<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 June 30, 1998, there were 81,175,817 shares of the registrant's Common Stock
outstanding.
<PAGE>
NORTHWEST AIRLINES CORPORATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income - Three months
and six months ended June 30, 1998 and 1997. 3
Condensed Consolidated Balance Sheets - June 30, 1998,
December 31, 1997 and June 30, 1997. 4
Condensed Consolidated Statements of Cash Flows - Six months
ended June 30, 1998 and 1997. 5
Notes to Condensed Consolidated Financial Statements 6
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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security-Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
EXHIBIT INDEX 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHWEST AIRLINES CORPORATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
(UNAUDITED, IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Passenger $ 2,125.7 $ 2,228.6 $ 4,173.2 $ 4,268.9
Cargo 161.1 195.9 328.8 366.6
Other 189.2 133.1 402.5 297.6
----------- ----------- ----------- -----------
2,476.0 2,557.6 4,904.5 4,933.1
OPERATING EXPENSES
Salaries, wages and benefits 852.9 770.0 1,619.5 1,502.5
Aircraft fuel and taxes 286.3 339.1 598.9 710.6
Commissions 184.0 215.3 372.4 421.4
Aircraft maintenance materials and repairs 182.8 166.1 366.8 320.3
Other rentals and landing fees 114.7 118.2 225.2 223.7
Depreciation and amortization 104.8 96.5 205.9 190.6
Aircraft rentals 86.3 91.6 172.6 175.9
Other 544.0 469.7 1,066.6 962.0
----------- ----------- ----------- -----------
2,355.8 2,266.5 4,627.9 4,507.0
----------- ----------- ----------- -----------
OPERATING INCOME 120.2 291.1 276.6 426.1
OTHER INCOME (EXPENSE)
Interest expense, net (66.8) (59.1) (122.1) (116.4)
Interest of mandatorily redeemable preferred
security holder (5.3) (5.9) (11.0) (12.0)
Investment income 16.2 17.8 32.3 29.9
Foreign currency gain (loss) 7.5 (27.7) 9.5 (14.9)
Other 8.9 6.2 10.4 14.3
----------- ----------- ----------- -----------
(39.5) (68.7) (80.9) (99.1)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 80.7 222.4 195.7 327.0
Income tax expense 32.1 86.2 76.1 126.2
----------- ----------- ----------- -----------
NET INCOME 48.6 136.2 119.6 200.8
Preferred stock requirements (0.2) (5.1) (0.4) (10.1)
----------- ----------- ----------- -----------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 48.4 $ 131.1 $ 119.2 $ 190.7
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per common share:
BASIC $ .56 $ 1.29 $ 1.29 $ 1.88
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DILUTED $ .51 $ 1.16 $ 1.17 $ 1.69
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
NORTHWEST AIRLINES CORPORATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------
June 30 December 31 June 30
(UNAUDITED, IN MILLIONS) 1998 1997 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 898.1 $ 740.4 $ 801.6
Short-term investments 112.9 437.7 231.0
Accounts receivable, net 596.5 664.8 770.7
Flight equipment spare parts, net 409.6 376.1 322.5
Prepaid expenses and other 376.0 378.8 301.9
---------- ---------- ----------
2,393.1 2,597.8 2,427.7
PROPERTY AND EQUIPMENT
Flight equipment, net 4,388.4 3,951.1 3,710.2
Other property and equipment, net 872.9 876.6 923.0
---------- ---------- ----------
5,261.3 4,827.7 4,633.2
FLIGHT EQUIPMENT UNDER CAPITAL LEASES, NET 622.6 637.1 653.8
OTHER ASSETS
International routes, net 716.0 727.8 739.5
Investments in affiliated companies and other 703.1 545.8 584.7
---------- ---------- ----------
1,419.1 1,273.6 1,324.2
---------- ---------- ----------
$ 9,696.1 $ 9,336.2 $ 9,038.9
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Air traffic liability $ 1,361.3 $ 1,222.5 $ 1,187.2
Accounts payable and other liabilities 1,853.1 1,766.2 1,680.1
Current maturities of long-term debt and
capital lease obligations 321.2 283.3 289.0
---------- ---------- ----------
3,535.6 3,272.0 3,156.3
LONG-TERM DEBT 2,677.5 1,841.9 2,026.1
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES 623.5 649.4 682.6
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 1,227.2 1,161.5 1,008.5
Pension and postretirement benefits 392.6 407.3 381.0
Other 580.4 674.1 332.0
---------- ---------- ----------
2,200.2 2,242.9 1,721.5
MANDATORILY REDEEMABLE PREFERRED SECURITY OF
SUBSIDIARY WHICH HOLDS SOLELY NON-RECOURSE
OBLIGATION OF COMPANY 458.3 486.3 553.9
REDEEMABLE STOCK
Preferred 265.5 306.2 588.8
Common -- 848.5 --
COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 1.1 1.0 1.0
Additional paid-in capital 1,330.6 1,273.6 1,176.4
Accumulated deficit (243.1) (362.2) (754.4)
Accumulated other comprehensive income (98.8) (101.8) (113.3)
Treasury stock (1,054.3) (1,121.6) --
---------- ---------- ----------
(64.5) (311.0) 309.7
---------- ---------- ----------
$ 9,696.1 $ 9,336.2 $ 9,038.9
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
NORTHWEST AIRLINES CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------
Six months ended June 30
(UNAUDITED, IN MILLIONS) 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 489.6 $ 425.5
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (550.5) (294.4)
Net decrease in short-term investments 336.2 40.2
Other, net (4.0) (34.4)
---------- --------
Net cash used in investing activities (218.3) (288.6)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 693.6 250.6
Payments of long-term debt and capital lease obligations (574.8) (130.8)
Repurchase of common stock (436.7) --
Proceeds from sale and leaseback transactions 219.2 --
Other, net (14.9) (14.5)
---------- --------
Net cash provided by (used in) financing activities (113.6) 105.3
INCREASE IN CASH AND CASH EQUIVALENTS 157.7 242.2
Cash and cash equivalents at beginning of period 740.4 559.4
---------- --------
Cash and cash equivalents at end of period $ 898.1 $ 801.6
---------- --------
---------- --------
Cash and cash equivalents and unrestricted short-term
investments at end of period $ 959.7 $ 959.7
---------- --------
---------- --------
Available to be borrowed under credit facilities $ 2,079.0 $ 727.3
---------- --------
---------- --------
Noncash Transactions:
Manufacturer financing obtained in connection with the
acquisition of aircraft $ 256.2 $ 47.0
Notes issued for the repurchase of common stock $ 343.7 --
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
NORTHWEST AIRLINES CORPORATION
- -------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. The condensed consolidated financial statements of Northwest Airlines
Corporation ("NWA Corp." or the "Company") included herein have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted as permitted by such rules and regulations. These financial
statements and related notes should be read in conjunction with the
financial statements and notes thereto included in the Company's audited
consolidated financial statements for the year ended December 31, 1997
contained in the Company's Annual Report on Form 10-K for 1997 (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 June 30, 1998, maturities of long-term debt were $234.9 million in 1998,
$306.3 million in 1999, $156.1 million in 2000, $262.1 million in 2001 and
$195.1 million in 2002.
5. On May 12, 1998, the Company obtained a secured 364-day $1.0 billion
revolving credit facility. In addition, the Company provided certain
collateral to secure its previously unsecured term loan and revolving
credit facilities. The Company has pledged various assets as collateral for
these credit facilities, principally aircraft and international route
authorities, having an aggregate book value of $2.2 billion.
At June 30, 1998, the Company had no borrowings outstanding under its
revolving credit facilities. In addition, the Company had the ability
under another facility to borrow up to $240 million using existing
aircraft as collateral. The $1.84 billion available to be borrowed
under the revolving credit facilities along with the $240 million
facility and the $960 million of cash, cash equivalents and unrestricted
short-term investments provided the Company with $3.04 billion of
available liquidity at June 30, 1998. In August 1998, the Company
borrowed all amounts available under these facilities. The $2.08
billion is scheduled to be repaid $175 million in 1998, $1.0 billion in
1999, $660 million in 2002 and the rest thereafter, with the Company having
the right to make partial or total prepayments at any time without penalty.
6. On May 1, 1998, NWA Corp. purchased from KLM Royal Dutch Airlines
("KLM") the remaining 18,177,874 shares of NWA Corp. common stock which
the Company had previously agreed to repurchase over a three year period
ending in September 2000. The purchase price of $780.4 million was paid
with a combination of $336.7 million of cash and three senior unsecured
7.88% notes with principal amounts of $206.0 million, $137.7 million and
$100 million. The maturity of the notes is September 29, 1998, 1999 and
2000, respectively. The $68.1 million excess of the financial statement
carrying value of the redeemable common stock over the repurchase price
was transferred to common stockholders' equity deficit on the same date.
As of May 1, 1998, earnings per share calculations do not include the
18.2 million shares repurchased. In certain limited circumstances (e.g.,
the failure of the alliance to maintain certain antitrust immunity or
Northwest Airlines, Inc.'s ("Northwest") default under the alliance
agreement), KLM will have an option to buy back from NWA Corp. up to
18.2 million shares.
6
<PAGE>
7. In June 1998, the Company amended its Regional Jet Services Agreement with
Mesaba Aviation, Inc. ("Mesaba") and agreed to lease 18 additional
Avro Regional Jet aircraft to Mesaba, for a total of 36 such aircraft. As
part of the amended agreement, the Company was granted an additional
warrant to purchase Mesaba Holdings, Inc. stock. If the Company were to
exercise all its warrants in Mesaba Holdings, Inc. stock when fully vested,
its ownership would increase from 28.8% to 41.2% as of June 30, 1998.
8. The following table sets forth the computation of basic and diluted
earnings per common share (in millions, except share data):
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
1998 1997 1998 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NUMERATOR:
Net income applicable to common
stockholders for basic
earnings per share $ 48.4 $ 131.1 $ 119.2 $ 190.7
Effect of dilutive securities:
Series C Preferred Stock .2 .3 .4 .6
----------- ------------ ------------ ------------
Net income applicable to common
stockholders after assumed
conversions for diluted
earnings per share $ 48.6 $ 131.4 $ 119.6 $ 191.3
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
DENOMINATOR:
Weighted-average shares outstanding
for basic earnings per share 86,955,059 102,000,308 92,339,897 101,673,339
Effect of dilutive securities:
Series C Preferred Stock 7,896,245 10,243,218 8,206,485 10,440,710
Employee stock options 934,004 1,368,527 1,255,750 1,372,988
----------- ------------ ------------ ------------
Adjusted weighted-average shares and
assumed conversions for diluted
earnings per share 95,785,308 113,612,053 101,802,132 113,487,037
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
7
<PAGE>
9. Beginning in 1998, the Company is required to report comprehensive income
as required by Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income." SFAS 130 requires minimum pension
liability adjustments and foreign currency translation adjustments, which
prior to adoption were reported separately in common stockholders' equity,
to be included in "other comprehensive income." Comprehensive income (net
income plus other comprehensive income) was $50.6 million and $132.8
million for the three months ended June 30, 1998 and 1997, respectively,
and $122.6 million and $200.4 million for the six months ended June 30,
1998 and 1997, respectively.
10. On April 30, 1998, the Company amended its Second Amended and Restated
Certificate of Incorporation to combine and reclassify the existing
separate classes of voting and non-voting Class A and Class B Common Stock
into a single class of voting Common Stock.
11. On June 25, 1998, the Company amended its Stockholder Rights Plan to
increase the permitted beneficial ownership threshold for certain qualified
institutional investors to 25% of NWA Corp.'s outstanding common stock.
12. As of January 1, 1998, the Company adopted early the provisions of
Statement of Position No. 98-5, "Reporting on the Costs of Start-Up
Activities", ("SOP 98-5"). SOP 98-5 requires costs of start-up activities
and organization costs to be expensed as incurred. The adoption of
SOP 98-5 did not have a material impact on the Company's financial position
or results of operations for the six months ended June 30, 1998.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132 ("SFAS 132"), "Employer's
Disclosures about Pensions and Other Postretirement Benefits." SFAS 132
revises disclosures about pension and other postretirement benefit plans,
but it does not change the measurement or recognition of those plans.
Because this statement only impacts how financial information is disclosed,
the adoption will have no impact to the Company's financial position or
results of operations.
In March 1998, Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed for or Obtained for Internal Use" ("SOP 98-1")
was issued. SOP 98-1 defines the type of costs that should be capitalized
versus expensed as incurred. The Company plans to adopt SOP 98-1 on
January 1, 1999. The Company does not anticipate that the adoption of SOP
98-1 will have a material impact on the Company's financial position or
results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." The Company is required to
adopt the new standard no later than January 1, 2000, with early adoption
permitted. No restatement of previously issued financial statements is
permitted. SFAS 133 will require the Company to recognize all derivatives
as assets or liabilities on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. While
the Company is in the process of evaluating the accounting and reporting
implications of SFAS 133, it does not anticipate any significant impact on
its financial position or results of operations. In general, the Company
does not invest in or take positions on derivative instruments other than
for the purposes of hedging specific risk exposures. Under the provisions
of SFAS 133, the Company will be able to more properly match the
recognition of foreign currency hedging derivative instruments with the
timing of the underlying hedged foreign currency cash flows.
On July 23, 1998, the Emerging Issues Task Force reached a consensus on
Issue No. 97-14, "Accounting for Deferred Compensation Arrangements Where
Amounts Earned are Held in a Rabbi Trust". Companies are required to
adopt the consensus as of September 30, 1998. The Company has not yet
determined the impact of adoption.
8
<PAGE>
13. In accordance with Rule 1-02 (bb) of Regulation S-X, the following summary
data (in millions) is presented for Northwest, the principal indirect
operating subsidiary of the Company.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------ ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenues $ 2,377.6 $ 2,466.8 $ 4,676.1 $ 4,757.2
Operating expenses 2,266.1 2,190.8 4,419.9 4,358.6
---------- ---------- ---------- ----------
Operating income 111.5 276.0 256.2 398.6
Other income (expense) (41.2) (81.8) (85.9) (125.6)
---------- ---------- ---------- ----------
Income before income taxes 70.3 194.2 170.3 273.0
Income tax expense 28.7 74.7 68.4 106.7
---------- ---------- ---------- ----------
Net income $ 41.6 $ 119.5 $ 101.9 $ 166.3
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
June 30 December 31 June 30
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current assets $ 2,179.6 $ 2,015.0 $ 1,939.3
Noncurrent assets 6,679.0 6,114.6 5,977.7
Current liabilities 3,684.6 3,164.7 3,040.7
Long-term debt and obligations under capital leases 2,969.2 2,016.9 2,202.1
Deferred credits and other liabilities 1,071.7 1,191.0 829.7
Mandatorily redeemable preferred security of subsidiary 458.3 486.3 553.9
</TABLE>
See also Note R to Consolidated Financial Statements in the Annual Report.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the quarter ended June 30, 1998, the Company reported net income of $48.6
million and operating income of $120.2 million. Diluted earnings per common
share were $.51 compared with $1.16 in 1997. Net income for the three months
ended June 30, 1998 included a provision of $67.1 million for retroactive pay
contained in a tentative agreement reached with the International Association
of Machinists and Aerospace Workers ("IAM") on June 16, 1998. Excluding the
after-tax effects of this provision, net income for the three months ended
June 30, 1998 would have been $90.9 million and diluted earnings per common
share would have been $.95 per share.
Substantially all of the Company's results of operations are attributable to
Northwest Airlines, Inc. ("Northwest") and the following discussion pertains
primarily to Northwest. The Company's results of operations for interim
periods are not necessarily indicative of such results for an entire year due
to seasonal factors as well as competitive and general economic conditions.
Information with respect to the Company's operating statistics follows (1):
<TABLE>
<CAPTION>
THREE MONTHS ENDED % SIX MONTHS ENDED %
JUNE 30 CHG. JUNE 30 CHG.
----------------------- -------- --------------------- --------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Scheduled service:
Available seat miles (ASM) (millions) 23,819.5 24,225.0 (1.7) 47,594.0 47,279.8 0.7
Revenue passenger miles (millions) 18,351.9 18,142.0 1.2 35,153.0 34,734.5 1.2
Passenger load factor (percent) 77.0 74.9 2.1 pts. 73.9 73.5 0.4 pts.
Revenue passengers (thousands) 13,676 13,862 (1.3) 26,380 26,524 (0.5)
Revenue yield per passenger mile (cents) 11.45 12.08 (5.2) 11.73 12.18 (3.7)
Passenger revenue per scheduled ASM (cents) 8.82 9.05 (2.5) 8.66 8.95 (3.2)
Operating revenue per total ASM (cents) (2) 9.65 9.74 (0.9) 9.49 9.66 (1.8)
Operating expense per total ASM (cents) (2) 9.11 8.64 5.4 8.89 8.82 0.8
Operating expense excluding provision for IAM
retroactive pay per total ASM (cents) (2) 8.83 8.64 2.2 8.75 8.82 (0.8)
Cargo ton miles (millions) 490.3 553.6 (11.4) 991.0 1,046.4 (5.3)
Cargo revenue per ton mile (cents) 32.80 35.39 (7.3) 33.14 35.03 (5.4)
Fuel gallons consumed (millions) 490.5 494.7 (0.8) 977.4 966.2 1.2
Average fuel cost per gallon (cents) 53.33 63.46 (16.0) 56.15 68.60 (18.1)
Number of operating aircraft at end of period 415 399 4.0
Full-time equivalent employees at end of period 51,332 48,197 6.5
</TABLE>
(1) All statistics exclude Express Airlines I, Inc. ("Express"), a wholly-owned
Northwest Airlink regional carrier.
(2) Excludes the estimated revenues and expenses associated with the operation
of Northwest's fleet of eight 747 freighter aircraft and MLT Inc.
10
<PAGE>
RESULTS OF OPERATIONS--THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Operating income decreased $170.9 million to $120.2 million. This decrease
was primarily due to the $67.1 million provision for IAM retroactive pay and
a decrease in passenger revenues of $102.9 million of which $33.5 million was
due to weaker foreign currency exchange rates and $71.7 million was due to
decreased capacity in the domestic and Pacific markets. The decrease in
capacity was primarily due to scheduled service reductions and higher than
normal flight cancellations resulting from employee work actions related to
the Company's contract negotiations with its unions. Increases in aircraft
maintenance of $16.7 million and other operating expenses of $74.3 million
were partially offset by a $52.8 million decrease in aircraft fuel.
OPERATING REVENUES. Operating revenues were $2.48 billion, a decrease of
$81.6 million (3.2%). System passenger revenues (which represented 85.9% of
total operating revenues) decreased 4.6%. The decrease was primarily
attributable to a 1.7% decrease in Northwest's scheduled service ASMs and a
2.5% decrease in Northwest's passenger revenue per scheduled ASM ("RASM").
The decrease in RASM was primarily due to weaker Asian markets and weaker
foreign currency exchange rates. Passenger revenue included $25.1 million and
$36.9 million of Express revenues for the three months ended June 30, 1998
and 1997, respectively.
Domestic passenger revenue, excluding Express, decreased $58.1 million (3.9%)
to $1.44 billion due primarily to a decrease in ASMs of 4.5%. Since early
April, the Company has experienced record high flight cancellations and
delays resulting from employee work actions. The Company reduced its
scheduled service to improve schedule integrity and estimates that the work
actions had an approximate $100 million negative impact to passenger revenue
during the second quarter. See also "Other Information - LABOR AGREEMENTS".
Due to the scheduled service reductions, the Company expects its scheduled
ASMs for the third quarter to be flat compared with the three months ended
September 30, 1997. Despite a decrease in ASMs, RASM increased slightly due
to a 3.3 point increase in passenger load factor.
Pacific passenger revenue decreased by $69.4 million (13.3%) to $451.4
million due to a 9.3% decrease in Pacific RASM. The decrease in Pacific RASM
was due to a 10.5% decrease in yield offset by a 0.9 point increase in
passenger load factor. The decrease in yield was attributable to an
unfavorable general economic environment in the Pacific and weaker Asian
currencies, of which the largest impact was due to the Japanese economy and
yen. The average yen per U.S. dollar exchange rate for the three months
ended June 30, 1998 and 1997 was 137 and 122, respectively, a weakening of
the yen of 12.3%. In response to the weaker economic environment and
increased competition from the revised U.S. Japan bilateral aviation
agreement, the Company eliminated Detroit-Seoul and Chicago-Tokyo service and
reduced capacity between Osaka and Honolulu. The Company then redeployed
these assets to other markets by adding nonstop service between
Detroit-Nagoya, Las Vegas-Tokyo and Tokyo-Anchorage and expanding Los
Angeles-Tokyo service. The Company expects that the general economic
environment in Asia will continue to adversely impact the Company's Pacific
revenues.
Atlantic passenger revenue increased $36.4 million (20.7%) to $212.3 million
due to a 27.6% increase in scheduled service ASMs which resulted primarily
from new flying (including service from Mumbai and Delhi, India to Amsterdam)
and the initiation of Philadelphia-Amsterdam and Seattle-Amsterdam service
and increases in Minneapolis/St. Paul-Amsterdam and Detroit-Amsterdam
services.
Cargo revenue decreased $34.8 million (17.8%) to $161.1 million due to 11.4%
fewer cargo ton miles and a 7.3% decrease in cargo revenue per ton mile,
driven primarily by weaker Asian markets and weaker foreign currency exchange
rates. The decrease in both volume and yield from 1997 is expected to
continue for the remainder of 1998. Other revenues were $189.2 million, an
improvement of $56.1 million (42.1%). The improvement was largely due to
increased revenue from KLM joint venture alliance settlements and MLT Inc.
11
<PAGE>
OPERATING EXPENSES. Operating expenses increased $89.3 million (3.9%).
Operating capacity decreased 1.7% to 23.8 billion total service ASMs which
contributed to the 5.4% increase in operating expense per total service ASM.
Salaries, wages and benefits expense increased $82.9 million (10.8%) due
primarily to the $67.1 million provision for IAM retroactive pay and an
increase in average full-time equivalent employees of 6.5%. The increase in
full-time equivalent employees was due to more mechanics resulting from
increased check cycles and an increase in reservation agents due to the
Company's alliance activities with KLM that resulted in Northwest taking over
KLM's North America sales and marketing functions beginning in April 1998.
Excluding the provision for IAM retroactive pay, operating expense per total
service ASM increased 2.2%.
Aircraft fuel and taxes decreased $52.8 million (15.6%) due to a 16.0%
decrease in average fuel cost per gallon. Commissions decreased by $31.3
million (14.5%) due primarily to a lower effective commission rate caused by
a shift in revenue mix and changes to the Company's commission structure
which began in September 1997. Aircraft maintenance materials and repairs
increased $16.7 million (10.1%) due to increased scheduled overhauls and
timing of check cycles. The Company continues to contract for maintenance
work with outside suppliers, resulting in labor costs that would normally be
classified as salaries and wages being included in maintenance materials and
repairs expense. Other expenses grew $74.3 million (15.8%) largely due to
higher volume of business for MLT Inc., increased claims from flight
disruptions due to employee work actions and weather, selling and marketing
fees and outside services.
OTHER INCOME AND EXPENSE. Interest expense-net increased $7.7 million
(13.0%) primarily due to newly issued debt. The foreign currency gain for
the three months ended June 30, 1998 was attributable to balance sheet
remeasurement of foreign currency-denominated assets and liabilities. The
foreign currency loss for the three months ended June 30, 1997 was
attributable to charges related to Japanese yen forward exchange and collar
option contracts and balance sheet remeasurement of foreign
currency-denominated assets and liabilities.
RESULTS OF OPERATIONS--SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Operating income decreased $149.5 million (35.1%) to $276.6 million. The
decrease was primarily due to a decrease in passenger revenues of $95.7
million of which $74.8 million was due to weaker foreign currency exchange
rates, a $67.1 million provision for IAM retroactive pay, increased other
operating expenses of $104.6 million and increased aircraft maintenance of
$46.5 million, all of which were partially offset by a $104.9 million
increase in other revenue and a $111.7 million decrease in aircraft fuel.
OPERATING REVENUES. Operating revenues were $4.90 billion, a decrease of
$28.6 million (.6%). System passenger revenues (which represented 85.1% of
total operating revenues) decreased $95.7 million (2.2%). The decrease was
attributable to a 3.2% decrease in Northwest's RASM. The decrease in RASM
was attributable to weaker Asian markets, the reinstatement of federal ticket
taxes in March 1997 and weaker foreign currency exchange rates. Passenger
revenue included $50.6 million and $36.9 million of Express revenues for the
six months ended June 30, 1998 and 1997, respectively.
Domestic passenger revenue, excluding Express, decreased $39.0 million (1.3%)
to $2.88 billion due largely to a 1.3% decrease in ASMs resulting from a
reduction in capacity and higher than normal flight cancellations. Since
early April, the Company has experienced record high flight cancellations and
delays resulting from employee work actions in response to the status of the
Company's contract negotiations with its unions. See also "Other Information
- - LABOR AGREEMENTS." A 1.1 point increase in passenger load factor somewhat
offset a decrease in yield which was held down due to the reinstatement of
federal taxes on airline tickets and international departures resulting in a
0.1% decrease in RASM.
Pacific passenger revenue decreased by $133.6 million (13.0%) to $894.9
million due to an 11.7% decrease in Pacific RASM. The decrease in Pacific
RASM was primarily due to a 10.6% decrease in yield and a 1.1 point decrease
in passenger load factor. The decrease in yield was attributable to an
unfavorable general economic environment in the Pacific and weaker Asian
currencies, of which the largest impact was due to the Japanese economy and
yen. The average yen per U.S. dollar exchange rate for the six months ended
June 30, 1998 and 1997 was 133 and 121, respectively, a weakening of the yen
of 9.9%. Atlantic passenger revenue increased $63.2 million (22.1%) to $349.3
million primarily due to a 23.9% increase in scheduled service ASMs which
resulted primarily from new flying.
12
<PAGE>
Cargo revenue decreased $37.8 million (10.3%) to $328.8 million due to 5.3%
fewer cargo ton miles and a 5.4% decrease in cargo revenue per ton mile,
driven by weaker Asian markets and weaker foreign currency exchange rates.
Other revenues were $402.5 million, an improvement of $104.9 million (35.2%).
The improvement was largely due to increased revenue from KLM joint venture
alliance settlements and MLT Inc.
OPERATING EXPENSES. Operating expenses increased $120.9 million (2.7%).
Operating capacity increased 0.7% to 47.6 billion total service ASMs with
operating expense per total service ASM increasing 0.8%. Salaries, wages and
benefits expense increased $117.0 million (7.8%) due primarily to a $67.1
million provision for IAM retroactive pay and an increase in average
full-time equivalent employees of 5.3%. See "Other Information - LABOR
AGREEMENTS". Aircraft fuel and taxes decreased $111.7 million (15.7%) due to
an 18.1% decrease in average fuel cost per gallon. Commissions decreased by
$49.0 million (11.6%) due primarily to a lower effective commission rate
caused by a shift in revenue mix and changes to the Company's commission
structure which began in September 1997. Aircraft maintenance materials and
repairs increased $46.5 million (14.5%) due primarily to increased scheduled
overhauls, timing of check cycles and increased utilization of outside
suppliers, which the Company anticiptates continuing at the same rate for the
remainder of 1998. Other expenses grew $104.6 million (10.9%) due mostly to
higher volume of business for MLT Inc., increased claims from flight
disruptions due to employee work actions and weather, outside services,
selling and marketing fees and supplies.
OTHER INCOME AND EXPENSE. The foreign currency gain for the six months ended
June 30, 1998 was primarily attributable to balance sheet remeasurement of
foreign currency-denominated assets and liabilities. The foreign currency
loss for the six months ended June 30, 1997 was attributable to charges
related to Japanese yen forward exchange and collar option contracts and
balance sheet remeasurement of foreign currency-denominated assets and
liabilities.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had cash and cash equivalents of $898.1
million, unrestricted short-term investments of $61.6 million, borrowing
capacity of $1.84 billion under its revolving credit facilities and the
ability under another facility to borrow up to $240 million using existing
aircraft as collateral, providing total available liquidity of $3.04 billion.
In light of the status of the Company's negotiations with its labor unions,
in August 1998, the Company borrowed all amounts available under these
facilities. See "Other Information - LABOR AGREEMENTS".
Net cash provided by operating activities for the six months ended June 30,
1998 was $489.6 million, a $64.1 million increase compared with the six
months ended June 30, 1997 due primarily to an increase in working capital.
Investing activities in 1998 consisted primarily of the purchase of eight
Airbus A320 aircraft, three used DC-10 aircraft and six RJ85 aircraft; costs
to commission aircraft that have not yet entered revenue service, engine
hushkitting, aircraft modifications and aircraft deposits. Investing
activities in 1997 consisted primarily of costs to commission aircraft that
have not yet entered revenue service, engine hushkitting, DC9-50 interior
refurbishment, aircraft deposits, ground equipment purchases and the
acquisition of Express. Financing activites for the six months ended June
30, 1998 consisted primarily of the issuance of $200 million of 7.625%
unsecured notes due 2005 and $200 million of 7.875% unsecured notes due 2008,
the payment of debt and capital lease obligations, the repurchase of common
stock and the sale and leaseback of three A320 aircraft and four RJ85
aircraft. Financing activities in 1997 consisted primarily of the issuance
of $150 million of 8.375% notes due 2004 and $100 million of 8.70% notes due
2007 and the payment of debt and capital lease obligations.
On May 1, 1998, NWA Corp. purchased from KLM the remaining 18.2 million
shares of NWA Corp. common stock which the Company had agreed to repurchase
over a three year period ending in September 2000. The purchase price of
$780.4 million was paid with a combination of $336.7 million of cash and
three senior unsecured notes due over three years for the remainder. The
cash was funded from the Company's general working capital.
13
<PAGE>
In 1998, NWA Corp. entered into agreements to acquire the beneficial
ownership of 9,514,868 shares of Class A Common Stock of Continental
Airlines, Inc. ("Continental"). These shares represent 15.4% of
Continental's common stock and 50.4% of its fully diluted voting power as of
December 31, 1997. Consideration is expected to consist of $367.2 million in
cash and 4.2 million shares of newly issued common stock. The cash is
expected to be funded from the Company's general working capital. The
transaction is expected to close by the end of 1998. For additional
information regarding the formation of a new holding company and the related
corporate restructuring, the Governance Agreement with Continental and the
operating alliance, see Note S to the Consolidated Financial Statements in
the Annual Report.
OTHER INFORMATION
LABOR AGREEMENTS. The Company's labor contracts with its three major domestic
employee unions became amendable in late 1996 and contract negotiations with
each union commenced at that time. See "Business - EMPLOYEES" in the Annual
Report on Form 10-K for the specific amendable dates. Under the Railway
Labor Act ("RLA"), the amendable agreement continues in effect while the
parties negotiate a new contract. In addition to direct negotiation, the RLA
also provides for a period of mediation, potential arbitration of unresolved
issues and a 30-day "cooling off" period before either party can resort to
self-help. The self-help remedies include, but are not limited to, a strike
by the members of the labor union and the imposition of proposed contract
amendments and hiring of replacement workers by the Company. Because the
terms of new labor agreements will be determined by collective bargaining,
the Company cannot predict the outcome of negotiations at this time.
The Company and the IAM reached a tentative agreement in June 1998, which was
not ratified by the covered employees, who include mechanics and related
employees, clerks, agents, equipment service employees and stock clerks. In
addition, on July 23, 1998, the Aircraft Mechanics Fraternal Association
("AMFA") filed an application with the National Mediation Board ("NMB")
seeking recognition as the collective-bargaining representative for
Northwest's mechanics and related employees who are currently covered by the
IAM. On August 12, 1998, the IAM requested that the NMB release the IAM from
mediation pursuant to the RLA to commence a 30-day "cooling off" period. The
NMB has not acted on the IAM's request. On August 13, 1998, the NMB advised
the Company that the NMB was authorizing a mail ballot election to determine
whether the IAM or AMFA should be the collective bargaining representative
for the Company's mechanics and related employees. The Company remains in
direct negotiations with its flight attendants union. On July 30, 1998 an
impasse was declared between the Company and its pilots union. The NMB
offered to submit the remaining issues to binding arbitration. The Company
accepted, but the pilots union rejected the NMB's offer which began a 30-day
"cooling off" period during which the two sides will continue to seek a
resolution to their differences. Beginning August 29, 1998 either party may
resort to self-help. In addition, as a result of the commencement of the
"cooling off" period, the Company anticipates that its third quarter traffic
will be adversely impacted. An extended work stoppage would have a material
adverse impact on the Company.
FOREIGN CURRENCY. The Company is exposed to the effect of foreign exchange
rate fluctuations on the U.S. dollar value of foreign currency-denominated
operating revenues and expenses. The Company's largest exposure comes from
the Japanese yen. In recent periods, the yen has weakened as the yen to U.S.
dollar exchange rate has changed from 115 yen to $1 at June 30, 1997 to 131
yen to $1 at December 31, 1997 to 139 yen to $1 at June 30, 1998. From time
to time the Company uses options and forward contracts to hedge its
anticipated yen-denominated net cash flows. At June 30, 1998, the Company
had $300.7 million (41.8 billion yen) in yen put options outstanding to hedge
its entire remaining 1998 anticipated yen-denominated net cash inflows.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note P to Consolidated Financial Statements in the Annual
Report contain additional discussion on risk management and financial
instruments.
AIRCRAFT FUEL. In the ordinary course of business, the Company manages the
price risk of fuel primarily utilizing futures contracts traded on regulated
exchanges. Gains or losses on hedge contracts are deferred until the related
fuel inventory is expensed. As of June 30, 1998, the Company had hedged
approximately 58% of its remaining 1998 fuel requirements.
14
<PAGE>
REGULATION. In April 1998, the Department of Transportation ("DOT") issued
proposed competition guidelines which would severely limit major carriers'
ability to compete with new entrant carriers. In addition, the Department of
Justice is investigating competition at major hub airports and several items
of legislation have been introduced in Congress that would, if enacted: (i)
authorize the withdrawal of slots from major carriers at key airports for
redistribution to new entrants and smaller carriers and/or (ii) provide
financial assistance, in the form of guarantees and/or subsidized loans, to
smaller carriers for aircraft purchases. The outcomes of the DOT guidelines,
the investigations and the proposed legislation are unknown. However, to the
extent that (i) restrictions are imposed upon Northwest's ability to respond
to competition, (ii) slots are taken from Northwest at key airports, or (iii)
competitors receive financial assistance, Northwest's business may be
adversely impacted.
YEAR 2000. The Company has spent $8 million for the six months ended June
30, 1998, for a total of $18 million of the total estimated cost of $55
million to ensure that the Company's computer systems will function properly
in the year 2000 and thereafter. Renovation to the Company's computer
systems is 60% complete. Validation and implementation are expected to be
completed in 1998 with integration testing occurring in 1999. The Company is
in the assessment phase of the impact of Year 2000 on its embedded operating
systems and third party relationships, which is expected to be completed in
the third quarter of 1998. The Company continues to work closely with the
governmental organizations and entities which provide essential aviation
industry infrastructure and is monitoring their progress together with other
airlines. The Company is working on developing contingency plans that will
address business continuance in 2000, which are expected to be complete by
the end of 1998. Management's Discussion and Analysis of Financial Condition
in the Annual Report contains additional information about this issue.
AIR CHINA ALLIANCE. On May 12, 1998, the Company entered into a four year
commercial cooperation alliance with Air China. The alliance will connect
the two carriers' networks and will include code-sharing, frequent flyer
program reciprocity and joint marketing. In addition, three Northwest
alliance partners (Alaska Airlines, America West Airlines and Continental)
have also entered into alliance agreements with Air China.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1.
Reference is made to Item 3, "Legal Proceedings" included in the Annual Report.
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 will not have a material adverse effect on the
Company's consolidated financial statements taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company's Annual Meeting of Stockholders was held on April 24, 1998.
An amendment to the Second Amended and Restated Certificate of Incorporation
to combine and reclassify the existing separate classes of voting and
non-voting Class A and Class B Common Stock into a single class of voting
Common Stock was submitted to a vote of security holders.
The votes of the stockholders on this proposal were as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstaining Broker Nonvotes
--------- ------------- ---------------- ---------------
<S> <C> <C> <C>
Class A Common Stock and
Series C Preferred Stock 80,155,552 439,608 301,758 2,999,133
Class B Common Stock 10,302 0 0 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
4.1 Amended and Restated Rights Agreement dated as of June 25, 1998
between Northwest Airlines Corporation and Norwest Bank
Minnesota, N.A., as Rights Agent (filed as Exhibit 1 to
Northwest Airlines Corporation's Current Report on Form 8-K
dated June 25, 1998 and incorporated herein by reference).
4.2 Common Stock Option Agreement between Northwest Airlines
Corporation and Koninklijke Luchtvaart Maatschappij N.V. dated
as of May 1, 1998.
10.1 Accelerated Common Stock Repurchase Agreement between Northwest
Airlines Corporation and Koninklijke Luchtvaart Maatschappij
N.V. and dated as of May 1, 1998.
10.2 Amended and Restated Standstill Agreement between Koninklijke
Luchtvaart Maatschappij N.V. and Northwest Airlines Corporation
dated as of May 1, 1998.
10.3 Credit Agreement among Northwest Airlines Corporation, NWA
Inc., Northwest Airlines, Inc. and various lending institutions
named therein dated as of December 15, 1995, as amended and
restated as of October 16, 1996 and as further amended and
restated as of December 29, 1997.
10.4 First Amendment to Credit Agreement among Northwest Airlines
Corporation, NWA Inc., Northwest Airlines, Inc. and various
lending institutions named therein dated as of January 23, 1998.
10.5 Temporary Amendment to Credit Agreement among Northwest
Airlines Corporation, NWA Inc., Northwest Airlines, Inc. and
various lending institutions named therein dated as of May 12,
1998.
10.6 Aircraft Mortgage and Security Agreement between Northwest
Airlines, Inc. and Bankers Trust Company, as Collateral Agent
dated as of May 12, 1998.
10.7 Slot Security Agreement between Northwest Airlines, Inc. and
Bankers Trust Company, as Collateral Agent, dated as of May 12,
1998.
10.8 Credit Agreement among Northwest Airlines Corporation, NWA
Inc., Northwest Airlines, Inc. and various lending
institutions named therein dated as of May 12, 1998.
10.9 First Amendment to Credit Agreement among Northwest Airlines
Corporation, NWA Inc., Northwest Airlines, Inc. and various
lending institutions named therein dated as of May 29, 1998.
10.10 Aircraft Mortgage and Security Agreement between Northwest
Airlines, Inc. and the Chase Manhattan Bank, as Collateral
Agent, dated as of May 12, 1998.
16
<PAGE>
10.11 Route Security Agreement between Northwest Airlines, Inc. and
the Chase Manhattan Bank, as Collateral Agent dated as May
12, 1998.
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.
(b) REPORTS ON FORM 8-K:
Form 8-K dated April 3, 1998.
Form 8-K dated June 18, 1998.
Form 8-K dated June 25, 1998.
17
<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: August 14, 1998 By: /s/ Rolf S. Andresen
---------------------------
Rolf S. Andresen
Vice President- Finance and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
4.1 Amended and Restated Rights Agreement dated as of June 25,
1998 between Northwest Airlines Corporation and Norwest
Bank Minnesota, N.A., as Rights Agent (filed as Exhibit 1
to Northwest Airlines Corporation's Current Report on Form
8-K dated June 25, 1998 and incorporated herein by
reference).
4.2 Common Stock Option Agreement between Northwest Airlines
Corporation and Koninklijke Luchtvaart Maatschappij N.V.
dated as of May 1, 1998.
10.1 Accelerated Common Stock Repurchase Agreement between
Northwest Airlines Corporation and Koninklijke Luchtvaart
Maatschappij N.V. and dated as of May 1, 1998.
10.2 Amended and Restated Standstill Agreement between
Koninklijke Luchtvaart Maatschappij N.V. and Northwest
Airlines Corporation dated as of May 1, 1998.
10.3 Credit Agreement among Northwest Airlines Corporation, NWA
Inc., Northwest Airlines, Inc. and various lending
institutions named therein dated as of December 15, 1995,
as amended and restated as of October 16, 1996 and as
further amended and restated as of December 29, 1997.
10.4 First Amendment to Credit Agreement among Northwest
Airlines Corporation, NWA Inc., Northwest Airlines, Inc.
and various lending institutions named therein dated as of
January 23, 1998.
10.5 Temporary Amendment to Credit Agreement among Northwest
Airlines Corporation, NWA Inc., Northwest Airlines, Inc.
and various lending institutions named therein dated as of
May 12, 1998.
10.6 Aircraft Mortgage and Security Agreement between Northwest
Airlines, Inc. and Bankers Trust Company, as Collateral
Agent dated as of May 12, 1998.
10.7 Slot Security Agreement between Northwest Airlines, Inc.
and Bankers Trust Company, as Collateral Agent, dated as of
May 12, 1998.
10.8 Credit Agreement among Northwest Airlines Corporation, NWA
Inc., Northwest Airlines, Inc. and various lending
institutions named therein dated as of May 12, 1998.
10.9 First Amendment to Credit Agreement among Northwest
Airlines Corporation, NWA Inc., Northwest Airlines, Inc.
and various lending institutions named therein dated as of
May 29, 1998.
10.10 Aircraft Mortgage and Security Agreement between Northwest
Airlines, Inc. and the Chase Manhattan Bank, as Collateral
Agent, dated as of May 12, 1998.
18
<PAGE>
10.11 Route Security Agreement between Northwest Airlines, Inc.
and the Chase Manhattan Bank, as Collateral Agent dated as
May 12, 1998.
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.
19
<PAGE>
CONFORMED COPY
NORTHWEST AIRLINES CORPORATION COMMON STOCK OPTION AGREEMENT
COMMON STOCK OPTION AGREEMENT, dated as of May 1, 1998 (this "OPTION
AGREEMENT"), between NORTHWEST AIRLINES CORPORATION, a Delaware corporation
("NWA CORP.") and KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a Netherlands
corporation ("KLM").
W I T N E S S E T H :
WHEREAS, NWA Corp. and KLM are parties to a Common Stock Repurchase
Agreement dated as of September 29, 1997, as amended (the "ORIGINAL
REPURCHASE AGREEMENT");
WHEREAS, pursuant to the Original Repurchase Agreement, on September 29,
1997 NWA Corp. repurchased from KLM 6,800,000 shares of NWA Corp.'s Class A
Common Stock, par value $.01 per share, and agreed to repurchase from KLM an
additional 18,177,874 Shares over the next three years;
WHEREAS, the parties wish to accelerate to the repurchase by NWA Corp.
from KLM of such additional 18,177,874 Shares, and to that end have entered
into the Accelerated Common Stock Repurchase Agreement, dated as of May 1,
1998 (the "ACCELERATED REPURCHASE AGREEMENT"; capitalized terms used herein
and not otherwise defined shall have the meanings given to them in the
Accelerated Repurchase Agreement) to provide for such accelerated repurchase
and certain other matters; and
WHEREAS, as an inducement to the willingness of KLM to agree to the
terms of the Accelerated Repurchase Agreement, NWA Corp. has agreed to grant
KLM the Options (as hereinafter defined) and to enter into this Option
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Accelerated Repurchase
Agreement, the parties hereto agree as follows:
ARTICLE I
GRANT OF OPTIONS
1.1 FIRST OPTION. (a) NWA Corp. hereby grants to KLM an
irrevocable option (the "FIRST OPTION") to purchase, subject to the terms
hereof, and subject to adjustment in accordance with Section 2.2(a) and
2.2(b), an aggregate of 13,277,874 Shares (the "FIRST OPTION SHARES") upon
the occurrence of a First Option Trigger Event (as defined below).
<PAGE>
2
(b) The price at which the First Option is exercisable is equal to:
(i) $237,694,888.24, which equals the sum of the aggregate
original principal amount of the promissory notes issued pursuant to
Sections 2.1(a)(ii) ("NOTE 2") and 2.1(a)(iii)(1) ("NOTE 3") of the
Accelerated Repurchase Agreement; PLUS
(ii) the sum of (A) an accretion factor at a 5% per annum rate
applied to the principal amounts of Note 2 and Note 3 outstanding from
time to time, with such accretion factor calculated based on the period
from and after the Closing Date and ending on (x) to the extent
outstanding or repaid on the First Option Closing Date, the First Option
Closing Date or (y) to the extent any portion of such principal amounts
is repaid prior to the First Option Closing Date, on such earlier date
or dates on which such repayments occur, plus (B) in the event any such
repayments occur prior to the First Option Closing Date, an accretion
factor (compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 2 and/or Note 3 that may be made from time
to time prior to the First Option Closing Date, with such accretion
factor calculated based, in respect of each such principal repayment, on
the period from and after the respective dates of such principal
repayments and ending on the First Option Closing Date; PLUS
(iii) to the extent any interest payments have been made on
Note 2 or Note 3 prior to the First Option Closing Date, an amount
calculated by applying a 5% per annum accretion factor, compounded
annually, to the portion of each such interest payment representing
interest accrued at a rate equal to 5% per annum, such accretion to be
calculated from the date of each such interest payment to the First
Option Closing Date; PLUS
(iv) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor (compounded annually) from
the Closing Date to the First Option Closing Date; LESS
(v) $28,052,064.10 if the First Option Closing Date is
September 29, 1999, or such amount decreased by a 5% per annum accretion
factor (compounded annually) if the First Option Closing Date is prior
to such date or increased by a 5% per annum accretion factor (compounded
annually) if the First Option Closing Date is after such date.
(c) In the event a Control Transaction is consummated which results
in a payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates only to Shares subject to repurchase
pursuant to Section 2.1(a)(ii) (and does not relate to Shares subject to
repurchase pursuant to Section 2.1(a)(iii)) of the Accelerated Repurchase
Agreement, the number of First Option Shares shall be reduced to 10,055,335,
and the price at which the First Option is exercisable will be equal to:
<PAGE>
3
(i) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(ii) the sum of (A) an accretion factor at a 5% per annum
rate applied to the principal amount of Note 3 outstanding from time to
time, with such accretion factor calculated based on the period from and
after the Closing Date and ending on (x) to the extent outstanding or
repaid on the First Option Closing Date, the First Option Closing Date
or (y) to the extent any portion of such principal amount is repaid
prior to the First Option Closing Date, on such earlier date or dates on
which such repayments occur, plus (B) in the event any such repayments
occur prior to the First Option Closing Date, an accretion factor
(compounded annually) at a 5% per annum rate applied to the principal
repayments of Note 3 that may be made from time to time prior to the
First Option Closing Date, with such accretion factor calculated based,
in respect of each such principal repayment, on the period from and
after the respective dates of such principal repayments and ending on
the First Option Closing Date; PLUS
(iii) to the extent any interest payments have been made on
Note 3 prior to the First Option Closing Date, an amount calculated by
applying a 5% per annum accretion factor, compounded annually, to the
portion of each such interest payment representing interest accrued at a
rate equal to 5% per annum, such accretion to be calculated from the
date of each such interest payment to the First Option Closing Date; PLUS
(iv) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor (compounded annually) from
the Closing Date to the First Option Closing Date; LESS
(v) $23,160,543.81 if the First Option Closing Date is
September 29, 1999, or such amount decreased by a 5% per annum accretion
factor (compounded annually) if the First Option Closing Date is prior
to such date or increased by a 5% per annum accretion factor (compounded
annually) if the First Option Closing Date is after such date.
(d) In the event a Control Transaction is consummated which results
in a payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates to Shares subject to repurchase pursuant
to Section 2.1(a)(ii) and 2.1(a)(iii) of the Accelerated Repurchase
Agreement, the First Option shall be immediately null and void.
1.2 SECOND OPTION. (a) NWA Corp. hereby grants to KLM an
irrevocable option (the "SECOND OPTION") to purchase, subject to the terms
hereof, an aggregate of 10,055,335 Shares (the "SECOND OPTION SHARES") upon
the occurrence of a Second Option Trigger Event (as defined below).
<PAGE>
4
(b) The price at which the Second Option is exercisable is equal to:
(i) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(ii) the sum of (A) an accretion factor at a 5% per annum
rate applied to the principal amount of Note 3 outstanding from time to
time, with such accretion factor calculated based on the period from and
after the Closing Date and ending on (x) to the extent outstanding or
repaid on the Second Option Closing Date, the Second Option Closing Date
or (y) to the extent any portion of such principal amount is repaid
prior to the Second Option Closing Date, on such earlier date or dates
on which such repayments occur, plus (B) in the event any such
repayments occur prior to the Second Option Closing Date, an accretion
factor (compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 3 that may be made from time to time prior
to the Second Option Closing Date, with such accretion factor calculated
based, in respect of each such principal repayment, on the period from
and after the respective dates of such principal repayments and ending
on the Second Option Closing Date; PLUS
(iii) to the extent any interest payments have been made on
Note 3 prior to the Second Option Closing Date, an amount calculated by
applying a 5% per annum accretion factor, compounded annually, to the
portion of each such interest payment representing interest accrued at a
rate equal to 5% per annum, such accretion to be calculated from the
date of each such interest payment to the Second Option Closing Date;
PLUS
(iv) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor (compounded annually) from
the Closing Date to the First Option Closing Date; LESS
(v) $24,318,571.00 if the Second Option Closing Date is
September 29, 2000, or such amount decreased by a 5% per annum accretion
factor (compounded annually) if the Second Option Closing Date is prior
to such date or increased by a 5% per annum accretion factor (compounded
annually) if the Second Option Closing Date is after such date.
(c) In the event a Control Transaction is consummated which results
in a payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates to Shares subject to repurchase pursuant
to Section 2.1(a)(iii) of the Accelerated Repurchase Agreement, the Second
Option shall be immediately null and void.
1.3 DEFAULT OPTION. (a) NWA Corp. hereby grants to KLM an
irrevocable option (the "DEFAULT OPTION") to purchase, subject to the terms
hereof, and subject to adjustment in accordance with Section 2.4, the
relevant number, as of the date of exercise of the Default Option, of Default
Option Shares upon the occurrence of a Default Option Trigger
<PAGE>
5
Event. The number of "DEFAULT OPTION SHARES" shall initially be 18,177,847
Shares and shall be reduced (on a cumulative basis) by
(i) 4,900,000 Shares on the later of (x) the date of repayment
in full of Note 1, (y) September 29, 1998 or (z) in the event on or
prior to September 29, 1998, KLM has delivered to Northwest Airlines,
Inc. ("Northwest") a notice under Section 1.04(b) of the Alliance
Implementation Agreement of a Material Default on the part of Northwest,
the date of either (A) Northwest's cure of such Material Default, (B) a
determination by the arbitrator(s) appointed pursuant to Section 9.08 of
the Alliance Implementation Agreement that no such a Material Default
exists, or (C) if such arbitrator(s) make a determination that a
Material Default on the part of Northwest 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, it being the case that if clause
(z) is applicable and neither subclauses (A), (B) or (C) occurs, the
reduction provided by this subparagraph (i) shall not occur; PROVIDED,
that upon consummation of a Control Transaction that results in a
payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates to Shares subject to repurchase
pursuant to Section 2.1(a)(i) of the Accelerated Repurchase Agreement,
the reduction provided by this subparagraph (i) shall occur concurrently
with such payment;
(ii) 3,222,559 Shares on the later of (x) the date of
repayment in full of Note 2, (y) September 29, 1999 or (z) in the event
on or prior to September 29, 1999, KLM has delivered to Northwest a
notice under Section 1.04(b) of the Alliance Implementation Agreement of
a Material Default on the part of Northwest, the date of either (A)
Northwest's cure of such Material Default, (B) a determination by the
arbitrator(s) appointed pursuant to Section 9.08 of the Alliance
Implementation Agreement that no such a Material Default exists, or (C)
if such arbitrator(s) make a determination that a Material Default on
the part of Northwest 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, it being the case that if clause (z) is applicable
and neither subclauses (A), (B) or (C) occurs, the reduction provided by
this subparagraph (ii) shall not occur; PROVIDED, that upon consummation
of a Control Transaction that results in a payment to KLM pursuant to
Section 2.2(d) of the Accelerated Repurchase Agreement, and such payment
relates to Shares subject to repurchase pursuant to Section 2.1(a)(ii)
of the Accelerated Repurchase Agreement, the reduction provided by this
subparagraph (ii) shall occur concurrently with such payment; and
(iii) 10,055,335 Shares on the later of (x) the date of
repayment in full of Note 3, (y) September 29, 2000 or (z) in the event
on or prior to September 29, 2000, KLM has delivered to Northwest a
notice under Section 1.04(b) of the Alliance Implementation Agreement of
a Material Default on the part of Northwest, the date of either (A)
Northwest's cure of such Material Default, (B) a determination by the
<PAGE>
6
arbitrator(s) appointed pursuant to Section 9.08 of the Alliance
Implementation Agreement that no such a Material Default exists, or (C)
if such arbitrator(s) make a determination that a Material Default on
the part of Northwest 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, it being the case that if clause (z) is applicable
and neither subclauses (A), (B) or (C) occurs, the reduction provided by
this subparagraph (iii) shall not occur; PROVIDED, that upon
consummation of a Control Transaction that results in a payment to KLM
pursuant to Section 2.2(d) of the Accelerated Repurchase Agreement, and
such payment relates to Shares subject to repurchase pursuant to Section
2.1(a)(iii) of the Accelerated Repurchase Agreement, the reduction
provided by this subparagraph (ii) shall occur concurrently with such
payment.
(b) The price at which the Default Option is exercisable is equal
to:
(i) If the number of Default Option Shares is 18,177,847, an
amount equal to:
(A) $443,671,591.16, which equals the sum of the aggregate
original principal amount of Note 2, Note 3 and the promissory note
issued pursuant to Section 2.1(a)(i) ("NOTE 1") of the Accelerated
Repurchase Agreement; PLUS
(B) the sum of (x) an accretion factor (compounded annually)
at a 5% per annum rate applied to the principal amounts of Note 1,
Note 2 and Note 3 outstanding from time to time, with such
accretion factor calculated based on the period from and after the
Closing Date and ending on (1) to the extent outstanding or repaid
on the Default Option Closing Date, the Default Option Closing Date
or (2) to the extent any portion of such principal amounts is
repaid prior to the Default Option Closing Date, on such earlier
date or dates on which such repayments occur, plus (y) in the event
any such repayments occur prior to the Default Option Closing Date,
an accretion factor (compounded annually) at a 5% per annum rate
applied to the principal repayments of Note 1, Note 2 and/or Note 3
that may be made from time to time prior to the Default Option
Closing Date, with such accretion factor calculated based, in
respect of each such principal repayment, on the period from and
after the respective dates of such principal repayments and ending
on the Default Option Closing Date; PLUS
(C) to the extent any interest payments have been made on
Note 1, Note 2 or Note 3 prior to the Default Option Closing Date,
an amount calculated by applying a 5% per annum accretion factor,
compounded annually, to the portion of each such interest payment
representing interest accrued at a rate equal to 5% per annum, such
accretion to be calculated from the date of each such interest
payment to the Default Option Closing Date; PLUS
<PAGE>
7
(D) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor from the Closing Date
to the Default Option Closing Date; LESS
(E) $28,052,064.10 if the Default Option Closing Date is
September 29, 1999, or such amount decreased by a 5% per annum
accretion factor if the Default Option Closing Date is prior to
such date or increased by a 5% per annum accretion factor if the
Default Option Closing Date is after such date.
(ii) If the number of Default Option Shares is 10,055,335,
an amount equal to:
(A) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(B) the sum of (x) an accretion factor (compounded annually)
at a 5% per annum rate applied to the principal amount of Note 3
outstanding from time to time, with such accretion factor
calculated based on the period from and after the Closing Date and
ending on (1) to the extent outstanding or repaid on the Default
Option Closing Date, the Default Option Closing Date or (2) to the
extent any portion of such principal amount is repaid prior to the
Default Option Closing Date, on such earlier date or dates on which
such repayments occur, plus (y) in the event any such repayments
occur prior to the Default Option Closing Date, an accretion factor
(compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 2 and/or Note 3 that may be made from
time to time prior to the Default Option Closing Date, with such
accretion factor calculated based, in respect of each such
principal repayment, on the period from and after the respective
dates of such principal repayments and ending on the Default Option
Closing Date; PLUS
(C) to the extent any interest payments have been made on
Note 3 prior to the Default Option Closing Date, an amount
calculated by applying a 5% per annum accretion factor, compounded
annually, to the portion of each such interest payment representing
interest accrued at a rate equal to 5% per annum, such accretion to
be calculated from the date of each such interest payment to the
Default Option Closing Date; PLUS
(D) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor from the Closing Date
to the Default Option Closing Date; LESS
(E) $24,318,571.00 if the Default Option Closing Date is
September 29, 2000, or such amount decreased by a 5% per annum
accretion factor if the
<PAGE>
8
Default Option Closing Date is prior to such date or increased
by a 5% per annum accretion factor if the Second Option Closing
Date is after such date.
(iii) If the number of Default Option Shares is 10,055,335,
an amount equal to:
(A) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(B) the sum of (x) an accretion factor (compounded annually)
at a 5% per annum rate applied to the principal amount of Note 3
outstanding from time to time, with such accretion factor
calculated based on the period from and after the Closing Date and
ending on (1) to the extent outstanding or repaid on the Default
Option Closing Date, the Default Option Closing Date or (2) to the
extent any portion of such principal amount is repaid prior to the
Default Option Closing Date, on such earlier date or dates on which
such repayments occur, plus (y) in the event any such repayments
occur prior to the Default Option Closing Date, an accretion factor
(compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 2 and/or Note 3 that may be made from
time to time prior to the Default Option Closing Date, with such
accretion factor calculated based, in respect of each such
principal repayment, on the period from and after the respective
dates of such principal repayments and ending on the Default Option
Closing Date; PLUS
(C) to the extent any interest payments have been made on
Note 3 prior to the Default Option Closing Date, an amount
calculated by applying a 5% per annum accretion factor, compounded
annually, to the portion of each such interest payment representing
interest accrued at a rate equal to 5% per annum, such accretion to
be calculated from the date of each such interest payment to the
Default Option Closing Date; PLUS
(D) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor from the Closing Date
to the Default Option Closing Date; LESS
(E) $24,318,571.00 if the Default Option Closing Date is
September 29, 2000, or such amount decreased by a 5% per annum
accretion factor if the Default Option Closing Date is prior to
such date or increased by a 5% per annum accretion factor if the
Second Option Closing Date is after such date.
<PAGE>
9
ARTICLE II
EXERCISABILITY OF OPTIONS
2.1 COMMENCEMENT OF EXERCISABILITY. (a) KLM may exercise the
First Option, the Second Option or the Default Option (each, an "Option")
only upon the occurrence of a First Option Trigger Event, a Second Option
Trigger Event or a Default Option Trigger Event, respectively (each, a
"Trigger Event").
(b) The deadline for providing notice of exercise of an Option
following the occurrence of a Trigger Event shall be as follows:
(i) In the case of a First Option Trigger Event described in
paragraph (a) of Section 2.2, written notice of exercise of the First
Option must be delivered by KLM to NWA Corp. no later than March 27,
2000; PROVIDED, on the date such notice is delivered the relevant
Adverse U.S. Condition or Adverse European Condition (as defined below),
as applicable, shall be continuing.
(ii) In the case of a First Option Trigger Event described in
paragraph (b) of Section 2.2, written notice of exercise of the First
Option must be delivered by KLM to NWA Corp. during the 30 day period
following the date on which Northwest gave KLM notice of termination of
the Alliance Implementation Agreement as contemplated by said paragraph
(b).
(iii) In the case of a Second Option Trigger Event, written
notice of exercise of the Second Option must be delivered by KLM to NWA
Corp. no later than March 28, 2001; PROVIDED, on the date such notice is
delivered the relevant Adverse U.S. Condition or Adverse European
Condition, as applicable, shall be continuing.
(iv) In the case of a Default Option Trigger Event, written
notice of exercise of the Default Option must be delivered by KLM to NWA
Corp. no later than ten Business Days after KLM has given notice to
Northwest of its termination of the Alliance Implementation Agreement as
contemplated by Section 2.4.
2.2 FIRST OPTION TRIGGER EVENT. A "FIRST OPTION TRIGGER EVENT"
shall mean the occurrence of either of the following:
(a) On September 29, 1999, (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 not have
been renewed or otherwise maintained or such antitrust immunity shall
not 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 or (B) the
European Commission shall have imposed conditions on the
<PAGE>
10
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 September 29, 1997
such that KLM's and Northwest's abilities to operate as contemplated in
the Alliance Implementation Agreement shall have been materially
adversely affected (the events described in (A) and (B) above being
referred to as "ADVERSE U.S. CONDITION" and the "ADVERSE EUROPEAN
CONDITION", respectively), AND KLM shall not have exercised the First
Option pursuant to Section 2.2(b) or the Default Option with respect to
any number of Shares other than 10,055,335; PROVIDED, that if KLM shall
have exercised the Default Option with respect to 10,055,335 Shares
prior to exercising the First Option, KLM shall only have the right to
exercise the First Option with respect to 3,222,559 Shares, and the
aggregate price set forth in Section 1.1(b) for the purchase of such
First Option Shares will be adjusted accordingly; or
(b) Within three months after the later of (i) September 29,
1998 and (ii) the completion of any arbitration proceedings referred to
in the fourth paragraph of the Hub Restrictions Letter (as defined
below), Northwest shall have given KLM notice of termination of the
Alliance Implementation Agreement entered into by KLM and Northwest on
September 29, 1997 in accordance with the letter agreement dated as of
September 29, 1997 between Northwest and KLM (the "HUB RESTRICTIONS
LETTER"), AND KLM shall not have exercised the First Option pursuant to
Section 2.2(a) or the Default Option with respect to any number of
Shares other than 10,055,335; PROVIDED, that if KLM shall have exercised
the Second Option or the Default Option with respect to 10,055,335
Shares prior to exercising the First Option, KLM shall only have the
right to exercise the First Option with respect to 3,222,559 Shares, and
the aggregate price set forth in Section 1.1(b) for the purchase of such
First Option Shares will be adjusted accordingly.
2.3 SECOND OPTION TRIGGER EVENT. A "SECOND OPTION TRIGGER EVENT"
shall occur if on September 29, 2000 an Adverse U.S. Condition or an Adverse
European Condition shall have occurred and be continuing, AND KLM shall not
have exercised the First Option or the Default Option.
2.4 DEFAULT OPTION TRIGGER EVENT. A "DEFAULT OPTION TRIGGER EVENT"
shall occur if, after requisite notice and opportunity to cure having been
provided to Northwest 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
as a result of a Material Default on the part of Northwest (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; PROVIDED, that if KLM shall have exercised the
First Option prior to exercising the Default Option, KLM shall only have the
right to exercise the Default Option with respect to a number of Shares equal
to the number of Shares which KLM would have had the right to purchase
pursuant to the Default Option had it not exercised the First Option minus
<PAGE>
11
13,277,874 (if such calculation results in a number that is not a positive
number, KLM's right to exercise the Default Option shall immediately
terminate), and the aggregate price set forth in Section 1.3(b) for the
purchase of such Default Option Shares will be adjusted accordingly;
PROVIDED, FURTHER, that if KLM shall have exercised the Second Option prior
to exercising the Default Option, KLM shall only have the right to exercise
the Default Option with respect to a number of Shares equal to the number of
Shares which KLM would have had the right to purchase pursuant to the Default
Option had it not exercised the Second Option minus 10,055,335 (if such
calculation results in a number that is not a positive number, KLM's right to
exercise the Default Option shall immediately terminate), and the aggregate
price set forth in Section 1.3(b) for the purchase of such Default Option
Shares will be adjusted accordingly.
2.5 MANNER OF EXERCISE. (a) To exercise the First Option, the
Second Option or the Default Option, KLM shall on or prior to the deadline
set forth in Section 2.1 deliver written notice to NWA Corp. of KLM's
exercise of the relevant option. Such notice shall describe in reasonable
detail the basis upon which the relevant Trigger Event is deemed to have
occurred, and the Option Closing Date shall be 15 Business Days after the
date of the notice of exercise. On such Option Closing Date, KLM shall pay
the applicable exercise price in Cash, against delivery by NWA Corp. to KLM
of one or more stock certificates and/or other property comprising the
Shares. To the extent that KLM is the holder of one or more outstanding
Notes, KLM may demand prepayment of such Note(s) held by it (including
accrued and unpaid interest but without any obligation on the part of NWA
Corp. to pay any Make-Whole Premium thereunder), and the amount owed by KLM
to NWA Corp. in connection with the relevant option exercise may be offset
against the amount owed by NWA Corp. to KLM under such Note(s) (including any
accrued and unpaid interest thereon) being prepaid.
(b) Shares acquired upon KLM's exercise of the First Option, the
Second Option or the Default Option are referred to as "OPTION SHARES".
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF NWA CORP. NWA Corp.
represents and warrants to KLM as follows:
(a) NWA Corp. has all requisite corporate power and authority
to execute and deliver this Option Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Option Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by NWA Corp.'s Board of
Directors and no other corporate proceedings on the part of NWA Corp.
are necessary to authorize the execution and delivery of this Option
Agreement or to consummate the transactions contemplated hereby. This
Option Agreement has been duly and validly executed and delivered by NWA
Corp. and constitutes the legal, valid and binding agreement of NWA
Corp., enforceable
<PAGE>
12
against NWA Corp. in accordance with its terms, except to the extent
that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regarding the availability of remedies.
(b) NWA Corp. has taken all necessary corporate action to
authorize and reserve and to permit it to issue or sell out of its
treasury, as the case may be, and at all times from the date hereof
through the termination of this Option Agreement in accordance with its
terms will have reserved for issuance or sale out of its treasury upon
the exercise of any Option, that number of shares of Common Stock equal
to the maximum number of shares of Common Stock at any time and from
time to time subject to an Option, and all such Shares of Common Stock,
upon issuance pursuant hereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all
claims, liens, encumbrances and security interests and not subject to
any preemptive rights.
3.2 REPRESENTATIONS AND WARRANTIES OF KLM. KLM represents and
warrants to NWA Corp. as follows:
(a) KLM is acquiring the Options and will be acquiring the
Option Shares for its own account for investment with no intention of
distributing or reselling such Options or Option Shares or any part
thereof in any transaction which would be in violation of the securities
laws of the United States of America or any state thereof or any other
jurisdiction, without prejudice, however, to its right at all times to
sell or otherwise dispose of all or any part of such Option Shares in
compliance with the transfer restrictions described in Section 4.2.
(b) KLM acknowledges that the Options and Option Shares to be
issued to it are being offered and sold without registration under the
Securities Act of 1933 (the "SECURITIES ACT") in reliance upon the
exemption provided in Section 4(2) of the Securities Act.
ARTICLE IV
MISCELLANEOUS
4.1 STATUS OF OPTION SHARES. KLM covenants and agrees that all
Option Shares held by KLM shall not be registered on the Foreign Stock
Registry of NWA Corp. so long as such Option Shares are held by KLM or any of
its Affiliates.
4.2 SECURITIES LAW REQUIREMENTS. (a) No Option Shares may be sold,
transferred or otherwise disposed of (any such sale, transfer or other
disposition, a "sale") unless the holder thereof shall have given written
notice to NWA Corp. or its successor of the holder's intention to effect the
sale describing the manner and circumstances thereof (which circumstances
shall include the sale of at least 5,000 Shares) and shall have represented
in
<PAGE>
13
such notice that the proposed sale may be effected without registration under
the Securities Act or under applicable blue sky laws. Such proposed sale may
be effected only if NWA Corp. shall have received such notice and such
representation and notified the holder in writing that either (i) NWA Corp.
accepts such representation or (ii) NWA Corp. requires a written opinion of
counsel reasonably satisfactory to NWA Corp. addressed to NWA Corp. to the
effect that the proposed sale may be effected without registration under the
Securities Act or under applicable blue sky laws. Upon delivery by NWA Corp.
of the notice described in clause (i) of the preceding sentence or receipt by
NWA Corp. of a reasonably satisfactory legal opinion as contemplated by
clause (ii) of the preceding sentence, the holder shall be entitled to effect
a sale of Option Shares as described in and in accordance with the terms of
the notice delivered by the holder to NWA Corp. The holder will cause any
proposed transferee of Option Shares to agree to take and hold such Option
Shares subject to the provisions and upon the conditions specified herein.
Such Option Shares transferred as provided above shall bear the legend set
forth in subparagraph (b) below.
(b) The certificates representing the Option Shares shall bear the
following legend:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THESE SHARES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
(c) The certificates representing the Option Shares, and each
certificate issued in transfer or exchange thereof, shall also bear any
legend required under any applicable securities or blue sky laws.
(d) NWA Corp. may make a notation on its records or give
instructions to any transfer agents of the Common Stock in order to implement
the restrictions on transfer set forth in this Section 4.2. NWA Corp. shall
not incur any liability for any delay in recognizing any transfer of Option
Shares if NWA Corp. reasonably believes that such transfer may have been or
would be in violation of the provisions of the Securities Act or applicable
blue sky laws.
(e) The provisions of Section 4.2 shall not apply to any sale of
Option Shares pursuant to an effective registration statement under the
Securities Act.
4.3 CHOICE OF LAW. THIS OPTION AGREEMENT 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 OPTION AGREEMENT 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 OPTION AGREEMENT.
<PAGE>
14
4.4 COUNTERPARTS. This Option Agreement 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.
4.5 NOTICES. All notices, requests, 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
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
<PAGE>
15
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.
4.6 ASSIGNMENT; SUCCESSORS. The Options shall not be transferable.
Neither KLM nor NWA Corp. may assign any of its rights or obligations under
this Agreement without the prior written consent of the other party hereto;
PROVIDED, that if Shares shall at any time consist not of Common Stock but of
shares or other securities issued by a person other than NWA Corp., NWA Corp.
may assign its rights and obligations hereunder to such other person if such
person undertakes in writing to perform NWA Corp.'s obligations hereunder and
NWA Corp. unconditionally guarantees the performance by such assignee of NWA
Corp.'s obligations hereunder pursuant to a written agreement satisfactory to
KLM, and such other person shall assume the rights and obligations of NWA
Corp. hereunder as though it were a party hereto. Any assignment in
contravention of this provision shall be void. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors in interest and assigns.
4.7 ENTIRE AGREEMENT; NO ORAL WAIVER. This Agreement together with
the Accelerated Repurchase Agreement, constitutes the entire agreement
between 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.
4.8 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.
4.9 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
<PAGE>
16
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 4.6; 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.
4.10 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.
4.11 INTERPRETATION. To the extent any ambiguity arises concerning
the interpretation of this Agreement, the parties agree that this Agreement,
together with the other documents and instruments contemplated hereby, is
intended to preserve the rights and obligations of the parties under the
Original Repurchase Agreement to the fullest extent possible, assuming that
the accelerated repurchase transactions contemplated by Section 2.1 of the
Accelerated Repurchase Agreement take place, and, accordingly, any such
ambiguity hereunder shall be resolved in light of such intent.
<PAGE>
IN WITNESS WHEREOF, the parties have executed, delivered and
entered into this Option Agreement as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By: /s/ James A. Lawrence
----------------------------------
Name: James A. Lawrence
Title: Executive Vice President
and Chief Financial Officer
By: /s/ Douglas M. Steenland
----------------------------------
Name: Douglas M. Steenland
Title: Senior Vice President,
General Counsel and Secretary
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
By: /s/ H. A. Petermeijer
----------------------------------
Name: H. A. Petermeijer
Title: Director Corporate Finance
<PAGE>
____________________________________
ACCELERATED COMMON STOCK
REPURCHASE AGREEMENT
BETWEEN
NORTHWEST AIRLINES CORPORATION
AND
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
DATED AS OF MAY 1, 1998
____________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DELIVERY AND PURCHASE OF SHARES . . . . . . . . . . . . 4
2.1 Purchase and Sale of Shares. . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Effect of Control Transaction. . . . . . . . . . . . . . . . . . . . . . 5
2.3 Effect of Certain Issuances of Common Stock. . . . . . . . . . . . . . . 7
2.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 7
3.1 Representations and Warranties of KLM. . . . . . . . . . . . . . . . . . 7
3.2 Representations and Warranties of NWA Corp . . . . . . . . . . . . . . . 9
ARTICLE IV
COVENANTS. . . . . . . . . . . . . . . . . . 11
4.1 No Transfers, Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Antitrust Immunity and European Community Conditions . . . . . . . . . . 11
4.3 No Stock Splits, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Transfer Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Northwest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V
CONDITIONS PRECEDENT. . . . . . . . . . . . . . . 12
5.1 Conditions to the Closing. . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI
WITHHOLDING TAXES. . . . . . . . . . . . . . . . 14
6.1 United States Federal Withholding Taxes. . . . . . . . . . . . . . . . . 14
-i-
<PAGE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII
GENERAL PROVISIONS . . . . . . . . . . . . . . . 15
7.1 Termination or Abandonment of Agreement. . . . . . . . . . . . . . . . . 15
7.2 Effect on the Original Repurchase Agreement. . . . . . . . . . . . . . . 15
7.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Execution in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.7 Titles and Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Entire Agreement; No Oral Waiver . . . . . . . . . . . . . . . . . . . . 18
7.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.11 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.12 Submission To Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . 18
7.13 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.14 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.15 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.16 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
EXHIBITS
Exhibit A Form of Northwest Airlines Corporation Common Stock Option
Agreement
Exhibit B Form of Amended and Restated Standstill Agreement
Exhibit C-1 Form of Note 1
Exhibit C-2 Form of Note 2
Exhibit C-3 Form of Note 3
Exhibit D Form of Investment Representation Letter
-ii-
<PAGE>
ACCELERATED COMMON STOCK REPURCHASE AGREEMENT
ACCELERATED COMMON STOCK REPURCHASE AGREEMENT dated as of May 1, 1998
between NORTHWEST AIRLINES CORPORATION, a Delaware corporation ("NWA CORP."),
and KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a Netherlands corporation ("KLM").
W I T N E S S E T H :
WHEREAS, NWA Corp. and KLM are parties to a Common Stock Repurchase
Agreement dated as of September 29, 1997, as amended (the "ORIGINAL REPURCHASE
AGREEMENT");
WHEREAS, pursuant to the Original Repurchase Agreement, on September
29, 1997 NWA Corp. repurchased from KLM 6,800,000 shares of NWA Corp.'s Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), and agreed
to repurchase from KLM an additional 18,177,874 Shares (as defined below) over
the next three years; and
WHEREAS, the parties wish to accelerate to the Closing Date specified
herein the repurchase by NWA Corp. from KLM of such additional 18,177,874
Shares;
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 Accelerated Common Stock Repurchase Agreement,
as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"ALLIANCE IMPLEMENTATION AGREEMENT" means the definitive agreement
with respect to commercial cooperation that was entered into by KLM and
Northwest Airlines, Inc. on September 29, 1997.
<PAGE>
2
"ANCILLARY AGREEMENTS" means the Standstill Agreement Amendment and
the Option 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.
"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
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, 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.
"CLOSING DATE" means May 1, 1998 or such earlier date as NWA Corp. and
KLM shall mutually agree. If the Closing Date falls on a date that is not
a Business Day, such Closing Date shall occur on the next succeeding
Business Day.
"COMMON STOCK" means NWA Corp.'s Common Stock, par value $.01 per
share (into which the Class A Common Stock heretofore held by KLM has been
reclassified on a share for share basis), or any common stock into which
the Common Stock of NWA Corp. may be converted by way of a merger pursuant
to Section 251(g) of the General Corporation Law of Delaware (the "DGCL").
"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 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 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, 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
<PAGE>
3
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.
"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).
"OPTION AGREEMENT" means the Northwest Airlines Corporation Stock
Option Agreement dated as of the Closing Date by and between NWA Corp. and
KLM substantially in the form of Exhibit A hereto.
"ORIGINAL PER SHARE PRICE" means (a) $42.867625 with respect to the
4,900,000 Shares referred to in Section 2.1(a)(i), (b) $45.752659 with
respect to the 3,222,539 Shares referred to in Section 2.1(a)(ii), and (c)
$48.831858 with respect to the 10,055,335 Shares referred to in Section
2.1(a)(iii).
"ORIGINAL REPURCHASE DATE" means (a) September 29, 1998 with respect
to the 4,900,000 Shares referred to in Section 2.1(a)(i), (b) September 29,
1999 with respect to the 3,222,539 Shares referred to in Section
2.1(a)(ii), and (c) September 29, 2000 with respect to the 10,055,335
Shares referred to in Section 2.1(a)(iii).
"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.
A "SHARE" means, as of the date hereof, one share of 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,
<PAGE>
4
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 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 the Standstill Agreement, dated as of
September 29, 1997, by and between KLM and NWA Corp. executed pursuant to
the Original Repurchase Agreement.
"STANDSTILL AGREEMENT AMENDMENT" means the amendment to the Standstill
Agreement to be dated as of the Closing Date, substantially in the form of
Exhibit B hereto.
"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) CLOSING DATE. On the terms and
subject to the conditions of this Agreement, on the Closing Date, KLM agrees to
transfer, assign and deliver to NWA Corp. the following:
(i) 4,900,000 Shares against delivery by NWA Corp. of a duly
executed promissory note payable to the order of KLM
issued by Northwest Airlines, Inc. ("NORTHWEST") and
guaranteed by NWA Corp., dated the Closing Date and
substantially in the form of Exhibit C-1 hereto
("NOTE 1"), in the aggregate principal amount (assuming
a May 1, 1998 Closing Date) of $205,976,702.92;
(ii) 3,222,539 Shares against delivery by NWA Corp. of a
duly executed promissory note payable to the order
of KLM issued by Northwest and guaranteed by NWA Corp.,
dated the Closing Date and substantially in
<PAGE>
5
the form of Exhibit C-2 hereto ("NOTE 2"), to KLM in the
aggregate principal amount (assuming a May 1, 1998 Closing
Date) of $137,694,888.24; and
(iii) 10,055,335 Shares against the delivery by NWA Corp. of (1)
$101,482,254.42 in Cash, representing the proceeds to be
received by Northwest on the Closing Date from the sale on
the Closing Date of one or more duly executed promissory
notes payable to the order of Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank") issued by
Northwest and guaranteed by NWA Corp., dated the Closing
Date and substantially in the form of Exhibit C-3 hereto in
the aggregate principal amount of $100,000,000 ("NOTE 3",
and collectively with Note 1 and Note 2, the "NOTES"), and
(2) $336,730,772.35 in Cash (assuming a May 1, 1998 Closing
Date);
comprised of a certificate or certificates representing 18,177,874 Shares, and
NWA Corp. agrees to purchase such Shares and make such payment to KLM against
delivery of such certificates on the Closing Date. The certificates
representing such Shares shall be duly endorsed in blank or accompanied by stock
powers duly executed in blank, with all necessary stock transfer stamps affixed.
In the event Rabobank fails to deliver to NWA Corp. on the Closing Date the
amount described in clause (iii)(1) above, NWA Corp. may, in full satisfaction
of its payment obligation under said clause (iii)(1), deliver to KLM Note 3
which would have otherwise been delivered to Rabobank had such payment been made
by Rabobank.
(b) CHANGE IN CLOSING DATE AND ACCRETION ADJUSTMENT. In the event
the Closing Date occurs other than on May 1, 1998 for any reason, the aggregate
principal amount of Note 1 and Note 2 and the Cash purchase price for the Shares
described in Section 2.1(a)(iii)(2) will be higher or lower than the amount
indicated in paragraph (a) above based on a 5% per annum accretion factor.
(c) CLOSING. The closing of the purchases and sales contemplated by
Section 2.1(a) of this Agreement will take place at the offices of Simpson
Thacher & Bartlett at 10:00 a.m. New York City time on the Closing Date.
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. NWA Corp. shall notify KLM as promptly as practicable of its good faith
estimate of the Transactional Value Per Share, but in no event later than 20
days prior to the date any payment is required to be
<PAGE>
6
made pursuant to subsection (d) below. 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 prices 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.
(c) NWA Corp. and KLM will attempt to agree on the value of securities
or other property described in clause (iv) 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 such Transactional Value Per Share (as finally determined in
accordance with this Section 2.2) is higher than the Original Per Share Price
for any Shares referenced in Section 2.1(a) whose Original Repurchase Date is a
date occurring after the consummation of such Control Transaction (Shares
fitting such description being referred to as "AFFECTED SHARES"), then NWA Corp.
will make a payment to KLM in respect of the Affected Shares equal to the
product of (A) the number of such Affected Shares times (B) the excess of (x)
the Transactional Value Per Share over (y) the Original Per Share Price for such
Affected Shares. Such payment shall be made on the date of consummation of such
Control Transaction or as promptly as practicable thereafter. No payment shall
be made in respect of any Shares whose Original Repurchase Date is a date
occurring prior to the date of consummation of the Control Transaction or whose
Original Repurchase Price is greater than the Transactional Value Per Share.
Notwithstanding the foregoing, in no event shall any such payment be made in
respect of any Shares as to which KLM has exercised its option to acquire the
corresponding Shares pursuant to the Option Agreement.
(e) Notwithstanding anything to the contrary in this Agreement or the
Option Agreement, if a Control Transaction involves a transaction where part of
the transaction consideration consists of securities or other property, then at
its option KLM, upon written notice delivered to NWA Corp. no later than 10
Business Days after final determination of
<PAGE>
7
the Transactional Value Per Share pursuant to this Section 2.2, may
irrevocably waive, with respect to the resulting Affected Shares, if any,
KLM's right to receive the payment otherwise required to be made by NWA Corp.
to KLM pursuant to Section 2.2(d) in respect of such Affected Shares, in
which case such Control Transaction will not cause any change in the
applicable price of, any adjustment to, or any termination of, any Option
pursuant to any of Sections 1.1(c), 1.1(d), 1.2(c), 1.3(a)(i), 1.3(a)(ii) or
1.3(a)(iii) of the Option Agreement.
2.3 EFFECT OF CERTAIN ISSUANCES OF COMMON STOCK. If after September
29, 1997 and prior to September 29, 1998, NWA Corp. or its successor 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 Original Per Share
Prices, then on the Original Repurchase Date for Shares whose Original Per Share
Price is less than such weighted average price, NWA Corp. will make a payment to
KLM equal to the product of (A) the number of Shares to which such Original
Repurchase Date relates, times (B) the excess of such higher weighted average
price over such Original Per Share Price; PROVIDED, no such payment shall be
required to be made 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.
2.4 TAXES. 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 2.2(d) or 2.3 which would
not have been imposed had the purchase and sale of Shares occurred on the
Original Repurchase Dates in accordance with the Original Repurchase Agreement.
KLM will seek indemnity under this Section 2.4 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 2.2(d) or 2.3 as the
tax consequences that apply to consideration received by KLM under Section 2.1.
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 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
<PAGE>
8
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 nor 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 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 currently necessary 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.
(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 Closing Date KLM will have, good and valid
title to the Shares to be purchased by NWA Corp. on the Closing Date, free
and clear of all Liens, except any Liens created pursuant to the terms of
this Agreement and the Original Repurchase Agreement.
(g) KLM is the record and beneficial owner on the date hereof of
18,177,874 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 Option Agreement.
<PAGE>
9
(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.
(i) KLM is acquiring the Notes for its own account for investment with
no intention of distributing or reselling such Notes or any part thereof in
any transaction which would be in violation of the securities laws of the
United States of America or any state thereof or any other jurisdiction,
without prejudice, however, to its right at all times to sell or otherwise
dispose of all or any part of such Notes in compliance with the transfer
restrictions described in Section 4.4.
(j) KLM acknowledges that the Notes to be issued to it are being
offered and sold without registration under the Securities Act of 1933 (the
"SECURITIES ACT") in reliance upon the exemption provided in Section 4(2)
of the Securities Act. KLM further acknowledges that such exemption
depends in part upon, and such Notes are being issued in reliance upon, the
following representations and warranties: KLM has access to the periodic
reports filed by NWA Corp. prior to the date hereof under the Exchange Act;
it has made, and is solely responsible for making, its own independent
evaluation of the economic, credit and other risks involved in accepting
the Notes as part of the purchase price for the Shares; it has been given
the opportunity to ask questions of, and receive answers from, NWA Corp.
concerning the business conducted by NWA Corp. and its subsidiaries and the
financial condition of NWA Corp. and its subsidiaries; and it has been
given the opportunity to obtain any additional information necessary in
order to make an informed decision with respect to such acceptance of the
Notes to the extent that NWA Corp. possesses such information or can
acquire it without unreasonable effort or expense.
3.2 REPRESENTATIONS AND WARRANTIES OF NWA CORP. NWA Corp. represents
and warrants to KLM as of the date hereof and as of the 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. 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 subject to Section 5.1(a)(v), 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 5.1(a)(v), each of this Agreement and the Ancillary Agreements 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
<PAGE>
10
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 nor 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) The "capital" of NWA Corp. is not "impaired" and will not become
"impaired", within the meaning of Section 160(a) (1) of the DGCL, as a
result of the issuance and delivery of the Notes and the payment of Cash by
NWA Corp. for the purchase of the Shares on the Closing Date.
(h) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable
value of the assets of (A) NWA Corp. and its subsidiaries, and (B)
Northwest and its subsidiaries (each on a consolidated basis) will exceed
the sum of their respective stated liabilities and identified contingent
liabilities; each of (X) NWA Corp. and its subsidiaries, and (Y) Northwest
and its subsidiaries (each on a consolidated basis) is not, nor will they
be after giving effect to the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, (i)
left with unreasonably
<PAGE>
11
small capital with which to carry on their business as it is proposed to
be conducted, (ii) unable to pay its debts (contingent or otherwise) as
they mature or (iii) otherwise insolvent.
ARTICLE IV
COVENANTS
4.1 NO TRANSFERS, LIENS. KLM hereby unconditionally and irrevocably
agrees that, prior to the Closing Date, 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.
4.2 ANTITRUST IMMUNITY AND EUROPEAN COMMUNITY CONDITIONS. Each of KLM
and NWA Corp. hereby agrees to use commercially reasonable efforts to arrange
for (a) the renewal or maintenance prior to September 29, 1999 (or, failing such
date, September 29, 2000) of the antitrust immunity presently granted to the
Northwest/KLM commercial alliance by the U.S. Department of Transportation
pursuant to Order 93-1-11 or (b) the renewal and/or modification prior to
September 29, 1999 (or, failing such date, September 29, 2000) of such antitrust
immunity 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 (c) the absence of any imposition
by the European Commission of 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
(but prior to September 29, 1997) such that KLM's and Northwest's abilities to
operate as contemplated in the Alliance Implementation Agreement shall have been
materially adversely affected.
4.3 NO STOCK SPLITS, ETC. Prior to the 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.
4.4 TRANSFER RESTRICTIONS. (a) The Notes shall bear the legend
appearing on the form of Notes and shall be subject to the restrictions on
transfer described therein. The legend set forth on any Note shall be removed
and NWA Corp. shall, and shall cause Northwest to, issue one or more replacement
certificates without such legend to the holder of the Note upon which it is
stamped if, unless otherwise required by state securities laws, such holder
provides NWA Corp. and Northwest with an opinion of counsel, in form, substance
and scope reasonably acceptable to NWA Corp. and Northwest, to the effect that a
public sale or transfer of the Note may be made without registration under the
Securities Act or such holder provides NWA Corp. and Northwest with reasonable
assurances that such Note can be sold pursuant to Rule 144(k) under the
Securities Act (or any successor provision).
<PAGE>
12
(b) Subject to compliance with applicable securities laws, KLM shall
have the right to pledge to one or more financial institutions or to sell,
assign, transfer or otherwise dispose of the Notes in a private placement or a
Rule 144A transaction under the Securities Act of 1933. The disclosure
concerning Northwest for any such transaction shall be based upon the filings
made by NWA Corp. under the Exchange Act. KLM and any investment bank
underwriting or placing a Note in any such transaction shall be afforded a
reasonable opportunity by NWA Corp. to conduct oral due diligence with senior
management of NWA Corp. or Northwest for purposes of determining the
advisability (in connection with any such sale by KLM) of updating the
disclosures concerning NWA Corp. then on file under the Exchange Act. KLM
agrees that, if requested by NWA Corp., (i) it will coordinate any such
transaction with any offering transactions being effected by Northwest or NWA
Corp. and (ii) it will defer any such transaction for a period of up to 90 days
(it being understood that NWA Corp. may request such deferral only one time in
any 180 day period and only for a good faith business reason). KLM shall have
no registration rights in respect of the Notes.
4.5 ANCILLARY AGREEMENTS. On or prior to the Closing Date, each
of KLM and NWA Corp. shall have executed the Ancillary Agreements and delivered
to each other signed copies of such Ancillary Agreements.
4.6 NORTHWEST. NWA Corp. shall cause Northwest to use all reasonable
efforts to consummate the transactions to be effected by Northwest contemplated
hereby.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO THE CLOSING. (a) The obligations of NWA Corp. to
effect the Closing shall be subject to the satisfaction (or waiver by NWA Corp.)
of the following conditions:
(i) REPRESENTATIONS AND WARRANTIES AND PERFORMANCE. The
representations and warranties of KLM contained herein shall have been true
and correct in all material respects when made and in addition shall be
true and correct in all material respects at and as of the Closing Date
with the same effect as though made at and as of the Closing Date. KLM
shall have performed in all material respects all obligations and shall
have complied in all material respects with all covenants and other
agreements required by this Agreement to be performed or complied with by
KLM at or prior to the Closing Date.
(ii) OFFICER'S CERTIFICATE. NWA Corp. shall have received an
executed certificate, dated the 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.
<PAGE>
13
(iv) ANCILLARY AGREEMENTS. KLM shall have executed and delivered
to NWA Corp. the Ancillary Agreements.
(v) 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
the Closing Date or would otherwise be impaired as a result of the payment
by NWA Corp. for the requisite Shares on the Closing Date within the
meaning of the DGCL; PROVIDED, 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 the Original
Repurchase 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
such determination as to capital impairment for purposes of the Closing
Date.
(vi) GOOD AND VALID TITLE. KLM shall have and deliver to NWA
Corp. good and valid title to all of the Shares to be purchased by NWA
Corp. at the Closing Date, free and clear of any Liens (except any Liens
created pursuant to the terms of this Agreement or the Original Repurchase
Agreement).
(vii) INVESTMENT REPRESENTATION LETTER FROM RABOBANK. Rabobank shall
have executed and delivered to NWA Corp. an Investment Representation
Letter substantially in the form of Exhibit D hereto.
(b) The obligations of KLM to effect the purchase of Shares on the
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 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 Closing
Date with the same effect as though made at and as of the 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 Closing Date.
<PAGE>
14
(ii) OFFICER'S CERTIFICATE. KLM shall have received an executed
certificate, dated the 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) ANCILLARY AGREEMENTS. NWA Corp. shall have executed and
delivered to KLM the Ancillary Agreements.
(c) If KLM has delivered to Northwest a notice under Section 1.04(b)
of the Alliance Implementation Agreement of a Material Default (as such term is
used in such Agreement) on the part of Northwest, the parties' obligations to
effect the purchase and sale of Shares on the Closing Date may, at the sole
option of KLM, be deferred pending either (i) Northwest'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 5.1(c). If such arbitrator(s) make a determination that a Material
Default on the part of Northwest 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 5.1(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.
(c) KLM will deliver to NWA Corp., promptly after the date hereof,
an Internal Revenue Service Form 1001 evidencing that KLM is entitled to the
benefits of the income tax treaty between The Netherlands and the United
States. KLM also agrees to
<PAGE>
15
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 United States 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 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, as of September 29, 1997, is accurately
described in the Original Repurchase Agreement and the Preferred Stock
Repurchase Agreement dated as of September 29, 1997 between KLM and NWA Corp.
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.
ARTICLE VII
GENERAL PROVISIONS
7.1 TERMINATION OR ABANDONMENT OF AGREEMENT. (a) If the condition
described in Section 5.1(a)(v) is not satisfied on the Closing Date, this
Agreement shall be terminated in its entirety, in which case the Original
Repurchase Agreement shall remain in effect unchanged by this Agreement unless
the parties shall otherwise agree.
(b) This Agreement may be terminated or abandoned at any time prior to
the Closing by mutual consent of the parties in writing, in which case the
Original Repurchase Agreement shall remain in effect unchanged by this Agreement
unless the parties shall otherwise agree.
(c) Except as otherwise specified in this Article VII, this Agreement
shall not terminate or expire until the Notes and all other amounts owed by NWA
Corp. and Northwest have been paid in full (including satisfying any tax
indemnity obligation) and KLM's options pursuant to the Option Agreement have
expired.
7.2 EFFECT ON THE ORIGINAL REPURCHASE AGREEMENT. (a) Upon the
execution of this Agreement, the covenant described in Section 4.1(b) of the
Original Repurchase Agreement shall be suspended for a period of time beginning
on the effective date of this Agreement and ending on the Closing Date, at which
time the entirety of Section 4.1 of the Original Repurchase Agreement shall
terminate pursuant to Section 7.2(b).
<PAGE>
16
(b) Upon consummation of the transactions contemplated by this
Agreement on the Closing Date, Sections 2.1(b), 2.1(c), 2.1(d), 2.1(e), 2.1(f)
(the second sentence), 2.1(g), 2.2, 2.3, 4.1, 4.5, 4.6, 5.2, 6.1 (to the extent
such section would provide for indemnification provided for by Section 6.1
hereof), 7.1(a), 7.1(b), 7.1(c), 7.1(d) and 7.1(f) of the Original Repurchase
Agreement shall terminate and be of no further force or effect.
(c) Upon consummation of the transactions contemplated by this
Agreement on the Closing Date, Section 7.1(e) of the Original Repurchase
Agreement shall be amended to read in its entirety as follows:
(e) (i) [intentionally omitted] (ii) If KLM exercises its right
to purchase shares of NWA Corp.'s common stock, par value $.01 per share,
pursuant to either the First Option or the Second Option (as such terms are
defined in the Northwest Airlines Corporation Common Stock Option Agreement
between NWA Corp. and KLM dated as of May 1, 1998), NWA Corp. shall have
the right to immediately terminate the Alliance Implementation Agreement
within thirty days of the date of such exercise.
7.3 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.
7.4 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.
7.5 NOTICES. All notices, requests, 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>
17
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.
7.6 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.
7.7 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.
7.8 SUCCESSORS AND ASSIGNS. This Agreement (but not the Notes issued
or sold hereunder) 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 (including any new
holding company of NWA Corp. following a reorganization transaction pursuant to
Section 251(g) of the DGCL) 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>
18
7.9 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.
7.10 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.
7.11 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.
7.12 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>
19
7.13 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.
7.14 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.
7.16 INTERPRETATION. To the extent any ambiguity arises concerning
the interpretation of this Agreement, the parties agree that this Agreement,
together with the other documents and instruments contemplated hereby, is
intended to preserve the rights and obligations of the parties under the
Original Repurchase Agreement to the fullest extent possible, assuming that the
accelerated repurchase transactions contemplated by Section 2.1 take place, and,
accordingly, any such ambiguity hereunder shall be resolved in light of such
intent.
<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/James A. Lawrence
------------------------------------
Name: James A. Lawrence
Title: Executive Vice President
and Chief Financial Officer
By: /s/Douglas M. Steenland
------------------------------------
Name: Douglas M. Steenland
Title: Senior Vice President,
General Counsel and Secretary
KONINKLIJKE LUCHTVAART
MAATSCHAPPIJ N.V.
By: /s/H.A. Petermeijer
------------------------------------
Name: H.A. Petermeijer
Title: Director Corporate Finance
<PAGE>
CONFORMED COPY
AMENDED AND RESTATED STANDSTILL AGREEMENT
AMENDED AND RESTATED STANDSTILL AGREEMENT, dated as of May 1, 1998
(this "AGREEMENT"), between KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a
Netherlands corporation ("KLM"), and NORTHWEST AIRLINES CORPORATION, a Delaware
corporation.
W I T N E S S E T H :
WHEREAS, NWA Corp. and KLM are parties to a Standstill Agreement,
dated as of September 29, 1997 (the "STANDSTILL AGREEMENT"), executed in
connection with the Common Stock Repurchase Agreement, dated as of September 29,
1997, between NWA Corp. (as defined below) and KLM, as amended (the "ORIGINAL
COMMON STOCK AGREEMENT");
WHEREAS, NWA Corp. and KLM have entered into an Accelerated Common Stock
Repurchase Agreement, dated as of the date hereof, (the "ACCELERATED REPURCHASE
AGREEMENT") in order to accelerate the repurchase from KLM of the remaining
18,177,874 Shares (as defined in the Accelerated Repurchase Agreement) to be
repurchased pursuant to the Original Common Stock Agreement;
WHEREAS, as an inducement to the willingness of KLM to agree to the terms
of the Accelerated Repurchase Agreement, NWA Corp. and KLM have also entered
into the Northwest Airlines Corporation Common Stock Option Agreement (the
"OPTION AGREEMENT"), dated as of the Closing Date (as defined in the Accelerated
Repurchase Agreement);
WHEREAS, NWA Corp. and KLM desire to amend and restate the Standstill
Agreement in connection with the Accelerated Purchase Agreement and the Option
Agreement;
NOW THEREFORE, the parties hereto agree to amend and restate the Standstill
Agreement so that it reads in its entirety 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
<PAGE>
2
concurrently with the Initial Closing Date (as defined in the Common
Stock Agreement), (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.
"COMMON STOCK AGREEMENT" means the Original Common Stock Agreement, as
amended by the Accelerated Repurchase Agreement and as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"DOLLARS" and "$" mean lawful currency of the United States of
America.
"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.
<PAGE>
3
"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.
"MERGER" means the merger, pursuant to Section 251(g) of the Delaware
General Corporation Law of Newbridge Merger Corporation, a Delaware
corporation and wholly owned subsidiary of Newbridge Parent Corporation,
with and into NWA Corp. in accordance with the terms of the Agreement and
Plan of Merger, dated as of January 25, 1998, among NWA Corp., Newbridge
Parent Corporation and Newbridge Merger Corporation, as a result of which
NWA Corp. will become a wholly owned subsidiary of Newbridge Parent
Corporation.
"NWA CORP." means (i) prior to the Merger, Northwest Airlines
Corporation, a Delaware corporation and (ii) following the Merger,
Newbridge Parent Corporation, a Delaware corporation, which shall change
its name to Northwest Airlines Corporation concurrently with the Merger,
and any holding company subsequently formed by NWA Corp. which holds more
than 50% of the NWA Corp. Combined Voting Power.
"NWA CORP. BOARD OF DIRECTORS" shall mean the board of directors of
NWA Corp. or any successor (including any holding company surviving the
Merger) 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
<PAGE>
4
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.
"NWA CORP. VOTING SECURITIES" shall mean, collectively, (i) the Common
Stock (as defined in the Accelerated Repurchase Agreement), (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 (including, in the case of NWA
Corp., any holding company surviving the Merger) 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 (including, in the case of NWA Corp., any holding company
surviving the Merger) 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 including any NWA Corp.
Voting Securities acquired or to be acquired by KLM pursuant to Section 1.1
or 1.2 of the Option Agreement).
<PAGE>
5
"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
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 or pursuant to an
Option (as defined in the Option 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
<PAGE>
6
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.
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. or any successor thereof or any Affiliate
thereof, (b) to seek to effect a Reorganization Transaction with respect to NWA
Corp. 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 NWA Corp. or any successor thereof or any Affiliate thereof,
the NWA Corp. Board of Directors or the policies of NWA Corp. 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 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. or any stockholders thereof 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
<PAGE>
7
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 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.
<PAGE>
8
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 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 or the Option
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 agreements,
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.
<PAGE>
9
Section 3. COVENANTS WITH RESPECT TO THE KLM VOTING SECURITIES AND
OTHER MATTERS.
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 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
<PAGE>
11
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 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
<PAGE>
12
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 exercises the Default Option (as defined in the
Option 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.
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, requests, demands or other communications
provided herein shall be made in writing and shall be deemed to have been duly
given if delivered as follows:
<PAGE>
13
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.
6.3 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.
<PAGE>
14
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 (including, in the case of NWA Corp., any holding company
surviving the Merger).
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, the Accelerated Repurchase Agreement, the Option
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. 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
<PAGE>
15
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/ James A. Lawrence
------------------------------------------
Name: James A. Lawrence
Title: Executive Vice President and
Chief Financial Officer
By: /s/ Douglas M. Steenland
------------------------------------------
Name: Douglas M. Steenland
Title: Senior Vice President
General Counsel and Secretary
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
By: /s/ H. A. Petermeijer
------------------------------------------
Name: H. A. Petermeijer
Title: Director Corporate Finance
<PAGE>
CREDIT AGREEMENT
among
NORTHWEST AIRLINES CORPORATION,
NWA INC.,
NORTHWEST AIRLINES, INC.,
ABN AMRO BANK N.V.,
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
__________________________________
Dated as of December 15, 1995
and
Amended and Restated as of October 16, 1996
and further
Amended and Restated as of December 29, 1997
__________________________________
$1,000,000,000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
SECTION 1. Amount and Terms of Credit.. . . . . . . . . . . . . . . . . . . . . . .1
1.01 The Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Minimum Amount of Each Borrowing, etc. . . . . . . . . . . . . . . . . . . . .4
1.03 Notice of Borrowing. . . . . . . . . . . . . . . . . . . . . . . . .4
1.03A Competitive Bid Borrowings. . . . . . . . . . . . . . . . . . . . .5
1.04 Disbursement of Funds. . . . . . . . . . . . . . . . . . . . . . . .7
1.05 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.06 Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.07 Pro Rata Borrowings. . . . . . . . . . . . . . . . . . . . . . . . .9
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.10 Increased Costs, Illegality, etc . . . . . . . . . . . . . . . . . 12
1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.12 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . 15
1.13 Replacement of Banks . . . . . . . . . . . . . . . . . . . . . . . 15
1.14 Extension of SRL Commitment Expiration Date; Replacement of
Non-Extending Banks or Conversion of Supplemental Revolving
Loans into Supplemental Term Loans. . . . . . . . . . . . . . . . 16
SECTION 2. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.01 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . 17
2.02 Letter of Credit Requests. . . . . . . . . . . . . . . . . . . . . 18
2.03 Letter of Credit Participations. . . . . . . . . . . . . . . . . . 19
2.04 Agreement to Repay Letter of Credit Drawings . . . . . . . . . . . 20
2.05 Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3. Fees; Reductions of Commitment . . . . . . . . . . . . . . . . . . . . 22
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.02 Voluntary Termination of Commitments . . . . . . . . . . . . . . . 23
3.03 Mandatory Reduction of Commitments . . . . . . . . . . . . . . . . 24
SECTION 4. Prepayments; Payments; Taxes . . . . . . . . . . . . . . . . . . . . . 24
4.01 Voluntary Prepayments. . . . . . . . . . . . . . . . . . . . . . . 25
4.02 Mandatory Repayments . . . . . . . . . . . . . . . . . . . . . . . 26
4.03 Method and Place of Payment. . . . . . . . . . . . . . . . . . . . 28
4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i)
<PAGE>
Page
-----
<S> <C>
SECTION 5.A. Conditions Precedent to Initial Credit Events. . . . . . . . . . . . 30
5A.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . . . 30
5A.02 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . 30
5A.03 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . 31
5A.04 Corporate Documents; Proceedings; etc . . . . . . . . . . . . . . 31
5A.05 Consent Letter. . . . . . . . . . . . . . . . . . . . . . . . . . 31
5A.06 Adverse Change, etc . . . . . . . . . . . . . . . . . . . . . . . 31
5A.07 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5A.08 Financial Outlook . . . . . . . . . . . . . . . . . . . . . . . . 32
5A.09 Existing Credit Agreement . . . . . . . . . . . . . . . . . . . . 32
5A.10 Fees, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5A.11 Appraisal of Pool Assets. . . . . . . . . . . . . . . . . . . . . 32
SECTION 5B. Conditions Precedent to All Credit Events . . . . . . . . . . . . . . 33
5B.01 Notice of Borrowing; Letter of Credit Request; Notice of
Competitive Bid Borrowing . . . . . . . . . . . . . . . . . . . 33
5B.02 No Default; Representations and Warranties. . . . . . . . . . . . 33
SECTION 6. Representations, Warranties and Agreements . . . . . . . . . . . . . . 33
6.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.02 Corporate Power and Authority. . . . . . . . . . . . . . . . . . . 34
6.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.04 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . 34
6.05 Financial Statements; Financial Outlook. . . . . . . . . . . . . . 35
6.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.07 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . 35
6.08 Use of Proceeds; Margin Regulations. . . . . . . . . . . . . . . . 36
6.09 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . 36
6.10 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.11 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . 37
6.12 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . 37
6.13 Air Carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 37
7.01 Information Covenants. . . . . . . . . . . . . . . . . . . . . . . 37
7.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . . 39
7.03 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.05 Consolidated Corporate Franchises. . . . . . . . . . . . . . . . . 40
7.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . 40
7.07 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.08 Good Repair. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.09 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . 41
(ii)
<PAGE>
Page
-----
<S> <C>
7.10 Performance of Obligations . . . . . . . . . . . . . . . . . . . . 41
7.11 Air Carrier. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.01 Changes in Business. . . . . . . . . . . . . . . . . . . . . . . . 42
8.02 Consolidation, Merger, etc . . . . . . . . . . . . . . . . . . . . 42
8.03 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.04 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.05 Distributions, etc . . . . . . . . . . . . . . . . . . . . . . . . 44
8.06 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.07 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 48
8.08 Limitation on Pool Assets. . . . . . . . . . . . . . . . . . . . . 48
8.09 Consolidated Indebtedness to Consolidated EBITDAR. . . . . . . . . 50
8.10 Consolidated EBITDAR to Consolidated Fixed Charges . . . . . . . . 50
8.11 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.12 LAX TWO CORP . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 9. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.02 Representations, etc . . . . . . . . . . . . . . . . . . . . . . . 51
9.03 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . 51
9.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.06 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.07 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.08 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10. Definitions and Accounting Terms. . . . . . . . . . . . . . . . . . . 54
10.01 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11. The Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.01 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.03 Lack of Reliance on any Agent. . . . . . . . . . . . . . . . . . . 74
11.04 Certain Rights of each Agent . . . . . . . . . . . . . . . . . . . 74
11.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.06 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.07 Each Agent in its Individual Capacity. . . . . . . . . . . . . . . 75
11.08 Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.09 Resignation by the Agents. . . . . . . . . . . . . . . . . . . . . 75
SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.01 Payment of Expenses, etc . . . . . . . . . . . . . . . . . . . . . 76
(iii)
<PAGE>
Page
-----
<S> <C>
12.02 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . 77
12.03 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
12.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . 77
12.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . 78
12.06 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . . . 79
12.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . 79
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 80
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.10 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . 81
12.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . 81
12.12 Amendment or Waiver; etc . . . . . . . . . . . . . . . . . . . . . 82
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.14 Domicile of Loans. . . . . . . . . . . . . . . . . . . . . . . . . 83
12.15 Limitation on Additional Amounts, etc. . . . . . . . . . . . . . . 83
12.16 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.17 Registry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
12.18 Addition of New Banks; Conversion of Existing Loans
of Continuing Banks; Termination of Commitments of
Non-Continuing Banks . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13. Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
13.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
13.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.03 Nature of Liability. . . . . . . . . . . . . . . . . . . . . . . . 86
13.04 Independent Obligation . . . . . . . . . . . . . . . . . . . . . . 86
13.05 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.06 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.07 Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.09 Limitation on Enforcement. . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SCHEDULE I Commitments
SCHEDULE II Bank Addresses
SCHEDULE III Existing Letters of Credit
SCHEDULE IV Subsidiaries
SCHEDULE V Existing Indebtedness
SCHEDULE VI Pool Assets
EXHIBIT A Form of Notice of Commitment Increase
EXHIBIT B-1 Form of Notice of Borrowing
EXHIBIT B-2 Form of Notice of Competitive Bid Borrowing
EXHIBIT C-1 Form of Term Note
EXHIBIT C-2 Form of Revolving Note
(iv)
<PAGE>
<S> <C>
EXHIBIT C-3 Form of Supplemental Revolving Note
EXHIBIT C-4 Form of Supplemental Term Note
EXHIBIT D Form of Letter of Credit Request
EXHIBIT E Form of Section 4.04(b)(ii) Certificate
EXHIBIT F-1 Form of Opinion of Douglas M. Steenland, Esq.,
Senior Vice President, General
Counsel and Secretary of the Credit Parties
EXHIBIT F-2 Form of Opinion of White & Case, Special Counsel
to the Agents
EXHIBIT G Form of Consent Letter
EXHIBIT H Form of Assignment and Assumption Agreement
</TABLE>
(v)
<PAGE>
CREDIT AGREEMENT, dated as of December 15, 1995, amended
and restated as of October 16, 1996 and further amended and restated as of
December 29, 1997, among NORTHWEST AIRLINES CORPORATION, a Delaware
corporation ("Holdings"), NWA INC., a Delaware corporation ("NWA"), NORTHWEST
AIRLINES, INC., a Minnesota corporation (the "Borrower"), the lending
institutions listed from time to time on Schedule I hereto (each a "Bank"
and, collectively, the "Banks"), ABN AMRO BANK N.V., as compliance agent (the
"Compliance Agent"), BANKERS TRUST COMPANY, as administrative agent (the
"Administrative Agent"), CHASE SECURITIES INC. (f/k/a CHEMICAL SECURITIES
INC.), as syndication agent (the "Syndication Agent"), CITIBANK, N.A., as
documentation agent (the "Documentation Agent"), and NATIONAL WESTMINSTER
BANK PLC and FIRST BANK NATIONAL ASSOCIATION, as Agents. Unless otherwise
defined herein, all capitalized terms used herein and defined in Section 10
are used herein as so defined.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Holdings, NWA, the Borrower, the Existing Banks,
the Compliance Agent, the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Agents are party to a credit agreement, dated as
of December 15, 1995 and amended and restated as of October 16, 1996 (as the
same has been amended, modified or supplemented to, but not including, the
Restatement Effective Date, the "Existing Credit Agreement"); and
WHEREAS, the parties hereto wish to amend and restate the
Existing Credit Agreement as herein provided:
NOW, THEREFORE, the parties hereto agree that the
Existing Credit Agreement shall be and hereby is amended and restated in its
entirety as follows:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 THE COMMITMENTS. (a) Subject to and upon the
terms and conditions set forth herein, each Bank with a Term Loan Commitment
severally agrees, (A) in the case of each Continuing Bank, to convert into
Term Loans, on the Restatement Effective Date, Existing Term Loans made by
such Continuing Bank to the Borrower pursuant to the Existing Credit
Agreement and outstanding on the Restatement Effective Date in an aggregate
principal amount equal to the amount set forth on Schedule I and/or (B) to
make on the Restatement Effective Date a term loan (each a "Term Loan" and,
collectively, the "Term Loans") to the Borrower, which Term Loans (i) shall,
at the option of the Borrower, be Base Rate Loans or Eurodollar Loans and
(ii) shall be made by each Bank in that aggregate principal amount (which, in
the case of each Continuing Bank, shall include the principal amount of
Existing Term Loans converted pursuant to clause (A) above) as is equal to
the Term Loan Commitment of such Bank on such date (before giving effect to
any reductions thereto on such date pursuant to Section 3.03(b)). Once
repaid, Term Loans incurred hereunder may not be reborrowed.
