.0
-------- -------- ---------- ----------
ADJUSTED EARNINGS $ 585.3 $ 528.2 $ 1,125.6 $ 1,179.6
-------- -------- ---------- ----------
-------- -------- ---------- ----------
FIXED CHARGES AND PREFERRED STOCK REQUIREMENTS:
Rent expense representative of interest (1) $ 50.5 $ 48.7 $ 147.8 $ 142.4
Interest expense net of capitalized interest 57.5 62.8 171.2 190.5
Interest of mandatorily redeemable
preferred security holder 6.3 6.7 18.3 20.6
Preferred stock requirements 5.0 10.0 21.5 52.7
Amortization of debt discount 1.4 3.2 4.0 9.7
Capitalized interest 2.4 1.5 7.8 5.1
-------- -------- ---------- ----------
FIXED CHARGES AND PREFERRED
STOCK REQUIREMENTS $ 123.1 $ 132.9 $ 370.6 $ 421.0
-------- -------- ---------- ----------
-------- -------- ---------- ----------
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK REQUIREMENTS 4.75 3.97 3.04 2.80
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
(1) Calculated as one-third of rentals, which is considered representative of
the interest factor.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,072
<SECURITIES> 195
<RECEIVABLES> 770
<ALLOWANCES> 23
<INVENTORY> 346
<CURRENT-ASSETS> 2,679
<PP&E> 6,622
<DEPRECIATION> 1,852
<TOTAL-ASSETS> 9,356
<CURRENT-LIABILITIES> 3,305
<BONDS> 0
324
0
<COMMON> 850
<OTHER-SE> (476)
<TOTAL-LIABILITY-AND-EQUITY> 9,356
<SALES> 2,801
<TOTAL-REVENUES> 2,801
<CGS> 0
<TOTAL-COSTS> 2,298
<OTHER-EXPENSES> 31
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> 473
<INCOME-TAX> 183
<INCOME-CONTINUING> 290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290
<EPS-PRIMARY> 2.75
<EPS-DILUTED> 2.51
</TABLE>