(b) Subject to and upon the terms and conditions set
forth herein, each Bank with a Basic Revolving Loan Commitment severally
agrees, (A) in the case of each Continuing Bank,
<PAGE>
to convert into Basic Revolving Loans, on the Restatement Effective Date,
Existing Revolving Loans made by such Continuing Bank to the Borrower
pursuant to the Existing Credit Agreement and outstanding on the Restatement
Effective Date in an aggregate principal amount equal to the amount set forth
on Schedule I and/or (B) at any time and from time to time on and after the
Restatement Effective Date and prior to the Revolving Loan Maturity Date, to
make a revolving loan or revolving loans (each, a "Basic Revolving Loan", and
collectively, the "Basic Revolving Loans") to the Borrower, which Basic
Revolving Loans (i) shall, at the option of the Borrower, be Base Rate Loans
or Eurodollar Loans, PROVIDED that, except as otherwise specifically provided
in Section 1.10(b), all Basic Revolving Loans comprising the same Borrowing
shall at all times be of the same Type, (ii) may be repaid and reborrowed in
accordance with the provisions hereof, (iii) shall not exceed for any Bank at
any time outstanding (which, in the case of each Continuing Bank, shall
include the principal amount of Existing Revolving Loans converted pursuant
to clause (A) above) that aggregate principal amount which when added to such
Bank's BRL Percentage of the sum of (x) the aggregate amount of all Letter of
Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, Basic Revolving
Loans) at such time plus (y) the aggregate outstanding principal amount of
all BRL Competitive Bid Loans (exclusive of BRL Competitive Bid Loans which
are repaid with the proceeds of, and simultaneously with the incurrence of,
Basic Revolving Loans) then outstanding, equals the Basic Revolving Loan
Commitment of such Bank at such time and (iv) shall not exceed for all Banks
at any time outstanding that aggregate principal amount which, when added to
the sum of (x) the aggregate amount of all Letter of Credit Outstandings
(exclusive of Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, Basic Revolving Loans) at such time
plus (y) the aggregate outstanding principal amount of all BRL Competitive
Bid Loans (exclusive of BRL Competitive Bid Loans which are repaid with the
proceeds of, and simultaneously with the incurrence of, Basic Revolving
Loans) then outstanding, equals the Total Basic Revolving Loan Commitment at
such time.
(c) So long as no Default or Event of Default shall then
exist, on a single date occurring after the Restatement Effective Date the
Borrower may increase the Total Basic Revolving Loan Commitment (the
"Commitment Increase") by an amount up to $50,000,000; PROVIDED that (i)
simultaneously with such Commitment Increase, the Borrower shall voluntarily
prepay (in compliance with the terms of Section 4.01) Term Loans in an
aggregate principal amount equal to the amount of the Commitment Increase
(the "Commitment Increase Amount"), (ii) at least five Business Days prior to
the proposed date of the Commitment Increase, the Borrower shall deliver to
the Administrative Agent irrevocable written notice of its intention to
increase the Total Basic Revolving Loan Commitment in the form of Exhibit A
(the "Notice of Commitment Increase"), appropriately completed, (iii) a
Commitment Increase may only occur once and (iv) there shall be no Unpaid
Drawings on the date of the Commitment Increase. Upon the occurrence of a
Commitment Increase, (A) each Bank receiving a prepayment of Term Loans in
connection with the Commitment Increase which has a Basic Revolving Loan
Commitment shall have its Basic Revolving Loan Commitment increased by an
amount equal to the aggregate principal amount of such prepayment of Term
Loans received by such Bank, (B) each Bank receiving a prepayment of Term
Loans in connection with the Commitment Increase which does not have a Basic
Revolving Loan Commitment shall then have a Basic Revolving Loan
-2-
<PAGE>
Commitment in the amount equal to the aggregate principal amount of such
prepayment of Term Loans received by such Bank, (C) Schedule I hereto shall
be modified to reflect such changes in each Bank's Basic Revolving Loan
Commitment, (D) new Revolving Notes will be issued, at the Borrower's
expense, to such Banks upon the request of such Banks, such new Revolving
Notes to be in conformity with the requirements of Section 1.05 with
appropriate modifications to the extent needed to reflect the revised Basic
Revolving Loan Commitments, (E) all Basic Revolving Loans outstanding
immediately prior to the Commitment Increase, if any, shall be deemed repaid
and shall then be pooled and assigned by the Banks and reallocated on a PRO
RATA basis by the Administrative Agent in such amounts and with such effect
as to provide that the Banks shall have outstanding Basic Revolving Loans
(with new Interest Periods as specified in the Notice of Commitment Increase)
based upon their new BRL Percentages (as adjusted after giving effect to the
Commitment Increase) of the aggregate principal amount of all then
outstanding Basic Revolving Loans, and each Bank agrees to sell and assign to
each other Bank, without recourse and without representation, and each Bank
agrees to purchase and assume from each other Bank, Basic Revolving Loans in
an aggregate principal amount to give effect to the foregoing provisions of
this sentence, and each of the Banks hereby further agrees to effect such
assignments on the date of the Commitment Increase by making to or receiving
from the Administrative Agent such payments as are necessary to give effect
to the foregoing as set forth in a notice delivered by the Administrative
Agent to the Banks no later than three Business Days prior to the date of the
Commitment Increase and (F) the Borrower shall compensate each Bank for all
losses, expenses and liabilities which such Bank may sustain as a result of
the repayment or deemed repayment of Basic Revolving Loans in connection with
the Commitment Increase.
(d) Subject to and upon the terms and conditions herein
set forth, each Bank severally agrees that the Borrower may incur a loan or
loans (each a "Competitive Bid Loan" and, collectively, the "Competitive Bid
Loans") pursuant to a Competitive Bid Borrowing from time to time after the
Restatement Effective Date and prior to the date which is the third Business
Day preceding the date which is 10 days prior to the Revolving Loan Maturity
Date, PROVIDED that after giving effect to any Competitive Bid Borrowing and
the use of the proceeds thereof, (x) the aggregate outstanding principal
amount of BRL Competitive Bid Loans when combined with the aggregate
outstanding principal amount of all Basic Revolving Loans then outstanding
and the aggregate Letter of Credit Outstandings at such time shall not exceed
the Total Basic Revolving Loan Commitment at such time and (y) the aggregate
outstanding principal amount of SRL Competitive Bid Loans when combined with
the aggregate outstanding principal amount of all Supplemental Revolving
Loans then outstanding shall not exceed the Total Supplemental Revolving Loan
Commitment at such time. Within the foregoing limits and subject to the
conditions set out in Section 1.03A, Competitive Bid Loans may be repaid and
reborrowed in accordance with the provisions hereof.
(e) Subject to and upon the terms and conditions herein
set forth, each Bank with a Supplemental Revolving Loan Commitment severally
agrees at any time and from time to time on and after the Restatement
Effective Date and prior to (x) the then effective Conversion Date (in the
case of Non-Extending Banks) or (y) the then effective SRL Commitment
Expiration Date (in the case of Extending Banks) to make a revolving loan or
revolving loans (each a "Supplemental Revolving Loan", and collectively, the
"Supplemental Revolving Loans") to the
-3-
<PAGE>
Borrower, which Supplemental Revolving Loans (i) shall, at the option of the
Borrower, be Base Rate Loans or Eurodollar Loans, PROVIDED that, except as
otherwise specifically provided in Section 1.10(b), all Supplemental
Revolving Loans comprising the same Borrowing shall at all times be of the
same Type, (ii) may be repaid and reborrowed in accordance with the
provisions hereof, (iii) shall not exceed for any Bank at any time
outstanding that aggregate principal amount which when added to such Bank's
SRL Percentage of the aggregate outstanding principal amount of all SRL
Competitive Bid Loans (exclusive of SRL Competitive Bid Loans which are
repaid with the proceeds of, and simultaneously with the incurrence of,
Supplemental Revolving Loans) then outstanding, equals the Supplemental
Revolving Loan Commitment of such Bank at such time and (iv) shall not exceed
for all Banks at any time outstanding that aggregate principal amount which,
when added to the aggregate outstanding principal amount of all SRL
Competitive Bid Loans (exclusive of SRL Competitive Bid Loans which are
repaid with the proceeds of, and simultaneously with the incurrence of,
Supplemental Revolving Loans) then outstanding, equals the Total Supplemental
Revolving Loan Commitment at such time.
(f) Subject to and upon the terms and conditions set
forth herein, the Borrower and each Non-Extending Bank which has Supplemental
Revolving Loans outstanding at such time agree that, if the Borrower so
elects pursuant to Section 1.14, at 9:00 A.M. (New York time) on any
Conversion Date, the aggregate principal amount of Supplemental Revolving
Loans owing to such Non-Extending Bank and outstanding at such time shall
(unless such Supplemental Revolving Loans have been declared (or have become)
due and payable pursuant to Section 9 of this Agreement) convert to and
thereafter constitute term loans ("Supplemental Term Loans") owing to such
Bank hereunder. The Supplemental Term Loans of any Bank (i) shall, at the
option of the Borrower, be Base Rate Loans or Eurodollar Loans and (ii) shall
not exceed in initial principal amount for such Bank an amount which equals
the aggregate principal amount of Supplemental Revolving Loans owed to such
Bank and outstanding immediately prior to such conversion. Once repaid,
Supplemental Term Loans may not be reborrowed. On the date of conversion of
any Supplemental Revolving Loans into Supplemental Term Loans, the Borrower
shall duly execute and deliver to each of the Banks with Supplemental Term
Loans, Supplemental Term Notes issued in accordance with Section 1.05.
1.02 MINIMUM AMOUNT OF EACH BORROWING, ETC. The
aggregate principal amount of each Borrowing shall not be less than
$10,000,000 (or, in the case of Competitive Bid Loans, $5,000,000) and, if
greater, shall be in integral multiples of $5,000,000 (or, in the case of
Competitive Bid Loans, $1,000,000). More than one Borrowing may occur on the
same date, but at no time shall there be outstanding more than 20 Borrowings
of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower
desires to make a Borrowing (other than a Competitive Bid Borrowing)
hereunder, it shall give the Administrative Agent at its Notice Office at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Base Rate Loan and at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Eurodollar Loan to be made hereunder, PROVIDED that any such
notice shall be deemed to have been given on a certain day only if given
before 11:00 A.M. (New York time) on such day. Each such written notice or
written confirmation of telephonic notice (each, a "Notice of Borrowing"),
except as otherwise
-4-
<PAGE>
expressly provided in Section 1.10, shall be irrevocable and shall be given
by the Borrower in the form of Exhibit B-1, appropriately completed to
specify the aggregate principal amount of the Loans to be made pursuant to
such Borrowing, the date of such Borrowing (which shall be a Business Day),
whether the Loans being made pursuant to such Borrowing shall constitute Term
Loans, Basic Revolving Loans or Supplemental Revolving Loans and whether the
Loans being made pursuant to such Borrowing are to be initially maintained as
Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial
Interest Period to be applicable thereto. The Administrative Agent shall
promptly give each Bank that is required to make Loans of the Tranche
specified in the respective Notice of Borrowing, notice of such proposed
Borrowing, of such Bank's proportionate share thereof and of the other
matters required by the immediately preceding sentence to be specified in the
Notice of Borrowing.
(b) Without in any way limiting the obligation of the
Borrower to confirm in writing any telephonic notice of any Borrowing of
Loans, the Administrative Agent may act without liability upon the basis of
telephonic notice of such Borrowing, believed by the Administrative Agent in
good faith to be from an Authorized Officer of the Borrower prior to receipt
of written confirmation.
1.03A COMPETITIVE BID BORROWINGS. (a) Whenever the
Borrower desires to incur a Competitive Bid Borrowing, it shall deliver to
the Administrative Agent, prior to 11:00 A.M. (New York time) (x) at least
four Business Days prior to the date of such proposed Competitive Bid
Borrowing, in the case of a Spread Borrowing, and (y) at least one Business
Day prior to the date of such proposed Competitive Bid Borrowing, in the case
of an Absolute Rate Borrowing, a written notice substantially in the form of
Exhibit B-2 hereto (a "Notice of Competitive Bid Borrowing"), which notice
shall specify in each case (i) the date (which shall be a Business Day) and
the aggregate amount of the proposed Competitive Bid Borrowing, (ii) the
maturity date for repayment of each and every Competitive Bid Loan to be made
as part of such Competitive Bid Borrowing (which maturity date may be (A)
one, two, three or six months after the date of such Competitive Bid
Borrowing, in the case of a Spread Borrowing, and (B) between 7 and 365 days,
inclusive, after the date of such Competitive Bid Borrowing, in the case of
an Absolute Rate Borrowing, PROVIDED that in no event shall the maturity date
of any Competitive Bid Borrowing be later than (x) in the case of a proposed
Borrowing of BRL Competitive Bid Loans, the third Business Day preceding the
Revolving Loan Maturity Date or (y) in the case of a proposed Borrowing of
SRL Competitive Bid Loans, the third Business Day preceding the then
effective SRL Commitment Expiration Date, (iii) the interest payment date or
dates relating thereto, (iv) whether the proposed Competitive Bid Borrowing
is to be an Absolute Rate Borrowing or a Spread Borrowing, (v) whether the
Borrower shall have the right, subject to Section 1.11, to voluntarily repay
such Competitive Bid Loans prior to the maturity thereof (a "Voluntary
Prepayment Right"), (vi) whether such proposed Competitive Bid Borrowing is
to consist of BRL Competitive Bid Loans or SRL Competitive Bid Loans and
(vii) any other terms to be applicable to such Competitive Bid Borrowing.
The Administrative Agent shall promptly notify each Bidder Bank by telephone
or facsimile of each such request for a Competitive Bid Borrowing received by
it from the Borrower and of the contents of the related Notice of Competitive
Bid Borrowing.
-5-
<PAGE>
(b) Each Bidder Bank shall, if, in its sole discretion,
it elects to do so, irrevocably offer to make one or more Competitive Bid
Loans to the Borrower as part of such proposed Competitive Bid Borrowing at a
rate or rates of interest specified by such Bidder Bank in its sole
discretion and determined by such Bidder Bank independently of each other
Bidder Bank, by notifying the Administrative Agent (which shall give prompt
notice thereof to the Borrower) before 10:00 A.M. (New York time) on the date
(the "Reply Date") which is (x) in the case of an Absolute Rate Borrowing,
the date of such proposed Competitive Bid Borrowing and (y) in the case of a
Spread Borrowing, three Business Days before the date of such proposed
Competitive Bid Borrowing, of the minimum amount and maximum amount of each
Competitive Bid Loan which such Bidder Bank would be willing to make as part
of such proposed Competitive Bid Borrowing (which amounts may, (i) in the
case of BRL Competitive Bid Borrowings, subject to clause (x) of the proviso
to the first sentence of Section 1.01(d), exceed such Bidder Bank's Basic
Revolving Loan Commitment and (ii) in the case of SRL Competitive Bid
Borrowings, subject to clause (y) of the proviso to the first sentence of
Section 1.01(d), exceed such Bidder Bank's Supplemental Revolving Loan
Commitment), the rate or rates of interest therefor, whether such Bidder Bank
agrees that the Borrower shall have a Voluntary Prepayment Right with respect
to the Competitive Bid Loan (if a Voluntary Prepayment Right has been
requested by the Borrower with respect to such Competitive Bid Loan) and such
Bidder Bank's lending office with respect to such Competitive Bid Loan;
PROVIDED that if the Administrative Agent in its capacity as a Bidder Bank
shall, in its sole discretion, elect to make any such offer, it shall notify
the Borrower of such offer before 9:45 A.M. (New York time) on the Reply
Date. Any Bidder Bank not giving the Administrative Agent the notice
specified in the preceding sentence shall not be obligated to, and shall not,
make any Competitive Bid Loan as part of such Competitive Bid Borrowing.
(c) The Borrower shall, in turn, before (x) 11:00 A.M.
(New York time) on the Reply Date in the case of a proposed Absolute Rate
Borrowing and (y) 10:00 A.M. (New York time) on the Business Day following
the Reply Date in the case of a proposed Spread Borrowing, either:
(i) cancel such Competitive Bid Borrowing by giving the
Administrative Agent notice to such effect, or
(ii) accept one or more of the offers made by any Bidder
Bank or Bidder Banks pursuant to clause (b) above by giving
notice (in writing or by telephone confirmed in writing) to the
Administrative Agent of the amount of each Competitive Bid Loan
(which amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount, notified
to the Borrower by the Administrative Agent on behalf of such
Bidder Bank for such Competitive Bid Borrowing pursuant to
clause (b) above) to be made by each Bidder Bank as part of
such Competitive Bid Borrowing, and reject any remaining offers
made by Bidder Banks pursuant to clause (b) above by giving the
Administrative Agent notice to that effect; PROVIDED that (x)
to the extent the Borrower accepts offers which do not include
a Voluntary Prepayment Right (each a "Non-Prepayment
Competitive Bid Offer"), the acceptance of such Non-Prepayment
Competitive Bid Offers shall only be made on the basis of
ascending Absolute Rates (in
-6-
<PAGE>
the case of an Absolute Rate Borrowing) or Spreads (in the case
of a Spread Borrowing) for all such Non-Prepayment Competitive
Bid Offers and (y) to the extent the Borrower accepts offers
which include a Voluntary Prepayment Right (each a "Prepayment
Competitive Bid Offer"), the acceptance of such Prepayment
Competitive Bid Offers shall only be made on the basis of
ascending Absolute Rates (in the case of an Absolute Rate
Borrowing) or Spreads (in the case of a Spread Borrowing) for
all such Prepayment Competitive Bid Offers, in each case set
forth in clauses (x) and (y) commencing with the lowest rate so
offered (it being understood and agreed that no Non-Prepayment
Competitive Bid Offer shall be permitted to be accepted by the
Borrower unless all Prepayment Competitive Bid Offers offered
at a lower rate than such Non-Prepayment Competitive Bid Offer
have been accepted by the Borrower); PROVIDED FURTHER, however,
if two or more Prepayment Competitive Bid Offers or
Non-Prepayment Competitive Bid Offers, as the case may be, are
made by Bidder Banks at the same rate and acceptance of all
such equal Prepayment Competitive Bid Offers or Non-Prepayment
Competitive Bid Offers, as the case may be, would result in a
greater principal amount of Competitive Bid Loans being
accepted than the aggregate principal amount requested by the
Borrower, if the Borrower elects to accept any of such offers
the Borrower shall accept such offers pro rata from such Bidder
Banks (on the basis of the maximum amounts of such offers)
unless any such Bidder Bank's pro rata share would be less than
the minimum amount specified by such Bidder Bank in its offer,
in which case the Borrower shall have the right to accept one
or more such equal offers in their entirety and reject the
other equal offer or offers or to allocate acceptance among all
such equal offers (but giving effect to the minimum and maximum
amounts specified for each such offer pursuant to clause (b)
above) as the Borrower may elect in its sole discretion.
(d) If the Borrower notifies the Administrative Agent
that such Competitive Bid Borrowing is cancelled pursuant to clause (c)(i)
above, the Administrative Agent shall give prompt notice thereof to the
Bidder Banks and such Competitive Bid Borrowing shall not be made.
(e) If the Borrower accepts one or more of the offers
made by any Bidder Bank or Bidder Banks pursuant to clause (c)(ii) above, the
Administrative Agent shall in turn promptly notify (x) each Bidder Bank that
has made an offer as described in clause (b) above, of the date and aggregate
amount of such Competitive Bid Borrowing and whether or not any offer or
offers made by such Bidder Bank pursuant to clause (b) above have been
accepted by the Borrower and (y) each Bidder Bank that is to make a
Competitive Bid Loan as part of such Competitive Bid Borrowing, of the amount
of each Competitive Bid Loan to be made by such Bidder Bank as part of such
Competitive Bid Borrowing.
1.04 DISBURSEMENT OF FUNDS. No later than 12:00 Noon
(New York time) on the date specified in each Notice of Borrowing or Notice
of Competitive Bid Borrowing, as the case may be, each Bank will make
available its PRO RATA portion of each Borrowing (or, in the case of a
Competitive Bid Borrowing, its portion, if any, of such Borrowing) requested
to be made on such date. All such amounts shall be made available in Dollars
and in immediately available funds at the Payment Office of the
Administrative Agent, and the Administrative Agent will make
-7-
<PAGE>
available to the Borrower at the Payment Office the aggregate of the amounts
so made available by the Banks. Unless the Administrative Agent shall have
been notified by any Bank prior to the date of Borrowing that such Bank does
not intend to make available to the Administrative Agent such Bank's portion
of any Borrowing to be made on such date, the Administrative Agent may assume
that such Bank has made such amount available to the Administrative Agent on
such date of Borrowing and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Administrative
Agent by such Bank, the Administrative Agent shall be entitled to recover
such corresponding amount on demand from such Bank. If such Bank does not
pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the Borrower
and the Borrower shall immediately pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to
recover on demand from such Bank or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agent to
the Borrower until the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (i) if recovered from such
Bank, at the overnight Federal Funds Rate and (ii) if recovered from the
Borrower, the rate of interest applicable to the respective Borrowing, as
determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be
deemed to relieve any Bank from its obligation to make Loans hereunder or to
prejudice any rights which the Borrower may have against any Bank as a result
of any failure by such Bank to make Loans hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loans (other than Competitive Bid Loans)
made by each Bank shall be evidenced (i) if Term Loans, by a promissory note
duly executed and delivered by the Borrower substantially in the form of
Exhibit C-1 with blanks appropriately completed in conformity herewith (each,
a "Term Note" and, collectively, the "Term Notes"), (ii) if Basic Revolving
Loans, by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit C-2, with blanks appropriately completed
in conformity herewith (each, a "Revolving Note" and, collectively, the
"Revolving Notes"), (iii) if Supplemental Revolving Loans, by a promissory
note duly executed and delivered by the Borrower substantially in the form of
Exhibit C-3 with blanks appropriately completed in conformity herewith (each,
a "Supplemental Revolving Note" and, collectively, the "Supplemental
Revolving Notes") and (iv) if Supplemental Term Loans, by a promissory note
duly executed and delivered by the Borrower substantially in the form of
Exhibit C-4, with blanks appropriately completed in conformity herewith
(each, a "Supplemental Term Note" and, collectively, the "Supplemental Term
Notes").
(b) The Term Note issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be
dated the Restatement Effective Date, (iii) be in a stated principal amount
equal to the Term Loan made by such Bank on the Restatement Effective Date
(which, in the case of each Continuing Bank, shall include the principal
amount of Existing Term Loans converted pursuant to Section 1.01(a)(A)) and
be payable in the principal amount of the Term Loan evidenced thereby, (iv)
mature on the Term Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
-8-
<PAGE>
Eurodollar Loans, as the case may be, evidenced thereby and (vi) be subject
to mandatory repayment as provided in Section 4.02.
(c) The Revolving Note issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be
dated the Restatement Effective Date, (iii) be in a stated principal amount
equal to the Basic Revolving Loan Commitment of such Bank and be payable in
the principal amount of the Basic Revolving Loans evidenced thereby, (iv)
mature on the Revolving Loan Maturity Date, (v) bear interest as provided in
the appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby and (vi) be subject
to mandatory repayment as provided in Section 4.02.
(d) The Supplemental Revolving Note issued to each Bank
shall (i) be executed by the Borrower, (ii) be payable to the order of such
Bank and be dated the Restatement Effective Date, (iii) be in a stated
principal amount equal to the Supplemental Revolving Loan Commitment of such
Bank and be payable in the principal amount of the Supplemental Revolving
Loans evidenced thereby, (iv) mature on the SRL Commitment Expiration Date,
(v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby and (vi) be subject to mandatory repayment as provided in
Section 4.02.
(e) The Supplemental Term Note issued to each Bank shall
(i) be executed by the Borrower, (ii) be payable to the order of such Bank
and be dated the Conversion Date applicable to such Bank, (iii) be in a
stated principal amount equal to the aggregate outstanding principal amount
of Supplemental Revolving Loans made by such Bank and converted into the
Supplemental Term Loans pursuant to Section 1.01(f) and be payable in the
principal amount of the Supplemental Term Loans evidenced thereby, (iv)
mature on the Supplemental Term Loan Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base
Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby and
(vi) be subject to mandatory repayment as provided in Section 4.02.
(f) Each Bank will note on its internal records the
amount of each Loan made by it and each payment in respect thereof and will
prior to any transfer of any of its Notes endorse on the reverse side thereof
the outstanding principal amount of Loans evidenced thereby. Failure to make
any such notation shall not affect the Borrower's obligations in respect of
such Loans.
1.06 CONVERSIONS. The Borrower shall have the option to
convert, on any Business Day, all or a portion equal to at least $10,000,000
(and, if greater, in integral multiples of $5,000,000) of the outstanding
principal amount of Term Loans, Basic Revolving Loans, Supplemental Revolving
Loans and/or Supplemental Term Loans made pursuant to one or more Borrowings
(so long as of the same Tranche) of one or more Types of Loans into a
Borrowing (of the same Tranche) of another Type of Loan, PROVIDED that (i)
except as otherwise provided in Section 1.10(b), Eurodollar Loans may be
converted into Base Rate Loans only on the last day of an Interest Period
applicable to the Loans being converted and no partial conversion of
Eurodollar Loans shall reduce the outstanding principal amount of such
Eurodollar Loans made pursuant to a single Borrowing to less than
$10,000,000, (ii) Base Rate Loans may only be
-9-
<PAGE>
converted into Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion and (iii) no conversion pursuant to
this Section 1.06 shall result in a greater number of Borrowings of
Eurodollar Loans than is permitted under Section 1.02. Each such conversion
shall be effected by the Borrower by giving the Administrative Agent at its
Notice Office prior to 11:00 A.M. (New York time) at least three Business
Days' prior notice (each, a "Notice of Conversion") specifying the Loans to
be so converted, the Borrowing or Borrowings pursuant to which such Loans
were made and, if to be converted into Eurodollar Loans, the Interest Period
to be initially applicable thereto. The Administrative Agent shall give each
Bank prompt notice of any such proposed conversion affecting any of its Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Term Loans,
Basic Revolving Loans and Supplemental Revolving Loans under this Agreement
shall be incurred from the Banks PRO RATA on the basis of their Term Loan
Commitments, Basic Revolving Loan Commitments or Supplemental Revolving Loan
Commitments, as the case may be. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Bank to make
its Loans hereunder.
1.08 INTEREST. (a) The Borrower agrees to pay interest
in respect of the unpaid principal amount of each Base Rate Loan from the
date the proceeds thereof are made available to the Borrower until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such
Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar
Loan pursuant to Section 1.06, at a rate per annum which shall be equal to
the Base Rate in effect from time to time.
(b) The Borrower agrees to pay interest in respect of
the unpaid principal amount of each Eurodollar Loan from the date the
proceeds thereof are made available to the Borrower until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such Eurodollar Loan
and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant
to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which
shall, during each Interest Period applicable thereto, be equal to the sum of
the Applicable Eurodollar Margin plus the Eurodollar Rate for such Interest
Period.
(c) e Borrower agrees to pay interest in respect of the
unpaid principal amount of each Competitive Bid Loan from the date the
proceeds thereof are made available to the Borrower until the maturity
(whether by acceleration or otherwise) of such Competitive Bid Loan, at the
rate or rates per annum specified by a Bidder Bank or Bidder Banks, as the
case may be, pursuant to Section 1.03A(b) and accepted by the Borrower
pursuant to Section 1.03A(c).
(d) Overdue principal and, to the extent permitted by
law, overdue interest in respect of each Loan and any other overdue amount
payable hereunder shall, in each case, bear interest at a rate per annum
equal to the greater of (x) except as provided in Section 1.08(d)(y), 2% per
annum in excess of the rate otherwise applicable to Base Rate Loans of the
respective Tranche of Loans (it being understood that for purposes of this
clause (x), (i) BRL Competitive Bid Loans shall be deemed to be Loans of the
Basic Revolving Loan facility and (ii) SRL
-10-
<PAGE>
Competitive Bid Loans and Supplemental Term Loans shall be deemed to be Loans
of the Supplemental Revolving Loan facility) from time to time and (y) in the
case of Eurodollar Loans and Competitive Bid Loans, until the end of the
applicable Interest Period for such Eurodollar Loans, or the original
scheduled maturity of such Competitive Bid Loans, as the case may be, at a
rate which is 2% in excess of the rate then borne by such Loans, in each case
with such interest to be payable on demand.
(e) Accrued (and theretofore unpaid) interest shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Competitive Bid Loan, at such
times as specified in the Notice of Competitive Bid Borrowing relating
thereto, (iii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iv) in respect of each Loan, on
any repayment or prepayment (on the amount repaid or prepaid), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(f) Upon each Interest Determination Date, the
Administrative Agent shall determine the Eurodollar Rate for each Interest
Period applicable to Eurodollar Loans and shall promptly notify the Borrower
and the Banks thereof.
1.09 INTEREST PERIODS. At the time it gives any Notice
of Borrowing or Notice of Conversion in respect of the making of, or
conversion into, any Eurodollar Loan (in the case of the initial Interest
Period applicable thereto) or on the third Business Day prior to the
expiration of an Interest Period applicable to such Eurodollar Loan (in the
case of any subsequent Interest Period), the Borrower shall have the right to
elect, by giving the Administrative Agent notice thereof, the interest period
or interest periods (each, an "Interest Period") applicable to such
Eurodollar Loan (or any portion thereof), which Interest Period shall, at the
option of the Borrower, be a one, two, three, six or (if available to all of
the Banks) twelve-month period, PROVIDED that:
(i) all Eurodollar Loans comprising a Borrowing shall at
all times have the same Interest Period (it being understood that one
Borrowing may be converted into more than one Borrowing as a result of the
selection of Interest Periods so long as in any event, after giving effect to
such conversions, all Banks with Commitments or Loans of the applicable
Tranche (or in the case of Supplemental Term Loans, all Banks whose Loans
were converted to Supplemental Term Loans on the same date) are participating
PRO RATA in such Borrowing and Section 1.02 is complied with);
(ii) the initial Interest Period for any Eurodollar Loan
shall commence on the date of Borrowing of such Eurodollar Loan
(including the date of any conversion thereto from a Loan of a
different Type) and each Interest Period occurring thereafter in
respect of such Eurodollar Loan shall commence on the day on which
the next preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan
begins on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period, such
-11-
<PAGE>
Interest Period shall end on the last Business Day of such calendar
month;
(iv) if any Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall expire
on the next succeeding Business Day; PROVIDED, HOWEVER, that if any
Interest Period for a Eurodollar Loan would otherwise expire on a
day which is not a Business Day but is a day of the month after
which no further Business Day occurs in such month, such Interest
Period shall expire on the next preceding Business Day;
(v) no Interest Period may be selected at any time when
a Default or Event of Default is then in existence;
(vi) no Interest Period in respect of any Borrowing of
any Tranche of Loans shall be selected which extends beyond the
respective Maturity Date for such Tranche;
(vii) no Interest Period in respect of any Borrowing of
Supplemental Revolving Loans shall be selected which extends beyond
the then effective SRL Commitment Expiration Date (without giving
effect to any future extensions thereof to occur after the date on
which such Interest Period is being selected unless on such date of
selection all Banks with a Supplemental Revolving Loan Commitment
(after giving effect to any assignment by Non-Extending Banks
pursuant to Section 1.14) constitute Extending Banks); and
(viii) no Interest Period in respect of any Borrowing of
Term Loans shall be selected which extends beyond any date upon
which a mandatory repayment of Term Loans will be required to be
made under Section 4.02(b) if the aggregate principal amount of
Term Loans which have Interest Periods which will expire after such
date will be in excess of the aggregate principal amount of Term
Loans then outstanding less the aggregate amount of such required
prepayment.
If upon the expiration of any Interest Period applicable to a Borrowing of
Eurodollar Loans, the Borrower has failed to elect, or is not permitted to
elect, a new Interest Period or Interest Periods to be applicable to such
Eurodollar Loans as provided above, the Borrower shall be deemed to have
elected to convert such Eurodollar Loans into Base Rate Loans effective as of
the expiration date of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the
event that any Bank shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto
but, with respect to clause (i) below, may be made only by the Administrative
Agent):
(i) on any Interest Determination Date (or, in the case
of any Spread Borrowing, the date that is two Business Days
prior to the proposed Spread Borrowing) that, by reason of any
changes arising after the date of this Agreement affecting the
- 12 -
<PAGE>
interbank Eurodollar market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased
costs or reductions in the amounts received or receivable
hereunder with respect to any Eurodollar Loan or Spread
Borrowing because of (x) any change since the Restatement
Effective Date in any applicable law or governmental rule,
regulation, order, guideline or request (whether or not having
the force of law) or in the interpretation or administration
thereof and including the introduction of any new law or
governmental rule, regulation, order, guideline or request
(such as, for example, but not limited to a change in official
reserve requirements, but, in all events, excluding reserves
required under Regulation D of the Board of Governors of the
Federal Reserve System to the extent included in the
computation of the Eurodollar Rate) and/or (y) other
circumstances (other than an adverse change in the credit
quality of such Bank) since the Restatement Effective Date
affecting the interbank Eurodollar market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan or Spread Borrowing has become (x) unlawful by
any law or governmental rule, regulation or order, (y)
impossible by compliance by any Bank in good faith with any
governmental request (whether or not having force of law) or
(z) impracticable as a result of a contingency occurring after
the date of this Agreement which materially and adversely
affects the interbank Eurodollar market; then, and in any
such event, such Bank (or the Administrative Agent, in the
case of clause (i) above) shall promptly give notice (by
telephone confirmed in writing) to the Borrower and, except in
the case of clause (i) above, to the Administrative Agent of
such determination (which notice the Administrative Agent
shall promptly transmit to each of the other Banks).
Thereafter (x) in the case of clause (i) above, Eurodollar
Loans (or Competitive Bid Loans constituting a Spread
Borrowing) shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Banks that
the circumstances giving rise to such notice by the
Administrative Agent no longer exist, and any Notice of
Borrowing, Notice of Competitive Bid Borrowing or Notice of
Conversion given by the Borrower with respect to Eurodollar
Loans or any Spread Borrowing, as the case may be, which have
not yet been incurred (including by way of conversion) shall
be deemed rescinded by the Borrower, (y) in the case of clause
(ii) above, the Borrower shall, subject to the provisions of
Section 12.15 (to the extent applicable) pay to such Bank,
upon written demand therefor, such additional amounts (in the
form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank shall
reasonably determine) as shall be required to compensate such
Bank for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the
additional amounts owed to such Bank, showing in reasonable
detail the basis for the calculation thereof, submitted to the
Borrower by such Bank in good faith shall, absent manifest
error, be final and conclusive and binding on all the parties
hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section
1.10(b) as promptly as possible and, in any event, within the
time period required by law. Each of the Administrative Agent
and each Bank agrees that if it gives notice to the
-13-
<PAGE>
Borrower of any of the events described in clause (i) or (iii)
above, it shall promptly notify the Borrower and, in the case
of any such Bank, the Administrative Agent, if such event
ceases to exist. If any such event described in clause (iii)
above ceases to exist as to a Bank, the obligations of such
Bank to make Eurodollar Loans and to convert Base Rate Loans
into Eurodollar Loans on the terms and conditions contained
herein shall be reinstated.
(b) At any time that any Eurodollar Loan or Spread
Borrowing is affected by the circumstances described in Section 1.10(a)(ii)
or (iii), the Borrower may (and in the case of a Eurodollar Loan or Spread
Borrowing affected by the circumstances described in Section 1.10(a)(iii)
shall) either (x) if the affected Eurodollar Loan or Spread Borrowing is then
being made initially or pursuant to a conversion, cancel the respective
Borrowing by giving the Administrative Agent telephonic notice (confirmed in
writing) on the same date that the Borrower was notified by the affected Bank
or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii), (y) if
the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' written notice to the Administrative Agent, require the
affected Bank to convert such Eurodollar Loan into a Base Rate Loan or (z) if
the affected Spread Borrowing is then outstanding, prepay such Spread
Borrowing in full (which prepayment may be made with the proceeds of Basic
Revolving Loans or Supplemental Revolving Loans), PROVIDED that, if more than
one Bank is affected at any time, then all affected Banks must be treated the
same pursuant to this Section 1.10(b).
(c) If at any time any Bank determines that the
introduction after the Restatement Effective Date of, or any change after the
Restatement Effective Date in, any applicable law or governmental rule,
regulation, order, guideline, directive or request (whether or not having the
force of law) concerning capital adequacy, or any change after the
Restatement Effective Date in interpretation or administration thereof by any
governmental authority, central bank or comparable agency, will have the
effect of increasing the amount of capital required or expected to be
maintained by such Bank or any corporation controlling such Bank based on the
existence of such Bank's Commitments hereunder or its obligations hereunder,
then the Borrower shall, subject to the provisions of Section 12.15 (to the
extent applicable), pay to such Bank, upon its written demand therefor, such
additional amounts as shall be required to compensate such Bank or such other
corporation for the increased cost to such Bank or such other corporation or
the reduction in the rate of return to such Bank or such other corporation as
a result of such increase of capital. In determining such additional
amounts, each Bank will act reasonably and in good faith and will use
averaging and attribution methods which are reasonable. Each Bank will
provide written notice thereof to the Borrower, which notice shall show the
basis for calculation of such additional amounts, although the failure to
give any such notice shall, subject to Section 12.15, not release or diminish
any of the Borrower's obligations to pay additional amounts pursuant to this
Section 1.10(c) upon receipt of such notice.
1.11 COMPENSATION. The Borrower shall, subject to the
provisions of Section 12.15 (to the extent applicable), compensate each Bank,
upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of
-14-
<PAGE>
the liquidation or reemployment of deposits or other funds required by such
Bank to fund its Eurodollar Loans or Competitive Bid Loans but excluding any
loss of anticipated profits) which such Bank may sustain: (i) if for any
reason (other than a default by such Bank or the Administrative Agent) a
Borrowing of, or conversion from or into, Eurodollar Loans or Competitive Bid
Loans accepted by the Borrower in accordance with Section 1.03A(c)(ii) does
not occur on a date specified therefor in a Notice of Borrowing, Notice of
Competitive Bid Borrowing or Notice of Conversion (whether or not withdrawn
by the Borrower or deemed withdrawn pursuant to Section 1.10(a) or (b)); (ii)
if any repayment (including, without limitation, any repayment made pursuant
to Section 1.01(c), 4.01 or 4.02 or as a result of an acceleration of the
Loans pursuant to Section 9) or conversion of any of its Eurodollar Loans
occurs on a date which is not the last day of an Interest Period with respect
thereto or any repayment of its Competitive Bid Loans occurs prior to the
maturity thereof; (iii) if any prepayment of any of its Eurodollar Loans or
Competitive Bid Loans is not made on any date specified in a notice of
prepayment given by the Borrower; or (iv) as a consequence of (x) any other
default by the Borrower to repay its Loans when required by the terms of this
Agreement or any Note held by such Bank, (y) any election made pursuant to
Section 1.10(b), or (z) the Commitment Increase pursuant to Section 1.01(c).
No Bank shall be deemed to have any loss, expense or liability incurred by
the reason of the liquidation or reemployment of deposits as a result of the
Borrower repaying Eurodollar Loans or Competitive Bid Loans priced by
reference to the Eurodollar Rate prior to the end of an Interest Period or
the maturity of a Competitive Bid Loan unless the Eurodollar Rate which would
be applicable to the Eurodollar Loan or Competitive Bid Loan being repaid if
such Eurodollar Rate were being determined on the date of repayment (assuming
for purposes of this determination that the Interest Period or the maturity
utilized in making such determination is the Interest Period or the maturity
originally applicable to such Eurodollar Loan or Competitive Bid Loan) is
less than the Eurodollar Rate actually applicable to the Eurodollar Loan or
Competitive Bid Loan being repaid.
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that
after becoming aware of the occurrence of any event giving rise to the
operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or
Section 4.04 with respect to such Bank, it will use reasonable efforts
(subject to overall policy considerations of such Bank) to designate another
lending office for any Loans affected by such event, PROVIDED that such
designation is made on such terms that such Bank and its lending office
suffer no material economic, legal or regulatory disadvantage, with the
object of avoiding the consequence of the event giving rise to the operation
of such Section. Nothing in this Section 1.12 shall affect or postpone any
of the obligations of the Borrower or the rights of any Bank provided in
Sections 1.10, 2.05 and 4.04, PROVIDED that this sentence shall not limit the
Borrower's rights and remedies in connection with a breach of the immediately
preceding sentence.
1.13 REPLACEMENT OF BANKS. If (x) any Bank defaults in
its obligations to make Loans or fund Unpaid Drawings, (y) any Bank refuses
to give timely consent to proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks as provided in Section 12.12(b) or (z) any Bank is owed
increased costs under Section 1.10 (by virtue of the application of Section
1.11 or otherwise), Section 2.05 or Section 4.04 which in the judgment of the
Borrower are material in amount and
-15-
<PAGE>
which are not otherwise requested by Banks constituting at least the
Super-Majority Banks, the Borrower shall have the right, if no Event of
Default then exists and, in the case of a Bank described in clause (z) above,
such Bank has not withdrawn its request for such compensation or changed its
applicable lending office with the effect of eliminating or substantially
decreasing (to a level which in the judgment of the Borrower is not material)
such increased cost, to replace such Bank (the "Replaced Bank") with one or
more other Eligible Transferee or Transferees (collectively, the "Replacement
Bank") with the consent of the Administrative Agent, which consent shall not
be unreasonably withheld or delayed, PROVIDED that (i) at the time of any
replacement pursuant to this Section 1.13, the Replacement Bank shall enter
into one or more Assignment and Assumption Agreements pursuant to which the
Replacement Bank shall acquire all of the Commitment and outstanding Loans
of, and participations in Letters of Credit by, the Replaced Bank and, in
connection therewith, shall pay to (x) the Replaced Bank in respect thereof
an amount equal to the sum of (a) an amount equal to the principal of, and
all accrued interest on, all outstanding Loans of the Replaced Bank, (b) an
amount equal to such Replaced Bank's BRL Percentage of all Unpaid Drawings
that have been funded by such Replaced Bank, together with all then unpaid
interest with respect thereto at such time and (c) an amount equal to all
accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to
Section 3.01 hereof and (y) the appropriate Issuing Bank an amount equal to
such Replaced Bank's BRL Percentage of any Unpaid Drawing not funded by such
Replaced Bank and (ii) all obligations of the Borrower owing to the Replaced
Bank (other than those specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being,
paid) shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective assignment documentation,
the payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Notes executed by the Borrower, the Replacement Bank shall become
a Bank hereunder and the Replaced Bank shall cease to constitute a Bank
hereunder, except with respect to indemnification provisions under this
Agreement, which shall survive as to such Replaced Bank.
1.14 EXTENSION OF SRL COMMITMENT EXPIRATION DATE;
REPLACEMENT OF NON-EXTENDING BANKS OR CONVERSION OF SUPPLEMENTAL REVOLVING
LOANS INTO SUPPLEMENTAL TERM LOANS. The Borrower may, at any time after the
date which is 90 days prior to the then SRL Commitment Expiration Date and
prior to the date which is 30 days prior to the then SRL Commitment
Expiration Date, by written notice to the Administrative Agent (which notice
the Administrative Agent shall promptly transmit to each Bank), request that
each Bank with a Supplemental Revolving Loan Commitment agree to a 364 day
extension of the SRL Commitment Expiration Date then in effect. Each Bank
with a Supplemental Revolving Loan Commitment shall respond to such extension
request (each such response being delivered to the Administrative Agent) not
earlier than the fifteenth day prior to the SRL Commitment Expiration Date
then in effect (such date, the "First Response Date") and not later than five
Business Days prior to the SRL Commitment Expiration Date then in effect (the
"Last Response Date"), with the failure of any Bank to respond being deemed
to be a negative response. Each Bank with a Supplemental Revolving Loan
Commitment shall decide, in its sole discretion, whether or not to agree to
such extension of the SRL Commitment Expiration Date. On the Business Day
next following the Last Response Date, the Administrative Agent shall advise
the Borrower of each
-16-
<PAGE>
Bank's response, whereupon the Borrower shall within one Business Day
determine, and so advise the Administrative Agent, either (a) not to have the
SRL Commitment Expiration Date extended or (b) to have the SRL Commitment
Expiration Date extended. If the Borrower so elects to extend the SRL
Commitment Expiration Date, and so long as no Default or Event of Default is
in existence at such time, then each Bank that has responded affirmatively as
set forth above (each such Bank, an "Extending Bank") shall be deemed to have
agreed (such agreement to become effective on the then effective SRL
Commitment Expiration Date (each such date, a "Conversion Date")) to cause
the SRL Commitment Expiration Date to be extended as to each Extending Bank
until the date which is 364 days after the SRL Commitment Expiration Date
then in effect. In the event that one or more Banks (each a "Non-Extending
Bank") do not agree to such extension, the Borrower may elect, with respect
to each such Non-Extending Bank, on or before the then SRL Commitment
Expiration Date then in effect, to either (i) provide, with the consent of
the Administrative Agent (which consent shall not be unreasonably withheld),
another financial institution to acquire the Supplemental Revolving Loan
Commitment of and Supplemental Revolving Loans owing to such Non-Extending
Bank and all amounts owing to such Non-Extending Bank in respect of such
Commitment and Loans under this Agreement, which assignment of such
Non-Extending Bank's Supplemental Revolving Loan Commitment and Supplemental
Revolving Loans and replacement of such Non-Extending Bank shall be effected
pursuant to an assignment agreement between the Non-Extending Bank and such
other financial institution or (ii) convert, on the Conversion Date, the
outstanding Supplemental Revolving Loans of such Non-Extending Bank into
Supplemental Term Loans as provided in Section 1.01(f), and upon such
conversion, terminate the Supplemental Revolving Loan Commitment of such
Non-Extending Bank pursuant to Section 3.03(d)(at which time Schedule I shall
be deemed modified to reflect the changed Supplemental Revolving Loan
Commitments). In the event that the Borrower shall elect not to replace or
terminate the Supplemental Revolving Loan Commitment of a Non-Extending Bank
at the end of any such 364 day period pursuant to the preceding sentence,
such Non-Extending Bank's Supplemental Revolving Loan Commitment shall
terminate on the Conversion Date and such Non-Extending Bank shall remain a
Bank hereunder until the payment in full of all amounts owing to such
Non-Extending Bank hereunder. The SRL Commitment Expiration Date may be
extended for successive periods of 364 days pursuant to this Section 1.14 but
in no event shall any SRL Commitment Expiration Date extend beyond the
Revolving Loan Maturity Date. On the Conversion Date, (x) new Supplemental
Revolving Notes and Supplemental Term Notes will be issued, at the Borrower's
expense, such new Notes to be in conformity with the requirements of Section
1.05 (with appropriate modifications) to the extent needed to reflect the
revised Supplemental Revolving Commitments of the Banks (and/or outstanding
Supplemental Term Loans, as the case may be) and (y) Schedule I shall be
deemed modified to reflect the changed Supplemental Revolving Loan
Commitments.
SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the
terms and conditions herein set forth, the Borrower may request that any
Issuing Bank issue, at any time and from time to time on and after the
Restatement Effective Date and prior to the Revolving Loan Maturity Date, for
the account of the Borrower and for the benefit of any holder (or any
trustee, agent or other
-17-
<PAGE>
similar representative for any such holders) of L/C Supportable Obligations
of Holdings or any of its Subsidiaries, an irrevocable standby letter of
credit, in a form customarily used by such Issuing Bank or in such other form
as has been approved by such Issuing Bank (each such standby letter of
credit, a "Letter of Credit") in support of such L/C Supportable Obligations
and each Issuing Bank agrees at any time and from time to time on or after
the Restatement Effective Date and prior to the Revolving Loan Maturity Date,
following its receipt of the respective Letter of Credit Request, that it
will issue for the account of the Borrower one or more Letters of Credit.
Schedule III contains a description of all letters of credit issued or
outstanding under the Existing Credit Agreement prior to the Restatement
Effective Date and which will remain outstanding on the Restatement Effective
Date. Each such letter of credit, including any extension thereof (each an
"Existing Letter of Credit") shall constitute a "Letter of Credit" for all
purposes of this Agreement and shall be deemed issued for purposes of
Sections 2.03 and 3.01 on the Restatement Effective Date. Notwithstanding the
foregoing, the respective Issuing Bank shall be under no obligation to issue
any Letter of Credit of the types described above if at the time of such
issuance:
(i) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin
or restrain such Issuing Bank from issuing such Letter of
Credit or any requirement of law applicable to such Issuing
Bank or any request or directive (whether or not having the
force of law) from any governmental authority with
jurisdiction over such Issuing Bank shall prohibit, or request
that such Issuing Bank refrain from, the issuance of letters
of credit generally or such Letter of Credit in particular or
shall impose upon such Issuing Bank with respect to such
Letter of Credit any restriction or reserve or capital
requirement (for which such Issuing Bank is not otherwise
compensated) not in effect on the Restatement Effective Date
or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Issuing Bank as of the
Restatement Effective Date and which such Issuing Bank in good
faith deems material to it; or
(ii) such Issuing Bank shall have received notice from the
Required Banks prior to the issuance of such Letter of Credit
of the type described in the penultimate sentence of Section
2.02.
(b) Notwithstanding the foregoing, (i) no Letter of
Credit shall be issued, the Stated Amount of which, when added to the Letter
of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the
date of, and prior to the issuance of, the respective Letter of Credit) at
such time would exceed (x) $75,000,000 or (y) when added to the aggregate
outstanding principal amount of all Basic Revolving Loans and all BRL
Competitive Bid Loans, the Total Basic Revolving Loan Commitment and (ii)
each Letter of Credit shall by its terms terminate on or before the tenth
Business Day prior to the Revolving Loan Maturity Date.
(c) Notwithstanding the foregoing, in the event a Bank
with a Basic Revolving Loan Commitment (or after the termination thereof, any
Letter of Credit Outstandings or Basic Revolving Loans) has defaulted in its
obligations to make Loans or fund Unpaid Drawings, no Issuing Bank shall be
required to issue any Letter of Credit unless the respective Issuing Bank
-18-
<PAGE>
has entered into arrangements satisfactory to it and the Borrower to
eliminate such Issuing Bank's risk with respect to the participation in
Letters of Credit of the defaulting Bank or Banks, including by cash
collateralizing such defaulting Bank's or Banks' BRL Percentage of the Letter
of Credit Outstandings.
2.02 LETTER OF CREDIT REQUESTS. Whenever the Borrower
desires that a Letter of Credit be issued for its account, the Borrower shall
give the Administrative Agent and the respective Issuing Bank at least two
Business Days' (or such shorter period as is acceptable to the respective
Issuing Bank) written notice (or telephonic notice promptly confirmed in
writing) thereof, PROVIDED that any such notice shall be deemed to have been
given on a certain day only if given before 11:00 A.M. (New York time) on
such day. Each such written notice or written confirmation of telephonic
notice shall be in the form of Exhibit D (each, a "Letter of Credit
Request"). Unless the respective Issuing Bank has received notice from the
Required Banks before it issues a Letter of Credit that one or more of the
conditions specified in Section 5A or Section 5B, as then applicable, are not
then satisfied or that the issuance of such Letter of Credit would violate
Section 2.01(b), then such Issuing Bank may issue the requested Letter of
Credit for the account of the Borrower in accordance with the Issuing Bank's
usual and customary practices. Upon its issuance, extension or amendment of
any Letter of Credit, such Issuing Bank shall promptly notify the
Administrative Agent of such issuance, extension or amendment, which notice
shall be accompanied by a copy of the issued Letter of Credit or amendment,
as the case may be.
2.03 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately
upon the issuance by any Issuing Bank of any Letter of Credit, such Issuing
Bank shall be deemed to have sold and transferred to each Bank with a Basic
Revolving Loan Commitment, other than such Issuing Bank (each such Bank, in
its capacity under this Section 2.03, a "Participant"), and each such
Participant shall be deemed irrevocably and unconditionally to have purchased
and received from such Issuing Bank, without recourse or warranty, an
undivided interest and participation, to the extent of such Participant's BRL
Percentage, in such Letter of Credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto, and
any security therefor or guaranty pertaining thereto (although the Letter of
Credit Fee shall be payable directly to the Administrative Agent for the
account of the Participants as provided in Section 3.01(b) and the
Participants shall have no right to receive any portion of any Facing Fees).
Upon any change in the Basic Revolving Loan Commitments or BRL Percentages of
the Banks pursuant to Section 1.01(c), 1.13 or 12.04, it is hereby agreed
that, with respect to all outstanding Letters of Credit and Unpaid Drawings,
there shall be an automatic adjustment to the participations pursuant to this
Section 2.03 to reflect the new BRL Percentages of the assignor and assignee
Bank or of all Banks with Basic Revolving Loan Commitments, as the case may
be.
(b) In determining whether to pay under any Letter of
Credit, such Issuing Bank shall have no obligation relative to the other
Banks other than to confirm that any documents required to be delivered under
such Letter of Credit appear to have been delivered and that they appear to
comply on their face with the requirements of such Letter of Credit. Any
action taken or omitted to be taken by any Issuing Bank under or in
connection with any Letter of Credit, if
-19-
<PAGE>
taken or omitted in the absence of gross negligence or willful misconduct,
shall not create for such Issuing Bank any resulting liability to the
Borrower or any Bank.
(c) In the event that any Issuing Bank makes any payment
under any Letter of Credit and the Borrower shall not have reimbursed such
amount in full to such Issuing Bank pursuant to Section 2.04(a), such Issuing
Bank shall promptly notify the Administrative Agent, which shall promptly
notify each Participant of such failure, and each Participant shall promptly
and unconditionally pay to such Issuing Bank the amount of such Participant's
BRL Percentage of such unreimbursed payment in Dollars and in same day funds.
If the Administrative Agent so notifies, prior to 12:00 Noon (New York time)
on any Business Day, any Participant required to fund a payment under a
Letter of Credit, such Participant shall make available to such Issuing Bank
in Dollars such Participant's BRL Percentage of the amount of such payment on
such Business Day in same day funds. If and to the extent such Participant
shall not have so made its BRL Percentage of the amount of such payment
available to such Issuing Bank, such Participant agrees to pay to such
Issuing Bank, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to
such Issuing Bank at the overnight Federal Funds Rate. The failure of any
Participant to make available to such Issuing Bank its BRL Percentage of any
payment under any Letter of Credit shall not relieve any other Participant of
its obligation hereunder to make available to such Issuing Bank its BRL
Percentage of any Letter of Credit on the date required, as specified above,
but no Participant shall be responsible for the failure of any other
Participant to make available to such Issuing Bank such other Participant's
BRL Percentage of any such payment.
(d) Whenever any Issuing Bank receives a payment of a
reimbursement obligation as to which it has received any payments from the
Participants pursuant to clause (c) above, such Issuing Bank shall pay to
each Participant which has paid its BRL Percentage thereof, in Dollars and in
same day funds, an amount equal to such Participant's share (based upon the
proportionate aggregate amount originally funded by such Participant to the
aggregate amount funded by all Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of
the respective participations.
(e) The obligations of the Participants to make payments
to each Issuing Bank with respect to Letters of Credit issued by it shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Credit Documents;
(ii) the existence of any claim, setoff, defense or other
right which the Borrower or any of its Subsidiaries may have
at any time against a beneficiary named in a Letter of Credit,
any transferee of any Letter of Credit (or any Person for whom
any such transferee may be acting), the Administrative Agent,
any Issuing Bank, any Participant, or any other Person,
whether in connection with this Agreement, any Letter of
Credit, the
-20-
<PAGE>
transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and
the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the
Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.04 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a)
The Borrower hereby agrees to reimburse the respective Issuing Bank, by
making payment to the Administrative Agent in immediately available funds at
the Payment Office, for any payment or disbursement made by it under any
Letter of Credit (each such amount, so paid until reimbursed, an "Unpaid
Drawing"), no later than three Business Days after the date of such payment
or disbursement, with interest on the amount so paid or disbursed by such
Issuing Bank, to the extent not reimbursed prior to 1:00 P.M. (New York time)
on the date of such payment or disbursement, from and including the date paid
or disbursed to but excluding the date such Issuing Bank was reimbursed by
the Borrower therefor at a rate per annum which shall be the Base Rate in
effect from time to time (plus an additional 2% per annum if not reimbursed
by the second Business Day following any such notice of payment or
disbursement), such interest payable on demand. The respective Issuing Bank
shall give the Borrower prompt notice of each Drawing under any Letter of
Credit, PROVIDED that the failure to give any such notice shall in no way
affect, impair or diminish the Borrower's obligations hereunder.
(b) The obligations of the Borrower under this Section
2.04 to reimburse the respective Issuing Bank with respect to drawings on
Letters of Credit (each, a "Drawing") including, in each case, interest
thereon, shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against any Bank (including in its capacity as
issuer of the Letter of Credit or as Participant), or any nonapplication or
misapplication by the beneficiary of the proceeds of such Drawing, the
respective Issuing Bank's only obligation to the Borrower being to confirm
that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to comply on their face
with the requirements of such Letter of Credit. Any action taken or omitted
to be taken by any Issuing Bank under or in connection with any Letter of
Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for such Issuing Bank any resulting liability to
the Borrower.
2.05 INCREASED COSTS. If at any time the introduction
after the Restatement Effective Date of, or any change after the Restatement
Effective Date in, any applicable law, rule, regulation, order, guideline or
request or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any Issuing Bank or any Participant, or any
corporation controlling such Person,
-21-
<PAGE>
with any request or directive by any such authority (whether or not having
the force of law) issued after the date of this Agreement, shall either (i)
impose, modify or make applicable any reserve, deposit, capital adequacy or
similar requirement against letters of credit issued by any Issuing Bank or
participated in by any Participant, or (ii) impose on any Issuing Bank or any
Participant, or any corporation controlling such Person, any other conditions
relating, directly or indirectly, to this Agreement or any Letter of Credit;
and the result of any of the foregoing is to increase the cost to any Issuing
Bank or any Participant of issuing, maintaining or participating in any
Letter of Credit, or reduce the amount of any sum received or receivable by
any Issuing Bank or any Participant hereunder or reduce the rate of return on
its capital with respect to Letters of Credit (except for changes in the rate
of tax on, or determined by reference to, the net income or profits of such
Issuing Bank or such Participant, or any corporation controlling such Person,
or any franchise tax based on the net income or profits of such Bank or
Participant, or any corporation controlling such Person, in either case
pursuant to the laws of the United States of America, the jurisdiction in
which it is organized or in which its principal office or applicable lending
office is located or any subdivision thereof or therein), but without
duplication of any amounts payable in respect of Taxes pursuant to Section
4.04(a), then, upon demand to the Borrower by such Issuing Bank or any
Participant (a copy of which demand shall be sent by such Issuing Bank or
such Participant to the Administrative Agent) and subject to the provisions
of Section 12.15 (to the extent applicable), the Borrower shall pay to such
Issuing Bank or such Participant such additional amount or amounts as will
compensate such Bank for such increased cost or reduction in the amount
receivable or reduction on the rate of return on its capital. Any Issuing
Bank or any Participant, upon determining that any additional amounts will be
payable pursuant to this Section 2.05, will give prompt written notice
thereof to the Borrower, which notice shall include a certificate submitted
to the Borrower by such Issuing Bank or such Participant (a copy of which
certificate shall be sent by such Issuing Bank or such Participant to the
Administrative Agent), setting forth in reasonable detail the basis for the
calculation of such additional amount or amounts necessary to compensate such
Issuing Bank or such Participant.
SECTION 3. FEES; REDUCTIONS OF COMMITMENT.
3.01 FEES. (a) (i) The Borrower agrees to pay the
Administrative Agent for distribution to each Bank with a Basic Revolving
Loan Commitment a commitment fee (the "BRL Commitment Fee") for the period
from the Restatement Effective Date to and including the Revolving Loan
Maturity Date (or such earlier date as the Total Basic Revolving Loan
Commitment shall have been terminated), computed at a rate for each day equal
to the Applicable Commitment Fee Percentage for Basic Revolving Loans for
such day multiplied by the daily Unutilized Basic Revolving Loan Commitment
of such Bank. Accrued BRL Commitment Fees shall be due and payable quarterly
in arrears on each Quarterly Payment Date and on the Revolving Loan Maturity
Date or such earlier date upon which the Total Basic Revolving Loan
Commitment is terminated.
(ii) The Borrower agrees to pay the Administrative Agent
for distribution to each Bank with a Supplemental Revolving Loan Commitment a
commitment fee (the "SRL Commitment Fee", and together with the BRL
Commitment Fee, the "Commitment Fee") for the period from the Restatement
Effective Date to and including the final SRL Commitment
-22-
<PAGE>
Expiration Date (or the Conversion Date in the case of Non-Extending Banks
only) or such earlier date as the Total Supplemental Revolving Loan
Commitment shall have been terminated, computed at a rate for each day equal
to the Applicable Commitment Fee Percentage for Supplemental Revolving Loans
for such day multiplied by the daily Unutilized Supplemental Revolving Loan
Commitment of such Bank. Accrued SRL Commitment Fees shall be due and
payable quarterly in arrears on each Quarterly Payment Date and on the final
SRL Commitment Expiration Date (or the Conversion Date in the case of
Non-Extending Banks only) or such earlier date upon which the Total
Supplemental Revolving Loan Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative
Agent for distribution to each Bank with a Basic Revolving Loan Commitment
(based on their respective BRL Percentages) a fee in respect of each Letter
of Credit issued hereunder (the "Letter of Credit Fee"), for the period from
and including the date of issuance of such Letter of Credit to and including
the termination of such Letter of Credit, computed for each day at a rate
equal to the Applicable Eurodollar Margin for such day multiplied by the
daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees
shall be due and payable quarterly in arrears on each Quarterly Payment Date
and upon the first day on or after the termination of the Total Basic
Revolving Loan Commitment upon which no Letters of Credit remain outstanding.
(c) The Borrower agrees to pay to the respective Issuing
Bank, for its own account, a facing fee in respect of each Letter of Credit
issued for its account hereunder (the "Facing Fee") for the period from and
including the date of issuance of such Letter of Credit to and including the
termination of such Letter of Credit, computed at a rate equal to 1/8 of 1%
per annum of the daily Stated Amount of such Letter of Credit. Accrued
Facing Fees shall be due and payable quarterly in arrears on each Quarterly
Payment Date and on the date upon which the Total Basic Revolving Loan
Commitment has been terminated and such Letter of Credit no longer remains
outstanding.
(d) The Borrower shall pay, upon each drawing under,
issuance of, or amendment to, any Letter of Credit, such amount as shall at
the time of such event be the administrative charge and out-of-pocket
expenses which the respective Issuing Bank is generally imposing in
connection with such occurrence with respect to standby letters of credit.
(e) The Borrower agrees to pay to the Administrative
Agent, for its own account, an administrative fee in the amount of $3,000 in
respect of each Competitive Bid Borrowing requested by the Borrower, which
fee shall be due and payable (whether or not an offer is made by a Bidder
Bank or an offer is accepted by the Borrower) on the later of (x) the Reply
Date and (y) the date of the Competitive Bid Borrowing.
(f) The Borrower shall pay to the Agents, for their own
account, such other fees as have been agreed to in writing by the Borrower
and the Agents.
3.02 VOLUNTARY TERMINATION OF COMMITMENTS. (a) Upon at
least three Business Days' prior written notice (or telephonic notice
confirmed in writing) to the Administrative Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the
Banks), the Borrower shall have the right, at any time or from time to time,
without premium or
-23-
<PAGE>
penalty, to terminate the Total Unutilized Basic Revolving Loan Commitment,
in whole or in part, and/or the Total Unutilized Supplemental Revolving Loan
Commitment, in whole or in part, PROVIDED that partial reductions of either
of such Commitments shall be in an amount of $5,000,000 or integral multiples
of $1,000,000 in excess thereof, PROVIDED that each such reduction pursuant
to this clause (a) shall apply proportionately to permanently reduce the
Basic Revolving Loan Commitment and/or the Supplemental Revolving Loan
Commitment, as the case may be, of each Bank with such a Commitment or
Commitments.
(b) In the event of certain refusals by a Bank to
consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks as
provided in Section 12.12(b), the Borrower shall have the right, upon five
Business Days' prior written notice to the Administrative Agent at its Notice
Office (which notice the Administrative Agent shall promptly transmit to each
of the Banks), to terminate the entire Basic Revolving Loan Commitment and
Supplemental Revolving Loan Commitment of such Bank, so long as all Loans,
together with accrued and unpaid interest, Fees and all other amounts, owing
to such Bank are repaid concurrently with the effectiveness of such
termination pursuant to Section 4.01(b), and the Borrower shall pay to the
Administrative Agent at such time an amount in cash and/or cash equivalents
equal to such Bank's applicable BRL Percentage of the Letter of Credit
Outstandings (which cash and/or cash equivalents shall be held by the
Administrative Agent as security for the obligations of the Borrower
hereunder in respect of such outstanding Letters of Credit pursuant to a cash
collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent (at which time Schedule I shall be
deemed modified to reflect such changed amounts)), and at such time, such
Bank shall no longer constitute a "Bank" for purposes of this Agreement,
except with respect to indemnifications under this Agreement pursuant to
Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06, which shall survive as to
such repaid Bank.
3.03 MANDATORY REDUCTION OF COMMITMENTS. (a) The Total
Commitment and the Term Loan Commitment, the Revolving Loan Commitment and
the Supplemental Revolving Loan Commitment of each Bank shall terminate in
their entirety on December 31, 1997 and the Existing Credit Agreement shall
continue in effect unless the Restatement Effective Date shall have occurred
on or before such date.
(b) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total Term Loan Commitment (and
the Term Loan Commitment of each Bank) shall terminate in its entirety on the
Restatement Effective Date (after giving effect to the making of the Term
Loans on such date).
(c) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total Basic Revolving Loan
Commitment and the Basic Revolving Loan Commitment of each Bank shall
terminate in their entirety on the Revolving Loan Maturity Date.
(d) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, the Total Supplemental Revolving
Loan Commitment and the Supplemental Revolving Loan Commitment of each Bank
shall terminate in their entirety on the final SRL
-24-
<PAGE>
Commitment Expiration Date and the Supplemental Revolving Loan Commitment of
each Non-Extending Bank shall terminate in its entirety on the Conversion
Date with respect to such Non-Extending Bank.
(e) In addition to any other mandatory commitment
reductions pursuant to this Section 3.03, on each date after the Restatement
Effective Date upon which a mandatory prepayment of Term Loans and
Supplemental Term Loans pursuant to Section 4.02(c) or (d) is required (and
exceeds in amount the aggregate principal amount of Term Loans and
Supplemental Term Loans then outstanding) or would be required if Term Loans
or Supplemental Term Loans were then outstanding, the Total Basic Revolving
Loan Commitment and/or the Total Supplemental Revolving Loan Commitment shall
be permanently reduced (the amount of such mandatory commitment reduction to
be applied to such Commitments on a pro rata basis) by the amount, if any, by
which the amount required to be applied pursuant to said Section (determined
as if an unlimited amount of Term Loans and Supplemental Term Loans were
actually outstanding) exceeds the aggregate principal amount of Term Loans
and Supplemental Term Loans then outstanding.
(f) Each reduction to the Total Term Loan Commitment,
Total Basic Revolving Loan Commitment and the Total Supplemental Revolving
Loan Commitment pursuant to this Section 3.03 shall be applied
proportionately to reduce the Term Loan Commitment, the Basic Revolving Loan
Commitment or the Supplemental Revolving Loan Commitment, as the case may be,
of each Bank with such a Commitment.
SECTION 4. PREPAYMENTS; PAYMENTS; TAXES.
4.01 VOLUNTARY PREPAYMENTS. (a) The Borrower shall
have the right to prepay the Loans, without premium or penalty, in whole or
in part at any time and from time to time on the following terms and
conditions: (i) the Borrower shall give the Administrative Agent prior to
12:00 Noon (New York time) at its Notice Office at least one Business Day's
prior written notice (or telephonic notice promptly confirmed in writing) of
its intent to prepay such Loans, whether Term Loans, Basic Revolving Loans,
Supplemental Revolving Loans, Supplemental Term Loans or Competitive Bid
Loans (if applicable) shall be prepaid, the amount of such prepayment and the
Types of Loans to be prepaid and, in the case of Eurodollar Loans, the
specific Borrowing or Borrowings pursuant to which made, which notice the
Administrative Agent shall promptly transmit to each of the Banks; (ii) each
prepayment (except any prepayment in full of a Borrowing) shall be in a
minimum amount of $1,000,000 and, if greater, shall be in integral multiples
thereof, PROVIDED that if any partial prepayment of Eurodollar Loans made
pursuant to any Borrowing shall reduce the outstanding Eurodollar Loans made
pursuant to such Borrowing to an amount less than $10,000,000 then such
Borrowing may not be continued as a Borrowing of Eurodollar Loans and any
election of an Interest Period with respect thereto given by the Borrower
shall have no force or effect; (iii) at the time of any prepayment of
Eurodollar Loans pursuant to this Section 4.01 on any day other than the last
day of an Interest Period applicable thereto or any prepayment of Competitive
Bid Loans on any day other than the maturity date thereof, the Borrower shall
pay the amounts then required pursuant to Section 1.11; (iv) except as
provided in clause (b) of this Section 4.01, each prepayment in respect of
any Loans made
-25-
<PAGE>
pursuant to a Borrowing shall be applied PRO RATA among the Banks which made
such Loans; and (v) each voluntary prepayment of Term Loans pursuant to this
Section 4.01(a) shall be applied pursuant to the terms of Section 4.02(e).
Notwithstanding anything to the contrary contained in this Section 4.01, the
Borrower shall have the right to voluntarily prepay any Competitive Bid Loan
only to the extent that the Borrower has a Voluntary Prepayment Right with
respect to such Competitive Bid Loan.
(b) In the event of certain refusals by a Bank to
consent to certain proposed changes, waivers, discharges or terminations with
respect to this Agreement which have been approved by the Required Banks as
provided in Section 12.12(b), the Borrower shall have the right, upon five
Business Days' prior written notice to the Administrative Agent at its Notice
Office (which notice the Administrative Agent shall promptly transmit to each
of the Banks) to repay all Loans, together with accrued and unpaid interest,
Fees and all other amounts owing to such Bank in accordance with said Section
12.12(b) so long as (A) in the case of the repayment of Basic Revolving Loans
and/or Supplemental Revolving Loans of any Bank pursuant to this clause (b)
the Basic Revolving Loan Commitment (if any) and Supplemental Revolving Loan
Commitment (if any) of such Bank are terminated concurrently with such
repayment pursuant to Section 3.02(b) (at which time Schedule I shall be
deemed modified to reflect the changed Basic Revolving Loan and Supplemental
Revolving Loan Commitments) and (B) in the case of the repayment of Loans of
any Bank the consents required by Section 12.12(b) in connection with the
repayment pursuant to this clause (b) shall have been obtained; PROVIDED that
repayments of Term Loans pursuant to this clause (b) shall only apply to
reduce the then remaining Scheduled Repayments to the extent such Term Loans
so repaid are not replaced pursuant to Section 12.12(b), with any such
reductions to reduce the then remaining Scheduled Repayments on a PRO RATA
basis (based upon the then remaining amount of Scheduled Repayments after
giving effect to all prior reductions thereto).
4.02 MANDATORY REPAYMENTS. (a) (i) On any day on which
the sum of the aggregate outstanding principal amount of the Basic Revolving
Loans, BRL Competitive Bid Loans and the Letter of Credit Outstandings
exceeds the Total Basic Revolving Loan Commitment as then in effect, the
Borrower shall prepay on such date the principal of Basic Revolving Loans of
the Banks in an amount equal to such excess. If, after giving effect to the
prepayment of all Basic Revolving Loans of Banks, the aggregate amount of the
BRL Competitive Bid Loans and the Letter of Credit Outstandings exceeds the
Total Basic Revolving Loan Commitment as then in effect, the Borrower shall
pay to the Administrative Agent at the Payment Office on such date an amount
of cash or cash equivalents equal to the amount of such excess (up to a
maximum amount equal to the Letter of Credit Outstandings at such time), such
cash or cash equivalents to be held as security for all obligations of the
Borrower to Banks hereunder in connection with such Letter of Credit
Outstandings in a cash collateral account to be established by the
Administrative Agent. If, after giving effect to the prepayment of all Basic
Revolving Loans of Banks and the cash collateralization of all Letter of
Credit Outstandings as set forth above, the remaining aggregate principal
amount of BRL Competitive Bid Loans exceeds the Total Basic Revolving Loan
Commitment as then in effect, the Borrower shall repay on such date the
principal of BRL Competitive Bid Loans having a Voluntary Prepayment Right in
an aggregate amount equal to such excess (up to a maximum amount equal to the
principal of
-26-
<PAGE>
BRL Competitive Bid Loans having a Voluntary Prepayment Right outstanding at
such time), PRO RATA among such BRL Competitive Bid Loans outstanding at such
time. If, after giving effect to the prepayment referred to in the
immediately preceding sentence, the remaining aggregate principal amount of
BRL Competitive Bid Loans exceeds the Total Basic Revolving Loan Commitment
as then in effect, the Borrower shall repay on such date the principal of
such BRL Competitive Bid Loans in an aggregate amount equal to such excess,
PRO RATA among such BRL Competitive Bid Loans outstanding at such time,
provided that no BRL Competitive Bid Loan shall be prepaid pursuant to this
sentence unless the Bank that made same consents to such prepayment, PROVIDED
FURTHER, that to the extent any Bank does not consent to the repayment of a
BRL Competitive Bid Loan the Borrower shall pay to the Administrative Agent
at the Payment Office on such date an amount of cash or cash equivalents
equal to the amount of such BRL Competitive Bid Loan, such cash or cash
equivalents to be held as security for all obligations of the Borrower in
respect of such BRL Competitive Bid Loan in a cash collateral account to be
established by the Administrative Agent.
(ii) On any day on which the sum of the aggregate
outstanding principal amount of the Supplemental Revolving Loans and SRL
Competitive Bid Loans exceeds the Total Supplemental Revolving Loan
Commitment as then in effect, the Borrower shall prepay on such date the
principal of Supplemental Revolving Loans of the Banks in an amount equal to
such excess. If, after giving effect to the prepayment of all Supplemental
Revolving Loans of Banks, the remaining aggregate principal amount of all SRL
Competitive Bid Loans exceeds the Total Supplemental Revolving Loan
Commitment as then in effect, the Borrower shall repay on such date the
principal of SRL Competitive Bid Loans having a Voluntary Prepayment Right in
an aggregate amount equal to such excess (up to a maximum amount equal to the
principal of SRL Competitive Bid Loans having a Voluntary Prepayment Right
outstanding at such time), PRO RATA among such SRL Competitive Bid Loans
outstanding at such time. If, after giving effect to the prepayment referred
to in the immediately preceding sentence, the remaining aggregate principal
amount of SRL Competitive Bid Loans exceeds the Total Supplemental Revolving
Loan Commitment as then in effect, the Borrower shall repay on such date the
principal of such SRL Competitive Bid Loans in an aggregate amount equal to
such excess, PRO RATA among such SRL Competitive Bid Loans outstanding at
such time, provided that no SRL Competitive Bid Loan shall be prepaid
pursuant to this sentence unless the Bank that made same consents to such
prepayment, PROVIDED FURTHER, that to the extent any Bank does not consent to
the repayment of an SRL Competitive Bid Loan the Borrower shall pay to the
Administrative Agent at the Payment Office on such date an amount of cash or
cash equivalents equal to the amount of such SRL Competitive Bid Loan, such
cash or cash equivalents to be held as security for all obligations of the
Borrower in respect of such SRL Competitive Bid Loan in a cash collateral
account to be established by the Administrative Agent.
(b) (i) In addition to any other mandatory repayments
pursuant to this Section 4.02, on each date set forth below, the Borrower
shall be required to repay that principal amount of Term Loans, to the extent
then outstanding, as is set forth opposite such date (each such repayment, as
the same may be reduced as provided in Section 4.01(b) or Section 4.02(e), a
"Scheduled Repayment"):
-27-
<PAGE>
<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
April 15, 2001 $50,000,000
January 15, 2002 $50,000,000
Term Loan Maturity Date $50,000,000
</TABLE>
(ii) In addition to any other mandatory repayments
pursuant to this Section 4.02, on the Supplemental Term Loan Maturity Date,
the Borrower shall be required to repay the aggregate principal amount of all
Supplemental Term Loans, if any, then outstanding.
(c) In addition to any other mandatory repayments
pursuant to this Section 4.02, on each date after the Restatement Effective
Date upon which Holdings or any of its Subsidiaries receives any proceeds
from any incurrence by Holdings or any of its Subsidiaries of Indebtedness
required to be applied pursuant to this Section in accordance with Section
8.06(d) or 8.06(e), an amount equal to the amount required by Section 8.06(d)
or 8.06(e), as the case may be, shall be applied as a mandatory repayment of
principal of outstanding Term Loans and Supplemental Term Loans (such
mandatory repayment to be applied on a PRO RATA basis among such Tranches
based on the then applicable TL Facility Percentage and STL Facility
Percentage) in accordance with the requirements of Sections 4.02(e) and (f).
(d) In addition to any other mandatory repayments
pursuant to this Section 4.02, on each date after the Restatement Effective
Date upon which Holdings or any of its Subsidiaries receives proceeds from
any sale of assets required to be applied pursuant to this Section in
accordance with Section 8.03, an amount equal to the amount required by
Section 8.03 shall be applied as a mandatory repayment of principal of
outstanding Term Loans and Supplemental Term Loans (such mandatory repayment
to be applied on a PRO RATA basis among such Tranches based on the then
applicable TL Facility Percentage and STL Facility Percentage) in accordance
with the requirements of Sections 4.02(e) and (f).
(e) Each amount applied to repay Term Loans pursuant to
Section 4.01(a) and Sections 4.02(c) and (d) shall be applied to reduce the
then remaining Scheduled Repayments (x) in the chronological order of
maturity with respect to the Scheduled Repayments which mature within twelve
months following the date of such repayment and (y) PRO RATA with respect to
Scheduled Repayments which mature thereafter, each such application to be
based upon the then remaining amount of Scheduled Repayments after giving
effect to all prior reductions thereto.
(f) With respect to each repayment of Loans required by
this Section 4.02, the Borrower may designate the Types of Loans which are to
be repaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings of the respective Tranche pursuant to which made, PROVIDED that:
(i) if any repayment of Eurodollar Loans made pursuant to a single Borrowing
shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing
to an amount less than $10,000,000, such Borrowing shall be converted at the
end of the then current Interest Period into a Borrowing of Base Rate Loans;
and (ii) each repayment of any Loans made pursuant to a Borrowing shall be
applied PRO RATA among the Banks making such Loans. In the absence of a
designation by the Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in
its sole discretion.
-28-
<PAGE>
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement or any Note
shall be made to the Administrative Agent for the account of the Bank or
Banks entitled thereto not later than 1:00 P.M. (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Payment Office of the Administrative Agent. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.
4.04 NET PAYMENTS. (a) All payments made by the
Guarantors or the Borrower hereunder or under any Note will be made without
set-off, counterclaim or other defense. Except as provided in Section
4.04(b), all such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, (i) any tax
imposed on or measured by the net income or profits of a Bank, or any
franchise tax based on the net income or profits of a Bank, in either case
pursuant to the laws of the United States of America or any political
subdivision or taxing authority thereof or therein or the jurisdiction in
which it is organized or in which the principal office or applicable lending
office of such Bank is located or any subdivision thereof or therein, and
(ii) in the case of any Bank organized under the laws of any jurisdiction
other than the United States of America or any State thereof (including the
District of Columbia), any taxes imposed by the United States of America by
means of withholding at the source unless such withholding results from a
change in applicable law or treaty subsequent to the date such Bank becomes a
Bank with respect to the Loan or portion thereof affected by such change) and
all interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imports, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes,
and such additional amounts as may be necessary so that every payment of all
amounts due under this Agreement or under any Note, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. If any amounts are payable in respect
of Taxes pursuant to the preceding sentence of this Section 4.04(a), then the
Borrower agrees to reimburse each Bank, upon the written request of such
Bank, for taxes imposed on or measured by the net income or profits of such
Bank, or any franchise tax based on the net income or profits of such Bank,
in either case pursuant to the laws of the jurisdiction in which the
principal office or applicable lending office of such Bank is located or
under the laws of any political subdivision or taxing authority of any such
jurisdiction in which the principal office or applicable lending office of
such Bank is located and for any withholding of income or similar taxes
imposed by the United States of America as such Bank shall determine are
payable by, or withheld from, such Bank in respect of such amounts so paid to
or on behalf of such Bank pursuant to the preceding sentence and in respect
of any amounts paid to or on behalf of such Bank pursuant to this sentence.
Such written request shall set forth the amount of net income or profits or
franchise taxes payable by, or withheld from, such Bank pursuant to the
immediately preceding sentence and shall be certified by an appropriate
officer of such Bank. The Borrower will pay any such Taxes required
-29-
<PAGE>
to be paid pursuant to this Section 4.04(a) within the time allowed for such
payment under applicable law and will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes is made to the
relevant taxation or other authority pursuant to applicable law certified
copies of tax receipts evidencing such payment by the Borrower. The Borrower
agrees to indemnify and hold harmless each Bank, and reimburse such Bank upon
its written request, for the amount of any Taxes so levied or imposed and
paid by such Bank.
(b) Each Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to
the Borrower and the Administrative Agent on or prior to the Restatement
Effective Date or in the case of a Bank that is an assignee or transferee of
an interest under this Agreement pursuant to Sections 1.13 or 12.04 (unless
the respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or Form 1001 (or successor forms) certifying to
such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit E (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under this
Agreement and under any Note. In addition, each Bank agrees that from time
to time after the Restatement Effective Date, when a lapse in time or change
in circumstances renders the previous certification obsolete or inaccurate in
any material respect, it will deliver to the Borrower and the Administrative
Agent two new accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001, or Form W-8 and a Section 4.04(b)(ii)
Certificate, as the case may be, and such other forms as may be required in
order to confirm or establish the entitlement of such Bank to a continued
exemption from or reduction in United States withholding tax with respect to
payments under this Agreement and any Note, or it shall immediately notify
the Borrower and the Administrative Agent of its inability to deliver any
such form or Certificate. Notwithstanding anything to the contrary contained
in Section 4.04(a), but subject to Section 12.04(b) and the immediately
succeeding sentence, (x) the Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or similar taxes
imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal
income tax purposes to the extent that such Bank has not provided to the
Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) the Borrower shall not
be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be
made to a Bank in respect of income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
if (I) such Bank has not provided to the Borrower the Internal Revenue
Service Forms and, if applicable, certificate required to be provided to the
Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment,
other than interest, to a Bank described in clause (ii) above, to the extent
that
-30-
<PAGE>
such Forms and, if applicable, certificate do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section
4.04 and except as set forth in Section 12.04(b), the Borrower agrees to pay
additional amounts and to indemnify each Bank in the manner set forth in
Section 4.04(a) (without regard to the identity of the jurisdiction requiring
the deduction or withholding) in respect of any amounts deducted or withheld
by it as described in the immediately preceding sentence as a result of any
changes after the Restatement Effective Date in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the official
interpretation thereof, relating to the deducting or withholding of income or
similar Taxes.
(c) The provisions of this Section 4.04 are subject to
the provisions of Section 12.15 (to the extent applicable).
SECTION 5.A. CONDITIONS PRECEDENT TO INITIAL CREDIT
EVENTS. The obligation of each Bank to make Loans and to participate in
Letters of Credit on the Restatement Effective Date, and the obligations of
each Issuing Bank to issue Letters of Credit on the Restatement Effective
Date, are subject to the satisfaction of the following conditions:
5A.01 EXECUTION OF AGREEMENT; NOTES. On or prior to the
Restatement Effective Date (i) this Agreement shall have been executed and
delivered as provided in Section 12.10 and (ii) there shall have been
delivered to the Administrative Agent for the account of each of the Banks
the appropriate Term Note, Revolving Note and/or Supplemental Revolving Note
executed by the Borrower, in each case in the amount and maturity and as
otherwise provided herein.
5A.02 OFFICERS' CERTIFICATE. (a) The Documentation
Agent shall have received a certificate dated the Restatement Effective Date
and signed by an Authorized Officer of the Borrower stating that all of the
applicable conditions set forth in Sections 5A.06, 5A.07, 5A.11 and 5B.02
have been satisfied as of such date.
(b) The Documentation Agent shall have received a
certificate dated the Restatement Effective Date and signed by an Authorized
Officer of Holdings (i) stating that Holdings is in compliance with Sections
8.09 and 8.10 as of the last day of the fiscal quarter ended September 30,
1997 and (ii) setting forth the calculations required to establish such
compliance.
5A.03 OPINIONS OF COUNSEL. The Documentation Agent
shall have received opinions, in form and substance satisfactory to the
Documentation Agent, addressed to each of the Agents and the Banks and dated
the Restatement Effective Date, from (i) Douglas M. Steenland, Esq., Senior
Vice President, General Counsel and Secretary of Holdings, NWA and the
Borrower, which opinion shall cover the matters contained in Exhibit F-1
hereto and (ii) White & Case, special counsel to the Agents, which opinion
shall cover the matters contained in Exhibit F-2 hereto.
5A.04 CORPORATE DOCUMENTS; PROCEEDINGS; ETC. (a) The
Documentation Agent shall have received from each Credit Party a certificate,
dated the Restatement Effective Date,
-31-
<PAGE>
signed by an Authorized Officer, and attested to by the Secretary or any
Assistant Secretary, of such Credit Party, (x) certifying that the
certificate of incorporation and by-laws of such Credit Party attached
thereto are true and correct copies thereof and (y) to the effect that such
Credit Party is in good standing in its respective state of incorporation.
(b) All corporate and legal proceedings and all
instruments and agreements in connection with the transactions contemplated
by this Agreement and the other Credit Documents shall be satisfactory in
form and substance to the Documentation Agent, and the Documentation Agent
shall have received all information and copies of all certificates, documents
and papers, including records of corporate proceedings, governmental
approvals, good standing certificates and bring-down telegrams or facsimiles,
if any, which the Documentation Agent may have requested in connection
therewith, such documents and papers, where appropriate, to be certified by
proper corporate or governmental authorities.
5A.05 CONSENT LETTER. The Documentation Agent shall
have received a letter from CT Corporation System, presently located at 1633
Broadway, New York, New York 10019, substantially in the form of Exhibit G,
indicating its consent to its appointment by each Credit Party as its agent
to receive service of process as specified in Section 12.08.
5A.06 ADVERSE CHANGE, ETC. After giving effect to the
transactions contemplated hereby, nothing shall have occurred which has had a
material adverse effect on the rights or remedies of the Agents or the Banks,
or on the ability of the Credit Parties to perform their respective
obligations to the Agents and the Banks or which has had a material adverse
effect on the results of operations or financial condition of Holdings and
its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken
as a whole.
5A.07 LITIGATION. No actions, suits or proceedings by
any entity (private or governmental) shall be pending or threatened (a) with
respect to the Transaction or this Agreement or any documentation executed in
connection therewith, or (b) which has had a materially adverse effect on
(i) the Transaction, (ii) the results of operations or financial condition of
Holdings and its Subsidiaries taken as a whole or of the Borrower and its
Subsidiaries taken as whole or (iii) the rights or remedies of the Banks
hereunder or under any other Credit Document or on the ability of any Credit
Party to perform its respective obligations to the Banks hereunder or under
any other Credit Document.
5A.08 FINANCIAL OUTLOOK. The Banks shall have received
the Financial Outlook which shall be in form and substance reasonably
satisfactory to the Documentation Agent and the Required Banks.
5A.09 EXISTING CREDIT AGREEMENT. On the Restatement
Effective Date, (i) each Existing Bank shall have surrendered to the
Administrative Agent for cancellation the promissory notes issued to it
pursuant to the Existing Credit Agreement in respect of its Existing Loans,
(ii) each Continuing Bank shall have converted its Existing Loans, as
contemplated by Sections 1.01(a) and (b), (iii) all Existing Loans being
converted as described in preceding clause (ii) which were outstanding as
Eurodollar Loans shall, at the time of such conversion, be converted into
Base Rate Loans or borrowed as Eurodollar Loans in accordance with Sections
-32-
<PAGE>
1.01(a) and (b) and the Borrower shall pay all breakage costs in accordance
with the provisions of Section 1.11 of the Existing Credit Agreement in
connection therewith, (iv) each Existing Bank shall have received payment in
full of all amounts then due and owing to it under the Existing Credit
Agreement, (v) the Borrower shall have paid all accrued and unpaid interest
and fees owing under the Existing Credit Agreement through the Restatement
Effective Date, and (vi) the Administrative Agent shall have received
evidence in form, scope and substance satisfactory to it that the matters set
forth in this Section 5A.09 have been satisfied on such date.
5A.10 FEES, ETC. The Borrower shall have paid to the
Agents and the Banks all costs, fees and expenses (including, without
limitation, legal fees and expenses) payable to the Agents and the Banks to
the extent then due.
5A.11 APPRAISAL OF POOL ASSETS. (a) The Compliance
Agent shall have received an Appraisal with respect to the Pool Assets
setting forth the Appraised Value of each Pool Asset as of the Restatement
Effective Date.
(b) After giving effect to the Credit Events occurring
on the Restatement Effective Date, (i) the Appraised Value of the Pool Assets
shall be equal to or greater than 1.5 times the sum of the Total Basic
Revolving Loan Commitment (or after the termination thereof, the total amount
of Basic Revolving Loans outstanding, Letter of Credit Outstandings and BRL
Competitive Bid Loans outstanding) plus the Total Supplemental Revolving Loan
Commitment (or after the termination thereof, the total amount of
Supplemental Revolving Loans and SRL Competitive Bid Loans outstanding) plus
the aggregate amount of Term Loans and Supplemental Term Loans outstanding
and (ii) the Appraised Value of the portion of the Pool Assets which consists
of Stage III Aircraft shall be equal to or greater than 1.25 times the sum of
the Total Basic Revolving Loan Commitment (or after the termination thereof,
the total amount of outstanding Basic Revolving Loans, Letter of Credit
Outstandings and BRL Competitive Bid Loans outstanding) plus the Total
Supplemental Revolving Loan Commitment (or after the termination thereof, the
total amount of Supplemental Revolving Loans and SRL Competitive Bid Loans
outstanding) plus the aggregate amount of Term Loans and Supplemental Term
Loans outstanding (such calculations in clauses (i) and (ii), the "Coverage
Tests").
(c) At the time of the initial Credit Event the Pool
Assets shall consist only of Stage III Aircraft, other aircraft and "slots".
SECTION 5B. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS.
The obligation of each Bank to make Loans (including Loans made on the
Restatement Effective Date), and to participate in Letters of Credit
(including Letters of Credit issued on the Restatement Effective Date), and
the obligations of each Issuing Bank to issue Letters of Credit (including
Letters of Credit issued on the Restatement Effective Date), is subject, at
the time of each such Credit Event (except as hereinafter indicated), to the
satisfaction of the following conditions:
5B.01 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST;
NOTICE OF COMPETITIVE BID BORROWING. (a) Prior to the making of each Term
Loan, Basic Revolving Loan or Supplemental Revolving Loan, the Administrative
Agent shall have received a Notice of Borrowing meeting the requirements of
Section 1.03(a).
-33-
<PAGE>
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the respective Issuing Bank shall have received a
Letter of Credit Request meeting the requirements of Section 2.02.
(c) Prior to the making of each Competitive Bid Loan,
the Administrative Agent shall have received a Notice of Competitive Bid
Borrowing meeting the requirements of Section 1.03A(a).
5B.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES.
At the time of each such Credit Event and also after giving effect thereto
(i) there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein or in any other Credit
Document shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on the
date of such Credit Event (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by each Credit Party to each Agent
and each of the Banks that all of the conditions specified in Section 5A and
in this Section 5B which are applicable to such Credit Event exist as of that
time. All of the Notes, certificates, legal opinions and other documents and
papers referred to in Section 5A and in this Section 5B, unless otherwise
specified, shall be delivered to the Documentation Agent at the Documentation
Agent's Office for the account of each of the Banks and, except for the
Notes, in sufficient counterparts for each of the Banks and shall be
reasonably satisfactory in form and substance to the Banks.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
In order to induce the Banks to enter into this Agreement and to make the
Loans, and issue (or participate in) the Letters of Credit as provided
herein, each Credit Party makes the following representations and warranties
to and agreements with the Banks (in each case solely to the extent
applicable to such Credit Party or its Subsidiaries), all of which shall
survive the execution and delivery of this Agreement and the Notes and the
making of the Loans and the issuance of the Letters of Credit, with the
occurrence of each Credit Event on or after the Restatement Effective Date
being deemed to constitute a representation and warranty that the matters
specified in this Section 6 are true and correct in all material respects on
the date of such Credit Event (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date).
6.01 CORPORATE STATUS. Each Credit Party and each of
its Subsidiaries (i) is a duly organized and validly existing corporation or
other entity in good standing under the laws of the jurisdiction of its
organization, (ii) has the power and authority to own its property and assets
and to transact the business in which it is engaged and presently proposes to
engage and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where it is required to be so qualified
and where the failure to be so qualified would have a material adverse
-34-
<PAGE>
effect on the results of operations or financial condition of Holdings and
its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken
as a whole.
6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party
has the power and authority to execute, deliver and perform the terms and
provisions of each of the Credit Documents to which it is party and has taken
all necessary action to authorize the execution, delivery and performance by
it of each of such Credit Documents. Each Credit Party has duly executed and
delivered each of the Credit Documents to which it is party, and each of such
Credit Documents constitutes such Credit Party's legal, valid and binding
obligation enforceable in accordance with its terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally
affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
6.03 NO VIOLATION. Neither the execution, delivery or
performance by any Credit Party of the Credit Documents to which it is a
party, nor compliance by it with the terms and provisions thereof, (i) will
contravene in any material respect any provision of any material applicable
law, statute, rule or regulation or any applicable order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will conflict in
any material respect with or result in any material breach of any of the
terms, covenants, conditions or provisions of, or constitute a material
default under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien upon any of the properties or assets of such
Credit Party pursuant to the terms of any material indenture, mortgage, deed
of trust, credit agreement or loan agreement, or any other material
agreement, contract or instrument, to which such Credit Party is a party or
by which it or any of its property or assets is bound or to which it may be
subject or (iii) will violate any provision of the certificate of
incorporation or by-laws of such Credit Party.
6.04 GOVERNMENTAL APPROVALS. No material order,
consent, approval, license, authorization or validation of, or filing,
recording or registration with, or exemption by, any governmental or public
body or authority, or any subdivision thereof, is required to authorize, or
is required in connection with, (i) the execution, delivery and performance
of any Credit Document (other than any such order, consent, approval,
license, authorization, validation, filing, recording, registration or
exemption required to be made or obtained after the Restatement Effective
Date in the ordinary course of business which the Borrower agrees to promptly
obtain as and when required under applicable law) or (ii) the legality,
validity, binding effect or enforceability of any Credit Document.
6.05 FINANCIAL STATEMENTS; FINANCIAL OUTLOOK.
(a)(i) The audited consolidated balance sheets of each of Holdings and its
Subsidiaries and the Borrower and its Subsidiaries at December 31, 1996 and
the related consolidated statements of operations, of common stockholders'
equity (deficit) (in the case of Holdings and its Subsidiaries) and of cash
flows of such parties for the fiscal year ended as of said date, which
financial statements have been examined by Ernst & Young, who delivered an
unqualified opinion in respect therewith and (ii) the unaudited consolidated
balance sheets of each of Holdings and its Subsidiaries and the Borrower and
its Subsidiaries at September 30, 1997 and the related consolidated
statements of
-35-
<PAGE>
operations of such parties for the fiscal period ended as of said date, all
of which financial statements referred to in the preceding clauses (i) and
(ii) have heretofore been furnished to each Bank and present fairly in all
material respects the financial position of such entities at the dates of
said statements and the results of operations for the periods covered thereby
in accordance with GAAP consistently applied, except to the extent provided
in the notes to said financial statements and, in the case of the September
30, 1997 statements, subject to normal and recurring year-end audit
adjustments. Since December 31, 1996, there has been no material adverse
change in the financial condition or results of operations of the Borrower or
either Guarantor.
(b) On and as of the Restatement Effective Date, the
Financial Outlook 1997-2002, dated as of December 4, 1997 (the "Financial
Outlook"), previously delivered to the Agents and the Banks, had been
prepared on a basis consistent with the financial statements referred to in
Section 6.05(a) (other than as set forth or presented in such Financial
Outlook), and there are no statements or conclusions in the Financial Outlook
which are based upon or include information known to any Credit Party to be
misleading in any material respect or which fail to take into account
material information regarding the matters reported therein. The Financial
Outlook is based on good faith estimates and assumptions believed by the
Credit Parties to be reasonable at the time made, it being recognized by the
Banks that the Financial Outlook as to future events is not to be viewed as
facts and that actual results during the period or periods covered by the
Financial Outlook may differ from the results set forth in the Financial
Outlook.
6.06 LITIGATION. There are no actions, suits or
proceedings pending or threatened with respect to any Credit Party or any of
its Subsidiaries (i) that have had a material adverse effect on the financial
condition or results of operations of the Borrower or either Guarantor or
(ii) that affect the legality, validity, binding effect or enforceability of
any Credit Document.
6.07 TRUE AND COMPLETE DISCLOSURE. All factual
information (taken as a whole) furnished by or on behalf of any Credit Party
in writing to any Agent or any Bank for purposes of or in connection with
this Agreement, the other Credit Documents or any transaction contemplated
herein or therein is, and all other such factual information (taken as a
whole) hereafter furnished by or on behalf of any such Persons in writing to
any Agent or any Bank will be, true and accurate in all material respects on
the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in
light of the circumstances under which such information was provided.
6.08 USE OF PROCEEDS; MARGIN REGULATIONS. (a) All
proceeds of the (x) Term Loans shall be used by the Borrower to effect the
Transaction and (y) Basic Revolving Loans and Supplemental Revolving Loans
shall be used by the Borrower (i) to effect the Transaction, (ii) to pay fees
and expenses arising in connection with the Transaction and (iii) for the
working capital purposes of the Borrower and its Subsidiaries.
(b) Not more than 25% of the value of the assets of the
Borrower, or of Holdings and its Subsidiaries on a consolidated basis, shall
constitute Margin Stock. Neither the making of any Loan nor the issuance of
any Letter of Credit nor the use of the proceeds of any thereof will
-36-
<PAGE>
violate or be inconsistent with the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System.
6.09 COMPLIANCE WITH ERISA. Each Pension Plan has been
operated and administered in compliance with all applicable requirements of
ERISA and, if intended to qualify under Section 401(a) or 403(a) of the Code,
in compliance with all applicable requirements of such provision except where
the failure to so comply would not result in, taking all instances in the
aggregate, liability in excess of $2,000,000. Full payment has been made by
each Credit Party or any of its ERISA Affiliates of all amounts which such
Persons are required under the terms of each Pension Plan and Multiemployer
Plan to have paid as contributions to such Pension Plan and Multiemployer
Plan except where the failure to so comply, taking all instances in the
aggregate, would not result in liability in excess of $2,000,000. None of
the Pension Plans had an accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, as
of the last day of the most recent plan year of such Pension Plan. No
Termination Event has occurred or, to the best knowledge of any Credit Party,
is expected by such Credit Party to occur with respect to any Pension Plan or
Multiemployer Plan such that any Credit Party or any of its ERISA Affiliates
would incur, taking all instances in the aggregate, liabilities in excess of
$10,000,000 (such liabilities to include, without limitation, any liability
to the PBGC or to any other party under Sections 4062, 4063 and 4064 of ERISA
or to any Multiemployer Plan determined under Section 4201 ET SEQ. of ERISA)
resulting from or associated with all such Termination Events. No Credit
Party nor any of its ERISA Affiliates has engaged in any transaction in
connection with which any such entity has been or could be subjected to
either a tax imposed by Section 4975 of the Code or the corresponding civil
penalty assessed pursuant to Sections 502(i) and 502(l) of ERISA, which
penalties and taxes for all such transactions are in an aggregate amount in
excess of $2,500,000. Using actuarial assumptions and computation methods
consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate
liabilities of Holdings and its Subsidiaries, the Borrower and its
Subsidiaries and their ERISA Affiliates to all Multiemployer Plans in the
event of a complete withdrawal therefrom, as of the close of the most recent
fiscal year of each such Multiemployer Plan ended prior to the date of the
most recent Credit Event, would not have a material adverse effect upon the
results of operation or financial condition of any Credit Party. No Credit
Party nor any of its Subsidiaries maintains or contributes to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) which provides
benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any employee pension benefit plan (as
defined in Section 3(2) of ERISA) the obligations with respect to which would
have a material adverse effect on the ability of any Credit Party to perform
its respective obligations under this Agreement.
6.10 SUBSIDIARIES. Schedule IV correctly sets forth, as
of the Restatement Effective Date, the percentage ownership (direct and
indirect) of Holdings, NWA and the Borrower in each of their respective
Subsidiaries.
6.11 INVESTMENT COMPANY ACT. None of the Credit Parties
or any of their respective Subsidiaries is an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
-37-
<PAGE>
6.12 COMPLIANCE WITH STATUTES, ETC. Each Credit Party
and each of its Subsidiaries is in material compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed
by, all governmental bodies, domestic or foreign, in respect of the conduct
of their businesses and the ownership of their properties (including
applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls) except such noncompliances as would
not, in the aggregate, have a material adverse effect on the financial
condition or results of operations of Holdings and its Subsidiaries taken as
a whole or of the Borrower and its Subsidiaries taken as a whole.
6.13 AIR CARRIER. The Borrower is a Certificated Air
Carrier.
SECTION 7. AFFIRMATIVE COVENANTS. Each Credit Party
hereby covenants and agrees (in each case solely to the extent that any
covenant or agreement set forth in this Section 7 is expressly stated to be
applicable to such Credit Party and its Subsidiaries) that on and after the
Restatement Effective Date and until the Total Commitment and all Letters of
Credit have terminated and the Loans, Notes and Unpaid Drawings, together
with interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full:
7.01 INFORMATION COVENANTS. Holdings will furnish to
each Bank:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available
and in any event within 120 days after the close of each
fiscal year of Holdings, (i) a copy of the SEC Form 10-K filed
by Holdings with the SEC for such fiscal year, or, if no such
Form 10-K was so filed by Holdings for such fiscal year, the
consolidated balance sheet of Holdings and its Subsidiaries
and whether or not such Form 10-K was filed, of the Borrower
and its Subsidiaries, as at the end of such fiscal year and
the related consolidated statements of operations, of common
stockholders' equity (deficit) (in the case of Holdings and
its Subsidiaries) and of cash flows for such fiscal year,
setting forth comparative consolidated figures as of the end
of and for the preceding fiscal year, and examined by Ernst &
Young (or (x) any other "Big Six" or "Big Four" accounting
firm or (y) any other firm of independent public accountants
of recognized standing selected by Holdings or the Borrower,
as the case may be, and reasonably acceptable to the Required
Banks) whose opinion shall not be qualified as to the scope of
audit or as to the status of Holdings or the Borrower as a
going concern, and (ii) a certificate of such accounting firm
stating that in the course of its regular audit of the
business of Holdings and the Borrower, which audit was
conducted in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of
any Default or Event of Default which has occurred and is
continuing or, if in the opinion of such accounting firm such
a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as
available and in any event within 45 days after the close of
each of the first three quarterly accounting periods in each
fiscal year of Holdings, a copy of the SEC Form 10-Q filed by
Holdings with the SEC for such quarterly period, or, if no
such Form 10-Q was so filed by Holdings with respect to any
-38-
<PAGE>
such quarterly period, the consolidated balance sheet of
Holdings and its Subsidiaries, and whether or not such Form
10-Q was filed, of the Borrower and its Subsidiaries, as at
the end of such quarterly period and the related consolidated
statements of operations for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of
such quarterly period and in each case setting forth
comparative consolidated figures as of the end of and for the
related periods in the prior fiscal year, all of which shall
be certified by an Authorized Officer of Holdings or the
Borrower, as the case may be, subject to changes resulting
from audit and normal year-end audit adjustments.
(c) BUDGETS. Not more than 75 days following the
commencement of each fiscal year of the Borrower, a budget of
the Borrower and its Subsidiaries in reasonable detail for
each fiscal month of such fiscal year as is customarily
prepared by management for its internal use setting forth,
with appropriate discussion, the principal assumptions upon
which such budget is based.
(d) OFFICER'S CERTIFICATES. At the time of the delivery
of the financial statements provided for in Section 7.01(a)
and (b), a certificate of an Authorized Officer of Holdings
and the Borrower to the effect that no Default or Event of
Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof and which
certificate shall set forth the calculations required, if any,
to establish whether each Credit Party was in compliance with
the provisions of Sections 8.02, 8.03, 8.04, 8.05, 8.06, 8.08,
8.09 and 8.10 as at the end of such fiscal period or year, as
the case may be.
(e) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in
any event within three Business Days after any senior
financial or legal officer of any Credit Party obtains
knowledge thereof, notice of (x) the occurrence of any event
which constitutes a Default or Event of Default which notice
shall specify the nature thereof, the period of existence
thereof and what action such Credit Party proposes to take
with respect thereto and (y) any litigation or governmental
proceeding pending against or affecting Holdings or any of its
Subsidiaries which is likely to have a material adverse effect
on the financial condition or results of operations of
Holdings and its Subsidiaries taken as a whole or the Borrower
and its Subsidiaries taken as a whole.
(f) RATING CHANGES. Promptly after any senior financial
or legal officer of NWA or the Borrower obtains knowledge
thereof, notice of any change in the Rating assigned by either
Rating Agency.
(g) APPRAISALS. (i) On the eighteen month anniversary
of the Restatement Effective Date and on each one year
anniversary thereafter, an Appraisal of each Pool Asset.
(h) OTHER INFORMATION. Promptly upon transmission
thereof, copies of any filings and registrations with, and
reports to, the Securities and Exchange Commission or any
successor thereto (the "SEC") by Holdings or any of its
Subsidiaries (other than amendments to any registration
statement (to the extent such registration statement, in the
form it becomes effective, is delivered to the Banks),
exhibits to any registration
-39-
<PAGE>
statement and any registration statements on Form S-8) and,
with reasonable promptness, such other information or
documents (financial or otherwise) as the Administrative Agent
on its own behalf or on behalf of the Required Banks may
reasonably request from time to time.
(i) NON-ORDINARY COURSE TRANSACTION. At any time after
the Restatement Effective Date that any Credit Party or any of
its respective Subsidiaries proposes to enter into any
transaction (or series of related transactions) with any
Affiliate of any Credit Party or any of their respective
Subsidiaries outside the ordinary course of business (other
than any transaction of a nature described in the proviso to
Section 8.07), the Borrower shall give the Compliance Agent
and the Banks (x) written notice of any such transaction at
least 7 Business Days (or such shorter period as the Required
Banks may agree) prior to the earlier of (I) the consummation
thereof or (II) the execution of a binding agreement therefor,
and (y) such other information related to the transaction as
the Compliance Agent or the Required Banks shall reasonably
request.
7.02 BOOKS, RECORDS AND INSPECTIONS. Each Credit Party
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries in conformity with GAAP
and all requirements of law shall be made of all dealings and transactions in
relation to its business and activities. Each Credit Party will, and will
cause each of its Subsidiaries to, permit, upon reasonable notice given by
the Administrative Agent to the Borrower on behalf of any Bank, officers and
designated representatives of any Bank (including without limitation,
appraisers) to visit and inspect any of the properties or assets of such
Credit Party and any of its Subsidiaries and to examine the books of account
of such Credit Party and any of its Subsidiaries and discuss the affairs,
finances and accounts of such Credit Party and of any of its Subsidiaries
with its and their officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as such Bank may
desire.
7.03 INSURANCE. Each Credit Party will, and will cause
each of its Subsidiaries to, at all times be covered by or maintain in full
force and effect insurance in such amounts, covering such risks and
liabilities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice and as is required by law.
7.04 PAYMENT OF TAXES. Each Credit Party will pay and
discharge, and will cause each of its Subsidiaries to pay and discharge, all
material taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any properties belonging to it,
prior to the date on which material penalties attach thereto, and all
material lawful claims which, if unpaid, might become a Lien or charge upon
any properties of any Credit Party or any of its Subsidiaries, PROVIDED that
no Credit Party nor any of its Subsidiaries shall be required to pay any such
tax, assessment, charge, levy or claim (i) which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves (in
the good faith judgment of the management of such Credit Party) with respect
thereto in accordance with GAAP or (ii) the nonpayment of which would not
have a material adverse effect on the financial condition or
-40-
<PAGE>
results of operations of Holdings and its Subsidiaries taken as a whole or of
the Borrower and its Subsidiaries taken as a whole.
7.05 CONSOLIDATED CORPORATE FRANCHISES. Each Credit
Party will do, and will cause each of its Subsidiaries to do, or cause to be
done, all things necessary to preserve and keep in full force and effect its
existence and its material rights, authority and franchises, unless the
failure to keep in full force and effect any such right, authority or
franchise would not have a material adverse effect on the financial condition
or results of operations of Holdings and its Subsidiaries taken as a whole or
of the Borrower and its Subsidiaries taken as a whole.
7.06 COMPLIANCE WITH STATUTES, ETC. Each Credit Party
will, and will cause each of its Subsidiaries to, comply in all material
respects with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls) other than those the
non-compliance with which would not have a material adverse effect on the
financial condition or results of operations of Holdings and its Subsidiaries
taken as a whole or the Borrower and its Subsidiaries taken as a whole.
7.07 ERISA. (a) As soon as practicable and in any
event within fifteen days after any Credit Party or any of its ERISA
Affiliates knows or has reason to know of the occurrence of any (i)
Termination Event in connection with any Pension Plan or Multiemployer Plan,
(ii) non-exempt "prohibited transaction" as described in Section 406 of ERISA
or Section 4975 of the Code, (iii) accumulated funding deficiency or
application to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard (including any required installment payments) or
an extension of any amortization period under Section 412 of the Code, (iv)
institution pursuant to Section 515 of ERISA to collect a delinquent
contribution, or (v) material liability by any Credit Party or any Subsidiary
of any Credit Party pursuant to any employee welfare benefit plan (as defined
in Section 3(1) of ERISA) that provides benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA) or
any employee pension benefit plan (as defined in Section 3(2) of ERISA) in
addition to the liability existing on the Restatement Effective Date pursuant
to any such welfare or pension plan or plans in connection with any Pension
Plan or Multiemployer Plan or any trust created thereunder, if as a result of
such event or transaction, considered together with other such events and
transactions occurring within the prior two years, the Credit Parties and
their ERISA Affiliates incur or could reasonably expect to incur liabilities
from all such events and transactions in excess of $5,000,000, such Credit
Party shall deliver to each of the Banks a certificate, signed by an
Authorized Officer of such Credit Party, specifying the nature thereof, what
action such Credit Party or such ERISA Affiliate has taken, is taking or
proposes to take with respect thereto, and any action taken or threatened by
the Internal Revenue Service, Department of Labor, PBGC, Pension Plan or
Multiemployer Plan, as applicable, to be taken with respect thereto (together
with copies of all relevant notices or other communications received from
such entity). For the purposes of this Section 7.07, a Credit Party shall be
deemed to have knowledge of all facts known by the "plan administrator" (as
defined in Section 3(16)(A)
-41-
<PAGE>
of ERISA) of any Pension Plan of which such Credit Party or any of its ERISA
Affiliates is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA).
(b) To the extent reasonably requested by any Bank, as
soon as practicable and in any event within 30 days after the filing of a
Form 5500 series annual report by a Credit Party or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Pension
Plan, such Credit Party shall furnish to such Bank a copy of such Form 5500
series annual report and the Schedule B (Actuarial Information) thereto (and
shall make available for inspection by such Bank at reasonable times copies
of the full annual report with respect to each Pension Plan).
7.08 GOOD REPAIR. Each Credit Party will, and will
cause each of its Subsidiaries to, ensure that its properties and equipment
used or useful in its business are kept in good repair, working order and
condition, normal wear and tear excepted, and that from time to time there
are made in such properties and equipment all needful and proper repairs,
renewals, replacements, extensions, additions, betterments and improvements
thereto, to the extent and in the manner customary for companies in similar
businesses, except where the failure to keep such properties and equipment in
good repair, working order and condition or to make such repairs, renewals,
replacements, extensions, additions, betterments and improvements would not
have a material adverse effect on the financial condition or results of
operations of Holdings and its Subsidiaries taken as a whole or of the
Borrower and its Subsidiaries taken as a whole.
7.09 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings and
the Borrower will, for financial reporting purposes, cause (i) each of its
and each of its Subsidiaries' fiscal years to end on December 31 of each year
and (ii) each of its and each of its Subsidiaries' fiscal quarters to end on
March 31, June 30, September 30 and December 31 of each year.
7.10 PERFORMANCE OF OBLIGATIONS. Each Credit Party
will, and will cause each of its Subsidiaries to, perform all of its
obligations under the terms of each mortgage, indenture, security agreement
and other debt instrument by which it is bound, except such non-performances
as would not have a material adverse effect on the financial condition or
results of operations of Holdings and its Subsidiaries taken as a whole or of
the Borrower and its Subsidiaries taken as a whole.
7.11 AIR CARRIER. The Borrower will at all times be a
Certificated Air Carrier.
SECTION 8. NEGATIVE COVENANTS. Each Credit Party hereby
covenants and agrees (in each case solely to the extent that any covenant or
agreement set forth in this Section 8 is expressly stated to be applicable to
such Credit Party and its Subsidiaries) that on the Restatement Effective
Date and thereafter, for so long as this Agreement is in effect and until the
Commitments and each Letter of Credit have terminated and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full:
8.01 CHANGES IN BUSINESS. No Credit Party will make any
material change in the lines of business in which it was engaged on the
Restatement Effective Date.
-42-
<PAGE>
8.02 CONSOLIDATION, MERGER, ETC. No Credit Party will
wind up, liquidate or dissolve its affairs, or enter into any transaction of
merger or consolidation, sell or otherwise dispose of all or substantially
all of its property or assets or agree to do any of the foregoing at any
future time, except that so long as no Default or Event of Default exists, or
would result therefrom and PROVIDED that each Credit Party complies with
Section 8.03 in connection with such transaction to the extent such Section
is applicable, any Credit Party may merge or consolidate with, or sell or
otherwise dispose of all or substantially all of its assets to, any Person,
PROVIDED that (i) in the case of any merger or consolidation, the surviving
corporation shall be such Credit Party or (ii) the surviving corporation, if
not such Credit Party (or the successor corporation, in the case of a sale or
other disposition of all or substantially all of a Credit Party's assets),
(A) is a corporation organized and existing under the laws of the United
States of America or any State thereof, (B) is a Citizen of the United
States, (C) executes and delivers agreements assuming the obligations of such
Credit Party under this Agreement and the other Credit Documents to which
such Credit Party is a party, which assumption agreements and all related
actions and documentation shall be in form and substance reasonably
satisfactory to the Administrative Agent and (D) delivers to the
Administrative Agent a certificate signed by an Authorized Officer of such
Credit Party and an opinion of counsel to such Person satisfactory to the
Administrative Agent, each stating that such transaction and such assumption
agreement comply with this Section and that all conditions precedent herein
provided for relating to such transaction have been complied with.
8.03 SALE OF ASSETS. No Credit Party will, nor will any
Credit Party permit any of its Subsidiaries to, sell, lease or
otherwise dispose of any assets, except:
(a) Holdings or any of its Subsidiaries may, in the
ordinary course of business and consistent with past
practices, exchange, in any transaction or series of related
transactions, on a like value basis, (i) its real property for
real property owned by another Person, (ii) its airplane
engines for airplane engines owned by another Person, and
(iii) its airline routes, "airport gates" and/or "slots" for
airline routes, "airport gates" and/or "slots" owned by
another Person; PROVIDED, HOWEVER, that (x) in no event may
Pool Assets be exchanged and (y) to the extent Holdings or any
of its Subsidiaries receives any cash and/or cash equivalents
from any such property exchange permitted pursuant to this
clause (a), the amount of such cash and/or cash equivalents
shall be applied in accordance with clause (f) of this Section
8.03;
(b) Holdings or any of its Subsidiaries may, in the
ordinary course of business and consistent with past
practices, sell spare parts (which in no event shall include
aircraft or aircraft engines) and supplies (including, without
limitation, fuel) so long as each such sale is for an amount
at least equal to the fair market value thereof (as determined
by the Borrower);
(c) "Parting out" of an aircraft engine shall be
permitted by Holdings or any of its Subsidiaries in the
ordinary course of business and consistent with past practices;
-43-
<PAGE>
(d) Holdings or any of its Subsidiaries may, in a
transaction, sell any of its aircraft (other than Pool
Assets), which aircraft is then substantially
contemporaneously leased back to the respective seller,
PROVIDED that with respect to sale and leasebacks of aircraft
owned on December 15, 1995, the stated expiration of the lease
of such aircraft to Holdings or one of its Subsidiaries is
after the Term Loan Maturity Date;
(e) Holdings or any of its Subsidiaries may sell airline
tickets and related services in the ordinary course of
business;
(f) Holdings or any of its Subsidiaries may sell, lease
or otherwise dispose of any assets (other than Pool Assets),
PROVIDED that to the extent the gross proceeds received from
all such transactions occurring after December 15, 1995
(including cash or cash equivalent proceeds received pursuant
to Section 8.03(a)) exceeds $500,000,000, an amount equal to
50% of the Net Sale Proceeds from all transactions which occur
after such $500,000,000 threshold is exceeded (including 50%
of the Net Sale Proceeds from that transaction in which such
threshold is exceeded but only out of that portion of the
gross proceeds which exceeds such $500,000,000 threshold)
shall be applied to repay Loans and reduce Commitments in
accordance with Sections 3.03(e) and 4.02(d);
(g) Holdings or any of its Subsidiaries may, in the
ordinary course of business and consistent with industry
practice, (i) trade the use of any "slot" (whether or not such
"slot" is a Pool Asset) with another air carrier or (ii) lease
or license any such "slot" to another air carrier, in each
case on a temporary basis and PROVIDED that such transactions
do not involve the transfer of title to such "slots";
(h) the Borrower may lease its Boeing 747 aircraft
bearing Manufacturer's Serial No. 22245 pursuant to the Korean
Lease; and
(i) any Credit Party may dispose of its equity interests
in (x) GHI-CA Corporation, a Delaware corporation which owns all of the
outstanding shares of capital stock of Grand Holding, Inc., a Nevada
corporation, d/b/a Champion Air and/or (y) Express Air I owned by such Credit
Party on the Restatement Effective Date.
8.04 LIENS. None of the Credit Parties will, or will
permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Lien upon or with respect to the
Pool Assets or assign any right to receive income from the
Pool Assets, or file or permit the filing with respect to the
Pool Assets of any financing statement under the UCC or any
similar notice of Lien under any similar recording or notice
statute, except:
(a) inchoate Liens for taxes not yet due or Liens for
taxes being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith
judgment of the management of the Borrower) have been
established in accordance with GAAP;
(b) Liens (other than any Lien imposed by ERISA) in
respect of the Pool Assets imposed by law which were incurred
in the ordinary course of business and which have
-44-
<PAGE>
not arisen to secure Indebtedness for borrowed money, such as
carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens and governmental
charges arising in the ordinary course of business, and which
either (x) do not in the aggregate materially detract from the
value of any Pool Asset or materially impair the use thereof
in the operation of the business of the Borrower or any of its
Subsidiaries or (y) are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset
subject to such Lien;
(c) Liens (where there has been no execution or levy and
no pledge or delivery of Pool Assets as security therefor)
arising out of judgments or awards against the Borrower or any
of its Subsidiaries with respect to which an appeal or
proceeding for review is being prosecuted in good faith and
which judgment or award shall be vacated, discharged,
satisfied or stayed or bonded pending appeal within 60 days
from the entry thereof;
(d) Liens in respect of any "slot", which is a Pool
Asset, constituting (i) trades with another air carrier or
(ii) leases or licenses to another air carrier, in each case
made by Holdings or any of its Subsidiaries on a temporary
basis, in the ordinary course of business and consistent with
industry practice, and PROVIDED that such transactions do not
involve the transfer of title to such "slots"; and
(e) the Korean Lease.
8.05 DISTRIBUTIONS, ETC. None of the Credit Parties
will, or will permit any of their respective Subsidiaries to,
authorize, declare or pay any dividends or return any capital
to, its stockholders, partners or members, or authorize or
make any other distribution, payment or delivery of property
or cash to its stockholders, partners or members as such or
redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any shares of any class of
its capital stock, any partnership interest or any limited
liability company interest (or any warrants for or options or
stock appreciation rights in respect of any of such shares,
partnership interests or limited liability company interests),
now or hereafter outstanding, or set aside any funds for any
of the foregoing purposes, and none of the Credit Parties will
permit any of their respective Subsidiaries to purchase or
otherwise acquire for consideration any shares of any class of
the capital stock, any partnership interest or any limited
liability company interests of any Credit Party or any such
Subsidiary, as the case may be (or any options or warrants or
stock appreciation rights issued by such Person with respect
to its capital stock, partnership interests or limited
liability company interests), now or hereafter outstanding
(all of the foregoing "Distributions"), except that:
(a) any Subsidiary of Holdings may make cash
Distributions to Holdings or any Subsidiary of Holdings;
(b) so long as no Default or Event of Default exists or
would result therefrom, Holdings or any of its Subsidiaries
shall be permitted to declare, make and pay cash
-45-
<PAGE>
Distributions to its respective shareholders in an amount not
to exceed the then Cumulative Net Income Amount less the sum
of (i) the amount of all such Distributions declared, made or
paid pursuant to this Section 8.05(b) prior to the date of
determination and on or after January 1, 1995 (other than
pursuant to Section 8.05(b)(ii)) plus (ii) the amount of all
such Distributions made by Holdings pursuant to Section
8.05(g); PROVIDED, HOWEVER, that to the extent any
non-Wholly-Owned Subsidiary of Holdings pays a cash
Distribution to its shareholders, Holdings or its respective
Subsidiary which owns the equity interest or interests in the
Subsidiary paying the cash Distribution receives at least its
proportionate share thereof (based upon its relative holdings
of equity interest in the Subsidiary paying such cash
Distribution and taking into account the relative preferences,
if any, of the various classes of equity interests in such
Subsidiary); it being understood that the amount of
Distributions declared, made or paid to Holdings or any of its
Subsidiaries shall not be counted for purposes of determining
whether the amount of Distributions have exceeded the
Cumulative Net Income Amount.;
(c) Holdings or any of its Subsidiaries may declare and
make stock dividends on its capital stock with the same or a
junior class of stock with respect to which such stock
dividend is being paid;
(d) Holdings or any of its Subsidiaries may repurchase
or redeem its capital stock solely through the issuance of
additional shares of its capital stock which is of the same or
a junior class of such capital stock being repurchased or
redeemed;
(e) so long as no Default or Event of Default exists or
would result therefrom, Holdings may declare, make and pay
Distributions in connection with any redemption of its Series
A Preferred Stock or Series B Preferred Stock;
(f) so long as no Default or Event of Default exists or
would result therefrom, Holdings or any of its Subsidiaries or
Affiliates may declare, make and pay Distributions consisting
of dividends on preferred securities of any Subsidiary or
Affiliate of Holdings issued in connection with the incurrence
of Indebtedness permitted by Section 8.06(l); and
(g) so long as no Default or Event of Default exists or
would result therefrom, on and after August 1, 1997, Holdings
may redeem, retire, repurchase or otherwise acquire up to
27,000,000 shares of common stock of Holdings owned by KLM for
an aggregate consideration not in excess of $1,300,000,000.
8.06 INDEBTEDNESS. None of the Credit Parties will, or
will permit any of their respective Subsidiaries to, contract, create, incur,
assume or suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness existing on the Restatement Effective
Date listed on Schedule V, including any refinancings or
renewals thereof, but only to the extent that such
-46-
<PAGE>
refinancing or renewal does not increase the principal amount
of such Indebtedness outstanding immediately prior to such
refinancing or renewal;
(c) intercompany Indebtedness among Holdings and its
Subsidiaries;
(d) additional unsecured Indebtedness of Holdings and
its Subsidiaries, PROVIDED that to the extent the gross
proceeds received from incurrences thereof after December 15,
1995 (other than any incurrence of any unsecured Indebtedness
of Holdings and its Subsidiaries the proceeds of which
Indebtedness is applied substantially contemporaneously to
refinance the outstanding principal amount of, premium, if
any, and accrued but unpaid interest on, any Indebtedness
incurred pursuant to this clause (d) or clause (e) below so
long as the principal amount of such Indebtedness being
incurred does not exceed the principal amount of Indebtedness
being refinanced immediately prior to such refinancing), plus
the amount of gross proceeds received from incurrences of
secured indebtedness pursuant to clause (e) below (such gross
proceeds being determined in accordance with clause (e)
below), exceed an amount equal to $600,000,000 (provided that
for purposes of determining whether the $600,000,000 threshold
has been exceeded Retired Unsecured Debt shall not be taken
into account), an amount equal to 50% of the Net Debt Proceeds
from all incurrences of unsecured Indebtedness after such
threshold is exceeded (including 50% of the Net Debt Proceeds
from the incurrence in which such threshold is exceeded but
only out of that portion of such gross proceeds which exceeds
such threshold at such time) shall be applied to repay Loans
and reduce Commitments in accordance with Sections 3.03(e) and
4.02(c);
(e) additional secured Indebtedness of Holdings and its
Subsidiaries, PROVIDED that to the extent the gross proceeds
received from incurrences thereof after December 15, 1995
(other than any incurrence of any secured Indebtedness of
Holdings and its Subsidiaries the proceeds of which
Indebtedness is applied substantially contemporaneously to
refinance the outstanding principal amount of, premium, if
any, and accrued but unpaid interest on, any Indebtedness
incurred pursuant to clause (d) above or this clause (e) so
long as the principal amount of such Indebtedness being
incurred does not exceed the principal amount of Indebtedness
being refinanced immediately prior to such refinancing), plus
the amount of gross proceeds received from incurrences of
unsecured indebtedness pursuant to clause (d) above in excess
of $300,000,000 (such gross proceeds being determined in
accordance with clause (d) above), exceed an amount equal to
$300,000,000 (provided that for purposes of determining
whether the $300,000,000 threshold has been exceeded Retired
Secured Debt shall not be taken into account), an amount equal
to 50% of the Net Debt Proceeds from all incurrences of
secured Indebtedness after such threshold is exceeded
(including 50% of the Net Debt Proceeds from the incurrence in
which such threshold is exceeded but only out of that portion
of such gross proceeds which exceeds such threshold at such
time) shall be applied to repay Loans and reduce Commitments
in accordance with Sections 3.03(e) and 4.02(c);
-47-
<PAGE>
(f) Indebtedness incurred in connection with the
financing of the Narita Hotel Property and assets related to
such hotel, PROVIDED that the Liens securing such Indebtedness
do not encumber any Pool Asset (or part thereof) and the
Indebtedness incurred in connection therewith does not exceed
the appraised value of the Narita Hotel Property;
(g) secured Indebtedness incurred to finance the
acquisition of hushkits heretofore or hereafter acquired by
the Borrower or any of its Subsidiaries or to refinance
indebtedness incurred to finance the acquisition of hushkits
and any other secured Indebtedness incurred to finance (or to
pre-fund the financing of) the purchase after December 15,
1995 of aircraft and other assets and any refinancing thereof,
PROVIDED that the Liens securing such Indebtedness do not
encumber any Pool Asset (or part thereof) and the Indebtedness
incurred in connection therewith does not exceed the purchase
price of the property being acquired or the principal amount
of the Indebtedness being refinanced;
(h) Indebtedness of Holdings and its Subsidiaries of the
type described in clause (v) of the definition of Indebtedness
and in clause (iii) thereof to the extent relating to
Indebtedness of the type described in clause (v) of the
definition thereof;
(i) Indebtedness constituting Contingent Obligations of
Holdings and its Subsidiaries with respect to corporations,
partnerships or joint ventures formed with other airlines to
conduct fueling, ticketing, terminal operations, aeronautical
radio communications, tariff publishing, industry trade
associations, local cartage and other similar airline
activities consistent with the Borrower's past business
practice, where the services provided are generally available
to all or substantially all of the airlines utilizing the
facility served;
(j) Indebtedness of Holdings and its Subsidiaries
incurred under and in respect of credit enhancement letters of
credit or other similar backstop liquidity facilities to the
extent any such letter of credit or backstop liquidity
facility, as the case may be, has not been drawn upon, which
letters of credit and liquidity facilities provide credit
support solely for the interest portion of Indebtedness
incurred by Holdings and its Subsidiaries and otherwise
permitted to be incurred pursuant to this Section 8.06;
(k) Indebtedness of Holdings and its Subsidiaries
consisting of Non-Facility Standby Letters of Credit and
reimbursement obligations with respect thereto, PROVIDED that
the aggregate amount of such Indebtedness shall not exceed
$35,000,000 at any one time;
(l) unsecured Indebtedness of Holdings and its
Subsidiaries incurred directly or indirectly to finance any
redemption pursuant to Section 8.05(e) and any refinancing
thereof, PROVIDED that (i) any such refinancing occurs
substantially contemporaneously with payment of the
Indebtedness being refinanced (or, if not substantially
contemporaneously with payment of the Indebtedness being
refinanced, on or prior to December 31, 1997) and (ii) no such
Indebtedness (other than a refinancing in accordance
-48-
<PAGE>
with clause (1)(i)) shall be incurred after December 31, 1997
to finance any portion of the redemption price paid in cash
with respect to any such redemption; and
(m) additional secured Indebtedness (whether or not
constituting purchase money Indebtedness) of Holdings and its
Subsidiaries incurred to finance or secured by Boeing 757
aircraft N544US, N545US, N546US, N547US, N548US and N549US so
long as the principal amount of such Indebtedness being
incurred does not exceed the fair market value of such
aircraft.
8.07 TRANSACTIONS WITH AFFILIATES. None of the Credit
Parties will, or will permit any of their respective Subsidiaries to, enter
into any transaction or series of related transactions with any Affiliate of
any Credit Party or any of their respective Subsidiaries, other than on terms
and conditions substantially as favorable to such Credit Party or such
Subsidiary as would reasonably be obtained by such Credit Party or such
Subsidiary at that time in a comparable arm's-length transaction with a
Person other than an Affiliate, PROVIDED that the foregoing restrictions
shall not apply to (a) customary fees paid to members of the Board of
Directors of Holdings and its Subsidiaries, (b) Distributions permitted by
Section 8.05 and (c) Indebtedness permitted by Section 8.06(l).
8.08 LIMITATION ON POOL ASSETS. (a) The Borrower will
not convey, sell, lease, transfer or otherwise dispose of (whether
voluntarily or involuntarily (it being understood that loss of property due
to theft, destruction, confiscation, prohibition on use or similar event
shall constitute a disposal for purposes of this covenant)), or remove or
substitute, any Pool Asset (or any engine included in the Pool Assets unless
such engine is replaced by another working engine or engines) or take any
action that could materially diminish the fair market value of the Pool
Assets taken as a whole, or agree to do any of the foregoing at any future
time, except that:
(i) so long as no Default or Event of Default exists,
the Borrower may replace a Pool Asset with another asset of
the Borrower (and Schedule VI shall be modified to reflect
such replacement), PROVIDED that (A) such replacement shall be
made on a dollar-for-dollar basis based upon (x) in the case
of the asset being removed from the Pool Assets, the Appraised
Value of such Pool Asset (as determined by the most recently
delivered Appraisal with respect to such Pool Asset), and (y)
in the case of the asset being added to the Pool Assets, the
Appraised Value of such asset (as determined by an Appraisal
performed at the time of such replacement), (B) after giving
effect to such replacement, the Appraised Value of the Stage
III Aircraft included in the Pool Assets which are from a
manufacturer other than Boeing or Airbus shall not exceed 60%
of the total Appraised Value of all Stage III Aircraft
included in the Pool Assets as a whole, (C) prior to effecting
the replacement, the Borrower shall have delivered a
certificate of an Authorized Officer of the Borrower
certifying compliance with this Section 8.08 and attaching to
such certificate all Appraisals not previously delivered to
the Banks and (D) the asset being added to the Pool Assets is
of a like kind as the asset being removed; it being understood
and agreed that (1) if the asset being removed is a Stage III
Aircraft, then only Stage III Aircraft may be substituted
therefor and (2) if the asset being removed
-49-
<PAGE>
is anything other than Stage III Aircraft, then only "slots",
Eligible Gates, aircraft and/or any other assets that are
reasonably satisfactory to the Agents may be substituted
therefor;
(ii) so long as no Default or Event of Default exists,
or would result therefrom, the Borrower may remove an asset
from the Pool Assets (and Schedule VI shall be modified to
reflect such removal), PROVIDED that (A) after giving effect
to such removal, the Appraised Value of the remaining Pool
Assets (as determined by an Appraisal of all Pool Assets
performed at the time of such removal) shall satisfy the
Coverage Tests, (B) after giving effect to such removal, the
Appraised Value of Stage III Aircraft included in the Pool
Assets which are from a manufacturer other than Boeing or
Airbus shall not exceed 60% of the total Appraised Value of
the Stage III Aircraft included in the Pool Assets as a whole
and (C) prior to effecting the removal, the Borrower shall
have delivered a certificate of an Authorized Officer of the
Borrower certifying that, and providing calculations
demonstrating that, after giving effect to such removal, the
Appraised Value of the Pool Assets shall satisfy the Coverage
Tests, and otherwise certifying compliance with this Section
8.08 and attaching to such certificate Appraisals of all Pool
Assets obtained in connection with such removal;
(iii) in the event (x) that an Appraisal furnished
pursuant to Section 7.01(g) discloses that one or both of the
Coverage Tests are not satisfied or (y) of an involuntary
disposal of any Pool Asset (or any engine included in the Pool
Assets unless such engine is replaced by another working
engine or engines) (whether by loss of property due to theft,
destruction, confiscation, prohibition or use, any similar
event or otherwise), if at the time of such disposal one or
both of the Coverage Tests are not then satisfied based upon
the most recent Appraisals of the Pool Assets (other than the
Pool Assets which are the subject of the involuntary
disposition) furnished pursuant to Section 7.01(g), the
Borrower shall within 30 days after the date of such Appraisal
or involuntary disposal, as the case may be, designate
additional assets as Pool Assets to the extent that, after
giving effect to such designation, the Appraised Value of the
Pool Assets, based on the most recently delivered Appraisals
with respect to assets already constituting Pool Assets and
based on an Appraisal performed at the time of such addition
with respect to assets being added to Pool Assets, shall
satisfy both Coverage Tests (and Schedule VI shall be modified
to reflect such addition), PROVIDED that (A) after giving
effect to such addition, the Appraised Value of Stage III
Aircraft included in the Pool Assets which are from a
manufacturer other than Boeing or Airbus shall not exceed 60%
of the total Appraised Value of the Stage III Aircraft
included in the Pool Assets as a whole, (B) at the time of
such addition, the Banks shall have received a certificate of
an Authorized Officer of the Borrower certifying that the
conditions set forth in this Section 8.08 shall have been
satisfied after giving effect to such addition and attaching
thereto any Appraisals not previously delivered to the Banks
and (C) the asset being added shall constitute an Eligible
Gate, a "slot" or an aircraft or any other asset that is
reasonably satisfactory to the Agents;
(iv) Holdings or any of its Subsidiaries may, in the
ordinary course of business and consistent with industry
practice, (i) trade the use of any "slot" that is a Pool Asset
-50-
<PAGE>
with another air carrier or (ii) lease or license any such
"slot" to another air carrier, in each case on a temporary
basis and PROVIDED that such transactions do not involve the
transfer of title to such "slots;" and
(v) the Borrower may lease its Boeing 747 aircraft bearing
Manufacturer's Serial No. 22245 pursuant to the Korean Lease.
(b) Except as set forth in Section 8.08(a)(iv), no
Credit Party shall, and no Credit Party shall permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of the
Borrower to create, incur, assume or suffer to exist any Lien on any Pool
Asset.
(c) The Pool Assets shall include, with respect to each
airframe included therein, a sufficient number of appropriate aircraft
engines to operate such airframe as an aircraft.
(d) After December 31, 1999, no aircraft other than
Stage III Aircraft (or higher) shall be included in the Pool Assets.
8.09 CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED EBITDAR.
Holdings will not permit the ratio of Consolidated Indebtedness as of the
last day of any fiscal quarter to Consolidated EBITDAR for the period of four
consecutive fiscal quarters ended on the last day of such fiscal quarter, to
be greater than 6.0:1.0.
8.10 CONSOLIDATED EBITDAR TO CONSOLIDATED FIXED CHARGES.
Holdings will not permit the ratio of Consolidated EBITDAR to Consolidated
Fixed Charges for any period of four consecutive fiscal quarters ended on the
last day of any fiscal quarter, to be less than 1.5:1.0.
8.11 ERISA. None of the Credit Parties will, or will
permit any of their respective Subsidiaries or its ERISA Affiliates to:
(i) engage in any transaction in connection with which
Holdings or any of its ERISA Affiliates could be subject to
either a tax imposed by Section 4975(a) of the Code or the
corresponding civil penalty assessed pursuant to Section
502(i) of ERISA, which penalties and taxes for all such
transactions could be in an aggregate amount in excess of
$2,500,000;
(ii) permit to exist any accumulated funding deficiency,
for which a waiver has not been obtained from the Internal
Revenue Service, with respect to any Pension Plan in an
aggregate amount greater than $5,000,000; or
(iii) permit to exist any failure to make contributions
or any unfunded benefits liability which creates, or with the
passage of time would create, a statutory lien or requirement
to provide security under ERISA or the Code in favor of the
PBGC or any Pension Plan, Multiemployer Plan or other entity
in an aggregate amount in excess of $5,000,000.
-51-
<PAGE>
8.12 LAX TWO CORP. At any time when Holdings directly or
indirectly owns more than 50% of the outstanding Voting Stock of LAX Two,
Holdings will not permit LAX Two or any of its Subsidiaries to engage in any
business other than the business engaged in by LAX Two and its Subsidiaries
as of December 15, 1995 or to change LAX Two's status as a non-profit
corporation to a for-profit corporation.
SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each, an "Event of Default"):
9.01 PAYMENTS. The Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for five or more Business Days, in the payment when
due of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any
other amounts owing hereunder or thereunder, PROVIDED that, in the case of this
clause (ii), the Administrative Agent shall have informed the Borrower of the
amount owing; or
9.02 REPRESENTATIONS, ETC. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
certificate delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made, and such default
shall continue unremedied for a period of 30 days after written notice to the
Borrower by the Administrative Agent or the Required Banks; or
9.03 COVENANTS. Any Credit Party shall (i) default in any
material respect in the due performance or observance by it of any term,
covenant or agreement contained in Section 8.02, 8.03 or 8.05 or (ii) default
in the due performance or observance by it of any term, covenant or agreement
contained in Section 8.09 or 8.10 and such default shall continue unremedied
for a period of 15 days after written notice to the Borrower by the
Administrative Agent or the Required Banks or (iii) default in any material
respect in the due performance or observance by it of any other term,
covenant or agreement contained in this Agreement (other than as described in
Section 9.01, 9.03(i) or 9.03(ii)), and such default shall continue
unremedied for a period of 30 days after written notice to the Borrower by
the Administrative Agent or the Required Banks; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) Any Credit Party or any of
its Subsidiaries shall (i) default in any payment of any Indebtedness (other
than the Obligations) which default is in excess of $10,000,000 beyond the
period of grace (not to exceed 10 days), if any, provided in the instrument or
agreement under which such Indebtedness was created or (ii) default in the
observance or performance of any agreement or condition relating to any
Indebtedness (other than the Obligations) if such Indebtedness is in excess of
$25,000,000 in the case of any one issue of Indebtedness or in excess of
$50,000,000 in the case of all such Indebtedness when aggregated with all Lease
claims described in clause (c)(ii) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such Indebtedness to
become due prior to its stated maturity; or (b) any Indebtedness (other than the
Obligations), individually in excess of $25,000,000, or in the
-52-
<PAGE>
aggregate in excess of $50,000,000 (when aggregated with all Lease claims
described in clause (c)(ii)), of any Credit Party or any of its Subsidiaries
shall be declared to be due and payable, or required to be prepaid other than
by a regularly scheduled required prepayment, prior to the stated maturity
thereof; or (c) any Credit Party or any of its Subsidiaries shall default in
the observance or performance of any agreement or condition relating to any
Lease if (i) the default is with respect to any payment in excess of
$10,000,000 beyond the period of grace (not to exceed 10 days), if any,
provided in the Lease or (ii) the effect of such default is to give the
lessor pursuant to such Lease a claim against any Credit Party (after
deducting from such claim the value of the property subject to such Lease) in
excess of $25,000,000 in the case of any one Lease or in excess of
$50,000,000 in the case of all Leases and all Indebtedness described in
clause (a)(ii) or (b) of this Section 9.04; or
9.05 BANKRUPTCY, ETC. The Borrower or any Guarantor (each a
"Designated Party") shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against a Designated Party and the petition is not controverted
within 10 days after service of notice of such case on such Designated Party, or
is not dismissed within 60 days after commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of a Designated Party; or a Designated Party
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to a
Designated Party; or there is commenced against a Designated Party any such
proceeding which remains undismissed for a period of 60 days; or a Designated
Party is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or a Designated Party
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
days; or a Designated Party makes a general assignment for the benefit of
creditors; or any corporate action is taken by a Designated Party for the
purpose of effecting any of the foregoing; or
9.06 ERISA. (i) Any "reportable event" as described in Section
4043 of ERISA or the regulations thereunder (excluding those events for which
the requirement for notice has been waived by the PBGC), or any other event
or condition, which the Required Banks determine constitutes reasonable
grounds under Section 4042 of ERISA for the termination of any Pension Plan
by the PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer or liquidate any Pension Plan shall have
occurred; or
(ii) A trustee shall be appointed by a United States District
Court to administer any Pension Plan; or
(iii) The PBGC shall institute proceedings to terminate any
Pension Plan or to appoint a trustee to administer any Pension Plan; or
-53-
<PAGE>
(iv) Holdings or any of its ERISA Affiliates shall become liable to
the PBGC or any other party under Section 4062, 4063 or 4064 of ERISA with
respect to any Pension Plan; or
(v) Holdings or any of its ERISA Affiliates shall become liable to
any Multiemployer Plan under Section 4201 ET SEQ. of ERISA; or
(vi) Any Pension Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code; or
(vii) A contribution required to be made to a Pension Plan or a
Multiemployer Plan has not been timely made; or
(viii) Any Credit Party or any Subsidiary of Holdings or any ERISA
Affiliate has incurred or is likely to incur a liability to or on account of a
Plan under Section 502(i), or 502(l) of ERISA or Section 4975 of the Code; or
(ix) Any Credit Party or any Subsidiary of any Credit Party has
incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) that provide
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or employee pension benefit plans (as defined in
Section 3(2) of ERISA) other than Pension Plans; if as of the date thereof or
any subsequent date, the sum of each Credit Party's and its ERISA Affiliates'
various liabilities (such liabilities to include, without limitation, any
liability to the PBGC or to any other party under Section 4062, 4063 or 4064 of
ERISA with respect to any Pension Plan, or to any Multiemployer Plan under
Section 4201 ET SEQ. of ERISA, and to be calculated after giving effect to the
tax consequences thereof) as a result of such events listed in subclauses (i)
through (ix) above exceeds $100,000,000; or
9.07 JUDGMENTS. One or more judgments or decrees shall be entered
against any Credit Party or any of its Subsidiaries involving a liability of
$25,000,000 or more in the case of any one such judgment or decree or
$50,000,000 or more in the aggregate for all such judgments and decrees (in each
case to the extent not paid or fully covered by insurance provided by a carrier
that has acknowledged coverage) and any such judgments or decrees shall not have
been vacated, discharged, satisfied or stayed or bonded pending appeal within 60
days from the entry thereof; or
9.08 GUARANTY. The Guaranty or any provision thereof shall cease to
be in full force or effect, or either Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under the Guaranty or either Guarantor shall default in any material respect in
the due performance or observance of any term, covenant or agreement on its part
to be performed or observed pursuant to the Guaranty; then, and in any such
event, and at any time thereafter, if any Event of Default shall then be
continuing, the Administrative Agent shall, upon the written request of the
Required Banks, by written notice to Holdings and the Borrower, take any or all
of the following actions, without prejudice to the
-54-
<PAGE>
rights of any Agent or any Bank to enforce its claims against the Borrower,
except as otherwise specifically provided for in this Agreement (PROVIDED
that if an Event of Default specified in Section 9.05 shall occur with
respect to the Borrower, the result which would occur upon the giving of
written notice by the Administrative Agent as specified in clauses (i) and
(ii) below shall occur automatically without the giving of any such notice):
(i) declare the Total Commitment terminated, whereupon the Commitments of
each Bank shall forthwith terminate immediately and all Fees theretofore
accrued shall forthwith become due and payable without any other notice of
any kind; (ii) declare the principal of and any accrued interest in respect
of all Loans and the Notes and all Obligations owing hereunder and thereunder
to be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Credit Party; (iii) terminate any Letter of Credit
which may be terminated in accordance with its terms; and (iv) direct the
Borrower to pay (and the Borrower agrees that upon receipt of such notice, or
upon the occurrence of an Event of Default specified in Section 9.05 with
respect to the Borrower, it will pay) to the Administrative Agent at the
Payment Office such additional amounts of cash, to be held as security for
the Borrower's reimbursement obligations for Drawings that may subsequently
occur thereunder, equal to the aggregate Stated Amount of all Letters of
Credit issued and then outstanding (after giving effect to any termination
pursuant to clause (iii)).
SECTION 10. DEFINITIONS AND ACCOUNTING TERMS.
10.01 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Absolute Rate" shall mean an interest rate (rounded to the nearest
.0001) expressed as a decimal.
"Absolute Rate Borrowing" shall mean a Competitive Bid Borrowing with
respect to which the Borrower has requested that the Banks offer to make
Competitive Bid Loans at Absolute Rates.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the
sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing
(x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market
as published in the most recent Federal Reserve System publication entitled
"Select Interest Rates", published weekly on Form H.15 as of the date hereof,
or if such publication or a substitute containing the foregoing rate
information shall not be published by the Federal Reserve System for any
week, the weekly average offering rate determined by the Administrative Agent
on the basis of quotations for such certificates received by it from three
certificate of deposit dealers in New York of recognized standing or, if such
quotations are unavailable, then on the basis of other sources reasonably
selected by the Administrative Agent, by (y) a percentage equal to 100% minus
the stated maximum rate of all reserve requirements as specified in
Regulation D of the Board of Governors of the Federal Reserve System
applicable on such day to a three-month certificate of deposit of a member
bank of the Federal Reserve
-55-
<PAGE>
System in excess of $100,000 (including, without limitation, any marginal,
emergency, supplemental, special or other reserves), plus (2) the then daily
net annual assessment rate (expressed as a percentage) as estimated by the
Administrative Agent for determining the current annual assessment payable by
the Administrative Agent to the Federal Deposit Insurance Corporation for
insuring three-month certificates of deposit.
"Administrative Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person; PROVIDED, HOWEVER, that for purposes of
Section 8.07, an Affiliate of Holdings shall, in any event, include any Person
that directly or indirectly owns more than 5% of the Voting Stock of Holdings
and any officer or director of Holdings or any such Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of Voting Stock, by
contract or otherwise.
"Agents" shall mean each of the Compliance Agent, the Syndication
Agent, the Documentation Agent, the Administrative Agent, National Westminster
Bank plc and First Bank National Association.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Applicable Eurodollar Margin" and "Applicable Commitment Fee
Percentage" shall mean, as of any date of determination, the percentage set
forth below under the appropriate heading corresponding to the senior unsecured
debt rating of the Borrower (without any credit enhancements of any type and
based upon an actual issuance of senior unsecured debt and not upon an "implied"
rating; PROVIDED, HOWEVER, to the extent that the Borrower does not have any
issuance of senior unsecured debt, then if there is an "implied" senior
unsecured debt rating of the Borrower which is publicly published by the
applicable Rating Agency then such "implied" rating shall be used for all
purposes of the table set forth below until such time as the Borrower has an
actual issuance of senior unsecured debt; PROVIDED FURTHER, that to the extent
that the Borrower does not have any issuance of senior unsecured debt or such an
"implied" senior unsecured debt rating then the Borrower may obtain a senior
unsecured debt rating and such rating shall be used for all purposes of the
table set forth below until such time as the Borrower has an actual issuance of
senior unsecured debt or an "implied" senior unsecured debt rating as heretofore
described), as rated by S&P (the "S&P Rating") and Moody's (the "Moody's
Rating", each of the S&P Rating and the Moody's Rating referred to herein as a
"Rating"):
- ---------------------------------------------------------------------------
APPLICABLE COMMITMENT FEE
PERCENTAGE
-56-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SENIOR UNSECURED
DEBT RATING OF THE APPLICABLE BASIC SUPPLEMENTAL
BORROWER EURODOLLAR REVOLVING REVOLVING
LEVEL (S&P/MOODY'S) MARGIN LOANS LOANS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 A- or higher or A3 or 0.300% 0.1000% 0.1000%
higher
- ------------------------------------------------------------------------------------------
2 BBB+ or Baa1 0.375% 0.1250% 0.1250%
- ------------------------------------------------------------------------------------------
3 BBB or Baa2 0.500% 0.1500% 0.1500%
- ------------------------------------------------------------------------------------------
4 BBB- or Baa3 0.625% 0.1875% 0.1600%
- ------------------------------------------------------------------------------------------
5 BB+ or Ba1 0.750% 0.2000% 0.1700%
- ------------------------------------------------------------------------------------------
6 BB or Ba2 1.000% 0.2250% 0.1875%
- ------------------------------------------------------------------------------------------
7 BB- or Ba3 1.125% 0.3250% 0.2850%
- ------------------------------------------------------------------------------------------
8 Lower than BB- or 1.500% 0.5000% 0.4600%
lower than Ba3
- ------------------------------------------------------------------------------------------
</TABLE>
The Administrative Agent shall determine the Applicable Eurodollar
Margin and the Applicable Commitment Fee Percentages from time to time in
accordance with the above table and notify the Borrower and the Banks of such
determination from time to time. In the event the S&P Rating and the Moody's
Rating correspond to different levels on the above table, the higher Rating
shall be used to determine the Applicable Eurodollar Margin or Applicable
Commitment Fee Percentages, as the case may be.
In the event either Rating Agency ceases to rate the Borrower's
senior unsecured debt for any reason, then the rating of NWA by such Rating
Agency with respect to the senior unsecured debt of NWA (without any credit
enhancement and based upon an actual issuance of senior unsecured debt and
not upon an "implied" rating; PROVIDED, HOWEVER, to the extent that NWA does
not have any issuance of senior unsecured debt, then if there is an "implied"
senior unsecured debt rating of NWA which is publicly published by the
applicable Rating Agency then such "implied" rating shall be used for all
purposes of the table set forth above until such time as NWA has an actual
issuance of senior unsecured debt, PROVIDED FURTHER, that to the extent NWA
does not have any issuance of senior unsecured debt or such an "implied"
senior unsecured debt rating then NWA may obtain a senior unsecured debt
rating and such rating shall be used for all purposes of the table set forth
above until such time as NWA has an actual issuance of senior unsecured debt
or an "implied" senior unsecured debt rating as heretofore described)
upgraded by one rating level shall be used as a substitute for the Rating of
such Rating Agency for all purposes of the above table. In the event that
either Rating Agency ceases to rate both the Borrower's senior unsecured debt
and NWA's senior unsecured debt for any reason, then the Rating of the other
Rating Agency of the senior unsecured debt of the Borrower (or, if
applicable, the senior unsecured debt of NWA (upgraded as aforesaid)) shall
be used for purposes of determining the Applicable Eurodollar Margin or the
Applicable Commitment Fee Percentages, as the case may be. If both Rating
Agencies cease to rate the senior unsecured debt of the Borrower and the
senior unsecured debt of NWA for any reason, then the level 8 rating set
-57-
<PAGE>
forth above shall be applicable for purposes of determining the Applicable
Eurodollar Margin or Applicable Commitment Fee Percentages, as the case may be.
Any necessary adjustment in the Applicable Eurodollar Margin or either
Applicable Commitment Fee Percentage, as the case may be, pursuant to the terms
hereof shall become effective immediately upon any change in a Rating.
"Appraisal" shall mean an appraisal, dated the date of delivery
thereof to the Banks pursuant to the terms of this Agreement, by one or more
independent appraisal firms satisfactory, at the time of such Appraisal, to the
Borrower and the Compliance Agent setting forth the fair market value, as
determined in accordance with the definition of "fair market value" promulgated
by the International Society of Transport Aircraft Trading, as of the date of
such appraisal of each Pool Asset or a proposed Pool Asset, as the case may be.
"Appraised Value" shall mean as of any date of determination the
aggregate fair market value as of such date of each Pool Asset or proposed Pool
Asset, as the case may be, as provided in the most recently delivered Appraisal.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement in the form of Exhibit H (appropriately completed).
"Authorized Officer" of any Credit Party shall mean the Chief
Executive Officer, the Chief Financial Officer or any Vice President and above
who reports directly or indirectly to the Chief Financial Officer.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (i) 1/2 of 1% in
excess of the Adjusted Certificate of Deposit Rate and (ii) the Prime Lending
Rate.
"Base Rate Loan" shall mean each Loan designated or deemed designated
as such by the Borrower at the time of the incurrence thereof or conversion
thereto.
"Basic Revolving Loan" shall have the meaning provided in
Section 1.01(b).
"Basic Revolving Loan Commitment" shall mean, for each Bank, the
amount set forth opposite such Bank's name in Schedule I hereto directly below
the column entitled "Basic Revolving Loan Commitment", as the same may be (x)
increased pursuant to Section 1.01(c) or (y) reduced from time to time pursuant
to Sections 3.02, 3.03 and/or 9 or (z) adjusted from time to time as a result of
assignments to or from such Bank pursuant to Section 1.13 or 12.04(b).
"Bidder Bank" shall mean each Bank that has notified in writing (and
has not withdrawn such notice) the Administrative Agent that it desires to
participate generally in the bidding arrangements relating to Competitive Bid
Borrowings.
-58-
<PAGE>
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowing" shall mean (i) the borrowing of one Type of Loan of a
single Tranche from all the Banks having Commitments of the respective Tranche
on a given date (or resulting from a conversion or conversions on such date or
resulting from a selection of an Interest Period or Interest Periods on such
date) having in the case of Eurodollar Loans the same Interest Period, PROVIDED
that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered
part of the related Borrowing of Eurodollar Loans, (ii) the borrowing of Loans
from Bidder Banks on a given date pursuant to one Competitive Bid Borrowing or
(iii) the conversion of Supplemental Revolving Loans to Supplemental Term Loans
on a given date.
"BRL Commitment Fee" shall have the meaning provided in Section
3.01(a)(i).
"BRL Competitive Bid Loan" shall mean a Competitive Bid Loan which is
designated as such by the Borrower in the Notice of Competitive Bid Borrowing
related thereto.
"BRL Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Basic Revolving Loan
Commitment of such Bank at such time and the denominator of which is the Total
Basic Revolving Loan Commitment at such time, PROVIDED that if the BRL
Percentage of any Bank is to be determined after the Total Basic Revolving Loan
Commitment has been terminated, then the BRL Percentages of the Banks shall be
determined immediately prior (and without giving effect) to such termination.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day except Saturday, Sunday and any day which shall be
in Minneapolis, Minnesota or New York City a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
any day which is a Business Day described in clause (i) above and which is also
a day for trading by and between banks in the interbank Eurodollar market.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on the
books of such Person, in each case taken at the amount thereof accounted for as
indebtedness in accordance with GAAP.
"Certificated Air Carrier" shall mean a Citizen of the United States
holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code, for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more of
cargo.
"Citizen of the United States" shall have the meaning provided in
Section 40102(a)(15) of Title 49 of the United States Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and the rulings issued
thereunder. Section references to
-59-
<PAGE>
the Code are to the Code, as in effect at the date of this Agreement, and to
any subsequent provision of the Code, amendatory thereof, supplemental
thereto or substituted therefor.
"Commitment" shall mean any of the commitments of any Bank, I.E.,
whether a Term Loan Commitment, Basic Revolving Loan Commitment or Supplemental
Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section
3.01(a)(ii).
"Commitment Increase" shall have the meaning provided in Section
1.01(c).
"Commitment Increase Amount" shall have the meaning provided in
Section 1.01(c).
"Competitive Bid Borrowing" shall mean a Borrowing of Competitive Bid
Loans pursuant to Section 1.03A.
"Competitive Bid Loan" shall have the meaning provided in Section
1.01(d).
"Compliance Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Consolidated EBITDAR" shall mean, for any period, the consolidated
operating income of Holdings and its Subsidiaries for such period plus (i)
consolidated aircraft operating rental expenses of Holdings and its Subsidiaries
for such period plus (ii) amortization, depreciation and non-cash stock
compensation expense (to the extent in excess of a $28 per share (adjusted for
any stock split or similar transaction) price with respect to such non-cash
stock compensation expense) that were deducted in arriving at the amount of such
consolidated operating income for such period plus (iii) interest income of
Holdings and its Subsidiaries during such period, all as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges" shall mean, for any period, the total
consolidated interest expense of Holdings and its Subsidiaries for such period
(calculated without regard to any limitations on the payment thereof, but
excluding all interest expense in connection with any Distribution permitted by
Section 8.05(f) and all interest expense in connection with Indebtedness
permitted by Section 8.06(l) except any such Indebtedness incurred by the
Borrower or any of its Subsidiaries which is not subordinated to the
Obligations) plus, without duplication, that portion of Capitalized Lease
Obligations of Holdings and its Subsidiaries representing the interest factor
for such period, plus the total consolidated aircraft operating rental expenses
of Holdings and its Subsidiaries for such period.
"Consolidated Indebtedness" shall mean, at any time, the sum of (i)
the aggregate outstanding principal amount of all Indebtedness (including,
without limitation, the current portion thereof, but excluding (1) all
Indebtedness of the type set forth in clause (v) of the definition of
Indebtedness, (2) all Indebtedness of the type set forth in clause (iii) of the
definition of Indebtedness to the extent relating to Indebtedness of the type
described in clause
-60-
<PAGE>
(v) of the definition thereof, (3) all Identified Indebtedness, and (4) all
Indebtedness permitted by Section 8.06(l) except any such Indebtedness
incurred by the Borrower or any of its Subsidiaries which is not subordinated
to the Obligations) and the principal component of Capitalized Lease
Obligations of Holdings and its Subsidiaries plus (ii) the capitalized
aircraft operating lease obligations of Holdings and its Subsidiaries
(calculated at any time of determination as the product of (x) seven and (y)
the aircraft operating rental expense of Holdings and its Subsidiaries for
the four fiscal quarters immediately preceding the date of determination).
"Consolidated Net Income" shall mean, for any period, net after tax
income of Holdings and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person
(other than Holdings or any of its Subsidiaries) (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; PROVIDED, HOWEVER, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made (or, if less, the maximum amount of such primary obligation for which
such Person may be liable pursuant to the terms of the instrument evidencing
such Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Bank" shall mean each Existing Bank with a Commitment
under this Agreement (immediately upon giving effect to the Restatement
Effective Date).
"Conversion Date" shall have the meaning provided in Section 1.14.
"Coverage Tests" shall have the meaning provided in Section 5A.11(b).
"Credit Documents" shall mean this Agreement (including the Guaranty
herein) and the Notes.
"Credit Event" shall mean the making of any Loan or the issuance of
any Letter of Credit.
"Credit Party" shall mean Holdings, NWA and the Borrower.
-61-
<PAGE>
"Cumulative Net Income Amount" shall mean on any date of
determination, an amount equal to 50% of Consolidated Net Income (determined on
a cumulative basis) for the period commencing on January 1, 1995 and ending on
the date of determination.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Designated Party" shall have the meaning provided in Section 9.05.
"Distribution" shall have the meaning provided in Section 8.05.
"Documentation Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Documentation Agent's Office" shall mean the office of the
Documentation Agent located at 399 Park Avenue, New York, New York 10043,
Attention: Global Aviation Risk Manager, or such other office as the
Documentation Agent may hereafter designate in writing as such to the other
parties hereto.
"Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.
"Drawing" shall have the meaning provided in Section 2.04(b).
"Eligible Gate" shall mean any airport gate of the Borrower upon which
at the time of becoming a Pool Asset, the Banks could receive a first priority
perfected security interest therein without the consent of any third Person
(other than a consent which has been obtained on or prior to the time such
airport gate becomes a Pool Asset).
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act) other than an airline, a commercial air carrier, an air
freight forwarder, an entity engaged in the business of parcel transport by air
or other similar Person or a corporation or other entity controlling, controlled
by or under common control with such an airline, commercial air carrier, air
freight forwarder, entity engaged in the business of parcel transport by air or
other similar Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement, and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings or any of its Subsidiaries would be
deemed to be a "single employer" within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
-62-
<PAGE>
"Eurodollar Loan" shall mean each Loan designated as such by the
Borrower at the time of the incurrence thereof or conversion thereto.
"Eurodollar Rate" shall mean, at the option of the Borrower, (a) (i)
the rate determined by the Administrative Agent to be the arithmetic average of
the offered quotation to first-class banks in the interbank Eurodollar market by
each Reference Bank for Dollar deposits of amounts in immediately available
funds comparable to the outstanding principal amount of the Eurodollar Loan of
such Reference Bank with maturities comparable to the Interest Period applicable
to such Eurodollar Loan commencing two Business Days thereafter as of 10:00 A.M.
(New York time) on the date which is two Business Days prior to the commencement
of such Interest Period, divided (and rounded off to the nearest 1/16 of 1%) by
(ii) a percentage equal to 100% minus the then stated maximum rate of all
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves required by applicable law) applicable
to any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D of the Board of Governors of the Federal
Reserve System (or any successor category of liabilities under Regulation D),
PROVIDED that if one or more of the Reference Banks fails to provide the
Administrative Agent with its aforesaid rate, then the Eurodollar Rate shall be
determined based on the rate or rates provided to the Administrative Agent by
the other Reference Bank or Banks, or (b) the arithmetic average of the offered
rates for deposits in Dollars for the applicable Interest Period (or the period
closest to such applicable Interest Period) which appear on the Reuters Screen
LIBO Page as of 10:00 A.M. (New York time)) on the date which is two Business
Days prior to the commencement of such Interest Period.
"Event of Default" shall have the meaning provided in Section 9.
"Existing Banks" shall mean each Person that was a "Bank" under, and
as defined in, the Existing Credit Agreement.
"Existing Credit Agreement" shall have the meaning provided in the
recitals to this Agreement.
"Existing Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Existing Loans" shall mean, collectively, the Existing Term Loans
and Existing Revolving Loans.
"Existing Revolving Loan Commitment" shall mean a or any "Revolving
Loan Commitment" under, and as defined in, the Existing Credit Agreement.
"Existing Revolving Loans" shall mean the "Revolving Loans" under,
and as defined in, the Existing Credit Agreement.
"Existing Term Loans" shall mean the "Term Loans" under, and as
defined in, the Existing Credit Agreement.
-63-
<PAGE>
"Express Air I" shall mean Express Airlines I, Inc., a
Georgia corporation, and Phoenix Airline Services, Inc., a Georgia
corporation.
"Extending Bank" shall have the meaning provided in
Section 1.14.
"Facing Fee" shall have the meaning provided in Section
3.01(c).
"Federal Funds Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized standing
selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or
referred to in Section 3.01.
"Financial Outlook" shall have the meaning provided in
Section 6.05(b).
"First Response Date" shall have the meaning provided in
Section 1.14.
"GAAP" shall have the meaning provided in Section
12.07(a).
"Guarantor" shall mean each of Holdings and NWA.
"Guaranty" shall mean the guaranty of Holdings and NWA
pursuant to Section 13.
"Hedging Obligations" shall mean, as to any Person, all
obligations and liabilities of such Person under any Interest Rate Protection
Agreement, which are payable upon the termination of such agreement.
"Holdings" shall have the meaning provided in the first
paragraph of this Agreement.
"Identified Indebtedness" shall mean and include (i)
Contingent Obligations incurred pursuant to Section 8.06(i), (ii) Contingent
Obligations of Holdings in respect of the Wayne County Special Facilities
Revenue Bonds; PROVIDED that the maximum aggregate liability of Holdings and
its Subsidiaries in respect of all such Contingent Obligations shall not
exceed $86,000,000 plus interest thereon, (iii) Contingent Obligations of
NATC for the benefit of a third party in respect of its space lease in Grand
Forks, North Dakota, PROVIDED that the maximum aggregate liability of NATC in
respect of all such Contingent Obligations shall not exceed $2,500,000, (iv)
Indebtedness of the type described in clause (iii) of the definition thereof
in connection with the Borrower's pledge of its receivables generated through
the Scheduled Airline Traffic Office to secure Indebtedness incurred by the
Scheduled Airline Traffic Office, the proceeds of which are advanced to the
Borrower on a non-recourse basis (other than such
-64-
<PAGE>
pledged receivables) and (v) Indebtedness incurred pursuant to Section
8.06(j) but only to the extent that such credit enhancement letters of credit
or backstop liquidity facilities referred to therein are not drawn upon.
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person for borrowed money or for the deferred purchase price
of property or services but excluding trade accounts payable and accrued
expenses incurred in the ordinary course of business, (ii) the maximum amount
available to be drawn under all letters of credit issued for the account of
such Person and all unpaid drawings in respect of such letters of credit,
(iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v),
(vi) or (vii) of this definition secured by any Lien on any property owned by
such Person, whether or not such Indebtedness has been assumed by such Person
(to the extent of the value of the respective property), (iv) Capitalized
Lease Obligations, (v) all obligations of such person to pay a specified
purchase price for goods or services, whether or not delivered or accepted,
I.E., take-or-pay and similar obligations, (vi) all Contingent Obligations of
such Person and (vii) all Hedging Obligations under any Interest Rate
Protection Agreement; PROVIDED, HOWEVER, that neither (a) the Japanese Land
Financing Obligations nor (b) any obligations of Holdings to repurchase
shares of its common stock owned by KLM to the extent such repurchase would
be permitted in accordance with Section 8.05(g) shall constitute Indebtedness.
"Interest Determination Date" shall mean, with respect to
any Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in
Section 1.09.
"Interest Rate Protection Agreement" shall mean any
interest rate swap agreement, interest rate cap agreement, interest collar
agreement, interest rate hedging agreement or other similar agreement or
arrangement.
"Issuing Bank" shall mean the Administrative Agent and/or
any Bank which at the request of the Borrower and with the consent of the
Administrative Agent agrees, in such Bank's sole discretion, to become an
Issuing Bank for the purposes of issuing Letters of Credit pursuant to
Section 2.
"Japanese Land Financing Obligations" shall mean all
obligations of the Borrower under that certain Second Amended and Restated
Loan Agreement, dated as of September 30, 1995, between the Borrower and
Konan City Planning Co., Ltd., but only to the extent that such obligations
are non-recourse with respect to all Credit Parties and their Subsidiaries
and are secured solely by the following real property: (i) the Azabu
property, (ii) the Kamiya-cho property and (iii) the Sarugaku-cho property.
"KLM" shall mean Koninklijke Luchtvaart Maatschappij
N.V., a Netherlands corporation.
-65-
<PAGE>
"Korean Lease" shall mean that certain Aircraft Lease
Agreement, dated July 8, 1994, between Singapore Airlines Limited, as lessor,
and Korean Air Lines Co., Ltd, as lessee, as modified pursuant to that
certain Aircraft Lease Novation Agreement among Singapore Airlines Limited,
the Borrower and Korean Air Lines Co., Ltd.
"Last Response Date" shall have the meaning provided in
Section 1.14.
"LAX Two" shall mean LAX TWO CORP., a non-profit
California mutual benefit corporation.
"L/C Supportable Obligations" shall mean and include
obligations of Holdings or any of its Subsidiaries incurred in the ordinary
course of business and such other obligations of Holdings or any of its
Subsidiaries as are reasonably acceptable to the respective Issuing Bank and
otherwise permitted to exist pursuant to the terms of this Agreement.
"Lease" shall mean any operating lease entered into by
any Credit Party or any of its Subsidiaries as lessee thereunder.
"Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Outstandings" shall mean, at any time,
the sum of (i) the aggregate Stated Amount of all outstanding Letters of
Credit and (ii) the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning
provided in Section 2.02.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, security deposit arrangement, encumbrance, lien (statutory or
other) or other security agreement or lien of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC
or any other similar recording or notice statute, and any capital lease
having substantially the same economic effect as any of the foregoing).
"Loan" shall mean each Term Loan, each Basic Revolving
Loan, each Supplemental Revolving Loan, each Supplemental Term Loan and each
Competitive Bid Loan.
"Margin Stock" shall have the meaning provided in
Regulation U of the Board of Governors of the Federal Reserve System.
"Maturity Date" with respect to any Tranche shall mean
either the Term Loan Maturity Date (in the case of Term Loans), the Revolving
Loan Maturity Date (in the case of Basic Revolving Loans), the SRL Commitment
Expiration Date (in the case of Supplemental Revolving Loans) or the
Supplemental Term Loan Maturity Date (in the case of Supplemental Term Loans).
-66-
<PAGE>
"Moody's" shall mean Moody's Investors Service, Inc., or
any successor corporation thereto.
"Moody's Rating" shall have the meaning provided in the
definition of "Applicable Eurodollar Margin".
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA with respect to which the Borrower or
any of its ERISA Affiliates is an "employer" as defined in Section 3(5) of
ERISA.
"Narita Hotel Property" shall mean the Narita
International Hotel and the "Flight Kitchen" located on the property on which
such hotel is located.
"NATC" shall mean Northwest Aerospace Training
Corporation, a Delaware corporation.
"Net Debt Proceeds" shall mean for any incurrence of
Indebtedness, the gross proceeds of such incurrence, net of (i) underwriting
discounts and commissions and other fees and costs associated therewith, (ii)
any taxes (including income taxes) currently paid or payable in the year of
incurrence or the following year as a result of such incurrence and (iii) in
the case of the incurrence of any such Indebtedness in connection with the
substantially contemporaneous refinancing of other Indebtedness, the
aggregate amount of the outstanding principal amount of, premium, if any, and
accrued but unpaid interest on, such other Indebtedness being refinanced with
the proceeds of such Indebtedness.
"Net Sale Proceeds" shall mean for any sale, lease,
transfer or other disposition of assets, the face amount of any promissory
note, receivable or other deferred payment and the gross cash proceeds plus
the fair market value of any other property received by Holdings or any of
its Subsidiaries from such sale, lease, transfer or other disposition, net of
reasonable transaction costs, the payment of the outstanding principal amount
of, premium, if any, and interest on any Indebtedness (other than the
Obligations) securing the assets being sold and required to be repaid as a
result thereof and the estimated marginal increase in income taxes which will
be payable by the Holdings' consolidated group with respect to the fiscal
year in which the sale occurs as a result of such sale.
"New Banks" shall mean each of the Persons listed on
Schedule I which is designated as a New Bank.
"Non-Continuing Bank" shall have the meaning provided in
Section 12.18.
"Non-Extending Banks" shall have the meaning provided in
Section 1.14.
"Non-Facility Standby Letters of Credit" shall mean each
standby letter of credit (other than Letters of Credit) issued for the
account of any Credit Party or any of its respective Subsidiaries in the
ordinary course of business.
-67-
<PAGE>
"Non-Prepayment Competitive Bid Offer" shall have the
meaning provided in Section 1.03A(c)(ii).
"Note" shall mean each Term Note, each Revolving Note,
each Supplemental Revolving Note and each Supplemental Term Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03(a).
"Notice of Commitment Increase" shall have the meaning
provided in Section 1.01(c).
"Notice of Competitive Bid Borrowing" shall have the
meaning provided in Section 1.03A(a).
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the
Administrative Agent located at 130 Liberty Street, New York, New York 10006,
Attention: Deal Administrator, Facsimile: (212) 250-7351 or (212) 250-6029,
or such other office as the Administrative Agent may hereafter designate in
writing as such to the other parties hereto.
"NWA" shall have the meaning provided in the first
paragraph of this Agreement.
"Obligations" shall mean all amounts owing to any Agent
or any Bank pursuant to the terms of this Agreement or any other Credit
Document.
"Participant" shall have the meaning provided in Section
2.03(a).
"Payment Office" shall mean the office of the
Administrative Agent located at 130 Liberty Street, New York, New York 10006,
Attention: Deal Administrator, Facsimile: (212) 250-7351 or (212) 250-6029,
or such other office as the Administrative Agent may hereafter designate in
writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation established pursuant to Section 4002 of ERISA, or any successor
thereto.
"Pension Plan" means any plan (other than a Multiemployer
Plan) described in Section 4021(a) of ERISA, and not excluded pursuant to
Section 4021(b) of ERISA, with respect to which any Credit Party or any of
its ERISA Affiliates is a "contributing sponsor" as defined in Section
4001(a)(13) of ERISA and each such plan for the five year period immediately
following the last date on which the Borrower or any of its ERISA Affiliates
contributed or had an obligation to contribute to such plan.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, limited liability company, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
-68-
<PAGE>
"Pool Assets" shall mean assets of the Borrower listed on
Schedule VI (which Schedule shall be prepared by the Borrower and be
reasonably satisfactory to the Compliance Agent), to the extent modified
pursuant to Section 8.08, and together with all the engines necessary to
comply with Section 8.08(c).
"Prepayment Competitive Bid Offer" shall have the meaning
set forth in Section 1.03A(c)(ii).
"Prime Lending Rate" shall mean the rate which the
Administrative Agent announces from time to time as its prime lending rate,
the Prime Lending Rate to change when and as such prime lending rate changes.
The Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. The
Administrative Agent may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Quarterly Payment Date" shall mean the fifteenth day of
each March, June, September and December occurring after the Restatement
Effective Date.
"Rating" shall have the meaning provided in the
definition of "Applicable Eurodollar Margin".
"Rating Agency" shall mean each of S&P and Moody's.
"Reference Banks" shall mean three Banks that are Agents
(or The Chase Manhattan Bank) and are acceptable to the Borrower, PROVIDED
that one such Bank shall be the Administrative Agent.
"Register" shall have the meaning set forth in Section
12.17.
"Replaced Bank" shall have the meaning provided in
Section 1.13.
"Replacement Bank" shall have the meaning provided in
Section 1.13.
"Reply Date" shall have the meaning provided in Section
1.03A(b).
"Required Banks" shall mean Banks, the sum of whose
outstanding Term Loans, Basic Revolving Loan Commitments (or after the
termination thereof, outstanding Basic Revolving Loans, BRL Competitive Bid
Loans and BRL Percentage of Letter of Credit Outstandings), Supplemental
Revolving Loan Commitments (or after the termination thereof, outstanding
Supplemental Revolving Loans and SRL Competitive Bid Loans) and outstanding
Supplemental Term Loans represent an amount greater than 50% of the sum of
all outstanding Term Loans, the Total Basic Revolving Loan Commitment (or
after the termination thereof, the sum of the then total outstanding
Basic Revolving Loans, BRL Competitive Bid Loans and Letter of Credit
Outstandings at such time), the Total Supplemental Revolving Loan Commitment
(or after the termination thereof, the sum of the then total outstanding
-69-
<PAGE>
Supplemental Revolving Loans and SRL Competitive Bid Loans) and all
outstanding Supplemental Term Loans.
"Restatement Effective Date" shall have the meaning
provided in Section 12.10.
"Retired Secured Debt" shall mean (i) all secured letters
of credit issued for the account of Holdings or any of its Subsidiaries to
the extent same have been returned undrawn to the respective issuers of such
letters of credit or to the extent of any permanent reduction of the same
without any drawing thereunder, (ii) all secured Contingent Obligations of
Holdings or any of its Subsidiaries to the extent that such Contingent
Obligations have been terminated without any Credit Party or any of its
respective Subsidiaries making any payment in respect thereof, (iii) all
secured Hedging Obligations of Holdings or any of its Subsidiaries to the
extent that such Hedging Obligations have been terminated without any Credit
Party or any of its respective Subsidiaries making any payment in respect
thereof and (iv) all Indebtedness of the type described in clause (iii) of
the definition of Indebtedness of Holdings or any of its Subsidiaries to the
extent that such Indebtedness has been permanently extinguished and the Lien
securing such Indebtedness on the property of the respective Credit Party or
any of its Subsidiaries has been unconditionally released.
"Retired Unsecured Debt" shall mean (i) all unsecured
letters of credit issued for the account of Holdings or any of its
Subsidiaries to the extent same have been returned undrawn to the respective
issuers of such letters of credit or to the extent of any permanent reduction
of the same without any drawing thereunder, (ii) all unsecured Contingent
Obligations of Holdings or any of its Subsidiaries to the extent that such
Contingent Obligations have been terminated without any Credit Party or any
of its respective Subsidiaries making any payment in respect thereof and
(iii) all unsecured Hedging Obligations of Holdings or any of its
Subsidiaries to the extent that such Hedging Obligations have been terminated
without any Credit Party or any of its respective Subsidiaries making any
payment in respect thereof.
"Reuters Screen LIBO Page" shall mean the display
designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such
other pages as may replace the LIBO page on the service for the purpose of
displaying London interbank offered rates of major banks).
"Revolving Loan Maturity Date" shall mean December 15,
2002.
"Revolving Note" shall have the meaning provided in
Section 1.05(a).
"S&P" shall mean Standard & Poor's Ratings Services or
any successor corporation thereto.
"S&P Rating" shall have the meaning provided in the
definition of "Applicable Eurodollar Margin".
"Scheduled Repayments" shall have the meaning provided in
Section 4.02(b).
"SEC" shall have the meaning provided in Section 7.01(h).
-70-
<PAGE>
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b).
"Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
"Spread" shall mean a percentage per annum in excess of,
or less than, the Eurodollar Rate determined in accordance with clause (b) of
the definition thereof.
"Spread Borrowing" shall mean a Competitive Bid Borrowing
with respect to which the Borrower has requested the Banks to make
Competitive Bid Loans at a Spread.
"SRL Commitment Expiration Date" shall mean December 21,
1998, as such date may be extended pursuant to Section 1.14.
"SRL Commitment Fee" shall have the meaning provided in
Section 3.01(a)(ii).
"SRL Competitive Bid Loan" shall mean a Competitive Bid
Loan which is designated as such by the Borrower in the Notice of Competitive
Bid Borrowing related thereto.
"SRL Percentage" of any Bank at any time shall mean a
fraction (expressed as a percentage) the numerator of which is the
Supplemental Revolving Loan Commitment of such Bank at such time and the
denominator of which is the Total Supplemental Revolving Loan Commitment at
such time, PROVIDED that if the SRL Percentage of any Bank is to be
determined after the Total Supplemental Revolving Loan Commitment has been
terminated, then the SRL Percentages of the Banks shall be determined
immediately prior (and without giving effect) to such termination.
"Stage III Aircraft" shall mean aircraft owned by the
Borrower certified as Stage III aircraft, as set forth in Federal Aviation
Regulation 36.1(f)(6), 14 C.F.R. Section 36.1(f)(6) or any successor
regulation, as amended, and, until December 31, 1999, Stage II aircraft owned
by the Borrower which can be certified as Stage III aircraft pursuant to such
regulation, with only a paper change.
"Stated Amount" of any letter of credit, including,
without limitation, each Letter of Credit, shall, at any time, mean the
maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met).
"STL Facility Percentage" shall mean a fraction
(expressed as a percentage) the numerator of which is the STL Facility
Percentage Amount at such time and the denominator of which is the sum of (x)
the STL Facility Percentage Amount at such time plus (y) the TL Facility
Percentage Amount at such time.
"STL Facility Percentage Amount" shall mean, at any time,
the aggregate principal amount of all outstanding Supplemental Term Loans at
such time.
-71-
<PAGE>
"Subsidiary" shall mean, as to any Person, (i) any
corporation more than 50% of whose stock having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any other class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
and/or one or more Subsidiaries of such Person and (ii) any partnership,
limited liability company, association, joint venture or other entity in
which such Person and/or one or more Subsidiaries of such Person has more
than a 50% equity interest at the time; PROVIDED HOWEVER that notwithstanding
anything to the contrary, LAX Two and its Subsidiaries shall be deemed not to
be Subsidiaries of Holdings or any of its Subsidiaries for all purposes of
this Agreement (including, without limitation, the calculation of the
financial covenants and the definitions relating thereto) and the other
Credit Documents.
"Super-Majority Banks" shall mean Banks, the sum of whose
outstanding Term Loans, Basic Revolving Loan Commitments (or after the
termination thereof, outstanding Basic Revolving Loans, BRL Competitive Bid
Loans and BRL Percentage of Letter of Credit Outstandings), Supplemental
Revolving Loan Commitments (or after the termination thereof, outstanding
Supplemental Revolving Loans and SRL Competitive Bid Loans) and Supplemental
Term Loans represent an amount greater than or equal to 80% of the sum of all
outstanding Term Loans, the Total Basic Revolving Loan Commitment (or after
the termination thereof, the sum of the then total outstanding Basic
Revolving Loans, BRL Competitive Bid Loans and Letter of Credit Outstandings
at such time), the Total Supplemental Revolving Loan Commitment (or after the
termination thereof, the sum of the then total outstanding Supplemental
Revolving Loans and SRL Competitive Bid Loans) and all outstanding
Supplemental Term Loans.
"Supplemental Revolving Loan" shall have the meaning
provided in Section 1.01(e).
"Supplemental Revolving Loan Commitment" shall mean, for
each Bank, the amount set forth opposite such Bank's name in Schedule I
hereto directly below the column entitled "Supplemental Revolving Loan
Commitment", as the same may be (x) reduced from time to time pursuant to
Sections 1.14, 3.02, 3.03 and/or 9 or (y) adjusted from time to time as a
result of assignments to or from such Bank pursuant to Section 1.13 or
12.04(b).
"Supplemental Revolving Note" shall have the meaning
provided in Section 1.05(a).
"Supplemental Term Loan" shall have the meaning provided
in Section 1.01(f).
"Supplemental Term Loan Maturity Date" shall mean
December 15, 2002.
"Supplemental Term Note" shall have the meaning provided
in Section 1.05(a).
"Syndication Agent" shall have the meaning provided in
the first paragraph of this Agreement.
"Taxes" shall have the meaning provided in Section
4.04(a).
-72-
<PAGE>
"Term Loan" shall have the meaning provided in Section
1.01(a).
"Term Loan Commitment" shall mean for each Bank, the
amount set forth opposite such Bank's name in Schedule I hereto directly
below the column entitled "Term Loan Commitment," as same may be (x) reduced
from time to time pursuant to Sections 3.03 and/or 9 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to
Section 12.04(b).
"Term Loan Maturity Date" shall mean December 15, 2002.
"Term Note" shall have the meaning provided in Section
1.05(a).
"Termination Event" means (i) a "reportable event"
described in Section 4043 of ERISA or in the regulations thereunder
(excluding events for which the requirement for notice of such reportable
event has been waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation Section 2615), or (ii) the withdrawal of any Credit Party or any
of its ERISA Affiliates from a Pension Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(iii) the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (iv) the institution of proceedings to terminate a Pension Plan by
the PBGC, or (v) any other event or condition which might constitute
reasonable grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or (vi) the
complete or partial withdrawal (within the meaning of Sections 4203 and 4205,
respectively, of ERISA) of any Credit Party or any of its ERISA Affiliates
from a Multiemployer Plan, or (vii) the insolvency or reorganization (within
the meaning of Section 4245 and 4241, respectively, of ERISA) of any
Multiemployer Plan.
"TL Facility Percentage" shall mean a fraction (expressed
as a percentage) the numerator of which is the TL Facility Percentage Amount
at such time and the denominator of which is the sum of (x) the TL Facility
Percentage Amount at such time plus (y) the STL Facility Percentage Amount at
such time.
"TL Facility Percentage Amount" shall mean, at any time,
the aggregate principal amount of all outstanding Term Loans at such time.
"Total Basic Revolving Loan Commitment" shall mean, at
any time, the sum of the Basic Revolving Loan Commitments of each of the
Banks.
"Total Commitment" shall mean, at any time, the sum of
the Commitments of each of the Banks.
"Total Supplemental Revolving Loan Commitment" shall
mean, at any time, the sum of the Supplemental Revolving Loan Commitments of
each of the Banks.
"Total Term Loan Commitment" shall mean, at any time, the
sum of the Term Loan Commitments of each of the Banks.
-73-
<PAGE>
"Total Unutilized Basic Revolving Loan Commitment" shall
mean, at any time, the sum of the Unutilized Basic Revolving Loan Commitments
of each of the Banks.
"Total Unutilized Supplemental Revolving Loan Commitment"
shall mean, at any time, the sum of the Unutilized Supplemental Revolving
Loan Commitments of each of the Banks.
"Tranche" shall mean the respective facility and
commitments utilized in making Loans hereunder, with there being three
separate Tranches, I.E., Term Loans, Basic Revolving Loans and Supplemental
Revolving Loans, PROVIDED, HOWEVER, in the event any Supplemental Revolving
Loans are converted into Supplemental Term Loans pursuant to Section 1.01(f),
from and after the Conversion Date there shall be four (assuming the SRL
Commitment Expiration Date is extended at such time) separate Tranches, I.E.,
Term Loans, Basic Revolving Loans, Supplemental Revolving Loans and
Supplemental Term Loans.
"Transaction" shall mean (i) the amendment and
restatement of the Existing Credit Agreement in the form of this Agreement as
provided herein, (ii) the incurrence of Loans hereunder on the Restatement
Effective Date, (iii) the conversion of Existing Loans on the Restatement
Effective Date pursuant to Section 1.01(a) and (b) and (iv) the repayment of
Existing Loans (together with interest and accrued Fees (under and as defined
in the Existing Credit Agreement)) on the Restatement Effective Date pursuant
to Section 12.18(c).
"Type" shall mean the type of Loan determined with regard
to the interest option applicable thereto, I.E., whether a Base Rate Loan or
a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time
to time in effect in the relevant jurisdiction.
"United States" and "U.S." shall each mean the United
States of America.
"Unpaid Drawing" shall have the meaning provided in
Section 2.04(a).
"Unutilized Basic Revolving Loan Commitment" with respect
to any Bank, at any time, shall mean such Bank's Basic Revolving Loan
Commitment at such time less the sum of (i) the aggregate outstanding
principal amount of Basic Revolving Loans made by such Bank plus (ii) such
Bank's BRL Percentage of all Letter of Credit Outstandings.
"Unutilized Supplemental Revolving Loan Commitment" with
respect to any Bank, at any time, shall mean such Bank's Supplemental
Revolving Loan Commitment at such time less the aggregate outstanding
principal amount of Supplemental Revolving Loans made by such Bank.
"Voluntary Prepayment Right" shall have the meaning
provided in Section 1.03A(a).
-74-
<PAGE>
"Voting Stock" means capital stock issued by a
corporation, or equivalent interests in any other Person, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for
the election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"Wholly-Owned Subsidiary" shall mean, as to any Person,
(i) any corporation 100% of whose capital stock (other than director's
qualifying shares) is at the time owned by such Person and/or one or more
Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at
such time.
SECTION 11. THE AGENTS.
11.01 APPOINTMENT. The Banks hereby designate each
Agent as agent to act as specified herein and in the other Credit Documents.
Each Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, each Agent
to take such action on its behalf under the provisions of this Agreement, the
other Credit Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of each
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. Each Agent may perform any of its duties hereunder by or
through its respective officers, directors, agents, employees or affiliates.
11.02 NATURE OF DUTIES. Each Agent shall not have any
duties or responsibilities except those expressly set forth in this Agreement
and the other Credit Documents. None of the Agents nor any of their
respective officers, directors, agents, employees or affiliates shall be
liable for any action taken or omitted by it or them hereunder or under any
other Credit Document or in connection herewith or therewith, unless caused
by its or their gross negligence or willful misconduct. The duties of each
Agent shall be mechanical and administrative in nature; each Agent shall not
have by reason of this Agreement or any other Credit Document a fiduciary
relationship in respect of any Bank or the holder of any Note; and nothing in
this Agreement or any other Credit Document, expressed or implied, is
intended to or shall be so construed as to impose upon any Agent any
obligations in respect of this Agreement or any other Credit Document except
as expressly set forth herein or therein.
11.03 LACK OF RELIANCE ON ANY AGENT. Independently and
without reliance upon each Agent, each Bank and the holder of each Note, to
the extent it deems appropriate, has made and shall continue to make (i) its
own independent investigation of the financial condition and affairs of
Holding and its Subsidiaries in connection with the making and the
continuance of the Loans and the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of
Holding and its Subsidiaries and, except as expressly provided in this
Agreement, each Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Bank or the holder of any
Note with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter. Each Agent shall not be responsible to any Bank or the
-75-
<PAGE>
holder of any Note for any recitals, statements, information, representations
or warranties herein or in any document, certificate or other writing
delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority
or sufficiency of this Agreement or any other Credit Document or the
financial condition of Holding and its Subsidiaries or be required to make
any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any other Credit
Document, or the financial condition of Holding and its Subsidiaries or the
existence or possible existence of any Default or Event of Default.
11.04 CERTAIN RIGHTS OF EACH AGENT. If any Agent shall
request instructions from the Required Banks with respect to any act or
action (including failure to act) in connection with this Agreement or any
other Credit Document, such Agent shall be entitled to refrain from such act
or taking such action unless and until such Agent shall have received
instructions from the Required Banks; and such Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, neither any Bank nor the holder of any Note shall have any right
of action whatsoever against any Agent as a result of such Agent acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks.
11.05 RELIANCE. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message signed,
sent or made by any Person that such Agent believed to be the proper Person,
and, with respect to all legal matters pertaining to this Agreement and any
other Credit Document and its duties hereunder and thereunder, upon advice of
counsel selected by such Agent.
11.06 INDEMNIFICATION. To the extent any Agent is not
reimbursed and indemnified by the Borrower the Banks will reimburse and
indemnify such Agent, in proportion to their respective "percentages" as used
in determining the Required Banks, for and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, costs,
expenses or disbursements of whatsoever kind or nature which may be imposed
on, asserted against or incurred by such Agent in performing its respective
duties hereunder or under any other Credit Document, in any way relating to
or arising out of this Agreement or any other Credit Document; PROVIDED that
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Agent's gross negligence or willful
misconduct.
11.07 EACH AGENT IN ITS INDIVIDUAL CAPACITY. With
respect to its obligation to make Loans under this Agreement, each Agent
shall have the rights and powers specified herein for a "Bank" and may
exercise the same rights and powers as though it were not performing the
duties specified herein; and the term "Banks," "Required Banks," "holders of
Notes" or any similar terms shall, unless the context clearly otherwise
indicates, include each Agent in its individual capacity. Each Agent may
accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with any Credit Party or any Affiliate of
any Credit Party as if it were not performing the duties specified herein,
and may accept fees and
-76-
<PAGE>
other consideration from the Borrower or any other Credit Party for services
in connection with this Agreement and otherwise without having to account for
the same to the Banks.
11.08 HOLDERS. Each Agent may deem and treat the payee
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the
case may be, shall have been filed with such Agent. Any request, authority
or consent of any Person who, at the time of making such request or giving
such authority or consent, is the holder of any Note shall be conclusive and
binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
11.09 RESIGNATION BY THE AGENTS. (a) Each Agent may
resign from the performance of all its functions and duties hereunder and/or
under the other Credit Documents at any time by giving 15 Business Days'
prior written notice to the Borrower and the Banks. Such resignation shall
take effect upon the appointment of a successor Agent pursuant to clauses (b)
and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so
appointed within such 15 Business Day period, such resigning Agent, with the
consent of the Borrower, shall then appoint a successor Agent who shall serve
as Agent hereunder or thereunder until such time, if any, as the Banks
appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to
clause (b) or (c) above by the 20th Business Day after the date such notice
of resignation was given by such Agent, such Agent's resignation shall become
effective and the Required Banks shall thereafter perform all the duties of
such Agent hereunder and/or under any other Credit Document until such time,
if any, as the Banks appoint a successor Agent as provided above.
SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, ETC. The Borrower shall:
(i) whether or not the transactions herein contemplated are consummated, pay
all reasonable and adequately documented fees and other out-of-pocket costs
and expenses (x) of each Agent (including, without limitation, the reasonable
and adequately documented fees and disbursements of White & Case) arising in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents, the commitment letter, the term sheet and the
documents and instruments referred to herein and therein and any amendment,
waiver or consent relating hereto or thereto and of the Syndication Agent in
connection with its syndication efforts with respect to this Agreement (but
excluding attorneys' fees and disbursements) and (y) of each Agent and each
of the Banks in connection with the enforcement of this Agreement and the
other Credit Documents and the documents and instruments referred to herein
and therein (including, without limitation, the reasonable and adequately
documented fees and disbursements of counsel
-77-
<PAGE>
for each Agent and for each of the Banks including any reasonable allocated
costs of in-house counsel); (ii) pay and hold each of the Banks harmless from
and against any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and save each of the Banks
harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable
to such Bank) to pay such taxes; and (iii) indemnify each Agent, each Bank
and each of their respective affiliates, and each of their respective
officers, directors, employees, representatives and agents from and hold each
of them harmless against any and all liabilities, obligations (including
removal or remedial actions), losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses and disbursements (including reasonable and
adequately documented attorneys' and consultants' fees and disbursements)
incurred by, imposed on or assessed against any of them as a result of, or
arising out of, or in any way related to, or by reason of, any investigation,
litigation or other proceeding (whether or not any Agent or any Bank is a
party thereto) related to the entering into and/or performance of this
Agreement or any other Credit Document, the commitment letter, the term sheet
or the actual or proposed use of any Letter of Credit or the proceeds of any
Loans hereunder or the consummation of any transactions contemplated herein
or in any other Credit Document or the exercise of any of their rights or
remedies provided herein or in the other Credit Documents, including, without
limitation, the reasonable and adequately documented fees and disbursements
of counsel and other consultants incurred in connection with any such
investigation, litigation or other proceeding (but excluding any losses,
liabilities, claims, damages or expenses to the extent arising or incurred by
reason of (x) a violation of laws or governmental regulations pertaining to
lending by the Person to be indemnified (or the Agent or Bank of which such
Person is an officer, director, employee, representative or agent); PROVIDED,
HOWEVER, that the Person to be indemnified shall, in all events, be entitled
to the indemnities set forth in Sections 1.10, 1.11, 2.05 and 4.04 to the
extent provided therein, or (y) the gross negligence or willful misconduct of
the Person to be indemnified). To the extent that the undertaking to
indemnify, pay or hold harmless any Person set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which is permissible
under applicable law.
12.02 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of an Event of Default, each Bank is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any
kind to any Credit Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by such Bank (including, without limitation, by branches and agencies
of such Bank wherever located) to or for the credit or the account of any
Credit Party against and on account of the Obligations and liabilities of any
Credit Party to such Bank under this Agreement or under any of the other
Credit Documents, including, without limitation, all interests in Obligations
purchased by such Bank pursuant to Section 12.06(b), and all other claims of
any nature or description arising out of or connected with this Agreement or
any other Credit Document, irrespective of whether or not such Bank shall
have made any demand hereunder and although said Obligations, liabilities or
claims, or any of them, shall be contingent or unmatured.
-78-
<PAGE>
12.03 NOTICES. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be
in writing (including telegraphic, telex, telecopier or cable communication)
and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to a
Credit Party, at the address specified opposite its signature below; if to
any Bank, at the address specified for such Bank on Schedule II hereto; or,
at such other address as shall be designated by any party in a written notice
to the other parties hereto. All such notices and communications shall, when
mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight
courier, be effective when received.
12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto; PROVIDED, HOWEVER,
no Credit Party may assign or transfer any of its rights, obligations or
interest hereunder or under any other Credit Document without the prior
written consent of the Banks and, PROVIDED FURTHER, that, although any Bank
may transfer, assign or grant participations in its rights hereunder, such
Bank shall remain a "Bank" for all purposes hereunder (and may not transfer
or assign all or any portion of its Commitments hereunder except as provided
in Section 12.04(b)) and the transferee, assignee or participant, as the case
may be, shall not constitute a "Bank" hereunder and, PROVIDED FURTHER, that
no Bank shall transfer or grant any participation under which the participant
shall have rights to approve any amendment to or waiver of this Agreement or
any other Credit Document except to the extent such amendment or waiver would
(i) extend the final scheduled maturity of any Loan, Note or Letter of Credit
(unless such Letter of Credit is not extended beyond the Revolving Loan
Maturity Date) in which such participant is participating, or reduce the rate
or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or increase the
amount of the participant's participation over the amount thereof then in
effect (it being understood that waivers or modifications of any conditions
precedent, covenants, Default or Event of Default or of a mandatory reduction
in the Total Commitment shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan shall be
permitted without the consent of any participant if the participant's
participation is not increased as a result thereof) or (ii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement. In the case of any such participation, the participant
shall not have any rights under this Agreement or any of the other Credit
Documents (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
Basic Revolving Loan Commitment (and related outstanding Obligations
hereunder), its Supplemental Revolving Loan Commitment (and related
outstanding Obligations thereunder) and its outstanding Loans to its parent
company and/or any affiliate of such Bank or to one or more Banks or (y)
assign all, or if less than all, a portion equal to at least $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, of such Basic Revolving
Loan Commitments, Supplemental Revolving Loan Commitments and outstanding
principal amount of Loans hereunder to one or more Eligible Transferees, each
of
-79-
<PAGE>
which assignees shall become a party to this Agreement as a Bank by execution
of an Assignment and Assumption Agreement; PROVIDED that, (i) at such time
Schedule I shall be deemed modified to reflect the Commitments (and/or
outstanding Loans, as the case may be) of such new Bank and of the existing
Banks, (ii) new Notes will be issued, at the Borrower's expense, to such new
Bank and to the assigning Bank upon the request of such new Bank or assigning
Bank, such new Notes to be in conformity with the requirements of Section
1.05 (with appropriate modifications) to the extent needed to reflect the
revised Commitments (and/or outstanding Loans), (iii) only with respect to
any assignment pursuant to clause (y) of this Section 12.04(b), the consent
of the Administrative Agent and the Borrower shall be required (which
consents shall not be unreasonably withheld or delayed); PROVIDED, HOWEVER,
the consent of the Borrower shall not be required at any time after an Event
of Default shall have occurred and is then continuing, and (iv) the
Administrative Agent shall receive at the time of each such assignment, from
the assigning or assignee Bank, the payment of a non-refundable assignment
fee of $3,500 and, PROVIDED FURTHER, that such transfer or assignment will
not be effective until recorded by the Administrative Agent on the Register
pursuant to Section 12.17 hereof. To the extent of any assignment pursuant
to this Section 12.04(b), the assigning Bank shall be relieved of its
obligations hereunder with respect to its assigned Commitments. At the time
of each assignment pursuant to this Section 12.04(b) to a Person which is not
already a Bank hereunder and which is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes, the respective assignee Bank shall provide to the Borrower and the
Agent the appropriate Internal Revenue Service Forms (and, if applicable a
Section 4.04(b)(ii) Certificate) described in Section 4.04(b).
(c) Any Bank may at any time pledge or assign all or any
portion of its rights under this Agreement or any other Credit Document to
any Federal Reserve Bank without notice to or consent of any Credit Party.
No such pledge or assignment shall release the transferor Bank from its
obligations hereunder.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of any Agent or any Bank or any holder of any Note in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower or any other Credit
Party and any Agent or any Bank or the holder of any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or under any other Credit Document preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights, powers and remedies herein or
in any other Credit Document expressly provided are cumulative and not
exclusive of any rights, powers or remedies which any Agent or any Bank or
the holder of any Note would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle any Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Agent or any Bank or the holder of any Note to
any other or further action in any circumstances without notice or demand.
12.06 PAYMENTS PRO RATA. (a) Except as otherwise
provided in this Agreement, the Administrative Agent agrees that promptly
after its receipt of each payment from or on behalf of the Borrower in
respect of any Obligations hereunder, it shall distribute such payment to the
-80-
<PAGE>
Banks (other than any Bank that has consented in writing to waive its PRO
RATA share of any such payment) PRO RATA based upon their respective shares,
if any, of the Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive
any amount hereunder (whether by voluntary payment, by realization upon
security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, by the enforcement of any right under the
Credit Documents, or otherwise), which is applicable to the payment of the
principal of, or interest on, the Loans, Unpaid Drawings, Commitment Fees or
Letter of Credit Fees, of a sum which with respect to the related sum or sums
received by other Banks is in a greater proportion than the total of such
Obligation then owed and due to such Bank bears to the total of such
Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the
Obligations of the respective Credit Party to such Banks in such amount as
shall result in a proportional participation by all the Banks in such amount;
PROVIDED that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved (except as
set forth in the notes thereto or as otherwise disclosed in writing by the
Borrower to the Banks); PROVIDED that, except as otherwise specifically
provided herein, all computations determining compliance with Section 8 shall
utilize accounting principles and policies in conformity with those used to
prepare the historical financial statements delivered to the Banks pursuant
to Section 6.05(a) (with the foregoing generally accepted accounting
principles, subject to the preceding proviso, herein called "GAAP").
(b) All computations of interest with respect to Base
Rate Loans shall be made on the basis of a year consisting of 365 (or, if
applicable, 366) days for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest
is payable. All other computations of interest and all computations of
Commitment Fees and all other Fees hereunder shall be made on the basis of a
year of 360 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest,
Commitment Fees or other Fees are payable.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
SITTING IN THE CITY OF NEW YORK OR OF THE
-81-
<PAGE>
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH CREDIT PARTY HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH CREDIT PARTY HEREBY DESIGNATES,
APPOINTS AND EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF
AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND
AGENT TO RECEIVE AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS
PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND
DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY
REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT
AS SUCH, EACH CREDIT PARTY AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND
AGENT IN NEW YORK CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT. EACH CREDIT
PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY
CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH
SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF
ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
(b) EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO
IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
-82-
<PAGE>
12.09 COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall
be lodged with the Borrower and each Agent.
12.10 EFFECTIVENESS. This Agreement shall become
effective on the date (the "Restatement Effective Date") on which each Credit
Party, each Agent, each of the Banks (including each Continuing Bank and each
New Bank) and the Required Banks (determined immediately before the
occurrence of the Restatement Effective Date) shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have delivered
the same to the Administrative Agent at its Notice Office or, in the case of
the Banks, shall have given to the Administrative Agent telephonic (confirmed
in writing), written, telecopy or telex notice (actually received) at such
office that the same has been signed and mailed to it and (ii) each of the
conditions contained in Sections 5A, 5B and 12.10(b) is met.
(b) On the Restatement Effective Date, each New Bank and
Continuing Bank shall have delivered to the Administrative Agent for the
account of the Borrower an amount equal to (i) in the case of each New Bank,
the Term Loans, Basic Revolving Loans and Supplemental Revolving Loans to be
made by such New Bank on the Restatement Effective Date and (ii) in the case
of each Continuing Bank, the amount by which the principal amount of Loans to
be made and/or converted by such Continuing Bank on the Restatement Effective
Date exceeds the amount of the Existing Loans of such Continuing Bank
outstanding on the Restatement Effective Date. Notwithstanding anything to
the contrary contained in this Section 12.10(b), in satisfying the foregoing
condition, unless the Administrative Agent shall have been notified by any
Bank prior to the occurrence of the Restatement Effective Date that such Bank
does not intend to make available to the Administrative Agent such Bank's
Term Loans, Basic Revolving Loans and Supplemental Revolving Loans required
to be made by it on such date, then the Administrative Agent may, in reliance
on such assumption, make available to the Borrower the corresponding amounts
in accordance with the provisions of Section 1.04 of this Agreement, and the
making available by the Administrative Agent of such amounts shall satisfy
the condition contained in this Section 12.10(b).
12.11 HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision
of this Agreement.
12.12 AMENDMENT OR WAIVER; ETC. (a) Neither this
Agreement nor any other Credit Document nor any terms hereof or thereof may
be changed, waived, discharged or terminated unless such change, waiver,
discharge or termination is in writing signed by the respective Credit
Parties party thereto and the Required Banks, PROVIDED that no such change,
waiver, discharge or termination shall, without the consent of each Bank
(with Obligations being directly affected thereby in the case of the
following clause (i)), (i) extend the final scheduled maturity of any Loan or
Note or extend the stated maturity of any Letter of Credit beyond the
Revolving Loan Maturity Date, or reduce the rate or extend the time of
payment of interest or
-83-
<PAGE>
Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates), or reduce the principal amount
thereof (except to the extent repaid in cash), (ii) amend, modify or waive
any provision of this Section 12.12, (iii) reduce the percentage specified in
the definition of Required Banks (it being understood that, with the consent
of the Required Banks, additional extensions of credit pursuant to this
Agreement may be included in the determination of the Required Banks on
substantially the same basis as the extensions of Term Loans, Basic Revolving
Loan Commitments and Supplemental Revolving Loan Commitments are included on
the Restatement Effective Date), (iv) release a Guarantor from its Guaranty
or (v) consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement; PROVIDED FURTHER, that no such
change, waiver, discharge or termination shall (w) be effective for purposes
of determining whether the conditions to the obligations of the Banks with
Supplemental Revolving Loan Commitments to make Supplemental Revolving Loans
set forth in Section 5B.02 have been satisfied, without the consent of Banks,
the sum of whose Supplemental Revolving Loan Commitments represent an amount
greater than 50% of the Total Supplemental Revolving Loan Commitment, (x)
increase the Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank except pursuant to Section 1.01(c) (it being
understood that waivers or modifications of conditions precedent, covenants,
Defaults or Events of Default or of a mandatory reduction in the Total
Commitment shall not constitute an increase of the Commitment of any Bank,
and that an increase in the available portion of any Commitment of any Bank
shall not constitute an increase in the Commitment of such Bank), (y) without
the consent of the Issuing Bank affected thereby, amend, modify or waive any
provision of Section 2 or alter its rights or obligations with respect to any
Letter of Credit issued by such Issuing Bank and (z) without the consent of
each Agent affected thereby, amend, modify or waive any provision of Section
11 as same applies to such Agent or any other provision as same relates to
the rights or obligations of such Agent.
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clause (a)(i) through (v), inclusive, of the first proviso to
Section 12.12(a), the consent of the Required Banks is obtained but the
consent of one or more of such other Banks whose consent is required is not
obtained, then the Borrower shall have the right, so long as each
non-consenting Bank whose individual consent is required is treated as
described in either clause (A) or (B) below, to either (A) replace such
non-consenting Bank with one or more Replacement Banks pursuant to Section
1.13 so long as at the time of such replacement, each such Replacement Bank
consents to the proposed change, waiver, discharge or termination or (B)
terminate all of such non-consenting Bank's Commitments and repay in full its
outstanding Loans, in accordance with Sections 3.02(b) and/or 4.01(b),
PROVIDED that, unless the Commitments terminated and Loans repaid pursuant to
preceding clause (B) are immediately replaced in full at such time through
the addition of new Banks or the increase of the Commitments and/or
outstanding Loans of existing Banks (who in each case must specifically
consent thereto), then in the case of any action pursuant to preceding clause
(B) the Required Banks (determined both before and after giving effect to the
proposed action) shall specifically consent thereto, PROVIDED FURTHER, that
the Borrower shall not have the right to replace a Bank solely as a result of
the exercise of such Bank's rights (and the withholding of any required
consent by such Bank) pursuant to the second proviso to Section 12.12(a).
-84-
<PAGE>
12.13 SURVIVAL. All indemnities set forth herein
including, without limitation, in Sections 1.10, 1.11, 2.05, 4.04, 12.01 and
12.06 shall, subject to Section 12.15 (to the extent applicable), survive the
execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Loans.
12.14 DOMICILE OF LOANS. Each Bank may transfer and
carry its Loans at, to or for the account of any office, Subsidiary or
Affiliate of such Bank. Notwithstanding anything to the contrary contained
herein, to the extent that a transfer of Loans pursuant to this Section 12.14
would, at the time of such transfer, result in increased costs under Section
1.10, 1.11, 2.05 or 4.04 from those being charged by the respective Bank
prior to such transfer, then the Borrower shall not be obligated to pay such
increased costs (although the Borrower shall be obligated to pay any other
increased costs of the type described above resulting from changes giving
rise to such increased costs after the date of the respective transfer).
12.15 LIMITATION ON ADDITIONAL AMOUNTS, ETC.
Notwithstanding anything to the contrary contained in Section 1.10, 1.11,
2.05 or 4.04 of this Agreement, unless a Bank gives notice to the Borrower
that it is obligated to pay an amount under such Section within 180 days
after the date the Bank incurs the respective increased costs, Taxes, loss,
expense or liability, reduction in amounts received or receivable or
reduction in return on capital, then such Bank shall only be entitled to be
compensated for such amount by the Borrower pursuant to said Section 1.10,
1.11, 2.05 or 4.04, as the case may be, to the extent the costs, Taxes, loss,
expense or liability, reduction in amounts received or receivable or
reduction in return on capital are incurred or suffered on or after the date
which occurs 180 days prior to such Bank giving notice to the Borrower that
it is obligated to pay the respective amounts pursuant to said Section 1.10,
1.11, 2.05 or 4.04, as the case may be. This Section 12.15 shall have no
applicability to any Section of this Agreement other than said Sections 1.10,
1.11, 2.05 and 4.04.
12.16 CONFIDENTIALITY. (a) Subject to the provisions
of clause (b) of this Section 12.16, each Bank shall hold all non-public
information obtained pursuant to the requirements of this Agreement which has
been identified as such by any Credit Party in accordance with its customary
procedure for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably to any bona fide prospective transferee or participant
in connection with the contemplated transfer of any Loan or Commitment or
participation therein or as required or requested by any governmental agency
or representative thereof or pursuant to legal process or to such Bank's
attorneys, affiliates or independent auditors; PROVIDED that, unless
specifically prohibited by applicable law or court order, each Bank shall
notify Holdings of any request by any governmental agency or representative
thereof (other than any such request in connection with an examination of the
financial condition of such Bank by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information;
and PROVIDED FURTHER, that in no event shall any Bank be obligated or
required to return any materials furnished by Holdings or any of its
Subsidiaries, PROVIDED that in the case of disclosure to any prospective
transferee or participant, such Person executes an agreement with such Bank
containing provisions substantially the same as to those contained in this
Section 12.16.
-85-
<PAGE>
(b) Each Credit Party hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related
to Holdings or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of Holdings or
any of its Subsidiaries), PROVIDED such Persons shall be subject to the
provisions of this Section 12.16 to the same extent as such Bank.
12.17 REGISTRY. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 12.17, to maintain a register (the "Register") on which it will
record the Commitments from time to time of each of the Banks, the Loans
(including, with respect to each Competitive Bid Loan, the maturity and
interest rates applicable thereto) made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank.
Failure to make any such recordation, or any error in such recordation shall
not affect the Borrower's obligations in respect of such Loans. With respect
to any Bank, the transfer of the Commitments of such Bank and the rights to
the principal of, and interest on, any Loan made pursuant to such Commitments
shall not be effective until such transfer is recorded on the Register
maintained by the Administrative Agent with respect to ownership of such
Commitments and Loans and prior to such recordation all amounts owing to the
transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of
any Commitments and Loans shall be recorded by the Administrative Agent on
the Register only upon the acceptance by the Administrative Agent of a
properly executed and delivered Assignment and Assumption Agreement pursuant
to Section 12.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the Administrative Agent for acceptance and
registration of assignment or transfer of all or part of a Loan, or as soon
thereafter as practicable, the assigning or transferor Bank shall surrender
the Note evidencing such Loan, and thereupon one or more new Notes in the
same aggregate principal amount shall be issued to the assigning or
transferor Bank and/or the new Bank. The Borrower agrees to indemnify the
Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this
Section 12.17.
12.18 ADDITION OF NEW BANKS; CONVERSION OF EXISTING
LOANS OF CONTINUING BANKS; TERMINATION OF COMMITMENTS OF NON-CONTINUING
BANKS. (a) On and as of the occurrence of the Restatement Effective Date in
accordance with Section 12.10, each New Bank shall become a "Bank" under, and
for all purposes of, this Agreement and the other Credit Documents.
(b) The parties hereto acknowledge that each Existing
Bank has been offered the opportunity to participate in this Agreement, after
the occurrence of the Restatement Effective Date, as a Continuing Bank
hereunder, but that no Existing Bank is obligated to be a Continuing Bank.
By their execution and delivery hereof, Holdings, NWA, the Borrower and the
Required Banks (determined immediately before the occurrence of the
Restatement Effective Date) consent to the voluntary repayment by the
Borrower of all outstanding Existing Loans and other Obligations owing to
each Existing Bank which has not elected to become a Continuing Bank (each
such Bank, a "Non-Continuing Bank") and to the voluntary termination by the
Borrower of
-86-
<PAGE>
the Revolving Loan Commitment (under, and as defined in, the Existing Credit
Agreement) of each Non-Continuing Bank, in each case to be effective on, and
contemporaneously with the occurrence of, the Restatement Effective Date, in
each case in accordance with the provisions of Section 12.18(c).
(c) Notwithstanding anything to the contrary contained
in the Existing Credit Agreement or any Credit Document, the Borrower and
each of the Banks hereby agrees that on the Restatement Effective Date, (i)
each Bank with a Commitment as set forth on Schedule I (after giving effect
to the Restatement Effective Date) shall make or maintain (including by way
of conversion) that principal amount of Term Loans, Basic Revolving Loans
and/or Supplemental Revolving Loans to the Borrower as is required by Section
1.01, provided that if the Existing Loans of any Continuing Bank outstanding
on the Restatement Effective Date (immediately before giving effect thereto)
exceed the aggregate principal amount of Loans required to be made available
by such Bank on such date (after giving effect to the Restatement Effective
Date), then Existing Loans of such Continuing Bank in an amount equal to such
excess shall be repaid on the Restatement Effective Date to such Continuing
Bank and (ii) in the case of each Non-Continuing Bank, all of such
Non-Continuing Bank's Existing Loans outstanding on the Restatement Effective
Date shall be repaid in full on such date, together with interest thereon and
all accrued Fees (under, and as defined in, the Existing Credit Agreement)
and any other amounts owing to such Non-Continuing Bank, and the Revolving
Loan Commitment (under, and as defined in, the Existing Credit Agreement) of
such Non-Continuing Bank, if any, shall be terminated, effective upon the
occurrence of the Restatement Effective Date. Notwithstanding anything to the
contrary contained in the Existing Credit Agreement, this Agreement or any
other Credit Document, the parties hereto hereby consent to the repayments
and reductions required above, and agree that in the event that any Existing
Bank shall fail to execute a counterpart of this Agreement prior to the
occurrence of the Restatement Effective Date, such Existing Bank shall be
deemed to be a Non-Continuing Bank and, concurrently with the occurrence of
the Restatement Effective Date, the Revolving Loan Commitment (under, and as
defined in, the Existing Credit Agreement) of such Existing Bank, if any,
shall be terminated, all Existing Loans of such Existing Bank outstanding on
the Restatement Effective Date shall be repaid in full, together with
interest thereon and all accrued Fees (under, and as defined in, the Existing
Credit Agreement) and any other amounts owing to such Existing Bank, and
concurrently with the occurrence of the Restatement Effective Date, such
Existing Bank shall no longer constitute a "Bank" under this Agreement and
the other Credit Documents, provided that all indemnities of the Credit
Parties under the Existing Credit Agreement and the other Credit Documents
(as in effect prior to the Restatement Effective Date) for the benefit of
such Existing Bank shall survive in accordance with the terms thereof.
SECTION 13. GUARANTY.
13.01 THE GUARANTY. In order to induce the Banks to
enter into this Agreement and to extend credit hereunder and in recognition
of the direct benefits to be received by the Guarantors from the proceeds of
the Loans and the issuance of the Letters of Credit, each Guarantor hereby
jointly and severally agrees with the Agents and the Banks as follows: each
Guarantor hereby jointly and severally, unconditionally and irrevocably
guarantees as primary
-87-
<PAGE>
obligor and not merely as surety the full and prompt payment when due,
whether upon maturity, by acceleration or otherwise, of any and all
indebtedness of the Borrower to each of the Banks and each of the Agents. If
any or all of the indebtedness of the Borrower to the Banks or the Agents
becomes due and payable hereunder, each Guarantor unconditionally promises on
a joint and several basis to pay such indebtedness to the Banks or the
Agents, as the case may be, or order, on demand, together with any and all
expenses which may be incurred by the Agents or the Banks in collecting any
of the indebtedness. The word "indebtedness" is used in this Section 13 in
its most comprehensive sense and includes any and all advances, debts,
obligations and liabilities of the Borrower arising in connection with this
Agreement and any other Credit Document, in each case, heretofore, now, or
hereafter made, incurred or created, whether voluntarily or involuntarily,
absolute or contingent, liquidated or unliquidated, determined or
undetermined, whether or not such indebtedness is from time to time reduced,
or extinguished and thereafter increased or incurred, whether the Borrower
may be liable individually or jointly with others, whether or not recovery
upon such indebtedness may be or hereafter become barred by any statute of
limitations, and whether or not such indebtedness may be or hereafter become
otherwise unenforceable.
13.02 BANKRUPTCY. Additionally, each Guarantor jointly
and severally, unconditionally and irrevocably guarantees the payment of any
and all indebtedness of the Borrower to each of the Banks and each of the
Agents whether or not due or payable by the Borrower upon the occurrence in
respect of the Borrower of any of the events specified in Section 9.05, and
unconditionally promises to pay such indebtedness to each of the Banks and
each of the Agents, or order, on demand, in lawful money of the United States.
13.03 NATURE OF LIABILITY. The liability of each
Guarantor hereunder is exclusive and independent of any security for or other
guaranty of the indebtedness of the Borrower whether executed by each
Guarantor, any other guarantor or by any other party, and the liability of
each Guarantor hereunder shall not be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party,
or (b) any other continuing or other guaranty, undertaking or maximum
liability of a guarantor or of any other party as to the indebtedness of the
Borrower, or (c) any payment on or in reduction of any such other guaranty or
undertaking, or (d) any dissolution, termination or increase, decrease or
change in personnel by the Borrower, or (e) any payment made to the Agents or
the Banks on the indebtedness which such Agents or such Banks repay the
Borrower pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each Guarantor
waives any right to the deferral or modification of its obligations hereunder
by reason of any such proceeding.
13.04 INDEPENDENT OBLIGATION. The obligations of each
Guarantor hereunder are independent of the obligations of any other guarantor
or the Borrower, and a separate action or actions may be brought and
prosecuted against each Guarantor whether or not action is brought against
any other guarantor or the Borrower and whether or not any other guarantor or
the Borrower be joined in any such action or actions. Each Guarantor waives,
to the fullest extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof.
Any payment by the Borrower or other circumstance which operates to toll
-88-
<PAGE>
any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to each Guarantor.
13.05 AUTHORIZATION. Each Guarantor authorizes the
Agents and the Banks without notice or demand (except as shall be required by
applicable statute and which cannot be waived), and without affecting or
impairing its liability hereunder, from time to time to (a) renew,
compromise, extend, increase, accelerate or otherwise change the time for
payment of, or otherwise change the terms of, the indebtedness or any part
thereof in accordance with this Agreement, including any increase or decrease
of the rate of interest thereon, (b) take and hold security from any
guarantor or any other party for the payment of this guaranty or the
indebtedness and exchange, enforce, waive and release any such security, (c)
apply such security and direct the order or manner of sale thereof as the
Agents and the Banks in their discretion may determine and (d) release or
substitute any one or more endorsers, guarantors, the Borrower or other
obligors.
13.06 RELIANCE. It is not necessary for the Agents or
the Banks to inquire into the capacity or powers of the Borrower or its
Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
13.07 SUBORDINATION. Any indebtedness of the Borrower
now or hereafter held by either Guarantor is hereby subordinated to the
indebtedness of the Borrower to the Agents and the Banks; and such
indebtedness of the Borrower to such Guarantor, if any Agent, after an Event
of Default has occurred and is continuing, so requests, shall be collected,
enforced and received by such Guarantor as trustee for the Banks and be paid
over to the Banks and the Agents on account of the indebtedness of the
Borrower to the Banks and the Agents, but without affecting or impairing in
any manner the liability of such Guarantor under the other provisions of this
Guaranty. Prior to the transfer by either Guarantor of any note or
negotiable instrument evidencing any indebtedness of the Borrower to such
Guarantor, such Guarantor shall mark such note or negotiable instrument with
a legend that the same is subject to this subordination.
13.08 WAIVER. (a) Each Guarantor waives any right
(except as shall be required by applicable statute and which cannot be
waived) to require the Agents or the Banks to (a) proceed against the
Borrower, any other guarantor or any other party, (b) proceed against or
exhaust any security held from the Borrower, any other guarantor or any other
party or (c) pursue any other remedy in the Agents' or the Banks' power
whatsoever. Each Guarantor waives any defense based on or arising out of any
defense of the Borrower, any other guarantor or any other party other than
payment in full of the indebtedness, including, without limitation, any
defense based on or arising out of the disability of the Borrower, any other
guarantor or any other party, or the unenforceability of the indebtedness or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower other than payment in full of the indebtedness.
The Agents and the Banks may, at their election, foreclose on any security
held by the Agents or the Banks by one or more judicial or nonjudicial sales
(to the extent such sale is permitted by applicable law), or exercise any
other right or remedy the Agents and the Banks may have against the Borrower
or any other party, or any security, without affecting or impairing in any
-89-
<PAGE>
way the liability of each Guarantor hereunder except to the extent the
indebtedness has been paid. Each Guarantor waives any defense arising out of
any such election by the Agents and the Banks, even though such election
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of such Guarantor against the Borrower or any other
party or any security. Until all indebtedness of the Borrower to the Banks
and to the Agents shall have been paid in full, each Guarantor agrees that it
will not exercise any right of subrogation, and waives any right to enforce
any remedy which the Agents and the Banks now have or may hereafter have
against the Borrower, and waives any benefit of, and any right to participate
in, any security now or hereafter held by the Agents and the Banks.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing upon
the risk of nonpayment of the indebtedness and the nature, scope and extent
of the risks which each Guarantor assumes and incurs hereunder, and agrees
that the Agents and the Banks shall have no duty to advise either Guarantor
of information known to them regarding such circumstances or risks.
13.09 LIMITATION ON ENFORCEMENT. The Banks agree that
this Guaranty may be enforced on their behalf only by the action of an Agent
acting upon the instructions of the Required Banks and that no Bank shall
have any right individually to seek to enforce or to enforce this Guaranty,
it being understood and agreed that such rights and remedies may be exercised
by each Agent for the benefit of the Banks upon the terms of this Agreement.
ENDNOTES
1 Each New Bank to be designated by the use of an asterisk.
-90-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date
first above written.
Address:
If by mail: NORTHWEST AIRLINES CORPORATION
5101 Northwest Drive
St. Paul, MN 55111
By /s/ Joseph Francht
If by courier: Title: Senior Vice President-
2700 Lone Oak Parkway Finance and Treasurer
Eagan, MN 55121
Tel: (612) 727-4883
Fax: (612) 726-0665 NWA INC.
Attn: Joseph Francht,
Senior Vice President
Finance and Treasurer By /s/ Joseph Francht
Title: Senior Vice President-
Finance and Treasurer
NORTHWEST AIRLINES, INC.
By /s/ Joseph Francht
Title: Senior Vice President-
Finance and Treasurer
-91-
<PAGE>
ABN AMRO BANK N.V., CHICAGO BRANCH,
Individually and as Compliance
Agent
By: /s/ John E. Lewis
---------------------------------
Title: Senior Vice President
By: /s/ John M. Ellenwood
---------------------------------
Title: Group Vice President
BANKERS TRUST COMPANY, Individually and
as Administrative Agent
By: /s/ Robert R. Telesca
---------------------------------
Title: Assistant Vice President
CHASE SECURITIES INC, as
Syndication Agent
By: /s/ Mathis H. Shinnick
---------------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK,
Individually and as Administrative
Agent
By: /s/ Richard C. Smith
---------------------------------
Title:
-92-
<PAGE>
CITIBANK, N.A., as Documentation Agent
By: /s/ John S. King
---------------------------------
Title: Vice President
CITICROP USA, INC.
By: /s/ John S. King
---------------------------------
Title: Vice President
NATIONAL WESTMINSTER BANK PLC, NEW YORK
BRANCH, Individually and as an
Agent
By: /s/ Angela Bozorgmir
---------------------------------
Title: Vice President
NATIONAL WESTMINISTER BANK PLC, NASSAU
BRANCH, Individually and as an
Agent
By: /s/ Angela Bozorgmir
---------------------------------
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION,
Individually and as an Agent
By: /s/ Mark R. Olmon
---------------------------------
Title: Vice President
-93-
<PAGE>
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCATION, A NATIONAL BANKING
ASSOCIATION
By: /s/ Craig Munro
---------------------------------
Title: Managing Director
CIBC INC.
By: /s/ Ihor Zaluckyj
---------------------------------
Title: Executive Director
CIBC Oppenheimer Corp.,
as agent
BANK OF TOKYO-MITSUBISHI, LTD, CHICAGO
BRANCH
By: /s/ Hajime Watanabe
---------------------------------
Title: Deputy General Manager
BANQUE NATIONALE DE PARIS
By: /s/ Jo Ellen Bender
---------------------------------
Title: Vice President and Manager
CHANG HWA COMMERCIAL BANK, LTD., NEW
YORK BRANCH
By: /s/ Wan-Tu Yeh
---------------------------------
Title: VP and General Manager
CHRISTIANIA BANK OG KREDITKASSE ASA, NEW
YORK BRANCH
-94-
<PAGE>
By: /s/ Carl-Petter Svendsen
---------------------------------
Title: First Vice President
By: /s/ Hans Chr. Kjelsrud
---------------------------------
Title: First Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Bertrand Cousin
---------------------------------
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ Thomas G. Muoio
---------------------------------
Title: Vice President
By: /s/ James P. Moran
---------------------------------
Title: Director
THE DAI-ICHI KANGYO BANK, LTD., CHICAGO
BRANCH
By: /s/ Takao Teramura
---------------------------------
Title: Vice President
-95-
<PAGE>
THE FUJI BANK, LIMITED
By: /s/ T. Takahashi
---------------------------------
Title: General Manager
THE MITSUBISHI TRUST AND BANKING
CORPORATION, NEW YORK BRANCH
By: /s/ Scott J. Paige
---------------------------------
Title: Senior Vice President
ROYAL BANK OF CANADA
By: /s/ Brian Bolotin
---------------------------------
Title: Manager
THE SAKURA BANK, LTD.
By: /s/ Yukiharu Sakumoto
---------------------------------
Title: Joint General Manager
THE SANWA BANK, LIMITED
By: /s/ T. Omura
---------------------------------
Title: Assistant General Manager
-96-
<PAGE>
THE SUMITOMO BANK, LIMITED, CHICAGO
BRANCH
By: /s/ John H. Kemper
---------------------------------
Title: Senior Vice President
THE SUMITOMO TRUST AND BANKING CO.,
LTD., LOS ANGELES AGENCY
By: /s/ Eleanor Chan
---------------------------------
Title: Manager and Vice President
CHIAO TUNG BANK CO., LTD. NEW YORK
AGENCY
By: /s/ Kuang-Si Shiu
---------------------------------
Title: SVP and GM
-97-
<PAGE>
SCHEDULE I
COMMITMENTS(1)
<TABLE>
<CAPTION>
Outstanding Supplemental
Outstanding Existing Term Loan Existing Revolving Basic Revolving Loan Revolving Loan
Bank Term Loans Commitment Loans Commitment Commitment
---- -------------------- ------------ ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
ABN AMRO Bank N.V., $7,846,153.85 $11,250,000 $0 $50,625,000 $13,125,000
Chicago Branch
Bankers Trust Company 7,846,153.85 $11,250,000 $0 $50,625,000 $13,125,000
The Chase Manhattan 7,846,153.85 $12,750,000 $0 $57,375,000 $14,875,000
Bank
Citicorp USA, Inc. 7,846,153.85 $11,250,000 $0 $50,625,000 $13,125,000
First Bank National 7,846,153.85 $11,250,000 $0 $50,625,000 $13,125,000
Association
National Westminster 7,846,153.85 $11,250,000 $0 $50,625,000 $13,125,000
Bank PLC
The Sakura Bank, Ltd. 7,384,615.38 $4,500,000 $0 $20,250,000 $5,250,000
Credit Lyonnais, New 6,923,076.92 $9,000,000 $0 $40,500,000 $10,500,000
York Branch
The Fuji Bank, Limited 6,923,076.92 $7,500,000 $0 $33,750,000 $8,750,000
The Mitsubishi Trust 6,923,076.92 $4,500,000 $0 $20,250,000 $5,250,000
and Banking
Corporation, New York
Branch
The Sanwa Bank, 6,923,076.92 $3,750,000 $0 $16,875,000 $4,375,000
Limited
Bank of America 6,461,538.46 $9,000,000 $0 $40,500,000 $10,500,000
National Trust Savings
Association, A
National Banking
Association
The Bank of Tokyo- 6,461,538.46 $4,500,000 $0 $20,250,000 $5,250,000
Mitsubishi, Ltd.,
Chicago Branch
Banque Nationale de 4,615,384.62 $3,750,000 $0 $16,875,000 $4,375,000
Paris
Credit Suisse First 4,615,384.62 $6,750,000 $0 $30,375,000 $7,875,000
Boston
Royal Bank of Canada 4,615,384.62 $9,000,000 $0 $40,500,000 $10,500,000
Chang Hwa Commercial 3,461,538.46 $2,250,000 $0 $10,125,000 $2,625,000
Bank, Ltd., New York
Branch
Christiania Bank og 3,461,538.46 $3,000,000 $0 $13,500,000 $3,500,000
Kreditkasse ASA, New
York Branch
The Dai-Ichi Kangyo 3,461,538.46 $2,250,000 $0 $10,125,000 $2,625,000
Bank, Ltd., Chicago
Branch
<PAGE>
SCHEDULE I
Page 2
<CAPTION>
Outstanding Supplemental
Outstanding Existing Term Loan Existing Revolving Basic Revolving Loan Revolving Loan
Bank Term Loans Commitment Loans Commitment Commitment
---- -------------------- ------------ ------------------ -------------------- --------------
<S> <C> <C> <C> <C> <C>
The Sumitomo Bank,
Limited, Chicago 3,461,538.46 $2,250,000 $0 $10,125,000 $2,625,000
Branch
CIBC Inc,* $0 $3,750,000 $0 $16,875,000 $4,375,000
Chiao Tung Bank Co., $0 $1,500,000 $0 $6,750,000 $1,750,000
Ltd., New York Agency*
Sumitomo Trust and $0 $3,750,000 $0 $16,875,000 $4,375,000
Banking Co., Ltd.,
Los Angeles Agency*
$150,000,000.00 $0 $675,000,000.00 $175,000,000.00
--------------- -- --------------- ---------------
--------------- -- --------------- ---------------
</TABLE>
_________________ *
*Denotes new bank
-2-
<PAGE>
SCHEDULE II
BANK ADDRESSES
ABN AMRO N.V., Chicago Branch 135 South LaSalle Street
Suite 760
Chicago, Illinois 60603
Attn: Lukes Van Der Hoef
Tel: (312) 904-5221
Fax: (312) 606-8428
Copy To:
135 South LaSalle Street
Chicago, Illinois 60603
Attn: John Lewis
Tel: (312) 904-2946
Fax: (312) 606-8428
Bank of America National Trust & 231 South LaSalle Street
Savings Association, A National Chicago, IL 60697
Banking Association Attn: Elizabeth Nolan
Tel: (312) 828-1292
Fax: (312) 828-1997
555 South Flower Street, 11th Floor
Los Angeles, CA 90071
Attn: Carolyn Simmons
Tel: (213) 228-2832
Fax: (213) 228-2756
Bankers Trust Company 233 South Wacker Drive,
Suite 8400
Chicago, Illinois 60606
Attn: Jonathan O. Salkin
Tel: (312) 993-8102
Fax: (312) 993-8218
233 South Wacker Drive,
Suite 8400
Chicago, Illinois 60606
Attn: Linda Stahulak
Tel: (312) 993-8109
Fax: (312) 993-8114
Banque Nationale de Paris 209 South LaSalle Street
Chicago, Illinois 60604
<PAGE>
SCHEDULE II
Page 2
Attn: Jo Ellen Bender
Tel: (312) 977-2225
Fax: (312) 977-1380
209 South LaSalle Street,
Suite 2400
Attn: Chris Howatt
Chicago, IL 60604
Tel: (312) 977-1383
Fax: (312) 977-1380
Chang Hwa Commercial Bank, Ltd. One World Trade Center
New York Branch Suite 3211
New York, New York 10048
Attn: Teddy Mou
Tel: (212) 390-7064
Fax: (212) 390-0120
The Chase Manhattan Bank 270 Park Avenue
New York, New York 10017
Attn: Matthew Massie
Tel: (212) 270-5432
Fax: (212) 270-5100
Copy To:
270 Park Avenue
New York, New York 10017
Attn: Mathis Shinnick
Tel: (212) 270-0474
Fax: (212) 270-9647
Chiao Tung Bank Co. One World Financial Center
200 Liberty Street
New York, NY 10281
Attn: Carbin Lin
Tel: (212) 285-2666
Fax: (212) 285-2922
Christiania Bank OG Kreditkasse, ASA 11 West 42nd Street
New York Branck 7th Floor
New York, New York 10036
Attn: Hans Kjelsrud/Knut Hatleskog
Tel: (212) 827-4800
Fax (212) 827-4888
-2-
<PAGE>
SCHEDULE II
Page 3
CIBC Inc. 425 Lexington Avenue
New York, NY 10017
Attn: Ihor Zaluckjy
Tel: (212) 856-3904
Fax: (212) 856-3991
425 Lexington Avenue
New York, NY 10017
Attn: Luca Bettini
Tel: (212) 856-6747
Fax: (212) 885-4940
Copy to:
2 Paces West
2727 Paces Ferry Road, Suite 120
Atlanta, GA 30339
Attn: Clare Coyne
Citicorp USA, Inc. 399 Park Avenue
New York, New York 10043
Attn: John King
Tel: (212) 559-6413
Fax: (212) 793-3734
399 Park Avenue
New York, New York 10043
Attn: Tom Boyle
Tel: (212) 559-6149
Fax: (212) 793-6303
Copy To:
399 Park Avenue
New York, NY 10043
Attn: Portfolio Management
Tel: (212) 559-6413
Fax: (212) 793-3734
Credit Lyonnais 1301 Avenue of the Americas
New York Branch New York, New York 10019
Attn: Bertrand Cousin
Tel: (212) 261-7363
Fax: (212) 261-7368
-3-
<PAGE>
SCHEDULE II
Page 4
1301 Avenue of the Americas
New York, New York 10019-6002
Attn: Michael Vitiello
Tel: (212) 261-7051
Fax: (212) 459-3187
Credit Suisse First Boston 11 Madison Avenue,
19th Floor
New York, New York 10010
Attn: Robert Finney
Tel: (212) 325-9038
Fax: (212) 325-8319
The Dai-Ichi Kangyo Bank, Ltd., 10 South Wacker Drive
Chicao Branch 26th Floor
Chicago, Illinois 60606
Attn: James Kearney
Tel: (312) 715-6368
Fax: (312) 876-2011
10 South Wacker Drive
26th Floor
Chicago, Illinois 60606
Attn: Yoko Eide
Tel: (312) 715-6358
Fax: (312) 876-2011
First Bank National Association 601 Second South Avenue
Minneapolis, Minnesota 55402-4302
Attn: Mark Olman
Tel: (612) 973-1085
Fax: (612) 973-0825
The Fuji Bank, Limited 225 West Wacker Drive
Suite 2000
Chicago, Illionis 60606
Attn: James Fayen
Tel: (312) 621-0397
Fax: (312) 621-539
Copy To:
225 West Wacker Drive
Suite 2000
-4-
<PAGE>
SCHEDULE II
Page 5
Chicago, Illionois 60606
Attn: Lee Prewitt
Tel: (312) 419-3664
Fax: (312) 621-0539
The Bank of Tokyo-Mitsubishi, Ltd. 227 West Monroe Street
Chicago Branch Suite 2300
Chicago, Illinois 60606
Attn: Michael W. Kempel
Tel: (312) 696-4682
Fax: (312) 696-4535/4533
Copy To:
227 West Monroe Street
Suite 2300
Chicago, Illinois 60606
Attn: Gus C. Browne II
Tel: (312) 696-4670
Fax: (312) 696-4535/4533
The Mitsubishi Trust and Banking 520 Madison Avenue
Corporation, New York Branch New York, New York 10022
Attn: Scott J. Paige
Tel: (212) 891-8216
Fax: (212) 755-2349
Copy To:
520 Madison Avenue
New York, New York 10022
Attn: Hisakata Isomura
Tel: (212) 891-8423
Fax: (212) 755-2349
National Westminister Bank PLC 175 Water Street
New York, New York 10038-4924
Attn: Stephen Sayre
Tel: (212) 602-5521
Fax: (212) 602-4354
Copy To:
175 Water Street
New York, New York 10038-4924
-5-
<PAGE>
SCHEDULE II
Page 6
Attn: Angela Bozorgmir
Tel: (212) 602-5491
Fax: (212) 602-4500
Royal Bank of Canada Grand Cayman (North America
No. 1) Branch
c/o New York Branch
Financial Square, 23rd Floor
32 Old Slip
New York, New York 10005-3531
Attn: Manager, Credit Admin.
Tel: (212) 428-6311
Fax: (212) 428-2372
For Competitive Bid Loan Matters:
Financial Square, 23rd Floor
32 Old Slip
New York, New York 10005-3531
Attn: Irene Wanamaker
Tel: (212) 428-6308
Fax: (212) 428-2310
Copy To:
Financial Square, 24th Floor
32 Old Slip
New York, New York 10005-3531
Attn: D.G. Calancie
Tel: (212) 428-6445
Fax: (212) 428-6459
The Sakura Bank, Ltd. 227 West Monroe Street
Chicago, Illinois 60606
Attn: David Wuertz
Tel: (312) 580-3268
Fax: (312) 332-5345
Copy To:
227 West Monroe Street
Chicago, Illinois 60606
Attn: Takao Okada
Tel: (312) 580-3260
Fax: (312) 332-5345
-6-
<PAGE>
SCHEDULE II
Page 7
The Sanwa Bank, Limited 10 South Wacker Drive
Suite 3100
Chicago, Illinois 60606
Attn: Tom Hisey
Tel: (312) 368-3080
Fax: (312) 346-6677
10 South Wacker Drive
Suite 3100
Chicago, Illinois 60606
Attn: Gordon Holtby
Tel: (312) 993-4325
Fax: (312) 346-6677
The Sumitomo Bank, Limited, Chicago 233 South Wacker Drive
Branch
Suite 4800
Chicago, Illinois 60606
Attn: Hitoshi Minami
Tel: (312) 876-7799
Fax: (312) 876-6436
Copy To:
233 South Wacker Drive
Suite 4800
Chicago, Illinois 60606
Attn: Gary Rabishaw
Tel: (312) 879-7697
Fax: (312) 876-6436
The Sumitomo Trust and Banking Co., 333 South Grand Avenue
Ltd., Los Angeles Agency Suite 5300
Los Angeles, CA 90071
Attn: Bettina Wen
Tel: (213) 229-2123
Fax: (213) 613-1089
-7-
<PAGE>
SCHEDULE III
EXISTING LETTERS OF CREDIT
[See attached.]
<PAGE>
SCHEDULE IV
SUBSIDIARIES
(wholly-owned unless otherwise specified)
Northwest Airlines Corporation (Delaware corporation)
NWA, Inc. (Delaware corporation)
Northwest Airlines, Inc. (Minnesota corporation)
NWA Fuel Services Corporation (Texas corporation)
Montana Enterprises, Inc. (Montana corporation)
Tomisato Shoji Hotel Business (Japanese corporation)
Republic Airlines, Inc. (Delaware corporation)*
Compass 315 LTD, Holding Company (U.K. corporation)
Tullion Limited (U.K. corporation)
Win-Win L.P. (Delaware limited partnership)**
NWA Worldclub, Inc. (Wisconsin corporation)
NWA Equity Holdings, Inc. (Texas corporation)
Wings Finance Company (Japanese corporation)
World Capital Management, Inc. (Minnesota corporation)
Northwest Aircraft Inc. (Delaware corporation)
Aircraft Foreign Sales, Inc. (U.S. Virgin Islands
corporation)
Northwest Aerospace Training Corporation (Delaware corporation)
MLT Inc. (Minnesota corporation)
NWA Retail Sales Inc. (Minnesota corporation)
NWA Aircraft Finance, Inc. (Delaware corporation)
Northwest Capital Funding Corp. (Delaware corporation)
Cardinal Insurance Company (Cayman) LTD. (Cayman Islands
corporation)
Northwest PARS Holdings, Inc. (Delaware corporation)
Northwest PARS, Inc. (Delaware corporation)
NWA Leasing Inc. (Minnesota corporation)
Express Airlines I, Inc.
Phoenix Airline Services, Inc.
* Inactive
** Northwest Airlines, Inc. is 99% limited partner.
<PAGE>
SCHEDULE V
EXISTING INDEBTEDNESS
[See Attached]
<PAGE>
POOL ASSETS
[See attached.]
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of January
23, 1998, among NORTHWEST AIRLINES CORPORATION, a Delaware corporation
("Holdings"), NWA INC., a Delaware corporation ("NWA"), NORTHWEST AIRLINES,
INC., a Minnesota corporation (the "Borrower"), the lenders from time to time
party thereto (each a "Bank" and, collectively, the "Banks"), ABN AMRO BANK
N.V., as compliance agent (the "Compliance Agent"), BANKERS TRUST COMPANY, as
administrative agent (the "Administrative Agent"), CHASE SECURITIES INC., as
syndication agent (the "Syndication Agent"), CITIBANK, N.A., as documentation
agent (the "Documentation Agent"), and NATIONAL WESTMINSTER BANK PLC and FIRST
BANK NATIONAL ASSOCIATION, as Agents. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, Holdings, NWA, the Borrower, the Compliance Agent, the
Administrative Agent, the Syndication Agent, the Documentation Agent, the other
Agents and the Banks are parties to a Credit Agreement, dated as of December 15,
1995 and amended and restated as of October 16, 1996 and further amended and
restated as of December 29, 1997 (as so amended and restated, the "Credit
Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as herein
provided;
NOW, THEREFORE, it is agreed:
1. Section 8.06 of the Credit Agreement is hereby amended by (1) deleting
the word "and" at the end of clause (l); (2) relettering clause (m) as clause
(o); and (3) inserting the following new clauses (m) and (n):
"(m) unsecured Indebtedness of Holdings or any of its Subsidiaries in
an aggregate original principal amount not in excess of $800,000,000
incurred to finance any redemption, retirement, repurchase or acquisition
pursuant to Section 8.05(g) (and in any event within 90 days after the
redemption, retirement, repurchase or acquisition being
<PAGE>
-2-
financed) and any refinancing thereof that does not increase the
outstanding principal amount thereof;
(n) unsecured Indebtedness of Holdings or any of its Subsidiaries in
an aggregate original principal amount not in excess of $250,000,000
incurred to finance any loans, advances or dividends of the nature referred
to in the proviso to the definition of the term "Distribution" herein (and
in any event within 90 days after the loan, advance or dividend being
financed) and any refinancing thereof that does not increase the
outstanding principal amount thereof; and"
2. The definitions of "Credit Party", "Distribution", "ERISA Affiliate",
"Guarantor" and "Subsidiary" in Section 10 of the Credit Agreement are hereby
amended in their entireties to read as set forth below:
" 'Credit Party' shall mean Holdings, NWA and the Borrower, and, in
the event Newco owns all of the outstanding shares of capital stock of
Holdings, Newco, except that Newco shall not be deemed to be a Credit Party
for purposes of Sections 6.09, 7.07 or 8.11 or for purposes of the
definitions of "Pension Plan" and "Termination Event" herein."
" 'Distribution' shall have the meaning provided in Section 8.05,
PROVIDED that loans, advances or dividends by Holdings or any of its
Subsidiaries in an aggregate amount not in excess of $400,000,000 to Newco
the proceeds of which are used to acquire, directly or indirectly, shares
of capital stock of Continental shall be deemed not to be Distributions for
all purposes of this Agreement."
" 'ERISA Affiliate' shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings or any of its Subsidiaries would be
deemed to be a "single employer" within the meaning of Section 414(b), (c),
(m), or (o) of the Code, PROVIDED that in no event shall Air Partners or
any of its Subsidiaries or Continental or any of its Subsidiaries be deemed
to be ERISA Affiliates for any purpose."
" 'Guarantor' shall mean each of Holdings and NWA (and, in the event
Newco owns all of the outstanding shares of capital stock of Holdings,
Newco)."
" 'Subsidiary' shall mean, as to any Person, (i) any corporation more
than 50% of whose stock having by the terms
<PAGE>
-3-
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time owned by such
Person and/or one or more Subsidiaries of such Person and (ii) any
partnership, limited liability company, association, joint venture or other
entity in which such Person and/or one or more Subsidiaries of such Person
has more than a 50% equity interest at the time; PROVIDED HOWEVER that
notwithstanding anything to the contrary, (x) LAX Two and its Subsidiaries
and (y) Air Partners and Continental and their Subsidiaries shall be deemed
not to be Subsidiaries of Holdings or any of its Subsidiaries for all
purposes of this Agreement (including, without limitation, the calculation
of the financial covenants and the definitions relating thereto) and the
other Credit Documents so long as, in the case of clause (y), Newco does
not own, directly or indirectly, more than 50% of the equity interest
(i.e., the economic interest rather than the voting interest) in
Continental."
3. Definitions of "Air Partners", "Continental" and "Newco" reading as
set forth below are hereby added to Section 10 of the Credit Agreement in
appropriate alphabetical sequence:
" 'Air Partners' shall mean Air Partners, L.P., a Texas limited
partnership."
" 'Continental' shall mean Continental Airlines, Inc., a Delaware
corporation."
" 'Newco' shall mean a holding company that owns all of the issued and
outstanding shares of capital stock of Holdings."
4. In the event that Newco (as defined in the Credit Agreement as amended
by this Amendment) owns all of the outstanding shares of capital stock of
Holdings,
(i) all references to "Holdings" in Sections 4.02(c), 4.02(d), 6
(excluding, however, Sections 6.05, 6.09 and 6.10), 7 (excluding, however,
Sections 7.01(a) and 7.01(b)), 8 (excluding, however, Section 8.05(e)), 9,
10 (excluding, however, the definitions of "Credit Party", "Distribution",
"Guarantor", "Holdings" and "Newco" and clause (ii) of the definition of
"Identified Indebtedness"), 11, and 12 of the Credit Agreement (as amended
pursuant to this Amendment) shall be deemed to refer to "Newco"; PROVIDED,
HOWEVER, that
<PAGE>
-4-
the references to "Holdings" in Sections 8.05(b) (second occurrence) and
8.05(g) of the Credit Agreement (as amended pursuant to this Amendment),
together with the reference to "Holdings" in clause (b) of the proviso to
the definition of "Indebtedness" in Section 10 of the Credit Agreement
(as amended pursuant to this Amendment), shall be deemed to refer to
"Newco and/or Holdings" and all references to "either Guarantor" in the
Credit Agreement shall be deemed to refer to "any Guarantor";
(ii) Sections 7.01(a) and 7.01(b) of the Credit Agreement shall be
amended in their entireties to read as set forth below:
" (a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within 120 days after the close of each fiscal year of
Newco, (i) a copy of the SEC Form 10-K filed by Newco with the SEC for
such fiscal year, or, if no such Form 10-K was so filed by Newco for
such fiscal year, the consolidated balance sheet of Newco and its
subsidiaries and whether or not such Form 10-K was filed, of each of
Holdings and its Subsidiaries and the Borrower and its Subsidiaries,
as at the end of such fiscal year and the related consolidated
statements of operations, of common stockholders' equity (deficit) (in
the case of Newco and its subsidiaries) and of cash flows for such
fiscal year, setting forth comparative consolidated figures as of the
end of and for the preceding fiscal year, and examined by Ernst &
Young (or (x) any other "Big Six" or "Big Four" accounting firm or (y)
any other firm of independent public accountants of recognized
standing selected by Newco, Holdings or the Borrower, as the case may
be, and reasonably acceptable to the Required Banks) whose opinion
shall not be qualified as to the scope of audit or as to the status of
Newco, Holdings or the Borrower as a going concern, and (ii) a
certificate of such accounting firm stating that in the course of its
regular audit of the business of Newco, Holdings and the Borrower,
which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge of
any Default or Event of Default which has occurred and is continuing
or, if in the opinion of such accounting firm such a Default or Event
of Default has occurred and is continuing, a statement as to the
nature thereof.
<PAGE>
-5-
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in
any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year of Newco, a copy of
the SEC Form 10-Q filed by Newco with the SEC for such quarterly
period, or, if no such Form 10-Q was so filed by Newco with respect to
any such quarterly period, the consolidated balance sheet of Newco and
its subsidiaries, and whether or not such Form 10-Q was filed, of each
of Holdings and its Subsidiaries and the Borrower and its
Subsidiaries, as at the end of such quarterly period and the related
consolidated statements of operations for such quarterly period and
for the elapsed portion of the fiscal year ended with the last day of
such quarterly period and in each case setting forth comparative
consolidated figures as of the end of and for the related periods in
the prior fiscal year, all of which shall be certified by an
Authorized Officer of Newco, Holdings or the Borrower, as the case may
be, subject to changes resulting from audit and normal year-end audit
adjustments."; and
(iii) Holdings shall, within five Business Days after the date on
which Newco first owns all of such capital stock, cause Newco to furnish to
the Documentation Agent (x) counterparts of the Credit Agreement and this
Amendment executed on behalf of Newco (or other appropriate documents
making Newco a party to each thereof), (y) a certificate of the Secretary
or any Assistant Secretary of Newco as to the matters set forth in Section
5A.04(a) of the Credit Agreement with respect to Newco and as to the
incumbency and signatures of the Authorized Officers (as defined in the
Credit Agreement as amended pursuant to this Amendment) of Newco, together
with a letter from CT Corporation System with respect to Newco,
substantially in the form of Exhibit G to the Credit Agreement and (z) an
opinion from Douglas M. Steenland, Esq., Senior Vice President, General
Counsel and Secretary of Newco, which opinion shall be substantially in the
form of Exhibit F-1 to the Credit Agreement (except that references therein
to "Holdings" shall be references to "Newco"); the failure of Holdings to
comply with the foregoing provisions of this Section 4(iii) shall be an
Event of Default under and for all purposes of the Credit Agreement (as
amended pursuant to this Amendment).
5. In order to induce the Compliance Agent, the Administrative Agent, the
Syndication Agent, the Documentation Agent, the Agents and the Banks to enter
into this Amendment, each of Holdings, NWA and the Borrower hereby (i) makes
each of
<PAGE>
-6-
the representations, warranties and agreements contained in the Credit
Agreement (except that any representation or warranty which by its terms is
made as of a specified date shall be required to be true and correct in all
material respects only as of such specified date) on the Amendment Effective
Date (as hereinafter defined), after giving effect to this Amendment and (ii)
represents and warrants that no Default or Event of Default is in existence
on the Amendment Effective Date, after giving effect to this Amendment.
6. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other provision of any other Credit Document.
7. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and each Agent.
8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
9. This Amendment shall become effective as of the date first written
above (the "Amendment Effective Date") on the date when Holdings, NWA, the
Borrower and the Required Banks shall have signed a copy hereof (whether the
same or different copies) and shall have delivered (including by way of
telecopier) the same to the Administrative Agent at the Notice Office.
10. From and after the Amendment Effective Date, all references in the
Credit Agreement and the other Credit Documents to the Credit Agreement shall be
deemed to be references to the Credit Agreement as amended hereby.
<PAGE>
-7-
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
NORTHWEST AIRLINES CORPORATION
By /s/ Joseph E. Francht, Jr.
--------------------------------
Name: Joseph E. Francht, Jr.
Title: Sr. Vice President - Finance &
Treasurer
NWA INC.
By /s/ Joseph E. Francht, Jr.
--------------------------------
Name: Joseph E. Francht, Jr.
Title: Sr. Vice President - Finance &
Treasurer
NORTHWEST AIRLINES, INC.
By /s/ Joseph E. Francht, Jr.
--------------------------------
Name: Joseph E. Francht, Jr.
Title: Sr. Vice President - Finance &
Treasurer
ABN AMRO BANK N.V., CHICAGO BRANCH,
Individually and as Compliance Agent
By /s/ Lukas van der Hoef
--------------------------------
Name: Lukas van der Hoef
Title: Vice President
By /s/ Claudia C. Heldring
--------------------------------
Name: Claudia C. Heldring
Title: Vice President
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By
--------------------------------
Name:
Title:
CHASE SECURITIES INC.,
as Syndication Agent
By /s/ [ILLEGIBLE]
--------------------------------
Name:
Title:
CITIBANK, N.A.,
as Documentation Agent
By /s/ Arthur Deffaa
--------------------------------
Name: Arthur Deffaa
Title: Vice President - Global Aviation
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH,
Individually and as an Agent
By
--------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION,
Individually and as an Agent
By /s/ Mark R. Oluin
--------------------------------
Name: Mark R. Oluin
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION, A NATIONAL
BANKING ASSOCIATION
By /s/ Craig S. Munro
--------------------------------
Name: Craig S. Munro
Title: Managing Director
THE BANK OF TOKYO-MITSUBISHI, LTD
CHICAGO BRANCH
By /s/ Hajime Watanabe
--------------------------------
Name: Hajime Watanabe
Title: Deputy General Manager
BANQUE NATIONALE DE PARIS
By /s/ Arnaud Collin du Bocage
--------------------------------
Name: Arnaud Collin du Bocage
Title: Executive Vice President
and General Manager
CHANG HWA COMMERCIAL BANK, LTD,
NEW YORK BRANCH
By /s/ Wan-Tu Yeh
--------------------------------
Name: Wan-Tu Yeh
Title: VP & General Manager
CHIAO TUNG BANK CO.,
LTD. NEW YORK AGENCY
By /s/ Kuang-Si Shiu
--------------------------------
Name: Kuang-Si Shiu
Title: Senior Vice President &
General Manager
THE CHASE MANHATTAN BANK
By /s/ [ILLEGIBLE]
--------------------------------
Name:
Title:
<PAGE>
CHRISTIANIA BANK OG KREDITKASSE ASA,
NEW YORK BRANCH
By /s/ Hans Chr. Rjeisrud
--------------------------------
Name: Hans Chr. Rjeisrud
Title: First Vice President
By /s/ Martin Lunder
--------------------------------
Name: Martin Lunder
Title: First Vice President
CIBC INC
By /s/ Ihor Zaluckyj
--------------------------------
Name: Ihor Zaluckyj
Title: Executive Director
CIBC Oppenheimer Corp., as Agent
CITICORP USA, INC.
By /s/ Arthur Deffaa
--------------------------------
Name: Arthur Deffaa
Title: Vice President - Global Aviation
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By /s/ Takao Teramura
--------------------------------
Name: Takao Teramura
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Philippe Soustra
--------------------------------
Name: Philippe Soustra
Title: Senior Vice President
<PAGE>
CREDIT SUISSE FIRST BOSTON
By /s/ Robert N. Finney
--------------------------------
Name: Robert N. Finney
Title: Managing Director
By /s/ Thomas G. Muoio
--------------------------------
Name: Thomas G. Muoio
Title: Vice President
THE FUJI BANK, LIMITED
By
--------------------------------
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION, NEW YORK BRANCH
By /s/ Scott J. Paige
--------------------------------
Name: Scott J. Paige
Title: Senior Vice President
ROYAL BANK OF CANADA
By /s/ Brian Bolotin
--------------------------------
Name: Brian Bolotin
Title: Manager
THE SAKURA BANK, LTD.
By
--------------------------------
Name:
Title:
<PAGE>
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By /s/ Gordon R. Holtby
--------------------------------
Name: Gordon R. Holtby
Title: Vice President & Manager
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By /s/ Kenichiro Kobayashi
--------------------------------
Name: Kenichiro Kobayashi
Title: Joint General Manager
THE SUMITOMO TRUST AND BANKING CO.
LTD., LOS ANGELES AGENCY
By /s/ Eleanor Chan
--------------------------------
Name: Eleanor Chan
Title: Manager & Vice President
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH,
Individually and as an Agent
By /s/ Angela Bozorgmir
--------------------------------
Name: Angela Bozorgmir
Title: Vice President
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH,
Individually and as an Agent
By /s/ Angela Bozorgmir
--------------------------------
Name: Angela Bozorgmir
Title: Vice President
<PAGE>
TEMPORARY AMENDMENT
TO CREDIT AGREEMENT
TEMPORARY AMENDMENT TO CREDIT AGREEMENT, dated as of May 12, 1998
(this "Amendment"), by and among NORTHWEST AIRLINES CORPORATION, a Delaware
corporation ("Holdings"), NWA INC., a Delaware corporation ("NWA"), NORTHWEST
AIRLINES, INC., a Minnesota corporation (the "Borrower"), the lenders from
time to time party to the Credit Agreement described below (each a "Bank"
and, collectively, the "Banks"), ABN AMRO BANK N.V., as compliance agent (the
"Compliance Agent"), BANKERS TRUST COMPANY, as administrative agent (the
"Administrative Agent"), CHASE SECURITIES INC., as syndication agent (the
"Syndication Agent"), CITIBANK, N.A., as documentation agent (the
"Documentation Agent"), and NATIONAL WESTMINSTER BANK PLC and U.S. BANK
NATIONAL ASSOCIATION (f/k/a FIRST BANK NATIONAL ASSOCIATION), as Agents. All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H:
WHEREAS, Holdings, NWA, the Borrower, the Compliance Agent, the
Administrative Agent, the Syndication Agent, the Documentation Agent, the
other Agents and the Banks are parties to a Credit Agreement, dated as of
December 15, 1995, as amended and restated as of October 16, 1996, as further
amended and restated as of December 29, 1997 and further amended as of
January 23, 1998 (as amended, modified and/or supplemented through the date
hereof, the "Credit Agreement");
WHEREAS, Holdings, NWA and the Borrower are concurrently herewith
entering into a Credit Agreement, dated as of the date hereof, by and among
Holdings, NWA, the Borrower, the lenders from time to time party thereto and
The Chase Manhattan Bank, as agent (as hereafter amended, modified and/or
supplemented from time to time by any amendment, modification or supplement,
the "New Credit Agreement");
WHEREAS, the parties hereto wish to permanently amend certain
provisions of the Credit Agreement as provided in paragraph 1 hereof; and
WHEREAS, the parties hereto wish to temporarily amend certain
provisions of the Credit Agreement as provided in paragraph 2 hereof, such
amendments (A) to be effective, subject to the proviso contained in paragraph
2(g), from the Temporary Amendment Effective Date (as herein defined) until
the earlier to occur of (x) May 12, 1999 and (y) the first date after the
Temporary Amendment Effective Date on which (i) no "Revolving Loans" and no
"Revolving Notes" (in each case as defined in the New Credit Agreement) are
outstanding, (ii) all "Obligations" (as defined in the New Credit Agreement)
have been repaid in full and (iii) the "Total Revolving Loan Commitment" (as
defined in the New Credit Agreement) has been terminated in full (such
earlier date, as it may be extended in accordance with the following proviso,
the "Temporary Amendment Expiry Date") and (B) to terminate and be of no
further
<PAGE>
force and effect on and as of the Temporary Amendment Expiry Date; provided,
however, if on the earlier of the dates in preceding clauses (x) and (y) a
Default or Event of Default shall have occurred and be continuing, then the
Temporary Amendment Expiry Date shall not occur until such later date on
which no Default or Event of Default shall have occurred and be continuing.
NOW THEREFORE, it is agreed:
1. The Credit Agreement is permanently amended as follows:
(a) Section 6 of the Credit Agreement is hereby amended by
inserting the following new Section 6.14 immediately after Section 6.13
appearing therein:
"6.14 Year 2000 Reprogramming. A project to complete on a timely
basis all the reprogramming required to permit the proper functioning, in and
following the year 2000, of (i) Holdings' or any of its Subsidiaries'
computer systems and (ii) equipment containing embedded microchips (excluding
systems and equipment of third-parties with which Holdings' or any of its
Subsidiaries' systems interface) and the testing of all such systems and
equipment, as so reprogrammed, has been implemented by Holdings and its
Subsidiaries. Neither Holdings nor any of its Subsidiaries believes that the
consequences of the year 2000 will pose significant operational problems for
its computer systems."
(b) Section 7.01 of the Credit Agreement is hereby amended by
inserting the following new clause (j) immediately after clause (i) appearing
therein:
"Prompt notice of any fact, event or circumstance relating to the
consequences of the year 2000 which it or any of its Subsidiaries is or
becomes aware of and that could be reasonably expected to (a) have a material
adverse impact on the implementation or anticipated July 1, 1999 date for
completion of the reprogramming and testing project referred to in Section
6.14 hereof, (b) have a material adverse impact on the proper functioning of
Holdings or any of its Subsidiaries' computer systems or equipment containing
embedded mircrochips on or after the year 2000 or (c) result in a material
adverse effect on the financial conditions or results of operations of
Holdings and its Subsidiaries taken as a whole or of the Borrower and its
Subsidiaries taken as a whole."
2. The Credit Agreement is amended as follows, but in each case
only until the Temporary Amendment Expiry Date:
(a) Section 1.08(a) of the Credit Agreement is hereby amended by
deleting the phrase "at a rate per annum which shall be equal to the Base
Rate" and inserting in lieu thereof the phrase "at a rate per annum which
shall be equal to the sum of 1% plus the Base Rate".
(b) Section 3.03(e) of the Credit Agreement is hereby amended by
deleting the phrase "pursuant to Section 4.02(c) or (d)" and inserting in
lieu thereof the phrase "pursuant to Section 4.02(c), (d) or (e)".
-2-
<PAGE>
(c) Section 4.02(c) of the Credit Agreement is hereby amended by
deleting the phrase "in accordance with the requirements of Sections 4.02(e)
and (f)" appearing therein and inserting in lieu thereof the phrase "in
accordance with the requirements of Sections 4.02(f) and (g)".
(d) Section 4.02(d) of the Credit Agreement is hereby amended by
deleting the phrase "in accordance with the requirements of Sections 4.02(e)
and (f)" appearing therein and inserting in lieu thereof the phrase "in
accordance with the requirements of Sections 4.02(f) and (g)".
(e) Section 4.02 is hereby amended by (i) re-lettering Sections
4.02(e) and (f) as Sections 4.02(f) and (g), respectively, and (ii) inserting
the following new Section 4.02(e):
"(e) In addition to any other mandatory repayments pursuant to
this Section 4.02, upon the occurrence of an Event of Loss with respect to
(i) Aircraft Collateral which the Borrower does not replace in accordance
with the provisions of Section 3.5(a) of the Aircraft Mortgage Agreement
and Section 8.03(II)(i) or (ii) Slot Collateral, an amount equal to the
value (as specified in the Appraisal most recently delivered pursuant to
the terms of this Agreement) of such Aircraft Collateral or Slot
Collateral, as the case may be, which is the subject of the Event of Loss
shall be applied as a mandatory repayment of principal of outstanding Term
Loans and Supplemental Term Loans (such mandatory repayment to be applied
on a pro rata basis among such Tranches based on the then applicable TL
Facility Percentage and STL Facility Percentage) in accordance with the
requirements of Sections 4.02(f) and (g), such repayments of Loans to occur
on the date which is (I) in the case of Aircraft Collateral, the earlier of
(x) the date on which the Borrower determines not to replace such
Collateral and (y) thirty (30) days from the date of the occurrence of such
Event of Loss and (II) in the case of Slot Collateral, the next Business
Day following the date of occurrence of such Event of Loss.".
(f) Section 6.03 of the Credit Agreement is hereby amended by
inserting following the words "(or the obligation to create or impose) any Lien"
appearing in clause (ii) thereof, the words "(except pursuant to the Security
Documents)".
(g) Section 6.05(a) of the Credit Agreement is amended by inserting
the following text immediately prior to the period appearing at the end thereof:
"; PROVIDED, that neither any strike or other labor action with
respect to the Borrower nor the effects thereof shall be deemed
to be a material adverse change in the financial condition or
results of operations of the Borrower or either Guarantor";
PROVIDED, HOWEVER, that the amendment to Section 6.05 (a) contained in this
paragraph 2(g) shall not become effective until such time as the Documentation
Agent shall have received a legal opinion, in form and substance satisfactory to
the Documentation Agent, addressed to each of the
-3-
<PAGE>
Agents and each of the Banks, from Crowe & Dunlevy regarding priority of the
Secured Creditors' security interests in the Aircraft Collateral (subject to
Permitted Liens).
(h) Section 6 of the Credit Agreement is hereby further amended by
inserting the following new Section 6.15 immediately after Section 6.14
appearing therein:
"6.15 SECURITY INTERESTS. (a) The security interests
created in favor of the Collateral Agent under the Security Documents
will at all times from and after the Temporary Amendment Effective
Date constitute, as security for the obligations purported to be
secured thereby, a legal, valid, enforceable and perfected security
interest in and Lien on all of the Collateral referred to therein in
favor of the Collateral Agent for the benefit of the Secured
Creditors, subject to no other Liens, except Permitted Liens.
(b) The Borrower has legal and marketable title to all
Collateral covered by such Security Documents free and clear of all
Liens (except Permitted Liens). The Aircraft Collateral has been duly
certified by the FAA as to type and airworthiness and the Collateral
has been insured by the Borrower in accordance with the terms of the
Security Documents. With respect to each Airframe included as
Collateral, the Collateral shall include a sufficient number of
appropriate Engines to operate each Airframe included in the
Collateral as an Aircraft.
(c) No consents, filings or recordings are required in order to
perfect (or maintain the perfection or priority of) the security
interests purported to be created by any of the Security Documents,
other than such as have been obtained and which remain in full force
and effect and other then periodic UCC continuation filings."
(i) Section 7.01 of the Credit Agreement is hereby amended by (i)
deleting the reference to Section 8.08 appearing in clause (d) thereof and (ii)
deleting the words "Pool Asset" appearing in clause (g) thereof and inserting in
lieu thereof the words "item of Collateral".
(j) Section 7.02 of the Credit Agreement is hereby amended by
inserting after the phrase "visit and inspect any of the properties or assets of
such Credit Party and any of its Subsidiaries" appearing in the second sentence
thereof the phrase "(including, without limitation, the Collateral and any
books, records or logs related thereto)".
(k) Section 7.03 of the Credit Agreement is hereby amended by (i)
deleting the word "or" following the words "at all times be covered by" and
inserting in lieu thereof the word "and", and (ii) inserting the words "to the
extent required by the Security Documents and other insurance" immediately
following the words "maintain in full force and effect insurance" appearing
therein.
(l) Section 7 of the Credit Agreement is hereby further amended by
inserting the following new Section 7.12 immediately after Section 7.11
appearing therein:
-4-
<PAGE>
"7.12 SECURITY INTERESTS. The Borrower shall perform any and all acts
and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement) for filing under the provisions of the UCC or the
Federal Aviation Act and the rules and regulations thereunder which are
necessary in order to maintain in favor of the Collateral Agent for the
benefit of the Secured Creditors a valid and perfected Lien on the
Collateral, subject to no other Liens except for Permitted Liens."
(m) Section 8.03 of the Credit Agreement is hereby amended by (i)
relettering such section as subsection (I), (ii) inserting the text "(but, with
respect to the Collateral, only to the extent permitted by the Security
Documents)" immediately prior to the semicolon appearing at the end of Section
8.03(c), (iii) deleting the words "Pool Assets" or "a Pool Asset" each time such
words appear therein and inserting in lieu thereof, the word "Collateral", (iv)
deleting the text appearing in Section 8.03(f) "shall be applied to repay Loans
and reduce Commitments in accordance with Sections 3.03(e) and 4.02(d)"; (v)
inserting the following text in lieu of the text referred to in preceding clause
(iv):
"shall be applied to repay "Revolving Loans" and reduce "Revolving
Loan Commitments" (in each case as defined in the New Credit
Agreement) in accordance with Sections 3.02(c) and 2.03(b) of the
New Credit Agreement; PROVIDED, HOWEVER, to the extent any
portion thereof is applied to reduce "Revolving Loan Commitments"
(as defined in the New Credit Agreement) a corresponding amount
shall be applied to repay Loans and reduce Commitments in
accordance with Sections 4.02(d) and 3.03(e) hereof on the
earlier to occur of (x) May 12, 1999 and (y) the first date after
the Temporary Amendment Effective Date on which (i) no "Revolving
Loans" and no "Revolving Notes" (in each case as defined in the
New Credit Agreement) are outstanding, (ii) all "Obligations"
(as defined in the New Credit Agreement) have been repaid in full
and (iii) the "Total Revolving Loan Commitment" (as defined in
the New Credit Agreement) has been terminated in full";
(vi) inserting the word "and" immediately after the semicolon appearing
at the end of clause (g) and deleting clause (h) in its entirety and
re-lettering clause (i) as clause (h); and (vii) inserting the following
new sub-section (II):
(II) The Borrower will not convey, sell, lease, transfer or
otherwise dispose of (whether voluntarily or involuntarily (it being
understood that loss of property due to theft, destruction, confiscation,
prohibition on use or similar event shall constitute a disposal for
purposes of this covenant)), or remove or substitute, any Collateral (or
any engine included in the Collateral unless such engine is replaced by
another working engine or engines in which the Collateral Agent has a
perfected security interest subject to no Liens other than Permitted Liens)
or take any action that could materially diminish the fair market value of
the Collateral taken as a whole, or agree to do any of the foregoing at any
future time, except that:
-5-
<PAGE>
(i) In the event (x) that an Appraisal furnished pursuant to
Section 7.01(g) discloses that one or both of the Coverage Tests are not
satisfied or (y) of an involuntary disposal of any Collateral (or any
engine included in the Collateral unless such engine is replaced by another
working engine or engines in which the Collateral Agent has a perfected
security interest subject to no Liens other than Permitted Liens) (whether
by loss of property due to theft, destruction, confiscation, prohibition on
use, any similar event or otherwise), if at the time of such disposal one
or both of the Coverage Tests are not then satisfied based upon the most
recent Appraisals of the Collateral (other than the Collateral which is the
subject of the involuntary disposition) furnished pursuant to Section
7.01(g), the Borrower shall within 30 days after the date of such Appraisal
or involuntary disposal, as the case may be, designate additional assets as
Collateral to the extent that, after giving effect to such designation, the
Appraised Value of the Collateral, based on the most recently delivered
Appraisals with respect to assets already constituting Collateral and based
on an Appraisal performed at the time of such addition with respect to
assets being added to Collateral, shall satisfy both Coverage Tests,
provided that (A) after giving effect to such addition, the Appraised Value
of Stage III Aircraft included in the Collateral which are from a
manufacturer other than Boeing or Airbus shall not exceed 60% of the total
Appraised Value of the Stage III Aircraft included in the Collateral as a
whole (it being understood that for purposes of this clause (A), Aircraft
manufactured by McDonnell Douglas Corporation shall be deemed not to be
Aircraft manufactured by Boeing notwithstanding the fact that McDonnell
Douglas Corporation and The Boeing Company were or are part of the same
corporate group); (B) at the time of such addition, the Banks shall have
received a certificate of an Authorized Officer of the Borrower certifying
that the conditions set forth in this Section 8.03 shall have been
satisfied after giving effect to such addition and attaching thereto any
Appraisals not previously delivered to the Banks; (C) the asset being added
shall constitute a "slot" or an aircraft or any other asset that is
reasonably satisfactory to the Collateral Agent except that after December
31, 1999 no aircraft other than Stage III Aircraft (or higher) shall be
included in the Collateral; and (D) the Borrower has taken all actions
necessary to grant to the Collateral Agent for the benefit of the Secured
Creditors a perfected security interest in such addition subject to no
Liens other than Permitted Liens; and
(ii) Holdings or any of its Subsidiaries may, in the ordinary
course of business and consistent with industry practice, (x) trade the use
of any "slot" that is Collateral with another air carrier or (y) lease or
license any such "slot" to another air carrier, in each case on a temporary
basis and PROVIDED that such transactions do not involve the transfer of
title to such "slots".
(n) Section 8.04 of the Credit Agreement is hereby amended by (i)
inserting after the word "except" appearing in the first sentence thereof the
phrase "(Liens described below are herein referred to as "Permitted Liens")";
(ii) deleting the words "Pool Assets" and "a Pool Asset" and inserting in lieu
thereof, the words "Collateral"; (iii) deleting the word "and" at the end of
clause (d); (iv) deleting the period appearing at the end of clause (e) and
inserting the text "; and" in lieu thereof; and (v) inserting the following new
clause (f): "(f) Liens created by the Security Documents.".
-6-
<PAGE>
(o) Section 8.05 is hereby amended by (i) inserting the text
"occurring on or before May 12, 1998" immediately prior to the semicolon
appearing at the end of Section 8.05(e) and (ii) inserting the text "on or
before May 12, 1998" immediately prior to the word "redeem" appearing in Section
8.05(g).
(p) Sections 8.06(d) and (e) of the Credit Agreement are each hereby
amended by (i) deleting the text "shall be applied to repay Loans and reduce
Commitments in accordance with Sections 3.03(e) and 4.02(c)" appearing in
Sections 8.06(d) and (e) and (ii) inserting the following text in lieu thereof:
"shall be applied to repay "Revolving Loans" and reduce
"Revolving Loan Commitments" (in each case as defined in the New
Credit Agreement) in accordance with Sections 3.02(c) and 2.03(b)
of the New Credit Agreement; PROVIDED, HOWEVER, to the extent any
portion thereof is applied to reduce "Revolving Loan Commitments"
(as defined in the New Credit Agreement) a corresponding amount
shall be applied to repay Loans and reduce Commitments in
accordance with Sections 4.02(d) and 3.03(e) hereof on the
earlier to occur of (x) May 12, 1999 and (y) the first date after
the Temporary Amendment Effective Date on which (i) no "Revolving
Loans" and no "Revolving Notes" (in each case as defined in the
New Credit Agreement) are outstanding, (ii) all "Obligations" (as
defined in the New Credit Agreement) have been repaid in full and
(iii) the "Total Revolving Loan Commitment" (as defined in the
New Credit Agreement) has been terminated in full".
(q) Section 8.06 of the Credit Agreement is hereby further amended
by (i) deleting the text "and" appearing at the end of clause (n), (ii)
re-lettering clause (o) thereof as clause (p) thereof and (iii) inserting the
following new clause (o) in the appropriate order in said Section:
"(o) Indebtedness incurred pursuant to the New Credit Agreement
in an aggregate principal amount outstanding at any one time not to
exceed $1,000,000,000 less the amount of permanent commitment
reductions thereunder after the Effective Date (as defined in the New
Credit Agreement); and"
(r) Section 8 of the Credit Agreement is hereby further amended by
(i) deleting Section 8.08 in its entirety and inserting in lieu thereof the
words "Intentionally Omitted." and (ii) inserting the following new Sections
8.13 and 8.14 at the end thereof:
"8.13 NEW CREDIT AGREEMENT. No Credit Party will amend the New
Credit Agreement or the other "Credit Documents" (as defined in the
New Credit Agreement).
8.14 NEW CREDIT AGREEMENT BORROWINGS. The Borrower will not
borrow "Revolving Loans" under, and as defined in, the New Credit
Agreement until such time as the Documentation Agent shall have
received a legal opinion, in form and
-7-
<PAGE>
substance satisfactory to the Documentation Agent, addressed to
each of the Agents and each of the Banks, from Crowe & Dunlevy
regarding priority of the Secured Creditors' security interests in
the Aircraft Collateral (subject to Permitted Liens)."
(s) Section 9 of the Credit Agreement is hereby amended by (i)
inserting the word "or" at the end of Section 9.08 and (ii) inserting the
following new Section 9.09 immediately following Section 9.08 appearing therein:
"9.09 SECURITY DOCUMENTS. Any of the Security Documents shall
cease to be in full force and effect or shall cease to give the
Collateral Agent for the benefit of the Secured Creditors the Liens,
rights, powers and privileges purported to be created thereby
(including, without limitation, in all cases, a perfected security
interest in, and Lien on, all of the Collateral), in favor of the
Collateral Agent, superior to and prior to the rights of all third
Persons (except for Permitted Liens); or any Credit Party shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any of
the Security Documents and such default in any material respect shall
continue beyond any grace period specifically applicable thereto
pursuant to the terms of such Security Document;"
(t) Section 9 of the Credit Agreement is hereby further amended by
(I) deleting the word "and" appearing immediately prior to the text "(iv)"
appearing in the last paragraph of said section and (II) inserting before the
period at the end of such last paragraph of said section the phrase "and (v)
enforce, as Collateral Agent, any or all of the Liens and security interests
created pursuant to the Security Documents".
(u) Section 10 of the Credit Agreement is hereby amended by deleting
the definitions of Agents, Applicable Eurodollar Margin, Applicable Commitment
Fee Percentage, Appraisal, Appraised Value and Credit Documents appearing
therein and inserting the following new definitions in lieu thereof:
" `Agents' shall mean each of the Compliance Agent, the
Syndication Agent, the Documentation Agent, the Administrative
Agent (including the Administrative Agent in its capacity as
Collateral Agent), National Westminster Bank plc and U.S. Bank
National Association (f/k/a First Bank National Association)."
" `Applicable Eurodollar Margin' shall mean 2.000%."
" `Applicable Commitment Fee Percentage' shall mean, for both
Basic Revolving Loans and Supplemental Revolving Loans, 0.3750%."
" `Appraisal' shall mean an appraisal, dated the date of
delivery thereof to the Banks pursuant to the terms of this Agreement,
by one or more independent appraisal firms satisfactory, at the time
of such Appraisal, to the Borrower and the
-8-
<PAGE>
Compliance Agent setting forth the fair market value, as determined
in accordance with the definition of "fair market value"
promulgated by the International Society of Transport Aircraft
Trading, as of the date of such appraisal of each item of
Collateral or proposed item of Collateral, as the case may be."
" `Appraised Value' shall mean as of any date of determination
the aggregate fair market value as of such date of each asset
constituting Collateral as provided in the most recently delivered
Appraisal."
" `Credit Documents' shall mean this Agreement (including the
Guaranty herein), the Notes, and each Security Document."
(v) Section 10 of the Credit Agreement is hereby further amended by
(I) deleting the definitions of Eligible Gate, Korean Lease and Pool Assets and
(II) deleting the text "amortization, depreciation and non-cash stock
compensation expense (to the extent in excess of $28 per share (adjusted for any
stock split or similar transaction) price with respect to such non-cash stock
compensation expense)" appearing in the definition of Consolidated EBITDAR and
inserting in lieu thereof the text "amortization and depreciation".
(w) Section 10 of the Credit Agreement is hereby further amended by
inserting the following new definitions in appropriate alphabetical order:
" `Aircraft' shall have the meaning provided in the Aircraft
Mortgage Agreement."
" `Aircraft Collateral' shall mean all "Collateral" as defined
in the Aircraft Mortgage Agreement."
" `Aircraft Mortgage Agreement' shall mean the Aircraft Mortgage
and Security Agreement entered into in connection with the Temporary
Amendment, as such agreement may be modified, amended or supplemented
from time to time in accordance with the terms thereof and of this
Agreement."
" `Airframe' shall have the meaning provided in the Aircraft
Mortgage Agreement."
" `Collateral' shall mean all of the "Aircraft Collateral" and
the "Slot Collateral"."
" `Collateral Agent' shall mean the Administrative Agent acting
as collateral agent for the Secured Creditors pursuant to the Security
Documents."
" `Engine' shall have the meaning set forth in the Aircraft
Mortgage Agreement."
" `Event of Loss' (x) with respect to an Aircraft, Airframe or
Engine shall mean any of the following events with respect to such
property: (i) the loss of
-9-
<PAGE>
such property or the use thereof due to the destruction of or
damage to such property which renders repair uneconomic or which
renders such property permanently unfit for normal use by the
Borrower for any reason whatsoever; (ii) any damage to such
property which results in an insurance settlement with respect to
such property on the basis of a total loss, or a constructive or
compromised total loss; (iii) the theft or disappearance of such
property, or the confiscation, condemnation, or seizure of, or
requisition of title to, or use of, such property by any
governmental or purported governmental authority (other than a
requisition for use by the United States government or any other
government of registry of such Aircraft) or any agency or
instrumentality of any thereof which in the case of any event
referred to in this clause (iii) (other than a requisition of
title) shall have resulted in the loss of possession of such
property by the Borrower for a period in excess of 180 consecutive
days or, in the case of a requisition of title, the requisition of
title shall not have been reversed within 90 days from the date of
such requisition of title; (iv) as a result of any law, rule,
regulation, order or other action by the FAA or other governmental
body of the government of registry of such Aircraft having
jurisdiction, the use of such property in the normal course of the
business of air transportation shall have been prohibited for a
period of 180 consecutive days; PROVIDED that an Event of Loss with
respect to an Aircraft shall be deemed to have occurred if an Event
of Loss occurs with respect to the Airframe of such Aircraft; and
(y) with respect to a "slot" shall mean the loss by the Borrower of
the right to use such slot.
" `FAA' means the United States Federal Aviation Administration
and any agency or instrumentality of the United States government
succeeding to its functions."
" `Federal Aviation Act' shall mean the Federal Aviation Act of
1958, as amended and recodified in Title 49, United States Code, or
any similar legislation of the United States to supersede, amend or
supplement such Act and the rules and regulations promulgated
thereunder."
" `New Credit Agreement' shall mean the credit agreement, dated
as of May 12, 1998, by and among Holdings, NWA, the Borrower, the
lenders from time to time party thereto and The Chase Manhattan Bank,
as agent, as amended, modified and/or supplemented from time to time."
" `Permitted Liens' shall have the meaning set forth in Section
8.04."
" `Secured Creditors' shall mean the Banks and the Agents."
" `Security Documents' shall mean the Aircraft Mortgage Agreement
and the Slot Security Agreement."
" `Slot Collateral' shall mean all of the "Collateral" as defined
in the Slot Security Agreement."
-10-
<PAGE>
" `Slot Security Agreement' shall mean the Slot Security
Agreement entered into connection with the Temporary Amendment, as
such agreement may be modified, amended or supplemented from time to
time accordance with the terms thereof and the terms of this
Agreement."
" `Temporary Amendment' shall mean the Temporary Amendment to
Credit Agreement dated as of May 12, 1998 by and among Holdings, NWA,
the Borrower, the Agents and the Banks."
" `Temporary Amendment Effective Date' shall have the meaning set
forth in the Temporary Amendment."
(x) Section 12.12(a) of the Credit Agreement is hereby amended by (I)
re-numbering clauses (ii)-(v) as clauses (iii)-(vi); and (II) inserting the
following new clause (ii):
"(ii) release all or substantially all of the Collateral (except
as expressly provided in the Security Documents),"
(y) Section 13.01 of the Credit Agreement is hereby amended by
deleting the text "in its most comprehensive sense and includes" and inserting
the text "to mean" in lieu thereof.
3. Subject to the proviso contained in paragraph 2(g), the
amendments referred to in paragraph 2 of this Amendment shall be in full force
and effect at all times after the Temporary Amendment Effective Date and prior
to the Temporary Amendment Expiry Date, but shall cease to have any force or
effect thereafter, and, on the Temporary Amendment Expiry Date, the Credit
Agreement shall automatically, and without any action on the part of any Person,
revert to the Credit Agreement as in effect without giving effect to the
amendments referred to in paragraph 2 of this Amendment and the Collateral Agent
shall, in accordance with the terms of the Security Documents, release its
security interest in the Collateral.
4. This Amendment is limited precisely as written and shall not be
deemed to be a modification, acceptance or waiver of any other term, condition
or provision of the Credit Agreement, the other Credit Documents or any of the
instruments or agreements referred to therein.
5. In order to induce the Compliance Agent, the Administrative
Agent, the Syndication Agent, the Documentation Agent, the other Agents and the
Banks to enter into this Amendment, each of Holdings, NWA and the Borrower
hereby represents and warrants that (x) no Default or Event of Default exists on
the Temporary Amendment Effective Date both before and after giving effect to
this Amendment and (y) all of the representations and warranties contained in
the Credit Documents shall be true and correct in all material respects on the
Temporary Amendment Effective Date both before and after giving effect to this
Amendment with the same effect as though such representations and warranties had
been made on and as of the Temporary Amendment Effective Date (it being
understood that any representation or
-11-
<PAGE>
warranty made as of a specific date shall be true and correct in all material
respects as of such specific date).
6. This Amendment shall become effective as of the date first
written above (the "Temporary Amendment Effective Date") when each of the
following conditions has been met (provided that if all such conditions have
not been so met by May 15, 1998, then this Amendment will not become
effective):
(i) the representations of Holdings, NWA and the Borrower set
forth in paragraph 5 above shall be true and correct in all material
respects;
(ii) each of Holdings, NWA, the Borrower and the Required Banks
shall have duly executed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of
facsimile transmission) the same to the Administrative Agent at its
Notice Office;
(iii) the Documentation Agent shall have received opinions, in
form and substance satisfactory to the Documentation Agent, addressed to
each of the Agents and the Banks and dated the Temporary Amendment
Effective Date, from (i) Douglas M. Steenland, Esq., Senior Vice
President, General Counsel and Secretary of Holdings, NWA and the
Borrower, which opinion shall generally cover the matters contained in
Exhibit F-1 to the Credit Agreement but relate to this Amendment and
shall be in form and substance satisfactory to the Agents, (ii) Crowe
and Dunlevy, special aviation counsel to the Credit Parties, which
opinion shall generally cover the matters contained in Exhibit D-2 to
the New Credit Agreement but relate to the Collateral (as defined in the
Credit Agreement (as amended by this Amendment)) and shall be in form
and substance satisfactory to the Agents, (iii) Dorsey & Whitney LLP,
special counsel to the Borrower, which opinion shall generally cover the
matters contained in Exhibit D-3 to the New Credit Agreement but relate
to the Collateral (as defined in the Credit Agreement (as amended by
this Amendment)) and shall be in form and substance satisfactory to the
Agents and (iv) White & Case LLP, special counsel to the Agents, which
opinion shall generally cover the matters contained in Exhibit F-2 to
the Credit Agreement but relate to this Amendment;
(iv) there shall have been delivered to each of the Agents and
each of the Banks a true and complete copy of the New Credit Agreement
which shall be in form and substance satisfactory to the Agents and the
Required Banks; PROVIDED, that unless the Administrative Agent has
received actual notice from another Agent or a Bank signatory hereto
that the condition contained in this clause (iv) has not been met to its
satisfaction, upon delivery of such Agent's or Bank's signatory page to
this Amendment in accordance with clause (ii) above, the condition
contained in this clause (iv) shall be deemed to have been met to such
Agents' or Banks' satisfaction;
(v) the "Effective Date" (as defined in the New Credit
Agreement) shall have occurred;
-12-
<PAGE>
(vi) The Borrower shall have paid to the Agents and Banks all
costs, fees and expenses (including, without limitation, legal fees and
expenses) payable to the Agents and the Banks to the extent then due and
payable;
(vii) (a) the Borrower shall have duly authorized, executed and
delivered (I) an Aircraft Mortgage Agreement in the form of Attachment I
to this Amendment (as modified, amended or supplemented from time to
time in accordance with the terms thereof and hereof, the "Aircraft
Mortgage Agreement") and (II) a Slot Security Agreement in the form of
Attachment II to this Amendment (as modified, amended or supplemented
from time to time in accordance with the terms thereof and hereof, the
"Slot Security Agreement" and, together with the Aircraft Mortgage
Agreement, the "Security Documents"), in each case covering all of the
respective Collateral referred to therein;
(b) the Agents shall have received executed copies of proper
financing statements to be filed under the U.C.C. in all jurisdictions
necessary to perfect the security interests purported to be created by
the respective Security Documents;
(c) the Agents shall have received evidence of the
completion of all recordings and filings with respect to the Security
Documents necessary in order to perfect the security interest created by
the Security Documents, including, without limitation, all filings with
the FAA;
(d) the Agents shall have received evidence that all third
party approvals, consents, or notices, or all other actions required or
deemed reasonably necessary by the Administrative Agent to perfect and
protect the security interests created by the Security Documents have
been obtained or taken, as the case may be;
(e) the Agents shall have received an independent insurance
report (including confirmation of coverage), in form and substance
reasonably satisfactory to the Administrative Agent, indicating compliance
by the Borrower with the terms of the Security Documents relating to
insurance with respect to the Collateral; and
(f) the Agents shall have received certified copies of a
Request for Information or Copies (form UCC-11) or equivalent reports,
listing any financing statements relating to the Collateral; and
(viii) the Documentation Agent shall have received a certificate
dated the Temporary Amendment Effective Date and signed by an Authorized
Officer of the Borrower stating that the conditions set forth in clauses
(i) and (v) above have been satisfied.
7. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and each Agent.
-13-
<PAGE>
8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
9. From and after the Temporary Amendment Effective Date (or, in the
case of the amendment referred to in paragraphs 2(g), the date specified in said
paragraph) and, except as otherwise provided herein, until the Temporary
Amendment Expiry Date, all references in the Credit Agreement and each of the
Credit Documents to the Credit Agreement or any Credit Document shall be deemed
to be references to such Credit Agreement or such Credit Document as amended
hereby.
* * * *
-14-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
NORTHWEST AIRLINES CORPORATION
By: /s/ Rolf S. Andresen
--------------------------------
Name: Rolf S. Andresen
Title: Vice President - Finance
and Chief Accounting Officer
NWA INC.
By: /s/ Rolf S. Andersen
--------------------------------
Name: Rolf S. Andresen
Title: Vice President - Finance
and Chief Accounting Officer
NORTHWEST AIRLINES, INC.
By: /s/ Rolf S. Andersen
--------------------------------
Name: Rolf S. Andresen
Title: Vice President - Finance
and Chief Accounting Officer
<PAGE>
ABN AMRO BANK N.V.,
CHICAGO BRANCH,
Individually and as Compliance Agent
By: /s/ John E. Lewis
--------------------------------
Name: John E. Lewis
Title: Senior Vice President
By: /s/ Lukas van der Hoef
--------------------------------
Name: John E. Lewis
Title: Vice President
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Administrative
Agent
By: /s/ Robert R. Telesca
--------------------------------
Name: Robert R. Telesca
Title: Assistant Vice President
<PAGE>
CHASE SECURITIES INC.,
as Syndication Agent
By: /s/ [Illegible]
--------------------------------
Name:
Title:
<PAGE>
CITIBANK, N.A.,
as Documentation Agent
By: /s/ [Illegible]
--------------------------------
Name:
Title: Attorney in Fact
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
NEW YORK BRANCH,
Individually and as an Agent
By: /s/ David Apps
--------------------------------
Name: David Apps
Title: Senior Vice President
<PAGE>
NATIONAL WESTMINSTER BANK PLC,
NASSAU BRANCH,
Individually and as an Agent
By: /s/ David Apps
--------------------------------
Name: David Apps
Title: Senior Vice President
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
Individually and as an Agent
By: /s/ [Illegible]
--------------------------------
Name: [Illegible]
Title: VP
<PAGE>
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By: /s/ Craig S. Munro
--------------------------------
Name: Craig S. Munro
Title: Managing Director
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.
CHICAGO BRANCH
By: /s/ Hajime Watanabe
--------------------------------
Name: Hajime Watanabe
Title: Deputy General Manager
<PAGE>
BANQUE NATIONALE DE PARIS
By: /s/ Arnaud Collin du Bocage
--------------------------------
Name: Arnaud Collin du Bocage
Title: Executive Vice President &
General Mgr.
<PAGE>
CHANG HWA COMMERCIAL BANK, LTD.,
NEW YORK BRANCH
By: /s/ Wan-Tu Yeh
--------------------------------
Name: Wan-Tu Yeh
Title: VP & General Manager
<PAGE>
THE CHASE MANHATTAN BANK
By: /s/ [Illegible]
--------------------------------
Name:
Title:
<PAGE>
CHIAO TUNG BANK CO., LTD. NEW YORK
AGENCY
By: /s/ Kuang Si Shiu
--------------------------------
Name: Kuang Si Shiu
Title: SVP & GM
<PAGE>
CREDIT LYONNAIS
NEW YORK BRANCH
By: /s/ Philippe Soustra
--------------------------------
Name: Philippe Soustra
Title: Senior Vice President
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: /s/ Robert N. Finney
--------------------------------
Name: Robert N. Finney
Title: Managing Director
By: /s/ Thomas G. Muoio
--------------------------------
Name: Thomas G. Muoio
Title: Vice President
<PAGE>
THE FUJI BANK, LIMITED
By: /s/ Peter L. Chinnici
--------------------------------
Name: Peter L. Chinnici
Title: Joint General Manager
<PAGE>
BERLIN LANDESBANK--GIROZENTRALE
By: /s/ Peter Storey /s/ Rudolf Schmidt
---------------------------------------------
Name: Peter Storey Rudolf Schmidt
Title: Senior Vice President Vice President
<PAGE>
ROYAL BANK OF CANADA
By: /s/ Michael Madnick
--------------------------------
Name: Michael Madnick
Title: Senior Manager
<PAGE>
DAI-ICHI KANGYO BANK, LTD., CHICAGO
BRANCH
By: /s/ Takao Teramura
--------------------------------
Name: Takao Teramura
Title: Senior President
<PAGE>
- -------------------------------------------------------------------------------
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT
DATED AS OF MAY 12, 1998
BETWEEN
NORTHWEST AIRLINES, INC.
AND
BANKERS TRUST COMPANY,
AS COLLATERAL AGENT
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
ARTICLE 1.
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2.
SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1. Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3.
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . 4
Section 3.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Necessary Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Other Financing Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Chief Executive Office; Records . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2. Possession, Operation and Use, Maintenance and Registration. . . . . 6
(a) Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Operation and Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Identification of Collateral Agent's Interest. . . . . . . . . . . . . . 10
(e) Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.3. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.4. Replacement and Pooling of Parts; Alterations, Modifications
and Additions; Substitution of Engines. . . . . . . . . . . . . . . 11
(a) Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Parts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Pooling of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Alterations; Modifications and Additions . . . . . . . . . . . . . . . . 12
(e) Substitution of Engines. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.5. Loss, Destruction or Requisition . . . . . . . . . . . . . . . . . . 15
(i)
<PAGE>
Page
------
<S> <C>
(a) Event of Loss With Respect to Airframes. . . . . . . . . . . . 15
(b) Effect of Replacement. . . . . . . . . . . . . . . . . . . . . 15
(c) Conditions to Airframe Replacement . . . . . . . . . . . . . . 16
(d) Non-Insurance Payments Received on Account of an Event of
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Requisition of Use . . . . . . . . . . . . . . . . . . . . . . 19
(f) Application of Payments During Existence of Event of Default . 19
Section 3.6. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Public Liability and Property Damage Insurance . . . . . . . . 19
(b) Insurance Against Loss or Damage to the Aircraft . . . . . . . 21
(c) Reports, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Self-Insurance . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Additional Insurance by the Collateral Agent and the Company . 24
(f) Indemnification by Government in Lieu of Insurance . . . . . . 24
(g) Application of Payments During Existence of an Event of
Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.7. Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 4.
REMEDIES OF THE COLLATERAL AGENT
Page
------
<S> <C>
UPON AN EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.1. Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.2. Remedies with Respect to Collateral. . . . . . . . . . . . . . . . . 26
(a) Remedies Available . . . . . . . . . . . . . . . . . . . . . . 26
(b) Notice of Sale . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Receiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Concerning Sales . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.3. Waiver of Appraisement, etc., Laws . . . . . . . . . . . . . . . . . 28
Section 4.4. Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.5. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.6. Discontinuance of Proceedings. . . . . . . . . . . . . . . . . . . . 30
ARTICLE 5.
INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.1. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.2. Indemnity Obligations Secured by Collateral; Survival. . . . . . . . 31
ARTICLE 6.
INVESTMENT OF SECURITY FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(ii)
<PAGE>
Page
------
<S> <C>
Section 6.1. Investment of Security Funds . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7.
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.1. No Legal Title to Collateral in Noteholder . . . . . . . . . . . . . 32
Section 7.2. Sale of the Aircraft by Collateral Agent Is Binding. . . . . . . . . 32
Section 7.3. Benefit of Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.5. Waiver; Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.6. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.7. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.8. Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.11. Company's Duties. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.12. Termination; Release. . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.14. The Collateral Agent. . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.15. Limited Obligations . . . . . . . . . . . . . . . . . . . . . . . . 36
Appendix A Definitions
Exhibit A Form of Aircraft Mortgage and Security Agreement Supplement
Schedule I Schedule of Airframes as part of the Collateral
Schedule II Schedule of Engines as part of the Collateral
Schedule III Schedule of Countries for Permitted Lessees
</TABLE>
(iii)
<PAGE>
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT
This AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (as
amended, modified or supplemented from time to time, the "MORTGAGE"), dated
as of May 12, 1998, between NORTHWEST AIRLINES, INC., a Minnesota corporation
(together with its successors and permitted assigns, the "COMPANY"), and
BANKERS TRUST COMPANY, as Collateral Agent (the "COLLATERAL AGENT"), for the
benefit of the Banks and the Agents under, and any other lender from time to
time party to the Credit Agreement hereinafter referred to (the Banks, the
Agents and the other lenders, if any, are hereinafter called the "SECURED
CREDITORS");
W I T N E S S E T H :
-------------------
WHEREAS, the Company has requested that the Agents and
the Banks agree to amend the Credit Agreement on the terms and subject to the
conditions provided in the Temporary Amendment;
WHEREAS, it is a condition precedent to the effectiveness
of the Temporary Amendment that the Company shall have executed and delivered
to the Collateral Agent this Mortgage; and
WHEREAS, the Company desires to execute the Mortgage to
satisfy the condition described in the preceding paragraph.
NOW, THEREFORE, to secure the due and punctual payment of
the Obligations, it is hereby covenanted and agreed by and between the
parties hereto as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. CERTAIN DEFINITIONS.
Unless otherwise defined herein or the context requires
otherwise, capitalized terms used herein shall have the meanings set forth in
APPENDIX A hereto.
ARTICLE 2.
SECURITY
Section 2.1. GRANT OF SECURITY INTEREST.
The Company, in order to secure (i) the prompt payment
when due of all the Obligations and (ii) the performance and observance by
the Company and the Guarantors of all agreements, covenants and provisions
contained herein and in the other Credit Documents, and
<PAGE>
in consideration of the premises and of the covenants herein contained, and
of other good and valuable consideration, the receipt of which is hereby
acknowledged, has granted, bargained, sold, assigned, transferred, conveyed,
mortgaged, pledged and confirmed and does hereby grant, bargain, sell,
assign, transfer, convey, mortgage, pledge and confirm unto the Collateral
Agent, its permitted successors and assigns, for the security and benefit of
the Secured Creditors, forever, a continuing security interest in, and
mortgage lien on, all estate, right, title and interest of the Company in, to
and under the following described properties, rights, interests and
privileges (which, collectively, including all property hereafter
specifically subjected to the lien of this Mortgage by any instrument
supplemental hereto, are referred to herein as the "COLLATERAL"):
(a) the Airframes described in Schedule I hereto and the
Engines described in Schedule II hereto, each of which Engines
is a 750 or more rated take-off horsepower or the equivalent
of such horsepower, and in the case of such Engines, whether
or not such Engines shall be installed in or attached to the
Airframes described in this clause or any other airframes,
together with all accessories, equipment, parts and
appurtenances appertaining or attached to the Airframes (other
than jet aircraft engines not constituting Engines) or the
Engines, whether now owned or hereafter acquired, and all
substitutions, renewals and replacements of and additions,
improvements, accessions and accumulations to the Airframe and
Engines and all records, logs and other documents at any time
maintained with respect to the foregoing;
(b) the Contract Rights;
(c) all proceeds with respect to the requisition of
title to or use of the Aircraft, or any part thereof, all
insurance proceeds with respect to the Aircraft or any part
thereof, and any other proceeds of any kind resulting from an
Event of Loss, but excluding any insurance maintained by the
Company and not required under Section 3.6 hereof;
(d) all moneys and securities now or hereafter paid or
deposited or required to be paid or deposited to or with the
Collateral Agent in pledge hereunder and held or required to
be held by the Collateral Agent hereunder;
(e) any and all property that may, from time to time
hereafter, in accordance with the provisions of this Mortgage,
by delivery or by Mortgage Supplement or by other writing of
any kind, for the purposes hereof be in any way subjected to
the lien and security interest hereof or be expressly
conveyed, mortgaged, assigned, transferred, deposited, in
which a security interest may be granted by the Company and/or
pledged by the Company, or by any Person authorized to so do
on its behalf or with its consent, to and with the Collateral
Agent, who is hereby authorized to receive the same at any and
all times as and for additional security hereunder; and
(f) all proceeds of the foregoing.
PROVIDED, HOWEVER, that notwithstanding any of the
foregoing provisions of this Section 2.1, so long as no Event of Default
shall have occurred and be continuing, (i) the
-2-
<PAGE>
Company shall have the right, to the exclusion of the Collateral Agent, to
quiet enjoyment of the Airframe and Engines, and to possess, use, retain and
control the Airframe and Engines and all revenues, income and profits derived
therefrom and (ii) the Collateral Agent, acting on behalf of the Secured
Creditors, (A) shall not, through it own actions or inactions, interfere
with, or suffer to exist with respect to any Aircraft any Lien attributable
to the Collateral Agent which might interfere with, the Company's (or any
Lessee's) continued possession, use and operation of, and quiet enjoyment
(including, without limitation, administrative quiet enjoyment) of, the
Aircraft during the term of this Mortgage in accordance with the terms of the
Credit Documents so long as no Event of Default shall have occurred and be
continuing, (B) shall not suffer to exist a default in any of its obligations
pursuant to this Mortgage that does not correspond to or result from an Event
of Default or Default and (C) neither the Collateral Agent nor any Secured
Creditor shall assign this Mortgage for security purposes without the prior
written consent of the Company, which may be granted or withheld in its sole
discretion (such consent, if granted, to be conveyed by the Company in
writing).
TO HAVE AND TO HOLD the Collateral unto the Collateral
Agent, its permitted successors and assigns, forever, upon the terms herein
set forth, in trust for the benefit, security and protection of the Secured
Creditors, without any priority of any one Secured Creditor over any other,
and for the uses and purposes and subject to the terms and provisions set
forth in this Mortgage.
It is expressly agreed that anything herein contained to
the contrary notwithstanding, the Company and the Guarantors shall remain
liable under each of the Credit Documents to which they are party to perform
all of the obligations assumed by them thereunder, all in accordance with and
pursuant to the terms and provisions thereof, and neither the Collateral
Agent, any other Agent nor the Banks shall have any obligation or liability
under any of the Credit Documents to which the Company or the Guarantors is a
party by reason of or arising out of the assignment hereunder, nor shall the
Collateral Agent, any other Agent or the Banks be required or obligated in
any manner to perform or fulfill any obligations of the Company or the
Guarantors under any of the Credit Documents to which the Company or the
Guarantors is a party, or, except as herein expressly provided, to make any
payment, or to make any inquiry as to the nature or sufficiency of any
payment received by it, or present or file any claim, or take any action to
collect or enforce the payment of any amounts which may have been assigned to
it or to which it may entitled at any time or times.
The Company does hereby irrevocably constitute and
appoint the Collateral Agent the true and lawful attorney of the Company
(which appointment is coupled with an interest) with full power (in the name
of the Company or otherwise) to ask, require, demand, receive, compound and
give acquittance for any and all moneys and claims for moneys (in each case
including insurance and requisition proceeds) and all other property which
now or hereafter constitutes part of the Collateral, to endorse any checks or
other instruments or orders in connection therewith and to file any claims or
to take any action or to institute any proceeding which the Collateral Agent
may deem to be necessary or advisable in the premises; PROVIDED that the
Collateral Agent shall not exercise any such rights except upon the
occurrence and during the continuance of an Event of Default.
-3-
<PAGE>
The Company agrees that at any time and from time to
time, upon the written request of the Collateral Agent, the Company will
promptly and duly execute and deliver or cause to be duly executed and
delivered any and all such further instruments and documents as the
Collateral Agent may reasonably deem desirable in obtaining the full benefits
of the assignment hereunder and of the rights and powers herein granted.
The Company does hereby warrant and represent that it has
not assigned or pledged, and hereby covenants that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, any of
its right, title or interest hereby assigned, to anyone other than the
Collateral Agent.
ARTICLE 3.
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.1. GENERAL.
The Company represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and
delivery of this Mortgage, as follows:
(a) NECESSARY FILINGS.
All filings, registrations and recordings necessary to
create, preserve, protect and perfect the security interest granted by the
Company to the Collateral Agent hereby in respect of the Collateral have been
accomplished and the security interest granted to the Collateral Agent
pursuant to this Mortgage in and to the Collateral constitutes a perfected
security interest therein prior to the rights of all other Persons therein
and subject to no other Liens (other than Permitted Liens) and is entitled to
all the rights, priorities and benefits afforded by the Federal Aviation Act
and other relevant law as enacted in any relevant jurisdiction to perfected
security interests.
(b) NO LIENS.
The Company is, and as to Collateral acquired by it from
time to time after the date hereof the Company will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Permitted Liens), and the Company
shall defend the Collateral against all claims and demands of all Persons
(other than Persons claiming by, through or under the Collateral Agent) at
any time claiming the same or any interest therein adverse to the Collateral
Agent.
(c) OTHER FINANCING STATEMENTS.
There is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) covering or
purporting to cover any interest of any kind in the Collateral (other than
Permitted Liens), and so long as the Total Commitment and/or any Letters of
Credit have not been terminated or any Loan or Note remains outstanding or
any of the Obligations remain unpaid, the Company will not execute or
authorize to be filed in any public
-4-
<PAGE>
office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of
and covering the security interests granted hereby by the Company.
(d) CHIEF EXECUTIVE OFFICE; RECORDS.
The chief executive office of the Company is located at
2700 Lone Oak Parkway, Eagan, Minnesota 55121. The Company will not move its
chief executive office except to such new location as the Company may
establish in accordance with the last sentence of this Section 3.1(d). The
Company shall not establish a new location for such office until (i) it shall
have given to the Collateral Agent not less than 30 days' prior written
notice of its intention to do so, clearly describing such new location and
providing such other information in connection therewith as the Collateral
Agent may request, (ii) with respect to such new location, it shall have
taken all action, satisfactory to the Collateral Agent, to maintain the
security interest of the Collateral Agent in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect,
(iii) at the request of the Collateral Agent, it shall have furnished an
opinion of counsel acceptable to the Collateral Agent to the effect that all
financing or continuation statements and amendments or supplements thereto
have been filed in the appropriate filing office or offices, and (iv) the
Collateral Agent shall have received evidence that all other actions
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
(e) RECOURSE.
This Mortgage is made with full recourse to the Company
and pursuant to and upon all the warranties, representations, covenants and
agreements on the part of the Company contained herein, in the other Credit
Documents and otherwise in writing in connection herewith or therewith.
-5-
<PAGE>
Section 3.2. POSSESSION, OPERATION AND USE, MAINTENANCE AND
REGISTRATION.
(a) POSSESSION.
The Company shall not, without the prior written consent of the
Collateral Agent, lease or otherwise in any manner deliver, transfer or
relinquish possession of any Airframe, Engine or Part, install or permit any
Engine to be installed in any airframe other than the Airframes or enter into
any Wet Lease; PROVIDED that so long as no Default of the type referred to in
Sections 9.01 or 9.05 of the Credit Agreement or Event of Default shall have
occurred and be continuing at the time of such lease, delivery, transfer or
relinquishment of possession or installation or such Wet Lease, so long as the
action to be taken shall not deprive the Collateral Agent of the first priority
Lien (subject to Permitted Liens) of this Mortgage on the Collateral and so long
as the Company (or any Lessee) shall comply with the provisions of Sections
3.2(c) and 3.6 hereof, the Company may, without the prior written consent of the
Collateral Agent:
(i) subject any Airframe or Engine or engines installed on an
Airframe to normal interchange agreements or any Engine to normal pooling
or similar arrangements, in each case customary in the airline industry and
entered into by the Company (or any Lessee) in the ordinary course of its
business; PROVIDED that (A) no such agreement or arrangement contemplates
or requires the transfer of title to any Airframe, (B) if the Company's
title to any Engine shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss with
respect to such Engine and the Company shall (or shall cause Lessee to)
comply with Section 3.4(e) hereof in respect thereof, and (C) any
interchange agreement to which the Airframes may be subject shall be with a
U.S. Air Carrier or a Foreign Air Carrier;
(ii) deliver possession of any Airframe or Engine to the
manufacturer thereof (or for delivery thereto) or to any organization (or
for delivery thereto) for testing, service, repair, maintenance or overhaul
work on such Airframe or Engine or any part thereof or for alterations or
modifications in or additions to such Airframe or Engine to the extent
required or permitted by the terms of Section 3.4(d) hereof;
(iii) install any Engine on an airframe which is owned by the Company
(or any Lessee) free and clear of all Liens, except: (A) Permitted Liens
and those which apply only to the engines (other than Engines), appliances,
parts, instruments, appurtenances, accessories, furnishings and other
equipment (other than Parts) installed on such airframe (but not to the
airframe as an entirety), (B) the rights of third parties under interchange
agreements which would be permitted under clause (i) above PROVIDED that
the Company's title to any such Engine and the first priority Lien of this
Mortgage shall not be divested or impaired as a result thereof and (C)
mortgage liens or other security interests, PROVIDED that (as regards this
subclause (C)) such mortgage liens or other security interests effectively
provide that such Engine shall not become subject to such mortgage or
security interest, notwithstanding the installation thereof on such
airframe;
(iv) install any Engine on an airframe which is leased to the
Company (or any Lessee) or purchased by the Company (or any Lessee) subject
to a conditional sale or
- 6 -
<PAGE>
other security agreement, PROVIDED that (x) such airframe is free and
clear of all Liens, except: (A) the rights of the parties to the lease or
conditional sale or other security agreement covering such airframe, or
their assignees, and (B) Liens of the type permitted by clause (iii) of
this Section 3.2(a) and (y) such lease, conditional sale or other security
agreement effectively provides that such Engine shall not become subject
to the lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe;
(v) install any Engine on an airframe owned by the Company (or any
Lessee), leased to the Company (or any Lessee) or purchased by the Company
(or any Lessee) which is subject to a conditional sale or other security
agreement under circumstances where neither clause (iii) nor clause (iv) of
this Section 3.2(a) is applicable, PROVIDED that such installation shall be
deemed an Event of Loss with respect to such Engine and that the Company
shall (or shall cause any Lessee to) comply with Section 3.4(e) hereof in
respect thereof, the Collateral Agent not intending hereby to waive any
right or interest it may have to or in such Engine under applicable law
until compliance by the Company with such Section 3.4(e);
(vi) to the extent permitted by Section 3.4(c) hereof, subject any
appliances, Parts or other equipment owned by the Company and removed from
any Airframe or Engine to any pooling arrangement referred to in such
Section;
(vii) subject (or permit any Lessee to subject) any Airframe or
Engine to the Civil Reserve Air Fleet Program and transfer (or permit any
Lessee to transfer) possession of any Airframe or Engine to the United
States of America or any instrumentality or agency thereof pursuant to the
Civil Reserve Air Fleet Program, so long as the Company (or any Lessee)
shall (A) promptly notify the Collateral Agent upon subjecting such
Airframe or Engine to the Civil Reserve Air Fleet Program in any contract
year and provide the Collateral Agent with the name and address of the
Contracting Office Representative for the Air Mobility Command of the
United States Air Force to whom notice must be given pursuant to Section
4.2 hereof, and (B) promptly notify the Collateral Agent upon transferring
possession of the Airframe or any Engine to the United States of America or
any agency or instrumentality thereof pursuant to such program;
(viii) enter into a Wet Lease for any Airframe or engines then
installed thereon with any third party, PROVIDED that if the Company (or
any Lessee) shall enter into any Wet Lease for a period of more than one
year (including renewal options) the Company shall provide to the
Collateral Agent written notice of such Wet Lease (such notice to be given
prior to entering into such Wet Lease, if practicable, but in any event
promptly after entering into such Wet Lease);
(ix) transfer possession of any Airframe or Engine to the United
States of America or any instrumentality or agency thereof pursuant to a
contract, a copy of which shall be provided to the Collateral Agent; or
- 7 -
<PAGE>
(x) the Company may, at any time, enter into any lease of any
Airframe or Engine with (A) a U.S. Air Carrier, (B) any Person approved in
writing by the Collateral Agent (with the approval of the Required Banks),
(C) any Permitted Lessee; or (D) any airline alliance partner of the
Company that otherwise meets the requirement of (A), (B) or (C) above or
has been previously approved in writing by the Collateral Agent, in any
such case, if (1) the lessee under such lease is not subject to a
proceeding or final order under applicable bankruptcy, insolvency or
reorganization laws on the date such lease is entered into, (2) in the
event that the lessee under such lease is a Foreign Air Carrier (other than
a Foreign Air Carrier principally based in Taiwan), the United States
maintains diplomatic relations with the country in which such foreign air
carrier is principally based at the time such lease is entered into (or, in
the case of a lease to a lessee principally based in Taiwan, maintains
diplomatic relations at least as good as those in effect on the Temporary
Amendment Effective Date) and (3) in the event that the lessee under such
lease is a Foreign Air Carrier, the Collateral Agent shall receive at the
time such lease is entered into an opinion of counsel (in form and
substance reasonably satisfactory to the Collateral Agent) to the Company
to the effect that (I) the terms of the proposed lease will be legal,
valid, binding and (subject to customary exceptions in foreign opinions
generally) enforceable against the proposed lessee in the country in which
the proposed lessee is principally based, (II) there exist no possessory
rights in favor of the lessee under such lease under the laws of such
lessee's country of domicile that would, upon bankruptcy or insolvency of
or other default by the Company and assuming at such time such lessee is
not insolvent or bankrupt, prevent the return or repossession of the
Aircraft in accordance with the terms of this Mortgage, (III) the laws of
such lessee's country of domicile require fair compensation by the
government of such jurisdiction payable in currency freely convertible into
Dollars for the loss of use of the Aircraft in the event of the requisition
by such government of such use, and (IV) the laws of such lessee's country
of domicile would give recognition to the Company's title to the Aircraft,
to the registry of the Aircraft in the name of the Company (or the proposed
lessee, as "lessee", as appropriate), and to the Lien of this Mortgage.
The rights of any Lessee or other transferee who receives possession
by reason of a transfer permitted by this Section 3.2(a) (other than the
transfer of an Engine which is deemed an Event of Loss) shall be effectively
subject and subordinate to, and any lease permitted by this Section 3.2(a) shall
be expressly subject and subordinate to, all the terms of this Mortgage and to
the Lien of this Mortgage, including, without limitation, the covenants
contained in this Section 3.2 and the Collateral Agent's rights to foreclosure
and possession pursuant to Section 4.2 hereof and to avoid such lease upon such
repossession, and the Company shall remain primarily liable hereunder for the
performance of all of the terms of this Mortgage to the same extent as if such
lease or transfer had not occurred, and, except as otherwise provided herein,
the terms of any such lease shall not permit any Lessee to take any action not
permitted to be taken by the Company in this Mortgage with respect to the
Aircraft. No pooling agreement, lease or other relinquishment of possession of
any Airframe or Engine, or Wet Lease shall in any way discharge or diminish any
of the Company's obligations to the Collateral Agent hereunder or constitute a
waiver of the Collateral Agent's rights or remedies hereunder. Any lease
permitted under this Section 3.2(a) shall expressly prohibit any further
sublease by the Lessee. The
- 8 -
<PAGE>
Collateral Agent agrees, for the benefit of the Company (and any Lessee) and
for the benefit of any mortgagee or other holder of a security interest in
any engine (other than an Engine) owned by the Company (or any Lessee), any
lessor of any engine (other than an Engine) leased to the Company (or any
Lessee) and any conditional vendor of any engine (other than an Engine)
purchased by the Company (or any Lessee) subject to a conditional sale
agreement or any other security agreement, that no interest shall be created
hereunder in any engine so owned, leased or purchased and that neither the
Collateral Agent nor its successors or assigns will acquire or claim, as
against the Company (or any Lessee) or any such mortgagee, lessor or
conditional vendor or other holder of a security interest or any successor or
assignee of any thereof, any right, title or interest in such engine as the
result of such engine being installed on the Airframes; PROVIDED, HOWEVER,
that such agreement of the Collateral Agent shall not be for the benefit of
any lessor or secured party of any airframe (other than the Airframes) leased
to the Company (or any Lessee) or purchased by the Company (or any Lessee)
subject to a conditional sale or other security agreement or for the benefit
of any mortgagee of or any other holder of a security interest in an airframe
owned by the Company (or any Lessee), unless such lessor, conditional vendor,
other secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against the Collateral Agent, any right, title or interest in an Engine as a
result of such Engine being installed on such airframe. The Company shall
provide to the Collateral Agent (i) written notice of any lease hereunder
(such notice to be given not later than five days prior to entering into such
lease) and (ii) a copy of each lease which has a term of more than three
months.
(b) OPERATION AND USE.
The Company will not maintain, use, service, repair, overhaul or
operate the Aircraft (or permit any Lessee or other Person to maintain, use,
service, repair, overhaul or operate the Aircraft) in violation of any law or
any rule, regulation, order or certificate of any government or governmental
authority (domestic or foreign) having jurisdiction, or in violation of any
airworthiness certificate, license or registration relating to the Aircraft
issued by any such authority, except to the extent that the Company (or any
Lessee) is contesting in good faith the validity or application of any such law,
rule, regulation or order in any reasonable manner which does not adversely
affect the first priority Lien (subject to Permitted Liens) of this Mortgage and
does not involve any material risk of sale, forfeiture or loss of the Aircraft.
The Company shall not operate the Aircraft, or permit any Lessee to
operate the Aircraft, in any area excluded from coverage by any insurance
required by the terms of Section 3.6 hereof; PROVIDED, HOWEVER, that the failure
of the Company to comply with the provisions of this sentence shall not give
rise to an Event of Default hereunder where such failure is attributable to
causes beyond the reasonable control of the Company (or any Lessee) or to
extraordinary circumstances involving an isolated occurrence or series of
incidents not in the ordinary course of the regular operations of the Company
(or any Lessee) and in each case the Company (or such Lessee, as the case may
be) is taking all reasonable steps to remedy such failure as soon as is
reasonably practicable.
- 9 -
<PAGE>
(c) MAINTENANCE.
The Company, at its own cost and expense, shall (or shall cause any
Lessee to) maintain, service, repair and overhaul (or cause to be maintained,
serviced, repaired and overhauled) the Aircraft so as to keep the Aircraft in as
good an operating condition as when initially subjected to the Lien hereof,
ordinary wear and tear excepted, and as may be necessary to enable the
applicable airworthiness certification for the Aircraft to be maintained in good
standing at all times (other than temporary periods of storage in accordance
with applicable regulations or during maintenance or modification permitted
hereunder) under the Federal Aviation Act, except when all Aircraft powered by
engines of the same type as those with which such Aircraft shall be equipped at
the time of such grounding and registered in the United States have been
grounded by the FAA (although such certification need actually be maintained
only during such period as an Aircraft is registered in the United States), or
the applicable laws of any other jurisdiction in which an Aircraft may then be
registered from time to time in accordance with the terms hereof, utilizing,
except during any period that a Lease is in effect, the same manner and standard
of maintenance, service, repair or overhaul used by the Company with respect to
similar aircraft operated by the Company in similar circumstances and utilizing,
during any period that a Lease is in effect, the same manner and standard of
maintenance, service, repair or overhaul used by the Lessee with respect to
similar aircraft operated by the Lessee in similar circumstances; PROVIDED,
HOWEVER, that in all circumstances the Aircraft shall be maintained by the
Company (or any Lessee) in accordance with maintenance standards required by, or
substantially equivalent to those required by, the FAA or the central civil
aviation authority of Canada, France, Germany, Japan, the Netherlands or the
United Kingdom. The Company shall maintain or cause to be maintained all
records, logs and other materials required to be maintained in respect of the
Aircraft by the FAA or the applicable regulatory agency or body of any other
jurisdiction in which the Aircraft may then be registered.
(d) IDENTIFICATION OF COLLATERAL AGENT'S INTEREST.
On or prior to the date of the Temporary Amendment, or as soon as
practicable thereafter, the Company agrees to fix and maintain (or cause to be
fixed and maintained), at its expense, in the cockpit of the Airframes adjacent
to the airworthiness certificate therein and on each Engine a nameplate bearing
the inscription:
"SUBJECT TO AN AIRCRAFT MORTGAGE AND SECURITY AGREEMENT IN FAVOR OF
BANKERS TRUST COMPANY, AS COLLATERAL AGENT"
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Collateral Agent). Except as above provided, the Company
will not allow the name of any Person (other than the Company) to be placed on
the Airframes or the Engines as a designation that might be interpreted as a
claim of security interest or ownership; PROVIDED that nothing herein contained
shall prohibit the Company (or any Lessee) from placing its customary colors and
insignia on the Airframes or the Engines.
- 10 -
<PAGE>
(e) REGISTRATION.
The Company, at its own expense, will (or will cause any Lessee to)
cause the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Company under the Federal Aviation Act, PROVIDED,
HOWEVER, that the Company may elect to effect a change in the registration of
the Aircraft, at the Company's expense, with the prior written consent of the
Collateral Agent (which shall not be unreasonably withheld).
Section 3.3. INSPECTION.
At reasonable times and, so long as no Event of Default shall have
occurred and be continuing, on at least 15 days prior written notice to the
Company, the Collateral Agent or its authorized representatives may (not more
than once every calendar year (unless an Event of Default has occurred and is
continuing)) inspect the Aircraft and inspect and make copies (at the Collateral
Agent's expense) of the books and records of the Company relating to the
maintenance of the Aircraft; any such inspection of the Aircraft shall be
limited to a visual, walk-around inspection and shall not include opening any
panels, bays or the like without the express consent of the Company; PROVIDED
that no exercise of such inspection rights shall interfere with the normal
operation or maintenance of the Aircraft by, or the business of, the Company or
any Lessee. The Collateral Agent shall not have any duty to make any such
inspection and shall not incur any liability or obligation by reason of not
making any such inspection.
Section 3.4. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS; SUBSTITUTION OF ENGINES.
(a) REPLACEMENT OF PARTS.
The Company, at its own cost and expense, will so long as any Airframe
or Engine is subject to the Lien of this Mortgage promptly replace or cause to
be replaced all Parts which may from time to time be incorporated or installed
in or attached to such Airframe or Engine and which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever, except as
otherwise provided in Section 3.4(d) hereof or if any Airframe or any Engine to
which a Part relates has suffered an Event of Loss. In addition, the Company (or
any Lessee) may, at its own cost and expense, remove in the ordinary course of
maintenance, service, repair, overhaul or testing, any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, PROVIDED that the Company (or such Lessee),
except as otherwise provided in Section 3.4(d) hereof, will, at its own cost and
expense, replace such Parts as promptly as practicable. All replacement Parts
shall be free and clear of all Liens (except Permitted Liens and pooling
arrangements to the extent permitted by Section 3.4(c) and except in the case of
replacement property temporarily installed on an emergency basis) and shall be
in as good operating condition as, and shall have a value and utility at least
equal to, the Parts replaced assuming such replaced Parts were in the condition
and repair required to be maintained by the terms hereof.
- 11 -
<PAGE>
(b) PARTS.
Except as otherwise provided in Section 3.4(d) hereof, all Parts at
any time removed from any Airframe or Engine shall remain subject to the Lien of
this Mortgage, no matter where located, until such time as such Parts shall be
replaced by parts that have been incorporated or installed in or attached to
such Airframe or Engine and which meet the requirements for replacement parts
specified in Section 3.4(a) hereof. Immediately upon any replacement part
becoming incorporated or installed in or attached to any Airframe or Engine as
provided in Section 3.4(a) hereof, without further act (subject only to
Permitted Liens and any pooling arrangement to the extent permitted by Section
3.4(c) hereof and except in the case of replacement property temporarily
installed on an emergency basis), (i) title to such replacement Part shall be
owned by the Company, (ii) the replaced Part shall thereupon be free and clear
of all rights of the Collateral Agent and the replacement part shall be deemed a
Part hereunder; and (iii) such replacement Part shall become subject to the Lien
of this Mortgage and be deemed part of such Airframe or Engine, as the case may
be, for all purposes hereof to the same extent as the Parts originally
incorporated or installed in or attached to such Airframe or Engine.
(c) POOLING OF PARTS.
Any Part removed from any Airframe or Engine as provided in Section
3.4(a) hereof may be subjected by the Company (or any Lessee) to a normal
pooling arrangement customary in the airline industry of which the Company (or
any Lessee) is a party entered into in the ordinary course of the Company's (or
such Lessee's) business; PROVIDED that the Part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Sections 3.4(a) and 3.4(b) hereof as promptly as practicable
after the removal of such removed Part. In addition, any replacement part when
incorporated or installed in or attached to any Airframe or any Engine in
accordance with Section 3.4(a) hereof may be owned by any third party subject to
such a normal pooling arrangement, PROVIDED that the Company (or any Lessee), at
its expense, as promptly thereafter as practicable, either (i) causes such
replacement Part to become subject to the Lien of this Mortgage, free and clear
of all Liens except Permitted Liens (other than pooling arrangements), at which
time such temporary replacement Part shall become a Part or (ii) replaces such
replacement Part by incorporating or installing in or attaching to such Airframe
or Engine a further replacement Part which is subject to the Lien of this
Mortgage, free and clear of all Liens except Permitted Liens (other than pooling
arrangements).
(d) ALTERATIONS; MODIFICATIONS AND ADDITIONS.
The Company, at its own expense, will make (or cause to be made) such
alterations and modifications in and additions to any Airframe or Engine as may
be required to be made from time to time to meet the applicable standards of the
FAA or any applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered as permitted by Section 3.2(e) hereof;
PROVIDED, HOWEVER, that the Company (or any Lessee) may, in good faith, contest
the validity or application of any such law, rule, regulation or order in any
reasonable manner which does not adversely affect the Collateral Agent. In
addition, the
- 12 -
<PAGE>
Company (or any Lessee), at its own expense, may from time to time add
further parts or accessories and make such alterations and modifications in
and additions to any Airframe or Engine as the Company (or such Lessee) may
deem desirable in the proper conduct of its business, including, without
limitation, removal of Parts which the Company (or such Lessee) has
determined in its reasonable judgment to be obsolete or no longer suitable or
appropriate for use on such Airframe or Engine (such parts, "OBSOLETE
PARTS"); PROVIDED that no such alteration, modification or addition shall
materially diminish the value, utility or remaining useful life of such
Airframe or Engine below the value, utility or remaining useful life thereof
immediately prior to such alteration, modification or addition, assuming such
Airframe or Engine was then in the condition required to be maintained by the
terms of this Mortgage, except that the value (but not the utility or
remaining useful life) of any Airframe or Engine may be reduced by the value
of Obsolete Parts which have been removed so long as the aggregate value of
all Obsolete Parts that shall have been removed and not replaced with respect
to any Aircraft shall not exceed an amount equal to 1.5% of the Appraised
Value of such Aircraft. All Parts incorporated or installed in or attached
or added to the Airframes or the Engines as the result of such alteration,
modification or addition (the "ADDITIONAL PARTS") shall become subject to the
Lien of this Mortgage. Notwithstanding the foregoing sentence, the Company
(or any Lessee) may remove or suffer to be removed any Additional Part,
PROVIDED that such Additional Part (i) is in addition to, and not in
replacement of or in substitution for, any Part originally incorporated or
installed in or attached to such Airframe or Engine at the time of delivery
thereof hereunder or any Part in replacement of, or in substitution for, any
such Part, (ii) is not required to be incorporated or installed in or
attached or added to such Airframe or Engine pursuant to the terms of Section
3.2(a) or (c) hereof or the first sentence of this Section 3.4(d), and (iii)
can be removed from such Airframe or Engine without diminishing or impairing
the value, utility or remaining useful life which such Airframe or Engine
would have had at the time of removal had such alteration, modification or
addition not occurred, assuming that such Airframe or Engine was in the
condition and repair required to be maintained by the terms hereof. Upon the
removal by the Company (or any Lessee) of any such part as above provided,
such part shall, without further act, be free and clear of all rights of the
Collateral Agent and such Part shall not be deemed a Part hereunder.
(e) SUBSTITUTION OF ENGINES.
The Company shall have the right at its option at any time, on at
least twenty (20) days' prior written notice to the Collateral Agent, to
substitute, and if an Event of Loss shall have occurred with respect to an
Engine (not involving an Event of Loss with respect to the Airframe to which
such Engine is attached with respect to which the Company makes the prepayment
required by Section 4.02(e) of the Credit Agreement or the substitution
permitted by Section 3.5(a)), shall within thirty (30) days after the occurrence
of such Event of Loss substitute a Replacement Engine of the same make and
model. In such event, immediately upon the effectiveness of such substitution
on the date set forth in such notice and without further act, (i) the replaced
Engine shall thereupon be free and clear of all rights of the Collateral Agent
and shall no longer be deemed an Engine hereunder, and (ii) such Replacement
Engine shall become subject to the Lien of this Mortgage, free and clear of all
Liens except Permitted Liens, and be deemed part of the relevant Aircraft for
all purposes hereof to the same extent as the Engine originally installed on or
attached to the Airframe. The Company's right to make a replacement
- 13 -
<PAGE>
hereunder shall be subject to the fulfillment of the following conditions
precedent at the Company's sole cost and expense:
(i) The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto and shall
be in full force and effect, and an executed counterpart of each shall have
been delivered to the Collateral Agent:
(A) a Mortgage Supplement covering the Replacement Engine
(filed for recording pursuant to the Federal Aviation Act, or the
applicable laws, rules and regulations of any other jurisdiction in
which the relevant Aircraft may then be registered as permitted
hereby);
(B) an Officer's Certificate of the Company stating (i)
that the Replacement Engine is of at least equal value, utility and
remaining useful life as the Engine it replaces assuming such Engine
had been maintained in the condition required hereunder and (ii) each
of the conditions specified in this paragraph (e) with respect to such
Replacement Engine, and any comparable provisions of any Lease
permitted hereby to which such Engine is subject, have been satisfied;
(C) such Uniform Commercial Code financing statements
covering the Lien created by this Mortgage as deemed necessary or
desirable by counsel for the Collateral Agent to protect the security
interests of the Collateral Agent in the Replacement Engine; and
(D) a certificate, reasonably acceptable to the Collateral
Agent in form and substance, of an aircraft engineer or qualified
independent aircraft appraiser certifying, with respect to such
Replacement Engine, to the effect specified in Section 3.4(e)(i)(B)
hereof;
(ii) Upon request by the Collateral Agent, the Company shall furnish
the Collateral Agent with (A) an opinion addressed to the Collateral Agent,
reasonably satisfactory in form and substance to the Collateral Agent, of
the Company's counsel, which may be the Company's General Counsel or an
Associate General Counsel, to the effect that such documents reasonably
requested by the Collateral Agent are sufficient to cause such Replacement
Engine to be subject to the Lien of this Mortgage, (B) upon recordation, an
opinion of qualified FAA counsel, or if applicable, qualified counsel in
the jurisdiction of the relevant Aircraft's registration addressed to the
Collateral Agent, in either case satisfactory in form and substance to the
Collateral Agent as to the due recordation of the Mortgage Supplement as a
first priority Lien on the Replacement Engine, registration of the
ownership of the Replacement Engine and the freedom from Liens of record
(except Permitted Liens), and (C) such evidence of compliance with the
insurance provisions of Section 3.6 hereof with respect to such Replacement
Engine as the Collateral Agent may reasonably request; and
(iii) The Company shall have delivered to the Collateral Agent (A) a
copy of the bill of sale respecting such Replacement Engine or other
evidence of the Company's
- 14 -
<PAGE>
ownership of such Replacement Engine, reasonably satisfactory to the
Collateral Agent and (B) appropriate instruments assigning to the
Collateral Agent the benefits, if any, of all manufacturer's and vendor's
warranties generally available and permitted to be assigned by the Company
with respect to such Replacement Engine.
Upon such substitution, (x) the Collateral Agent shall execute and
deliver to the Company such documents and instruments, prepared at the Company's
expense, as the Company shall reasonably request, to evidence the release of
such replaced Engine from the Lien of this Mortgage; (y) the Collateral Agent
shall assign to the Company all claims it may have against any other Person
relating to an Event of Loss of such replaced Engine giving rise to such
substitution; and (z) the Company shall receive all insurance proceeds and
proceeds in respect of any Event of Loss of such replaced Engine giving rise to
such replacement to the extent not previously applied to the purchase price of
the Replacement Engine as provided in Sections 3.6(b)(I), second paragraph, and
3.5(d)(ii) hereof.
Section 3.5. LOSS, DESTRUCTION OR REQUISITION.
(a) EVENT OF LOSS WITH RESPECT TO AIRFRAMES.
Upon the occurrence of an Event of Loss with respect to an Airframe or
an Engine, the Company shall forthwith (and in any event within ten (10) days
after such occurrence) give the Collateral Agent written notice of such Event of
Loss. The Company shall, within twenty (20) days after the occurrence of an
Event of Loss with respect to such Airframe give the Collateral Agent written
notice of its election to perform one of the following options (it being agreed
that, if the Company shall not have given notice of such election within such 20
day period, the Company shall be required to make the prepayment required by
Section 4.02(e) of the Credit Agreement). The Company may elect either to (i)
make the prepayment required by Section 4.02(e) of the Credit Agreement or (ii)
cause to be subjected to the Lien of this Mortgage in replacement thereof not
later than the Business Day next succeeding the 30th day following the
occurrence of such Event of Loss, a Replacement Airframe (together with the same
number of Replacement Engines as the number of Engines, if any, installed on
such Airframe at the time such Event of Loss occurred), such Replacement
Airframe and Replacement Engines to be free and clear of all Liens except
Permitted Liens, to have a value, utility and remaining useful life at least
equal to, and to be of a comparable or improved model as, such Airframe and
Engines, if any, so replaced, as of the date of the Event of Loss (assuming such
Airframes and Engines were in the condition required by the terms hereof);
PROVIDED that if the Company does not perform its obligation to effect such
replacement in accordance with this Section 3.5(a) during the period of time
provided herein, then the Company shall make the prepayment required by Section
4.02(e) of the Credit Agreement on the Business Day next succeeding the 30th day
following the occurrence of such Event of Loss.
(b) EFFECT OF REPLACEMENT.
Upon the Company having provided a Replacement Aircraft as provided
for in Section 3.5(a) above, (x) the Lien of this Mortgage shall continue with
respect to such Replacement Aircraft as though no Event of Loss had occurred;
the Collateral Agent shall, at the
- 15 -
<PAGE>
cost and expense of the Company, release from the Lien of this Mortgage the
replaced Airframe and Engines or engines, if any, attached to such Airframe
upon the occurrence of the Event of Loss by executing and delivering to the
Company such documents and instruments, prepared at the Company's expense, as
the Company may reasonably request to evidence such release; and (y) the
Collateral Agent shall assign to the Company all claims it may have against
any other Person arising from the Event of Loss and the Company shall receive
all insurance proceeds and proceeds from any award in respect of
condemnation, confiscation, seizure or requisition, including any investment
interest thereon, to the extent not previously applied to the purchase price
of the Replacement Aircraft as provided in Sections 3.5(d)(i) and 3.6 hereof.
(c) CONDITIONS TO AIRFRAME REPLACEMENT.
(i) The Company's right to make a replacement under Section 3.5(a)
hereof shall be subject to the fulfillment, at the Company's sole cost and
expense and in addition to the conditions contained in such Section 3.5(a), of
the following conditions precedent:
(1) On the date that the Replacement Aircraft is delivered, which
date shall be not later than the Business Day next succeeding the 30th day
following the Event of Loss leading to such replacement (hereinafter
referred to as the "REPLACEMENT CLOSING DATE"), no Event of Default shall
have occurred and be continuing;
(2) On the Replacement Closing Date, the following documents shall
have been duly authorized, executed and delivered by the respective party
or parties thereto and shall be in full force and effect, and an executed
counterpart of each thereof shall have been delivered to the Collateral
Agent:
(A) a Mortgage Supplement covering the Replacement Aircraft
(filed for recording pursuant to the Federal Aviation Act, or the
applicable laws, rules and regulations of any other jurisdiction in
which the Aircraft to be replaced may then be registered as permitted
hereby);
(B) such Uniform Commercial Code financing statements
covering the Lien created by this Mortgage as deemed necessary or
desirable by counsel for the Collateral Agent to protect the security
interests of the Collateral Agent in the Replacement Aircraft; and
(C) a certificate, reasonably acceptable to the Collateral
Agent in form and substance, of an aircraft engineer or qualified
independent aircraft appraiser certifying (I) that the Replacement
Airframe is the same model as the Airframe to be replaced (or an
improved model, as the case may be) and has a value, utility and
remaining useful life at least equal to the Airframe to be replaced,
assuming such Airframe had been maintained in the condition required
hereunder and (II) with respect to the Replacement Engines
constituting part of such Replacement Aircraft to the effect specified
in Section 3.4(e)(i)(B) hereof.
- 16 -
<PAGE>
(3) On or before the Replacement Closing Date, the Collateral Agent
shall have received from the Company such documents and evidence with
respect to the Company as the Collateral Agent may reasonably request in
order to establish the consummation of the transactions contemplated by
this Section 3.5(c), evidence of taking of all necessary corporate action
in connection therewith and compliance with the conditions set forth in
this Section 3.5(c), in each case in form and substance reasonably
satisfactory to the Collateral Agent;
(4) The Collateral Agent shall have received evidence satisfactory
to the Collateral Agent as to the due compliance with Section 3.6 hereof
with respect to the Replacement Aircraft;
(5) On the Replacement Closing Date, (A) the Company shall cause
the Replacement Aircraft to be subject to the Lien of this Mortgage, free
and clear of Liens (other than Permitted Liens), (B) the Replacement
Aircraft shall have been duly certified by the FAA or the relevant body or
agency of the jurisdiction then applicable to the registration of the
Airframe to be replaced as to type and airworthiness in accordance with the
terms of this Mortgage, and the registration of the Replacement Aircraft in
the name of the Company (or any Lessee as lessee if the Aircraft to be
replaced had been so registered immediately prior to the occurrence of the
Event of Loss with respect thereto) shall have been duly made with the FAA
or the relevant body or agency of the jurisdiction then applicable to the
registration of the Airframe to be replaced and (C) the Collateral Agent
shall have received evidence satisfactory to it with respect to the matters
covered by this subparagraph (5);
(6) On the Replacement Closing Date, the following statements shall
be true and the Collateral Agent shall have received an Officer's
Certificate of the Company, dated the Replacement Closing Date, stating
that (A) the matters set forth in subparagraph (1) above are confirmed, (B)
no Event of Default will result from the Company acquiring its interest in
the Replacement Aircraft and (C) each of the conditions specified in this
paragraph (c) with respect to such Replacement Airframe, and any comparable
provisions of any lease permitted hereby to which such Airframe is subject,
have been satisfied;
(7) The Collateral Agent shall, at the expense of the Company, have
received (A) an opinion addressed to the Collateral Agent, reasonably
satisfactory in form and substance to the Collateral Agent, from
Cadwalader, Wickersham & Taft or other counsel selected by the Company and
reasonably satisfactory to the Collateral Agent to the effect that (i) the
Replacement Airframe and Replacement Engines, if any, has or have been made
subject to the Lien of this Mortgage and (ii) all required action has been
taken in order to maintain, and such action shall maintain, the
effectiveness and priority of the interests in the Collateral which the
Mortgage purports to create and (B) an opinion of qualified FAA counsel or,
if applicable, qualified local counsel in the jurisdiction where the
Aircraft to be replaced is registered, in either case addressed to the
Collateral Agent and in form and substance satisfactory to the Collateral
Agent, respecting the due recordation of the Mortgage Supplement as a first
priority Lien respecting such
- 17 -
<PAGE>
Replacement Aircraft, the registration of the ownership thereof and
freedom from Liens of record (other than Permitted Liens); and
(8) The Company shall have delivered to the Collateral Agent (A) a
copy of the original bill of sale respecting such Replacement Airframe and
Replacement Engines, if any, and (B) appropriate instruments assigning to
the Collateral Agent the benefits, if any, of all manufacturer's and
vendor's warranties generally available and permitted to be assigned by the
Company with respect to such Replacement Airframe and/or Replacement
Engine.
(d) NON-INSURANCE PAYMENTS RECEIVED ON ACCOUNT OF AN EVENT OF LOSS.
As between the Collateral Agent and the Company, any payments on
account of an Event of Loss (other than insurance proceeds or other payments the
application of which is provided for in Section 3.6 hereof, or elsewhere in this
Mortgage, as the case may be, or payments in respect of damage to the business
or property, of the Company) with respect to any Airframe, Engine or Part
received at any time by the Collateral Agent or by the Company from any
governmental authority or other Person will be applied as follows:
(i) if such payments are received with respect to an Event of Loss
as to any Aircraft, and the relevant Airframe or the relevant Airframe and
Engines or engines installed thereon are being replaced by the Company
pursuant to Section 3.5(a) hereof, such payments shall be paid over to, or
retained by, the Collateral Agent as security and upon completion of such
replacement (or upon the closing therefor) and compliance with the
provisions of Sections 3.5(a) and (c) with respect to the Event of Loss for
which such payments are made, paid over to or retained by the Company;
(ii) if such payments are received with respect to an Event of Loss
to an Engine or Part (not involving an Event of Loss as to an Airframe)
that has been or is being replaced by the Company pursuant to Section
3.4(e) hereof, such payments shall be paid over to, or retained by, the
Company; and
(iii) if such payments are received with respect to an Event of Loss
as to an Aircraft, if the relevant Airframe or the relevant Airframe and
Engines or engines installed thereon has not or have not been and will not
be replaced as contemplated by Section 3.5(a) hereof, such payments shall
be applied to the prepayment required pursuant to Section 4.02(e) of the
Credit Agreement and the payment of any other Obligations then due and
payable and thereafter, the balance, if any, of such payment shall be
promptly paid over to, or retained by, the Company.
- 18 -
<PAGE>
(e) REQUISITION OF USE.
In the event of a requisition for use by any government, so long as it
does not constitute an Event of Loss, of any Airframe and the Engines or engines
installed on such Airframe so long as any Airframe or Engine is subject to the
Lien of this Mortgage, the Company shall promptly notify the Collateral Agent of
such requisition and all of the Company's obligations under this Mortgage shall
continue to the same extent as if such requisition had not occurred. So long as
no Event of Default shall have occurred and be continuing, any payments received
by the Collateral Agent or the Company from such government with respect to such
requisition of use shall be paid over to, or retained by, the Company. In the
event of an Event of Loss of an Engine resulting from the requisition for use by
a government of such Engine (but not an Airframe), the Company will replace such
Engine hereunder by complying with the terms of Section 3.4(e) hereof and any
payments received by the Collateral Agent or the Company from such government
with respect to such requisition shall be paid over to, or retained by, the
Company.
(f) APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT.
Any amount referred to in this Section 3.5 which is payable to the
Company (or any Lessee) shall not be paid to or retained by the Company (or such
Lessee), if at the time of such payment or retention an Event of Default shall
have occurred and be continuing, but shall be held by or paid over to the
Collateral Agent as security for the Obligations and, if the aggregate unpaid
principal amounts of the Notes shall be declared to be due and payable pursuant
to the Credit Agreement, applied against the Obligations as and when due. Upon
the earlier of (a) such time as there shall not be continuing any such Event of
Default or (b) the termination of this Mortgage in accordance with Section 8.1,
such amount, and any interest realized thereon pursuant to Section 6.1 hereof,
shall be paid over to the Company (or such Lessee) to the extent not previously
applied in accordance with the preceding sentence.
Section 3.6. INSURANCE.
(a) PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE.
(I) Except as provided in clause (II) of this Section 3.6(a), the
Company will carry or cause to be carried at its or any Lessee's expense (i)
aircraft public liability (including, without limitation, passenger legal
liability) (and including aircraft war risk and hijacking insurance, if and to
the extent the same is maintained by the Company (or any Lessee) with respect to
other aircraft owned or leased, and operated by the Company (or such Lessee) on
the same routes) insurance and property damage insurance (exclusive of
manufacturer's product liability insurance) with respect to all the Aircraft, in
an amount not less than the greater of (x) with respect to each Aircraft of any
type, the amount of public liability and property damage insurance from time to
time applicable to aircraft owned or operated by the Company of the same type
and (y) the amount of public liability and property damage maintained by the
Company on the Temporary Amendment Effective Date and (ii) cargo liability
insurance, in the case of both clause (i) and clause (ii), (A) with respect to
Aircraft of any type, of the type and covering the same risks as from time to
time applicable to aircraft operated by the Company of the same type as the
Aircraft and (B) which is maintained in effect with insurers of recognized
responsibility.
- 19 -
<PAGE>
Any policies of insurance carried in accordance with this paragraph (a) and
any policies taken out in substitution or replacement for any of such
policies (A) shall be amended to name the Secured Creditors (but without
imposing on any such party liability to pay the premiums for such insurance)
(and, if any Lease shall be in effect, the Company in its capacity as lessor
under the Lease) as additional insureds as their interests may appear, (B)
shall provide that in respect of the interest of the Secured Creditors (and,
if any Lease shall be in effect, the Company in its capacity as lessor under
the Lease) in such policies the insurance shall not be invalidated by any
action or inaction of the Company (or, if any Lease is then in effect, any
Lessee) or any other Person and shall insure the Secured Creditors (and, if
any Lease shall be in effect, the Company in its capacity as lessor under the
Lease) regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by the Company (or, if any Lease is then
in effect, any Lessee), (C) may provide for self-insurance to the extent
permitted by Section 3.6(d) and (D) shall provide that if the insurers cancel
such insurance for any reason whatever or if any material change is made in
such insurance which adversely affects the interest of the Secured Creditors
(or, if any Lease shall be in effect, the Company in its capacity as lessor
under the Lease), or such insurance shall lapse for non-payment of premium,
such cancellation, lapse or change shall not be effective as to the Secured
Creditors (or, if any Lease shall be in effect, the Company in its capacity
as lessor under the Lease) for thirty (30) days (seven (7) days in the case
of war risk and allied perils coverage) after issuance to the Collateral
Agent of written notice by such insurers of such cancellation, lapse or
change; PROVIDED, HOWEVER, that if any notice period specified above is not
reasonably obtainable, such policies shall provide for as long a period of
prior notice as shall then be reasonably obtainable. Each liability policy
(1) shall be primary without right of contribution from any other insurance
which is carried by the Secured Creditors (or, if any Lease shall be in
effect, the Company in its capacity as lessor under the Lease), (2) shall
expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate
policy covering each insured, and (3) shall waive any right of the insurers
to any set-off or counterclaim or any other deduction, whether by attachment
or otherwise, in respect of any liability of the Secured Creditors (or, if
any Lease shall be in effect, the Company in its capacity as lessor under the
Lease) to the extent of any moneys due to the Secured Creditors (or, if any
Lease shall be in effect, the Company in its capacity as lessor under the
Lease).
(II) During any period that an Aircraft is on the ground and not in
operation, the Company may, in relation to such Aircraft, carry or cause to be
carried, in lieu of the insurance required by clause (I) above, insurance
otherwise conforming with the provisions of said clause (I) except that (A) the
amounts of coverage shall not be required to exceed the amounts of public
liability and property damage insurance from time to time applicable to aircraft
owned or operated by the Company of the same type as such Aircraft and which are
on the ground and not in operation; and (B) the scope of the risks covered and
the type of insurance shall be the same as from time to time shall be applicable
to aircraft owned or operated by the Company of the same type which are on the
ground and not in operation.
- 20 -
<PAGE>
(b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT.
(I) Except as provided in clause (II) of this Section 3.6(b),
the Company shall maintain or cause to be maintained in effect, at its or any
Lessee's expense, with insurers of recognized responsibility, all-risk ground
and flight aircraft hull insurance covering the Aircraft and all-risk ground
and flight coverage of Engines and Parts while temporarily removed from the
Aircraft and not replaced by similar components (including, without
limitation, war risk and governmental confiscation and expropriation (other
than by the government of registry of the relevant Aircraft) and hijacking
insurance, if and to the extent the same is maintained by the Company (or, if
a Lease is then in effect, any Lessee) with respect to other of the same type
aircraft owned or operated by the Company (or such Lessee) on the same
routes, except that the Company (or such Lessee) shall maintain war risk and
governmental confiscation and expropriation (other than by the government of
registry of the relevant Aircraft) and hijacking insurance if the Aircraft
are operated on routes where the custom is for major international air
carriers flying comparable routes to carry such insurance) which is of the
type as from time to time applicable to aircraft owned or operated by the
Company of the same type as the Aircraft; PROVIDED that such insurance shall
at all times while the Aircraft are subject to this Mortgage be for an amount
(subject to self-insurance to the extent permitted by Section 3.6(d)) not
less than the amount of insurance of the same type maintained by the Company
on the Temporary Amendment Effective Date with respect to the Aircraft. Any
policies carried in accordance with this paragraph (b) covering the Aircraft
and any policies taken out in substitution or replacement for any such
policies (i) shall be amended to name the Collateral Agent as a loss payee,
as its interest may appear (but without imposing on any such party liability
to pay premiums with respect to such insurance), (ii) may provide for
self-insurance to the extent permitted in Section 3.6(d), (iii) shall provide
that (A) in the Event of a Loss involving proceeds in excess of an amount
equal to 13.5% of the Appraised Value of the Aircraft subject to such Event
of Loss, the proceeds in respect of such loss up to an amount equal to the
amount of the prepayment required by Section 4.02(e) of the Credit Agreement
with respect to such loss (the "BALANCE DUE"), shall be payable to the
Collateral Agent (except in the case of a loss with respect to an Engine
installed on an airframe other than an Airframe, in which case the Company
(or any Lessee) shall arrange for any payment of insurance proceeds in
respect of such loss to be held for the account of the Collateral Agent
whether such payment is made to the Company (or any Lessee) or any third
party), it being understood and agreed that in the case of any payment to the
Collateral Agent otherwise than in respect of an Event of Loss, the
Collateral Agent shall, upon receipt of evidence satisfactory to it that the
damage giving rise to such payment shall have been repaired or that such
payment shall then be required to pay for repairs then being made, pay the
amount of such payment to the Company or its order, and (B) the entire amount
of any loss involving total proceeds equal to the amount set forth in clause
(A) above or less or the amount of any proceeds of any loss in excess of the
Balance Due shall be paid to the Company or its order unless an Event of
Default shall have occurred and be continuing and the insurers shall have
been notified thereof by the Collateral Agent, (iv) shall provide that if the
insurers cancel such insurance for any reason whatever, or such insurance
lapses for non-payment of premium or if any material change is made in the
insurance which adversely affects the interest of the Collateral Agent, such
cancellation, lapse or change shall not be effective as to the Collateral
Agent (or, if any Lease shall be in effect, the Company in its capacity as
lessor under the Lease) for thirty (30) days
- 21 -
<PAGE>
(seven (7) days in case of hull war risk and allied perils coverage) after
issuance to the Collateral Agent (or, if any Lease is in effect, the Company
in its capacity as lessor under the Lease) of written notice by such insurers
of such cancellation, lapse or change; PROVIDED, HOWEVER, that if any notice
period specified above is not generally obtainable, such policies shall
provide for as long a period of prior notice as shall then be generally
obtainable, (v) shall provide that in respect of the interest of the
Collateral Agent (and, if any Lease shall be in effect, the Company in its
capacity as lessor under the Lease) in such policies the insurance shall not
be invalidated by any action or inaction of the Company (or, if a Lease is
then in effect, any Lessee) or any other Person and shall insure the
Collateral Agent (and, if any Lease shall be in effect, the Company in its
capacity as lessor under the Lease) regardless of any breach or violation of
any warranty, declaration or condition contained in such policies by the
Company (or, if a Lease is then in effect, any Lessee), (vi) shall be primary
without any right of contribution from any other insurance which is carried
by the Secured Creditors (or, if any Lease shall be in effect, the Company in
its capacity as lessor under the Lease), (vii) shall waive any right of
subrogation of the insurers against the Secured Creditors (and if any Lease
shall be in effect, the Company in its capacity as lessor under the Lease),
and (viii) shall waive any right of the insurers to set-off or counterclaim
or any other deduction, whether by attachment or otherwise, in respect of any
liability of the Secured Creditors or the Company (or any Lessee) to the
extent of any moneys due to the Collateral Agent. In the case of a loss with
respect to an engine (other than an Engine) installed on an Airframe, the
Collateral Agent shall hold any payment to it of any insurance proceeds in
respect of such loss for the account of the Company or any other third party
that is entitled to receive such proceeds.
As between the Collateral Agent and the Company, it is agreed that all
insurance payments received as the result of the occurrence of an Event of Loss
will be applied as follows:
(w) if such payment is received as the result of an Event of Loss
with respect to an Airframe (the Airframe and any Engines installed
thereon) that has been or is being replaced by the Company as contemplated
by Section 3.5(a) hereof, such payments shall be paid over to, or retained
by, the Collateral Agent and upon completion of such replacement be paid
over to the Company;
(x) if such payments are received with respect to an Airframe (or
the Airframe and the Engines installed thereon) that has not been or is not
being replaced by the Company as contemplated by Section 3.5(a) hereof, so
much of such payments remaining, after reimbursement of the Collateral
Agent for reasonable costs and expenses, as shall not exceed the Balance
Due shall be applied in reduction of the Company's obligation to pay the
Balance Due in accordance with Section 4.02(e) of the Credit Agreement, if
not already paid by the Company, or, if already paid by the Company, shall
be applied to reimburse the Company for its payment of such Balance Due,
and the balance, if any, of such payments remaining thereafter will be paid
over to, or retained by, the Company (or if directed by the Company, any
Lessee); and
(y) if such payments are received with respect to an Engine under
the circumstances contemplated by Section 3.4(e) hereof, so much of such
payments remaining,
- 22 -
<PAGE>
after reimbursement of the Collateral Agent for reasonable costs and
expenses, shall be paid over to, or retained by, the Company (or if
directed by the Company, any Lessee); PROVIDED that the Company shall
have fully performed or, concurrently therewith, will fully perform,
the terms of Section 3.4(e) hereof with respect to the Event of Loss for
which such payments are made.
As between the Collateral Agent and the Company, the insurance
payments for any property damage or loss to any Airframe or Engine not
constituting an Event of Loss with respect thereto will be applied in payment
for repairs or for replacement property in accordance with the terms of Sections
3.2(c) and 3.4 hereof, if not already paid for by the Company (or any Lessee),
and any balance (or if already paid for by the Company (or any Lessee), all such
insurance proceeds) remaining after compliance with such Sections with respect
to such loss shall be paid to the Company (or any Lessee if directed by the
Company).
(II) During any period that an Aircraft is on the ground and not in
operation, the Company may, in relation to such Aircraft, carry or cause to be
carried, in lieu of the insurance required by clause (b) (I) above, insurance
otherwise conforming with the provisions of said clause (b) (I) except that the
scope of the risks and the type of insurance shall be the same as from time to
time applicable to aircraft owned by the Company of the same type similarly on
the ground and not in operation; PROVIDED that the Company shall maintain
insurance against risk of loss or damage to such Aircraft in an amount at least
equal to the amount of insurance of such type maintained by the Company on the
Temporary Amendment Effective Date with respect to such Aircraft during such
period that such Aircraft is on the ground and not in operation.
(c) REPORTS, ETC.
The Company will furnish, or cause to be furnished, to the Collateral
Agent, on or before the Temporary Amendment Effective Date and on or before July
1, in each year thereafter commencing July 1, 1999 a report, signed by Aon Risk
Services, Inc. of Minnesota, Marsh & McLennan, Incorporated or any other
independent firm of insurance brokers reasonably acceptable to the Collateral
Agent (the "INSURANCE BROKERS"), describing in reasonable detail the insurance
and reinsurance then carried and maintained with respect to the Aircraft and
stating the opinion of such firm that the insurance then carried and maintained
with respect to the Aircraft complies with the terms hereof; PROVIDED, HOWEVER,
that all information contained in the foregoing report shall not be made
available by the Secured Creditors to anyone except (A) to permitted transferees
of the interest of the Secured Creditors who agree to hold such information
confidential, (B) to the Secured Creditors' counsels or independent public
accountants or independent insurance advisors who agree to hold such information
confidential or (C) as may be required by any statute, court or administrative
order or decree or governmental ruling or regulation. The Company will cause
such Insurance Brokers to agree to advise the Collateral Agent in writing of any
default in the payment of any premium and of any other act or omission on the
part of the Company of which it has knowledge and which might invalidate or
render unenforceable, in whole or in part, any insurance on the Aircraft. To
the extent such agreement is reasonably obtainable, the Company will also cause
such Insurance Brokers to agree to advise the Collateral Agent in writing at
least thirty (30) days (seven (7) days in the case of war risk and
- 23 -
<PAGE>
allied perils coverage) prior to the expiration or termination date of any
insurance carried and maintained on the Aircraft pursuant to this Section
3.6. In addition, the Company will also cause such Insurance Brokers to
deliver to the Collateral Agent, on or prior to the date of expiration of any
insurance policy referenced in a previously delivered certificate of
insurance, a new certificate of insurance, substantially in the same form as
delivered by the Company to the Collateral Agent on the Temporary Amendment
Effective Date. In the event that the Company or any Lessee shall fail to
maintain or cause to be maintained insurance as herein provided, the
Collateral Agent may at its sole option provide such insurance and, in such
event, the Company shall, upon demand, reimburse the Collateral Agent for the
cost thereof to the Collateral Agent, without waiver of any other rights the
Collateral Agent may have.
(d) SELF-INSURANCE.
The Company may self-insure by way of deductible, premium adjustment
or franchise provisions or otherwise (including, with respect to insurance
maintained pursuant to Section 3.6(b), insuring for maximum amounts which are
less than the amounts required by such Section) in the insurance covering the
risks required to be insured against pursuant to this Section 3.6 under a
program applicable to all the aircraft in the Company's fleet, but in no case
shall the aggregate amount of self-insurance in regard to Section 3.6(a) and
Section 3.6(b) exceed during any policy year, with respect to all of the
aircraft in the Company's fleet (including, without limitation, the Aircraft),
the lesser of (a) 50% of the largest replacement value of any single aircraft in
the Company's fleet or (b) 1-1/2% of the average aggregate insurable value
(during the preceding policy year) of all aircraft (including, without
limitation, the Aircraft) on which the Company carries insurance. In addition,
the Company (and any Lessee) may self-insure to the extent of any applicable
mandatory minimum per aircraft (or, if applicable, per annum or other period)
hull or liability insurance deductible imposed by the aircraft hull or liability
insurers.
(e) ADDITIONAL INSURANCE BY THE COLLATERAL AGENT AND THE COMPANY.
The Company (and any Lessee) may at its own expense carry insurance
with respect to its interest in the Aircraft in amounts in excess of that
required to be maintained by this Section 3.6, so long as such excess insurance
is not in conflict with the insurance otherwise required hereunder.
(f) INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE.
Notwithstanding any provisions of this Section 3.6 requiring
insurance, the Collateral Agent agrees to accept, in lieu of insurance against
any risk with respect to an Aircraft, indemnification from, or insurance
provided by, the United States Government or any agency or instrumentality
thereof or, upon the written consent of the Collateral Agent, other government
of registry of such Aircraft or any agency or instrumentality thereof, against
such risk in an amount which, when added to the amount of insurance against such
risk maintained by the Company (or any Lessee) with respect to the Aircraft
(including permitted self-insurance) shall be at least equal to the amount of
insurance against such risk otherwise required by this Section 3.6.
- 24 -
<PAGE>
(g) APPLICATION OF PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT.
Any amount referred to in paragraph (b) of this Section 3.6 which is
payable to or retainable by the Company (or any Lessee) shall not be paid to or
retained by the Company (or any Lessee) if at the time of such payment or
retention an Event of Default shall have occurred and be continuing, but shall
be held by or paid over to the Collateral Agent as security for the Obligations
and, if the aggregate unpaid principal amount of the Notes shall be declared to
be due and payable pursuant to the Credit Agreement, applied against the
Obligations as and when due. Upon the earlier of (a) such time as there shall
not be continuing any such Event of Default or (b) the termination of this
Mortgage in accordance with Section 8.1, such amount, and any interest realized
thereon pursuant to Section 6.1 hereof, shall be paid to the Company (or such
Lessee) to the extent not previously applied in accordance with the preceding
sentence.
Section 3.7. FILINGS.
The Company will take, or cause to be taken, at the Company's cost and
expense, such action with respect to the recording, filing, re-recording and
re-filing of this Mortgage in the office of the Federal Aviation Administration,
pursuant to the Federal Aviation Act, and in such other places as may be
required under any applicable law or regulation, each Mortgage Supplement and
any financing statements or other instruments as are necessary, or reasonably
requested by the Collateral Agent and appropriate, to maintain, so long as this
Mortgage is in effect, the perfection and preservation of the Lien created by
this Mortgage, or will furnish to the Collateral Agent timely notice of the
necessity of such action, together with such instruments, in execution form, and
such other information as may be required to enable the Collateral Agent to take
such action.
ARTICLE 4.
REMEDIES OF THE COLLATERAL AGENT
UPON AN EVENT OF DEFAULT
Section 4.1. EVENT OF DEFAULT. It shall be an Event of Default
hereunder if under the Credit Agreement an "Event of Default" (as such term is
defined in the Credit Agreement) shall occur; PROVIDED, that if the Company
shall have undertaken to cure any failure which arises under Section 3.2(c)
hereof, or under the first sentence of Section 3.2(b) hereof as it relates to
maintenance, service, repair or overhaul or under Section 3.4(a), (b), (c) or
(d) hereof and, notwithstanding the diligence of the Company in attempting to
cure such failure, such failure is not cured within 30 days but is curable with
future due diligence, there shall exist no Event of Default so long as the
Company is proceeding with due diligence to cure such failure and such failure
is remedied not later than one hundred eighty (180) days after receipt by the
Company of notice from the Collateral Agent of such failure; and PROVIDED
FURTHER, that any failure of the Company to perform or observe any covenant,
condition, agreement or any error in a representation or warranty shall not
constitute an Event of Default if such failure or error is caused solely by
reason of an event that constitutes an Event of Loss so long as the Company is
continuing to comply with all of the terms of Section 3.5 hereof.
- 25 -
<PAGE>
Section 4.2. REMEDIES WITH RESPECT TO COLLATERAL.
(a) REMEDIES AVAILABLE.
Upon (i) the occurrence and continuance of any Event of Default, the
Collateral Agent (in accordance with the provisions of Article 5 hereof) may,
and upon the written instructions of the Required Banks, the Collateral Agent
shall, do one or more of the following; PROVIDED, HOWEVER, that during any
period that an Aircraft is subject to the Civil Reserve Air Fleet Program in
accordance with the provisions of Section 3.2(a) hereof and in possession of the
United States government or an agency or instrumentality of the United States,
the Collateral Agent shall not, on account of any Event of Default, be entitled
to exercise any of the remedies specified in the following clauses (A), (B) and
(C) in relation to such Aircraft in such manner as to limit the Company's
control under this Mortgage of the relevant Airframe, or any Engines installed
thereon, unless at least sixty (60) days' (or such lesser period as may then be
applicable under the Air Mobility Command program of the United States Air
Force) written notice of default hereunder shall have been given by the
Collateral Agent by registered or certified mail to the Company (and any Lessee)
with a copy addressed to the Contracting Office Representative for the Air
Mobility Command of the United States Air Force under any contract with the
Company (or any Lessee) relating to such Aircraft:
(A) cause the Company, upon the written demand of the Collateral
Agent, at the Company's expense, to deliver promptly, and the Company shall
deliver promptly, all or such part of the Airframes, the Engines or other
Collateral as the Collateral Agent may so demand to the Collateral Agent or
its order, or the Collateral Agent, at its option, may enter upon the
premises where all or any part of the Airframes, the Engines or other
Collateral are located and take immediate possession (to the exclusion of
the Company and all Persons claiming under or through the Company) of and
remove the same by summary proceedings or otherwise together with any
engine which is not an Engine but which is installed on an Airframe,
subject to all of the rights of the owner, lessor, lien or secured party of
such engine; PROVIDED that an Airframe with an engine (which is not an
Engine) installed thereon may be flown or returned only to a location
within the continental United States, and such engine shall be held for the
account of any such owner, lessor, lienor or secured party or, if owned by
the Company, may at the option of the Collateral Agent, be exchanged with
the Company for an Engine in accordance with the provisions of Section
3.4(e) hereof;
(B) sell all or any part of the Airframes, Engines or other
Collateral at public or private sale, whether or not the Collateral Agent
shall at the time have possession thereof, as the Collateral Agent may
determine, or lease or otherwise dispose of all or any part of the
Airframes, the Engines or other Collateral as the Collateral Agent, in its
sole discretion, may determine, all free and clear of any rights or claims
of whatsoever kind of the Company; PROVIDED, HOWEVER, that the Company
shall be entitled at any time prior to any such disposition to redeem the
Collateral by paying in full all of the Obligations; or
- 26 -
<PAGE>
(C) exercise any or all of the rights and powers and pursue any and
all remedies of a secured party under the Uniform Commercial Code of the
State of New York.
Upon every taking of possession of Collateral under this Section 4.2,
the Collateral Agent may, from time to time, at the expense of the Collateral
Agent, make all such expenditures for maintenance, insurance, repairs,
replacements, alterations, additions and improvements to and of the Collateral,
as it may deem proper. In each such case, the Collateral Agent shall have the
right to maintain, store, lease, control or manage the Collateral and to
exercise all rights and powers of the Company relating to the Collateral in
connection therewith, as the Collateral Agent shall deem best, including the
right to enter into any and all such agreements with respect to the maintenance,
insurance, storage, leasing, control, management or disposition of the
Collateral or any part thereof as the Collateral Agent may determine; and the
Collateral Agent shall be entitled to collect and receive directly all tolls,
rents, revenues, issues, income, products and profits of the Collateral and
every part thereof, without prejudice, however, to the right of the Collateral
Agent under any provision of this Mortgage to collect and receive all cash held
by, or required to be deposited with, the Collateral Agent hereunder. Such
tolls, rents, revenues, issues, income, products and profits shall be applied to
pay the expenses of storage, leasing, control, management or disposition of the
Collateral, and of all maintenance, repairs, replacements, alterations,
additions and improvements, and to make all payments which the Collateral Agent
may be required or may elect to make, if any, for taxes, assessments, insurance
or other proper charges upon the Collateral or any part thereof (including the
employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Company), and all other
payments which the Collateral Agent may be required or authorized to make under
any provision of this Mortgage, as well as just and reasonable compensation for
the services of the Collateral Agent, and of all Persons properly engaged and
employed by the Collateral Agent.
In addition, the Company shall be liable for all legal fees and other
costs and expenses incurred by reason of the occurrence of any Event of Default
or the exercise of the Collateral Agent's remedies with respect thereto,
including all costs and expenses incurred in connection with the retaking or
return of any Airframe or Engines in accordance with the terms hereof or under
the Uniform Commercial Code of the State of New York, which amounts shall, until
paid, be secured by the Lien of this Mortgage.
If an Event of Default shall have occurred and the Notes shall have
been accelerated at the request of the Collateral Agent the Company shall
promptly execute and deliver to the Collateral Agent such instruments of title
and other documents as the Collateral Agent may deem necessary or advisable to
enable the Collateral Agent or an agent or representative designated by the
Collateral Agent, at such time or times and place or places as the Collateral
Agent may specify, to obtain possession of all or any part of the Collateral to
which the Collateral Agent shall at the time be entitled hereunder. If the
Company shall for any reason fail to execute and deliver such instruments and
documents after such request by the Collateral Agent, the Collateral Agent may
obtain a judgment conferring on the Collateral Agent the right to immediate
possession and requiring the Company to execute and deliver such instruments and
- 27 -
<PAGE>
documents to the Collateral Agent, to the entry of which judgment the Company
hereby specifically consents to the fullest extent it may lawfully do so.
Nothing in the foregoing shall affect the right of each Secured
Creditor to receive all payments of principal of, and interest on, the
Obligations held by such Secured Creditor and all other amounts owing to such
Secured Creditor as and when the same may be due.
(b) NOTICE OF SALE.
The Collateral Agent shall give the Company at least fifteen (15)
days' prior written notice of the date fixed for any public sale of any Airframe
or Engine or the date on or after which any private sale will be held, which
notice the Company hereby agrees is reasonable notice, and any such public sale
shall be conducted in general so as to afford the Company (and any Lessee) a
reasonable opportunity to bid.
(c) RECEIVER.
If any Event of Default shall occur and be continuing, to the extent
permitted by law, the Collateral Agent shall be entitled, as a matter of right
as against the Company, without notice or demand and without regard to the
adequacy of the security for the Obligations or the solvency of the Company,
upon the commencement of judicial proceedings by it to enforce any right under
this Mortgage, to the appointment of a receiver of the Collateral and of the
tolls, rents, revenues, issues, income, products and profits thereof.
(d) CONCERNING SALES.
At any sale under this Article, any Secured Creditor may bid for and
purchase the property offered for sale, may make payment on account thereof as
herein provided, and, upon compliance with the terms of sale, may hold, retain
and dispose of such property without further accountability therefor. Any
purchaser shall be entitled, for the purpose of making payment for the property
purchased, to deliver any of the Notes or other Obligations in lieu of cash in
the amount which shall be payable thereon as principal or interest. Said Notes
and other Obligations, in case the amount so payable to the holders thereof
shall be less than the amounts due thereon, shall be returned to the holders
thereof after being stamped or endorsed to show partial payment.
Section 4.3. WAIVER OF APPRAISEMENT, ETC., LAWS.
To the full extent that it may lawfully so agree, the Company agrees
that it will not at any time insist upon, plead, claim or take the benefit or
advantage of, any appraisement, valuation, stay, extension, or redemption law
now or hereafter in force, in order to prevent or hinder the enforcement of this
Mortgage or the absolute sale of the Collateral, or any part thereof, or the
possession thereof by any purchaser at any sale under this Article; but the
Company, for itself and all who may claim under it, so far as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws. The
Company, for itself and all who may claim under it, waives, to the extent that
it lawfully may, all right to have the property in the Collateral
- 28 -
<PAGE>
marshalled upon any foreclosure hereof, and agrees that any court having
jurisdiction to foreclosure this Mortgage may order the sale of the
Collateral as an entirety.
Section 4.4. APPLICATION OF PROCEEDS.
(a) All moneys collected by the Collateral Agent upon any sale or
other disposition of the Collateral shall be applied as follows:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (ii) and (iii) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors, with each Secured
Creditor receiving an amount equal to its outstanding Obligations or, if
the proceeds are insufficient to pay in full all such Obligations, its Pro
Rata Share of the amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Mortgage pursuant to Section 7.12 hereof, to the
Company or as required by applicable law.
(b) For purposes of this Mortgage "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or amount, that
amount (expressed as a percentage) equal to a fraction the numerator of which is
the then unpaid amount of such Secured Creditor's Obligations and the
denominator of which is the then outstanding amount of all Obligations.
(c) If any payment to any Secured Creditor of its Pro Rata Share of
any distribution would result in overpayment to such Secured Creditor, such
excess amount shall instead be distributed in respect of the unpaid Obligations
of the other Secured Creditors, with each Secured Creditor whose Obligations
have not been paid in full to receive an amount equal to such excess amount
multiplied by a fraction the numerator of which is the unpaid Obligations of
such Secured Creditor and the denominator of which is the unpaid Obligations of
all Secured Creditors entitled to such distribution.
(d) It is understood that the Company shall remain liable to the
extent of any deficiency between the amount of the proceeds of the Collateral
and the aggregate amount of the sums referred to in clauses (i) and (ii) of
Section 4.4(a).
Section 4.5. REMEDIES CUMULATIVE.
Each and every right, power and remedy hereby specifically given to
the Collateral Agent or otherwise in this Mortgage shall be cumulative and shall
be in addition to every other right, power and remedy specifically given under
this Mortgage or the other Credit Documents or now or hereafter existing at law,
in equity or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from
- 29 -
<PAGE>
time to time or simultaneously and as often and in such order as may be
deemed expedient by the Collateral Agent. All such rights, powers and
remedies shall be cumulative and the exercise or the beginning of the
exercise of one shall not be deemed a waiver of the right to exercise any
other or others. No delay or omission of the Collateral Agent in the
exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall
be construed to be a waiver of any Default or Event of Default or an
acquiescence therein. No notice to or demand on the Company in any case
shall entitle it to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any of the rights of the Collateral
Agent to any other or further action in any circumstances. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights
hereunder and shall be entitled to judgment, then in such suit the Collateral
Agent may recover reasonable expenses, including attorneys' fees, and the
amounts thereof shall be included in such judgment.
Section 4.6. DISCONTINUANCE OF PROCEEDINGS.
In case the Collateral Agent shall have instituted any proceeding to
enforce any right, power or remedy under this Mortgage by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the
Collateral Agent, then and in every such case the Company, the Collateral Agent
and each holder of any of the Obligations shall be restored to their former
positions and rights hereunder with respect to the Collateral subject to the
security interest created under this Mortgage, and all rights, remedies and
powers of the Collateral Agent shall continue as if no such proceeding had been
instituted (but otherwise without prejudice).
ARTICLE 5.
INDEMNITY
Section 5.1. INDEMNITY.
(a) The Company agrees to indemnify, reimburse and hold the
Collateral Agent, each Secured Creditor and their successors, permitted assigns,
employees, agents and servants (hereinafter in this Section 5.1 referred to as
"Indemnitees") harmless from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments and any and all
reasonable costs, expenses or disbursements (including reasonable attorneys'
fees and expenses) (for the purposes of this Section 5.1 the foregoing are
collectively, called "expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Mortgage, any other Credit Document or any other document
executed in connection herewith or therewith or in any other way connected with
the administration of the transactions contemplated hereby or thereby or the
enforcement of any of the terms of, or the preservation of any rights under any
thereof, or in any way relating to or arising out of the manufacture, ownership,
ordering, purchase, delivery, control, acceptance, lease, financing, possession,
operation, condition, sale, return or other disposition, or use of the
Collateral (including, without limitation, latent or other defects, whether or
not discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort
- 30 -
<PAGE>
(including, without limitation, claims arising or imposed under the doctrine
of strict liability, or for or on account of injury to or the death of any
Person (including any Indemnitee), or property damage); provided that no
Indemnitee shall be indemnified pursuant to this Section 5.1(a) for losses,
damages or liabilities to the extent caused by the gross negligence or
willful misconduct of such Indemnitee. The Company agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation,
damage, injury, penalty, claim, demand, action, suit or judgment, the Company
shall assume full responsibility for the defense thereof. Indemnitees agree
to use their best efforts to promptly notify the Company of any such
assertion of which such Indemnitees have knowledge.
(b) Without limiting the application of Section 5.1(a), the Company
agrees to pay, or reimburse the Collateral Agent for any and all reasonable
fees, costs and expenses of whatever kind or nature incurred in connection with
the creation, preservation or protection of the Collateral Agent's Liens on, and
security interest in, the Collateral, including, without limitation, all fees
and taxes in connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any taxes or Liens upon or
in respect of the Collateral, premiums for insurance with respect to the
Collateral and all other reasonable fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the Collateral Agent's
interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of or
relating to the Collateral.
(c) Without limiting the application of Section 5.1(a) or (b), the
Company agrees to pay, indemnify and hold the Indemnitees harmless from and
against any loss, costs, damages and expenses which the Indemnitees may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Company in this Mortgage, or any other Credit Document or in any writing
contemplated by or made or delivered pursuant to or in connection with this
Mortgage, or any other Credit Document.
(d) If and to the extent that the obligations of the Company under
this Section 5.1 are unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
Section 5.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL.
Any amounts paid by any Indemnitee as to which such Indemnitee has the
right to reimbursement shall constitute Obligations secured by the Collateral
until the Termination Date. The indemnity obligations of the Company contained
in this Section 5 shall continue in full force and effect notwithstanding the
full payment of all the Notes issued under the Credit Agreement and the payment
of all other Obligations and notwithstanding the discharge thereof.
- 31 -
<PAGE>
ARTICLE 6.
INVESTMENT OF SECURITY FUNDS
Section 6.1. INVESTMENT OF SECURITY FUNDS.
Any monies paid to or retained by the Collateral Agent which are
required to be paid to the Company or applied for the benefit of the Company
(including, without limitation, amounts payable to the Company under Sections
3.5(d), 3.5(f), 3.6(b) and 3.6(g) hereof), but which the Collateral Agent is
entitled to hold under the terms hereof pending the occurrence of some event or
the performance of some act (including, without limitation, the remedying of an
Event of Default), shall, until paid to the Company or applied as provided
herein, be invested by the Collateral Agent at the written authorization and
direction of the Company from time to time at the sole expense and risk of the
Company in Permitted Investments. After the occurrence and during the
continuance of an Event of Default, Permitted Investments will be selected by
the Collateral Agent at its discretion. At the time of such payment or
application, there shall be remitted to the Company any gain (including interest
received) realized as the result of any such investment (net of any fees,
commissions, other expenses or losses, if any, incurred in connection with such
investment) unless an Event of Default shall have occurred and be continuing.
The Collateral Agent shall not be liable for any loss relating to a Permitted
Investment made pursuant to this Article 6. The Company will promptly pay to
the Collateral Agent, on demand, the amount of any loss (net of any gains,
including interest received) realized as the result of any such investment
(together with any fees, commissions and other expenses, if any, incurred in
connection with such investment).
ARTICLE 7.
MISCELLANEOUS
Section 7.1. NO LEGAL TITLE TO COLLATERAL IN NOTEHOLDER.
No Secured Creditor shall have legal title to any part of the
Collateral. No transfer, by operation of law or otherwise, of a Note or other
right, title and interest of a Secured Creditor in and to the Collateral or this
Mortgage shall operate to terminate this Mortgage or entitle any successor or
transferee of such Secured Creditor to an accounting or to the transfer to it of
legal title to any part of the Collateral.
Section 7.2. SALE OF THE AIRCRAFT BY COLLATERAL AGENT IS BINDING.
Any sale or other conveyance of the Aircraft, the Airframe, any Engine
or any interest therein by the Collateral Agent made pursuant to the terms of
this Mortgage shall bind the Secured Creditors and the Company, and shall be
effective to transfer or convey all right, title and interest of the Collateral
Agent, the Company, and the Secured Creditors in and to the Aircraft, the
Airframe, any Engine or any interest therein. No purchaser or other grantee
shall be required to inquire as to the authorization, necessity, expediency or
regularity of such sale or
- 32 -
<PAGE>
conveyance or as to the application of any sale or other proceeds with
respect thereto by the Collateral Agent;
Section 7.3. BENEFIT OF MORTGAGE.
Nothing in this Mortgage, whether express or implied, shall be
construed to give to any Person other than the Company, the Collateral Agent,
and the Secured Creditors any legal or equitable right, remedy or claim under or
in respect of this Mortgage or any Note.
Section 7.4. NOTICES.
Except as otherwise specified herein, all notices, requests, demands
or other communications to or upon the respective parties hereto shall be in
writing (including telegraphic, telex, facsimile transmission or cable
communication) and shall be delivered, mailed, telegraphed, telexed, facsimile
transmitted or cabled, addressed:
(a) if to the Company, at its office at:
2700 Lone Oak Parkway
Eagan, MN 55121
Telecopy: (612) 726-0665
Attention: Senior Vice President -
Finance and Treasurer
(b) if to the Collateral Agent:
Bankers Trust Company
233 South Wacker Drive
Suite 8400
Chicago, Illinois 60606
Telecopy: (312) 993-8218
Attention: John C. Moses; and
Jonathan Salkin
(c) if to any Secured Creditor, either (x) to the Administrative
Agent, at the address of the Administrative Agent specified in the Credit
Agreement or (y) at such address as such Secured Creditor shall have
specified in the Credit Agreement;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder. All such
notices and communications shall, when mailed, telegraphed, telexed, facsimile
transmitted or cabled or sent by overnight courier, be effective on the third
Business Day following deposit in the U.S. mails, certified, return receipt
requested, when delivered to the telegraph company, cable company or on the day
following delivery to an overnight courier, as the case may be, or when sent by
telex or facsimile device, except that notices and communications to the
Collateral Agent shall not be effective until received by the Collateral Agent.
- 33 -
<PAGE>
Section 7.5. WAIVER; AMENDMENT.
None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Company and the Collateral Agent (with the consent of the Required
Banks or, to the extent required by Section 12.12 of the Credit Agreement, all
of the Banks).
Section 7.6. OBLIGATIONS ABSOLUTE.
The obligations of the Company hereunder shall remain in full force
and effect without regard to, and shall not be impaired by, (a) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or the like of the Company, except to the extent that the enforceability thereof
may be limited by any such event; (b) any exercise or non-exercise, or any
waiver of, any right, remedy, power or privilege under or in respect of this
Mortgage or any other Credit Document, except as specifically set forth in a
waiver granted pursuant to Section 7.5; or (c) any amendment to or modification
of any Credit Document or any security for any of the Obligations; whether or
not the Company shall have notice or knowledge of any of the foregoing, except
as specifically set forth in an amendment or modification executed pursuant to
Section 7.5.
Section 7.7. SUCCESSORS AND ASSIGNS.
This Mortgage shall be binding upon each Assignor and its successors
and assigns and shall inure to the benefit of the Collateral Agent and each
Secured Creditor and their respective successors and assigns; PROVIDED, that the
Company may not transfer or assign any or all of its rights or obligations
hereunder without the prior written consent of the Collateral Agent. All
agreements, statements, representations and warranties made by the Company
herein or in any certificate or other instrument delivered by the Company or on
its behalf under this Mortgage shall be considered to have been relied upon by
the Secured Creditors and shall survive the execution and delivery of this
Mortgage and the other Credit Documents regardless of any investigation made by
the Secured Creditors or on their behalf.
Section 7.8. HEADINGS DESCRIPTIVE.
The headings of the several sections of this Mortgage are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Mortgage.
Section 7.9. SEVERABILITY.
Any provision of this Mortgage which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
- 34 -
<PAGE>
Section 7.10. GOVERNING LAW.
THIS MORTGAGE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, BE GOVERNED BY, AND BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THAT WOULD
DICTATE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.
Section 7.11. COMPANY'S DUTIES.
It is expressly agreed, anything herein contained to the contrary
notwithstanding, that the Company shall remain liable to perform all of the
obligations, if any, assumed by it with respect to the Collateral and the
Collateral Agent shall not have any obligations or liabilities with respect to
any Collateral by reason of or arising out of this Mortgage, nor shall the
Collateral Agent be required or obligated in any manner to perform or fulfill
any of the obligations of the Company under or with respect to any Collateral.
Section 7.12. TERMINATION; RELEASE.
(a) After the Termination Date, this Agreement shall terminate
(provided that all indemnities set forth herein including, without limitation,
in Section 5.1 hereof shall survive such termination) and the Collateral Agent,
at the request and expense of the Company, will promptly execute and deliver to
the Company a proper instrument or instruments (including Uniform Commercial
Code termination statements on form UCC-3) acknowledging the satisfaction and
termination of this Mortgage, and will duly assign, transfer and deliver to the
Company (without recourse and without any representation or warranty) such of
its Collateral as may be in the possession of the Collateral Agent and as has
not theretofore been sold or otherwise applied or released pursuant to this
Mortgage. As used in this Mortgage, "Termination Date" shall mean the earlier
to occur of (x) the Temporary Amendment Expiry Date and (y) the first date upon
which the Total Commitment and all Letters of Credit have been terminated, no
Note is outstanding (and all Loans have been paid in full), and all other
Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by the Credit Agreement or is otherwise
released at the direction of the Required Banks (or all the Banks if required by
Section 12.12 of the Credit Agreement) and the proceeds of such sale or sales or
from such release are applied in accordance with the terms of the Credit
Agreement, such Collateral will be sold free and clear of the Liens created by
this Mortgage and the Collateral Agent, at the request and expense of the
Company, will duly assign, transfer and deliver to the Company (without recourse
and without any representation or warranty) such of the Collateral of the
Company as is then being (or has been) so sold or released and as may be in the
possession of the Collateral Agent and has not theretofore been released
pursuant to this Mortgage.
- 35 -
<PAGE>
(c) At any time that the Company desires that Collateral be
released as provided in the foregoing Section 7.12(a) or (b), it shall deliver
to the Collateral Agent a certificate signed by its chief financial officer or
another authorized senior officer stating that the release of the respective
Collateral is permitted pursuant to Section 7.12(a) or (b). If requested by the
Collateral Agent (although the Collateral Agent shall have no obligation to make
any such request), the Company shall furnish appropriate legal opinions (from
counsel, which may be in-house counsel, acceptable to the Collateral Agent) to
the effect set forth in the immediately preceding sentence. The Collateral
Agent shall have no liability whatsoever to any Secured Creditor as the result
of any release of Collateral by it as permitted by this Section 7.
Section 7.13. COUNTERPARTS.
This Mortgage may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Company and the Collateral Agent.
Section 7.14. THE COLLATERAL AGENT.
The Collateral Agent will hold in accordance with this Mortgage all
items of the Collateral at any time received under this Mortgage. It is
expressly understood and agreed by the parties hereto and each Secured Creditor,
by accepting the benefits of this Mortgage, acknowledges and agrees that the
obligations of the Collateral Agent as holder of the Collateral and interests
therein and with respect to the disposition thereof, and otherwise under this
Mortgage, are only those expressly set forth in this Mortgage. The Collateral
Agent shall act hereunder on the terms and conditions set forth in Section 11 of
the Credit Agreement.
Section 7.15. LIMITED OBLIGATIONS.
It is the desire and intent of the Company, the Collateral Agent and
the Secured Creditors that this Mortgage shall be enforced against the Company
to the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If and to the extent that the
obligations of the Company under this Mortgage shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation, because
of any applicable state or federal law relating to fraudulent conveyances or
transfers, which laws would determine the solvency of the Company by reference
to the full amount of the Obligations at the time of the execution and delivery
of this Mortgage), then the amount of the Obligations of the Company shall be
deemed to be reduced and the Company shall pay the maximum amount of the
Obligations which would be permissible under the applicable law.
- 36 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Mortgage to be
duly executed by their respective officers, as the case may be, there unto duly
authorized, as of the day and year first above written.
NORTHWEST AIRLINES, INC.
By: /s/ Mark D. Powers
----------------------------------
Title: Vice President-Finance
and Assistant Treasurer
BANKERS TRUST COMPANY,
as Collateral Agent
By: /s/ Robert R. Telesca
----------------------------------
Title: Assistant Vice President
<PAGE>
DEFINITIONS RELATING TO THE
AIRCRAFT MORTGAGE AGREEMENT
Unless otherwise defined herein, terms used in the Mortgage shall have
the meaning provided thereto in the "Credit Agreement" as defined herein. The
definitions stated herein shall apply equally to both the singular and plural
forms of the terms defined.
"ADDITIONAL PARTS" has the meaning given such term in Section 3.4(d)
of the Mortgage.
"AGENTS" has the meaning given to such term in the Credit Agreement.
"AIRCRAFT" means each of the Airframes (or any Replacement Airframes
substituted therefor pursuant to Section 3.5 of the Mortgage) together with the
Engines (if any) installed thereon (or any Replacement Engines substituted for
said Engines pursuant to Section 3.4 of the Mortgage), whether or not any of
such initial or substitute Engines may from time to time be installed on such
Airframe or may be installed on any other airframe or on any other aircraft.
"AIRFRAMES" means each of the airframes described in Section 2.1(a) of
the Mortgage together with any and all Parts (other than Engines or engines),
and any Replacement Airframe that may from time to time be substituted, pursuant
to Section 3.5 of the Mortgage, for such Airframe; so long as the same shall be
incorporated or installed in or attached to such Airframe.
"APPRAISED VALUE" means the value of the Aircraft as set forth in the
most recent Appraisal delivered pursuant to Section 5A.11 or Section 7.01(g) of
the Credit Agreement.
"BALANCE DUE" has the meaning given such term in Section 3.6(b) of the
Mortgage.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended
from time to time, and any successor provisions thereof.
"BANKS" has the meaning provided such term in the Credit Agreement.
"CERTIFICATED AIR CARRIER" means a Citizen of the United States
holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code, for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more of
cargo.
"CITIZEN OF THE UNITED STATES" has the meaning specified in Section
40102(a)(15) of Title 49 of the United States Code.
"CIVIL RESERVE AIR FLEET PROGRAM" means the Civil Reserve Air Fleet
Program, currently administered by the United States Air Force Military Command
pursuant to Executive Order No. 11490, as amended, or any substantially similar
program.
<PAGE>
"COLLATERAL" has the meaning given to such term in Section 2.1 of the
Mortgage.
"COLLATERAL AGENT" has the meaning specified in the preamble to the
Mortgage.
"COMPANY" has the meaning specified in the preamble to the Mortgage.
"CONTRACT RIGHTS" means all of the Company's right, title and interest
in and to any purchase agreement, modification agreement and buyer-furnished
equipment agreement, as and to the extent that the same relates to any Aircraft
and the operation thereof, including, without limitation, (a) all claims for
damages in respect of any Aircraft arising as a result of any default by the
manufacturer or the seller under any purchase agreement, modification agreement
and buyer-furnished equipment agreement, in respect of such Aircraft, including,
without limitation, all warranty, service life policy, aircraft performance
guarantee and indemnity provisions in such agreements in respect of any Aircraft
and all claims thereunder and (b) any and all rights of the Company to compel
performance of the terms of any purchase agreement, modification agreement and
buyer-furnished equipment agreement, in respect of any Aircraft.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of December
15, 1995, amended and restated as of October 16, 1996, further amended and
restated as of December 29, 1997, further amended as of January 23, 1998 and
further amended as of May 12, 1998, by and among Northwest Airlines Corporation,
a Delaware corporation, NWA Inc., a Delaware corporation, the Company, the
lenders from time to time party thereto (the "Banks") ABN AMRO Bank N.V., as
compliance agent (the "Compliance Agent"), Bankers Trust Company, as
administrative agent (the "Administrative Agent"), Chase Securities Inc., as
syndication agent (the "Syndication Agent"), Citibank, N.A., as documentation
agent (the "Documentation Agent"), and National Westminster Bank plc and U.S.
Bancorp (f/k/a First Bank National Association) as agents (together with the
Compliance Agent, the Administrative Agent, the Syndication Agent and the
Documentation Agent, each an "Agent" and collectively, the Agents") as amended,
modified and/or supplemented from time to time.
"DEFAULT" means an event which, with the giving of notice, lapse of
time or both would become an Event of Default.
"DOLLARS" and "$" means the lawful currency of the United States of
America.
"ENGINES" means each of the engines described in Section 2.1(a) of the
Mortgage whether or not from time to time installed on any Airframe or on any
other aircraft, and any Replacement Engine that may from time to time be
substituted, pursuant to Section 3.4 of the Mortgage, for such Engine; together
in each case with any and all Parts incorporated or installed in or attached
thereto.
"EVENT OF DEFAULT" has the meaning given such term in Section 4.1 of
the Mortgage.
"EVENT OF LOSS" with respect to the Aircraft, the Airframes, or the
Engines means any of the following events with respect to such property:
<PAGE>
(i) the loss of such property or the use thereof due to the
destruction of or damage to such property which renders repair uneconomic
or which renders such property permanently unfit for normal use by the
Company for any reason whatsoever;
(ii) any damage to such property which results in an insurance
settlement with respect to such property on the basis of a total loss, or a
constructive or compromised total loss;
(iii) the theft or disappearance of such property, or the
confiscation, condemnation, or seizure of, or requisition of title to, or
use of, such property by any governmental or purported governmental
authority (other than a requisition for use by the United States government
or any other government of registry of an Aircraft, or any agency or
instrumentality of any thereof which in the case of any event referred to
in this clause (iii) (other than a requisition of title) shall have
resulted in the loss of possession of such property by the Company for a
period in excess of 180 consecutive days or, in the case of a requisition
of title, the requisition of title shall not have been reversed within 90
days from the date of such requisition of title;
(iv) as a result of any law, rule, regulation, order or other action
by the Federal Aviation Administration or other governmental body of the
government of registry of an Aircraft having jurisdiction, the use of such
property in the normal course of the business of air transportation shall
have been prohibited for a period of 180 consecutive days; and
(v) any divestiture of title to an Engine treated as an Event of
Loss pursuant to Section 3.2(a) of the Mortgage. An Event of Loss with
respect to an Aircraft shall be deemed to have occurred if an Event of Loss
occurs with respect to the relevant Airframe.
"FEDERAL AVIATION ACT" means that portion of the United States Code
comprising those provisions formerly referred to as the Federal Aviation Act of
1958, as amended, or any subsequent legislation that amends, supplements or
supersedes such provisions.
"FEDERAL AVIATION ADMINISTRATION" and "FAA" mean the United States
Federal Aviation Administration, and any agency or instrumentality of the United
States government succeeding to its functions.
"FOREIGN AIR CARRIER" means any air carrier which is not a U.S. Air
Carrier and which performs maintenance, preventative maintenance and inspections
for an Aircraft, an Airframe, the Parts and/or the related Engines or engines to
standards which are approved by, or which are substantially equivalent to those
required by, the Federal Aviation Administration, the Civil Aviation Authority
of United Kingdom, the Direction Generale de l'Aviation Civile of the French
Republic, the Luftfahrt Bundesamt of the Federal Republic of Germany, the
Rijflauchtraatdienst of the Kingdom of the Netherlands, the Ministry of
Transportation of Japan or the Federal Ministry of Transport of Canada (or any
agency or instrumentality of the applicable government succeeding to the
jurisdiction of the foregoing entities).
<PAGE>
"GUARANTOR" or "GUARANTORS" means individually or collectively, as the
context may require, Northwest Airlines Corporation, a Delaware corporation, NWA
Inc., a Delaware corporation, and, any other "Guarantor" under, and as defined
in, the Credit Agreement.
"LEASE" means any lease permitted by the terms of Section 3.2(a)(x) of
the Mortgage.
"LESSEE" means any lessee permitted by the terms of Section 3.2(a)(x)
of the Mortgage.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
security deposit arrangement, encumbrance, lien (statutory or other) or other
security agreement or lien of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any capital lease having substantially
the same economic effect as any of the foregoing).
"MORTGAGE" means the Aircraft Mortgage and Security Agreement covering
the Collateral, dated as of May 12, 1998, between the Company and the Collateral
Agent, as the same may be amended, modified or supplemented from time to time.
"MORTGAGE SUPPLEMENT" means any Mortgage and Security Agreement
Supplement substantially in the form of EXHIBIT A to the Mortgage, and any other
supplement to the Mortgage, from time to time executed and delivered.
"OBLIGATIONS" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and indebtedness (including, without limitation, indemnities, fees
and interest thereon) of the Company and each Guarantor owing to the Secured
Creditors, now existing or hereafter incurred under, arising out of or in
connection with any Credit Document and the due performance and compliance by
the Company and each Guarantor with the terms of each such Credit Document;
(ii) any and all sums advanced by the Collateral Agent in order to preserve the
Collateral or preserve its security interest in the Collateral and (iii) in the
event of any proceeding for the collection or enforcement of any indebtedness,
obligations, or liabilities referred to in clauses (i) and (ii) above, after an
Event of Default shall have occurred and be continuing, the reasonable expenses
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs.
"OBSOLETE PARTS" has the meaning given such term in Section 3.4(d) of
the Mortgage.
<PAGE>
"OFFICER'S CERTIFICATE" means, as to any Person, a certificate signed
by the Chairman, the Vice Chairman, the President, any Executive Vice President,
any Director, any Senior Vice President, any Vice President, any Assistant Vice
President, the Treasurer or any Assistant Treasurer, the Secretary, or any
Assistant Secretary of such Person.
"PARTS" means any and all appliances, parts, instruments,
appurtenances, accessories, furnishings, seats, buyer furnished equipment, and
other equipment of whatever nature (other than (a) complete Engines or engines,
(b) items leased by the Company from a third party and (c) cargo containers)
which may from time to time be incorporated or installed in or attached to any
Airframe or any Engine.
"PERMITTED INVESTMENTS" means (i) direct obligations of the United
States of America and agencies guaranteed by the United States government having
a final maturity of 90 days or less from date of purchase thereof; (ii)
certificates of deposit issued by, bankers' acceptances of, or time deposits
with, any bank, trust company or national banking association incorporated under
the laws of the United States of America or one of the states thereof having
combined capital and surplus and retained earnings as of its last report of
condition of at least $500,000,000 and having a rating of Aa or better by
Moody's Investors Service, Inc. ("MOODY'S") or AA or better by Standard & Poor's
Corporation ("S&P") and having a final maturity of 90 days or less from date of
purchase thereof; and (iii) commercial paper of any holding company of a bank,
trust company or national banking association described in (ii) and commercial
paper of any corporation or finance company incorporated or doing business under
the laws of the United States of America or any state thereof having a rating
assigned to such commercial paper of Al by S&P or P1 by Moody's and having a
final maturity of 90 days or less from the date of purchase thereof; provided
that the aggregate amount at any one time so invested in certificates of deposit
issued by any one bank shall not be in excess of 5% of such bank's capital and
surplus.
"PERMITTED LESSEE" means any air carrier domiciled in a country listed
in SCHEDULE III to the Mortgage.
"PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"REPLACEMENT AIRCRAFT" means any Aircraft of which a Replacement
Airframe is part.
"REPLACEMENT AIRFRAME" means an aircraft (except Engines or engines
from time to time installed thereon), which shall have been made subject to the
Lien of the Mortgage pursuant to Section 3.5 thereof.
"REPLACEMENT CLOSING DATE" has the meaning given such term in Section
3.5(c) of the Mortgage.
<PAGE>
"REPLACEMENT ENGINE" means an aircraft engine suitable for
installation and use on the relevant Airframe and which has a value, utility and
remaining useful life (except for maintenance cycle condition) at least equal to
the Engine which it is replacing, assuming such Engine was of the value, utility
and remaining useful life (except for maintenance cycle condition) required by
the terms of the Mortgage, and which shall have been made subject to the Lien of
the Mortgage pursuant to Section 3.4 or 3.5 of the Mortgage.
"REQUIRED BANKS" has the meaning given such term in the Credit
Agreement.
"SECURED CREDITORS" has the meaning given such term in the preamble to
the Mortgage.
"TEMPORARY AMENDMENT" means the Temporary Amendment to the Credit
Agreement, dated as of May 12, 1998, by and among Holdings, NWA, the Company,
the Agents and the Banks.
"TEMPORARY AMENDMENT EFFECTIVE DATE" has the meaning provided in the
Temporary Amendment.
"TEMPORARY AMENDMENT EXPIRY DATE" has the meaning provided in the
Temporary Amendment.
"TERMINATION DATE" has the meaning given to such term in Section 7.12
of the Mortgage.
"U.S. AIR CARRIER" means any Certificated Air Carrier as to which
there is in force an air carrier operating certificate issued pursuant to Part
121 of the regulations under the Federal Aviation Act, or which may operate as
an air carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"WET LEASE" means any arrangement whereby the Company (or any Lessee)
agrees to furnish any Airframe and the Engines or engines installed thereon to a
third party pursuant to which such Airframe and Engines or engines (i) shall be
operated solely by regular employees of the Company (or any Lessee) possessing
all current certificates and licenses that would be required under the Federal
Aviation Act or, if the Aircraft is not registered in the United States, all
certificates and licenses required by the laws of the jurisdiction of registry,
for the performance by such employees of similar functions within the United
States of America or such other jurisdiction of registry (it is understood that
cabin attendants need not be regular employees of the Company (or any Lessee)
and (ii) shall be maintained by the Company (or any Lessee) in accordance with
its normal maintenance practices.
<PAGE>
EXHIBIT A
FORM OF AIRCRAFT MORTGAGE AND SECURITY
AGREEMENT SUPPLEMENT NO.___
Aircraft Mortgage and Security Agreement Supplement No. _____ dated
___________ ("MORTGAGE SUPPLEMENT") of NORTHWEST AIRLINES, INC. (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Aircraft and Security Mortgage Agreement, dated as of May
12, (the "MORTGAGE"), between the Company and Bankers Trust Company, as
Collateral Agent (the "COLLATERAL AGENT"), provides for the execution and
delivery of supplements thereto substantially in the form hereof which shall
particularly describe the Aircraft (such term and other defined terms in the
Mortgage being used herein with the same meanings), and shall specifically grant
a security interest in the Aircraft to the Collateral Agent; and
WHEREAS, the Company has, as provided in the Mortgage, heretofore
executed and delivered to the Collateral Agent _ Mortgage Supplement(s) for the
purpose of specifically subjecting to the Lien of the Mortgage certain airframes
and/or engines therein described, which Mortgage Supplement(s) is/are dated and
has/have been duly recorded with the FAA as set forth below, to wit:
DATE RECORDATION DATE FAA DOCUMENT NUMBER
NOW, THEREFORE, in order to secure the prompt payment of the
Obligations, subject to the terms and conditions of the Mortgage, and in
consideration of the premises and of the covenants contained in the Mortgage,
and of other good and valuable consideration given to the Company at or before
the delivery hereof, the receipt whereof is hereby acknowledged, the Company has
mortgaged, assigned, pledged, hypothecated and granted, and does hereby
mortgage, assign, pledge, hypothecate and grant, a continuing security interest
in, and mortgage lien on, the property comprising all its right, title and
interest in and to the Airframes and Engines described in Annex A attached
hereto, whether or not such Engines shall be installed in or attached to the
Airframes or any other aircraft, to the Collateral Agent, its successors and
assigns, for the benefit and security of the Secured Creditors;
To have and to hold all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the benefit and security of
the Secured Creditors and for the uses and purposes and subject to the terms and
provisions set forth in the Mortgage.
This Mortgage Supplement shall be construed as supplemental to the
Mortgage and shall form a part thereof, and the Mortgage is hereby incorporated
by reference herein and is hereby ratified, approved and confirmed and terms not
otherwise defined herein shall have the meaning provided in the Mortgage.
<PAGE>
Exhibit A
Page 2
THIS MORTGAGE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THAT WOULD
DICTATE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.
<PAGE>
Exhibit A
Page 3
IN WITNESS WHEREOF, the Company has caused this Supplement No. _ to be
duly executed by one of its duly authorized officers, as of the day and year
first above written.
NORTHWEST AIRLINES, INC.
By:____________________________________
Title:
<PAGE>
ANNEX A
TO MORTGAGE
SUPPLEMENT NO. ______
DESCRIPTION OF AIRFRAME AND ENGINES
AIRFRAME
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
to
MORTGAGE
SCHEDULE OF AIRFRAMES AS
PART OF THE COLLATERAL
------------------------
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------ ----- ---------------- --------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-32 N604NW 47222
McDonnell Douglas DC-9-32 N605NW 47223
McDonnell Douglas DC-9-32 N606NW 47225
McDonnell Douglas DC-9-32 N607NW 47232
McDonnell Douglas DC-9-32 N608NW 47233
McDonnell Douglas DC-9-32 N609NW 47234
McDonnell Douglas DC-9-32 N610NW 47432
McDonnell Douglas DC-9-32 N611NA 47435
McDonnell Douglas DC-9-32 N612NW 47436
McDonnell Douglas DC-9-32 N613NW 47438
McDonnell Douglas DC-9-32 N614NW 47128
McDonnell Douglas DC-9-32 N615NW 47129
McDonnell Douglas DC-9-32 N618NW 47433
McDonnell Douglas DC-9-32 N619NW 47518
McDonnell Douglas DC-9-32 N621NW 47544
McDonnell Douglas DC-9-32 N623NW 47591
McDonnell Douglas DC-9-31 N952N 47073
McDonnell Douglas DC-9-31 N953N 47083
McDonnell Douglas DC-9-31 N955N 47160
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
Page 2
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------ ----- ---------------- --------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-31 N957N 47253
McDonnell Douglas DC-9-31 N960N 47256
McDonnell Douglas DC-9-32 N927RC 47469
McDonnell Douglas DC-9-32 N3322L 47031
McDonnell Douglas DC-9-32 N3324L 47103
McDonnell Douglas DC-9-31 N8938E 47161
McDonnell Douglas DC-9-31 N919RW 47162
McDonnell Douglas DC-9-31 N920RW 47163
McDonnell Douglas DC-9-31 N913RW 47171
McDonnell Douglas DC-9-31 N912RW 47150
McDonnell Douglas DC-9-31 N911RW 47149
McDonnell Douglas DC-9-31 N9330 47138
McDonnell Douglas DC-9-31 N9331 47263
McDonnell Douglas DC-9-31 N9333 47246
McDonnell Douglas DC-9-31 N9336 47338
McDonnell Douglas DC-9-31 N8986E 47402
McDonnell Douglas DC-9-31 N8944E 47167
McDonnell Douglas DC-9-31 N8945E 47181
McDonnell Douglas DC-9-31 N8950E 47186
McDonnell Douglas DC-9-31 N8957E 47215
McDonnell Douglas DC-9-31 N8960E 45869
McDonnell Douglas DC-9-31 N8979E 47328
McDonnell Douglas DC-9-31 N8978E 47327
</TABLE>
<PAGE>
SCHEDULE I
Page 3
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------ ----- ---------------- --------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-32 N601NW 47038
McDonnell Douglas DC-9-32 N602NW 47046
McDonnell Douglas DC-9-32 N603NW 47101
McDonnell Douglas DC-9-31 N956N 47252
McDonnell Douglas DC-9-31 N958N 47254
McDonnell Douglas DC-9-31 N959N 47255
McDonnell Douglas DC-9-31 N89S 47042
McDonnell Douglas DC-9-31 N1334U 47280
McDonnell Douglas DC-9-31 N1332U 47404
McDonnell Douglas DC-9-31 N908H 47517
McDonnell Douglas DC-9-32 N9347 45827
McDonnell Douglas DC-9-31 N916RW 47144
McDonnell Douglas DC-9-31 N924RW 47185
McDonnell Douglas DC-9-31 N914RW 47362
McDonnell Douglas DC-9-31 N9332 47264
McDonnell Douglas DC-9-31 N9335 47337
McDonnell Douglas DC-9-31 N9337 47346
McDonnell Douglas DC-9-31 N9338 47347
McDonnell Douglas DC-9-31 N8925E 45840
McDonnell Douglas DC-9-31 N8926E 45863
McDonnell Douglas DC-9-31 N8920E 45835
McDonnell Douglas DC-9-31 N8921E 45836
McDonnell Douglas DC-9-31 N8923E 45838
</TABLE>
<PAGE>
SCHEDULE I
Page 4
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------ ----- ---------------- --------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-31 N9339 47382
McDonnell Douglas DC-9-32 N967N 47573
McDonnell Douglas DC-9-32 N945N 47664
McDonnell Douglas DC-9-31 N918RW 47158
McDonnell Douglas DC-9-31 N917RW 47145
McDonnell Douglas DC-9-31 N922RW 47182
McDonnell Douglas DC-9-31 N923RW 47183
McDonnell Douglas DC-9-31 N921RW 47164
McDonnell Douglas DC-9-32 N943N 47647
McDonnell Douglas DC-9-32 N987US 47458
McDonnell Douglas DC-9-31 N1798U 47369
McDonnell Douglas DC-9-32 N982US 45790
McDonnell Douglas DC-9-32 N9346 47376
McDonnell Douglas DC-9-32 N984US 47383
McDonnell Douglas DC-9-32 N941N 47450
McDonnell Douglas DC-9-32 N940N 47572
McDonnell Douglas DC-9-31 N9334 47247
McDonnell Douglas DC-9-31 N915RW 47139
McDonnell Douglas DC-9-31 N9340 47389
McDonnell Douglas DC-9-32 N942N 47459
McDonnell Douglas DC-9-32 N949N 47566
McDonnell Douglas DC-9-32 N622NW 47575
McDonnell Douglas DC-9-32 N617NW 47235
</TABLE>
<PAGE>
SCHEDULE I
Page 5
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------ ----- ---------------- --------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-32 N616NW 47229
McDonnell Douglas DC-9-32 N620NW 47533
McDonnell Douglas DC-10-40 N141US 46750
McDonnell Douglas DC-10-40 N145US 46754
McDonnell Douglas DC-10-40 N146US 46755
McDonnell Douglas DC-10-40 N147US 46756
McDonnell Douglas DC-10-40 N148US 46757
McDonnell Douglas DC-10-40 N149US 46758
McDonnell Douglas DC-10-40 N150US 46759
McDonnell Douglas DC-10-40 N151US 46760
McDonnell Douglas DC-10-40 N152US 46761
McDonnell Douglas DC-10-40 N153US 46762
McDonnell Douglas DC-10-40 N154US 46763
McDonnell Douglas DC-10-40 N155US 46764
McDonnell Douglas DC-10-40 N156US 46765
McDonnell Douglas DC-10-40 N157US 46766
McDonnell Douglas DC-10-40 N158US 46767
McDonnell Douglas DC-10-40 N159US 46768
McDonnell Douglas DC-10-40 N160US 46769
McDonnell Douglas DC-10-40 N161US 46770
McDonnell Douglas DC-10-40 N162US 46771
McDonnell Douglas DC-10-30 N224NW 46581
McDonnell Douglas DC-10-30 N226NW 46583
</TABLE>
<PAGE>
SCHEDULE I
Page 6
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------ ----- ---------------- --------------
<S> <C> <C> <C>
McDonnell Douglas DC-10-30 N228NW 46578
McDonnell Douglas DC-10-30 N234NW 46912
McDonnell Douglas DC-10-30 N235NW 46915
McDonnell Douglas DC-10-30 N236NW 46934
McDonnell Douglas DC-9-82 N301RC 48054
McDonnell Douglas DC-9-82 N302RC 48055
McDonnell Douglas DC-9-82 N931MC 48057
Boeing 747-151 N601US 19778
Boeing 747-151 N603US 19780
Boeing 747-151 N608US 19785
Boeing 747-251B N611US 20356
Boeing 747-251B N612US 20357
Boeing 747-251B N613US 20358
Boeing 747-251B N614US 20359
Boeing 747-251B N615US 20360
Boeing 747-251B N623US 21705
Boeing 747-251B N624US 21706
Boeing 747-251B N625US 21707
Boeing 747-251B N628US 22389
Boeing 747-212B N641NW 21941
Boeing 747-212B N642NW 21942
Boeing 747-251F N616US 21120
Boeing 747-251F N617US 21121
</TABLE>
<PAGE>
SCHEDULE I
Page 7
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------ ----- ---------------- --------------
<S> <C> <C> <C>
Boeing 747-251F N618US 21122
Boeing 747-251F N619US 21321
Boeing 747-251F N629US 22388
</TABLE>
<PAGE>
Schedule II
to
MORTGAGE
SCHEDULE OF ENGINES AS
PART OF THE COLLATERAL
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT8D-7 649148 Pratt & JT8D-7 649500
Whitney
Pratt & Whitney JT8D-7 649532 Pratt & JT8D-7 649524
Whitney
Pratt & Whitney JT8D-7 649604 Pratt & JT8D-7 649626
Whitney
Pratt & Whitney JT8D-7 653447 Pratt & JT8D-7 653315
Whitney
Pratt & Whitney JT8D-7 653519 Pratt & JT8D-7 653601
Whitney
Pratt & Whitney JT8D-7 653630 Pratt & JT8D-7 653617
Whitney
Pratt & Whitney JT8D-7 653641 Pratt & JT8D-7 653677
Whitney
Pratt & Whitney JT8D-7 653719 Pratt & JT8D-7 653713
Whitney
Pratt & Whitney JT8D-7 653772 Pratt & JT8D-7 653787
Whitney
Pratt & Whitney JT8D-7 653840 Pratt & JT8D-7 653819
Whitney
Pratt & Whitney JT8D-7 653943 Pratt & JT8D-7 653978
Whitney
Pratt & Whitney JT8D-7 654026 Pratt & JT8D-7 653998
Whitney
Pratt & Whitney JT8D-7 654058 Pratt & JT8D-7 654075
Whitney
</TABLE>
<PAGE>
Schedule II
Page 2
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT8D-7 654682 Pratt & JT8D-7 654111
Whitney
Pratt & Whitney JT8D-7 655196 Pratt & JT8D-7 655205
Whitney
Pratt & Whitney JT8D-7 655286 Pratt & JT8D-7 655225
Whitney
Pratt & Whitney JT8D-7 655294 Pratt & JT8D-7 655307
Whitney
Pratt & Whitney JT8D-7 655393 Pratt & JT8D-7 655379
Whitney
Pratt & Whitney JT8D-7 656025 Pratt & JT8D-7 656835
Whitney
Pratt & Whitney JT8D-7 657167 Pratt & JT8D-7 656850
Whitney
Pratt & Whitney JT8D-7 657274 Pratt & JT8D-7 657302
Whitney
Pratt & Whitney JT8D-7 657319 Pratt & JT8D-7 657307
Whitney
Pratt & Whitney JT8D-7 657355 Pratt & JT8D-7 657366
Whitney
Pratt & Whitney JT8D-7 657381 Pratt & JT8D-7 657371
Whitney
Pratt & Whitney JT8D-7 657440 Pratt & JT8D-7 657448
Whitney
Pratt & Whitney JT8D-7 657451 Pratt & JT8D-7 657464
Whitney
Pratt & Whitney JT8D-7 657497 Pratt & JT8D-7 657511
Whitney
</TABLE>
<PAGE>
Schedule II
Page 3
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT8D-7 657532 Pratt & JT8D-7 657542
Whitney
Pratt & Whitney JT8D-7 657610 Pratt & JT8D-7 657580
Whitney
Pratt & Whitney JT8D-7 657621 Pratt & JT8D-7 657635
Whitney
Pratt & Whitney JT8D-9 678061 Pratt & JT8D-9 667115
Whitney
Pratt & Whitney JT8D-9 653753 Pratt & JT8D-9 654012
Whitney
Pratt & Whitney JT8D-9 656937 Pratt & JT8D-9 654414
Whitney
Pratt & Whitney JT8D-9 656946 Pratt & JT8D-9 656955
Whitney
Pratt & Whitney JT8D-9 657013 Pratt & JT8D-9 656987
Whitney
Pratt & Whitney JT8D-9 657018 Pratt & JT8D-9 657139
Whitney
Pratt & Whitney JT8D-9 657219 Pratt & JT8D-9 657147
Whitney
Pratt & Whitney JT8D-9 657252 Pratt & JT8D-9 657259
Whitney
Pratt & Whitney JT8D-9 657282 Pratt & JT8D-9 657277
Whitney
Pratt & Whitney JT8D-9 657284 Pratt & JT8D-9 657294
Whitney
Pratt & Whitney JT8D-9 657330 Pratt & JT8D-9 657313
Whitney
Pratt & Whitney JT8D-9 657515 Pratt & JT8D-9 657582
Whitney
</TABLE>
<PAGE>
Schedule II
Page 4
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT8D-9 657746 Pratt & JT8D-9 657681
Whitney
Pratt & Whitney JT8D-9 657754 Pratt & JT8D-9 657761
Whitney
Pratt & Whitney JT8D-9 665265 Pratt & JT8D-9 665250
Whitney
Pratt & Whitney JT8D-9 665293 Pratt & JT8D-9 666072
Whitney
Pratt & Whitney JT8D-9 666163 Pratt & JT8D-9 666080
Whitney
Pratt & Whitney JT8D-9 666167 Pratt & JT8D-9 666089
Whitney
Pratt & Whitney JT8D-9 666293 Pratt & JT8D-9 666150
Whitney
Pratt & Whitney JT8D-9 666304 Pratt & JT8D-9 666307
Whitney
Pratt & Whitney JT8D-9 666311 Pratt & JT8D-9 666308
Whitney
Pratt & Whitney JT8D-9 666315 Pratt & JT8D-9 666323
Whitney
Pratt & Whitney JT8D-9 666676 Pratt & JT8D-9 666387
Whitney
Pratt & Whitney JT8D-9 666705 Pratt & JT8D-9 666706
Whitney
Pratt & Whitney JT8D-9 666719 Pratt & JT8D-9 666707
Whitney
Pratt & Whitney JT8D-9 666725 Pratt & JT8D-9 666758
Whitney
</TABLE>
<PAGE>
Schedule II
Page 5
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT8D-9 666774 Pratt & JT8D-9 666757
Whitney
Pratt & Whitney JT8D-9 666783 Pratt & JT8D-9 666789
Whitney
Pratt & Whitney JT8D-9 666812 Pratt & JT8D-9 666797
Whitney
Pratt & Whitney JT8D-9 666820 Pratt & JT8D-9 666825
Whitney
Pratt & Whitney JT8D-9 666837 Pratt & JT8D-9 666831
Whitney
Pratt & Whitney JT8D-9 666866 Pratt & JT8D-9
Whitney
Pratt & Whitney
JT8D-9 666905 Pratt & JT8D-9 666896
Whitney
Pratt & Whitney JT8D-9 666927 Pratt & JT8D-9 666953
Whitney
Pratt & Whitney JT8D-9 666959 Pratt & JT8D-9 666954
Whitney
Pratt & Whitney JT8D-9 666963 Pratt & JT8D-9 666965
Whitney
Pratt & Whitney JT8D-7 648941 Pratt & JT8D-7 649030
Whitney
Pratt & Whitney JT8D-7 649474 Pratt & JT8D-7 649250
Whitney
Pratt & Whitney JT8D-7 649677 Pratt & JT8D-7 653382
Whitney
Pratt & Whitney JT8D-7 653388 Pratt & JT8D-7 653387
Whitney
Pratt & Whitney JT8D-7 653404 Pratt & JT8D-7 653483
Whitney
</TABLE>
<PAGE>
Schedule II
Page 6
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT8D-7 653685 Pratt & JT8D-7 653680
Whitney
Pratt & Whitney JT8D-7 653690 Pratt & JT8D-7 653698
Whitney
Pratt & Whitney JT8D-7 653760 Pratt & JT8D-7 653702
Whitney
Pratt & Whitney JT8D-7 653779 Pratt & JT8D-7 653859
Whitney
Pratt & Whitney JT8D-7 653954 Pratt & JT8D-7 653941
Whitney
Pratt & Whitney JT8D-7 654000 Pratt & JT8D-7 654160
Whitney
Pratt & Whitney JT8D-7 655224 Pratt & JT8D-7 655220
Whitney
Pratt & Whitney JT8D-7 656926 Pratt & JT8D-7 656991
Whitney
Pratt & Whitney JT8D-7 657548 Pratt & JT8D-7 657009
Whitney
Pratt & Whitney JT8D-9 653883 Pratt & JT8D-9 654648
Whitney
Pratt & Whitney JT8D-9 657092 Pratt & JT8D-9 657069
Whitney
Pratt & Whitney JT8D-9 657133 Pratt & JT8D-9 657609
Whitney
Pratt & Whitney JT8D-9 666017 Pratt & JT8D-9 665266
Whitney
Pratt & Whitney JT8D-9 666681 Pratt & JT8D-9 666790
Whitney
</TABLE>
<PAGE>
Schedule II
Page 7
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT8D-9 666856 Pratt & JT8D-9 666806
Whitney
Pratt & Whitney JT8D-9 666917 Pratt & JT8D-9 666920
Whitney
Pratt & Whitney JT8D-9 666970 Pratt & JT8D-9 666979
Whitney
Pratt & Whitney JT8D-9 667022 Pratt & JT8D-9 667031
Whitney
Pratt & Whitney JT8D-9 666971 Pratt & JT8D-9 667111
Whitney
Pratt & Whitney JT9D-20 686114 Pratt & JT9D-20 686115
Whitney
Pratt & Whitney JT9D-20 686117 Pratt & JT9D-20 686118
Whitney
Pratt & Whitney JT9D-20 686119 Pratt & JT9D-20 686122
Whitney
Pratt & Whitney JT9D-20 686128 Pratt & JT9D-20 686125
Whitney
Pratt & Whitney JT9D-20 686123 Pratt & JT9D-20 686134
Whitney
Pratt & Whitney JT9D-20 686135 Pratt & JT9D-20 686136
Whitney
Pratt & Whitney JT9D-20 686144 Pratt & JT9D-20 686142
Whitney
Pratt & Whitney JT9D-20 686139 Pratt & JT9D-20 686145
Whitney
Pratt & Whitney JT9D-20 686147 Pratt & JT9D-20 686151
Whitney
Pratt & Whitney JT9D-20 686158 Pratt & JT9D-20 686154
</TABLE>
<PAGE>
Schedule II
Page 8
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Whitney
Pratt & Whitney JT9D-20 686152 Pratt & JT9D-20 686159
Whitney
Pratt & Whitney JT9D-20 686165 Pratt & JT9D-20 686166
Whitney
Pratt & Whitney JT9D-20 686171 Pratt & JT9D-20 686170
Whitney
Pratt & Whitney JT9D-20 686167 Pratt & JT9D-20 686175
Whitney
Pratt & Whitney JT9D-20 686176 Pratt & JT9-20 686178
Whitney
Pratt & Whitney JT9D-20J 686162 Pratt & JT9D-20J 686163
Whitney
Pratt & Whitney JT9D-20J 686164 Pratt & JT9D-20J 686110
Whitney
Pratt & Whitney JT9D-20J 686111 Pratt & JT9D-20J 686112
Whitney
Pratt & Whitney JT9D-20J 686120 Pratt & JT9D-20J 686116
Whitney
Pratt & Whitney JT9D-20J 686113 Pratt & JT9D-20J 686126
Whitney
Pratt & Whitney JT9D-20J 686127 Pratt & JT9D-20J 686129
Whitney
Pratt & Whitney JT9D-20J 686138 Pratt & JT9D-20J 686133
Whitney
Pratt & Whitney JT9D-20J 686132 Pratt & JT9D-20J 686141
Whitney
Pratt & Whitney JT9D-20J 686143 Pratt & JT9D-20J 686146
Whitney
</TABLE>
<PAGE>
Schedule II
Page 9
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT9D-20J 686148 Pratt & JT9D-20J 686149
Whitney
Pratt & Whitney JT9D-20J 686150 Pratt & JT9D-20J 686156
Whitney
Pratt & Whitney JT9D-20J 686155 Pratt & JT9D-20J 686153
Whitney
Pratt & Whitney JT9D-20J 686157 Pratt & JT9D-20J 686160
Whitney
Pratt & Whitney JT9D-20J 686161
GE CF6-50C 528259 GE CF6-50C 455114
GE CF6-50C 455455 GE CF6-50C 517245
GE CF6-50C 528135 GE CF6-50C 528362
GE CF6-50C 455144 GE CF6-50C 455391
GE CF6-50C 455479 GE CF6-50C 455499
GE CF6-50C 455747 GE CF6-50C2 455441
GE CF6-50C2 517175 GE CF6-50C2 517499
GE CF6-50C2 455271 GE CF6-50C2 455756
GE CF6-50C2B 517477 GE CF6-50C2B 455314
Pratt & Whitney JT8D-217 708401 Pratt & JT8D-217 708402
Whitney
Pratt & Whitney JT8D-217 708408 Pratt & JT8D-217 708407
Whitney
Pratt & Whitney JT8D-217 708425 Pratt & JT8D-217 708426
Whitney
Pratt & Whitney JT9D-7A 662402 Pratt & JT9D-7A 662404
Whitney
</TABLE>
<PAGE>
Schedule II
Page 10
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT9D-7A 662438 Pratt & JT9D-7A 662452
Whitney
Pratt & Whitney JT9D-7A 662542 Pratt & JT9D-7A 662490
Whitney
Pratt & Whitney JT9D-7A 662454 Pratt & JT9D-7A 662453
Whitney
Pratt & Whitney JT9D-7A 662615 Pratt & JT9D-7A 662634
Whitney
Pratt & Whitney JT9D-7A 662645 Pratt & JT9D-7A 662678
Whitney
Pratt & Whitney JT9D-7F 662401 Pratt & JT9D-7F 662407
Whitney
Pratt & Whitney JT9D-7F 662472 Pratt & JT9D-7F 662502
Whitney
Pratt & Whitney JT9D-7Q 702240 Pratt & JT9D-7Q 702242
Whitney
Pratt & Whitney JT9D-7Q 702253 Pratt & JT9D-7Q 702256
Whitney
Pratt & Whitney JT9D-7Q 702451 Pratt & JT9D-7Q 702444
Whitney
Pratt & Whitney JT9D-7Q 702313 Pratt & JT9D-7Q 702275
Whitney
Pratt & Whitney JT9D-7R 715038 Pratt & JT9D-7R 715150
Whitney
Pratt & Whitney JT9D-7R 715171 Pratt & JT9D-7R 715187
Whitney
Pratt & Whitney JT9D-7Q 702026 Pratt & JT9D-7Q 702038
Whitney
Pratt & Whitney JT9D-7Q 702039 Pratt & JT9D-7Q 702047
Whitney
</TABLE>
<PAGE>
Schedule II
Page 11
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT9D-7Q 702052 Pratt & JT9D-7Q 702051
Whitney
Pratt & Whitney JT9D-7Q 702049 Pratt & JT9D-7Q 702048
Whitney
Pratt & Whitney JT9D-7Q 702054 Pratt & JT9D-7Q 702055
Whitney
Pratt & Whitney JT9D-7Q 702056 Pratt & JT9D-7Q 702073
Whitney
Pratt & Whitney JT9D-7Q 702095 Pratt & JT9D-7Q 702085
Whitney
Pratt & Whitney JT9D-7Q 702079 Pratt & JT9D-7Q 702074
Whitney
Pratt & Whitney JT9D-7Q 702123 Pratt & JT9D-7Q 702136
Whitney
Pratt & Whitney JT9D-7Q 702145 Pratt & JT9D-7Q 702147
Whitney
Pratt & Whitney JT9D-7Q 702166 Pratt & JT9D-7Q 702170
Whitney
Pratt & Whitney JT9D-7Q 702171 Pratt & JT9D-7Q 702172
Whitney
Pratt & Whitney JT9D-7Q 702224 Pratt & JT9D-7Q 702200
Whitney
Pratt & Whitney JT9D-7Q 702176 Pratt & JT9D-7Q 702173
Whitney
Pratt & Whitney JT9D-7F 662715 Pratt & JT9D-7F 662880
Whitney
Pratt & Whitney JT9D-7F 662951 Pratt & JT9D-7F 690456
Whitney
</TABLE>
<PAGE>
Schedule II
Page 12
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
------------ ----- Serial No. ------------ ----- Serial No.
-------------- ---------------
<S> <C> <C> <C> <C> <C>
Pratt & Whitney JT9D-7F 689562 Pratt & JT9D-7F 689481
Whitney
Pratt & Whitney JT9D-7F 689472 Pratt & JT9D-7F 689471
Whitney
Pratt & Whitney JT9D-7F 689563 Pratt & JT9D-7F 689564
Whitney
Pratt & Whitney JT9D-7F 689565 Pratt & JT9D-7F 662710
Whitney
Pratt & Whitney JT9D-7F 662633 Pratt & JT9D-7F 662629
Whitney
Pratt & Whitney JT9D-7F 662608 Pratt & JT9D-7F 662545
Whitney
Pratt & Whitney JT9D-7F 662636 Pratt & JT9D-7F 662640
Whitney
Pratt & Whitney JT9D-7F 662643 Pratt & JT9D-7F 662706
Whitney
</TABLE>
<PAGE>
Schedule III
to
MORTGAGE
<TABLE>
<CAPTION>
SCHEDULE OF COUNTRIES FOR PERMITTED LESSEES
-------------------------------------------
<S> <C>
Argentina Switzerland
Australia Thailand
Austria Tobago
Bahamas Trinidad
Belgium United Kingdom
Brazil Venezuela
Canada
Chile
Denmark
Egypt
Finland
France
Germany
Greece
Hungary
Iceland
India
Indonesia
Ireland
Italy
Japan
Luxembourg
Malaysia
Mexico
Malta
Morocco
Netherlands
New Zealand
Norway
Paraguay
People's Republic of China
Philippines
Portugal
Republic of China (Taiwan)
Singapore
South Africa
South Korea
Spain
Sweden
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SLOT SECURITY AGREEMENT
between
NORTHWEST AIRLINES, INC.,
as Pledgor
and
BANKERS TRUST COMPANY,
as Collateral Agent
----------------------------------
Dated as of May 12, 1998
----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2. Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 3. No Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 4. Representation, Warranties and Covenants . . . . . . . . . . . . . . . .2
Section 5. Supplements, Further Assurances. . . . . . . . . . . . . . . . . . . . .4
Section 6. Provisions Concerning Pledged Collateral . . . . . . . . . . . . . . . .4
(i) Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
(ii) Permitted Transfers of Pledged Slots . . . . . . . . . . . . . . . .4
(iii) Financing Statements . . . . . . . . . . . . . . . . . . . . . . . .4
(iv) Compliance with Laws and Regulations . . . . . . . . . . . . . . . .5
(v) Notice of Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 7. Collateral Agent Appointed Attorney-in-Fact. . . . . . . . . . . . . . .5
Section 8. Collateral Agent May Perform . . . . . . . . . . . . . . . . . . . . . .6
Section 9. The Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 10. Events of Default, Remedies . . . . . . . . . . . . . . . . . . . . . .6
A. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . .6
B. Remedies; Obtaining the Collateral Upon Event of Default . . . . . . . .6
C. Remedies; Disposition of the Collateral. . . . . . . . . . . . . . . . .7
<PAGE>
Section 11. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . .8
Section 12. No Waiver; Discontinuance of Proceeding . . . . . . . . . . . . . . . .8
Section 13. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 14. Amendments, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 15. Termination; Release. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 16. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 18. Continuing Security Interest; Transfer of Notes . . . . . . . . . . . 13
Section 19. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 20. Consent to Jurisdiction and Service of Process. . . . . . . . . . . . 14
Section 21. Security Interest Absolute. . . . . . . . . . . . . . . . . . . . . . 14
Section 22. Severability of Provisions. . . . . . . . . . . . . . . . . . . . . . 15
Section 23. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 24. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . 15
Section 25. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . 15
Section 26. The Pledgor's Duties. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 27. Limited Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE>
SLOT SECURITY AGREEMENT
SLOT SECURITY AGREEMENT, dated as of May 12, 1998 (as amended,
modified or supplemented from time to time, this "Agreement"), between NORTHWEST
AIRLINES, INC., a Minnesota corporation (the "Pledgor"), and BANKERS TRUST
COMPANY, as Collateral Agent (the "Collateral Agent"), for the benefit of the
Banks and the Agents under, and any other lender from time to time party to, the
Credit Agreement herein referred to (such Banks, the Agents and the other
lenders, if any, are hereinafter called the "Secured Creditors"). Except as
otherwise defined in Section 16 of this Agreement, terms used herein and defined
in the Credit Agreement shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, the Pledgor has requested that the Agents and the Banks agree
to amend the Credit Agreement on the terms and subject to the conditions
provided in the Temporary Amendment;
WHEREAS, it is a condition precedent to the effectiveness of the
Temporary Amendment that the Pledgor shall have executed and delivered to the
Collateral Agent this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to satisfy the
condition precedent described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
Section 1. PLEDGE. The Pledgor hereby pledges to the Collateral
Agent and grants to the Collateral Agent for the benefit of the Secured
Creditors a security interest in all of the following (the "Collateral"), to
secure all of the Obligations:
(i) all of the right, title and interest of the Pledgor in, to and
under each and every Pledged Slot, now existing or hereafter arising from
time to time; and
(ii) all Proceeds of any and all of the foregoing;
Section 2. OBLIGATIONS. This Agreement secures, and the Collateral
is collateral security for, the Obligations.
Section 3. NO RELEASE. Nothing set forth in this Agreement shall
relieve the Pledgor from the performance of any term, covenant, condition or
agreement on the Pledgor's part to be performed or observed under or in respect
of any of the Collateral or from any liability
<PAGE>
to any Person under or in respect of any of the Collateral or impose any
obligation on the Collateral Agent or any Secured Party to perform or observe
any such term, covenant, condition or agreement on the Pledgor's part to be so
performed or observed or impose any liability on the Collateral Agent or any
Secured Creditor for any act or omission on the part of the Pledgor relating
thereto or for any breach of any representation or warranty on the part of the
Pledgor contained in this Agreement, or in respect of the Collateral or made in
connection herewith or therewith. This Section shall survive the termination of
this Agreement and the discharge of the Pledgor's other obligations hereunder
and under the Credit Documents.
Section 4. REPRESENTATION, WARRANTIES AND COVENANTS. The Pledgor
represents, warrants and covenants as follows:
(i) All filings, registrations and recordings necessary or
reasonably requested by the Collateral Agent to create, preserve, protect
and perfect the security interests granted by the Pledgor to the Collateral
Agent hereby in respect of the Collateral have been accomplished by the
Pledgor. The security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to this instrument in and to the
Collateral constitute and hereafter will constitute a perfected security
interest therein superior and prior to the rights of all other Persons
therein and subject to no other Liens, except for Permitted Liens and
subject to the Federal Aviation Act and is entitled to all the rights,
priorities and benefits afforded by the Uniform Commercial Code or other
relevant law as enacted in any relevant jurisdiction to perfected security
interests.
(ii) The Pledgor is, and as to Collateral acquired by it from time
to time after the date hereof the Pledgor will be, the owner of all
Collateral free from any Lien except for the Lien and security interest
created by this Agreement, Permitted Liens and subject to the Federal
Aviation Act and/or the ability of the FAA to withdraw slots. The Pledgor
will, at or before the time it subjects any property to the Lien of this
Agreement, cause evidence of its title to be duly recorded, filed, or filed
for recording, to the extent permitted or required under any applicable
law, by the Pledgor as owner. Pledgor shall defend the Collateral against
any and all claims and demands of all Persons at any time claiming any
interest therein adverse to the Collateral Agent or any Secured Creditor.
(iii) There is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) on the date
hereof, covering or purporting to cover any interest of any kind in the
Collateral, and so long as the Credit Agreement has not been terminated or
any of the Obligations remain, the Pledgor shall not execute or authorize
to be filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction),
or statements relating to the Collateral, except financing statements filed
or to be filed in respect of and covering the security interests granted
hereby by the Pledgor.
(iv) The chief executive offices of the Pledgor as of the date of
this Agreement are located at 2700 Lone Oak Parkway, Eagan, MN 55121. The
Pledgor shall not move its chief executive office except to such new
location as the Pledgor may establish in
-2-
<PAGE>
accordance with this Section 4(iv). The Pledgor shall not establish any
other location for its chief executive office until (i) it shall have given
to the Collateral Agent not less than 45 days' prior written notice of its
intention so to do, clearly describing such new location (which shall be
within the continental United States of America), and providing such other
information in connection therewith as the Collateral Agent may reasonably
request, and (ii) with respect to such new location, it shall have taken
all action reasonably satisfactory to the Collateral Agent to maintain the
perfection and priority of the security interest of the Collateral Agent on
behalf of the Secured Creditors in the Collateral intended to be granted
hereby.
(v) The Pledgor represents and warrants that it holds the
requisite authority to hold each of the Pledged Slots pursuant to authority
granted by the FAA pursuant to Title 14 of the Code of Federal Regulations,
Part 93, and that it has, at all times after obtaining each such Pledged
Slot, complied in all material respects with all of the terms, conditions
and limitations of each rule or regulation of the FAA and DOT and with all
applicable provisions of the Federal Aviation Act and applicable rules and
regulations promulgated thereunder and that there exists no material
violation of such terms, conditions or limitations that gives the FAA or
DOT the right to terminate, cancel, withdraw or modify the rights of the
Pledgor in any such Pledged Slot.
(vi) The Pledgor is a Citizen of the United States and a
Certificated Air Carrier. All material licenses, permits, authorizations,
certificates of compliance, certificates of public convenience and
necessity and other certificates (including, without limitation, air
carrier operating certificates and operations specifications issued by the
FAA pursuant to 14 C.F.R. Part 121) which are required by the DOT or the
FAA and which are adequate for the conduct of the business of the Pledgor
are in full force and duly issued to the Pledgor. There are no license
fees owed on the Pledgor's DOT or FAA licenses, certificates or
authorizations. The Pledgor is in compliance with all material
requirements of the certificates and authorizations issued to it by the DOT
or the FAA.
(vii) The Pledgor has full corporate power and authority and legal
right to pledge all the Collateral pursuant to this Agreement.
(viii) No consent of any other party (including, without limitation,
stockholders or creditors of the Pledgor), and no consent, authorization,
approval, or other action by, and (except in connection with the perfection
of the Lien created hereby) no notice to or filing with, any Governmental
Authority or other Person is required either (x) for the pledge by the
Pledgor of the Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement or (y) for the exercise by the
Collateral Agent of the rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement; PROVIDED,
HOWEVER, that the transfer of Pledged Slots is subject to confirmation by
the FAA.
(ix) All information set forth herein relating to the Collateral is
accurate in all material respects as of the date hereof.
-3-
<PAGE>
(x) This Agreement is made with full recourse to the Pledgor and
pursuant to and upon all the warranties, representations, covenants and
agreements on the part of the Pledgor contained herein, in the other Credit
Documents, and otherwise in writing in connection herewith or therewith.
Section 5. SUPPLEMENTS, FURTHER ASSURANCES. The Pledgor agrees that
at any time and from time to time, at the expense of the Pledgor, the Pledgor
will promptly execute and deliver all further instruments and documents, in form
and substance reasonably acceptable to the Collateral Agent, and take all
further action, that may be required or that the Collateral Agent reasonably
deems necessary, in order to perfect, preserve and protect any security interest
granted or purported to be granted hereby or to enable the Collateral Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. The Pledgor shall pay any applicable filing fees and other expenses
related to the filing or financing and continuation statements or the expenses
for other action taken to perfect the security interest granted hereunder. The
Pledgor hereby authorizes the Collateral Agent to file any financing or
continuation statements without the signature of the Pledgor when permitted by
law.
Section 6. PROVISIONS CONCERNING PLEDGED COLLATERAL.
(i) MAINTENANCE. Except as otherwise provided in this Section
6(i), Pledgor will do or cause to be done all things necessary to preserve
and keep in full force and effect its material rights in and to use its
Pledged Slots. Without in any way limiting the foregoing, the Pledgor
shall promptly take all such steps as may be necessary to obtain renewal of
each such Pledged Slot from the FAA, within a commercially reasonable time
prior to the expiration of such authority, and shall take all such other
steps as may be necessary now or in the future to maintain, renew and
obtain the rights, licenses or certifications as are necessary to the
continued and future use by the Pledgor of the Pledged Slots. The Pledgor
shall further take all actions necessary or, in the reasonable judgment of
Collateral Agent, advisable in order to maintain the Pledgor's material
rights in and the Pledgor's right to use the Pledged Slots. Nothing in
this provision shall be interpreted to prevent the Pledgor from modifying
or discontinuing its use of any of the Pledged Slots due to a determination
made by the Pledgor that it is commercially reasonable not to maintain or
otherwise perform with respect to any of the Pledged Slots as specified
above; PROVIDED, HOWEVER, the Pledgor shall give the Collateral Agent
thirty days prior notice of any material modification or any
discontinuation of use of any of the Slots.
(ii) PERMITTED TRANSFERS OF PLEDGED SLOTS. Notwithstanding
anything to the contrary herein contained, the Pledgor shall be entitled to
transfer or otherwise dispose of its rights in Pledged Slots to the extent
expressly permitted by Section 8.03(II)(ii) of the Credit Agreement.
(iii) FINANCING STATEMENTS. The Pledgor shall sign and deliver to
the Collateral Agent such financing and continuation statements, in form
and substance acceptable to the Collateral Agent, as may from time to time
be required or necessary to grant, continue
-4-
<PAGE>
and maintain a valid, enforceable, first priority security interest in the
Collateral as provided herein, and the other rights, as against third
parties, provided hereby, all in accordance with the Uniform Commercial
Code as enacted in any and all relevant jurisdictions or any other relevant
law. The Pledgor shall pay any applicable filing fees and other expenses
related to the filing of such financing and continuation statements. The
Pledgor authorizes the Collateral Agent to file any such financing or
continuation statements without the signature of the Pledgor where
permitted by law.
(iv) COMPLIANCE WITH LAWS AND REGULATIONS. The Pledgor shall
promptly comply in all material respects with all laws, ordinances, orders,
rules, regulations, and requirements of all Federal, state, municipal or
other governmental or quasi-governmental authorities or bodies then having
jurisdiction over the Collateral (or any part thereof) and/or the use
thereof by the Pledgor, of every nature and kind (the "Requirements")
including any of the same which relate to or require changes or
requirements incident to or as the result of any use thereof or otherwise,
and the Pledgor shall so comply, whether or not such Requirements shall now
exist or shall hereafter be enacted or promulgated and whether or not the
same may be said to be within the present contemplation of the parties
hereto. Notwithstanding the foregoing, if the Pledgor contests a
Requirement, it shall not be obligated to comply with such Requirement to
the extent such non-compliance or deferral is consistent with law and does
not have a materially adverse effect on the Collateral or the security
interest therein.
(v) NOTICE OF LAWS. The Pledgor agrees to give the Collateral
Agent notice of any violations of any Requirement enacted, passed,
promulgated, made, issued or adopted by any of the governmental departments
or agencies or authorities hereinbefore mentioned affecting the Collateral
or the Pledgor's use thereof, a copy of which is served upon or received by
the Pledgor, or otherwise brought to the attention of the Pledgor, by
mailing within thirty (30) business days after such service, receipt, or
after the same otherwise comes to the attention of the Pledgor, a copy of
each and every one thereof to the Collateral Agent. At the same time, the
Pledgor will inform the Collateral Agent as to the work or steps which the
Pledgor proposes to do or take in order to correct the violation.
Notwithstanding the foregoing, however, if such work or step would require
any alterations which would, in the Collateral Agent's reasonable opinion,
reduce the value of the Collateral or change the general character or use
of the Collateral, the Pledgor may, with the consent of the Collateral
Agent, defer compliance therewith, as long as such deferral is consistent
with applicable law in order that the Pledgor may, with the consent of the
Collateral Agent, at the Pledgor's expense, contest or seek modification of
or other relief with respect to such Requirements, but nothing herein shall
relieve the Pledgor of the duty and obligation, at the Pledgor's expense,
to comply with such Requirements, or such Requirements as modified,
whenever the Collateral Agent shall so direct.
Section 7. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor
hereby appoints the Collateral Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the
-5-
<PAGE>
Collateral Agent's discretion to take any action and to execute any instrument
which the Collateral Agent may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement, which appointment as attorney-in-fact
is coupled with an interest.
Section 8. COLLATERAL AGENT MAY PERFORM. If the Pledgor fails to
perform any agreement contained herein within a reasonable time after receipt of
a written request to do so from the Collateral Agent, the Collateral Agent may
itself perform, or cause performance of, such agreement, and the reasonable
expenses of the Collateral Agent, including, without limitation, the fees and
expenses of its counsel, incurred in connection therewith, shall be payable by
the Pledgor and shall be considered Obligations.
Section 9. THE COLLATERAL AGENT . It is expressly understood and
agreed by the parties hereto and each Secured Creditor, by accepting the
benefits of this Agreement, acknowledges and agrees that the obligations of the
Collateral Agent as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are only
those expressly set forth in this Agreement. The Collateral Agent shall act
hereunder on the terms and conditions set forth in Section 11 of the Credit
Agreement.
Section 10. EVENTS OF DEFAULT, REMEDIES.
A. EVENTS OF DEFAULT. It shall be an Event of Default hereunder if
under the Credit Agreement an "Event of Default" (as such term is defined in
such Agreement) shall occur.
B. REMEDIES; OBTAINING THE COLLATERAL UPON EVENT OF DEFAULT. If any
Event of Default shall have occurred and be continuing, then and in every such
case, the Collateral Agent (acting at the direction and with the consent of the
Required Banks) may, at any time or from time to time during such Event of
Default:
(i) Declare the entire right, title and interest of the Pledgor in
and to each Pledged Slot vested, subject to the requirements imposed by the
Federal Aviation Act and the FAA, in which event such rights, title and
interest shall immediately vest in the Collateral Agent, in which case the
Pledgor agrees to execute and deliver such deeds of conveyance, assignments
and other documents or instruments (including any notices or applications
to the DOT, FAA or any other governmental or regulatory authority having
jurisdiction over any such Pledged Slot or the use thereof) as shall be
requested by the Collateral Agent in order to effectuate the transfer of
such Pledged Slots, together with copies of the certificates or orders
issued by the FAA representing same and any other rights of the Pledgor
with respect thereto, to any designee or designees selected by the
Collateral Agent and approved by the FAA, it being understood that, as of
the date hereof, transfers of Pledged Slots within the United States must
accommodate FAA requirement that said slots be used only by air carriers;
it being further understood that the Pledgor's obligation to deliver such
Collateral and such documents and instruments with respect thereto is of
the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled
to a decree requiring specific performance by the Pledgor of said
obligations; and
-6-
<PAGE>
(ii) Sell or otherwise liquidate, or direct the Pledgor to sell or
otherwise liquidate, any or all of the Collateral or any part thereof,
subject to the requirements imposed by the Federal Aviation Act and the FAA
and take possession of the proceeds of any such sale or liquidation.
C. REMEDIES; DISPOSITION OF THE COLLATERAL. (i) The Collateral Agent
may from time to time exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to it and
to the extent not in violation of applicable law, including the Federal Aviation
Act, and subject to the approval of the DOT or its successor or nominee, all the
rights and remedies of a secured party on default under the Uniform Commercial
Code (the "Code") in effect in all relevant jurisdictions at the time of an
Event of Default, and the Collateral Agent may also in its sole discretion,
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Collateral Agent may deem commercially reasonable. To
the extent not inconsistent with the Federal Aviation Act and the FAA
requirements, the Collateral Agent or any other Secured Creditor may be the
purchasers of any or all of the Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at such sale, to
use and apply any of the Obligations owed to such Person as a credit on account
of the purchase price of any Collateral payable by such Person at such sale.
Each purchaser at any such sale shall acquire the property sold absolutely free
from any claim or right on the part of the Pledgor, and the Pledgor hereby
waives, to the fullest extent permitted by law, all rights of redemption, stay
or appraisal which it now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted. The Pledgor agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Collateral Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. The Pledgor hereby waives, to
the full extent permitted by law, any claims against the Collateral Agent
arising by reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale.
(ii) Except as otherwise provided herein, the Pledgor hereby
waives, to the fullest extent permitted by applicable law, notice or judicial
hearing in connection with the Collateral Agent's taking possession or the
Collateral Agent's disposition of any of the Collateral, including, without
limitation, any and all prior notice and hearing for any prejudgment remedy or
remedies and any such right which the Pledgor would otherwise have under law,
and the Pledgor hereby further waives to the fullest extent permitted by
applicable law: (a) all damages occasioned by such taking of possession; (b) all
other requirements as to the time, place and terms of sale or other requirements
with respect to the enforcement of the Collateral Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation,
-7-
<PAGE>
stay, extension or moratorium now or hereafter in force under any applicable
law. Any sale of, or the grant of options to purchase, or any other realization
upon, any Collateral shall operate to divest all right, title, interest, claim
and demand, either at law or in equity, of the Pledgor therein and thereto, and
shall be a perpetual bar both at law and in equity against the Pledgor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Pledgor.
Section 11. APPLICATION OF PROCEEDS. (a) Any cash held by the
Collateral Agent as Collateral and all cash proceeds received by the Collateral
Agent in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral pursuant to the exercise by the Collateral Agent
of its remedies as a secured creditor as provided in Section 10 of this
Agreement shall be applied from time to time by the Collateral Agent:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (ii) and (iii) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors, with each Secured
Creditor receiving an amount equal to its outstanding Obligations or, if
the proceeds are insufficient to pay in full all such Obligations, its Pro
Rata Share of the amount remaining to be distributed; and
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Agreement pursuant to Section 15 hereof to the Pledgor
or as required by applicable law.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's
Obligations and the denominator of which is the then outstanding amount of all
Obligations.
(c) If any payment to any Secured Creditor of its Pro Rata Share
of any distribution would result in overpayment to such Secured Creditor, such
excess amount shall instead be distributed in respect of the unpaid Obligations
of the other Secured Creditors, with each Secured Creditor whose Obligations
have not been paid in full to receive an amount equal to such excess amount
multiplied by a fraction the numerator of which is the unpaid Obligations of
such Secured Creditor and the denominator of which is the unpaid Obligations of
all Secured Creditors entitled to such distribution.
(d) It is understood that the Company shall remain liable to the
extent of any deficiency between the amount of the proceeds of the Collateral
and the aggregate amount of the sums referred to in clauses (i) and (ii) of
Section 11(a).
Section 12. NO WAIVER; DISCONTINUANCE OF PROCEEDING. (a) Each and
every right, power and remedy hereby specifically given to the Collateral Agent
or otherwise in this
-8-
<PAGE>
Agreement shall be cumulative and shall be in addition to every other right,
power and remedy specifically given under this Agreement or the other Credit
Documents now or hereafter existing at law, in equity or by statute and each and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Collateral Agent. All such
rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any default or Event of Default or an acquiescence
therein. No notice to or demand on the Pledgor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
(b) In the event the Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Collateral Agent, then and in every such case the Pledgor, the Collateral
Agent and each holder of any of the Obligations shall to the extent permitted by
applicable law be restored to their respective former positions and rights
hereunder with respect to the Collateral, and all rights, remedies and powers of
the Collateral Agent and the Secured Parties shall continue as if no such
proceeding had been instituted.
Section 13. INDEMNIFICATION. (a) The Pledgor agrees to indemnify,
reimburse and hold the Collateral Agent, each Secured Creditor and their
respective successors, permitted assigns, employees, agents and servants
(hereinafter in this Section 13 referred to individually as "Indemnitee," and
collectively as "Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all reasonable costs, expenses or disbursements (including
reasonable attorneys' fees and expenses) (for the purposes of this Section 13
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any other Credit Document or any
other document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), the violation of the laws of any
country, state or other governmental body or unit, any tort (including, without
limitation, claims arising or imposed under the doctrine of strict liability, or
for or on account of injury to or the death of any Person (including any
Indemnitee), or property damage); provided that no Indemnitee shall be
indemnified pursuant to this Section 13(a) for
-9-
<PAGE>
losses, damages or liabilities to the extent caused by the gross negligence or
willful misconduct of such Indemnitee. The Pledgor agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation,
damage, injury, penalty, claim, demand, action, suit or judgment, the Pledgor
shall assume full responsibility for the defense thereof. Each Indemnitee
agrees to use its best efforts to promptly notify the Pledgor of any such
assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 13(a), the Pledgor
agrees to pay, or reimburse the Collateral Agent for, any and all reasonable
fees, costs and expenses of whatever kind or nature incurred in connection with
the creation, preservation or protection of the Collateral Agent's Liens on, and
security interest in, the Collateral, including, without limitation, all fees
and taxes in connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any taxes or Liens upon or
in respect of the Collateral, premiums for insurance with respect to the
Collateral and all other reasonable fees, costs and expenses in connection with
protecting, maintaining or preserving the Collateral and the Collateral Agent's
interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of or
relating to the Collateral.
(c) If and to the extent that the obligations of the Pledgor under
this Section 13 are unenforceable for any reason, the Pledgor hereby agrees to
make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
(d) Any amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement shall constitute Obligations secured by the
Collateral. The indemnity obligations of the Pledgor contained in this Section
13 shall continue in full force and effect notwithstanding the full payment of
all the Notes issued under the Credit Agreement and the payment of all other
Obligations and notwithstanding the discharge thereof.
Section 14. AMENDMENTS, ETC. This Agreement may not be amended,
modified or waived except with the written consent of the Pledgor and the
Collateral Agent (with the consent of the Required Banks or, to the extent
required by Section 12.12 of the Credit Agreement, all of the Banks). Any
amendment, modification or supplement of or to any provision of this Agreement,
any termination or waiver of any provision of this Agreement and any consent to
any departure by the Pledgor from the terms of any provision of this Agreement
shall be effective only in the specific instance and for the specific purpose
for which made or given. No notice to or demand upon the Pledgor in any
instance hereunder shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances.
Section 15. TERMINATION; RELEASE. (a) After the Termination Date,
this Agreement shall terminate (provided that all indemnities set forth herein
shall survive) and the Collateral Agent, at the request and expense of the
Pledgor, will promptly execute and deliver to the Pledgor a proper instrument or
instruments (including Uniform Commercial Code termination statements on form
UCC-3) acknowledging the satisfaction and termination of this
-10-
<PAGE>
Agreement, and will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of its Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the earlier to occur of (x) the
Temporary Amendment Expiry Date and (y) the first date upon which the Total
Commitment and all Letters of Credit have been terminated, no Note is
outstanding (and all Loans have been paid in full), and all other Obligations
then owing have been paid in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by the Credit Agreement or this Agreement or is
otherwise released at the direction of the Required Banks (or all the Banks if
required by Section 12.12 of the Credit Agreement) and the proceeds of such sale
or sales or from such release are applied in accordance with the terms of the
Credit Agreement, such Collateral will be sold free and clear of the Liens
created by this Agreement and the Collateral Agent, at the request and expense
of the Pledgor, will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the Collateral of
the Pledgor as is then being (or has been) so sold or released and as may be in
the possession of the Collateral Agent and has not theretofore been released
pursuant to this Agreement.
(c) At any time that the Pledgor desires that Collateral be
released as provided in the foregoing Section 15(a) or (b), it shall deliver to
the Collateral Agent a certificate signed by its chief financial officer or
another authorized senior officer stating that the release of the respective
Collateral is permitted pursuant to Section 15(a) or (b). If requested by the
Collateral Agent (although the Collateral Agent shall have no obligation to make
any such request), the Pledgor shall furnish appropriate legal opinions (from
counsel, which may be in-house counsel, acceptable to the Collateral Agent) to
the effect set forth in the immediately preceding sentence. The Collateral
Agent shall have no liability whatsoever to any Secured Creditor as the result
of any release of Collateral by it as permitted by this Section 15.
Section 16. DEFINITIONS. The following terms shall have the
following meanings. Such definitions shall be equally applicable to the
singular and plural forms of the terms defined.
"Agreement" has the meaning provided in the preamble hereto.
"Collateral" has the meaning provided in Section 1 hereof.
"Collateral Agent" has the meaning provided in the preamble hereto.
"Credit Agreement" shall mean the Credit Agreement, dated as of
December 15, 1995, as amended and restated as of October 16, 1996, further
amended and restated as of December 29, 1997, further amended as of January 23,
1998 and further amended as of May 12, 1998 by and among Northwest Airlines
Corporation, a Delaware corporation, NWA Inc., a Delaware corporation, Northwest
Airlines, Inc., a Minnesota corporation (the "Borrower"), the lenders from time
to time party thereto (the "Banks") ABN AMRO Bank N.V., as compliance agent (the
"Compliance Agent"), Bankers Trust Company, as administrative agent (the
"Administrative Agent"), Chase Securities Inc., as syndication agent (the
"Syndication Agent"),
-11-
<PAGE>
Citibank, N.A., as documentation agent (the "Documentation Agent"), and National
Westminster Bank plc and U.S. Bancorp (f/k/a First Bank National Association),
as agents (together with the Compliance Agent, the Administrative Agent, the
Syndication Agent and the Documentation Agent, each an "Agent" and collectively,
the Agents") as amended, modified and/or supplemented from time to time.
"DOT" shall mean the United States Department of Transportation.
"Event of Default" has the meaning provided in Section 10.A hereof.
"FAA" shall mean the Federal Aviation Administration, and any
successor thereto.
"Federal Aviation Act" shall mean the Federal Aviation Act of 1958, as
amended from time to time, and any successor provisions, and the rules and
regulations thereunder.
"Governmental Authority" shall mean any federal, state, local or other
governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body located in the United States.
"Indemnitee" shall have the meaning provided in Section 13 hereof.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and indebtedness (including, without limitation, indemnities, fees
and interest thereon) of the Pledgor and each Guarantor owing to the Secured
Creditors, now existing or hereafter incurred under, arising out of or in
connection with any Credit Document and the due performance and compliance by
the Pledgor and each Guarantor with the terms of each such Credit Document;
(ii) any and all sums advanced by the Collateral Agent in order to preserve the
Collateral or preserve its security interest in the Collateral; and (iii) in the
event of any proceeding for the collection or enforcement of any indebtedness,
obligations, or liabilities referred to in clauses (i) and (ii) above, after an
Event of Default shall have occurred and be continuing, the reasonable expenses
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs.
"Pledged Slots" shall mean all the takeoff and landing rights of the
Borrower identified on Schedule I hereto.
"Pledgor" has the meaning provided in the preamble hereto.
"Proceeds" shall have the meaning assigned that term under the Uniform
Commercial Code as in effect in any relevant jurisdiction or under other
relevant law and, in any event, shall include, but not be limited to, any and
all (i) proceeds of any insurance, indemnity, warranty or guarantee payable to
the Collateral Agent or to the Pledgor or any affiliate of the
-12-
<PAGE>
Pledgor from time to time with respect to any of the Collateral, (ii) payments
(in any form whatsoever), made or due and payable to the Pledgor from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), (iii) instruments
representing obligations to pay amounts in respect of the Collateral, (iv)
products of the Collateral and (v) other amounts from time to time paid or
payable under or in connection with any of the Collateral.
"Requirements" has the meaning provided in Section 6(iii) hereof.
"Secured Creditors" has the meaning provided in the preamble hereto.
"Temporary Amendment" shall mean the Temporary Amendment to the Credit
Agreement, dated as of May 12, 1998, by and among Holdings, NWA, the Borrower,
the Agents and the Banks.
"Temporary Amendment Expiry Date" shall have the meaning provided in
the Temporary Amendment.
"Termination Date" has the meaning provided in Section 15 hereof.
Section 17. NOTICES. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and shall be delivered, mailed,
telegraphed, telexed, facsimile transmitted or cabled, addressed:
(a) if to the Pledgor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent, at its address set forth
opposite its signature below; or
(c) if to any Bank, either (x) to the Administrative Agent, at the
address of the Administrative Agent specified in the Credit Agreement or
(y) at such address as such Bank shall have specified in the Credit
Agreement;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder. All such
notices and communications shall, when mailed, telegraphed, telexed, facsimile
transmitted or cabled or sent by overnight courier, be effective on the third
Business Day following deposit in the U.S. mails, certified, return receipt
requested, when delivered to the telegraph company, cable company or on the day
following delivery to an overnight courier, as the case may be, or sent by telex
or facsimile device, except that notices and communications to the Collateral
Agent shall not be effective until received by the Collateral Agent.
Section 18. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and
-13-
<PAGE>
effect until payment in full in cash of all Obligations, (ii) be binding upon
the Pledgor, its successors and assigns, and (iii) inure, together with the
rights and remedies of the Collateral Agent hereunder, to the benefit of the
Collateral Agent and each other Secured Creditor and each of their respective
successors, transferees and assigns; no other persons (including, without
limitation, any other creditor of the Pledgor) shall have any interest herein or
any right or benefit with respect hereto. Without limiting the generality of
the foregoing clause (iii) and subject to the provisions of the Credit
Agreement, any Secured Creditor may assign or otherwise transfer any
indebtedness held by it secured by this Agreement to any other person or entity,
and such other person or entity shall thereupon become vested with all the
benefits in respect thereof granted to such Secured Creditor herein or
otherwise, subject, however, to the provisions of the Credit Agreement.
Section 19. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT
OF LAWS PROVISIONS THEREOF.
Section 20. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All
judicial proceedings brought against the Pledgor with respect to this Agreement
may be brought in any state or federal court of competent jurisdiction in the
State of New York and by execution and delivery of this Agreement, the Pledgor
accepts for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The Pledgor designates and appoints CT Corporation System,
1633 Broadway, New York, New York 10019 and such other Persons as may hereafter
be selected by the Pledgor irrevocably agreeing in writing to so serve, as its
agent to receive on its behalf service of all process in any such proceedings in
any such court, such service being hereby acknowledged by the Pledgor to be
effective and binding service in every respect. A copy of any such process so
served shall be mailed by registered mail to the Pledgor at the address set
forth on the signature page of this Agreement, except that unless otherwise
provided by applicable law, any failure to mail such copy shall not affect the
validity of service of process. If any agent appointed by the Pledgor refuses
to accept service, the Pledgor hereby agrees that service upon it by mail shall
constitute sufficient notice. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of the
Collateral Agent to bring proceedings against the Pledgor in the courts of any
other jurisdiction.
Section 21. SECURITY INTEREST ABSOLUTE. The obligations of the
Pledgor hereunder shall remain in full force and effect without regard to, and
shall not be impaired by, (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of the Pledgor,
except to the extent that the enforceability thereof may be limited by any such
event; (b) any exercise or non-exercise, or any waiver of, any right, remedy,
power or privilege under or in respect of this Agreement or any other Credit
Document, except as specifically set forth in a waiver granted pursuant to
Section 14; (c) any amendment to or modification of any Credit Document or any
security for any of the Obligations, whether or not
-14-
<PAGE>
the Pledgor shall have notice or knowledge of any of the foregoing, except as
specifically set forth in an amendment or modification executed pursuant to
Section 14; (d) any lack of validity or enforceability of the Credit Agreement
or any other agreement or instrument relating thereto; or (e) any other
circumstances which might otherwise constitute a defense available to, or a
discharge of, the Pledgor.
Section 22. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 23. HEADINGS. Section headings used in this Agreement are
for convenience of reference only and shall not affect the construction of this
Agreement.
Section 24. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same Agreement. A
set of the counterparts executed by all the parties hereto shall be lodged with
the Pledgor and the Collateral Agent.
Section 25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Pledgor and its successors and assigns and shall inure to the benefit
of the Collateral Agent and each Secured Creditor and their respective
successors and assigns; PROVIDED that the Pledgor may not transfer or assign any
or all of its rights or obligations hereunder without the prior written consent
of the Collateral Agent. All agreements, statements, representations and
warranties made by the Pledgor herein or in any certificate or other instrument
delivered by the Pledgor or on its behalf under this Agreement shall be
considered to have been relied upon by the Secured Creditors and shall survive
the execution and delivery of this Agreement and the other Credit Documents
regardless of any investigation made by the Secured Creditors or on their
behalf.
Section 26. THE PLEDGOR'S DUTIES. It is expressly agreed, anything
herein contained to the contrary notwithstanding, that the Pledgor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of the Pledgor under or with
respect to any Collateral.
Section 27. LIMITED OBLIGATIONS. It is the desire and intent of the
Pledgor, the Collateral Agent and the Secured Creditors that this Agreement
shall be enforced against the Pledgor to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. If and to the extent that the obligations of the Pledgor under this
Agreement shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers, which laws would determine the
solvency of the Pledgor by reference to the full amount of the Obligations at
the time of the execution and delivery of this Agreement), then the amount of
the Obligations of the Pledgor shall be deemed to be reduced
-15-
<PAGE>
and the Pledgor shall pay the maximum amount of the Obligations which would be
permissible under the applicable law.
-16-
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NORTHWEST AIRLINES, INC.
By: /s/ Mark D. Powers
-------------------------------------
Name: Mark D. Powers
Title: Vice President-Finance and
Assistant Treasurer
Notice Address:
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Attention: General Counsel
BANKERS TRUST COMPANY,
as Collateral Agent
By: /s/ Robert R. Telesca
----------------------------------
Name: Robert R. Telesca
Title: Assistant Vice President
Notice Address:
233 South Wacker Drive
Suite 8400
Chicago, Illinois 60606
Attention: John C. Moses; and
Jonathan Salkin
-17-
<PAGE>
SCHEDULE I
SCHEDULE OF PLEDGED SLOTS
The Pledged Slots are as follows:
I. DCA - WASHINGTON NATIONAL
<TABLE>
<CAPTION>
SLOT SLOT
TIME NUMBER TIME NUMBER
<S> <C> <C> <C>
0700(4) 1171 1300(4) 1142
1399 1161
1594 1211
1614 1265
0800(3) 1132 1400(6) 1109
1150 1390
1225 1442
0900(5) 1056 1471
1215 1533
1367 1549
1619 1500(2) 1282
1649 1621
1100(5) 1223 1800(4) 1401
1366 1515
1507 1563
1508 1626
1578 1900(4) 1232
1200(7) 1027 1277
1106 1307
1107 1379
1137 2000(4) 1308
1176 1332
1329 1638
1338 1643
----
48
</TABLE>
<PAGE>
Schedule I
Page 2
II. ORD - CHICAGO O'HARE
<TABLE>
<CAPTION>
SLOT SLOT
TIME NUMBER TIME NUMBER
<S> <C> <C> <C>
0645(3) 7297 1315(2) 7689
7335 7897
7648 1415(2) 7483
0715(1) 7718 7979
0745(2) 7626 1515(2) 7497
7992 7696
0815(1) 8019 1545(2) 8130
0845(2) 8197 8504
8329 1615(1) 8018
0915(2) 7985 1645(3) 7947
8254 7998
0945(3) 7811 8561
8511 1715(1) 8123
8616 1745(2) 8106
1015(1) 8332 8127
1045(2) 8313 1815(1) 7933
8459 1845(1) 7812
1115(1) 7584 1915(2) 7955
1215(2) 7867 8513
8074 2015(1) 7967
1245(2) 7580 2045(1) 7655
----
8317 43
</TABLE>
III. LGA-NEW YORK LAGUARDIA
<TABLE>
<CAPTION>
SLOT SLOT
TIME NUMBER TIME NUMBER
<S> <C> <C> <C>
0730 D 3505 1530 A 3524
0900 A 3018 D 3613
0930 D 3442 1600 D 3569
D 3692 1630 A 3859
1000 A 3747 D 3460
D 3202 1700 A 3602
1030 A 3231 1730 A 3458
1100 A 3233 1800 D 3127
A 3740 1830 A 3005
D 3534 1900 A 3858
1130 D 3026 1930 A 3006
D 3193 D 3361
1200 A 3244 D 3589
A 3459 2000 D 3249
D 3454 ----
1300 A 3685 31
D 3760
</TABLE>
<PAGE>
[CONFORMED COPY WITH
EXHIBITS G-1 AND G-2
CONFORMED AS EXECUTED]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
NORTHWEST AIRLINES CORPORATION,
NWA INC.,
NORTHWEST AIRLINES, INC.,
THE CHASE MANHATTAN BANK,
as Agent,
and
VARIOUS LENDING INSTITUTIONS
__________________________________
Dated as of May 12, 1998
__________________________________
$1,000,000,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . .1
1.01 The Commitments. . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Minimum Amount of Each Borrowing, etc. . . . . . . . . . . . . .1
1.03 Notice of Borrowing. . . . . . . . . . . . . . . . . . . . . . .1
1.04 Disbursement of Funds. . . . . . . . . . . . . . . . . . . . . .2
1.05 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.06 Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.07 Pro Rata Borrowings. . . . . . . . . . . . . . . . . . . . . . .3
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . .4
1.10 Increased Costs, Illegality, etc . . . . . . . . . . . . . . . .5
1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.12 Change of Lending Office . . . . . . . . . . . . . . . . . . . .7
1.13 Replacement of Banks . . . . . . . . . . . . . . . . . . . . . .8
SECTION 2. Fees; Reductions of Commitment . . . . . . . . . . . . . . . . . . .8
2.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.02 Voluntary Termination of Commitments . . . . . . . . . . . . . .9
2.03 Mandatory Reduction of Commitments . . . . . . . . . . . . . . .9
SECTION 3. Prepayments; Payments; Taxes . . . . . . . . . . . . . . . . . . . 10
3.01 Voluntary Prepayments. . . . . . . . . . . . . . . . . . . . . 10
3.02 Mandatory Repayments . . . . . . . . . . . . . . . . . . . . . 10
3.03 Method and Place of Payment. . . . . . . . . . . . . . . . . . 12
3.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4A. Conditions Precedent to Effective Date. . . . . . . . . . . . . . 14
4A.01 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4A.02 Officers' Certificate . . . . . . . . . . . . . . . . . . . . 14
4A.03 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 14
4A.04 Corporate Documents; Proceedings; etc . . . . . . . . . . . . 14
4A.05 Consent Letter. . . . . . . . . . . . . . . . . . . . . . . . 15
4A.06 Adverse Change, etc . . . . . . . . . . . . . . . . . . . . . 15
4A.07 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 15
4A.08 Financial Outlook . . . . . . . . . . . . . . . . . . . . . . 15
4A.09 Existing Credit Agreement . . . . . . . . . . . . . . . . . . 15
4A.10 Fees, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i)
<PAGE>
Page
----
4A.11 Appraisal of Collateral . . . . . . . . . . . . . . . . . . . 15
4A.12 Security Documents. . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4B. Conditions Precedent to All Credit Events . . . . . . . . . . . . 16
4B.01 Notice of Borrowing.. . . . . . . . . . . . . . . . . . . . . 16
4B.02 No Default; Representations and Warranties. . . . . . . . . . 16
4B.03 Full Utilization of Existing Facilities . . . . . . . . . . . 17
4B.04 Security Matters. . . . . . . . . . . . . . . . . . . . . . . 17
4B.05 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5. Representations, Warranties and Agreements . . . . . . . . . . . . 17
5.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . 17
5.02 Corporate Power and Authority. . . . . . . . . . . . . . . . . 18
5.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.04 Governmental Approvals . . . . . . . . . . . . . . . . . . . . 18
5.05 Financial Statements; Financial Outlook. . . . . . . . . . . . 18
5.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.07 True and Complete Disclosure . . . . . . . . . . . . . . . . . 19
5.08 Use of Proceeds; Margin Regulations. . . . . . . . . . . . . . 19
5.09 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 19
5.10 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Investment Company Act . . . . . . . . . . . . . . . . . . . . 20
5.12 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . 20
5.13 Air Carrier. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.14 Security Interests . . . . . . . . . . . . . . . . . . . . . . 21
5.15 Year 2000 Reprogramming. . . . . . . . . . . . . . . . . . . . 21
SECTION 6. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . 21
6.01 Information Covenants. . . . . . . . . . . . . . . . . . . . . 21
6.02 Books, Records and Inspections . . . . . . . . . . . . . . . . 23
6.03 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . 24
6.05 Consolidated Corporate Franchises. . . . . . . . . . . . . . . 24
6.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . 24
6.07 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.08 Good Repair. . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.09 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . 25
6.10 Performance of Obligations . . . . . . . . . . . . . . . . . . 25
6.11 Air Carrier. . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.12 Security Interests . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 7. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . 26
7.01 Changes in Business. . . . . . . . . . . . . . . . . . . . . . 26
7.02 Consolidation, Merger, etc . . . . . . . . . . . . . . . . . . 26
(ii)
<PAGE>
Page
----
7.03 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . 26
7.04 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.05 Distributions, etc . . . . . . . . . . . . . . . . . . . . . . 28
7.06 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.07 Transactions with Affiliates . . . . . . . . . . . . . . . . . 33
7.08 Consolidated Indebtedness to Consolidated EBITDAR. . . . . . . 33
7.09 Consolidated EBITDAR to Consolidated Fixed Charges . . . . . . 33
7.10 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.11 LAX TWO CORP . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.12 Existing Credit Agreement; Bridge Debt Agreement . . . . . . . 34
SECTION 8. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 34
8.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.02 Representations, etc.. . . . . . . . . . . . . . . . . . . . . 34
8.03 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.04 Default Under Other Agreements . . . . . . . . . . . . . . . . 34
8.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . 35
8.06 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.07 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.08 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.09 Security Documents . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 9. Definitions and Accounting Terms . . . . . . . . . . . . . . . . . 37
9.01 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 10. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.02 Nature of Duties. . . . . . . . . . . . . . . . . . . . . . . 51
10.03 Lack of Reliance on Agent . . . . . . . . . . . . . . . . . . 51
10.04 Certain Rights of Agent . . . . . . . . . . . . . . . . . . . 52
10.05 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 52
10.07 Agent in its Individual Capacity. . . . . . . . . . . . . . . 52
10.08 Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.09 Resignation by the Agent. . . . . . . . . . . . . . . . . . . 53
SECTION 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . 53
11.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . 54
11.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.04 Benefit of Agreement. . . . . . . . . . . . . . . . . . . . . 55
11.05 No Waiver; Remedies Cumulative. . . . . . . . . . . . . . . . 56
11.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . 56
11.07 Calculations; Computations. . . . . . . . . . . . . . . . . . 57
(iii)
<PAGE>
Page
----
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . 57
11.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 58
11.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . 59
11.11 Headings Descriptive. . . . . . . . . . . . . . . . . . . . . 59
11.12 Amendment or Waiver; etc. . . . . . . . . . . . . . . . . . . 59
11.13 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.14 Domicile of Revolving Loans . . . . . . . . . . . . . . . . . 60
11.15 Limitation on Additional Amounts, etc.. . . . . . . . . . . . 60
11.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 60
11.17 Registry. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.18 Newco Reorganization. . . . . . . . . . . . . . . . . . . . . 61
SECTION 12. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.01 The Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . 63
12.02 Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . . 64
12.04 Independent Obligation. . . . . . . . . . . . . . . . . . . . 64
12.05 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 64
12.06 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.07 Subordination . . . . . . . . . . . . . . . . . . . . . . . . 64
12.08 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.09 Limitation on Enforcement . . . . . . . . . . . . . . . . . . 65
</TABLE>
SCHEDULE I Commitments
SCHEDULE II Bank Addresses
SCHEDULE III Subsidiaries
SCHEDULE IV Existing Indebtedness
EXHIBIT A Form of Notice of Borrowing
EXHIBIT B Form of Revolving Note
EXHIBIT C Form of Section 3.04(b)(ii) Certificate
EXHIBIT D-1 Form of Opinion of Douglas M. Steenland, Esq.,
Senior Vice President, General Counsel
and Secretary of the Credit Parties
EXHIBIT D-2 Form of Opinion of Crowe & Dunlevy, Special Aviation Counsel to
the Credit Parties
EXHIBIT D-3 Form of Opinion of Dorsey & Whitney, Special
Counsel to the Borrower
EXHIBIT D-4 Form of Opinion of White & Case, Special
Counsel to the Agent
EXHIBIT E Form of Consent Letter
EXHIBIT F Form of Assignment and Assumption Agreement
EXHIBIT G-1 Form of Aircraft Mortgage and Security Agreement
(iv)
<PAGE>
EXHIBIT G-2 Form of Route Security Agreement
(v)
<PAGE>
CREDIT AGREEMENT, dated as of May 12, 1998, among NORTHWEST
AIRLINES CORPORATION, a Delaware corporation ("Holdings"), NWA INC., a
Delaware corporation ("NWA"), NORTHWEST AIRLINES, INC., a Minnesota
corporation (the "Borrower"), the lending institutions listed from time to
time on Schedule I hereto (each a "Bank" and, collectively, the "Banks"), and
THE CHASE MANHATTAN BANK, as agent (the "Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 10 are used
herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available the credit facility provided
for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 THE COMMITMENTS. Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees at any time and from
time to time on and after the Initial Borrowing Date and prior to the
Revolving Loan Maturity Date, to make a revolving loan or revolving loans
(each, a "Revolving Loan", and collectively, the "Revolving Loans") to the
Borrower, which Revolving Loans (i) shall, at the option of the Borrower, be
Base Rate Loans or Eurodollar Loans, PROVIDED that, (x) except as otherwise
specifically provided in Section 1.10(b), all Revolving Loans comprising the
same Borrowing shall at all times be of the same Type and (y) no Eurodollar
Loans may be incurred prior to June 1, 1998, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, and (iii) shall not
exceed for any Bank at any time outstanding that aggregate principal amount
which equals the Revolving Loan Commitment of such Bank at such time.
1.02 MINIMUM AMOUNT OF EACH BORROWING, ETC. The aggregate
principal amount of each Borrowing shall not be less than $10,000,000 and, if
greater, shall be in integral multiples of $5,000,000. More than one
Borrowing may occur on the same date, but at no time shall there be
outstanding more than 20 Borrowings of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to
make a Borrowing hereunder, it shall give the Agent at its Notice Office at
least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Base Rate Loan and at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Eurodollar Loan to be made hereunder, PROVIDED that any such
notice shall be deemed to have been given on a certain day only if given
before 11:00 A.M. (New York time) on such day. Each such written notice or
written confirmation of telephonic notice (each, a "Notice of Borrowing"),
except as otherwise expressly provided in Section 1.10, shall be irrevocable
and shall be given by the Borrower in the form of Exhibit A, appropriately
completed to specify the aggregate principal amount of the Revolving Loans to
be made pursuant to such Borrowing, the date of such Borrowing (which shall
be a Business Day), and whether the Revolving Loans being
<PAGE>
made pursuant to such Borrowing are to be initially maintained as Base Rate
Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest
Period to be applicable thereto. The Agent shall promptly give each Bank
notice of such proposed Borrowing, of such Bank's proportionate share thereof
and of the other matters required by the immediately preceding sentence to be
specified in the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice of any Borrowing of Revolving Loans,
the Agent may act without liability upon the basis of telephonic notice of
such Borrowing, believed by the Agent in good faith to be from an Authorized
Officer of the Borrower prior to receipt of written confirmation.
1.04 DISBURSEMENT OF FUNDS. No later than 12:00 Noon (New York
time) on the date specified in each Notice of Borrowing, each Bank will make
available its PRO RATA portion of each Borrowing requested to be made on such
date. All such amounts shall be made available in Dollars and in immediately
available funds at the Payment Office of the Agent, and the Agent will make
available to the Borrower at the Payment Office the aggregate of the amounts
so made available by the Banks. Unless the Agent shall have been notified by
any Bank prior to the date of Borrowing that such Bank does not intend to
make available to the Agent such Bank's portion of any Borrowing to be made
on such date, the Agent may assume that such Bank has made such amount
available to the Agent on such date of Borrowing and the Agent may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to the
Agent by such Bank, the Agent shall be entitled to recover such corresponding
amount on demand from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the Borrower and the Borrower shall immediately pay
such corresponding amount to the Agent. The Agent shall also be entitled to
recover on demand from such Bank or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Agent to the Borrower
until the date such corresponding amount is recovered by the Agent, at a rate
per annum equal to (i) if recovered from such Bank, the overnight Federal
Funds Rate and (ii) if recovered from the Borrower, the rate of interest
applicable to the respective Borrowing, as determined pursuant to Section
1.08. Nothing in this Section 1.04 shall be deemed to relieve any Bank from
its obligation to make Revolving Loans hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any failure by
such Bank to make Revolving Loans hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the principal
of, and interest on, the Revolving Loans made by each Bank shall be evidenced
by a promissory note duly executed and delivered by the Borrower
substantially in the form of Exhibit B with blanks appropriately completed in
conformity herewith (each, a "Revolving Note" and, collectively, the
"Revolving Notes").
(b) The Revolving Note issued to each Bank shall (i) be executed
by the Borrower, (ii) be payable to the order of such Bank and be dated the
Effective Date, (iii) be in a stated principal amount equal to the Revolving
Loan Commitment of such Bank and be payable
-2-
<PAGE>
in the principal amount of the Revolving Loans evidenced thereby, (iv) mature
on the Revolving Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby and (vi) be subject
to mandatory repayment as provided in Section 3.02.
(c) Each Bank will note on its internal records the amount of each
Revolving Loan made by it and each payment in respect thereof and will prior
to any transfer of any of its Revolving Notes endorse on the reverse side
thereof the outstanding principal amount of Revolving Loans evidenced
thereby. Failure to make any such notation shall not affect the Borrower's
obligations in respect of such Revolving Loans.
1.06 CONVERSIONS. The Borrower shall have the option to convert,
on any Business Day, all or a portion equal to at least $10,000,000 (and, if
greater, in integral multiples of $5,000,000) of the outstanding principal
amount of Revolving Loans made pursuant to one or more Borrowings of one or
more Types of Revolving Loans into a Borrowing of another Type of Revolving
Loan, PROVIDED that (i) except as otherwise provided in Section 1.10(b),
Eurodollar Loans may be converted into Base Rate Loans only on the last day
of an Interest Period applicable to the Revolving Loans being converted and
no partial conversion of Eurodollar Loans shall reduce the outstanding
principal amount of such Eurodollar Loans made pursuant to a single Borrowing
to less than $10,000,000, (ii) Base Rate Loans may only be converted into
Eurodollar Loans if no Default or Event of Default is in existence on the
date of the conversion, (iii) no conversion pursuant to this Section 1.06
shall result in a greater number of Borrowings of Eurodollar Loans than is
permitted under Section 1.02 and (iv) prior to June 1, 1998, no Revolving
Loan may be converted into Eurodollar Loans. Each such conversion shall be
effected by the Borrower by giving the Agent at its Notice Office prior to
11:00 A.M. (New York time) at least three Business Days' prior notice (each,
a "Notice of Conversion") specifying the Revolving Loans to be so converted,
the Borrowing or Borrowings pursuant to which such Revolving Loans were made
and, if to be converted into Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Agent shall give each Bank prompt notice
of any such proposed conversion affecting any of its Revolving Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Revolving Loans under
this Agreement shall be incurred from the Banks PRO RATA on the basis of
their Revolving Loan Commitments. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make
Revolving Loans hereunder and that each Bank shall be obligated to make the
Revolving Loans provided to be made by it hereunder, regardless of the
failure of any other Bank to make its Revolving Loans hereunder.
1.08 INTEREST. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan from the date
the proceeds thereof are made available to the Borrower until the earlier of
(i) the maturity (whether by acceleration or otherwise) of such Base Rate
Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall be equal to the sum
of 1% plus the Base Rate in effect from time to time.
-3-
<PAGE>
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date the proceeds thereof
are made available to the Borrower until the earlier of (i) the maturity
(whether by acceleration or otherwise) of such Eurodollar Loan and (ii) the
conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, 1.09 or 1.10, as applicable, at a rate per annum which shall, during
each Interest Period applicable thereto, be equal to the sum of 2% plus the
Eurodollar Rate for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Revolving Loan and any other overdue amount
payable hereunder shall, in each case, bear interest at a rate per annum
equal to the greater of (x) except as provided in Section 1.08(d)(y), 2% per
annum in excess of the rate otherwise applicable to Base Rate Loans from time
to time and (y) in the case of Eurodollar Loans, until the end of the
applicable Interest Period for such Eurodollar Loans, at a rate which is 2%
in excess of the rate then borne by such Eurodollar Loans, in each case with
such interest to be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i)
in respect of each Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of
each Interest Period applicable thereto and, in the case of an Interest
Period in excess of three months, on each date occurring at three month
intervals after the first day of such Interest Period and (iii) in respect of
each Revolving Loan, on any repayment or prepayment (on the amount repaid or
prepaid), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) Upon each Interest Determination Date, the Agent shall
determine the Eurodollar Rate for each Interest Period applicable to
Eurodollar Loans and shall promptly notify the Borrower and the Banks
thereof.
1.09 INTEREST PERIODS. (a) At the time it gives any Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, any Eurodollar Loan (in the case of the initial Interest Period
applicable thereto) or on the third Business Day prior to the expiration of
an Interest Period applicable to such Eurodollar Loan (in the case of any
subsequent Interest Period), the Borrower shall have the right to elect, by
giving the Agent notice thereof, the interest period or interest periods
(each, an "Interest Period") applicable to such Eurodollar Loan (or any
portion thereof), which Interest Period shall, at the option of the Borrower,
be a one, two, three or six-month period, PROVIDED that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period (it being understood that one Borrowing may
be converted into more than one Borrowing as a result of the selection of
Interest Periods so long as in any event, after giving effect to such
conversions, all Banks are participating PRO RATA in such Borrowing and
Section 1.02 is complied with);
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including the
date of any conversion thereto from a Revolving Loan of a different Type)
and each Interest Period occurring thereafter
-4-
<PAGE>
in respect of such Eurodollar Loan shall commence on the day on which the
next preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on
a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end on
the last Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED, HOWEVER, that if any Interest Period for
a Eurodollar Loan would otherwise expire on a day which is not a Business
Day but is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(v) no Interest Period may be selected at any time when a Default
or Event of Default is then in existence;
(vi) no Interest Period in respect of any Borrowing shall be
selected which extends beyond the Revolving Loan Maturity Date; and
(vii) no Interest Period may be selected which would commence prior
to June 1, 1998.
If upon the expiration of any Interest Period applicable to a Borrowing of
Eurodollar Loans, the Borrower has failed to elect, or is not permitted to
elect, a new Interest Period or Interest Periods to be applicable to such
Eurodollar Loans as provided above, the Borrower shall be deemed to have
elected to convert such Eurodollar Loans into Base Rate Loans effective as of
the expiration date of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that any
Bank shall have determined (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto but, with respect
to clause (i) below, may be made only by the Agent):
(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, order, guideline or request
(such as, for example, but
-5-
<PAGE>
not limited to a change in official reserve requirements, but, in all
events, excluding reserves required under Regulation D of the Board of
Governors of the Federal Reserve System to the extent included in the
computation of the Eurodollar Rate) and/or (y) other circumstances
(other than an adverse change in the credit quality of such Bank) since
the date of this Agreement affecting the interbank Eurodollar market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has become (x) unlawful by any law or governmental rule, regulation or
order, (y) impossible by compliance by any Bank in good faith with any
governmental request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the date of this
Agreement which materially and adversely affects the interbank Eurodollar
market;
then, and in any such event, such Bank (or the Agent, in the case of clause
(i) above) shall promptly give notice (by telephone confirmed in writing) to
the Borrower and, except in the case of clause (i) above, to the Agent of
such determination (which notice the Agent shall promptly transmit to each of
the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar
Loans shall no longer be available until such time as the Agent notifies the
Borrower and the Banks that the circumstances giving rise to such notice by
the Agent no longer exist, and any Notice of Borrowing or Notice of
Conversion given by the Borrower with respect to Eurodollar Loans, which have
not yet been incurred (including by way of conversion) shall be deemed
rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower
shall, subject to the provisions of Section 11.15 (to the extent applicable)
pay to such Bank, upon written demand therefor, such additional amounts (in
the form of an increased rate of, or a different method of calculating,
interest or otherwise as such Bank shall reasonably determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the
additional amounts owed to such Bank, showing in reasonable detail the basis
for the calculation thereof, submitted to the Borrower by such Bank in good
faith shall, absent manifest error, be final and conclusive and binding on
all the parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 1.10(b) as
promptly as possible and, in any event, within the time period required by
law. Each of the Agent and each Bank agrees that if it gives notice to the
Borrower of any of the events described in clause (i) or (iii) above, it
shall promptly notify the Borrower and, in the case of any such Bank, the
Agent, if such event ceases to exist. If any such event described in clause
(iii) above ceases to exist as to a Bank, the obligations of such Bank to
make Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans on
the terms and conditions contained herein shall be reinstated.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected by the circumstances described in
Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then
being made initially or pursuant to a conversion, cancel the respective
Borrowing by giving the Agent telephonic notice (confirmed in writing) on the
same date that the Borrower was notified by the affected Bank pursuant to
Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then
outstanding, upon at least three Business Days' written notice to
-6-
<PAGE>
the Agent, require the affected Bank to convert such Eurodollar Loan into a
Base Rate Loan, PROVIDED that, if more than one Bank is affected at any time,
then all affected Banks must be treated the same pursuant to this Section
1.10(b).
(c) If at any time any Bank determines that the introduction after
the date of this Agreement of, or any change after the date of this Agreement
in, any applicable law or governmental rule, regulation, order, guideline,
directive or request (whether or not having the force of law) concerning
capital adequacy, or any change after the date of this Agreement in
interpretation or administration thereof by any governmental authority,
central bank or comparable agency, will have the effect of increasing the
amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank based on the existence of such Bank's
Revolving Loan Commitment hereunder or its obligations hereunder, then the
Borrower shall, subject to the provisions of Section 11.15 (to the extent
applicable), pay to such Bank, upon its written demand therefor, such
additional amounts as shall be required to compensate such Bank or such other
corporation for the increased cost to such Bank or such other corporation or
the reduction in the rate of return to such Bank or such other corporation as
a result of such increase of capital. In determining such additional
amounts, each Bank will act reasonably and in good faith and will use
averaging and attribution methods which are reasonable. Each Bank will
provide written notice thereof to the Borrower, which notice shall show the
basis for calculation of such additional amounts, although the failure to
give any such notice shall, subject to Section 11.15, not release or diminish
any of the Borrower's obligations to pay additional amounts pursuant to this
Section 1.10(c) upon receipt of such notice.
1.11 COMPENSATION. The Borrower shall, subject to the provisions of
Section 11.15 (to the extent applicable), compensate each Bank, upon its written
request (which request shall set forth the basis for requesting such
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by such Bank to
fund its Eurodollar Loans but excluding any loss of anticipated profits) which
such Bank may sustain: (i) if for any reason (other than a default by such Bank
or the Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does
not occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a) or (b)); (ii) if any repayment (including, without
limitation, any repayment made pursuant to Section 3.01 or 3.02 or as a result
of an acceleration of the Revolving Loans pursuant to Section 8) or conversion
of any of its Eurodollar Loans occurs on a date which is not the last day of an
Interest Period with respect thereto; (iii) if any prepayment of any of its
Eurodollar Loans is not made on any date specified in a notice of prepayment
given by the Borrower; or (iv) as a consequence of (x) any other default by the
Borrower to repay its Revolving Loans when required by the terms of this
Agreement or any Revolving Note held by such Bank or (y) any election made
pursuant to Section 1.10(b). No Bank shall be deemed to have any loss, expense
or liability incurred by the reason of the liquidation or reemployment of
deposits as a result of the Borrower repaying Eurodollar Loans prior to the end
of an Interest Period unless the Eurodollar Rate which would be applicable to
the Eurodollar Loan being repaid if such Eurodollar Rate were being determined
on the date of repayment (assuming for purposes of this determination that the
Interest Period or the maturity
-7-
<PAGE>
utilized in making such determination is the Interest Period or the maturity
originally applicable to such Eurodollar Loan) is less than the Eurodollar
Rate actually applicable to the Eurodollar Loan being repaid.
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that after
becoming aware of the occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), or Section 3.04 with respect
to such Bank, it will use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office for any
Revolving Loans affected by such event, PROVIDED that such designation is
made on such terms that such Bank and its lending office suffer no material
economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section.
Nothing in this Section 1.12 shall affect or postpone any of the obligations
of the Borrower or the rights of any Bank provided in Sections 1.10 and 3.04,
PROVIDED that this sentence shall not limit the Borrower's rights and
remedies in connection with a breach of the immediately preceding sentence.
1.13 REPLACEMENT OF BANKS. If (x) any Bank defaults in its
obligations to make Revolving Loans, (y) any Bank refuses to give timely consent
to proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
11.12(b) or (z) any Bank is owed increased costs under Section 1.10 (by virtue
of the application of Section 1.11 or otherwise) or Section 3.04 which in the
judgment of the Borrower are material in amount and which are not otherwise
requested by Banks constituting at least the Super-Majority Banks, the Borrower
shall have the right, if no Event of Default then exists and, in the case of a
Bank described in clause (z) above, such Bank has not withdrawn its request for
such compensation or changed its applicable lending office with the effect of
eliminating or substantially decreasing (to a level which in the judgment of the
Borrower is not material) such increased cost, to replace such Bank (the
"Replaced Bank") with one or more other Eligible Transferee or Transferees
(collectively, the "Replacement Bank") with the consent of the Agent, which
consent shall not be unreasonably withheld or delayed, PROVIDED that (i) at the
time of any replacement pursuant to this Section 1.13, the Replacement Bank
shall enter into one or more Assignment and Assumption Agreements pursuant to
which the Replacement Bank shall acquire all of the Revolving Loan Commitment
and outstanding Revolving Loans of the Replaced Bank and, in connection
therewith, shall pay to the Replaced Bank in respect thereof an amount equal to
the sum of (a) an amount equal to the principal of, and all accrued interest on,
all outstanding Revolving Loans of the Replaced Bank and (b) an amount equal to
all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to
Section 2.01 hereof and (ii) all obligations of the Borrower owing to the
Replaced Bank (other than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective assignment documentation, the
payment of amounts referred to in clauses (i) and (ii) above and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Revolving Note executed by the Borrower, the Replacement Bank shall
become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank
hereunder, except with respect to indem-
-8-
<PAGE>
nifications under this Agreement pursuant to Section 1.10, 1.11, 3.04, 11.01
and 11.06, which shall survive as to such Replaced Bank.
SECTION 2. FEES; REDUCTIONS OF COMMITMENT.
2.01 FEES. (a) The Borrower agrees to pay the Agent for
distribution to each Bank a commitment fee (the "Commitment Fee") for the
period from the Effective Date to and including the Revolving Loan Maturity
Date (or such earlier date as the Total Revolving Loan Commitment shall have
been terminated), computed at a per annum rate equal to .3750% multiplied by
the daily Unutilized Revolving Loan Commitment of such Bank. Accrued
Commitment Fees shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the Revolving Loan Maturity Date or such
earlier date upon which the Total Revolving Loan Commitment is terminated.
(b) The Borrower shall pay to the Agent, for its own account, such
other fees as have been agreed to in writing by the Borrower and the Agent.
2.02 VOLUNTARY TERMINATION OF COMMITMENTS. (a) Upon at least
three Business Days' prior written notice (or telephonic notice confirmed in
writing) to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), the Borrower shall have the right,
at any time or from time to time, without premium or penalty, to terminate
the Total Unutilized Revolving Loan Commitment, in whole or in part,
PROVIDED that any such partial reduction shall be in an amount of $5,000,000
or integral multiples of $1,000,000 in excess thereof, PROVIDED further that
each such reduction pursuant to this clause (a) shall apply proportionately
to permanently reduce the Revolving Loan Commitment of each Bank.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 11.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Agent at its Notice Office (which notice the
Agent shall promptly transmit to each of the Banks), to terminate the entire
Revolving Loan Commitment of such Bank, so long as all Revolving Loans,
together with accrued and unpaid interest, Fees and all other amounts, owing
to such Bank are repaid concurrently with the effectiveness of such
termination pursuant to Section 3.01(b) (at which time Schedule I shall be
deemed modified to reflect such changed amounts)), and at such time, such
Bank shall no longer constitute a "Bank" for purposes of this Agreement,
except with respect to indemnifications under this Agreement pursuant to
Sections 1.10, 1.11, 3.04, 11.01 and 11.06, which shall survive as to such
repaid Bank.
2.03 MANDATORY REDUCTION OF COMMITMENTS. (a) The Total Revolving
Loan Commitment and the Revolving Loan Commitment of each Bank shall
terminate in their entirety on the Revolving Loan Maturity Date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 2.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each Bank) shall be reduced at the time any payment is
required to be made on the principal
-9-
<PAGE>
amount of Revolving Loans (or would be required to be made if Revolving Loans
were then outstanding) pursuant to Section 3.02(b), (c), (d) or (e), by an
amount equal to the maximum amount of Revolving Loans that would be required
to be repaid pursuant to Section 3.02(b), (c) or (d) assuming that Revolving
Loans were outstanding in an aggregate principal amount equal to the Total
Revolving Loan Commitment.
(c) Each reduction to the Total Revolving Loan Commitment pursuant
to this Section 2.03 shall be applied proportionately to reduce the Revolving
Loan Commitment of each Bank.
SECTION 3. PREPAYMENTS; PAYMENTS; TAXES.
3.01 VOLUNTARY PREPAYMENTS. (a) The Borrower shall have the
right to prepay the Revolving Loans, without premium or penalty, in whole or
in part at any time and from time to time on the following terms and
conditions: (i) the Borrower shall give the Agent prior to 12:00 Noon (New
York time) at its Notice Office at least one Business Day's prior written
notice (or telephonic notice promptly confirmed in writing) of its intent to
prepay such Revolving Loans, the amount of such prepayment and the Types of
Revolving Loans to be prepaid and, in the case of Eurodollar Loans, the
specific Borrowing or Borrowings pursuant to which made, which notice the
Agent shall promptly transmit to each of the Banks; (ii) each prepayment
(except any prepayment in full of a Borrowing) shall be in a minimum amount
of $1,000,000 and, if greater, shall be in integral multiples thereof,
PROVIDED that if any partial prepayment of Eurodollar Loans made pursuant to
any Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to
such Borrowing to an amount less than $10,000,000 then such Borrowing may not
be continued as a Borrowing of Eurodollar Loans and any election of an
Interest Period with respect thereto given by the Borrower shall have no
force or effect; (iii) at the time of any prepayment of Eurodollar Loans
pursuant to this Section 3.01 on any day other than the last day of an
Interest Period applicable thereto, the Borrower shall pay the amounts then
required pursuant to Section 1.11 and (iv) except as provided in clause (b)
of this Section 3.01, each prepayment in respect of any Revolving Loans made
pursuant to a Borrowing shall be applied PRO RATA among the Banks which made
such Revolving Loans.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 11.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Agent at its Notice Office (which notice the
Agent shall promptly transmit to each of the Banks) to repay all Revolving
Loans, together with accrued and unpaid interest, Fees and all other amounts,
owing to such Bank in accordance with said Section 11.12(b) so long as (A)
the Revolving Loan Commitment of such Bank is terminated concurrently with
such repayment pursuant to Section 2.02(b) (at which time Schedule I shall be
deemed modified to reflect the changed Revolving Loan Commitment) and (B) the
consents required by Section 11.12(b) in connection with the repayment
pursuant to this clause (b) shall have been obtained.
-10-
<PAGE>
3.02 MANDATORY REPAYMENTS. (a) On any day on which the aggregate
outstanding principal amount of the Revolving Loans exceeds the Total
Revolving Loan Commitment as then in effect, the Borrower shall prepay on
such date the principal of Revolving Loans of the Banks in an amount equal to
such excess.
(b) In addition to any other mandatory repayments pursuant to this
Section 3.02, on each date after the Effective Date upon which Holdings or
any of its Subsidiaries receives any proceeds from any incurrence by Holdings
or any of its Subsidiaries of Indebtedness required to be applied pursuant to
this Section in accordance with Section 7.06(d) or 7.06(e), an amount equal
to the amount required by Section 7.06(d) or 7.06(e), as the case may be,
shall be applied as a mandatory repayment of principal of outstanding
Revolving Loans in accordance with the requirements of Sections 3.02(f).
(c) In addition to any other mandatory repayments pursuant to this
Section 3.02, on each date after the Effective Date upon which Holdings or
any of its Subsidiaries receives proceeds from any sale of assets required to
be applied pursuant to this Section in accordance with Section 7.03, an
amount equal to the amount required by Section 7.03 shall be applied as a
mandatory repayment of principal of outstanding Revolving Loans in accordance
with the requirements of Section 3.02(f).
(d) In addition to any other mandatory repayments pursuant to this
Section 3.02, upon the occurrence of an Event of Loss with respect to
Aircraft Collateral which the Borrower does not replace in accordance with
the provisions of Section 3.5(a) of the Aircraft Mortgage Agreement, an
amount equal to 70% of the value (as specified in the Appraisals) of such
Aircraft Collateral which is the subject of the Event of Loss shall be
applied as a mandatory repayment of principal of outstanding Revolving Loans
in accordance with the requirements of Section 3.02(f) on the date which is
the earlier of (x) the date on which the Borrower determines not to replace
such Collateral and (y) thirty (30) days from the date of occurrence of such
Event of Loss; PROVIDED that no mandatory repayment shall be required to the
extent that the aggregate value (as specified in the Appraisals) of Aircraft
which are or have been the subject of Events of Loss since the Effective Date
does not exceed $20 million and so long as the number of Aircraft which are
or have been since the Effective Date the subject of Events of Loss does not
exceed three (3).
(e) In addition to any other mandatory repayments pursuant to this
Section 3.02, upon the occurrence of an Event of Loss with respect to Route
Collateral which results in failure to be in compliance with the Coverage
Tests on the 30th day following the date of occurrence of such Event of Loss,
as such failure is determined based on Appraisals obtained by the Borrower
following such Event of Loss, an amount equal to the amount necessary for the
Coverage Tests to be complied with (based on the Collateral after giving
effect to such Event of Loss and the Appraisals obtained after such Event of
Loss) shall be applied as a mandatory repayment of principal of outstanding
Revolving Loans in accordance with the requirements of Section 3.02(f).
(f) With respect to each repayment of Revolving Loans required by
this Section 3.02, the Borrower may designate the Types of Revolving Loans
which are to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made,
-11-
<PAGE>
PROVIDED that: (i) if any repayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant
to such Borrowing to an amount less than $10,000,000, such Borrowing shall be
converted at the end of the then current Interest Period into a Borrowing of
Base Rate Loans; and (ii) each repayment of any Revolving Loans made pursuant
to a Borrowing shall be applied PRO RATA among the Banks. In the absence of
a designation by the Borrower as described in the preceding sentence, the
Agent shall, subject to the above, make such designation in its sole
discretion.
3.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement or any
Revolving Note shall be made to the Agent for the account of the Bank or
Banks entitled thereto not later than 1:00 P.M. (New York time) on the date
when due and shall be made in Dollars in immediately available funds at the
Payment Office of the Agent. Whenever any payment to be made hereunder or
under any Revolving Note shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.
3.04 NET PAYMENTS. (a) All payments made by the Guarantors or
the Borrower hereunder or under any Revolving Note will be made without
set-off, counterclaim or other defense. Except as provided in Section
3.04(b), all such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, (i) any tax
imposed on or measured by the net income or profits of a Bank, or any
franchise tax based on the net income or profits of a Bank, in either case
pursuant to the laws of the United States of America or any political
subdivision or taxing authority thereof or therein or the jurisdiction in
which it is organized or in which the principal office or applicable lending
office of such Bank is located or any subdivision thereof or therein, and
(ii) in the case of any Bank organized under the laws of any jurisdiction
other than the United States of America or any State thereof (including the
District of Columbia), any taxes imposed by the United States of America by
means of withholding at the source unless such withholding results from a
change in applicable law or treaty subsequent to the date such Bank becomes a
Bank with respect to the Revolving Loan or portion thereof affected by such
change) and all interest, penalties or similar liabilities with respect
thereto (all such non-excluded taxes, levies, imports, duties, fees,
assessments or other charges being referred to collectively as "Taxes"). If
any Taxes are so levied or imposed, the Borrower agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any Revolving
Note, after withholding or deduction for or on account of any Taxes, will not
be less than the amount provided for herein or in such Revolving Note. If
any amounts are payable in respect of Taxes pursuant to the preceding
sentence of this Section 3.04(a), then the Borrower agrees to reimburse each
Bank, upon the written request of such Bank, for taxes imposed on or measured
by the net income or profits of such Bank, or any franchise tax based on the
net income or profits of such Bank, in either case pursuant to the laws of
the jurisdiction in which the principal office or applicable lending office
of such Bank is located or under the laws of any
-12-
<PAGE>
political subdivision or taxing authority of any such jurisdiction in which
the principal office or applicable lending office of such Bank is located and
for any withholding of income or similar taxes imposed by the United States
of America as such Bank shall determine are payable by, or withheld from,
such Bank in respect of such amounts so paid to or on behalf of such Bank
pursuant to the preceding sentence and in respect of any amounts paid to or
on behalf of such Bank pursuant to this sentence. Such written request shall
set forth the amount of net income or profits or franchise taxes payable by,
or withheld from, such Bank pursuant to the immediately preceding sentence
and shall be certified by an appropriate officer of such Bank. The Borrower
will pay any such Taxes required to be paid pursuant to this Section 3.04(a)
within the time allowed for such payment under applicable law and will
furnish to the Agent within 45 days after the date the payment of any Taxes
is made to the relevant taxation or other authority pursuant to applicable
law certified copies of tax receipts evidencing such payment by the Borrower.
The Borrower agrees to indemnify and hold harmless each Bank, and reimburse
such Bank upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Bank.
(b) Each Bank which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Agent on or prior to the Effective Date or in the case of a Bank that is
an assignee or transferee of an interest under this Agreement pursuant to
Sections 1.13 or 11.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or Form 1001 (or successor
forms) certifying to such Bank's entitlement to a complete exemption from United
States withholding tax with respect to payments to be made under this Agreement
and under any Revolving Note, or (ii) if the Bank is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal
Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a
certificate substantially in the form of Exhibit C (any such certificate, a
"Section 3.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under this
Agreement and under any Revolving Note. In addition, each Bank agrees that from
time to time after the Effective Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to the Borrower and the Agent two new accurate
and complete original signed copies of Internal Revenue Service Form 4224 or
1001, or Form W-8 and a Section 3.04(b)(ii) Certificate, as the case may be, and
such other forms as may be required in order to confirm or establish the
entitlement of such Bank to a continued exemption from or reduction in United
States withholding tax with respect to payments under this Agreement and any
Revolving Note, or it shall immediately notify the Borrower and the Agent of its
inability to deliver any such form or certificate. Notwithstanding anything to
the contrary contained in Section 3.04(a), but subject to Section 11.04(b) and
the immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes to the extent
-13-
<PAGE>
that such Bank has not provided to the Borrower U.S. Internal Revenue Service
Forms that establish a complete exemption from such deduction or withholding
and (y) the Borrower shall not be obligated pursuant to Section 3.04(a)
hereof to gross-up payments to be made to a Bank in respect of income or
similar taxes imposed by the United States (or any political subdivision or
taxing authority thereof or therein) if (I) such Bank has not provided to the
Borrower the Internal Revenue Service Forms and, if applicable, certificate
required to be provided to the Borrower pursuant to this Section 3.04(b) or
(II) in the case of a payment, other than interest, to a Bank described in
clause (ii) above, to the extent that such forms and, if applicable,
certificate do not establish a complete exemption from withholding of such
taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 3.04 and except as set forth in Section
11.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Bank in the manner set forth in Section 3.04(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Effective
Date in any applicable law, treaty, governmental rule, regulation, guideline
or order, or in the official interpretation thereof, relating to the
deducting or withholding of income or similar Taxes.
(c) The provisions of this Section 3.04 are subject to the
provisions of Section 11.15 (to the extent applicable).
SECTION 4A. CONDITIONS PRECEDENT TO EFFECTIVE DATE. The
occurrence of the Effective Date is subject to the satisfaction of the
following conditions:
4A.01 NOTES. On or prior to the Effective Date there shall have
been delivered to the Agent for the account of each of the Banks the
appropriate Revolving Note executed by the Borrower and in the amount and
maturity and as otherwise provided herein.
4A.02 OFFICERS' CERTIFICATE (a) On the Effective Date, the Agent
shall have received a certificate dated the Effective Date and signed by an
Authorized Officer of the Borrower stating that all of the applicable
conditions set forth in Sections 4A.06, 4A.07, 4A.11 and 4B.02 have been
satisfied as of such date.
(b) On the Effective Date, the Agent shall have received a
certificate dated the Effective Date and signed by an Authorized Officer of
Holdings (i) stating that Holdings is in compliance with Sections 7.08 and
7.09 as of the last day of the fiscal quarter ended March 31, 1998 and (ii)
setting forth the calculations required to establish such compliance.
4A.03 OPINIONS OF COUNSEL. On the Effective Date, the Agent shall
have received opinions, in form and substance satisfactory to the Agent,
addressed to the Agent and the Banks and dated the Effective Date, from (i)
Douglas M. Steenland, Esq., Senior Vice President, General Counsel and
Secretary of the Credit Parties, which opinion shall cover the matters
contained in Exhibit D-1 hereto, (ii) Crowe & Dunlevy, special aviation
counsel for the Agent, which opinion shall cover the matters contained in
Exhibit D-2 hereto, (iii) Dorsey & Whitney, special counsel for the Borrower,
which opinion shall cover the matters contained in
-14-
<PAGE>
Exhibit D-3 hereto and (iv) White & Case, special counsel to the Agent, which
opinion shall cover the matters contained in Exhibit D-4 hereto.
4A.04 CORPORATE DOCUMENTS; PROCEEDINGS; ETC. (a) On the
Effective Date, the Agent shall have received from each Credit Party a
certificate, dated the Effective Date, signed by an Authorized Officer, and
attested to by the Secretary or any Assistant Secretary, of such Credit
Party, (x) certifying that the certificate of incorporation and by-laws of
such Credit Party attached thereto are true and correct copies thereof and
(y) to the effect that such Credit Party is in good standing in its
respective state of incorporation.
(b) On the Effective Date, all corporate and legal proceedings and
all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Credit Documents shall be
satisfactory in form and substance to the Agent, and the Agent shall have
received all information and copies of all certificates, documents and
papers, including records of corporate proceedings, governmental approvals,
good standing certificates and bring-down telegrams or facsimiles, if any,
which the Agent may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
4A.05 CONSENT LETTER. The Agent shall have received a letter from
CT Corporation System, presently located at 1633 Broadway, New York, New York
10019, substantially in the form of Exhibit E, indicating its consent to its
appointment by each Credit Party as its agent to receive service of process
as specified in Section 11.08.
4A.06 ADVERSE CHANGE, ETC. On the Effective Date, nothing shall
have occurred which has had a material adverse effect on (i) the rights or
remedies of the Agent or the Banks, (ii) the ability of the Credit Parties to
perform their respective obligations to the Agent and the Banks or (iii) the
results of operations or financial condition of Holdings and its Subsidiaries
taken as a whole or the Borrower and its Subsidiaries taken as a whole,
provided, however, that neither a strike or other labor action with respect
to the Borrower nor the effects thereof shall be deemed to have such a
material adverse effect.
4A.07 LITIGATION. On the Effective Date, no actions, suits or
proceedings by any entity (private or governmental) shall be pending or
threatened (a) with respect to the Transaction or this Agreement or any
documentation executed in connection therewith, or (b) which has had a
materially adverse effect on (i) the Transaction, (ii) the results of
operations or financial condition of Holdings and its Subsidiaries taken as a
whole or of the Borrower and its Subsidiaries taken as whole or (iii) the
rights or remedies of the Banks hereunder or under any other Credit Document
or on the ability of any Credit Party to perform its respective obligations
to the Banks hereunder or under any other Credit Document.
4A.08 FINANCIAL OUTLOOK. The Banks shall have received the
Financial Outlook which shall be in form and substance reasonably
satisfactory to the Agent and the Required Banks.
-15-
<PAGE>
4A.09 EXISTING CREDIT AGREEMENT. On the Effective Date, the
Existing Credit Agreement shall have been amended in form, scope and
substance satisfactory to the Agent and the Required Banks.
4A.10 FEES, ETC. The Borrower shall have paid to the Agent and
the Banks all costs, fees and expenses (including, without limitation, legal
fees and expenses) payable to the Agent and the Banks to the extent then due.
4A.11 APPRAISAL OF COLLATERAL. (a) The Agent shall have received
Appraisals with respect to the Collateral setting forth the Appraised Value
of such Collateral as of the Effective Date, which Appraisals shall be in
form and substance satisfactory to the Agent.
(b)(i) The Appraised Value of the Collateral (using fair market
values with respect to the Route Collateral) shall be equal to or greater
than 1.75 times the Total Revolving Loan Commitment and (ii) the Appraised
Value of the Collateral (using "orderly liquidation" values with respect to
the Route Collateral) shall be equal to or greater than 1.5 times the Total
Revolving Loan Commitment (such calculations in clauses (i) and (ii), the
"Coverage Tests").
4A.12 SECURITY DOCUMENTS. On the Effective Date, the Borrower
shall have duly authorized, executed and delivered (i) an Aircraft Mortgage
and Security Agreement in the form of Exhibit G-1 hereto (as modified,
amended or supplemented from time to time in accordance with the terms
thereof and hereof, the "Aircraft Mortgage Agreement") and (ii) a Route
Security Agreement in the form of Exhibit G-2 hereto (as modified, amended or
supplemented from time to time in accordance with the terms thereof and
hereof, the "Route Security Agreement" and, together with the Aircraft
Mortgage Agreement, the "Security Documents"), in each case covering all of
the Aircraft Collateral or the Route Collateral, as the case may be, together
with:
(i) executed copies of proper financing statements to be filed under
the UCC in all jurisdictions required to perfect the security interests
purported to be created by the respective Security Documents;
(ii) evidence of the completion of all other recordings and filings
with respect to the Security Documents in order to perfect the security
interest created by the Security Documents, including without limitation,
all filings with the FAA;
(iii) evidence that all third party approvals, consents, or notices,
or all other actions required or deemed reasonably necessary by the Agent,
to perfect and protect the security interests created by the Security
Documents have been obtained or taken, as the case may be;
(iv) an independent insurance report (including confirmation of
coverage), in form and substance reasonably satisfactory to the Agent,
indicating compliance by the Borrower with the terms of the Security
Documents relating to insurance with respect to the Collateral; and
-16-
<PAGE>
(v) certified copies of a Request for Information or Copies (form
UCC-11) or equivalent reports, listing any financing statements relating to
the Collateral.
SECTION 4B. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The
obligation of each Bank to make Revolving Loans (including Revolving Loans
made on the Initial Borrowing Date) is subject, at the time of each such
Credit Event, to the satisfaction of the following conditions:
4B.01 NOTICE OF BORROWING. The Agent shall have received a Notice
of Borrowing meeting the requirements of Section 1.03(a).
4B.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of
each such Credit Event and also after giving effect thereto (i) there shall
exist no Default or Event of Default and (ii) all representations and
warranties contained herein or in any other Credit Document shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on the date of such Credit Event
(it being understood and agreed that any representation or warranty which by
its terms is made as of a specified date shall be required to be true and
correct in all material respects only as of such specified date).
4B.03 FULL UTILIZATION OF EXISTING FACILITIES. At the time of
such Credit Event, the Borrower shall have utilized all of the commitments
under each of the Existing Credit Agreement and the Bridge Debt Agreement.
4B.04 SECURITY MATTERS. On the Initial Borrowing Date, the Agent
shall have received a legal opinion, in form and substance satisfactory to
the Agent, addressed to the Agent and the Banks and dated the Initial
Borrowing Date, from Crowe & Dunlevy regarding priority of the Secured
Creditors' security interests in the Aircraft Collateral.
4B.05 EFFECTIVE DATE. On or prior to the Initial Borrowing Date,
the Effective Date shall have occurred.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by each Credit Party to the Agent
and each of the Banks that all of the conditions specified in Section 4A and
in this Section 4B which are applicable to such Credit Event exist as of that
time. All of the Revolving Notes, certificates, legal opinions and other
documents and papers referred to in Section 4A and in this Section 4B, unless
otherwise specified, shall be delivered to the Agent at the Agent's Notice
Office for the account of each of the Banks and, except for the Revolving
Notes, in sufficient counterparts for each of the Banks and shall be
reasonably satisfactory in form and substance to the Banks.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to
induce the Banks to enter into this Agreement and to make the Revolving Loans,
each Credit Party makes the following representations and warranties to and
agreements with the Banks (in each case solely to the extent applicable to such
Credit Party or its Subsidiaries), all of which shall survive the execution and
delivery of this Agreement and the Revolving Notes and the making of
-17-
<PAGE>
the Revolving Loans, with the occurrence of each Credit Event on or after the
Effective Date being deemed to constitute a representation and warranty that
the matters specified in this Section 5 are true and correct in all material
respects on the date of such Credit Event (it being understood and agreed
that any representation or warranty which by its terms is made as of a
specified date shall be required to be true and correct in all material
respects only as of such specified date).
5.01 CORPORATE STATUS. Each Credit Party and each of its
Subsidiaries (i) is a duly organized and validly existing corporation or
other entity in good standing under the laws of the jurisdiction of its
organization, (ii) has the power and authority to own its property and assets
and to transact the business in which it is engaged and presently proposes to
engage and (iii) is duly qualified and is authorized to do business and is in
good standing in each jurisdiction where it is required to be so qualified
and where the failure to be so qualified would have a material adverse effect
on the results of operations or financial condition of Holdings and its
Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a
whole.
5.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
power and authority to execute, deliver and perform the terms and provisions
of each of the Credit Documents to which it is party and has taken all
necessary action to authorize the execution, delivery and performance by it
of each of such Credit Documents. Each Credit Party has duly executed and
delivered each of the Credit Documents to which it is party, and each of such
Credit Documents constitutes such Credit Party's legal, valid and binding
obligation enforceable in accordance with its terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally
affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
5.03 NO VIOLATION. Neither the execution, delivery or performance
by any Credit Party of the Credit Documents to which it is a party, nor
compliance by it with the terms and provisions thereof, (i) will contravene
in any material respect any provision of any material applicable law,
statute, rule or regulation or any applicable order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will conflict in
any material respect with or result in any material breach of any of the
terms, covenants, conditions or provisions of, or constitute a material
default under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien (except pursuant to the Security Documents)
upon any of the properties or assets of such Credit Party pursuant to the
terms of any material indenture, mortgage, deed of trust, credit agreement or
loan agreement, or any other material agreement, contract or instrument, to
which such Credit Party is a party or by which it or any of its property or
assets is bound or to which it may be subject or (iii) will violate any
provision of the certificate of incorporation or by-laws of such Credit Party.
5.04 GOVERNMENTAL APPROVALS. No material order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of any Credit
-18-
<PAGE>
Document (other than any such order, consent, approval, license,
authorization, validation, filing, recording, registration or exemption
required to be made or obtained after the Effective Date in the ordinary
course of business which the Borrower agrees to promptly obtain as and when
required under applicable law) or (ii) the legality, validity, binding effect
or enforceability of any Credit Document.
5.05 FINANCIAL STATEMENTS; FINANCIAL OUTLOOK. (a) The audited
consolidated balance sheets of each of Holdings and its Subsidiaries and the
Borrower and its Subsidiaries at December 31, 1997 and the related
consolidated statements of operations, of common stockholders' equity
(deficit) (in the case of Holdings and its Subsidiaries) and of cash flows of
such parties for the fiscal year ended as of said date, which financial
statements have been examined by Ernst & Young, who delivered an unqualified
opinion in respect therewith have heretofore been furnished to each Bank and
present fairly in all material respects the financial position of such
entities at the dates of said statements and the results of operations for
the periods covered thereby in accordance with GAAP consistently applied,
except to the extent provided in the notes to said financial statements.
Since December 31, 1997, there has been no material adverse change in the
financial condition or results of operations of the Borrower or either
Guarantor, provided that no strike or other labor action with respect to the
Borrower nor the effects thereof shall be deemed to be a material adverse
change in the financial condition or results of operations of the Borrower or
either Guarantor.
(b) On and as of the Effective Date, the Financial Outlook
1997-2002, dated as of December 4, 1997 (the "Financial Outlook"), previously
delivered to the Agent and the Banks, had been prepared on a basis consistent
with the financial statements referred to in Section 5.05(a) (other than as
set forth or presented in such Financial Outlook), and there are no
statements or conclusions in the Financial Outlook which are based upon or
include information known to any Credit Party to be misleading in any
material respect or which fail to take into account material information
regarding the matters reported therein. The Financial Outlook is based on
good faith estimates and assumptions believed by the Credit Parties to be
reasonable at the time made, which the Credit Parties continue to believe are
reasonable as of the Effective Date, it being recognized by the Banks that
the Financial Outlook as to future events is not to be viewed as facts and
that actual results during the period or periods covered by the Financial
Outlook may differ from the results set forth in the Financial Outlook.
5.06 LITIGATION. There are no actions, suits or proceedings
pending or threatened with respect to any Credit Party or any of its
Subsidiaries (i) that have had a material adverse effect on the financial
condition or results of operations of the Borrower or either Guarantor or
(ii) that affect the legality, validity, binding effect or enforceability of
any Credit Document.
5.07 TRUE AND COMPLETE DISCLOSURE. All factual information (taken as
a whole) furnished by or on behalf of any Credit Party in writing to the Agent
or any Bank for purposes of or in connection with this Agreement, the other
Credit Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of any such Persons in writing to the Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information
-19-
<PAGE>
(taken as a whole) not misleading in any material respect at such time in
light of the circumstances under which such information was provided.
5.08 USE OF PROCEEDS; MARGIN REGULATIONS. (a) All proceeds of
the Revolving Loans shall be used by the Borrower (i) to effect the
Transaction, (ii) to pay fees and expenses arising in connection with the
Transaction and (iii) for the working capital purposes of the Borrower and
its Subsidiaries.
(b) Not more than 25% of the value of the assets of the Borrower, or
of Holdings and its Subsidiaries on a consolidated basis, shall constitute
Margin Stock. Neither the making of any Revolving Loan nor the use of the
proceeds of any thereof will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
5.09 COMPLIANCE WITH ERISA. Each Pension Plan has been operated and
administered in compliance with all applicable requirements of ERISA and, if
intended to qualify under Section 401(a) or 403(a) of the Code, in compliance
with all applicable requirements of such provision except where the failure to
so comply would not result in, taking all instances in the aggregate, liability
in excess of $2,000,000. Full payment has been made by each Credit Party or any
of its ERISA Affiliates of all amounts which such Persons are required under the
terms of each Pension Plan and Multiemployer Plan to have paid as contributions
to such Pension Plan and Multiemployer Plan except where the failure to so
comply, taking all instances in the aggregate, would not result in liability in
excess of $2,000,000. None of the Pension Plans had an accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent plan year of such
Pension Plan. No Termination Event has occurred or, to the best knowledge of
any Credit Party, is expected by such Credit Party to occur with respect to any
Pension Plan or Multiemployer Plan such that any Credit Party or any of its
ERISA Affiliates would incur, taking all instances in the aggregate, liabilities
in excess of $10,000,000 (such liabilities to include, without limitation, any
liability to the PBGC or to any other party under Sections 4062, 4063 and 4064
of ERISA or to any Multiemployer Plan determined under Section 4201 ET SEQ. of
ERISA) resulting from or associated with all such Termination Events. No Credit
Party nor any of its ERISA Affiliates has engaged in any transaction in
connection with which any such entity has been or could be subjected to either a
tax imposed by Section 4975 of the Code or the corresponding civil penalty
assessed pursuant to Sections 502(i) and 502(l) of ERISA, which penalties and
taxes for all such transactions are in an aggregate amount in excess of
$2,500,000. Using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of Holdings
and its Subsidiaries, the Borrower and its Subsidiaries and their ERISA
Affiliates to all Multiemployer Plans in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each such
Multiemployer Plan ended prior to the date of the most recent Credit Event,
would not have a material adverse effect upon the results of operation or
financial condition of any Credit Party. No Credit Party nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) which provides benefits to retired employees
or other former employees (other than as required by Section 601 of ERISA) or
any employee pension benefit plan (as defined in Section
-20-
<PAGE>
3(2) of ERISA) the obligations with respect to which would have a material
adverse effect on the ability of any Credit Party to perform its respective
obligations under this Agreement.
5.10 SUBSIDIARIES. Schedule III correctly sets forth, as of the
Effective Date, the percentage ownership (direct and indirect) of Holdings,
NWA and the Borrower in each of their respective Subsidiaries.
5.11 INVESTMENT COMPANY ACT. None of the Credit Parties or any of
their respective Subsidiaries is an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
5.12 COMPLIANCE WITH STATUTES, ETC. Each Credit Party and each of
its Subsidiaries is in material compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
businesses and the ownership of its properties (including applicable
statutes, regulations, orders and restrictions relating to environmental
standards and controls) except such noncompliances as would not, in the
aggregate, have a material adverse effect on the financial condition or
results of operations of Holdings and its Subsidiaries taken as a whole or of
the Borrower and its Subsidiaries taken as a whole.
5.13 AIR CARRIER. The Borrower is a Certificated Air Carrier.
5.14 SECURITY INTERESTS. (a) The security interests created in
favor of the Collateral Agent under the Security Documents will at all times
from and after the Initial Borrowing Date constitute, as security for the
obligations purported to be secured thereby, a legal, valid, enforceable and
perfected security interest in and Lien on all of the Collateral referred to
therein in favor of the Collateral Agent for the benefit of the Secured
Creditors, subject to no other Liens except Permitted Liens.
(b) The Borrower has legal and marketable title to all Collateral
covered by such Security Documents free and clear of all Liens (except
Permitted Liens). The Aircraft Collateral has been duly certified by the FAA
as to type and airworthiness and the Collateral has been insured by the
Borrower in accordance with the terms of the Security Documents. The
Collateral shall include a sufficient number of appropriate Engines to
operate each Airframe included in the Collateral as an Aircraft.
(c) No consents, filings or recordings are required in order to
perfect (or maintain the perfection or priority of) the security interests
purported to be created by any of the Security Documents, other than such as
have been obtained and which remain in full force and effect and other than
periodic UCC continuation filings.
5.15 YEAR 2000 REPROGRAMMING. A project to complete on a timely
basis all the reprogramming required to permit the proper functioning, in and
following the year 2000, of (i) Holdings' or any of its Subsidiaries' computer
systems and (ii) equipment containing embedded microchips (excluding systems and
equipment of third-parties with which Holdings' or any of its
-21-
<PAGE>
Subsidiaries' systems interface) and the testing of all such systems and
equipment, as so reprogrammed, has been implemented by Holdings and its
Subsidiaries. Neither Holdings nor any of its Subsidiaries believes that the
consequences of the year 2000 will pose significant operational problems for
its computer systems.
SECTION 6. AFFIRMATIVE COVENANTS. Each Credit Party hereby
covenants and agrees (in each case solely to the extent that any covenant or
agreement set forth in this Section 6 is expressly stated to be applicable to
such Credit Party and its Subsidiaries) that on and after the Effective Date
and until the Total Revolving Loan Commitment and the Revolving Loans and the
Revolving Notes together with interest, Fees and all other Obligations
incurred hereunder and thereunder, are paid in full:
6.01 INFORMATION COVENANTS. Holdings will furnish to each Bank:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within 120 days after the close of each fiscal year of Holdings, (i)
a copy of the SEC Form 10-K filed by Holdings with the SEC for such fiscal
year, or, if no such Form 10-K was so filed by Holdings for such fiscal
year, the consolidated balance sheet of Holdings and its Subsidiaries and
whether or not such Form 10-K was filed, of the Borrower and its
Subsidiaries, as at the end of such fiscal year and the related
consolidated statements of operations, of common stockholders' equity
(deficit) (in the case of Holdings and its Subsidiaries) and of cash flows
for such fiscal year, setting forth comparative consolidated figures as of
the end of and for the preceding fiscal year, and examined by Ernst & Young
(or (x) any other "Big Six" or "Big Four" accounting firm or (y) any other
firm of independent public accountants of recognized standing selected by
Holdings or the Borrower, as the case may be, and reasonably acceptable to
the Required Banks) whose opinion shall not be qualified as to the scope of
audit or as to the status of Holdings or the Borrower as a going concern,
and (ii) a certificate of such accounting firm stating that in the course
of its regular audit of the business of Holdings and the Borrower, which
audit was conducted in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of any Default or
Event of Default which has occurred and is continuing or, if in the opinion
of such accounting firm such a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within 45 days after the close of each of the first three quarterly
accounting periods in each fiscal year of Holdings, a copy of the SEC Form
10-Q filed by Holdings with the SEC for such quarterly period, or, if no
such Form 10-Q was so filed by Holdings with respect to any such quarterly
period, the consolidated balance sheet of Holdings and its Subsidiaries,
and whether or not such Form 10-Q was filed, of the Borrower and its
Subsidiaries, as at the end of such quarterly period and the related
consolidated statements of operations for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of such
quarterly period and in each case setting forth comparative consolidated
figures as of the end of and for the related periods in the prior fiscal
year, all of which shall be
-22-
<PAGE>
certified by an Authorized Officer of Holdings or the Borrower, as the
case may be, subject to changes resulting from audit and normal year-end
audit adjustments.
(c) BUDGETS. Not more than 75 days following the commencement of
each fiscal year of the Borrower, a budget of the Borrower and its
Subsidiaries in reasonable detail for each fiscal month of such fiscal year
as is customarily prepared by management for its internal use setting
forth, with appropriate discussion, the principal assumptions upon which
such budget is based.
(d) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Section 6.01(a) and (b), a certificate
of an Authorized Officer of Holdings and the Borrower to the effect that no
Default or Event of Default exists or, if any Default or Event of Default
does exist, specifying the nature and extent thereof and which certificate
shall set forth the calculations required, if any, to establish whether
each Credit Party was in compliance with the provisions of Sections 7.02,
7.03, 7.04, 7.05, 7.06, 7.08 and 7.09 as at the end of such fiscal period
or year, as the case may be.
(e) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within three Business Days after any senior financial or legal officer of
any Credit Party obtains knowledge thereof, notice of (x) the occurrence of
any event which constitutes a Default or Event of Default which notice
shall specify the nature thereof, the period of existence thereof and what
action such Credit Party proposes to take with respect thereto and (y) any
litigation or governmental proceeding pending against or affecting Holdings
or any of its Subsidiaries which is likely to have a material adverse
effect on the financial condition or results of operations of Holdings and
its Subsidiaries taken as a whole or the Borrower and its Subsidiaries
taken as a whole.
(f) RATING CHANGES. Promptly after any senior financial or legal
officer of NWA or the Borrower obtains knowledge thereof, notice of any
change in the Rating assigned by either Rating Agency.
(g) OTHER INFORMATION. Promptly upon transmission thereof, copies of
any filings and registrations with, and reports to, the Securities and
Exchange Commission or any successor thereto (the "SEC") by Holdings or any
of its Subsidiaries (other than amendments to any registration statement
(to the extent such registration statement, in the form it becomes
effective, is delivered to the Banks), exhibits to any registration
statement and any registration statements on Form S-8) and, with reasonable
promptness, such other information or documents (financial or otherwise) as
the Agent on its own behalf or on behalf of the Required Banks may
reasonably request from time to time.
(h) NON-ORDINARY COURSE TRANSACTION. At any time after the Effective
Date that any Credit Party or any of its respective Subsidiaries proposes
to enter into any transaction (or series of related transactions) with any
Affiliate of any Credit Party or any of their respective Subsidiaries
outside the ordinary course of business (other than any transaction of a
nature described in the proviso to Section 7.07), the Borrower shall give
the Agent and the Banks (x) written notice of any such transaction at least
7 Business
-23-
<PAGE>
Days (or such shorter period as the Required Banks may agree) prior to the
earlier of (I) the consummation thereof or (II) the execution of a binding
agreement therefor, and (y) such other information related to the
transaction as the Agent or the Required Banks shall reasonably request.
(i) Prompt notice of any fact, event or circumstance relating to the
consequences of the year 2000 which it or any of its Subsidiaries is or
becomes aware of and that could be reasonably expected to (a) have a
material adverse impact on the implementation or anticipated July 1, 1999
date for completion of the reprogramming and testing project referred to in
Section 5.15 hereof, (b) have a material adverse impact on the proper
functioning of Holdings or any of its Subsidiaries' computer systems or
equipment containing embedded microchips on or after the year 2000 or (c)
result in a material adverse effect on the financial conditions or results
of operations of Holdings and its Subsidiaries taken as a whole or of the
Borrower and its Subsidiaries taken as a whole.
6.02 BOOKS, RECORDS AND INSPECTIONS. Each Credit Party will, and
will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and
all requirements of law shall be made of all dealings and transactions in
relation to its business and activities. Each Credit Party will, and will
cause each of its Subsidiaries to, permit, upon reasonable notice given by
the Agent to the Borrower on behalf of any Bank, officers and designated
representatives of any Bank (including without limitation, appraisers) to
visit and inspect any of the properties or assets of such Credit Party and
any of its Subsidiaries (including, without limitation, the Collateral and
any books, records or logs related thereto) and to examine the books of
account of such Credit Party and any of its Subsidiaries and discuss the
affairs, finances and accounts of such Credit Party and of any of its
Subsidiaries with its and their officers and independent accountants, all at
such reasonable times and intervals and to such reasonable extent as such
Bank may desire.
6.03 INSURANCE. Each Credit Party will, and will cause each of
its Subsidiaries to, at all times be covered by and maintain in full force
and effect insurance required by the Security Documents and other insurance
in such amounts, covering such risks and liabilities and with such
deductibles or self-insured retentions as are in accordance with normal
industry practice and as is required by law.
6.04 PAYMENT OF TAXES. Each Credit Party will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all material
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the
date on which material penalties attach thereto, and all material lawful
claims which, if unpaid, might become a Lien or charge upon any properties of
any Credit Party or any of its Subsidiaries, PROVIDED that no Credit Party
nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim (i) which is being contested in good faith
and by proper proceedings if it has maintained adequate reserves (in the good
faith judgment of the management of such Credit Party) with respect thereto
in accordance with GAAP or (ii) the nonpayment of which would not have a
material adverse effect on the financial condition or results of operations
of Holdings and its Subsidiaries taken as a whole or of the Borrower and its
Subsidiaries taken as a whole.
-24-
<PAGE>
6.05 CONSOLIDATED CORPORATE FRANCHISES. Each Credit Party will
do, and will cause each of its Subsidiaries to do, or cause to be done, all
things necessary to preserve and keep in full force and effect its existence
and its material rights, authority and franchises, unless the failure to keep
in full force and effect any such right, authority or franchise would not
have a material adverse effect on the financial condition or results of
operations of Holdings and its Subsidiaries taken as a whole or of the
Borrower and its Subsidiaries taken as a whole.
6.06 COMPLIANCE WITH STATUTES, ETC. Each Credit Party will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including applicable statutes, regulations, orders and restrictions relating
to environmental standards and controls) other than those the non-compliance
with which would not have a material adverse effect on the financial
condition or results of operations of Holdings and its Subsidiaries taken as
a whole or the Borrower and its Subsidiaries taken as a whole.
6.07 ERISA. (a) As soon as practicable and in any event within
fifteen days after any Credit Party or any of its ERISA Affiliates knows or
has reason to know of the occurrence of any (i) Termination Event in
connection with any Pension Plan or Multiemployer Plan, (ii) non-exempt
"prohibited transaction" as described in Section 406 of ERISA or Section 4975
of the Code, (iii) accumulated funding deficiency or application to the
Secretary of the Treasury for a waiver or modification of the minimum funding
standard (including any required installment payments) or an extension of any
amortization period under Section 412 of the Code, (iv) institution pursuant
to Section 515 of ERISA to collect a delinquent contribution, or (v) material
liability by any Credit Party or any Subsidiary of any Credit Party pursuant
to any employee welfare benefit plan (as defined in Section 3(1) of ERISA)
that provides benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or any employee pension benefit
plan (as defined in Section 3(2) of ERISA) in addition to the liability
existing on the Effective Date pursuant to any such welfare or pension plan
or plans in connection with any Pension Plan or Multiemployer Plan or any
trust created thereunder, if as a result of such event or transaction,
considered together with other such events and transactions occurring within
the prior two years, the Credit Parties and their ERISA Affiliates incur or
could reasonably expect to incur liabilities from all such events and
transactions in excess of $5,000,000, such Credit Party shall deliver to each
of the Banks a certificate, signed by an Authorized Officer of such Credit
Party, specifying the nature thereof, what action such Credit Party or such
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto, and any action taken or threatened by the Internal Revenue Service,
Department of Labor, PBGC, Pension Plan or Multiemployer Plan, as applicable,
to be taken with respect thereto (together with copies of all relevant
notices or other communications received from such entity). For the purposes
of this Section 6.07, a Credit Party shall be deemed to have knowledge of all
facts known by the "plan administrator" (as defined in Section 3(16)(A) of
ERISA) of any Pension Plan of which such Credit Party or any of its ERISA
Affiliates is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA).
-25-
<PAGE>
(b) To the extent reasonably requested by any Bank, as soon as
practicable and in any event within 30 days after the filing of a Form 5500
series annual report by a Credit Party or any of its ERISA Affiliates with
the Internal Revenue Service with respect to each Pension Plan, such Credit
Party shall furnish to such Bank a copy of such Form 5500 series annual
report and the Schedule B (Actuarial Information) thereto (and shall make
available for inspection by such Bank at reasonable times copies of the full
annual report with respect to each Pension Plan).
6.08 GOOD REPAIR. Each Credit Party will, and will cause each of
its Subsidiaries to, ensure that its properties and equipment used or useful
in its business are kept in good repair, working order and condition, normal
wear and tear excepted, and that from time to time there are made in such
properties and equipment all needful and proper repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto, to
the extent and in the manner customary for companies in similar businesses,
except where the failure to keep such properties and equipment in good
repair, working order and condition or to make such repairs, renewals,
replacements, extensions, additions, betterments and improvements would not
have a material adverse effect on the financial condition or results of
operations of Holdings and its Subsidiaries taken as a whole or of the
Borrower and its Subsidiaries taken as a whole.
6.09 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings and the
Borrower will, for financial reporting purposes, cause (i) each of its and
each of its Subsidiaries' fiscal years to end on December 31 of each year and
(ii) each of its and each of its Subsidiaries' fiscal quarters to end on
March 31, June 30, September 30 and December 31 of each year.
6.10 PERFORMANCE OF OBLIGATIONS. Each Credit Party will, and will
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement and other debt
instrument by which it is bound, except such non-performances as would not
have a material adverse effect on the financial condition or results of
operations of Holdings and its Subsidiaries taken as a whole or of the
Borrower and its Subsidiaries taken as a whole.
6.11 AIR CARRIER. The Borrower will at all times be a
Certificated Air Carrier.
6.12 SECURITY INTERESTS. The Borrower shall perform any and all
acts and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement) for filing under the provisions of the UCC or the
Federal Aviation Act and the rules and regulations thereunder, which are
necessary in order to maintain in favor of the Collateral Agent for the
benefit of the Secured Creditors a valid and perfected Lien on the
Collateral, subject to no other Liens except for Permitted Liens.
SECTION 7. NEGATIVE COVENANTS. Each Credit Party hereby covenants
and agrees (in each case solely to the extent that any covenant or agreement
set forth in this Section 7 is expressly stated to be applicable to such
Credit Party and its Subsidiaries) that on the Effective Date and thereafter,
for so long as this Agreement is in effect and until the Total Revolving Loan
Commitment has terminated, no Revolving Notes are outstanding and the
Revolving Loans, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full:
-26-
<PAGE>
7.01 CHANGES IN BUSINESS. No Credit Party will make any material
change in the lines of business in which it was engaged on the Effective Date.
7.02 CONSOLIDATION, MERGER, ETC. No Credit Party will wind up,
liquidate or dissolve its affairs, or enter into any transaction of merger or
consolidation, sell or otherwise dispose of all or substantially all of its
property or assets or agree to do any of the foregoing at any future time,
except that so long as no Default or Event of Default exists, or would result
therefrom and PROVIDED that each Credit Party complies with Section 7.03 in
connection with such transaction to the extent such Section is applicable,
any Credit Party may merge or consolidate with, or sell or otherwise dispose
of all or substantially all of its assets to, any Person, PROVIDED that (i)
in the case of any merger or consolidation, the surviving corporation shall
be such Credit Party or (ii) the surviving corporation, if not such Credit
Party (or the successor corporation, in the case of a sale or other
disposition of all or substantially all of a Credit Party's assets), (A) is a
corporation organized and existing under the laws of the United States of
America or any State thereof, (B) is a Citizen of the United States, (C)
executes and delivers agreements assuming the obligations of such Credit
Party under this Agreement and the other Credit Documents to which such
Credit Party is a party, which assumption agreements and all related actions
and documentation shall be in form and substance reasonably satisfactory to
the Agent and (D) delivers to the Agent a certificate signed by an Authorized
Officer of such Credit Party and an opinion of counsel to such Person
satisfactory to the Agent, each stating that such transaction and such
assumption agreement comply with this Section and that all conditions
precedent herein provided for relating to such transaction have been complied
with.
7.03 SALE OF ASSETS. (I) No Credit Party will, nor will any
Credit Party permit any of its Subsidiaries to, sell, lease or otherwise
dispose of any assets, except:
(a) Holdings or any of its Subsidiaries may, in the ordinary course
of business and consistent with past practices, exchange, in any
transaction or series of related transactions, on a like value basis, (i)
its real property for real property owned by another Person, (ii) its
airplane engines for airplane engines owned by another Person, and (iii)
its airline routes, "airport gates" and/or "slots" for airline routes,
"airport gates" and/or "slots" owned by another Person; PROVIDED, HOWEVER,
that (x) in no event may Collateral be exchanged and (y) to the extent
Holdings or any of its Subsidiaries receives any cash and/or cash
equivalents from any such property exchange permitted pursuant to this
clause (a), the amount of such cash and/or cash equivalents shall be
applied in accordance with clause (f) of this Section 7.03(I);
(b) Holdings or any of its Subsidiaries may, in the ordinary course
of business and consistent with past practices, sell spare parts (which in
no event shall include aircraft or aircraft engines) and supplies
(including, without limitation, fuel) so long as each such sale is for an
amount at least equal to the fair market value thereof (as determined by
the Borrower);
-27-
<PAGE>
(c) "parting out" of an aircraft engine shall be permitted by
Holdings or any of its Subsidiaries in the ordinary course of business and
consistent with past practices (but, with respect to the Collateral, only
to the extent permitted by the Security Documents);
(d) Holdings or any of its Subsidiaries may, in a transaction, sell
any of its aircraft (other than Collateral), which aircraft is then
substantially contemporaneously leased back to the respective seller,
PROVIDED that with respect to sale and leasebacks of aircraft owned on the
Effective Date, the stated expiration of the lease of such aircraft to
Holdings or one of its Subsidiaries is after the Revolving Loan Maturity
Date;
(e) Holdings or any of its Subsidiaries may sell airline tickets and
related services in the ordinary course of business;
(f) Holdings or any of its Subsidiaries may sell, lease or otherwise
dispose of any assets (other than Collateral), PROVIDED that to the extent
the gross proceeds received from all such transactions occurring after
December 15, 1995 (including cash or cash equivalent proceeds received
pursuant to Section 7.03(a)) exceeds $500,000,000, an amount equal to 50%
of the Net Sale Proceeds from all transactions which occur after such
$500,000,000 threshold is exceeded (including 50% of the Net Sale Proceeds
from that transaction in which such threshold is exceeded but only out of
that portion of the gross proceeds which exceeds such $500,000,000
threshold) shall be applied to repay Revolving Loans and reduce Revolving
Loan Commitments in accordance with Sections 3.02(c) and 2.03(b);
(g) Holdings or any of its Subsidiaries may, in the ordinary course
of business and consistent with industry practice, (i) trade the use of any
"slot" with another air carrier or (ii) lease or license any such "slot" to
another air carrier, in each case on a temporary basis and PROVIDED that
such transactions do not involve the transfer of title to such "slots"; and
(h) any Credit Party may dispose of its equity interests in (x)
GHI-CA Corporation, a Delaware corporation which owns all of the
outstanding shares of capital stock of Grand Holding, Inc., a Nevada
corporation, d/b/a Champion Air and/or (y) Express Air I owned by such
Credit Party on the Effective Date.
(II) The Borrower will not convey, sell, lease, transfer or
otherwise dispose of or remove or substitute, any Collateral (or any engine
included in the Collateral unless such engine is replaced by another working
engine or engines in which the Collateral Agent has a perfected security
interest subject to no Liens other than Permitted Liens) or take any action
that could materially diminish the fair market value of the Collateral taken
as a whole, or agree to do any of the foregoing at any future time, except as
may be permitted pursuant to the provisions of the Security Documents.
7.04 LIENS. None of the Credit Parties will, or will permit any of
their respective Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon or with respect to the Collateral or assign any right to receive
income from the Collateral, or file or permit the filing
-28-
<PAGE>
with respect to the Collateral of any financing statement under the UCC or
any similar notice of Lien under any similar recording or notice statute,
except (Liens described below are herein referred as "Permitted Liens"):
(a) Liens created by the Security Documents:
(b) Liens for taxes not yet due or Liens for taxes being contested in
good faith and by appropriate proceedings for which adequate reserves (in
the good faith judgment of the management of the Borrower) have been
established in accordance with GAAP;
(c) Liens (other than any Lien imposed by ERISA) in respect of the
Collateral imposed by law which were incurred in the ordinary course of
business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens and governmental charges arising
in the ordinary course of business, and which either (x) do not in the
aggregate materially detract from the value of any Collateral or materially
impair the use thereof in the operation of the business of the Borrower or
any of its Subsidiaries or (y) are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property or asset subject to such Lien; and
(d) Liens (where there has been no execution or levy and no pledge or
delivery of Collateral as security therefor) arising out of judgments or
awards against the Borrower or any of its Subsidiaries with respect to
which an appeal or proceeding for review is being prosecuted in good faith
and which judgment or award shall be vacated, discharged, satisfied or
stayed or bonded pending appeal within 60 days from the entry thereof.
7.05 DISTRIBUTIONS, ETC. None of the Credit Parties will, or will
permit any of their respective Subsidiaries to, authorize, declare or pay any
dividends or return any capital to, its stockholders, partners or members, or
authorize or make any other distribution, payment or delivery of property or
cash to its stockholders, partners or members as such or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a consideration, any
shares of any class of its capital stock, any partnership interest or any
limited liability company interest (or any warrants for or options or stock
appreciation rights in respect of any of such shares, partnership interests or
limited liability company interests), now or hereafter outstanding, or set aside
any funds for any of the foregoing purposes, and none of the Credit Parties will
permit any of their respective Subsidiaries to purchase or otherwise acquire for
consideration any shares of any class of the capital stock, any partnership
interest or any limited liability company interests of any Credit Party or any
such Subsidiary, as the case may be (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock,
partnership interests or limited liability company interests), now or hereafter
outstanding (all of the foregoing "Distributions"), except that:
(a) any Subsidiary of Holdings may make cash Distributions to
Holdings or any Subsidiary of Holdings;
-29-
<PAGE>
(b) so long as no Default or Event of Default exists or would result
therefrom, Holdings or any of its Subsidiaries shall be permitted to
declare, make and pay cash Distributions to its respective shareholders in
an amount not to exceed the then Cumulative Net Income Amount less the sum
of (i) the amount of all such Distributions declared, made or paid pursuant
to this Section 7.05(b) prior to the date of determination and on or after
January 1, 1995 (other than pursuant to Section 7.05(b)(ii)) plus (ii) the
amount of all such Distributions made by Holdings pursuant to Section
7.05(g); PROVIDED, HOWEVER, that to the extent any non-Wholly- Owned
Subsidiary of Holdings pays a cash Distribution to its shareholders,
Holdings or its respective Subsidiary which owns the equity interest or
interests in the Subsidiary paying the cash Distribution receives at least
its proportionate share thereof (based upon its relative holdings of equity
interest in the Subsidiary paying such cash Distribution and taking into
account the relative preferences, if any, of the various classes of equity
interests in such Subsidiary); it being understood that the amount of
Distributions declared, made or paid to Holdings or any of its Subsidiaries
shall not be counted for purposes of determining whether the amount of
Distributions have exceeded the Cumulative Net Income Amount;
(c) Holdings or any of its Subsidiaries may declare and make stock
dividends on its capital stock with the same or a junior class of stock
with respect to which such stock dividend is being paid;
(d) Holdings or any of its Subsidiaries may repurchase or redeem its
capital stock solely through the issuance of additional shares of its
capital stock which is of the same or a junior class of such capital stock
being repurchased or redeemed;
(e) so long as no Default or Event of Default exists or would result
therefrom, Holdings may declare, make and pay Distributions in connection
with any redemption of its Series A Preferred Stock or Series B Preferred
Stock occurring on or before the Effective Date;
(f) so long as no Default or Event of Default exists or would result
therefrom, Holdings or any of its Subsidiaries or Affiliates may declare,
make and pay Distributions consisting of dividends on preferred securities
of any Subsidiary or Affiliate of Holdings issued in connection with the
incurrence of Indebtedness permitted by Section 7.06(l); and
(g) so long as no Default or Event of Default exists or would result
therefrom Holdings may on or before the Effective Date redeem, retire,
repurchase or otherwise acquire up to 27,000,000 shares of common stock of
Holdings owned by KLM for an aggregate consideration not in excess of
$1,300,000,000.
7.06 INDEBTEDNESS. None of the Credit Parties will, or will
permit any of their respective Subsidiaries to, contract, create, incur,
assume or suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
-30-
<PAGE>
(b) Indebtedness existing on the Effective Date listed on Schedule V,
including any refinancings or renewals thereof, but only to the extent that
such refinancing or renewal does not increase the principal amount of such
Indebtedness outstanding immediately prior to such refinancing or renewal;
(c) intercompany Indebtedness among Holdings and its Subsidiaries;
(d) additional unsecured Indebtedness of Holdings and its
Subsidiaries, PROVIDED that to the extent the gross proceeds received from
incurrences thereof after December 15, 1995 (other than any incurrence of
any unsecured Indebtedness of Holdings and its Subsidiaries the proceeds of
which Indebtedness is applied substantially contemporaneously to refinance
the outstanding principal amount of, premium, if any, and accrued but
unpaid interest on, any Indebtedness incurred pursuant to this clause (d)
or clause (e) below so long as the principal amount of such Indebtedness
being incurred does not exceed the principal amount of Indebtedness being
refinanced immediately prior to such refinancing), plus the amount of gross
proceeds received from incurrences of secured indebtedness pursuant to
clause (e) below (such gross proceeds being determined in accordance with
clause (e) below), exceed an amount equal to $600,000,000 (provided that
for purposes of determining whether the $600,000,000 threshold has been
exceeded Retired Unsecured Debt shall not be taken into account), an amount
equal to 50% of the Net Debt Proceeds from all incurrences of unsecured
Indebtedness after such threshold is exceeded (including 50% of the Net
Debt Proceeds from the incurrence in which such threshold is exceeded but
only out of that portion of such gross proceeds which exceeds such
threshold at such time) shall be applied to repay Revolving Loans and
reduce Revolving Commitments in accordance with Sections 3.02(b) and
2.03(b);
(e) additional secured Indebtedness of Holdings and its Subsidiaries,
PROVIDED that to the extent the gross proceeds received from incurrences
thereof after December 15, 1995 (other than any incurrence of any secured
Indebtedness of Holdings and its Subsidiaries the proceeds of which
Indebtedness is applied substantially contemporaneously to refinance the
outstanding principal amount of, premium, if any, and accrued but unpaid
interest on, any Indebtedness incurred pursuant to clause (d) above or this
clause (e) so long as the principal amount of such Indebtedness being
incurred does not exceed the principal amount of Indebtedness being
refinanced immediately prior to such refinancing), plus the amount of gross
proceeds received from incurrences of unsecured indebtedness pursuant to
clause (d) above in excess of $300,000,000 (such gross proceeds being
determined in accordance with clause (d) above), exceed an amount equal to
$300,000,000 (provided that for purposes of determining whether the
$300,000,000 threshold has been exceeded Retired Secured Debt shall not be
taken into account), an amount equal to 50% of the Net Debt Proceeds from
all incurrences of secured Indebtedness after such threshold is exceeded
(including 50% of the Net Debt Proceeds from the incurrence in which such
threshold is exceeded but only out of that portion of such gross proceeds
which exceeds such threshold at such time) shall be applied to repay
Revolving Loans and reduce Revolving Commitments in accordance with
Sections 3.02(b) and 2.03(b);
-31-
<PAGE>
(f) Indebtedness incurred in connection with the financing of the
Narita Hotel Property and assets related to such hotel, PROVIDED that the
Liens securing such Indebtedness do not encumber any Collateral (or part
thereof) and the Indebtedness incurred in connection therewith does not
exceed the appraised value of the Narita Hotel Property;
(g) secured Indebtedness incurred to finance the acquisition of
hushkits heretofore or hereafter acquired by the Borrower or any of its
Subsidiaries or to refinance indebtedness incurred to finance the
acquisition of hushkits and any other secured Indebtedness incurred to
finance (or to pre-fund the financing of) the purchase after December 15,
1995 of aircraft and other assets and any refinancing thereof, PROVIDED
that the Liens securing such Indebtedness do not encumber any Collateral
(or part thereof) and the Indebtedness incurred in connection therewith
does not exceed the purchase price of the property being acquired or the
principal amount of the Indebtedness being refinanced;
(h) Indebtedness of Holdings and its Subsidiaries of the type
described in clause (v) of the definition of Indebtedness and in clause
(iii) thereof to the extent relating to Indebtedness of the type described
in clause (v) of the definition thereof;
(i) Indebtedness constituting Contingent Obligations of Holdings and
its Subsidiaries with respect to corporations, partnerships or joint
ventures formed with other airlines to conduct fueling, ticketing, terminal
operations, aeronautical radio communications, tariff publishing, industry
trade associations, local cartage and other similar airline activities
consistent with the Borrower's past business practice, where the services
provided are generally available to all or substantially all of the
airlines utilizing the facility served;
(j) Indebtedness of Holdings and its Subsidiaries incurred under and
in respect of credit enhancement letters of credit or other similar
backstop liquidity facilities to the extent any such letter of credit or
backstop liquidity facility, as the case may be, has not been drawn upon,
which letters of credit and liquidity facilities provide credit support
solely for the interest portion of Indebtedness incurred by Holdings and
its Subsidiaries and otherwise permitted to be incurred pursuant to this
Section 7.06;
(k) Indebtedness of Holdings and its Subsidiaries consisting of
standby letters of credit issued for the account of any Credit Party or any
of its respective Subsidiaries in the ordinary course of business and
reimbursement obligations with respect thereto, PROVIDED that the aggregate
amount of such Indebtedness shall not exceed $35,000,000 at any one time;
(l) unsecured Indebtedness of Holdings and its Subsidiaries incurred
directly or indirectly to finance any redemption pursuant to Section
7.05(e) and any refinancing thereof, PROVIDED that (i) any such refinancing
occurs substantially contemporaneously with payment of the Indebtedness
being refinanced (or, if not substantially contemporaneously with payment
of the Indebtedness being refinanced, on or prior to December 31, 1997) and
(ii) no such Indebtedness (other than a refinancing in accordance
-32-
<PAGE>
with clause (l)(i)) shall be incurred to finance any portion of the
redemption price paid in cash with respect to any such redemption;
(m) unsecured Indebtedness of Holdings or any of its Subsidiaries in
an aggregate original principal amount not in excess of $800,000,000
incurred to finance any redemption, retirement, repurchase or acquisition
pursuant to Section 7.05(g) (and in any event within 90 days after the
redemption, retirement, repurchase or acquisition being financed) and any
refinancing thereof that does not increase the outstanding principal amount
thereof;
(n) unsecured Indebtedness of Holdings or any of its Subsidiaries in
an aggregate original principal amount not in excess of $250,000,000
incurred to finance any loans, advances or dividends of the nature referred
to in the proviso to the definition of the term "Distribution" herein (and
in any event within 90 days after the loan, advance or dividend being
financed) and any refinancing thereof that does not increase the
outstanding principal amount thereof;
(o) additional secured Indebtedness (whether or not constituting
purchase money Indebtedness) of Holdings and its Subsidiaries incurred to
finance or secured by Boeing 757 aircraft N544US, N545US, N546US, N547US,
N548US and N549US so long as the principal amount of such Indebtedness
being incurred does not exceed the fair market value of such aircraft; and
(p) Indebtedness incurred pursuant to the Existing Credit Agreement
in an aggregate principal amount outstanding at any one time not to exceed
$1,000,000,000 less (i) the amount of Term Loans, under and as defined in
the Existing Credit Agreement, which are repaid after the Effective Date
and (ii) the amount of permanent commitment reductions after the Effective
Date.
7.07 TRANSACTIONS WITH AFFILIATES. None of the Credit Parties
will, or will permit any of their respective Subsidiaries to, enter into any
transaction or series of related transactions with any Affiliate of any
Credit Party or any of their respective Subsidiaries, other than on terms and
conditions substantially as favorable to such Credit Party or such Subsidiary
as would reasonably be obtained by such Credit Party or such Subsidiary at
that time in a comparable arm's-length transaction with a Person other than
an Affiliate, PROVIDED that the foregoing restrictions shall not apply to (a)
customary fees paid to members of the Board of Directors of Holdings and its
Subsidiaries, (b) Distributions permitted by Section 7.05 and (c)
Indebtedness permitted by Section 7.06(l).
7.08 CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED EBITDAR. Holdings
will not permit the ratio of Consolidated Indebtedness as of the last day of
any fiscal quarter to Consolidated EBITDAR for the period of four consecutive
fiscal quarters ended on the last day of such fiscal quarter, to be greater
than 6.0:1.0.
-33-
<PAGE>
7.09 CONSOLIDATED EBITDAR TO CONSOLIDATED FIXED CHARGES. Holdings
will not permit the ratio of Consolidated EBITDAR to Consolidated Fixed
Charges for any period of four consecutive fiscal quarters ended on the last
day of any fiscal quarter, to be less than 1.5:1.0.
7.10 ERISA. None of the Credit Parties will, or will permit any of
their respective Subsidiaries or its ERISA Affiliates to:
(i) engage in any transaction in connection with which Holdings or
any of its ERISA Affiliates could be subject to either a tax imposed by
Section 4975(a) of the Code or the corresponding civil penalty assessed
pursuant to Section 502(i) of ERISA, which penalties and taxes for all such
transactions could be in an aggregate amount in excess of $2,500,000;
(ii) permit to exist any accumulated funding deficiency, for which a
waiver has not been obtained from the Internal Revenue Service, with
respect to any Pension Plan in an aggregate amount greater than $5,000,000;
or
(iii) permit to exist any failure to make contributions or any
unfunded benefits liability which creates, or with the passage of time
would create, a statutory lien or requirement to provide security under
ERISA or the Code in favor of the PBGC or any Pension Plan, Multiemployer
Plan or other entity in an aggregate amount in excess of $5,000,000.
7.11 LAX TWO CORP. At any time when Holdings directly or
indirectly owns more than 50% of the outstanding Voting Stock of LAX Two,
Holdings will not permit LAX Two or any of its Subsidiaries to engage in any
business other than the business engaged in by LAX Two and its Subsidiaries
as of December 15, 1995 or to change LAX Two's status as a non-profit
corporation to a for-profit corporation.
7.12 EXISTING CREDIT AGREEMENT; BRIDGE DEBT AGREEMENT. (a) The
Borrower will not voluntarily reduce or terminate any loan commitments under
the Existing Credit Agreement or the Bridge Debt Agreement.
(b) The Borrower will not voluntarily repay any outstanding loans
under the Existing Credit Agreement, at any time when any Revolving Loans are
outstanding hereunder and the Borrower will not voluntarily repay any
outstanding loans under the Bridge Debt Agreement at any time when any
Revolving Loans are outstanding hereunder or there shall exist any Revolving
Loan Commitments.
(c) The Borrower will not incur any loan under the Bridge Debt
Agreement with a maturity date that is earlier than the first anniversary of
the Effective Date.
(d) The Borrower will not amend the Existing Credit Agreement or
the "Credit Documents" (as such term is defined in the Existing Credit
Agreement).
-34-
<PAGE>
SECTION 8. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each, an "Event of Default"):
8.01 PAYMENTS. The Borrower shall (i) default in the payment when
due of any principal of any Revolving Loan or any Revolving Note or (ii)
default, and such default shall continue unremedied for five or more Business
Days, in the payment when due of any interest on any Revolving Loan or
Revolving Note, or any Fees or any other amounts owing hereunder or
thereunder, PROVIDED that, in the case of this clause (ii), the Agent shall
have informed the Borrower of the amount owing; or
8.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or
in any certificate delivered pursuant hereto or thereto shall prove to be
untrue in any material respect on the date as of which made or deemed made,
and such default shall continue unremedied for a period of 30 days after
written notice to the Borrower by the Agent or the Required Banks; or
8.03 COVENANTS. Any Credit Party shall (i) default in any
material respect in the due performance or observance by it of any term,
covenant or agreement contained in Section 7.02, 7.03 or 7.05 or (ii) default
in the due performance or observance by it of any term, covenant or agreement
contained in Section 7.08 or 7.09 and such default shall continue unremedied
for a period of 15 days after written notice to the Borrower by the Agent or
the Required Banks or (iii) default in any material respect in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement (other than as described in Section 8.01, 8.03(i)
or 8.03(ii)), and such default shall continue unremedied for a period of 30
days after written notice to the Borrower by the Agent or the Required Banks;
or
8.04 DEFAULT UNDER OTHER AGREEMENTS. (a) Any Credit Party or any of
its Subsidiaries shall (i) default in any payment of any Indebtedness (other
than the Obligations) which default is in excess of $10,000,000 beyond the
period of grace (not to exceed 10 days), if any, provided in the instrument or
agreement under which such Indebtedness was created or (ii) default in the
observance or performance of any agreement or condition relating to any
Indebtedness (other than the Obligations) if such Indebtedness is in excess of
$25,000,000 in the case of any one issue of Indebtedness or in excess of
$50,000,000 in the case of all such Indebtedness when aggregated with all Lease
claims described in clause (c)(ii) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such Indebtedness to
become due prior to its stated maturity; or (b) any Indebtedness (other than the
Obligations), individually in excess of $25,000,000, or in the aggregate in
excess of $50,000,000 (when aggregated with all Lease claims described in clause
(c)(ii)), of any Credit Party or any of its Subsidiaries shall be declared to be
due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; or (c) any Credit
Party or any of its Subsidiaries shall default in the observance or performance
of any agreement or condition relating to any Lease if (i) the default is with
respect to any payment in excess of $10,000,000 beyond the period of grace (not
to
-35-
<PAGE>
exceed 10 days), if any, provided in the Lease or (ii) the effect of such
default is to give the lessor pursuant to such Lease a claim against any
Credit Party (after deducting from such claim the value of the property
subject to such Lease) in excess of $25,000,000 in the case of any one Lease
or in excess of $50,000,000 in the case of all Leases and all Indebtedness
described in clause (a)(ii) or (b) of this Section 8.04; or
8.05 BANKRUPTCY, ETC. The Borrower or any Guarantor (each a
"Designated Party") shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter
in effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against a Designated Party and the petition is
not controverted within 10 days after service of notice of such case on such
Designated Party, or is not dismissed within 60 days after commencement of
the case; or a custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or substantially all of the property of a
Designated Party; or a Designated Party commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to a Designated Party; or there
is commenced against a Designated Party any such proceeding which remains
undismissed for a period of 60 days; or a Designated Party is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any
such case or proceeding is entered; or a Designated Party suffers any
appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 60 days; or
a Designated Party makes a general assignment for the benefit of creditors;
or any corporate action is taken by a Designated Party for the purpose of
effecting any of the foregoing; or
8.06 ERISA. (i) Any "reportable event" as described in Section
4043 of ERISA or the regulations thereunder (excluding those events for which
the requirement for notice has been waived by the PBGC), or any other event
or condition, which the Required Banks determine constitutes reasonable
grounds under Section 4042 of ERISA for the termination of any Pension Plan
by the PBGC or for the appointment by the appropriate United States District
Court of a trustee to administer or liquidate any Pension Plan shall have
occurred; or
(ii) A trustee shall be appointed by a United States District
Court to administer any Pension Plan; or
(iii) The PBGC shall institute proceedings to terminate any
Pension Plan or to appoint a trustee to administer any Pension Plan; or
(iv) Holdings or any of its ERISA Affiliates shall become liable
to the PBGC or any other party under Section 4062, 4063 or 4064 of ERISA with
respect to any Pension Plan; or
(v) Holdings or any of its ERISA Affiliates shall become liable
to any Multiemployer Plan under Section 4201 ET SEQ. of ERISA; or
-36-
<PAGE>
(vi) Any Pension Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code; or
(vii) A contribution required to be made to a Pension Plan or a
Multiemployer Plan has not been timely made; or
(viii) Any Credit Party or any Subsidiary of Holdings or any ERISA
Affiliate has incurred or is likely to incur a liability to or on account of
a Plan under Section 502(i), or 502(l) of ERISA or Section 4975 of the Code;
or
(ix) Any Credit Party or any Subsidiary of any Credit Party has
incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) that provide
benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or employee pension benefit plans (as
defined in Section 3(2) of ERISA) other than Pension Plans;
if as of the date thereof or any subsequent date, the sum of each Credit
Party's and its ERISA Affiliates' various liabilities (such liabilities to
include, without limitation, any liability to the PBGC or to any other party
under Section 4062, 4063 or 4064 of ERISA with respect to any Pension Plan,
or to any Multiemployer Plan under Section 4201 ET SEQ. of ERISA, and to be
calculated after giving effect to the tax consequences thereof) as a result
of such events listed in subclauses (i) through (ix) above exceeds
$100,000,000; or
8.07 JUDGMENTS. One or more judgments or decrees shall be entered
against any Credit Party or any of its Subsidiaries involving a liability of
$25,000,000 or more in the case of any one such judgment or decree or
$50,000,000 or more in the aggregate for all such judgments and decrees (in each
case to the extent not paid or fully covered by insurance provided by a carrier
that has acknowledged coverage) and any such judgments or decrees shall not have
been vacated, discharged, satisfied or stayed or bonded pending appeal within 60
days from the entry thereof; or
8.08 GUARANTY. The Guaranty or any provision thereof shall cease
to be in full force or effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under the Guaranty or any Guarantor shall default in any material respect in
the due performance or observance of any term, covenant or agreement on its
part to be performed or observed pursuant to the Guaranty; or
8.09 SECURITY DOCUMENTS. Any of the Security Documents shall cease
to be in full force and effect or shall cease to give the Collateral Agent for
the benefit of the Secured Creditors the Liens, rights, powers and privileges
purported to be created thereby (including, without limitation, in all cases, a
perfected security interest in, and Lien on, all of the Collateral), in favor of
the Collateral Agent, superior to and prior to the rights of all third Persons
(except for Permitted Liens), or any Credit Party shall default in any material
respect in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed
-37-
<PAGE>
pursuant to any of the Security Documents and such default shall continue
beyond any grace period specifically applicable thereto pursuant to the terms
of such Security Document;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent shall, upon the written request
of the Required Banks, by written notice to Holdings and the Borrower, take
any or all of the following actions, without prejudice to the rights of the
Agent or any Bank to enforce its claims against the Borrower, except as
otherwise specifically provided for in this Agreement (PROVIDED that if an
Event of Default specified in Section 8.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by
the Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Revolving Loan Commitment terminated, whereupon the Revolving Loan
Commitment of each Bank shall forthwith terminate immediately and all Fees
theretofore accrued shall forthwith become due and payable without any other
notice of any kind; (ii) declare the principal of and any accrued interest in
respect of all Revolving Loans and the Revolving Notes and all Obligations
owing hereunder and thereunder to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Credit Party; and
(iii) enforce, as Collateral Agent, any or all of the Liens and security
interests created pursuant to the Security Documents.
SECTION 9. Definitions and Accounting Terms.
9.01 DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the
sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing
(x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market
as published in the most recent Federal Reserve System publication entitled
"Select Interest Rates", published weekly on Form H.15 as of the date hereof,
or if such publication or a substitute containing the foregoing rate
information shall not be published by the Federal Reserve System for any
week, the weekly average offering rate determined by the Agent on the basis
of quotations for such certificates received by it from three certificate of
deposit dealers in New York of recognized standing or, if such quotations are
unavailable, then on the basis of other sources reasonably selected by the
Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all
reserve requirements as specified in Regulation D of the Board of Governors
of the Federal Reserve System applicable on such day to a three-month
certificate of deposit of a member bank of the Federal Reserve System in
excess of $100,000 (including, without limitation, any marginal, emergency,
supplemental, special or other reserves), plus (2) the then daily net annual
assessment rate (expressed as a percentage) as estimated by the Agent for
determining the current annual assessment payable by the Agent to the Federal
Deposit Insurance Corporation for insuring three-month certificates of
deposit.
-38-
<PAGE>
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person; PROVIDED, HOWEVER, that for
purposes of Section 7.07, an Affiliate of Holdings shall, in any event,
include any Person that directly or indirectly owns more than 5% of the
Voting Stock of Holdings and any officer or director of Holdings or any such
Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such other Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph of
this Agreement.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
"Air Partners" shall mean Air Partners, L.P., a Texas limited
partnership.
"Aircraft" shall have the meaning provided in the Aircraft Mortgage
Agreement.
"Aircraft Collateral" shall mean all "Collateral" as defined in the
Aircraft Mortgage Agreement.
"Aircraft Mortgage Agreement" shall have the meaning provided in
Section 4A.12 hereof.
"Airframe" shall have the meaning provided in the Aircraft Mortgage
Agreement.
"Appraisal" shall mean an appraisal, dated the date of delivery
thereof to the Banks pursuant to the terms of this Agreement, by one or more
independent appraisal firms satisfactory, at the time of such Appraisal, to
the Borrower and the Agent (i) in the case of the Aircraft Collateral setting
forth the fair market value, as determined in accordance with the definition
of "fair market value" promulgated by the International Society of Transport
Aircraft Trading, as of the date of such appraisal and (ii) in the case of
the Route Collateral setting forth both the fair market value, and the
orderly liquidation value as of the date of such appraisal.
"Appraised Value" shall mean as of any date of determination (i)
with respect to the Aircraft Collateral, the aggregate fair market value as
of such date of each asset constituting Aircraft Collateral as provided in
the most recently delivered Appraisal, and (ii) with respect to the Route
Collateral, each of the aggregate "fair market value" and aggregate "orderly
liquidation value" as of such date of each asset constituting Route
Collateral as provided in the most recently delivered Appraisal.
"Assignment and Assumption Agreement" shall mean an Assignment and
Assumption Agreement substantially in the form of Exhibit F (appropriately
completed).
-39-
<PAGE>
"Authorized Officer" of any Credit Party shall mean the Chief
Executive Officer, the Chief Financial Officer or any Vice President and
above who reports directly or indirectly to the Chief Financial Officer.
"Bank" shall have the meaning provided in the first paragraph of
this Agreement.
"Bankruptcy Code" shall have the meaning provided in Section 8.05.
"Base Rate" at any time shall mean the higher of (i) 1/2 of 1% in
excess of the Adjusted Certificate of Deposit Rate and (ii) the Prime Lending
Rate.
"Base Rate Loan" shall mean each Revolving Loan designated or
deemed designated as such by the Borrower at the time of the incurrence
thereof or conversion thereto.
"Borrower" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the borrowing of one Type of Revolving Loans
from all the Banks on a given date (or resulting from a conversion or
conversions on such date or resulting from a selection of an Interest Period
or Interest Periods on such date) having in the case of Eurodollar Loans the
same Interest Period, PROVIDED that Base Rate Loans incurred pursuant to
Section 1.10(b) shall be considered part of the related Borrowing of
Eurodollar Loans.
"Bridge Debt Agreement" shall mean the Amended and Restated Credit
Agreement dated as of October 11, 1996, among the Borrower, the lenders from
time to time party thereto, ABN Amro Bank N.V., as Documentation Agent,
Bankers Trust Company, as Administrative Agent, and Chase Securities Inc., as
Syndication Agent.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day
which shall be in Minneapolis, Minnesota or New York City a legal holiday or
a day on which banking institutions are authorized or required by law or
other government action to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day which is a Business Day described in clause (i)
above and which is also a day for trading by and between banks in the
interbank Eurodollar market.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on
the books of such Person, in each case taken at the amount thereof accounted
for as indebtedness in accordance with GAAP.
"Certificated Air Carrier" shall mean a Citizen of the United
States holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code, for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo.
-40-
<PAGE>
"Citizen of the United States" shall have the meaning provided in
Section 40102(a)(15) of Title 49 of the United States Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the date of this Agreement, and to any subsequent provision of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the "Aircraft Collateral" and the
"Routes Collateral".
"Collateral Agent" shall mean the Agent acting as collateral agent
for the Secured Creditors pursuant to the Security Documents.
"Commitment Fee" shall have the meaning provided in Section 2.01(a).
"Consolidated EBITDAR" shall mean, for any period, the consolidated
operating income of Holdings and its Subsidiaries for such period plus (i)
consolidated aircraft operating rental expenses of Holdings and its
Subsidiaries for such period plus (ii) amortization and depreciation that
were deducted in arriving at the amount of such consolidated operating income
for such period plus (iii) interest income of Holdings and its Subsidiaries
during such period, all as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Fixed Charges" shall mean, for any period, the total
consolidated interest expense of Holdings and its Subsidiaries for such
period (calculated without regard to any limitations on the payment thereof,
but excluding all interest expense in connection with any Distribution
permitted by Section 7.05(f) and all interest expense in connection with
Indebtedness permitted by Section 7.06(l) except any such Indebtedness
incurred by the Borrower or any of its Subsidiaries which is not subordinated
to the Obligations) plus, without duplication, that portion of Capitalized
Lease Obligations of Holdings and its Subsidiaries representing the interest
factor for such period, plus the total consolidated aircraft operating rental
expenses of Holdings and its Subsidiaries for such period.
"Consolidated Indebtedness" shall mean, at any time, the sum of (i)
the aggregate outstanding principal amount of all Indebtedness (including,
without limitation, the current portion thereof, but excluding (1) all
Indebtedness of the type set forth in clause (v) of the definition of
Indebtedness, (2) all Indebtedness of the type set forth in clause (iii) of
the definition of Indebtedness to the extent relating to Indebtedness of the
type described in clause (v) of the definition thereof, (3) all Identified
Indebtedness, and (4) all Indebtedness permitted by Section 7.06(l) except
any such Indebtedness incurred by the Borrower or any of its Subsidiaries
which is not subordinated to the Obligations) and the principal component of
Capitalized Lease Obligations of Holdings and its Subsidiaries plus (ii) the
capitalized aircraft operating lease obligations of Holdings and its
Subsidiaries (calculated at any time of determination as the product of (x)
seven and (y) the aircraft operating rental expense of Holdings and its
Subsidiaries for the four fiscal quarters immediately preceding the date of
determination).
-41-
<PAGE>
"Consolidated Net Income" shall mean, for any period, net after tax
income of Holdings and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Continental" shall mean Continental Airlines, Inc., a Delaware
corporation.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (other than Holdings or any of its Subsidiaries) (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting
direct or indirect security therefor, (ii) to advance or supply funds (x) for
the purchase or payment of any such primary obligation or (y) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect
thereof; PROVIDED, HOWEVER, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be deemed
to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made (or, if
less, the maximum amount of such primary obligation for which such Person may
be liable pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith.
"Coverage Tests" shall have the meaning provided in Section
4A.11(b).
"Credit Documents" shall mean this Agreement (including the
Guaranty herein), the Revolving Notes and each Security Document.
"Credit Event" shall mean the making of any Revolving Loan.
"Credit Party" shall mean Holdings, NWA and the Borrower, and, in
the event Newco becomes the owner of all of the outstanding shares of capital
stock of Holdings, Newco, except that Newco shall not be deemed to be a
Credit Party for purposes of Sections 5.09, 6.07 or 7.10 or for purposes of
the definitions of "Pension Plan" and "Termination Event" herein.
"Cumulative Net Income Amount" shall mean on any date of
determination, an amount equal to 50% of Consolidated Net Income (determined
on a cumulative basis) for the period commencing on January 1, 1995 and
ending on the date of determination.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Designated Party" shall have the meaning provided in Section 8.05.
-42-
<PAGE>
"Distribution" shall have the meaning provided in Section 7.05,
PROVIDED that loans, advances or dividends by Holdings or any of its
Subsidiaries in an aggregate amount not in excess of $400,000,000 to Newco
the proceeds of which are used to acquire, directly or indirectly, shares of
capital stock of Continental shall be deemed not to be Distributions for all
purposes of this Agreement.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Effective Date" shall have the meaning provided in Section 11.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in
Regulation D of the Securities Act) other than an airline, a commercial air
carrier, an air freight forwarder, an entity engaged in the business of
parcel transport by air or other similar Person or a corporation or other
entity controlling, controlled by or under common control with such an
airline, commercial air carrier, air freight forwarder, entity engaged in the
business of parcel transport by air or other similar Person.
"Engine" shall have the meaning set forth in the Aircraft Mortgage
Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement, and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with Holdings or any of its Subsidiaries would
be deemed to be a "single employer" within the meaning of Section 414(b),
(c), (m) or (o) of the Code, PROVIDED that in no event shall Air Partners or
any of its Subsidiaries or Continental or any of its Subsidiaries be deemed
to be ERISA Affiliates for any purpose.
"Eurodollar Loan" shall mean each Revolving Loan designated as such
by the Borrower at the time of the incurrence thereof or conversion thereto.
"Eurodollar Rate" shall mean, at the option of the Borrower, (a) (i)
the rate determined by the Agent to be the arithmetic average of the offered
quotation to first-class banks in the interbank Eurodollar market by each
Reference Bank for Dollar deposits of amounts in immediately available funds
comparable to the outstanding principal amount of the Eurodollar Loan of such
Reference Bank with maturities comparable to the Interest Period applicable to
such Eurodollar Loan commencing two Business Days thereafter as of 10:00 A.M.
(New York time) on the date which is two Business Days prior to the commencement
of such Interest Period, divided (and rounded off to the nearest 1/16 of 1%) by
(ii) a percentage equal to 100% minus the then stated maximum rate of all
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves required by applicable law)
-43-
<PAGE>
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency liabilities as defined in Regulation D of the Board of Governors
of the Federal Reserve System (or any successor category of liabilities under
Regulation D), PROVIDED that if one or more of the Reference Banks fails to
provide the Agent with its aforesaid rate, then the Eurodollar Rate shall be
determined based on the rate or rates provided to the Agent by the other
Reference Bank or Banks, or (b) the arithmetic average of the offered rates
for deposits in Dollars for the applicable Interest Period (or the period
closest to such applicable Interest Period) which appear on the Reuters
Screen LIBO Page as of 10:00 A.M. (New York time) on the date which is two
Business Days prior to the commencement of such Interest Period.
"Event of Default" shall have the meaning provided in Section 8.
"Event of Loss" (x) with respect to an Aircraft, Airframe or Engine
shall mean any of the following events with respect to such property: (i)
the loss of such property or the use thereof due to the destruction of or
damage to such property which renders repair uneconomic or which renders such
property permanently unfit for normal use by the Borrower for any reason
whatsoever; (ii) any damage to such property which results in an insurance
settlement with respect to such property on the basis of a total loss, or a
constructive or compromised total loss; (iii) the theft or disappearance of
such property, or the confiscation, condemnation. or seizure of, or
requisition of title to, or use of, such property by any governmental or
purported governmental authority (other than a requisition for use by the
United States government or any other government of registry of such
Aircraft) or any agency or instrumentality of any thereof which in the case
of any event referred to in this clause (iii) (other than a requisition of
title) shall have resulted in the loss of possession of such property by the
Borrower for a period in excess of 180 consecutive days or, in the case of a
requisition of title, the requisition of title shall not have been reversed
within 90 days from the date of such requisition of title; and (iv) as a
result of any law, rule, regulation, order or other action by the FAA or
other governmental body of the government of registry of such Aircraft having
jurisdiction, the use of such property in the normal course of the business
of air transportation shall have been prohibited for a period of 180
consecutive days, PROVIDED that an Event of Loss with respect to an Aircraft
shall be deemed to have occurred if an Event of Loss occurs with respect to
the Airframe of such Aircraft; and (y) with respect to a Route shall mean the
loss by the Borrower of the right to use such Route.
"Existing Credit Agreement" shall mean the Credit Agreement among
Holdings, NWA, the Borrower, the lenders from time to time party thereto, ABN
Amro Bank N.V. as Compliance Agent, Bankers Trust Company as Administrative
Agent, Chase Securities Inc. as Syndication Agent, Citibank N.A. as
Documentation Agent, and National Westminster Bank plc and U.S. Bank National
Association (f/k/a First Bank National Association) as Agents, dated as of
December 15, 1995, as amended and restated as of October 16, 1996, as further
amended and restated as of December 29, 1997 and further amended as of
January 23, 1998.
"Express Air I" shall mean Express Airlines I, Inc., a Georgia
corporation, and Phoenix Airline Services, Inc., a Georgia corporation.
-44-
<PAGE>
"FAA" means the United States Federal Aviation Administration and
any agency or instrumentality of the United States government succeeding to
its functions.
"Federal Aviation Act" shall mean the Federal Aviation Act of 1958,
as amended and recodified in Title 49, United States Code, or any similar
legislation of the United States to supersede, amend or supplement such Act
and the rules and regulations promulgated thereunder.
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average
of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
Federal Funds brokers of recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in
Section 2.01.
"Financial Outlook" shall have the meaning provided in Section
5.05(b).
"GAAP" shall have the meaning provided in Section 11.07(a).
"Guarantor" shall mean each of Holdings and NWA (and, in the event
Newco becomes the owner all of the outstanding shares of capital stock of
Holdings, Newco).
"Guaranty" shall mean the guaranty of Holdings and NWA pursuant to
Section 12.
"Hedging Obligations" shall mean, as to any Person, all obligations
and liabilities of such Person under any Interest Rate Protection Agreement,
which are payable upon the termination of such agreement.
"Holdings" shall have the meaning provided in the first paragraph
of this Agreement.
"Identified Indebtedness" shall mean and include (i) Contingent
Obligations incurred pursuant to Section 7.06(i), (ii) Contingent Obligations of
Holdings in respect of the Wayne County Special Facilities Revenue Bonds;
PROVIDED that the maximum aggregate liability of Holdings and its Subsidiaries
in respect of all such Contingent Obligations shall not exceed $86,000,000 plus
interest thereon, (iii) Contingent Obligations of NATC for the benefit of a
third party in respect of its space lease in Grand Forks, North Dakota, PROVIDED
that the maximum aggregate liability of NATC in respect of all such Contingent
Obligations shall not exceed $2,500,000, (iv) Indebtedness of the type described
in clause (iii) of the definition thereof in connection with the Borrower's
pledge of its receivables generated through the Scheduled Airline Traffic Office
to secure Indebtedness incurred by the Scheduled Airline Traffic Office, the
proceeds of which are advanced to the Borrower on a non-recourse basis (other
than such pledged receivables) and (v) Indebtedness incurred pursuant to Section
7.06(j) but only to the
-45-
<PAGE>
extent that such credit enhancement letters of credit or backstop liquidity
facilities referred to therein are not drawn upon.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of
such Person for borrowed money or for the deferred purchase price of property
or services but excluding trade accounts payable and accrued expenses
incurred in the ordinary course of business, (ii) the maximum amount
available to be drawn under all letters of credit issued for the account of
such Person and all unpaid drawings in respect of such letters of credit,
(iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v),
(vi) or (vii) of this definition secured by any Lien on any property owned by
such Person, whether or not such Indebtedness has been assumed by such Person
(to the extent of the value of the respective property), (iv) Capitalized
Lease Obligations, (v) all obligations of such person to pay a specified
purchase price for goods or services, whether or not delivered or accepted,
I.E., take-or-pay and similar obligations, (vi) all Contingent Obligations of
such Person and (vii) all Hedging Obligations under any Interest Rate
Protection Agreement; PROVIDED, HOWEVER, that neither (a) the Japanese Land
Financing Obligations nor (b) any obligations of Holdings to repurchase
shares of its common stock owned by KLM to the extent such repurchase would
be permitted in accordance with Section 7.05(g) shall constitute Indebtedness.
"Initial Borrowing Date" shall mean the date on which the initial
Credit Event occurs.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
"Japanese Land Financing Obligations" shall mean all obligations of
the Borrower under that certain Second Amended and Restated Loan Agreement,
dated as of September 30, 1995, between the Borrower and Konan City Planning
Co., Ltd., but only to the extent that such obligations are non-recourse with
respect to all Credit Parties and their Subsidiaries and are secured solely
by the following real property: (i) the Azabu property, (ii) the Kamiya-cho
property and (iii) the Sarugaku-cho property.
"KLM" shall mean Koninklijke Luchtvaart Maatschappij N.V., a
Netherlands corporation.
"LAX Two" shall mean LAX TWO CORP., a non-profit California mutual
benefit corporation.
-46-
<PAGE>
"Lease" shall mean any operating lease entered into by any Credit
Party or any of its Subsidiaries as lessee thereunder.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security deposit arrangement, encumbrance, lien (statutory or other) or other
security agreement or lien of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement,
any financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any capital lease having
substantially the same economic effect as any of the foregoing).
"Margin Stock" shall have the meaning provided in Regulation U of
the Board of Governors of the Federal Reserve System.
"Moody's" shall mean Moody's Investors Service, Inc., or any
successor corporation thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA with respect to which the Borrower or any of its
ERISA Affiliates is an "employer" as defined in Section 3(5) of ERISA.
"Narita Hotel Property" shall mean the Narita International Hotel
and the "Flight Kitchen" located on the property on which such hotel is
located.
"NATC" shall mean Northwest Aerospace Training Corporation, a
Delaware corporation.
"Net Debt Proceeds" shall mean for any incurrence of Indebtedness,
the gross proceeds of such incurrence, net of (i) underwriting discounts and
commissions and other fees and costs associated therewith, (ii) any taxes
(including income taxes) currently paid or payable in the year of incurrence
or the following year as a result of such incurrence and (iii) in the case of
the incurrence of any such Indebtedness in connection with the substantially
contemporaneous refinancing of other Indebtedness, the aggregate amount of
the outstanding principal amount of, premium, if any, and accrued but unpaid
interest on, such other Indebtedness being refinanced with the proceeds of
such Indebtedness.
"Net Sale Proceeds" shall mean for any sale, lease, transfer or
other disposition of assets, the face amount of any promissory note,
receivable or other deferred payment and the gross cash proceeds plus the
fair market value of any other property received by Holdings or any of its
Subsidiaries from such sale, lease, transfer or other disposition, net of
reasonable transaction costs, the payment of the outstanding principal amount
of, premium, if any, and interest on any Indebtedness (other than the
Obligations) securing the assets being sold and required to be repaid as a
result thereof and the estimated marginal increase in income taxes which will
be payable by the Holdings' consolidated group with respect to the fiscal
year in which the sale occurs as a result of such sale.
-47-
<PAGE>
"Newco" shall mean a holding company that becomes the owner after
the Effective Date of all of the issued and outstanding shares of capital
stock of Holdings.
"Notice of Borrowing" shall have the meaning provided in Section
1.03(a).
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Agent located at One
Chase Manhattan Plaza, New York, New York 10081, Attention: Jesus Sang, Loan
and Agency Services Group, 8th Floor, Facsimile: (212) 552-5650, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"NWA" shall have the meaning provided in the first paragraph of
this Agreement.
"Obligations" shall mean all amounts owing to the Agent or any Bank
pursuant to the terms of this Agreement or any other Credit Document.
"Payment Office" shall mean the office of the Agent located at One
Chase Manhattan Plaza, New York, New York 10081 Attention: Jesus Sang, Loan
and Agency Services Group, 8th Floor, Facsimile: (212) 552-5650, or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan" means any plan (other than a Multiemployer Plan)
described in Section 4021(a) of ERISA, and not excluded pursuant to Section
4021(b) of ERISA, with respect to which any Credit Party or any of its ERISA
Affiliates is a "contributing sponsor" as defined in Section 4001(a)(13) of
ERISA and each such plan for the five year period immediately following the
last date on which the Borrower or any of its ERISA Affiliates contributed or
had an obligation to contribute to such plan.
"Percentage" of any Bank at any time shall mean a fraction
(expressed as a percentage) the numerator of which is the Revolving Loan
Commitment of such Bank at such time and the denominator of which is the
Total Revolving Loan Commitment at such time, PROVIDED that if the Percentage
of any Bank is to be determined after the Total Revolving Loan Commitment has
been terminated, then the Percentages of the Banks shall be determined
immediately prior (and without giving effect) to such termination.
"Permitted Liens" shall have the meaning set forth in Section 7.04
hereof.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, limited liability company, trust or other
enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Prime Lending Rate" shall mean the rate which the Agent announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime
-48-
<PAGE>
lending rate changes. The Prime Lending Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. The Agent may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Quarterly Payment Date" shall mean the fifteenth day of each
March, June, September and December occurring after the Effective Date.
"Rating" shall mean the senior unsecured debt rating of the
Borrower as rated by each Rating Agency.
"Rating Agency" shall mean each of S&P and Moody's.
"Reference Banks" shall mean three Banks that are acceptable to the
Borrower, PROVIDED that one such Bank shall be the Agent.
"Register" shall have the meaning set forth in Section 11.17.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Required Banks" shall mean Banks, the sum of whose outstanding
Revolving Loan Commitments (or after the termination thereof, outstanding
Revolving Loans) represent an amount greater than 50% of the Total Revolving
Loan Commitment (or after the termination thereof, the sum of the total
outstanding Revolving Loans at such time).
"Retired Secured Debt" shall mean (i) all secured letters of credit
issued for the account of Holdings or any of its Subsidiaries to the extent
same have been returned undrawn to the respective issuers of such letters of
credit or to the extent of any permanent reduction of the same without any
drawing thereunder, (ii) all secured Contingent Obligations of Holdings or
any of its Subsidiaries to the extent that such Contingent Obligations have
been terminated without any Credit Party or any of its respective
Subsidiaries making any payment in respect thereof, (iii) all secured Hedging
Obligations of Holdings or any of its Subsidiaries to the extent that such
Hedging Obligations have been terminated without any Credit Party or any of
its respective Subsidiaries making any payment in respect thereof and (iv)
all Indebtedness of the type described in clause (iii) of the definition of
Indebtedness of Holdings or any of its Subsidiaries to the extent that such
Indebtedness has been permanently extinguished and the Lien securing such
Indebtedness on the property of the respective Credit Party or any of its
Subsidiaries has been unconditionally released.
"Retired Unsecured Debt" shall mean (i) all unsecured letters of
credit issued for the account of Holdings or any of its Subsidiaries to the
extent same have been returned undrawn to the respective issuers of such
letters of credit or to the extent of any permanent reduction of the same
without any drawing thereunder, (ii) all unsecured Contingent Obligations of
Holdings or any of its Subsidiaries to the extent that such Contingent
Obligations have been terminated without any Credit Party or any of its
respective Subsidiaries making any payment in respect
-49-
<PAGE>
thereof and (iii) all unsecured Hedging Obligations of Holdings or any of its
Subsidiaries to the extent that such Hedging Obligations have been terminated
without any Credit Party or any of its respective Subsidiaries making any
payment in respect thereof.
"Reuters Screen LIBO Page" shall mean the display designated as
page "LIBO" on the Reuters Monitor Money Rates Service (or such other pages
as may replace the LIBO page on the service for the purpose of displaying
London interbank offered rates of major banks).
"Revolving Loan" shall have the meaning provided in Section 1.01.
"Revolving Loan Commitment" shall mean, for each Bank, the amount
set forth opposite such Bank's name in Schedule I hereto directly below the
column entitled "Revolving Loan Commitment", as the same may be (x) reduced
from time to time pursuant to Sections 2.02, 2.03 and/or 9 or (y) adjusted
from time to time as a result of assignments to or from such Bank pursuant to
Section 1.13 or 11.04(b).
"Revolving Loan Maturity Date" shall mean the date occurring 364
days after the Effective Date.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Route Collateral" shall mean all of the "Collateral" as defined in
the Route Security Agreement.
"Route Security Agreement" shall have the meaning provided in
Section 4.A12 hereof.
"Routes" shall have the meaning provided in the Route Security
Agreement.
"S&P" shall mean Standard & Poor's Ratings Services or any
successor corporation thereto.
"SEC" shall have the meaning provided in Section 6.01(g).
"Section 3.04(b)(ii) Certificate" shall have the meaning provided
in Section 3.04(b).
"Secured Creditors" shall mean the Banks, the Agent and the
Collateral Agent.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Security Documents" shall have the meaning provided in Section
4A.12 hereof.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation (irrespective of whether
or not at the time stock of any other class
-50-
<PAGE>
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person and/or one or more Subsidiaries of such Person and (ii) any
partnership, limited liability company, association, joint venture or other
entity in which such Person and/or one or more Subsidiaries of such Person
has more than a 50% equity interest at the time; PROVIDED HOWEVER that
notwithstanding anything to the contrary, (x) LAX Two and its Subsidiaries
and (y) Air Partners and Continental and their Subsidiaries shall be deemed
not to be Subsidiaries of Holdings or any of its Subsidiaries for all
purposes of this Agreement (including, without limitation, the calculation of
the financial covenants and the definitions relating thereto) and the other
Credit Documents so long as, in the case of clause (y), Newco does not own,
directly or indirectly, more than 50% of the equity interest (i.e., the
economic interest rather than the voting interest) of Continental.
"Super-Majority Banks" shall mean Banks, the sum of whose
outstanding Revolving Loan Commitments (or after the termination thereof,
outstanding Revolving Loans) represent an amount greater than or equal to 80%
of the Total Revolving Loan Commitment (or after the termination thereof, the
sum of the total outstanding Revolving Loans at such time).
"Taxes" shall have the meaning provided in Section 3.04(a).
"Termination Event" means (i) a "reportable event" described in
Section 4043 of ERISA or in the regulations thereunder (excluding events for
which the requirement for notice of such reportable event has been waived
under subsection .13, .14, .16, .18, .19 or .20 of PBGC Regulation Section
2615), or (ii) the withdrawal of any Credit Party or any of its ERISA
Affiliates from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii)
the filing of a notice of intent to terminate a Pension Plan or the treatment
of a Pension Plan amendment as a termination under Section 4041 of ERISA, or
(iv) the institution of proceedings to terminate a Pension Plan by the PBGC,
or (v) any other event or condition which might constitute reasonable grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, or (vi) the complete or partial
withdrawal (within the meaning of Sections 4203 and 4205, respectively, of
ERISA) of any Credit Party or any of its ERISA Affiliates from a
Multiemployer Plan, or (vii) the insolvency or reorganization (within the
meaning of Section 4245 and 4241, respectively, of ERISA) of any
Multiemployer Plan.
"Total Revolving Loan Commitment" shall mean, at any time, the sum
of the Revolving Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any
time, the sum of the Unutilized Revolving Loan Commitments of each of the
Banks.
"Transaction" shall mean (i) the incurrence of Revolving Loans
hereunder on the Initial Borrowing Date, (ii) the execution and delivery of
this Agreement and the other Credit Documents by the Credit Parties and (iii)
the payment of fees and expenses in connection with the foregoing.
-51-
<PAGE>
"Type" shall mean the type of Revolving Loan determined with regard
to the interest option applicable thereto, I.E., whether a Base Rate Loan or
a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"United States" and "U.S." shall each mean the United States of
America.
"Unutilized Revolving Loan Commitment" with respect to any Bank, at
any time, shall mean such Bank's Revolving Loan Commitment at such time less
the aggregate outstanding principal amount of Revolving Loans made by such
Bank.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
SECTION 10. THE AGENT.
10.01 APPOINTMENT. The Banks hereby designate The Chase Manhattan
Bank as Agent (for purposes of this Section 10, the term "Agent" shall
include The Chase Manhattan Bank in its capacity as Collateral Agent pursuant
to the Security Documents) to act as specified herein and in the other Credit
Documents. Each Bank hereby irrevocably authorizes, and each holder of any
Revolving Note by the acceptance of such Revolving Note shall be deemed
irrevocably to authorize, the Agent to take such action on its behalf under
the provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The
Agent may perform any of its duties hereunder by or through its respective
officers, directors, agents, employees or affiliates.
10.02 NATURE OF DUTIES. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. Neither the Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action
taken or omitted by it or them hereunder or under any other Credit Document
or in connection herewith or therewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason
of this Agreement or any other Credit Document a fiduciary relationship in
respect of any Bank or the holder of any Revolving Note; and nothing in this
Agreement or
-52-
<PAGE>
any other Credit Document, expressed or implied, is intended to or shall be
so construed as to impose upon the Agent any obligations in respect of this
Agreement or any other Credit Document except as expressly set forth herein
or therein.
10.03 LACK OF RELIANCE ON AGENT. Independently and without
reliance upon the Agent, each Bank and the holder of each Revolving Note, to
the extent it deems appropriate, has made and shall continue to make (i) its
own independent investigation of the financial condition and affairs of
Holding and its Subsidiaries in connection with the making and the
continuance of the Revolving Loans and the taking or not taking of any action
in connection herewith and (ii) its own appraisal of the creditworthiness of
Holding and its Subsidiaries and, except as expressly provided in this
Agreement, the Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Bank or the holder of any
Revolving Note with any credit or other information with respect thereto,
whether coming into its possession before the making of the Revolving Loans
or at any time or times thereafter. The Agent shall not be responsible to any
Bank or the holder of any Revolving Note for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of Holding and its Subsidiaries or be
required to make any inquiry concerning either the performance or observance
of any of the terms, provisions or conditions of this Agreement or any other
Credit Document, or the financial condition of Holding and its Subsidiaries
or the existence or possible existence of any Default or Event of Default.
10.04 CERTAIN RIGHTS OF AGENT. If the Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other
Credit Document, the Agent shall be entitled to refrain from such act or
taking such action unless and until it shall have received instructions from
the Required Banks; and the Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, neither any Bank
nor the holder of any Revolving Note shall have any right of action
whatsoever against the Agent as a result of the Agent acting or refraining
from acting hereunder or under any other Credit Document in accordance with
the instructions of the Required Banks.
10.05 RELIANCE. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made
by any Person that the Agent believed to be the proper Person, and, with
respect to all legal matters pertaining to this Agreement and any other
Credit Document and its duties hereunder and thereunder, upon advice of
counsel selected by the Agent.
10.06 INDEMNIFICATION. To the extent the Agent is not reimbursed and
indemnified by the Borrower, the Banks will reimburse and indemnify the Agent,
in proportion to their respective Percentages, for and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by the Agent in performing its
respective duties hereunder or under any other Credit Document, in any way
relating to or
-53-
<PAGE>
arising out of this Agreement or any other Credit Document; PROVIDED that no
Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful
misconduct.
10.07 AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
obligation to make Revolving Loans under this Agreement, the Agent shall have
the rights and powers specified herein for a "Bank" and may exercise the same
rights and powers as though it were not performing the duties specified
herein; and the term "Banks," "Required Banks," "holders of Revolving Notes"
or any similar terms shall, unless the context clearly otherwise indicates,
include the Agent in its individual capacity. The Agent may accept deposits
from, lend money to, and generally engage in any kind of banking, trust or
other business with any Credit Party or any Affiliate of any Credit Party as
if it were not performing the duties specified herein, and may accept fees
and other consideration from the Borrower or any other Credit Party for
services in connection with this Agreement and otherwise without having to
account for the same to the Banks.
10.08 HOLDERS. The Agent may deem and treat the payee of any
Revolving Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment, transfer or endorsement thereof, as the
case may be, shall have been filed with the Agent. Any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Revolving Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as
the case may be, of such Revolving Note or of any Revolving Note or Revolving
Notes issued in exchange therefor.
10.09 RESIGNATION BY THE AGENT. (a) The Agent may resign from
the performance of all its functions and duties hereunder and/or under the
other Credit Documents at any time by giving 15 Business Days' prior written
notice to the Borrower and the Banks. Such resignation shall take effect
upon the appointment of a successor Agent pursuant to clauses (b) and (c)
below or as otherwise provided below.
(b) Upon any such notice of resignation, the Banks shall appoint a
successor Agent hereunder or thereunder who shall be a commercial bank or
trust company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed within
such 15 Business Day period, the resigning Agent, with the consent of the
Borrower, shall then appoint a successor Agent who shall serve as Agent
hereunder or thereunder until such time, if any, as the Banks appoint a
successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause
(b) or (c) above by the 20th Business Day after the date such notice of
resignation was given by such Agent, such Agent's resignation shall become
effective and the Required Banks shall thereafter perform all the duties of
such Agent hereunder and/or under any other Credit Document until such time,
if any, as the Banks appoint a successor Agent as provided above.
-54-
<PAGE>
SECTION 11. MISCELLANEOUS.
11.01 PAYMENT OF EXPENSES, ETC. The Borrower shall: (i) whether
or not the transactions herein contemplated are consummated, pay all
reasonable and adequately documented fees and other out-of-pocket costs and
expenses (x) of the Agent (including, without limitation, the reasonable and
adequately documented fees and disbursements of White & Case LLP) arising in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents, the commitment letter, the term sheet and the
documents and instruments referred to herein and therein and any amendment,
waiver or consent relating hereto or thereto and of the Agent in connection
with its syndication efforts with respect to this Agreement (but excluding
attorneys' fees and disbursements) and (y) of the Agent and each of the Banks
in connection with the enforcement of this Agreement and the other Credit
Documents and the documents and instruments referred to herein and therein
(including, without limitation, the reasonable and adequately documented fees
and disbursements of counsel for the Agent and for each of the Banks
including any reasonable allocated costs of in-house counsel); (ii) pay and
hold each of the Banks harmless from and against any and all present and
future stamp, excise and other similar taxes with respect to the foregoing
matters and save each of the Banks harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iii)
indemnify the Agent, each Bank and each of their respective affiliates, and
each of their respective officers, directors, employees, representatives and
agents from and hold each of them harmless against any and all liabilities,
obligations (including removal or remedial actions), losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses and
disbursements (including reasonable and adequately documented attorneys' and
consultants' fees and disbursements) incurred by, imposed on or assessed
against any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding
(whether or not the Agent or any Bank is a party thereto) related to the
entering into and/or performance of this Agreement or any other Credit
Document, the commitment letter, the term sheet or the actual or proposed use
of the proceeds of any Revolving Loans hereunder or the consummation of any
transactions contemplated herein or in any other Credit Document or the
exercise of any of their rights or remedies provided herein or in the other
Credit Documents, including, without limitation, the reasonable and
adequately documented fees and disbursements of counsel and other consultants
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any losses, liabilities, claims, damages or
expenses to the extent arising or incurred by reason of (x) a violation of
laws or governmental regulations pertaining to lending by the Person to be
indemnified (or the Agent or the Bank of which such Person is an officer,
director, employee, representative or agent); PROVIDED, HOWEVER, that the
Person to be indemnified shall, in all events, be entitled to the indemnities
set forth in Sections 1.10, 1.11 and 3.04 to the extent provided therein, or
(y) the gross negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless any Person set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrower shall make
the maximum contribution to the payment and satisfaction of each of the
indemnified liabilities which is permissible under applicable law.
-55-
<PAGE>
11.02 RIGHT OF SETOFF. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of
any such rights, upon the occurrence and during the continuance of an Event
of Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any
Credit Party or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general
or special) and any other Indebtedness at any time held or owing by such Bank
(including, without limitation, by branches and agencies of such Bank
wherever located) to or for the credit or the account of any Credit Party
against and on account of the Obligations and liabilities of any Credit Party
to such Bank under this Agreement or under any of the other Credit Documents,
including, without limitation, all interests in Obligations purchased by such
Bank pursuant to Section 11.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not such Bank shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any
of them, shall be contingent or unmatured.
11.03 NOTICES. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to a Credit Party,
at the address specified opposite its signature below; if to the Agent, at
its Notice Office; if to any Bank, at the address specified for such Bank on
Schedule II hereto; or, at such other address as shall be designated by any
party in a written notice to the other parties hereto. All such notices and
communications shall, when mailed, telegraphed, telexed, telecopied, or
cabled or sent by overnight courier, be effective when received.
11.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; PROVIDED, HOWEVER, no Credit
Party may assign or transfer any of its rights, obligations or interest
hereunder or under any other Credit Document without the prior written
consent of the Banks and, PROVIDED FURTHER, that, although any Bank may
transfer, assign or grant participations in its rights hereunder, such Bank
shall remain a "Bank" for all purposes hereunder (and may not transfer or
assign all or any portion of its Commitments hereunder except as provided in
Section 11.04(b)) and the transferee, assignee or participant, as the case
may be, shall not constitute a "Bank" hereunder and, PROVIDED FURTHER, that
no Bank shall transfer or grant any participation under which the participant
shall have rights to approve any amendment to or waiver of this Agreement or
any other Credit Document except to the extent such amendment or waiver would
(i) extend the final scheduled maturity of any Revolving Loan or Revolving
Note in which such participant is participating, or reduce the rate or extend
the time of payment of interest or Fees thereon (except in connection with a
waiver of applicability of any post-default increase in interest rates) or
reduce the principal amount thereof, or increase the amount of the
participant's participation over the amount thereof then in effect (it being
understood that waivers or modifications of any conditions precedent,
covenants, Default or Event of Default or of a mandatory reduction in the
Total Revolving Loan Commitment shall not constitute a change in the terms of
such participation, and that an increase in any Revolving Loan Commitment or
Revolving Loan shall be permitted without the consent of any participant if
the participant's participation is not increased as a result thereof) or (ii)
consent to the assignment or transfer by
-56-
<PAGE>
the Borrower of any of its rights and obligations under this Agreement. In
the case of any such participation, the participant shall not have any rights
under this Agreement or any of the other Credit Documents (the participant's
rights against such Bank in respect of such participation to be those set
forth in the agreement executed by such Bank in favor of the participant
relating thereto) and all amounts payable by the Borrower hereunder shall be
determined as if such Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its
Revolving Loan Commitment (and related outstanding Obligations hereunder),
and its outstanding Revolving Loans to its parent company and/or any
affiliate of such Bank or to one or more Banks or (y) assign all, or if less
than all, a portion equal to at least $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, of such Revolving Loan Commitments and
outstanding principal amount of Revolving Loans hereunder to one or more
Eligible Transferees, each of which assignees shall become a party to this
Agreement as a Bank by execution of an Assignment and Assumption Agreement;
PROVIDED that, (i) at such time Schedule I shall be deemed modified to
reflect the Revolving Loan Commitments (and/or outstanding Revolving Loans,
as the case may be) of such new Bank and of the existing Banks, (ii) new
Revolving Notes will be issued, at the Borrower's expense, to such new Bank
and to the assigning Bank upon the request of such new Bank or assigning
Bank, such new Revolving Notes to be in conformity with the requirements of
Section 1.05 (with appropriate modifications) to the extent needed to reflect
the revised Revolving Loan Commitments (and/or outstanding Revolving Loans),
(iii) only with respect to any assignment pursuant to clause (y) of this
Section 11.04(b), the consent of the Agent and the Borrower shall be required
(which consents shall not be unreasonably withheld or delayed); PROVIDED,
HOWEVER, the consent of the Borrower shall not be required at any time after
an Event of Default shall have occurred and is then continuing, and (iv) the
Agent shall receive at the time of each such assignment, from the assigning
or assignee Bank, the payment of a non- refundable assignment fee of $3,500
and, PROVIDED FURTHER, that such transfer or assignment will not be effective
until recorded by the Agent on the Register pursuant to Section 11.17 hereof.
To the extent of any assignment pursuant to this Section 11.04(b), the
assigning Bank shall be relieved of its obligations hereunder with respect to
its assigned Revolving Loan Commitment. At the time of each assignment
pursuant to this Section 11.04(b) to a Person which is not already a Bank
hereunder and which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Bank shall provide to the Borrower and the Agent the
appropriate Internal Revenue Service Forms (and, if applicable a Section
3.04(b)(ii) Certificate) described in Section 3.04(b).
(c) Any Bank may at any time pledge or assign all or any portion
of its rights under this Agreement or any other Credit Document to any
Federal Reserve Bank without notice to or consent of any Credit Party. No
such pledge or assignment shall release the transferor Bank from its
obligations hereunder.
11.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of the Agent or any Bank or any holder of any Revolving Note in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the
-57-
<PAGE>
Borrower or any other Credit Party and the Agent or any Bank or the holder of
any Revolving Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any
other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Credit Document expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which the Agent or any Bank or the holder of any Revolving Note would
otherwise have. No notice to or demand on any Credit Party in any case shall
entitle any Credit Party to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Agent or
any Bank or the holder of any Revolving Note to any other or further action
in any circumstances without notice or demand.
11.06 PAYMENTS PRO RATA. (a) Except as otherwise provided in
this Agreement, the Agent agrees that promptly after its receipt of each
payment from or on behalf of the Borrower in respect of any Obligations
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has consented in writing to waive its PRO RATA share of any such
payment) PRO RATA based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal of, or
interest on, the Revolving Loans or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than
the total of such Obligation then owed and due to such Bank bears to the
total of such Obligation then owed and due to all of the Banks immediately
prior to such receipt, then such Bank receiving such excess payment shall
purchase for cash without recourse or warranty from the other Banks an
interest in the Obligations of the respective Credit Party to such Banks in
such amount as shall result in a proportional participation by all the Banks
in such amount; PROVIDED that if all or any portion of such excess amount is
thereafter recovered from such Bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
11.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved (except as set forth in
the notes thereto or as otherwise disclosed in writing by the Borrower to the
Banks); PROVIDED that, except as otherwise specifically provided herein, all
computations determining compliance with Section 7 shall utilize accounting
principles and policies in conformity with those used to prepare the
historical financial statements delivered to the Banks pursuant to Section
5.05(a) (with the foregoing generally accepted accounting principles, subject
to the preceding proviso, herein called "GAAP").
(b) All computations of interest with respect to Base Rate Loans
shall be made on the basis of a year consisting of 365 (or, if applicable, 366)
days for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest
-58-
<PAGE>
is payable. All other computations of interest and all computations of Fees
hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring
in the period for which such interest or Fees are payable.
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
SITTING IN THE CITY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
CREDIT PARTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH CREDIT PARTY HEREBY DESIGNATES, APPOINTS AND EMPOWERS CT
CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW
YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE AND
ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF
ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED
IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE
AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH CREDIT PARTY
AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY ON
THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE AGENT
UNDER THIS AGREEMENT. EACH CREDIT PARTY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO ANY CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE
ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT UNDER THIS
AGREEMENT, ANY BANK OR THE HOLDER OF ANY REVOLVING NOTE TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.
(b) EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE
AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
-59-
<PAGE>
SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.09 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
11.10 EFFECTIVENESS. This Agreement shall become effective on the
date (the "Effective Date") on which (a) each Credit Party, the Agent and
each of the Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to the Agent at its
Notice Office or, in the case of the Banks, shall have given to the Agent
telephonic (confirmed in writing), written, telecopy or telex notice
(actually received) at such office that the same has been signed and mailed
to it and (b) the conditions set forth in Article 4A hereof are satisfied.
11.11 HEADINGS DESCRIPTIVE. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
11.12 AMENDMENT OR WAIVER; ETC. (a) Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party
thereto and the Required Banks, PROVIDED that no such change, waiver,
discharge or termination shall, without the consent of each Bank (with
Obligations being directly affected thereby in the case of the following
clause (i)), (i) extend the final scheduled maturity of any Revolving Loan or
Revolving Note, or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates), or reduce the principal amount
thereof (except to the extent repaid in cash), (ii) release all or
substantially all of the Collateral (except as expressly provided in the
Security Documents), (iii) amend, modify or waive any provision of this
Section 11.12, (iv) reduce the percentage specified in the definition of
Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as the extensions of Revolving Loan Commitments are included on the
Effective Date), (v) release a Guarantor from its Guaranty or (vi) consent to
the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement; PROVIDED FURTHER, that no such change,
waiver, discharge or termination shall (x) increase the Revolving Loan Commit-
-60-
<PAGE>
ments of any Bank over the amount thereof then in effect without the consent
of such Bank (it being understood that waivers or modifications of conditions
precedent, covenants, Defaults or Events of Default or of a mandatory
reduction in the Total Revolving Loan Commitment shall not constitute an
increase of the Revolving Loan Commitment of any Bank, and that an increase
in the available portion of any Revolving Loan Commitment of any Bank shall
not constitute an increase in the Commitment of such Bank) and (y) without
the consent of the Agent, amend, modify or waive any provision of Section 10
as same applies to the Agent or any other provision as same relates to the
rights or obligations of the Agent.
(b) If, in connection with any proposed change, waiver, discharge
or termination to any of the provisions of this Agreement as contemplated by
clause (a)(i) through (vi), inclusive, of the first proviso to Section
11.12(a), the consent of the Required Banks is obtained but the consent of
one or more of such other Banks whose consent is required is not obtained,
then the Borrower shall have the right, so long as each non-consenting Bank
whose individual consent is required is treated as described in either clause
(A) or (B) below, to either (A) replace such non-consenting Bank with one or
more Replacement Banks pursuant to Section 1.13 so long as at the time of
such replacement, each such Replacement Bank consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Bank's
Revolving Loan Commitment and repay in full its outstanding Revolving Loans,
in accordance with Sections 2.02(b) and/or 3.01(b), PROVIDED that, unless the
Revolving Loan Commitment terminated and the Revolving Loans repaid pursuant
to preceding clause (B) are immediately replaced in full at such time through
the addition of new Banks or the increase of the Revolving Loan Commitments
and/or outstanding Revolving Loans of existing Banks (who in each case must
specifically consent thereto), then in the case of any action pursuant to
preceding clause (B) the Required Banks (determined both before and after
giving effect to the proposed action) shall specifically consent thereto,
PROVIDED FURTHER, that the Borrower shall not have the right to replace a
Bank solely as a result of the exercise of such Bank's rights (and the
withholding of any required consent by such Bank) pursuant to the second
proviso to Section 11.12(a).
11.13 SURVIVAL. All indemnities set forth herein including,
without limitation, in Sections 1.10, 1.11, 3.04, 11.01 and 11.06 shall,
subject to Section 11.15 (to the extent applicable), survive the execution,
delivery and termination of this Agreement and the Revolving Notes and the
making and repayment of the Revolving Loans.
11.14 DOMICILE OF REVOLVING LOANS. Each Bank may transfer and
carry its Revolving Loans at, to or for the account of any office, Subsidiary
or Affiliate of such Bank. Notwithstanding anything to the contrary
contained herein, to the extent that a transfer of Revolving Loans pursuant
to this Section 11.14 would, at the time of such transfer, result in
increased costs under Section 1.10, 1.11 or 3.04 from those being charged by
the respective Bank prior to such transfer, then the Borrower shall not be
obligated to pay such increased costs (although the Borrower shall be
obligated to pay any other increased costs of the type described above
resulting from changes giving rise to such increased costs after the date of
the respective transfer).
-61-
<PAGE>
11.15 LIMITATION ON ADDITIONAL AMOUNTS, ETC. Notwithstanding
anything to the contrary contained in Section 1.10, 1.11 or 3.04 of this
Agreement, unless a Bank gives notice to the Borrower that it is obligated to
pay an amount under such Section within 180 days after the date the Bank
incurs the respective increased costs, Taxes, loss, expense or liability,
reduction in amounts received or receivable or reduction in return on
capital, then such Bank shall only be entitled to be compensated for such
amount by the Borrower pursuant to said Section 1.10, 1.11 or 3.04, as the
case may be, to the extent the costs, Taxes, loss, expense or liability,
reduction in amounts received or receivable or reduction in return on capital
are incurred or suffered on or after the date which occurs 180 days prior to
such Bank giving notice to the Borrower that it is obligated to pay the
respective amounts pursuant to said Section 1.10, 1.11 or 3.04, as the case
may be. This Section 11.15 shall have no applicability to any Section of
this Agreement other than said Sections 1.10, 1.11 and 3.04.
11.16 CONFIDENTIALITY. (a) Subject to the provisions of clause
(b) of this Section 11.16, each Bank shall hold all non-public information
obtained pursuant to the requirements of this Agreement which has been
identified as such by any Credit Party in accordance with its customary
procedure for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably to any bona fide prospective transferee or participant
in connection with the contemplated transfer of any Revolving Loan or
Revolving Loan Commitment or participation therein or as required or
requested by any governmental agency or representative thereof or pursuant to
legal process or to such Bank's attorneys, affiliates or independent
auditors; PROVIDED that, unless specifically prohibited by applicable law or
court order, each Bank shall notify Holdings of any request by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by
such governmental agency) for disclosure of any such non-public information
prior to disclosure of such information; and PROVIDED FURTHER, that in no
event shall any Bank be obligated or required to return any materials
furnished by Holdings or any of its Subsidiaries, PROVIDED that in the case
of disclosure to any prospective transferee or participant, such Person
executes an agreement with such Bank containing provisions substantially the
same as to those contained in this Section 11.16.
(b) Each Credit Party hereby acknowledges and agrees that each
Bank may share with any of its affiliates any information related to Holdings
or any of its Subsidiaries (including, without limitation, any nonpublic
customer information regarding the creditworthiness of Holdings or any of its
Subsidiaries), PROVIDED such Persons shall be subject to the provisions of
this Section 11.16 to the same extent as such Bank.
11.17 REGISTRY. The Borrower hereby designates the Agent to serve as
the Borrower's agent, solely for purposes of this Section 11.17, to maintain a
register (the "Register") on which it will record the Revolving Loan Commitments
from time to time of each of the Banks, the Revolving Loans made by each of the
Banks and each repayment in respect of the principal amount of the Revolving
Loans of each Bank. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Revolving Loans. With respect to any Bank, the transfer of the Revolving Loan
Commitment of such Bank and the rights to the principal of, and interest on, any
Revolving Loan made pursuant
-62-
<PAGE>
to such Revolving Loan Commitment shall not be effective until such transfer
is recorded on the Register maintained by the Agent with respect to ownership
of such Revolving Loan Commitment and Revolving Loans and prior to such
recordation all amounts owing to the transferor with respect to such
Revolving Loan Commitment and Revolving Loans shall remain owing to the
transferor. The registration of assignment or transfer of all or part of any
Revolving Loan Commitment and Revolving Loans shall be recorded by the Agent
on the Register only upon the acceptance by the Agent of a properly executed
and delivered Assignment and Assumption Agreement pursuant to Section
11.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Agent for acceptance and registration of assignment or
transfer of all or part of a Revolving Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall surrender the Revolving
Note evidencing such Revolving Loan, and thereupon one or more new Revolving
Notes in the same aggregate principal amount shall be issued to the assigning
or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the
Agent from and against any and all losses, claims, damages and liabilities of
whatsoever nature which may be imposed on, asserted against or incurred by
the Agent in performing its duties under this Section 11.17.
11.18 NEWCO REORGANIZATION. In the event that Newco owns all of
the outstanding shares of capital stock of Holdings:
(i) all references to "Holdings" in Section 3.02(b), 3.02(c), 5
(excluding, however, Sections 5.05, 5.09 and 5.10), 6 (excluding, however,
Sections 6.01(a) and 6.01(b)), 7 (excluding, however, Section 7.05(e)), 8,
9 (excluding, however, the definitions of "Credit Party", "Distribution,"
"Guarantor," "Holdings" and "Newco" and clause (ii) of the definition of
"Identified Indebtedness"), 10, and 11 of this Agreement shall be deemed to
refer to "Newco"; PROVIDED, HOWEVER, that the references to "Holdings" in
Sections 7.05(b) (second occurrence) and 7.05(g) hereof, together with the
reference to "Holdings" in clause (b) of the proviso to the definition of
"Indebtedness" in Section 9 hereof, shall be deemed to refer to "Newco
and/or Holdings" and all references to "either Guarantor" in this Agreement
shall be deemed to refer to "any Guarantor;"
(ii) Sections 6.01(a) and 6.01(b) hereof shall be amended in their
entireties to read as set forth below:
"(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and
in any event within 120 days after the close of each fiscal year of
Newco, (i) a copy of the SEC Form 10-K filed by Newco with the SEC for
such fiscal year, or, if no such Form 10-K was so filed by Newco for
such fiscal year, the consolidated balance sheet of Newco and its
subsidiaries and whether or not such Form 10-K was filed, of each of
Holdings and its Subsidiaries and the Borrower and its Subsidiaries,
as at the end of such fiscal year and the related consolidated
statements of operations, of common stockholders' equity (deficit) (in
the case of Newco and its subsidiaries) and of cash flows for such
fiscal year, setting forth comparative consolidated figures as of the
end of and for the preceding fiscal year, and examined by Ernst &
Young (or (x) any other "Big Six" or "Big Four"
-63-
<PAGE>
accounting firm or (y) any other firm of independent public
accountants of recognized standing selected by Newco, Holdings or
the Borrower, as the case may be, and reasonably acceptable to the
Required Banks) whose opinion shall not be qualified as to the
scope of audit or as to the status of Newco, Holdings or the
Borrower as a going concern, and (ii) a certificate of such
accounting firm stating that in the course of its regular audit of
the business of Newco, Holdings and the Borrower, which audit was
conducted in accordance with generally accepted auditing standards,
such accounting firm has obtained no knowledge of any Default or
Event of Default which has occurred and is continuing or, if in the
opinion of such accounting firm such a Default or Event of Default
has occurred and is continuing, a statement as to the nature
thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available
and in any event within 45 days after the close of each of the first
three quarterly accounting periods in each fiscal year of Newco, a
copy of the SEC Form 10-Q filed by Newco with the SEC for such
quarterly period, or, if no such Form 10-Q was so filed by Newco with
respect to any such quarterly period, the consolidated balance sheet
of Newco and its subsidiaries, and whether or not such Form 10-Q was
filed, of each of Holdings and its Subsidiaries and the Borrower and
its Subsidiaries, as at the end of such quarterly period and the
related consolidated statements of operations for such quarterly
period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period and in each case setting forth
comparative consolidated figures as of the end of and for the related
periods in the prior fiscal year, all of which shall be certified by
an Authorized Officer of Newco, Holdings or the Borrower, as the case
may be, subject to changes resulting from audit and normal year-end
audit adjustments."; and
(iii) Holdings shall, within five Business Days after the date on
which Newco first owns all of such capital stock, cause Newco to furnish to
the Agent (x) counterparts of this Agreement executed on behalf of Newco
(or other appropriate documents making Newco a party hereto), (y) a
certificate of the Secretary or any Assistant Secretary of Newco as to the
matters set forth in Section 4A.04(a) of this Agreement with respect to
Newco and as to the incumbency and signatures of the Authorized Officers of
Newco, together with a letter from CT Corporation System with respect to
Newco, substantially in the form of Exhibit E hereto and (z) an opinion
from Douglas M. Steenland, Esq., Senior Vice President, General Counsel and
Secretary of Newco, which opinion shall be substantially in the form of
Exhibit D-1 hereto (except that references therein to "Holdings" shall be
references to "Newco"); the failure of Holdings to comply with the
foregoing provisions of this Section 11.18(iii) shall be an Event of
Default under and for all purposes of this Agreement.
SECTION 12. GUARANTY.
12.01 THE GUARANTY. In order to induce the Banks to enter into
this Agreement and to extend credit hereunder and in recognition of the
direct benefits to be received by the
-64-
<PAGE>
Guarantors from the proceeds of the Revolving Loans, each Guarantor hereby
jointly and severally agrees with the Agent and the Banks as follows: each
Guarantor hereby jointly and severally, unconditionally and irrevocably
guarantees as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, by acceleration or otherwise, of any
and all indebtedness of the Borrower to each of the Banks and of the Agent.
If any or all of the indebtedness of the Borrower to the Banks or the Agent
becomes due and payable hereunder, each Guarantor unconditionally promises on
a joint and several basis to pay such indebtedness to the Banks or the Agent,
as the case may be, or order, on demand, together with any and all expenses
which may be incurred by the Agent or the Banks in collecting any of the
indebtedness. The word "indebtedness" is used in this Section 12 to mean any
and all advances, debts, obligations and liabilities of the Borrower arising
in connection with this Agreement and any other Credit Document, in each
case, heretofore, now, or hereafter made, incurred or created, whether
voluntarily or involuntarily, absolute or contingent, liquidated or
unliquidated, determined or undetermined, whether or not such indebtedness is
from time to time reduced, or extinguished and thereafter increased or
incurred, whether the Borrower may be liable individually or jointly with
others, whether or not recovery upon such indebtedness may be or hereafter
become barred by any statute of limitations, and whether or not such
indebtedness may be or hereafter become otherwise unenforceable.
12.02 BANKRUPTCY. Additionally, each Guarantor jointly and
severally, unconditionally and irrevocably guarantees the payment of any and all
indebtedness of the Borrower to each of the Banks and the Agent whether or not
due or payable by the Borrower upon the occurrence in respect of the Borrower of
any of the events specified in Section 8.05, and unconditionally promises to pay
such indebtedness to each of the Banks and the Agents, or order, on demand, in
lawful money of the United States.
12.03 NATURE OF LIABILITY. The liability of each Guarantor hereunder
is exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrower whether executed by each Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, or (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the indebtedness of the Borrower, or (c) any payment on or in
reduction of any such other guaranty or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, or (e)
any payment made to the Agent or the Banks on the indebtedness which the Agents
or such Bank repay the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
12.04 INDEPENDENT OBLIGATION. The obligations of each Guarantor
hereunder are independent of the obligations of any other guarantor or the
Borrower, and a separate action or actions may be brought and prosecuted against
each Guarantor whether or not action is brought against any other guarantor or
the Borrower and whether or not any other guarantor or the Borrower be joined in
any such action or actions. Each Guarantor waives, to the fullest extent
-65-
<PAGE>
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Borrower
or other circumstance which operates to toll any statute of limitations as to
the Borrower shall operate to toll the statute of limitations as to each
Guarantor.
12.05 AUTHORIZATION. Each Guarantor authorizes the Agent and the
Banks without notice or demand (except as shall be required by applicable
statute and which cannot be waived), and without affecting or impairing its
liability hereunder, from time to time to (a) renew, compromise, extend,
increase, accelerate or otherwise change the time for payment of, or
otherwise change the terms of, the indebtedness or any part thereof in
accordance with this Agreement, including any increase or decrease of the
rate of interest thereon, (b) take and hold security from any guarantor or
any other party for the payment of this guaranty or the indebtedness and
exchange, enforce, waive and release any such security, (c) apply such
security and direct the order or manner of sale thereof as the Agent and the
Banks in their discretion may determine and (d) release or substitute any one
or more endorsers, guarantors, the Borrower or other obligors.
12.06 RELIANCE. It is not necessary for the Agent or the Banks to
inquire into the capacity or powers of the Borrower or its Subsidiaries or
the officers, directors, partners or agents acting or purporting to act on
its behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
12.07 SUBORDINATION. Any indebtedness of the Borrower now or
hereafter held by either Guarantor is hereby subordinated to the indebtedness
of the Borrower to the Agent and the Banks; and such indebtedness of the
Borrower to such Guarantor, if the Agent, after an Event of Default has
occurred and is continuing, so requests, shall be collected, enforced and
received by such Guarantor as trustee for the Banks and be paid over to the
Banks and the Agent on account of the indebtedness of the Borrower to the
Banks and the Agent, but without affecting or impairing in any manner the
liability of such Guarantor under the other provisions of this Guaranty.
Prior to the transfer by either Guarantor of any note or negotiable
instrument evidencing any indebtedness of the Borrower to such Guarantor,
such Guarantor shall mark such note or negotiable instrument with a legend
that the same is subject to this subordination.
12.08 WAIVER. (a) Each Guarantor waives any right (except as shall
be required by applicable statute and which cannot be waived) to require the
Agent or the Banks to (a) proceed against the Borrower, any other guarantor or
any other party, (b) proceed against or exhaust any security held from the
Borrower, any other guarantor or any other party or (c) pursue any other remedy
in the Agent's or the Banks' power whatsoever. Each Guarantor waives any
defense based on or arising out of any defense of the Borrower, any other
guarantor or any other party other than payment in full of the indebtedness,
including, without limitation, any defense based on or arising out of the
disability of the Borrower, any other guarantor or any other party, or the
unenforceability of the indebtedness or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower other than payment in
full of the indebtedness. The Agent and the Banks may, at their election,
foreclose on any security held by the Agent or the Banks by one or more judicial
or nonjudicial sales (to the extent such sale is permitted by
-66-
<PAGE>
applicable law), or exercise any other right or remedy the Agent and the
Banks may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of each Guarantor
hereunder except to the extent the indebtedness has been paid. Each
Guarantor waives any defense arising out of any such election by the Agent
and the Banks, even though such election operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of such
Guarantor against the Borrower or any other party or any security. Until all
indebtedness of the Borrower to the Banks and to the Agent shall have been
paid in full, each Guarantor agrees that it will not exercise any right of
subrogation, and waives any right to enforce any remedy which the Agent and
the Banks now have or may hereafter have against the Borrower, and waives any
benefit of, and any right to participate in, any security now or hereafter
held by the Agent and the Banks.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing upon
the risk of nonpayment of the indebtedness and the nature, scope and extent
of the risks which each Guarantor assumes and incurs hereunder, and agrees
that the Agent and the Banks shall have no duty to advise either Guarantor of
information known to them regarding such circumstances or risks.
12.09 LIMITATION ON ENFORCEMENT. The Banks agree that this
Guaranty may be enforced on their behalf only by the action of the Agent
acting upon the instructions of the Required Banks and that no Bank shall
have any right individually to seek to enforce or to enforce this Guaranty,
it being understood and agreed that such rights and remedies may be exercised
by the Agent for the benefit of the Banks upon the terms of this Agreement.
-67-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date
first above written.
Address:
- --------
If by mail: NORTHWEST AIRLINES CORPORATION
5101 Northwest Drive
St. Paul, MN 55111
If by courier: By: /s/ Rolf S. Andresen
2700 Lone Oak Parkway -------------------------------------
Eagan, MN 55121 Title: Vice President - Finance and
Chief Accounting Officer
Tel: (612) 727-4883
Fax: (612) 726-0665 NWA INC.
Attn:
By: /s/ Rolf S. Andresen
--------------------------------------
Title: Vice President - Finance and
Chief Accounting Officer
NORTHWEST AIRLINES, INC.
By: /s/ Rolf S. Andresen
--------------------------------------
Title: Vice President - Finance and
Chief Accounting Officer
THE CHASE MANHATTAN BANK
Individually and as Agent
By: /s/ Matthew H. Massie
--------------------------------------
Title: Managing Director
<PAGE>
ABN AMRO BANK N.V.,
CHICAGO BRANCH
By: /s/ John E. Lewis
--------------------------------------
Title: Senior Vice President
By: /s/ Lukas Van Der Hoef
--------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION
By: /s/ Craig S. Munro
--------------------------------------
Title: Managing Director
BANK OF TOKYO - MITSUBISHI, LTD., CHICAGO
BRANCH
By: /s/ Hajime Watanabe
--------------------------------------
Title: Deputy General Manager
BANKERS TRUST COMPANY
By: /s/ Robert R. Telesca
--------------------------------------
Title: Assistant Vice President
CITICORP USA, INC.
By: /s/ Thomas Boyle
--------------------------------------
Title: Attorney in Fact
<PAGE>
CREDIT LYONNAIS, NEW YORK BRANCH
By: /s/ Phillipe Soustra
--------------------------------------
Title: Senior Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ Robert Finney
--------------------------------------
Title: Managing Director
By: /s/ Thomas G. Muoio
--------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/ Peter Chinnici
--------------------------------------
Title: Joint General Manager
LEHMAN COMMERCIAL PAPER INC.
By: /s/ William J. Gallagher
--------------------------------------
Title:
ROYAL BANK OF CANADA
By: /s/ Michael Madnick
--------------------------------------
Title: Senior Manager
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Mark Olman
--------------------------------------
Title: Vice-President
<PAGE>
SCHEDULE I
COMMITMENTS
<TABLE>
<CAPTION>
Revolving Loan
Bank Commitment
---- --------------
<S> <C>
The Chase Manhattan Bank 86,000,000
Bankers Trust Company 84,000,000
Citicorp Securities, Inc. 83,000,000
ABN AMRO Bank, N.V. 83,000,000
US Bank 83,000,000
Bank of America 83,000,000
Credit Lyonnais 83,000,000
Royal Bank of Canada 83,000,000
The Fuji Bank, Limited 83,000,000
Credit Suisse First Boston 83,000,000
Lehman Brothers 83,000,000
Bank of Tokyo Mitsubishi,Ltd. 83,000,000
Total 1,000,000,000
-------------
</TABLE>
<PAGE>
SCHEDULE II
BANK ADDRESSES
ABN AMRO N.V., Chicago Branch 135 South LaSalle Street
Chicago, Illinois 60603
Attn: Lukas Van Der Hoef
Tel: (312) 904-5221
Fax: (312) 606-8428
Copy To:
135 South LaSalle Street
Chicago, Illinois 60603
Attn: John Lewis
Tel: (312) 904-2946
Fax: (312) 606-8428
Bankers Trust Company 233 South Wacker Drive,
Suite 8400
Chicago, Illinois 60606
Attn: Jonathan O. Salkin
Tel: (312) 993-8102
Fax: (312) 993-8218
233 South Wacker Drive,
Suite 8400
Chicago, Illinois 60606
Attn: Linda Stahulak
Tel: (312) 993-8109
Fax: (312) 993-8114
<PAGE>
SCHEDULE II
Page 2
Citicorp USA, Inc. 399 Park Avenue
New York, New York 10043
Attn: John King
Tel: (212) 559-6413
Fax: (212) 793-3734
399 Park Avenue
New York, New York 10043
Attn: Tom Boyle
Tel: (212) 559-6149
Fax: (212) 793-6303
Copy To:
399 Park Avenue
New York, NY 10043
Attn: Portfolio Management
Tel: (212) 559-6413
Fax: (212) 793-3734
U.S. Bank National Association 601 Second Avenue South, 7th Floor
Minneapolis, MN 55402-4302
Attn: Mark Olman
Tel: (612) 973-1085
Fax: (612) 973-0825
Bank of America National Trust & 231 South LaSalle Street
Savings Association, A National Banking Chicago, IL 60697
Association Attn: Elizabeth Nolan
Tel: (312) 828-1292
Fax: (312) 828-1997
555 South Flower Street, 11th Floor
Los Angeles, CA 90071
Attn: Carolyn Simmons
Tel: (213) 228-2832
Fax: (213) 228-2756
Credit Lyonnais
New York Branch 1301 Avenue of the Americas
New York, New York 10019
Attn: Bertrand Cousin
<PAGE>
SCHEDULE II
Page 3
Tel: (212) 261-7363
Fax: (212) 261-7368
1301 Avenue of the Americas
New York, New York 10019-6002
Attn: Michael Vitiello
Tel: (212) 261-7051
Fax: (212) 459-3187
<PAGE>
SCHEDULE II
Page 4
Royal Bank of Canada New York Branch
Financial Square, 23rd Floor
32 Old Slip
New York, New York 10005-3531
Attn: Manager, Credit Admin.
Tel: (212) 428-6305
Fax: (212) 428-2372
Copy To:
One Liberty Plaza, 4th Floor
New York, New York 10006-1404
Attn: Kristin Jaffe, Senior Manager
Tel: (212) 428-6217
Fax: (212) 428-6459
The Fuji Bank, Limited 225 West Wacker Drive
Suite 2000
Chicago, Illinois 60606
Attn: James Fayen
Tel: (312) 621-0397
Fax: (312) 621-0539
Copy To:
225 West Wacker Drive
Suite 2000
Chicago, Illinois 60606
Attn: Lee Prewitt
Tel: (312) 419-3664
Fax: (312) 621-0539
The Bank of Tokyo-Mitsubishi, Ltd. 227 West Monroe Street
Chicago Branch Suite 2300
Chicago, Illinois 60606
Attn: Michael W. Kempel
Tel: (312) 696-4682
Fax: (312) 696-4535/4533
Copy To:
<PAGE>
SCHEDULE II
Page 5
227 West Monroe Street
Suite 2300
Chicago, Illinois 60606
Attn: Gus C. Browne II
Tel: (312) 696-4670
Fax: (312) 696-4535/4533
Credit Suisse First Boston 11 Madison Avenue,
19th Floor
New York, New York 10010
Attn: Robert Finney
Tel: (212) 325-9038
Fax: (212) 325-8319
Lehman Brothers 190 South LaSalle Street
Chicago, IL 60603
Attn: John Gramins
Tel: (312) 609-8245
Fax: (312) 609-8249
Copy To:
3 World Financial Center
New York, NY 10285-0900
Attn: Chris Ryan
Tel: (212) 526-6304
<PAGE>
SCHEDULE II
SUBSIDIARIES
(wholly-owned unless otherwise specified)
Northwest Airlines Corporation (Delaware corporation)
Newbridge Parent Corporation (Delaware corporation)
Newbridge Merger Corporation (Delaware corporation)
NWA Inc. (Delaware corporation)
Northwest Airlines, Inc. (Minnesota corporation)
NWA Fuel Services Corporation (Texas corporation)
Montana Enterprises, Inc. (Montana corporation)
Tomisato Shoji Hotel Business (Japanese corporation)
Republic Airlines, Inc. (Delaware corporation)*
Compass 315 LTD, Holding Company (U.K. corporation)
Tullion Limited (U.K. corporation)
Win-Win L.P. (Delaware limited partnership)*
NWA Worldclub, Inc. (Wisconsin corporation)
NWA Equity Holdings, Inc. (Texas corporation)
Wings Finance Company (Japanese corporation)
World Capital Management, Inc. (Minnesota corporation)
Northwest Aircraft Inc. (Delaware corporation)
Aircraft Foreign Sales, Inc. (U.S. Virgin Islands
corporation)
Northwest Aerospace Training Corporation (Delaware corporation)
MLT Inc. (Minnesota corporation)
NWA Retail Sales Inc. (Minnesota corporation)
NWA Aircraft Finance, Inc. (Delaware corporation)
Northwest Capital Funding Corp. (Delaware corporation)
Cardinal Insurance Company (Cayman) LTD. (Cayman Islands
corporation)
Northwest PARS Holdings, Inc. (Delaware corporation)
Northwest PARS, Inc. (Delaware corporation)
NWA Leasing Inc. (Minnesota corporation)
Express Airlines I, Inc.
Phoenix Airline Services, Inc.
- --------------------
* Inactive
** Northwest Airlines, Inc. is 99% limited partner.
<PAGE>
SCHEDULE IV
EXISTING INDEBTEDNESS *
[See Attached]
- --------------------
* Existing Credit Agreement not to appear.
<PAGE>
FIRST AMENDMENT
TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
May 29, 1998, by and among NORTHWEST AIRLINES CORPORATION, a Delaware
Corporation ("Holdings"), NWA INC., a Delaware corporation ("NWA"), NORTHWEST
AIRLINES, INC., a Minnesota corporation (the "Borrower"), the lenders party to
the Credit Agreement referred to below on the date hereof and immediately before
giving effect to this Amendment (the "Existing Banks"), THE CHASE MANHATTAN
BANK, as Agent (in such capacity, the "Agent"), and each of the lenders listed
on Schedule A hereto (the "New Banks"). All capitalized terms used herein and
not otherwise defined shall have the respective meanings provided such terms in
the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, Holdings, NWA, the Borrower, the Existing Banks and the Agent
are parties to a Credit Agreement, dated as of May 12, 1998 (the "Credit
Agreement"); and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
1. On the First Amendment Effective Date (as defined below), each
of the Existing Banks severally and not jointly hereby sells and assigns to
each of the New Banks without recourse and without representation or warranty
(other than as expressly provided herein), and each New Bank hereby purchases
and assumes from each of the Existing Banks, that interest in and to each of
such Existing Bank's rights and obligations in respect of the Total Revolving
Loan Commitment as of the date hereof which in the aggregate represents such
New Bank's PRO RATA share (for each such New Bank, its "Pro Rata Share") in
the Total Revolving Loan Commitment as set forth on such Schedule B hereto
(calculated after giving effect to this Amendment), and such Pro Rata Share
represents all of the outstanding rights and obligations under the Credit
Agreement that are being sold and assigned to each New Bank pursuant to this
Amendment. After giving effect to this Amendment, each Bank's Revolving Loan
Commitment will be as set forth on Schedule C hereto.
2. In accordance with the requirements of Section 11.04(b) of the
Credit Agreement, on the First Amendment Effective Date, (i) the Credit
Agreement shall be amended by deleting Schedule I thereto in its entirety and
by inserting in lieu thereof a new Schedule I in the form of Schedule C
hereto and (ii) the Borrower agrees that it will issue an appropriate
Revolving Note to each Bank in conformity with the requirements of Section
1.05 of the Credit Agreement.
<PAGE>
3. On and after the First Amendment Effective Date, Schedule II to
the Credit Agreement shall be amended by deleting such Schedule in its entirety
and inserting in lieu thereof a new Schedule II in the form of Schedule D
hereto.
4. Each Existing Bank (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Holdings or
any of its Subsidiaries or the performance or observance by Holdings or any of
its Subsidiaries of any of their obligations under the Credit Agreement or the
other Credit Documents to which they are a party or any other instrument or
document furnished pursuant thereto.
5. Each New Bank (i) confirms that it has received a copy of the
Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Amendment; (ii) agrees that it will, independently
and without reliance upon the Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Transferee under Section
13.04(b) of the Credit Agreement; (iv) appoints and authorizes the Agent and the
Collateral Agent to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Credit Documents as are
delegated to the Agent and the Collateral Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Bank; and (vi)
if it is organized under the laws of a jurisdiction outside of the United
States, represents and warrants that it has submitted the forms described in
Section 11.04(b) of the Credit Agreement.
6. Notwithstanding anything to the contrary in Section 11.17 of the
Credit Agreement, the Agent shall record the transfers contemplated hereby in
the Register.
7. In order to induce the Agent, the Existing Banks and the New
Banks to enter into this Amendment, each of Holdings, NWA and the Borrower
hereby represents and warrants that (x) no Default or Event of Default exists on
the First Amendment Effective Date both before and after giving effect to this
Amendment and (y) all of the representations and warranties contained in the
Credit Documents shall be true and correct in all material respects on the First
Amendment Effective Date both before and after giving effect to this Amendment
with the same effect as though such representations and warranties had been made
on and as of the
<PAGE>
First Amendment Effective Date (it being understood that any representation
or warranty made as of a specific date shall be true and correct in all
material respects as of such specific date).
8. This Amendment is limited precisely as written and shall not be
deemed to be a modification, acceptance or waiver of any other term, condition
or provision of the Credit Agreement, the other Credit Documents or any of the
instruments or agreements referred to therein.
9. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.
10. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
11. Subject to Section 12 of this Amendment, this Amendment shall
become effective on the date (the "First Amendment Effective Date") when
Holdings, NWA, the Borrower, the Agent, the Required Banks (before giving effect
to this Amendment), each Existing Bank and each New Bank shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of facsimile transmission) the same to the Agent at
the Notice Office.
12. Notwithstanding Section 11 of this Amendment, if for any reason
any New Bank shall not have signed a counterpart hereof and delivered the same
to the Agent at the Notice Office in each case on or prior to May 29, 1998,
then, if the Required Banks (before giving effect to this Amendment) agree, this
Amendment shall become effective notwithstanding such failure, provided that (x)
Schedule C shall be modified to delete any such New Bank and such New Bank's
relevant Pro Rata Share shall be reallocated among the Existing Banks in such
manner as such Existing Banks shall agree and (y) the signature pages of this
Amendment shall be deemed revised to delete such New Bank's name therefrom.
13. From and after the First Amendment Effective Date all references
in the Credit Agreement and each of the Credit Documents to the Credit Agreement
or any Credit Document shall be deemed to be references to such Credit Agreement
or such Credit Document as amended hereby.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this First Amendment as of the date
first above written.
NORTHWEST AIRLINES CORPORATION
By /s/ Joseph E. Francht
-----------------------------------------
Title: Senior Vice President - Finance
and Treasurer
NWA INC.
By /s/ Joseph E. Francht
-----------------------------------------
Title: Senior Vice President - Finance
and Treasurer
NORTHWEST AIRLINES, INC.
By /s/ Joseph E. Francht
-----------------------------------------
Title: Senior Vice President - Finance
and Treasurer
<PAGE>
EXISTING BANKS:
THE CHASE MANHATTAN BANK
Individually and as Agent
By Illegible
-------------------------------------
Title:
<PAGE>
ABN AMRO BANK N.V.,
CHICAGO BRANCH
By: /s/ Lukas Vander Hoef
-------------------------------------
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION
By: /s/ Craig S. Munro
-------------------------------------
Title: Managing Director
<PAGE>
BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO
BRANCH
By: /s/ Hajime Watanabe
-------------------------------------
Title: Deputy General Manager
<PAGE>
BANKERS TRUST COMPANY
By: /s/ Robert R. Telesca
-------------------------------------
Title: Assistant Vice President
<PAGE>
CITICORP USA, INC.
By: Illegible
-------------------------------------
Title:
<PAGE>
CREDIT LYONNAIS, NEW YORK BRANCH
By: /s/ Philippe Soustra
-------------------------------------
Title: Senior Vice President
<PAGE>
CREDIT SUISSE FIRST BOSTON
By: /s/ Robert N. Finney
-------------------------------------
Title: Managing Director
<PAGE>
THE FUJI BANK, LIMITED
By: /s/ Peter L Chinnici
-------------------------------------
Title: Joint General Manager
<PAGE>
LEHMAN COMMERCIAL PAPER INC.
By: Illegible
-------------------------------------
Title:
<PAGE>
ROYAL BANK OF CANADA
By: /s/ D. W. Naquin
-------------------------------------
Title: Senior Manager
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Mark A. Olmon
-------------------------------------
Title: Vice President
<PAGE>
NEW BANKS:
THE BANK OF NEW YORK
By: /s/ Richard A. Raffetto
-------------------------------------
Title: Vice President
<PAGE>
THE MITSUBISHI TRUST & BANKING CORPORATION,
NEW YORK BRANCH
By: /s/ Scott J. Paige
-------------------------------------
Title: Senior Vice President
<PAGE>
BANQUE NATIONALE DE PARIS
By: /s/ Arnaud Collin du Bocage
-------------------------------------
Title: Executive Vice President and
Branch Manager
<PAGE>
THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Ken-Ichiro Kobayashi
-------------------------------------
Title: Joint General Manager
<PAGE>
THE SUMITOMO TRUST & BANKING CO.,
LOS ANGELES AGENCY
By: /s/ Eleanor Chan
-------------------------------------
Title: Manager and Vice President
<PAGE>
PARIBAS
By: /s/ Chuck Irwin
-------------------------------------
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA, ATLANTA
AGENCY
By: /s/ P. C. H. Ashby
-------------------------------------
Title: Senior Manager Loan Operations
<PAGE>
FIRST COMMERCIAL BANK
By: /s/ Vincent T. C. Chen
-------------------------------------
Title: Senior Vice President and
General Manager
<PAGE>
THE TOKAI BANK, LIMITED
By: /s/ Shusui Toyoda
-------------------------------------
Title: General Manager
<PAGE>
SCHEDULE A
to
First
AMENDMENT
NEW BANKS
THE BANK OF NEW YORK
THE MITSUBISHI TRUST & BANKING CORPORATION, NEW YORK BRANCH
BANQUE NATIONALE DE PARIS
THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH
THE SUMITOMO TRUST & BANKING CO., LOS ANGELES AGENCY
PARIBAS
THE BANK OF NOVA SCOTIA, ATLANTA AGENCY
FIRST COMMERCIAL BANK
THE TOKAI BANK, LIMITED<PAGE>
<PAGE>
SCHEDULE B
to
First
AMENDMENT
RELEVANT PERCENTAGES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Revolving Loan Commitment
-------------------------
Bank Pro Rata Share
---- --------------
- --------------------------------------------------------------------------------
<S> <C>
The Chase Manhattan Bank 7.05833%
- --------------------------------------------------------------------------------
Bankers Trust Company 6.85833%
- --------------------------------------------------------------------------------
US Bank 6.75833%
- --------------------------------------------------------------------------------
ABN Amro Bank N.V., Chicago Branch 6.75833%
- --------------------------------------------------------------------------------
Bank Of America National Trust & 6.75833%
Savings Association
- --------------------------------------------------------------------------------
Citicorp USA, Inc. 6.75833%
- --------------------------------------------------------------------------------
Bank Of Tokyo-Mitsubishi, Ltd., 6.75833%
Chicago Branch
- --------------------------------------------------------------------------------
Credit Lyonnais 6.75833%
- --------------------------------------------------------------------------------
Credit Suisse First Boston 6.75833%
- --------------------------------------------------------------------------------
The Fuji Bank, Limited 6.75833%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lehman Brothers 6.75833%
- --------------------------------------------------------------------------------
Royal Bank of Canada 6.75833%
- --------------------------------------------------------------------------------
The Bank of New York 2.50000%
- --------------------------------------------------------------------------------
The Bank of Nova Scotia 2.50000%
- --------------------------------------------------------------------------------
Banque Nationale de Paris 2.50000%
- --------------------------------------------------------------------------------
The Mitsubishi Trust & Banking Corp. 2.50000%
- --------------------------------------------------------------------------------
The Sumitomo Bank, Ltd. 2.50000%
- --------------------------------------------------------------------------------
Banque Paribas 1.50000%
- --------------------------------------------------------------------------------
First Commercial Bank. 1.50000%
- --------------------------------------------------------------------------------
The Sumitomo Trust & Banking Co., 1.50000%
Ltd.
- --------------------------------------------------------------------------------
The Tokai Bank, Limited 1.50000%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE C
to
FIRST
AMENDMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Bank Revolving Loan Commitment
---- -------------------------
- --------------------------------------------------------------------------------
<S> <C>
The Chase Manhattan Bank 70,583,333.34
- --------------------------------------------------------------------------------
Bankers Trust Company 68,583,333.33
- --------------------------------------------------------------------------------
US Bank 67,583,333.33
- --------------------------------------------------------------------------------
ABN Amro Bank N.V., Chicago Branch 67,583,333.33
- --------------------------------------------------------------------------------
Bank Of America National Trust & 67,583,333.33
Savings Association
- --------------------------------------------------------------------------------
Citicorp USA, Inc. 67,583,333.33
- --------------------------------------------------------------------------------
Bank Of Tokyo-Mitsubishi, Ltd., 67,583,333.33
Chicago Branch
- --------------------------------------------------------------------------------
Credit Lyonnais 67,583,333.33
- --------------------------------------------------------------------------------
Credit Suisse First Boston 67,583,333.33
- --------------------------------------------------------------------------------
The Fuji Bank, Limited 67,583,333.33
- --------------------------------------------------------------------------------
Lehman Brothers 67,583,333.33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Royal Bank of Canada 67,583,333.33
- --------------------------------------------------------------------------------
The Bank of New York 25,000,000.00
- --------------------------------------------------------------------------------
The Bank of Nova Scotia 25,000,000.00
- --------------------------------------------------------------------------------
Banque Nationale de Paris 25,000,000.00
- --------------------------------------------------------------------------------
The Mitsubishi Trust & Banking Corp. 25,000,000.00
- --------------------------------------------------------------------------------
The Sumitomo Bank, Ltd. 25,000,000.00
- --------------------------------------------------------------------------------
Banque Paribas 15,000,000.00
- --------------------------------------------------------------------------------
First Commercial Bank. 15,000,000.00
- --------------------------------------------------------------------------------
The Sumitomo Trust & Banking Co., 15,000,000.00
Ltd.
- --------------------------------------------------------------------------------
The Tokai Bank, Limited 15,000,000.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE D
to
FIRST
AMENDMENT
BANK ADDRESSES
--------------
ABN AMRO N.V., Chicago Branch 135 South LaSalle Street
Chicago, Illinois 60603
Attn: Lukas Van Der Hoef
Tel: (312) 904-5221
Fax: (312) 606-8428
Copy To:
135 South LaSalle Street
Chicago, Illinois 60603
Attn: John Lewis
Tel: (312) 904-2946
Fax: (312) 606-8428
Bank of America National Trust & 231 South LaSalle Street
Savings Association, A National Chicago, IL 60697
Banking Association Attn: Elizabeth Nolan
Tel: (312) 828-1292
Fax: (312) 828-1997
555 South Flower Street, 11th Floor
Los Angeles, CA 90071
Attn: Carolyn Simmons
Tel: (213) 228-2832
Fax: (213) 228-2756
The Bank of New York One Wall Street, 19th Floor
New York, NY 10286
Attn: Richard Raffeto
Tel: (212) 635-8044
Fax: (212) 635-1208
<PAGE>
The Bank of Nova Scotia, Atlanta 181 West Madison Street, Ste. 3700
Agency Chicago, IL 60602
Attn: Sarish Patel
Tel: (312) 201-4188
Fax: (312) 201-4108
The Bank of Tokyo-Mitsubishi, Ltd. 227 West Monroe Street
Chicago Branch Suite 2300
Chicago, Illinois 60606
Attn: Michael W. Kempel
Tel: (312) 696-4682
Fax: (312) 696-4535/4533
Copy To:
227 West Monroe Street
Suite 2300
Chicago, Illinois 60606
Attn: Gus C. Browne II
Tel: (312) 696-4670
Fax: (312) 696-4535/4533
Bankers Trust Company 233 South Wacker Drive,
Suite 8400
Chicago, Illinois 60606
Attn: Jonathan O. Salkin
Tel: (312) 993-8102
Fax: (312) 993-8218
233 South Wacker Drive,
Suite 8400
Chicago, Illinois 60606
Attn: Linda Stahulak
Tel: (312) 993-8109
Fax: (312) 993-8114
Banque Nationale De Paris 209 South LaSalle Street, Ste. 500
Chicago, IL 60604
Attn: Jo Ellen Bender
Tel: (312) 977-2225
Fax: (312) 977-1380
<PAGE>
Chase Securities Inc. Global Syndicated Finance - 5th Floor
270 Park Avenue
New York, NY 10017
Attn: Marc S. Allinson
Tel: (212) 270-3658
Fax: (212) 270-1063
270 Park Avenue
New York, NY 10017
Attn: Deborah Davey
Tel: (212) 270-9316
Fax: (212) 270-1063
270 Park Avenue
New York, NY 10017
Attn: John Kuhn
Tel: (212) 270-1656
Fax: 212) 270-1063
270 Park Avenue
New York, NY 10017
Attn: Adam Reinmann
Tel: (212) 270-9801
Fax: (212) 270-1063
Aerospace Group - 38th Floor
270 Park Avenue
New York, NY 10017
Attn: Mathis Shinnick
Tel: (212) 270-3622
Fax: (212) 270-6040
270 Park Avenue
New York, NY 10017
Attn: Mathew H. Massie
Tel: (212) 270-5432
Fax: (212) 270-5100
Legal Dept. - 39th Floor
270 Park Avenue
New York, NY 10017
Attn: Jacqueline F. Stein
Tel: (212) 270-6505
Fax: (212) 270-2934
<PAGE>
Citicorp USA, Inc. 399 Park Avenue
New York, New York 10043
Attn: John King
Tel: (212) 559-6413
Fax: (212) 793-3734
399 Park Avenue
New York, New York 10043
Attn: Tom Boyle
Tel: (212) 559-6149
Fax: (212) 793-6303
Copy To:
399 Park Avenue
New York, NY 10043
Attn: Portfolio Management
Tel: (212) 559-6413
Fax: (212) 793-3734
Credit Lyonnais
New York Branch 1301 Avenue of the Americas
New York, New York 10019
Attn: Bertrand Cousin
Tel: (212) 261-7363
Fax: (212) 261-7368
1301 Avenue of the Americas
New York, New York 10019-6002
Attn: Michael Vitiello
Tel: (212) 261-7051
Fax: (212) 459-3187
Credit Suisse First Boston 11 Madison Avenue,
19th Floor
New York, New York 10010
Attn: Robert Finney
Tel: (212) 325-9038
Fax: (212) 325-8319
First Commercial Bank Two World Trade Center, Ste. 7868
New York, NY 10048
Attn: Jeffrey Wang
(212) 432-6590
(212) 432-7250
<PAGE>
The Fuji Bank, Limited 225 West Wacker Drive
Suite 2000
Chicago, Illinois 60606
Attn: James Fayen
Tel: (312) 621-0397
Fax: (312) 621-0539
Copy To:
225 West Wacker Drive
Suite 2000
Chicago, Illinois 60606
Attn: Lee Prewitt
Tel: (312) 419-3664
Fax: (312) 621-0539
Lehman Brothers 190 South LaSalle Street
Chicago, IL 60603
Attn: John Gramins
Tel: (312) 609-8245
Fax: (312) 609-8249
Copy To:
3 World Financial Center
New York, NY 10285-0900
Attn: Chris Ryan
Tel: (212) 526-6304
The Mitsubishi Trust & Banking
Corporation 520 Madison Avenue
New York, NY 10022
Attn: Scott Paige
Tel: (212) 891-8216
Fax: (212) 644-6825
Paribas 1200 Smith Street, Suite 3100
Houston, TX 77002
Attn: Chuck Irwin
Tel: (713) 659-4811
Fax: (713) 659-5234
<PAGE>
Royal Bank of Canada New York Branch
Financial Square, 23rd Floor
32 Old Slip
New York, New York 10005-3531
Attn: Manager, Credit Admin.
Tel: (212) 428-6305
Fax: (212) 428-2372
Copy To:
One Liberty Plaza, 4th Floor
New York, New York 10006-1404
Attn: Kristin Jaffe, Senior Manager
Tel: (212) 428-6217
Fax: (212) 428-6459
The Sumitomo Bank Limited,
Chicago Branch 233 South Wacker Drive
Suite 4800
Chicago, IL 60606-6448
Attn: Gary Rabishaw
Tel.: (312) 879-7697
Fax: (312) 876-6436
The Sumitomo Trust & Banking Co.,
Ltd., Los Angeles Agency 333 South Grand Street, Suite 5300
Los Angeles, CA 90071
Attn: Gary Rubishaw
Tel: (312) 879-7697
Fax: (312) 876-6436
Tokai Bank Ltd. 181 Madison Street, Suite 3600
Chicago, IL 60602
Attn: Hideyuki Lio
Tel: (312) 456-3441
Fax: (312) 977-0003
U.S. Bank National Association 601 Second Avenue South, 7th Floor
Minneapolis, MN 55402-4302
Attn: Mark Olman
Tel: (612) 973-1085
Fax: (612) 973-0825
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT
DATED AS OF MAY 12, 1998
BETWEEN
NORTHWEST AIRLINES, INC.
AND
THE CHASE MANHATTAN BANK,
AS COLLATERAL AGENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
AIRCRAFT MORTGAGE AND SECURITY AGREEMENT
This AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (as amended, modified
or supplemented from time to time, the "Mortgage"), dated as of May 12, 1998,
between NORTHWEST AIRLINES, INC., a Minnesota corporation (together with its
successors and permitted assigns, the "COMPANY"), and THE CHASE MANHATTAN
BANK, as Collateral Agent (the "COLLATERAL AGENT"), for the benefit of the
Banks and the Agent under, and any other lender from time to time party to
the Credit Agreement hereinafter referred to (the Banks, the Agent and the
other lenders, if any, are hereinafter called the "SECURED CREDITORS");
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth in
the Credit Agreement, the Banks have agreed to make available the Loans to
the Company provided for therein;
WHEREAS, it is a condition precedent to the above-described
extension of credit that the Company shall have executed and delivered to the
Collateral Agent this Mortgage; and
WHEREAS, the Company desires to execute the Mortgage to satisfy the
condition described in the preceding paragraph.
NOW, THEREFORE, to secure the due and punctual payment of the
Obligations, it is hereby covenanted and agreed by and between the parties
hereto as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. CERTAIN DEFINITIONS.
Unless otherwise defined herein or the context requires otherwise,
capitalized terms used herein shall have the meanings set forth in APPENDIX A
hereto.
ARTICLE 2.
SECURITY
Section 2.1. GRANT OF SECURITY INTEREST.
The Company, in order to secure (i) the prompt payment when due of
all the Obligations and (ii) the performance and observance by the Company
and the Guarantors of all agreements, covenants and provisions contained
herein and in the other Credit Documents, and in consideration of the
premises and of the covenants herein contained, and of other good and
<PAGE>
valuable consideration, the receipt of which is hereby acknowledged, has
granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged
and confirmed and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm unto the Collateral Agent, its permitted
successors and assigns, for the security and benefit of the Secured
Creditors, forever, a continuing security interest in, and mortgage lien on,
all estate, right, title and interest of the Company in, to and under the
following described properties, rights, interests and privileges (which,
collectively, including all property hereafter specifically subjected to the
lien of this Mortgage by any instrument supplemental hereto, are referred to
herein as the "COLLATERAL"):
(a) the Airframes described in Schedule I hereto and the Engines
described in Schedule II hereto, each of which Engines is a 750 or more
rated take-off horsepower or the equivalent of such horsepower, and in
the case of such Engines, whether or not such Engines shall be installed
in or attached to the Airframes described in this clause or any other
airframes, together with all accessories, equipment, parts and
appurtenances appertaining or attached to the Airframes (other than jet
aircraft engines not constituting Engines) or the Engines, whether now
owned or hereafter acquired, and all substitutions, renewals and
replacements of and additions, improvements, accessions and
accumulations to the Airframe and Engines and all records, logs and
other documents at any time maintained with respect to the foregoing;
(b) the Contract Rights;
(c) all proceeds with respect to the requisition of title to or
use of the Aircraft, or any part thereof, all insurance proceeds with
respect to the Aircraft or any part thereof, and any other proceeds of
any kind resulting from an Event of Loss, but excluding any insurance
maintained by the Company and not required under Section 3.6 hereof;
(d) all moneys and securities now or hereafter paid or deposited
or required to be paid or deposited to or with the Collateral Agent in
pledge hereunder and held or required to be held by the Collateral Agent
hereunder;
(e) any and all property that may, from time to time hereafter, in
accordance with the provisions of this Mortgage, by delivery or by
Mortgage Supplement or by other writing of any kind, for the purposes
hereof be in any way subjected to the lien and security interest hereof
or be expressly conveyed, mortgaged, assigned, transferred, deposited,
in which a security interest may be granted by the Company and/or
pledged by the Company, or by any Person authorized to so do on its
behalf or with its consent, to and with the Collateral Agent, who is
hereby authorized to receive the same at any and all times as and for
additional security hereunder; and
(f) all proceeds of the foregoing.
PROVIDED, HOWEVER, that notwithstanding any of the foregoing
provisions of this Section 2.1, so long as no Event of Default shall have
occurred and be continuing, (i) the Company shall have the right, to the
exclusion of the Collateral Agent, to quiet enjoyment of the
-2-
<PAGE>
Airframe and Engines, and to possess, use, retain and control the Airframe
and Engines and all revenues, income and profits derived therefrom and (ii)
the Collateral Agent, acting on behalf of the Secured Creditors, (A) shall
not, through it own actions or inactions, interfere with, or suffer to exist
with respect to any Aircraft any Lien attributable to the Collateral Agent
which might interfere with, the Company's (or any Lessee's) continued
possession, use and operation of, and quiet enjoyment (including, without
limitation, administrative quiet enjoyment) of, the Aircraft during the term
of this Mortgage in accordance with the terms of the Credit Documents so long
as no Event of Default shall have occurred and be continuing, (B) shall not
suffer to exist a default in any of its obligations pursuant to this Mortgage
that does not correspond to or result from an Event of Default or Default and
(C) neither the Collateral Agent nor any Secured Creditor shall assign this
Mortgage for security purposes without the prior written consent of the
Company, which may be granted or withheld in its sole discretion (such
consent, if granted, to be conveyed by the Company in writing).
TO HAVE AND TO HOLD the Collateral unto the Collateral Agent, its
permitted successors and assigns, forever, upon the terms herein set forth,
in trust for the benefit, security and protection of the Secured Creditors,
without any priority of any one Secured Creditor over any other, and for the
uses and purposes and subject to the terms and provisions set forth in this
Mortgage.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Company and the Guarantors shall remain liable
under each of the Credit Documents to which they are party to perform all of
the obligations assumed by them thereunder, all in accordance with and
pursuant to the terms and provisions thereof, and neither the Agent, the
Collateral Agent nor the Banks shall have any obligation or liability under
any of the Credit Documents to which the Company or the Guarantors is a party
by reason of or arising out of the assignment hereunder, nor shall the Agent,
the Collateral Agent or the Banks be required or obligated in any manner to
perform or fulfill any obligations of the Company or the Guarantors under any
of the Credit Documents to which the Company or the Guarantors is a party,
or, except as herein expressly provided, to make any payment, or to make any
inquiry as to the nature or sufficiency of any payment received by it, or
present or file any claim, or take any action to collect or enforce the
payment of any amounts which may have been assigned to it or to which it may
entitled at any time or times.
The Company does hereby irrevocably constitute and appoint the
Collateral Agent the true and lawful attorney of the Company (which
appointment is coupled with an interest) with full power (in the name of the
Company or otherwise) to ask, require, demand, receive, compound and give
acquittance for any and all moneys and claims for moneys (in each case
including insurance and requisition proceeds) and all other property which
now or hereafter constitutes part of the Collateral, to endorse any checks or
other instruments or orders in connection therewith and to file any claims or
to take any action or to institute any proceeding which the Collateral Agent
may deem to be necessary or advisable in the premises; PROVIDED that the
Collateral Agent shall not exercise any such rights except upon the
occurrence and during the continuance of an Event of Default.
-3-
<PAGE>
The Company agrees that at any time and from time to time, upon the
written request of the Collateral Agent, the Company will promptly and duly
execute and deliver or cause to be duly executed and delivered any and all
such further instruments and documents as the Collateral Agent may reasonably
deem desirable in obtaining the full benefits of the assignment hereunder and
of the rights and powers herein granted.
The Company does hereby warrant and represent that it has not
assigned or pledged, and hereby covenants that it will not assign or pledge,
so long as the assignment hereunder shall remain in effect, any of its right,
title or interest hereby assigned, to anyone other than the Collateral Agent.
ARTICLE 3.
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.1. GENERAL.
The Company represents, warrants and covenants, which representations,
warranties and covenants shall survive execution and delivery of this Mortgage,
as follows:
(a) NECESSARY FILINGS.
All filings, registrations and recordings necessary to create,
preserve, protect and perfect the security interest granted by the Company to
the Collateral Agent hereby in respect of the Collateral have been
accomplished and the security interest granted to the Collateral Agent
pursuant to this Mortgage in and to the Collateral constitutes a perfected
security interest therein prior to the rights of all other Persons therein
and subject to no other Liens (other than Permitted Liens) and is entitled to
all the rights, priorities and benefits afforded by the Federal Aviation Act
and other relevant law as enacted in any relevant jurisdiction to perfected
security interests.
(b) NO LIENS.
The Company is, and as to Collateral acquired by it from time to
time after the date hereof the Company will be, the owner of all Collateral
free from any Lien, security interest, encumbrance or other right, title or
interest of any Person (other than Permitted Liens), and the Company shall
defend the Collateral against all claims and demands of all Persons (other
than Persons claiming by, through or under the Collateral Agent) at any time
claiming the same or any interest therein adverse to the Collateral Agent.
(c) OTHER FINANCING STATEMENTS.
There is no financing statement (or similar statement or instrument
of registration under the law of any jurisdiction) covering or purporting to
cover any interest of any kind in the Collateral (other than Permitted
Liens), and so long as the Total Loan Commitment has not been terminated or
any Note remains outstanding or any of the Obligations remain unpaid, the
Company will not execute or authorize to be filed in any public office any
financing statement (or
-4-
<PAGE>
similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security
interests granted hereby by the Company.
(d) CHIEF EXECUTIVE OFFICE; RECORDS.
The chief executive office of the Company is located at 2700 Lone
Oak Parkway, Eagan, Minnesota 55121. The Company will not move its chief
executive office except to such new location as the Company may establish in
accordance with the last sentence of this Section 3.1(d). The Company shall
not establish a new location for such office until (i) it shall have given to
the Collateral Agent not less than 30 days' prior written notice of its
intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Collateral Agent may
request, (ii) with respect to such new location, it shall have taken all
action, satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted
hereby at all times fully perfected and in full force and effect, (iii) at
the request of the Collateral Agent, it shall have furnished an opinion of
counsel acceptable to the Collateral Agent to the effect that all financing
or continuation statements and amendments or supplements thereto have been
filed in the appropriate filing office or offices, and (iv) the Collateral
Agent shall have received evidence that all other actions (including, without
limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and
maintain the perfection and priority of) the security interest granted hereby.
(e) RECOURSE.
This Mortgage is made with full recourse to the Company and
pursuant to and upon all the warranties, representations, covenants and
agreements on the part of the Company contained herein, in the other Credit
Documents and otherwise in writing in connection herewith or therewith.
-5-
<PAGE>
Section 3.2. POSSESSION, OPERATION AND USE, MAINTENANCE AND
REGISTRATION.
(a) POSSESSION.
The Company shall not, without the prior written consent of the
Collateral Agent, lease or otherwise in any manner deliver, transfer or
relinquish possession of any Airframe, Engine or Part, install or permit any
Engine to be installed in any airframe other than the Airframes or enter into
any Wet Lease; PROVIDED that so long as no Default of the type referred to in
Sections 8.01 or 8.05 of the Credit Agreement or Event of Default shall have
occurred and be continuing at the time of such lease, delivery, transfer or
relinquishment of possession or installation or such Wet Lease, so long as
the action to be taken shall not deprive the Collateral Agent of the first
priority Lien (subject to Permitted Liens) of this Mortgage on the Collateral
and so long as the Company (or any Lessee) shall comply with the provisions
of Sections 3.2(c) and 3.6 hereof, the Company may, without the prior written
consent of the Collateral Agent:
(i) subject any Airframe or Engine or engines installed on an
Airframe to normal interchange agreements or any Engine to normal
pooling or similar arrangements, in each case customary in the airline
industry and entered into by the Company (or any Lessee) in the ordinary
course of its business; PROVIDED that (A) no such agreement or
arrangement contemplates or requires the transfer of title to any
Airframe, (B) if the Company's title to any Engine shall be divested
under any such agreement or arrangement, such divestiture shall be
deemed to be an Event of Loss with respect to such Engine and the
Company shall (or shall cause Lessee to) comply with Section 3.4(e)
hereof in respect thereof, and (C) any interchange agreement to which
the Airframes may be subject shall be with a U.S. Air Carrier or a
Foreign Air Carrier;
(ii) deliver possession of any Airframe or Engine to the
manufacturer thereof (or for delivery thereto) or to any organization
(or for delivery thereto) for testing, service, repair, maintenance or
overhaul work on such Airframe or Engine or any part thereof or for
alterations or modifications in or additions to such Airframe or Engine
to the extent required or permitted by the terms of Section 3.4(d)
hereof;
(iii) install any Engine on an airframe which is owned by the
Company (or any Lessee) free and clear of all Liens, except: (A)
Permitted Liens and those which apply only to the engines (other than
Engines), appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such
airframe (but not to the airframe as an entirety), (B) the rights of
third parties under interchange agreements which would be permitted
under clause (i) above PROVIDED that the Company's title to any such
Engine and the first priority Lien of this Mortgage shall not be
divested or impaired as a result thereof and (C) mortgage liens or other
security interests, PROVIDED that (as regards this subclause (C)) such
mortgage liens or other security interests effectively provide that such
Engine shall not become subject to such mortgage or security interest,
notwithstanding the installation thereof on such airframe;
(iv) install any Engine on an airframe which is leased to the
Company (or any Lessee) or purchased by the Company (or any Lessee)
subject to a conditional sale or
-6-
<PAGE>
other security agreement, PROVIDED that (x) such airframe is free and
clear of all Liens, except: (A) the rights of the parties to the lease
or conditional sale or other security agreement covering such airframe,
or their assignees, and (B) Liens of the type permitted by clause (iii)
of this Section 3.2(a) and (y) such lease, conditional sale or other
security agreement effectively provides that such Engine shall not
become subject to the lien of such lease, conditional sale or other
security agreement, notwithstanding the installation thereof on such
airframe;
(v) install any Engine on an airframe owned by the Company (or
any Lessee), leased to the Company (or any Lessee) or purchased by the
Company (or any Lessee) which is subject to a conditional sale or other
security agreement under circumstances where neither clause (iii) nor
clause (iv) of this Section 3.2(a) is applicable, PROVIDED that such
installation shall be deemed an Event of Loss with respect to such
Engine and that the Company shall (or shall cause any Lessee to) comply
with Section 3.4(e) hereof in respect thereof, the Collateral Agent not
intending hereby to waive any right or interest it may have to or in
such Engine under applicable law until compliance by the Company with
such Section 3.4(e);
(vi) to the extent permitted by Section 3.4(c) hereof, subject
any appliances, Parts or other equipment owned by the Company and
removed from any Airframe or Engine to any pooling arrangement referred
to in such Section;
(vii) subject (or permit any Lessee to subject) any Airframe or
Engine to the Civil Reserve Air Fleet Program and transfer (or permit
any Lessee to transfer) possession of any Airframe or Engine to the
United States of America or any instrumentality or agency thereof
pursuant to the Civil Reserve Air Fleet Program, so long as the Company
(or any Lessee) shall (A) promptly notify the Collateral Agent upon
subjecting such Airframe or Engine to the Civil Reserve Air Fleet
Program in any contract year and provide the Collateral Agent with the
name and address of the Contracting Office Representative for the Air
Mobility Command of the United States Air Force to whom notice must be
given pursuant to Section 4.2 hereof, and (B) promptly notify the
Collateral Agent upon transferring possession of the Airframe or any
Engine to the United States of America or any agency or instrumentality
thereof pursuant to such program;
(viii) enter into a Wet Lease for any Airframe or engines then
installed thereon with any third party, PROVIDED that if the Company (or
any Lessee) shall enter into any Wet Lease for a period of more than one
year (including renewal options) the Company shall provide to the
Collateral Agent written notice of such Wet Lease (such notice to be
given prior to entering into such Wet Lease, if practicable, but in any
event promptly after entering into such Wet Lease);
(ix) transfer possession of any Airframe or Engine to the United
States of America or any instrumentality or agency thereof pursuant to a
contract, a copy of which shall be provided to the Collateral Agent; or
-7-
<PAGE>
(x) the Company may, at any time, enter into any lease of any
Airframe or Engine or with (A) a U.S. Air Carrier, (B) any Person
approved in writing by the Collateral Agent (with the approval of the
Required Banks), (C) any Permitted Lessee; or (D) any airline alliance
partner of the Company that otherwise meets the requirement of (A), (B)
or (C) above or has been previously approved in writing by the
Collateral Agent, in any such case, if (1) the lessee under such lease
is not subject to a proceeding or final order under applicable
bankruptcy, insolvency or reorganization laws on the date such lease is
entered into, (2) in the event that the lessee under such lease is a
Foreign Air Carrier (other than a Foreign Air Carrier principally based
in Taiwan), the United States maintains diplomatic relations with the
country in which such Foreign Air Carrier is principally based at the
time such lease is entered into (or, in the case of a lease to a lessee
principally based in Taiwan, maintains diplomatic relations at least as
good as those in effect on the Effective Date) and (3) in the event that
the lessee under such lease is a Foreign Air Carrier, the Collateral
Agent shall receive at the time such lease is entered into an opinion of
counsel (in form and substance reasonably satisfactory to the Collateral
Agent) to the Company to the effect that (I) the terms of the proposed
lease will be legal, valid, binding and (subject to customary exceptions
in foreign opinions generally) enforceable against the proposed lessee
in the country in which the proposed lessee is principally based, (II)
there exist no possessory rights in favor of the lessee under such lease
under the laws of such lessee's country of domicile that would, upon
bankruptcy or insolvency of or other default by the Company and assuming
at such time such lessee is not insolvent or bankrupt, prevent the
return or repossession of the Aircraft in accordance with the terms of
this Mortgage, (III) the laws of such lessee's country of domicile
require fair compensation by the government of such jurisdiction payable
in currency freely convertible into Dollars for the loss of use of the
Aircraft in the event of the requisition by such government of such use,
and (IV) the laws of such lessee's country of domicile would give
recognition to the Company's title to the Aircraft, to the registry of
the Aircraft in the name of the Company (or the proposed lessee, as
"lessee", as appropriate), and to the Lien of this Mortgage.
The rights of any Lessee or other transferee who receives
possession by reason of a transfer permitted by this Section 3.2(a) (other
than the transfer of an Engine which is deemed an Event of Loss) shall be
effectively subject and subordinate to, and any lease permitted by this
Section 3.2(a) shall be expressly subject and subordinate to, all the terms
of this Mortgage and to the Lien of this Mortgage, including, without
limitation, the covenants contained in this Section 3.2 and the Collateral
Agent's rights to foreclosure and possession pursuant to Section 4.2 hereof
and to avoid such lease upon such repossession, and the Company shall remain
primarily liable hereunder for the performance of all of the terms of this
Mortgage to the same extent as if such lease or transfer had not occurred,
and, except as otherwise provided herein, the terms of any such lease shall
not permit any Lessee to take any action not permitted to be taken by the
Company in this Mortgage with respect to the Aircraft. No pooling agreement,
lease or other relinquishment of possession of any Airframe or Engine, or Wet
Lease shall in any way discharge or diminish any of the Company's obligations
to the Collateral Agent hereunder or constitute a waiver of the Collateral
Agent's rights or remedies hereunder. Any lease permitted under this Section
3.2(a) shall expressly prohibit any further sublease by the Lessee. The
-8-
<PAGE>
Collateral Agent agrees, for the benefit of the Company (and any Lessee) and
for the benefit of any mortgagee or other holder of a security interest in
any engine (other than an Engine) owned by the Company (or any Lessee), any
lessor of any engine (other than an Engine) leased to the Company (or any
Lessee) and any conditional vendor of any engine (other than an Engine)
purchased by the Company (or any Lessee) subject to a conditional sale
agreement or any other security agreement, that no interest shall be created
hereunder in any engine so owned, leased or purchased and that neither the
Collateral Agent nor its successors or assigns will acquire or claim, as
against the Company (or any Lessee) or any such mortgagee, lessor or
conditional vendor or other holder of a security interest or any successor or
assignee of any thereof, any right, title or interest in such engine as the
result of such engine being installed on the Airframes; PROVIDED, HOWEVER,
that such agreement of the Collateral Agent shall not be for the benefit of
any lessor or secured party of any airframe (other than the Airframes) leased
to the Company (or any Lessee) or purchased by the Company (or any Lessee)
subject to a conditional sale or other security agreement or for the benefit
of any mortgagee of or any other holder of a security interest in an airframe
owned by the Company (or any Lessee), unless such lessor, conditional vendor,
other secured party or mortgagee has expressly agreed (which agreement may be
contained in such lease, conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as
against the Collateral Agent, any right, title or interest in an Engine as a
result of such Engine being installed on such airframe. The Company shall
provide to the Collateral Agent (i) written notice of any lease hereunder
(such notice to be given not later than five days prior to entering into such
lease) and (ii) a copy of each lease which has a term of more than three
months.
(b) OPERATION AND USE.
The Company will not maintain, use, service, repair, overhaul or
operate the Aircraft (or permit any Lessee or other Person to maintain, use,
service, repair, overhaul or operate the Aircraft) in violation of any law or
any rule, regulation, order or certificate of any government or governmental
authority (domestic or foreign) having jurisdiction, or in violation of any
airworthiness certificate, license or registration relating to the Aircraft
issued by any such authority, except to the extent that the Company (or any
Lessee) is contesting in good faith the validity or application of any such
law, rule, regulation or order in any reasonable manner which does not
adversely affect the first priority Lien (subject to Permitted Liens) of this
Mortgage and does not involve any material risk of sale, forfeiture or loss
of the Aircraft.
The Company shall not operate the Aircraft, or permit any Lessee to
operate the Aircraft, in any area excluded from coverage by any insurance
required by the terms of Section 3.6 hereof; PROVIDED, HOWEVER, that the
failure of the Company to comply with the provisions of this sentence shall
not give rise to an Event of Default hereunder where such failure is
attributable to causes beyond the reasonable control of the Company (or any
Lessee) or to extraordinary circumstances involving an isolated occurrence or
series of incidents not in the ordinary course of the regular operations of
the Company (or any Lessee) and in each case the Company (or such Lessee, as
the case may be) is taking all reasonable steps to remedy such failure as
soon as is reasonably practicable.
-9-
<PAGE>
(c) MAINTENANCE.
The Company, at its own cost and expense, shall (or shall cause any
Lessee to) maintain, service, repair and overhaul (or cause to be maintained,
serviced, repaired and overhauled) the Aircraft so as to keep the Aircraft in
as good an operating condition as when initially subjected to the Lien
hereof, ordinary wear and tear excepted, and as may be necessary to enable
the applicable airworthiness certification for the Aircraft to be maintained
in good standing at all times (other than temporary periods of storage in
accordance with applicable regulations or during maintenance or modification
permitted hereunder) under the Federal Aviation Act, except when all Aircraft
powered by engines of the same type as those with which such Aircraft shall
be equipped at the time of such grounding and registered in the United States
have been grounded by the FAA (although such certification need actually be
maintained only during such period as an Aircraft is registered in the United
States), or the applicable laws of any other jurisdiction in which an
Aircraft may then be registered from time to time in accordance with the
terms hereof, utilizing, except during any period that a Lease is in effect,
the same manner and standard of maintenance, service, repair or overhaul used
by the Company with respect to similar aircraft operated by the Company in
similar circumstances and utilizing, during any period that a Lease is in
effect, the same manner and standard of maintenance, service, repair or
overhaul used by the Lessee with respect to similar aircraft operated by the
Lessee in similar circumstances; PROVIDED, HOWEVER, that in all circumstances
the Aircraft shall be maintained by the Company (or any Lessee) in accordance
with maintenance standards required by, or substantially equivalent to those
required by, the FAA or the central civil aviation authority of Canada,
France, Germany, Japan, the Netherlands or the United Kingdom. The Company
shall maintain or cause to be maintained all records, logs and other
materials required to be maintained in respect of the Aircraft by the FAA or
the applicable regulatory agency or body of any other jurisdiction in which
the Aircraft may then be registered.
(d) IDENTIFICATION OF COLLATERAL AGENT'S INTEREST.
On or prior to the date of the Credit Agreement, or as soon as
practicable thereafter, the Company agrees to fix and maintain (or cause to
be fixed and maintained), at its expense, in the cockpit of the Airframes
adjacent to the airworthiness certificate therein and on each Engine a
nameplate bearing the inscription:
"SUBJECT TO AN AIRCRAFT MORTGAGE AND SECURITY AGREEMENT IN FAVOR OF
THE CHASE MANHATTAN BANK, AS COLLATERAL AGENT"
(such nameplate to be replaced, if necessary, with a nameplate reflecting the
name of any successor Collateral Agent). Except as above provided, the
Company will not allow the name of any Person (other than the Company) to be
placed on the Airframes or the Engines as a designation that might be
interpreted as a claim of security interest or ownership; PROVIDED that
nothing herein contained shall prohibit the Company (or any Lessee) from
placing its customary colors and insignia on the Airframes or the Engines.
-10-
<PAGE>
(e) REGISTRATION.
The Company, at its own expense, will (or will cause any Lessee to)
cause the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Company under the Federal Aviation Act,
PROVIDED, HOWEVER, that the Company may elect to effect a change in the
registration of the Aircraft, at the Company's expense, with the prior
written consent of the Collateral Agent (which shall not be unreasonably
withheld).
Section 3.3. INSPECTION.
At reasonable times and, so long as no Event of Default shall have
occurred and be continuing, on at least 15 days prior written notice to the
Company, the Collateral Agent or its authorized representatives may (not more
than once every calendar year (unless an Event of Default has occurred and is
continuing)) inspect the Aircraft and inspect and make copies (at the
Collateral Agent's expense) of the books and records of the Company relating
to the maintenance of the Aircraft; any such inspection of the Aircraft shall
be limited to a visual, walk-around inspection and shall not include opening
any panels, bays or the like without the express consent of the Company;
PROVIDED that no exercise of such inspection rights shall interfere with the
normal operation or maintenance of the Aircraft by, or the business of, the
Company or any Lessee. The Collateral Agent shall not have any duty to make
any such inspection and shall not incur any liability or obligation by reason
of not making any such inspection.
Section 3.4. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS; SUBSTITUTION OF ENGINES.
(a) REPLACEMENT OF PARTS.
The Company, at its own cost and expense, will so long as any
Airframe or Engine is subject to the Lien of this Mortgage promptly replace
or cause to be replaced all Parts which may from time to time be incorporated
or installed in or attached to such Airframe or Engine and which may from
time to time become worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use for any reason
whatsoever, except as otherwise provided in Section 3.4(d) hereof or if any
Airframe or any Engine to which a Part relates has suffered an Event of Loss.
In addition, the Company (or any Lessee) may, at its own cost and expense,
remove in the ordinary course of maintenance, service, repair, overhaul or
testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use,
PROVIDED that the Company (or such Lessee), except as otherwise provided in
Section 3.4(d) hereof, will, at its own cost and expense, replace such Parts
as promptly as practicable. All replacement Parts shall be free and clear of
all Liens (except Permitted Liens and pooling arrangements to the extent
permitted by Section 3.4(c) and except in the case of replacement property
temporarily installed on an emergency basis) and shall be in as good
operating condition as, and shall have a value and utility at least equal to,
the Parts replaced assuming such replaced Parts were in the condition and
repair required to be maintained by the terms hereof.
-11-
<PAGE>
(b) PARTS.
Except as otherwise provided in Section 3.4(d) hereof, all Parts at
any time removed from any Airframe or Engine shall remain subject to the Lien of
this Mortgage, no matter where located, until such time as such Parts shall be
replaced by parts that have been incorporated or installed in or attached to
such Airframe or Engine and which meet the requirements for replacement parts
specified in Section 3.4(a) hereof. Immediately upon any replacement part
becoming incorporated or installed in or attached to any Airframe or Engine as
provided in Section 3.4(a) hereof, without further act (subject only to
Permitted Liens and any pooling arrangement to the extent permitted by Section
3.4(c) hereof and except in the case of replacement property temporarily
installed on an emergency basis), (i) title to such replacement Part shall be
owned by the Company, (ii) the replaced Part shall thereupon be free and clear
of all rights of the Collateral Agent and the replacement part shall be deemed a
Part hereunder; and (iii) such replacement Part shall become subject to the Lien
of this Mortgage and be deemed part of such Airframe or Engine, as the case may
be, for all purposes hereof to the same extent as the Parts originally
incorporated or installed in or attached to such Airframe or Engine.
(c) POOLING OF PARTS.
Any Part removed from any Airframe or Engine as provided in Section
3.4(a) hereof may be subjected by the Company (or any Lessee) to a normal
pooling arrangement customary in the airline industry of which the Company (or
any Lessee) is a party entered into in the ordinary course of the Company's (or
such Lessee's) business; PROVIDED that the Part replacing such removed Part
shall be incorporated or installed in or attached to such Airframe or Engine in
accordance with Sections 3.4(a) and 3.4(b) hereof as promptly as practicable
after the removal of such removed Part. In addition, any replacement part when
incorporated or installed in or attached to any Airframe or any Engine in
accordance with Section 3.4(a) hereof may be owned by any third party subject to
such a normal pooling arrangement, PROVIDED that the Company (or any Lessee), at
its expense, as promptly thereafter as practicable, either (i) causes such
replacement Part to become subject to the Lien of this Mortgage, free and clear
of all Liens except Permitted Liens (other than pooling arrangements), at which
time such temporary replacement Part shall become a Part or (ii) replaces such
replacement Part by incorporating or installing in or attaching to such Airframe
or Engine a further replacement Part which is subject to the Lien of this
Mortgage, free and clear of all Liens except Permitted Liens (other than pooling
arrangements).
(d) ALTERATIONS; MODIFICATIONS AND ADDITIONS.
The Company, at its own expense, will make (or cause to be made) such
alterations and modifications in and additions to any Airframe or Engine as may
be required to be made from time to time to meet the applicable standards of the
FAA or any applicable regulatory agency or body of any other jurisdiction in
which the Aircraft may then be registered as permitted by Section 3.2(e) hereof;
PROVIDED, HOWEVER, that the Company (or any Lessee) may, in good faith, contest
the validity or application of any such law, rule, regulation or order in any
reasonable manner which does not adversely affect the Collateral Agent. In
addition, the
-12-
<PAGE>
Company (or any Lessee), at its own expense, may from time to time
add further parts or accessories and make such alterations and modifications in
and additions to any Airframe or Engine as the Company (or such Lessee) may deem
desirable in the proper conduct of its business, including, without limitation,
removal of Parts which the Company (or such Lessee) has determined in its
reasonable judgment to be obsolete or no longer suitable or appropriate for use
on such Airframe or Engine (such parts, "OBSOLETE PARTS"); PROVIDED that no such
alteration, modification or addition shall materially diminish the value,
utility or remaining useful life of such Airframe or Engine below the value,
utility or remaining useful life thereof immediately prior to such alteration,
modification or addition, assuming such Airframe or Engine was then in the
condition required to be maintained by the terms of this Mortgage, except that
the value (but not the utility or remaining useful life) of any Airframe or
Engine may be reduced by the value of Obsolete Parts which have been removed so
long as the aggregate value of all Obsolete Parts that shall have been removed
and not replaced with respect to any Aircraft shall not exceed an amount equal
to 1.5% of the Appraised Value of such Aircraft. All Parts incorporated or
installed in or attached or added to the Airframes or the Engines as the result
of such alteration, modification or addition (the "ADDITIONAL PARTS") shall
become subject to the Lien of this Mortgage. Notwithstanding the foregoing
sentence, the Company (or any Lessee) may remove or suffer to be removed any
Additional Part, PROVIDED that such Additional Part (i) is in addition to, and
not in replacement of or in substitution for, any Part originally incorporated
or installed in or attached to such Airframe or Engine at the time of delivery
thereof hereunder or any Part in replacement of, or in substitution for, any
such Part, (ii) is not required to be incorporated or installed in or attached
or added to such Airframe or Engine pursuant to the terms of Section 3.2(a) or
(c) hereof or the first sentence of this Section 3.4(d), and (iii) can be
removed from such Airframe or Engine without diminishing or impairing the value,
utility or remaining useful life which such Airframe or Engine would have had at
the time of removal had such alteration, modification or addition not occurred,
assuming that such Airframe or Engine was in the condition and repair required
to be maintained by the terms hereof. Upon the removal by the Company (or any
Lessee) of any such part as above provided, such part shall, without further
act, be free and clear of all rights of the Collateral Agent and such Part shall
not be deemed a Part hereunder.
(e) SUBSTITUTION OF ENGINES.
The Company shall have the right at its option at any time, on at
least twenty (20) days' prior written notice to the Collateral Agent, to
substitute, and if an Event of Loss shall have occurred with respect to an
Engine (not involving an Event of Loss with respect to the Airframe to which
such Engine is attached with respect to which the Company makes the prepayment
required by Section 3.02(d) of the Credit Agreement or the substitution
permitted by Section 3.5(a) hereof), shall within thirty (30) days after the
occurrence of such Event of Loss substitute, a Replacement Engine of the same
make and model. In such event, immediately upon the effectiveness of such
substitution on the date set forth in such notice and without further act, (i)
the replaced Engine shall thereupon be free and clear of all rights of the
Collateral Agent and shall no longer be deemed an Engine hereunder, and (ii)
such Replacement Engine shall become subject to the Lien of this Mortgage, free
and clear of all Liens except Permitted Liens, and be deemed part of the
relevant Aircraft for all purposes hereof to the same extent as the Engine
originally installed on or attached to the Airframe. The Company's right to
make a replacement
-13-
<PAGE>
hereunder shall be subject to the fulfillment of the following conditions
precedent at the Company's sole cost and expense:
(i) The following documents shall have been duly authorized, executed
and delivered by the respective party or parties thereto and shall be in
full force and effect, and an executed counterpart of each shall have been
delivered to the Collateral Agent:
(A) a Mortgage Supplement covering the Replacement Engine (filed
for recording pursuant to the Federal Aviation Act, or the applicable
laws, rules and regulations of any other jurisdiction in which the
relevant Aircraft may then be registered as permitted hereby);
(B) an Officer's Certificate of the Company stating (i) that the
Replacement Engine is of at least equal value, utility and remaining
useful life as the Engine it replaces assuming such Engine had been
maintained in the condition required hereunder and (ii) each of the
conditions specified in this paragraph (e) with respect to such
Replacement Engine, and any comparable provisions of any Lease
permitted hereby to which such Engine is subject, have been satisfied;
(C) such Uniform Commercial Code financing statements covering
the Lien created by this Mortgage as deemed necessary or desirable by
counsel for the Collateral Agent to protect the security interests of
the Collateral Agent in the Replacement Engine; and
(D) a certificate, reasonably acceptable to the Collateral Agent
in form and substance, of an aircraft engineer or qualified
independent aircraft appraiser certifying, with respect to such
Replacement Engine, to the effect specified in Section 3.4(e)(i)(B)
hereof;
(ii) Upon request by the Collateral Agent, the Company shall furnish
the Collateral Agent with (A) an opinion addressed to the Collateral Agent,
reasonably satisfactory in form and substance to the Collateral Agent, of
the Company's counsel, which may be the Company's General Counsel or an
Associate General Counsel, to the effect that such documents reasonably
requested by the Collateral Agent are sufficient to cause such Replacement
Engine to be subject to the Lien of this Mortgage, (B) upon recordation, an
opinion of qualified FAA counsel, or if applicable, qualified counsel in
the jurisdiction of the relevant Aircraft's registration addressed to the
Collateral Agent, in either case satisfactory in form and substance to the
Collateral Agent as to the due recordation of the Mortgage Supplement as a
first priority Lien on the Replacement Engine, registration of the
ownership of the Replacement Engine and the freedom from Liens of record
(except Permitted Liens), and (C) such evidence of compliance with the
insurance provisions of Section 3.6 hereof with respect to such Replacement
Engine as the Collateral Agent may reasonably request; and
(iii) The Company shall have delivered to the Collateral Agent (A)
a copy of the bill of sale respecting such Replacement Engine or other
evidence of the Company's
-14-
<PAGE>
ownership of such Replacement Engine, reasonably satisfactory to the
Collateral Agent and (B) appropriate instruments assigning to the
Collateral Agent the benefits, if any, of all manufacturer's and vendor's
warranties generally available and permitted to be assigned by the Company
with respect to such Replacement Engine.
Upon such substitution, (x) the Collateral Agent shall execute and
deliver to the Company such documents and instruments, prepared at the Company's
expense, as the Company shall reasonably request, to evidence the release of
such replaced Engine from the Lien of this Mortgage; (y) the Collateral Agent
shall assign to the Company all claims it may have against any other Person
relating to an Event of Loss of such replaced Engine giving rise to such
substitution; and (z) the Company shall receive all insurance proceeds and
proceeds in respect of any Event of Loss of such replaced Engine giving rise to
such replacement to the extent not previously applied to the purchase price of
the Replacement Engine as provided in Sections 3.6(b)(I), second paragraph, and
3.5(d)(ii) hereof.
Section 3.5. LOSS, DESTRUCTION OR REQUISITION.
(a) EVENT OF LOSS WITH RESPECT TO AIRFRAMES.
Upon the occurrence of an Event of Loss with respect to an Airframe or
an Engine, the Company shall forthwith (and in any event within ten (10) days
after such occurrence) give the Collateral Agent written notice of such Event of
Loss. The Company shall, within twenty (20) days after the occurrence of an
Event of Loss with respect to such Airframe give the Collateral Agent written
notice of its election to perform one of the following options (it being agreed
that, if the Company shall not have given notice of such election within such 20
day period, the Company shall be required to make the prepayment required by
Section 3.02(d) of the Credit Agreement). The Company may elect either to (i)
make the prepayment required by Section 3.02(d) of the Credit Agreement or (ii)
cause to be subjected to the Lien of this Mortgage in replacement thereof not
later than the Business Day next succeeding the 30th day following the
occurrence of such Event of Loss, a Replacement Airframe (together with the same
number of Replacement Engines as the number of Engines, if any, installed on
such Airframe at the time such Event of Loss occurred), such Replacement
Airframe and Replacement Engines to be free and clear of all Liens except
Permitted Liens, to have a value, utility and remaining useful life at least
equal to, and to be of a comparable or improved model as, such Airframe and
Engines, if any, so replaced, as of the date of the Event of Loss (assuming such
Airframes and Engines were in the condition required by the terms hereof);
PROVIDED that if the Company does not perform its obligation to effect such
replacement in accordance with this Section 3.5(a) during the period of time
provided herein, then the Company shall make the prepayment required by Section
3.02(d) of the Credit Agreement on the Business Day next succeeding the 30th day
following the occurrence of such Event of Loss.
(b) EFFECT OF REPLACEMENT.
Upon the Company having provided a Replacement Aircraft as provided
for in Section 3.5(a) above, (x) the Lien of this Mortgage shall continue with
respect to such Replacement Aircraft as though no Event of Loss had occurred;
the Collateral Agent shall, at the
-15-
<PAGE>
cost and expense of the Company, release from the Lien of this Mortgage the
replaced Airframe and Engines or engines, if any, attached to such Airframe
upon the occurrence of the Event of Loss by executing and delivering to the
Company such documents and instruments, prepared at the Company's expense, as
the Company may reasonably request to evidence such release; and (y) the
Collateral Agent shall assign to the Company all claims it may have against
any other Person arising from the Event of Loss and the Company shall receive
all insurance proceeds and proceeds from any award in respect of
condemnation, confiscation, seizure or requisition, including any investment
interest thereon, to the extent not previously applied to the purchase price
of the Replacement Aircraft as provided in Sections 3.5(d)(i) and 3.6 hereof.
(c) CONDITIONS TO AIRFRAME REPLACEMENT.
(i) The Company's right to make a replacement under Section 3.5(a)
hereof shall be subject to the fulfillment, at the Company's sole cost and
expense and in addition to the conditions contained in such Section 3.5(a), of
the following conditions precedent:
(1) On the date that the Replacement Aircraft is delivered, which
date shall be not later than the Business Day next succeeding the 30th day
following the Event of Loss leading to such replacement (hereinafter
referred to as the "REPLACEMENT CLOSING DATE"), no Event of Default shall
have occurred and be continuing;
(2) On the Replacement Closing Date, the following documents shall
have been duly authorized, executed and delivered by the respective party
or parties thereto and shall be in full force and effect, and an executed
counterpart of each thereof shall have been delivered to the Collateral
Agent:
(A) a Mortgage Supplement covering the Replacement Aircraft
(filed for recording pursuant to the Federal Aviation Act, or the
applicable laws, rules and regulations of any other jurisdiction in
which the Aircraft to be replaced may then be registered as permitted
hereby);
(B) such Uniform Commercial Code financing statements covering
the Lien created by this Mortgage as deemed necessary or desirable by
counsel for the Collateral Agent to protect the security interests of
the Collateral Agent in the Replacement Aircraft; and
(C) a certificate, reasonably acceptable to the Collateral Agent
in form and substance, of an aircraft engineer or qualified
independent aircraft appraiser certifying (I) that the Replacement
Airframe is the same model as the Airframe to be replaced (or an
improved model, as the case may be) and has a value, utility and
remaining useful life at least equal to the Airframe to be replaced,
assuming such Airframe had been maintained in the condition required
hereunder and (II) with respect to the Replacement Engines
constituting part of such Replacement Aircraft to the effect specified
in Section 3.4(e)(i)(B) hereof.
-16-
<PAGE>
(3) On or before the Replacement Closing Date, the Collateral Agent
shall have received from the Company such documents and evidence with
respect to the Company as the Collateral Agent may reasonably request in
order to establish the consummation of the transactions contemplated by
this Section 3.5(c), evidence of taking of all necessary corporate action
in connection therewith and compliance with the conditions set forth in
this Section 3.5(c), in each case in form and substance reasonably
satisfactory to the Collateral Agent;
(4) The Collateral Agent shall have received evidence satisfactory to
the Collateral Agent as to the due compliance with Section 3.6 hereof with
respect to the Replacement Aircraft;
(5) On the Replacement Closing Date, (A) the Company shall cause the
Replacement Aircraft to be subject to the Lien of this Mortgage, free and
clear of Liens (other than Permitted Liens), (B) the Replacement Aircraft
shall have been duly certified by the FAA or the relevant body or agency of
the jurisdiction then applicable to the registration of the Airframe to be
replaced as to type and airworthiness in accordance with the terms of this
Mortgage, and the registration of the Replacement Aircraft in the name of
the Company (or any Lessee as lessee if the Aircraft to be replaced had
been so registered immediately prior to the occurrence of the Event of Loss
with respect thereto) shall have been duly made with the FAA or the
relevant body or agency of the jurisdiction then applicable to the
registration of the Airframe to be replaced and (C) the Collateral Agent
shall have received evidence satisfactory to it with respect to the matters
covered by this subparagraph (5);
(6) On the Replacement Closing Date, the following statements shall
be true and the Collateral Agent shall have received an Officer's
Certificate of the Company, dated the Replacement Closing Date, stating
that (A) the matters set forth in subparagraph (1) above are confirmed, (B)
no Event of Default will result from the Company acquiring its interest in
the Replacement Aircraft and (C) each of the conditions specified in this
paragraph (c) with respect to such Replacement Airframe, and any comparable
provisions of any lease permitted hereby to which such Airframe is subject,
have been satisfied;
(7) The Collateral Agent shall, at the expense of the Company, have
received (A) an opinion addressed to the Collateral Agent, reasonably
satisfactory in form and substance to the Collateral Agent, from
Cadwalader, Wickersham & Taft or other counsel selected by the Company and
reasonably satisfactory to the Collateral Agent to the effect that (i) the
Replacement Airframe and Replacement Engines, if any, has or have been made
subject to the Lien of this Mortgage and (ii) all required action has been
taken in order to maintain, and such action shall maintain, the
effectiveness and priority of the interests in the Collateral which the
Mortgage purports to create and (B) an opinion of qualified FAA counsel or,
if applicable, qualified local counsel in the jurisdiction where the
Aircraft to be replaced is registered, in either case addressed to the
Collateral Agent and in form and substance satisfactory to the Collateral
Agent, respecting the due recordation of the Mortgage Supplement as a first
priority Lien respecting such
-17-
<PAGE>
Replacement Aircraft, the registration of the ownership thereof and freedom
from Liens of record (other than Permitted Liens); and
(8) The Company shall have delivered to the Collateral Agent (A) a
copy of the original bill of sale respecting such Replacement Airframe and
Replacement Engines, if any, and (B) appropriate instruments assigning to
the Collateral Agent the benefits, if any, of all manufacturer's and
vendor's warranties generally available and permitted to be assigned by the
Company with respect to such Replacement Airframe and/or Replacement
Engine.
(d) NON-INSURANCE PAYMENTS RECEIVED ON ACCOUNT OF AN EVENT OF LOSS.
As between the Collateral Agent and the Company, any payments on
account of an Event of Loss (other than insurance proceeds or other payments the
application of which is provided for in Section 3.6 hereof, or elsewhere in this
Mortgage, as the case may be, or payments in respect of damage to the business
or property, of the Company) with respect to any Airframe, Engine or Part
received at any time by the Collateral Agent or by the Company from any
governmental authority or other Person will be applied as follows:
(i) if such payments are received with respect to an Event of Loss as
to any Aircraft, and the relevant Airframe or the relevant Airframe and
Engines or engines installed thereon are being replaced by the Company
pursuant to Section 3.5(a) hereof, such payments shall be paid over to, or
retained by, the Collateral Agent as security and upon completion of such
replacement (or upon the closing therefor) and compliance with the
provisions of Sections 3.5(a) and (c) with respect to the Event of Loss for
which such payments are made, paid over to or retained by the Company;
(ii) if such payments are received with respect to an Event of Loss to
an Engine or Part (not involving an Event of Loss as to an Airframe) that
has been or is being replaced by the Company pursuant to Section 3.4(e)
hereof, such payments shall be paid over to, or retained by, the Company;
and
(iii) if such payments are received with respect to an Event of
Loss as to an Aircraft, if the relevant Airframe or the relevant Airframe
and Engines or engines installed thereon has not or have not been and will
not be replaced as contemplated by Section 3.5(a) hereof, such payments
shall be applied to the prepayment required pursuant to Section 3.02(d) of
the Credit Agreement and the payment of any other Obligations then due and
payable and thereafter, the balance, if any, of such payment shall be
promptly paid over to, or retained by, the Company.
-18-
<PAGE>
(e) REQUISITION OF USE.
In the event of a requisition for use by any government, so long as it
does not constitute an Event of Loss, of any Airframe and the Engines or engines
installed on such Airframe so long as any Airframe or Engine is subject to the
Lien of this Mortgage, the Company shall promptly notify the Collateral Agent of
such requisition and all of the Company's obligations under this Mortgage shall
continue to the same extent as if such requisition had not occurred. So long as
no Event of Default shall have occurred and be continuing, any payments received
by the Collateral Agent or the Company from such government with respect to such
requisition of use shall be paid over to, or retained by, the Company. In the
event of an Event of Loss of an Engine resulting from the requisition for use by
a government of such Engine (but not an Airframe), the Company will replace such
Engine hereunder by complying with the terms of Section 3.4(e) hereof and any
payments received by the Collateral Agent or the Company from such government
with respect to such requisition shall be paid over to, or retained by, the
Company.
(f) APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT.
Any amount referred to in this Section 3.5 which is payable to the
Company (or any Lessee) shall not be paid to or retained by the Company (or such
Lessee), if at the time of such payment or retention an Event of Default shall
have occurred and be continuing, but shall be held by or paid over to the
Collateral Agent as security for the Obligations and, if the aggregate unpaid
principal amounts of the Notes shall be declared to be due and payable pursuant
to the Credit Agreement, applied against the Obligations as and when due. Upon
the earlier of (a) such time as there shall not be continuing any such Event of
Default or (b) the termination of this Mortgage in accordance with Section 8.1,
such amount, and any interest realized thereon pursuant to Section 6.1 hereof,
shall be paid over to the Company (or such Lessee) to the extent not previously
applied in accordance with the preceding sentence.
Section 3.6. INSURANCE.
(a) PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE.
(I) Except as provided in clause (II) of this Section 3.6(a), the
Company will carry or cause to be carried at its or any Lessee's expense (i)
aircraft public liability (including, without limitation, passenger legal
liability) (and including aircraft war risk and hijacking insurance, if and to
the extent the same is maintained by the Company (or any Lessee) with respect to
other aircraft owned or leased, and operated by the Company (or such Lessee) on
the same routes) insurance and property damage insurance (exclusive of
manufacturer's product liability insurance) with respect to all the Aircraft, in
an amount not less than the greater of (x) with respect to each Aircraft of any
type, the amount of public liability and property damage insurance from time to
time applicable to aircraft owned or operated by the Company of the same type
and (y) the amount of public liability and property damage maintained by the
Company on the Effective Date and (ii) cargo liability insurance, in the case of
both clause (i) and clause (ii), (A) with respect to Aircraft of any type, of
the type and covering the same risks as from time to time applicable to aircraft
operated by the Company of the same type as the Aircraft and (B) which is
maintained in effect with insurers of recognized responsibility. Any policies of
insurance carried
-19-
<PAGE>
in accordance with this paragraph (a) and any policies taken out in
substitution or replacement for any of such policies (A) shall be amended to
name the Secured Creditors (but without imposing on any such party liability
to pay the premiums for such insurance) (and, if any Lease shall be in
effect, the Company in its capacity as lessor under the Lease) as additional
insureds as their interest may appear, (B) shall provide that in respect of
the interest of the Secured Creditors (and, if any Lease shall be in effect,
the Company in its capacity as lessor under the Lease) in such policies the
insurance shall not be invalidated by any action or inaction of the Company
(or, if any Lease is then in effect, any Lessee) or any other Person and
shall insure the Secured Creditors (and, if any Lease shall be in effect, the
Company in its capacity as lessor under the Lease) regardless of any breach
or violation of any warranty, declaration or condition contained in such
policies by the Company (or, if any Lease is then in effect, any Lessee), (C)
may provide for self-insurance to the extent permitted by Section 3.6(d) and
(D) shall provide that if the insurers cancel such insurance for any reason
whatever or if any material change is made in such insurance which adversely
affects the interest of the Secured Creditors (or, if any Lease shall be in
effect, the Company in its capacity as lessor under the Lease), or such
insurance shall lapse for non-payment of premium, such cancellation, lapse or
change shall not be effective as to the Secured Creditors (or, if any Lease
shall be in effect, the Company in its capacity as lessor under the Lease)
for thirty (30) days (seven (7) days in the case of war risk and allied
perils coverage) after issuance to the Collateral Agent of written notice by
such insurers of such cancellation, lapse or change; PROVIDED, HOWEVER, that
if any notice period specified above is not reasonably obtainable, such
policies shall provide for as long a period of prior notice as shall then be
reasonably obtainable. Each liability policy (1) shall be primary without
right of contribution from any other insurance which is carried by the
Secured Creditors (or, if any Lease shall be in effect, the Company in its
capacity as lessor under the Lease), (2) shall expressly provide that all of
the provisions thereof, except the limits of liability, shall operate in the
same manner as if there were a separate policy covering each insured, and (3)
shall waive any right of the insurers to any set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in respect of any
liability of the Secured Creditors (or, if any Lease shall be in effect, the
Company in its capacity as lessor under the Lease) to the extent of any
moneys due to the Secured Creditors (or, if any Lease shall be in effect, the
Company in its capacity as lessor under the Lease).
(II) During any period that an Aircraft is on the ground and not in
operation, the Company may, in relation to such Aircraft, carry or cause to be
carried, in lieu of the insurance required by clause (I) above, insurance
otherwise conforming with the provisions of said clause (I) except that (A) the
amounts of coverage shall not be required to exceed the amounts of public
liability and property damage insurance from time to time applicable to aircraft
owned or operated by the Company of the same type as such Aircraft and which are
on the ground and not in operation; and (B) the scope of the risks covered and
the type of insurance shall be the same as from time to time shall be applicable
to aircraft owned or operated by the Company of the same type which are on the
ground and not in operation.
-20-
<PAGE>
(b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT.
(I) Except as provided in clause (II) of this Section 3.6(b), the
Company shall maintain or cause to be maintained in effect, at its or any
Lessee's expense, with insurers of recognized responsibility, all-risk ground
and flight aircraft hull insurance covering the Aircraft and all-risk ground and
flight coverage of Engines and Parts while temporarily removed from the Aircraft
and not replaced by similar components (including, without limitation, war risk
and governmental confiscation and expropriation (other than by the government of
registry of the relevant Aircraft) and hijacking insurance, if and to the extent
the same is maintained by the Company (or, if a Lease is then in effect, any
Lessee) with respect to other of the same type aircraft owned or operated by the
Company (or such Lessee) on the same routes, except that the Company (or such
Lessee) shall maintain war risk and governmental confiscation and expropriation
(other than by the government of registry of the relevant Aircraft) and
hijacking insurance if the Aircraft are operated on routes where the custom is
for major international air carriers flying comparable routes to carry such
insurance) which is of the type as from time to time applicable to aircraft
owned or operated by the Company of the same type as the Aircraft; PROVIDED that
such insurance shall at all times while the Aircraft are subject to this
Mortgage be for an amount (subject to self-insurance to the extent permitted by
Section 3.6(d)) not less than the amount of insurance of the same type
maintained by the Company on the Effective Date with respect to the Aircraft.
Any policies carried in accordance with this paragraph (b) covering the Aircraft
and any policies taken out in substitution or replacement for any such policies
(i) shall be amended to name the Collateral Agent as a loss payee, as its
interest may appear (but without imposing on any such party liability to pay
premiums with respect to such insurance), (ii) may provide for self-insurance to
the extent permitted in Section 3.6(d), (iii) shall provide that (A) in the
event of a loss involving proceeds in excess of an amount equal to 13.5% of the
Appraised Value of the Aircraft subject to such event of loss, the proceeds in
respect of such loss up to an amount equal to the amount of the prepayment
required by Section 3.02(d) of the Credit Agreement with respect to such loss
(the "BALANCE DUE"), shall be payable to the Collateral Agent (except in the
case of a loss with respect to an Engine installed on an airframe other than an
Airframe, in which case the Company (or any Lessee) shall arrange for any
payment of insurance proceeds in respect of such loss to be held for the account
of the Collateral Agent whether such payment is made to the Company (or any
Lessee) or any third party), it being understood and agreed that in the case of
any payment to the Collateral Agent otherwise than in respect of an Event of
Loss, the Collateral Agent shall, upon receipt of evidence satisfactory to it
that the damage giving rise to such payment shall have been repaired or that
such payment shall then be required to pay for repairs then being made, pay the
amount of such payment to the Company or its order, and (B) the entire amount of
any loss involving total proceeds equal to the amount set forth in clause (A)
above or less or the amount of any proceeds of any loss in excess of the Balance
Due shall be paid to the Company or its order unless an Event of Default shall
have occurred and be continuing and the insurers shall have been notified
thereof by the Collateral Agent, (iv) shall provide that if the insurers cancel
such insurance for any reason whatever, or such insurance lapses for non-payment
of premium or if any material change is made in the insurance which adversely
affects the interest of the Collateral Agent, such cancellation, lapse or change
shall not be effective as to the Collateral Agent (or, if any Lease shall be in
effect, the Company in its capacity as lessor under the Lease) for thirty (30)
days (seven (7) days in case of
-21-
<PAGE>
hull war risk and allied perils coverage) after issuance to the Collateral
Agent (or, if any Lease is in effect, the Company in its capacity as lessor
under the Lease) of written notice by such insurers of such cancellation,
lapse or change; PROVIDED, HOWEVER, that if any notice period specified above
is not generally obtainable, such policies shall provide for as long a period
of prior notice as shall then be generally obtainable, (v) shall provide that
in respect of the interest of the Collateral Agent (and, if any Lease shall
be in effect, the Company in its capacity as lessor under the Lease) in such
policies the insurance shall not be invalidated by any action or inaction of
the Company (or, if a Lease is then in effect, any Lessee) or any other
Person and shall insure the Collateral Agent (and, if any Lease shall be in
effect, the Company in its capacity as lessor under the Lease) regardless of
any breach or violation of any warranty, declaration or condition contained
in such policies by the Company (or, if a Lease is then in effect, any
Lessee), (vi) shall be primary without any right of contribution from any
other insurance which is carried by the Secured Creditors (or, if any Lease
shall be in effect, the Company in its capacity as lessor under the Lease),
(vii) shall waive any right of subrogation of the insurers against the
Secured Creditors (and if any Lease shall be in effect, the Company in its
capacity as lessor under the Lease), and (viii) shall waive any right of the
insurers to set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of the Secured Creditors
or the Company (or any Lessee) to the extent of any moneys due to the
Collateral Agent. In the case of a loss with respect to an engine (other
than an Engine) installed on an Airframe, the Collateral Agent shall hold any
payment to it of any insurance proceeds in respect of such loss for the
account of the Company or any other third party that is entitled to receive
such proceeds.
As between the Collateral Agent and the Company, it is agreed that all
insurance payments received as the result of the occurrence of an Event of Loss
will be applied as follows:
(w) if such payment is received as the result of an Event of Loss
with respect to an Airframe (the Airframe and any Engines installed
thereon) that has been or is being replaced by the Company as contemplated
by Section 3.5(a) hereof, such payments shall be paid over to, or retained
by, the Collateral Agent and upon completion of such replacement be paid
over to the Company;
(x) if such payments are received with respect to an Airframe (or the
Airframe and the Engines installed thereon) that has not been or is not
being replaced by the Company as contemplated by Section 3.5(a) hereof, so
much of such payments remaining, after reimbursement of the Collateral
Agent for reasonable costs and expenses, as shall not exceed the Balance
Due shall be applied in reduction of the Company's obligation to pay the
Balance Due in accordance with Section 3.02(d) of the Credit Agreement, if
not already paid by the Company, or, if already paid by the Company, shall
be applied to reimburse the Company for its payment of such Balance Due,
and the balance, if any, of such payments remaining thereafter will be paid
over to, or retained by, the Company (or if directed by the Company, any
Lessee); and
(y) if such payments are received with respect to an Engine under the
circumstances contemplated by Section 3.4(e) hereof, so much of such
payments remaining, after reimbursement of the Collateral Agent for
reasonable costs and expenses, shall be
-22-
<PAGE>
paid over to, or retained by, the Company (or if directed by the Company,
any Lessee); PROVIDED that the Company shall have fully performed or,
concurrently therewith, will fully perform, the terms of Section 3.4(e)
hereof with respect to the Event of Loss for which such payments are made.
As between the Collateral Agent and the Company, the insurance
payments for any property damage or loss to any Airframe or Engine not
constituting an Event of Loss with respect thereto will be applied in payment
for repairs or for replacement property in accordance with the terms of Sections
3.2(c) and 3.4 hereof, if not already paid for by the Company (or any Lessee),
and any balance (or if already paid for by the Company (or any Lessee), all such
insurance proceeds) remaining after compliance with such Sections with respect
to such loss shall be paid to the Company (or any Lessee if directed by the
Company).
(II) During any period that an Aircraft is on the ground and not in
operation, the Company may, in relation to such Aircraft, carry or cause to be
carried, in lieu of the insurance required by clause (b) (I) above, insurance
otherwise conforming with the provisions of said clause (b) (I) except that the
scope of the risks and the type of insurance shall be the same as from time to
time applicable to aircraft owned by the Company of the same type similarly on
the ground and not in operation; PROVIDED that the Company shall maintain
insurance against risk of loss or damage to such Aircraft in an amount at least
equal to the amount of insurance of such type maintained by the Company on the
Effective Date with respect to such Aircraft during such period that such
Aircraft is on the ground and not in operation.
(c) REPORTS, ETC.
The Company will furnish, or cause to be furnished, to the Collateral
Agent, on or before the Effective Date and on or before July 1, in each year
thereafter commencing July 1, 1999 a report, signed by Aon Risk Services, Inc.
of Minnesota, Marsh & McLennan, Incorporated or any other independent firm of
insurance brokers reasonably acceptable to the Collateral Agent (the "INSURANCE
BROKERS"), describing in reasonable detail the insurance and reinsurance then
carried and maintained with respect to the Aircraft and stating the opinion of
such firm that the insurance then carried and maintained with respect to the
Aircraft complies with the terms hereof; PROVIDED, HOWEVER, that all information
contained in the foregoing report shall not be made available by the Secured
Creditors to anyone except (A) to permitted transferees of the interest of the
Secured Creditors who agree to hold such information confidential, (B) to the
Secured Creditors' counsels or independent public accountants or independent
insurance advisors who agree to hold such information confidential or (C) as may
be required by any statute, court or administrative order or decree or
governmental ruling or regulation. The Company will cause such Insurance
Brokers to agree to advise the Collateral Agent in writing of any default in the
payment of any premium and of any other act or omission on the part of the
Company of which it has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft. To the
extent such agreement is reasonably obtainable, the Company will also cause such
Insurance Brokers to agree to advise the Collateral Agent in writing at least
thirty (30) days (seven (7) days in the case of war risk and allied perils
coverage) prior to the expiration or termination date of any insurance carried
and
-23-
<PAGE>
maintained on the Aircraft pursuant to this Section 3.6. In addition, the
Company will also cause such Insurance Brokers to deliver to the Collateral
Agent, on or prior to the date of expiration of any insurance policy
referenced in a previously delivered certificate of insurance, a new
certificate of insurance, substantially in the same form as delivered by the
Company to the Collateral Agent on the Effective Date. In the event that the
Company or any Lessee shall fail to maintain or cause to be maintained
insurance as herein provided, the Collateral Agent may at its sole option
provide such insurance and, in such event, the Company shall, upon demand,
reimburse the Collateral Agent for the cost thereof to the Collateral Agent,
without waiver of any other rights the Collateral Agent may have.
(d) SELF-INSURANCE.
The Company may self-insure by way of deductible, premium
adjustment or franchise provisions or otherwise (including, with respect to
insurance maintained pursuant to Section 3.6(b), insuring for maximum amounts
which are less than the amounts required by such Section) in the insurance
covering the risks required to be insured against pursuant to this Section
3.6 under a program applicable to all the aircraft in the Company's fleet,
but in no case shall the aggregate amount of self-insurance in regard to
Section 3.6(a) and Section 3.6(b) exceed during any policy year, with respect
to all of the aircraft in the Company's fleet (including, without limitation,
the Aircraft), the lesser of (a) 50% of the largest replacement value of any
single aircraft in the Company's fleet or (b) 1-1/2% of the average aggregate
insurable value (during the preceding policy year) of all aircraft
(including, without limitation, the Aircraft) on which the Company carries
insurance. In addition, the Company (and any Lessee) may self-insure to the
extent of any applicable mandatory minimum per aircraft (or, if applicable,
per annum or other period) hull or liability insurance deductible imposed by
the aircraft hull or liability insurers.
(e) ADDITIONAL INSURANCE BY THE COLLATERAL AGENT AND THE COMPANY.
The Company (and any Lessee) may at its own expense carry insurance
with respect to its interest in the Aircraft in amounts in excess of that
required to be maintained by this Section 3.6, so long as such excess
insurance is not in conflict with the insurance otherwise required hereunder.
(f) INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE.
Notwithstanding any provisions of this Section 3.6 requiring
insurance, the Collateral Agent agrees to accept, in lieu of insurance
against any risk with respect to an Aircraft, indemnification from, or
insurance provided by, the United States Government or any agency or
instrumentality thereof or, upon the written consent of the Collateral Agent,
other government of registry of such Aircraft or any agency or
instrumentality thereof, against such risk in an amount which, when added to
the amount of insurance against such risk maintained by the Company (or any
Lessee) with respect to the Aircraft (including permitted self-insurance)
shall be at least equal to the amount of insurance against such risk
otherwise required by this Section 3.6.
-24-
<PAGE>
(g) APPLICATION OF PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT.
Any amount referred to in paragraph (b) of this Section 3.6 which
is payable to or retainable by the Company (or any Lessee) shall not be paid
to or retained by the Company (or any Lessee) if at the time of such payment
or retention an Event of Default shall have occurred and be continuing, but
shall be held by or paid over to the Collateral Agent as security for the
Obligations and, if the aggregate unpaid principal amount of the Notes shall
be declared to be due and payable pursuant to the Credit Agreement, applied
against the Obligations as and when due. Upon the earlier of (a) such time as
there shall not be continuing any such Event of Default or (b) the
termination of this Mortgage in accordance with Section 8.1, such amount, and
any interest realized thereon pursuant to Section 6.1 hereof, shall be paid
to the Company (or such Lessee) to the extent not previously applied in
accordance with the preceding sentence.
Section 3.7. FILINGS.
The Company will take, or cause to be taken, at the Company's cost
and expense, such action with respect to the recording, filing, re-recording
and re-filing of this Mortgage in the office of the Federal Aviation
Administration, pursuant to the Federal Aviation Act, and in such other
places as may be required under any applicable law or regulation, each
Mortgage Supplement and any financing statements or other instruments as are
necessary, or reasonably requested by the Collateral Agent and appropriate,
to maintain, so long as this Mortgage is in effect, the perfection and
preservation of the Lien created by this Mortgage, or will furnish to the
Collateral Agent timely notice of the necessity of such action, together with
such instruments, in execution form, and such other information as may be
required to enable the Collateral Agent to take such action.
ARTICLE 4.
REMEDIES OF THE COLLATERAL AGENT
UPON AN EVENT OF DEFAULT
Section 4.1. EVENT OF DEFAULT. It shall be an Event of Default
hereunder if under the Credit Agreement an "Event of Default" (as such term
is defined in the Credit Agreement) shall occur; PROVIDED, that if the
Company shall have undertaken to cure any failure which arises under Section
3.2(c) hereof, or under the first sentence of Section 3.2(b) hereof as it
relates to maintenance, service, repair or overhaul or under Section 3.4(a),
(b), (c) or (d) hereof and, notwithstanding the diligence of the Company in
attempting to cure such failure, such failure is not cured within 30 days but
is curable with future due diligence, there shall exist no Event of Default
so long as the Company is proceeding with due diligence to cure such failure
and such failure is remedied not later than one hundred eighty (180) days
after receipt by the Company of notice from the Collateral Agent of such
failure; and PROVIDED FURTHER, that any failure of the Company to perform or
observe any covenant, condition, agreement or any error in a representation
or warranty shall not constitute an Event of Default if such failure or error
is caused solely by reason of an event that constitutes an Event of Loss so
long as the Company is continuing to comply with all of the terms of Section
3.5 hereof.
-25-
<PAGE>
Section 4.2. REMEDIES WITH RESPECT TO COLLATERAL.
(a) REMEDIES AVAILABLE.
Upon (i) the occurrence and continuance of any Event of Default,
the Collateral Agent (in accordance with the provisions of Article 5 hereof)
may, and upon the written instructions of the Required Banks, the Collateral
Agent shall, do one or more of the following; PROVIDED, HOWEVER, that during
any period that an Aircraft is subject to the Civil Reserve Air Fleet Program
in accordance with the provisions of Section 3.2(a) hereof and in possession
of the United States government or an agency or instrumentality of the United
States, the Collateral Agent shall not, on account of any Event of Default,
be entitled to exercise any of the remedies specified in the following
clauses (A), (B) and (C) in relation to such Aircraft in such manner as to
limit the Company's control under this Mortgage of the relevant Airframe, or
any Engines installed thereon, unless at least sixty (60) days' (or such
lesser period as may then be applicable under the Air Mobility Command
program of the United States Air Force) written notice of default hereunder
shall have been given by the Collateral Agent by registered or certified mail
to the Company (and any Lessee) with a copy addressed to the Contracting
Office Representative for the Air Mobility Command of the United States Air
Force under any contract with the Company (or any Lessee) relating to such
Aircraft:
(A) cause the Company, upon the written demand of the Collateral
Agent, at the Company's expense, to deliver promptly, and the Company
shall deliver promptly, all or such part of the Airframes, the Engines
or other Collateral as the Collateral Agent may so demand to the
Collateral Agent or its order, or the Collateral Agent, at its option,
may enter upon the premises where all or any part of the Airframes, the
Engines or other Collateral are located and take immediate possession
(to the exclusion of the Company and all Persons claiming under or
through the Company) of and remove the same by summary proceedings or
otherwise together with any engine which is not an Engine but which is
installed on an Airframe, subject to all of the rights of the owner,
lessor, lien or secured party of such engine; PROVIDED that an Airframe
with an engine (which is not an Engine) installed thereon may be flown
or returned only to a location within the continental United States, and
such engine shall be held for the account of any such owner, lessor,
lienor or secured party or, if owned by the Company, may at the option
of the Collateral Agent, be exchanged with the Company for an Engine in
accordance with the provisions of Section 3.4(e) hereof;
(B) sell all or any part of the Airframes, Engines or other
Collateral at public or private sale, whether or not the Collateral
Agent shall at the time have possession thereof, as the Collateral Agent
may determine, or lease or otherwise dispose of all or any part of the
Airframes, the Engines or other Collateral as the Collateral Agent, in
its sole discretion, may determine, all free and clear of any rights or
claims of whatsoever kind of the Company; PROVIDED, HOWEVER, that the
Company shall be entitled at any time prior to any such disposition to
redeem the Collateral by paying in full all of the Obligations; or
-26-
<PAGE>
(C) exercise any or all of the rights and powers and pursue any
and all remedies of a secured party under the Uniform Commercial Code of
the State of New York.
Upon every taking of possession of Collateral under this Section
4.2, the Collateral Agent may, from time to time, at the expense of the
Collateral Agent, make all such expenditures for maintenance, insurance,
repairs, replacements, alterations, additions and improvements to and of the
Collateral, as it may deem proper. In each such case, the Collateral Agent
shall have the right to maintain, store, lease, control or manage the
Collateral and to exercise all rights and powers of the Company relating to
the Collateral in connection therewith, as the Collateral Agent shall deem
best, including the right to enter into any and all such agreements with
respect to the maintenance, insurance, storage, leasing, control, management
or disposition of the Collateral or any part thereof as the Collateral Agent
may determine; and the Collateral Agent shall be entitled to collect and
receive directly all tolls, rents, revenues, issues, income, products and
profits of the Collateral and every part thereof, without prejudice, however,
to the right of the Collateral Agent under any provision of this Mortgage to
collect and receive all cash held by, or required to be deposited with, the
Collateral Agent hereunder. Such tolls, rents, revenues, issues, income,
products and profits shall be applied to pay the expenses of storage,
leasing, control, management or disposition of the Collateral, and of all
maintenance, repairs, replacements, alterations, additions and improvements,
and to make all payments which the Collateral Agent may be required or may
elect to make, if any, for taxes, assessments, insurance or other proper
charges upon the Collateral or any part thereof (including the employment of
engineers and accountants to examine, inspect and make reports upon the
properties and books and records of the Company), and all other payments
which the Collateral Agent may be required or authorized to make under any
provision of this Mortgage, as well as just and reasonable compensation for
the services of the Collateral Agent, and of all Persons properly engaged and
employed by the Collateral Agent.
In addition, the Company shall be liable for all legal fees and
other costs and expenses incurred by reason of the occurrence of any Event of
Default or the exercise of the Collateral Agent's remedies with respect
thereto, including all costs and expenses incurred in connection with the
retaking or return of any Airframe or Engines in accordance with the terms
hereof or under the Uniform Commercial Code of the State of New York, which
amounts shall, until paid, be secured by the Lien of this Mortgage.
If an Event of Default shall have occurred and the Notes shall have
been accelerated at the request of the Collateral Agent the Company shall
promptly execute and deliver to the Collateral Agent such instruments of
title and other documents as the Collateral Agent may deem necessary or
advisable to enable the Collateral Agent or an agent or representative
designated by the Collateral Agent, at such time or times and place or places
as the Collateral Agent may specify, to obtain possession of all or any part
of the Collateral to which the Collateral Agent shall at the time be entitled
hereunder. If the Company shall for any reason fail to execute and deliver
such instruments and documents after such request by the Collateral Agent,
the Collateral Agent may obtain a judgment conferring on the Collateral Agent
the right to immediate possession and requiring the Company to execute and
deliver such instruments and
-27-
<PAGE>
documents to the Collateral Agent, to the entry of which judgment the Company
hereby specifically consents to the fullest extent it may lawfully do so.
Nothing in the foregoing shall affect the right of each Secured
Creditor to receive all payments of principal of, and interest on, the
Obligations held by such Secured Creditor and all other amounts owing to such
Secured Creditor as and when the same may be due.
(b) NOTICE OF SALE.
The Collateral Agent shall give the Company at least fifteen (15)
days' prior written notice of the date fixed for any public sale of any
Airframe or Engine or the date on or after which any private sale will be
held, which notice the Company hereby agrees is reasonable notice, and any
such public sale shall be conducted in general so as to afford the Company
(and any Lessee) a reasonable opportunity to bid.
(c) RECEIVER.
If any Event of Default shall occur and be continuing, to the
extent permitted by law, the Collateral Agent shall be entitled, as a matter
of right as against the Company, without notice or demand and without regard
to the adequacy of the security for the Obligations or the solvency of the
Company, upon the commencement of judicial proceedings by it to enforce any
right under this Mortgage, to the appointment of a receiver of the Collateral
and of the tolls, rents, revenues, issues, income, products and profits
thereof.
(d) CONCERNING SALES.
At any sale under this Article, any Secured Creditor may bid for
and purchase the property offered for sale, may make payment on account
thereof as herein provided, and, upon compliance with the terms of sale, may
hold, retain and dispose of such property without further accountability
therefor. Any purchaser shall be entitled, for the purpose of making payment
for the property purchased, to deliver any of the Notes or other Obligations
in lieu of cash in the amount which shall be payable thereon as principal or
interest. Said Notes and other Obligations, in case the amount so payable to
the holders thereof shall be less than the amounts due thereon, shall be
returned to the holders thereof after being stamped or endorsed to show
partial payment.
Section 4.3. WAIVER OF APPRAISEMENT, ETC., LAWS.
To the full extent that it may lawfully so agree, the Company
agrees that it will not at any time insist upon, plead, claim or take the
benefit or advantage of, any appraisement, valuation, stay, extension, or
redemption law now or hereafter in force, in order to prevent or hinder the
enforcement of this Mortgage or the absolute sale of the Collateral, or any
part thereof, or the possession thereof by any purchaser at any sale under
this Article; but the Company, for itself and all who may claim under it, so
far as it or they now or hereafter lawfully may, hereby waives the benefit of
all such laws. The Company, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have the property in
the Collateral
-28-
<PAGE>
marshalled upon any foreclosure hereof, and agrees that any court having
jurisdiction to foreclosure this Mortgage may order the sale of the
Collateral as an entirety.
Section 4.4. APPLICATION OF PROCEEDS.
(a) All moneys collected by the Collateral Agent upon any sale or
other disposition of the Collateral shall be applied as follows:
(i) first, to the payment of all Obligations owing the
Collateral Agent of the type provided in clauses (ii) and (iii) of the
definition of Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors, with each Secured
Creditor receiving an amount equal to its outstanding Obligations or, if
the proceeds are insufficient to pay in full all such Obligations, its
Pro Rata Share of the amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Mortgage pursuant to Section 7.12 hereof, to the
Company or as required by applicable law.
(b) For purposes of this Mortgage "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Obligations and
the denominator of which is the then outstanding amount of all Obligations.
(c) If any payment to any Secured Creditor of its Pro Rata Share
of any distribution would result in overpayment to such Secured Creditor,
such excess amount shall instead be distributed in respect of the unpaid
Obligations of the other Secured Creditors, with each Secured Creditor whose
Obligations have not been paid in full to receive an amount equal to such
excess amount multiplied by a fraction the numerator of which is the unpaid
Obligations of such Secured Creditor and the denominator of which is the
unpaid Obligations of all Secured Creditors entitled to such distribution.
(d) It is understood that the Company shall remain liable to the
extent of any deficiency between the amount of the proceeds of the Collateral
and the aggregate amount of the sums referred to in clauses (i) and (ii) of
Section 4.4(a).
Section 4.5. REMEDIES CUMULATIVE.
Each and every right, power and remedy hereby specifically given to
the Collateral Agent or otherwise in this Mortgage shall be cumulative and
shall be in addition to every other right, power and remedy specifically
given under this Mortgage or the other Credit Documents or now or hereafter
existing at law, in equity or by statute and each and every right, power and
remedy whether specifically herein given or otherwise existing may be
exercised from
-29-
<PAGE>
time to time or simultaneously and as often and in such order as may be
deemed expedient by the Collateral Agent. All such rights, powers and
remedies shall be cumulative and the exercise or the beginning of the
exercise of one shall not be deemed a waiver of the right to exercise any
other or others. No delay or omission of the Collateral Agent in the
exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall
be construed to be a waiver of any Default or Event of Default or an
acquiescence therein. No notice to or demand on the Company in any case
shall entitle it to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any of the rights of the Collateral
Agent to any other or further action in any circumstances. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights
hereunder and shall be entitled to judgment, then in such suit the Collateral
Agent may recover reasonable expenses, including attorneys' fees, and the
amounts thereof shall be included in such judgment.
Section 4.6. DISCONTINUANCE OF PROCEEDINGS.
In case the Collateral Agent shall have instituted any proceeding
to enforce any right, power or remedy under this Mortgage by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the
Collateral Agent, then and in every such case the Company, the Collateral
Agent and each holder of any of the Obligations shall be restored to their
former positions and rights hereunder with respect to the Collateral subject
to the security interest created under this Mortgage, and all rights,
remedies and powers of the Collateral Agent shall continue as if no such
proceeding had been instituted (but otherwise without prejudice).
ARTICLE 5.
INDEMNITY
Section 5.1. INDEMNITY.
(a) The Company agrees to indemnify, reimburse and hold the
Collateral Agent, each Secured Creditor and their successors, permitted
assigns, employees, agents and servants (hereinafter in this Section 5.1
referred to as "Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all reasonable costs, expenses or disbursements
(including reasonable attorneys' fees and expenses) (for the purposes of this
Section 5.1 the foregoing are collectively, called "expenses") of whatsoever
kind and nature imposed on, asserted against or incurred by any of the
Indemnitees in any way relating to or arising out of this Mortgage, any other
Credit Document or any other document executed in connection herewith or
therewith or in any other way connected with the administration of the
transactions contemplated hereby or thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort
-30-
<PAGE>
(including, without limitation, claims arising or imposed under the doctrine
of strict liability, or for or on account of injury to or the death of any
Person (including any Indemnitee), or property damage); provided that no
Indemnitee shall be indemnified pursuant to this Section 5.1(a) for losses,
damages or liabilities to the extent caused by the gross negligence or
willful misconduct of such Indemnitee. The Company agrees that upon written
notice by any Indemnitee of the assertion of such a liability, obligation,
damage, injury, penalty, claim, demand, action, suit or judgment, the Company
shall assume full responsibility for the defense thereof. Indemnitees agree
to use their best efforts to promptly notify the Company of any such
assertion of which such Indemnitees have knowledge.
(b) Without limiting the application of Section 5.1(a), the
Company agrees to pay, or reimburse the Collateral Agent for any and all
reasonable fees, costs and expenses of whatever kind or nature incurred in
connection with the creation, preservation or protection of the Collateral
Agent's Liens on, and security interest in, the Collateral, including,
without limitation, all fees and taxes in connection with the recording or
filing of instruments and documents in public offices, payment or discharge
of any taxes or Liens upon or in respect of the Collateral, premiums for
insurance with respect to the Collateral and all other reasonable fees, costs
and expenses in connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits or proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 5.1(a) or (b), the
Company agrees to pay, indemnify and hold the Indemnitees harmless from and
against any loss, costs, damages and expenses which the Indemnitees may
suffer, expend or incur in consequence of or growing out of any
misrepresentation by the Company in this Mortgage, or any other Credit
Document or in any writing contemplated by or made or delivered pursuant to
or in connection with this Mortgage, or any other Credit Document.
(d) If and to the extent that the obligations of the Company under
this Section 5.1 are unenforceable for any reason, the Company hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
Section 5.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL.
Any amounts paid by any Indemnitee as to which such Indemnitee has
the right to reimbursement shall constitute Obligations secured by the
Collateral until the Termination Date. The indemnity obligations of the
Company contained in this Section 5 shall continue in full force and effect
notwithstanding the full payment of all the Notes issued under the Credit
Agreement and the payment of all other Obligations and notwithstanding the
discharge thereof.
-31-
<PAGE>
ARTICLE 6.
INVESTMENT OF SECURITY FUNDS
Section 6.1. INVESTMENT OF SECURITY FUNDS.
Any monies paid to or retained by the Collateral Agent which are
required to be paid to the Company or applied for the benefit of the Company
(including, without limitation, amounts payable to the Company under Sections
3.5(d), 3.5(f), 3.6(b) and 3.6(g) hereof), but which the Collateral Agent is
entitled to hold under the terms hereof pending the occurrence of some event
or the performance of some act (including, without limitation, the remedying
of an Event of Default), shall, until paid to the Company or applied as
provided herein, be invested by the Collateral Agent at the written
authorization and direction of the Company from time to time at the sole
expense and risk of the Company in Permitted Investments. After the
occurrence and during the continuance of an Event of Default, Permitted
Investments will be selected by the Collateral Agent at its discretion. At
the time of such payment or application, there shall be remitted to the
Company any gain (including interest received) realized as the result of any
such investment (net of any fees, commissions, other expenses or losses, if
any, incurred in connection with such investment) unless an Event of Default
shall have occurred and be continuing. The Collateral Agent shall not be
liable for any loss relating to a Permitted Investment made pursuant to this
Article 6. The Company will promptly pay to the Collateral Agent, on demand,
the amount of any loss (net of any gains, including interest received)
realized as the result of any such investment (together with any fees,
commissions and other expenses, if any, incurred in connection with such
investment).
ARTICLE 7.
MISCELLANEOUS
Section 7.1. NO LEGAL TITLE TO COLLATERAL IN NOTEHOLDER.
No Secured Creditor shall have legal title to any part of the
Collateral. No transfer, by operation of law or otherwise, of a Note or
other right, title and interest of a Secured Creditor in and to the
Collateral or this Mortgage shall operate to terminate this Mortgage or
entitle any successor or transferee of such Secured Creditor to an accounting
or to the transfer to it of legal title to any part of the Collateral.
Section 7.2. SALE OF THE AIRCRAFT BY COLLATERAL AGENT IS BINDING.
Any sale or other conveyance of the Aircraft, the Airframe, any
Engine or any interest therein by the Collateral Agent made pursuant to the
terms of this Mortgage shall bind the Secured Creditors and the Company, and
shall be effective to transfer or convey all right, title and interest of the
Collateral Agent, the Company, and the Secured Creditors in and to the
Aircraft, the Airframe, any Engine or any interest therein. No purchaser or
other grantee shall be required to inquire as to the authorization,
necessity, expediency or regularity of such sale or
-32-
<PAGE>
conveyance or as to the application of any sale or other proceeds with
respect thereto by the Collateral Agent;
Section 7.3. BENEFIT OF MORTGAGE.
Nothing in this Mortgage, whether express or implied, shall be
construed to give to any Person other than the Company, the Collateral Agent,
and the Secured Creditors any legal or equitable right, remedy or claim under
or in respect of this Mortgage or any Note.
Section 7.4. NOTICES.
Except as otherwise specified herein, all notices, requests,
demands or other communications to or upon the respective parties hereto
shall be in writing (including telegraphic, telex, facsimile transmission or
cable communication) and shall be delivered, mailed, telegraphed, telexed,
facsimile transmitted or cabled, addressed:
(a) if to the Company, at its office at:
2700 Lone Oak Parkway
Eagan, MN 55121
Telecopy: (612) 726-0665
Attention: Senior Vice President -
Finance and Treasurer
(b) if to the Collateral Agent:
One Chase Manhattan Plaza
Loan and Agency Services Group
8th Floor
New York , New York 10081
Telecopy (212) 552-5650
Attention: Jesus Sang
with a copy to:
Matthew Massie
Aerospace Group
270 Park Avenue
38th Floor
New York, New York 10017
Telecopy (212) 270-5100
(c) if to any Secured Creditor, either (x) to the Agent, at the
address of the Agent specified in the Credit Agreement or (y) at such
address as such Secured Creditor shall have specified in the Credit
Agreement;
-33-
<PAGE>
or at such other address as shall have been furnished in writing by any
Person described above to the party required to give notice hereunder. All
such notices and communications shall, when mailed, telegraphed, telexed,
facsimile transmitted or cabled or sent by overnight courier, be effective on
the third Business Day following deposit in the U.S. mails, certified, return
receipt requested, when delivered to the telegraph company, cable company or
on the day following delivery to an overnight courier, as the case may be, or
when sent by telex or facsimile device, except that notices and
communications to the Collateral Agent shall not be effective until received
by the Collateral Agent.
Section 7.5. WAIVER; AMENDMENT.
None of the terms and conditions of this Mortgage may be changed,
waived, modified or varied in any manner whatsoever unless in writing duly
signed by the Company and the Collateral Agent (with the consent of the
Required Banks or, to the extent required by Section 11.12 of the Credit
Agreement, all of the Banks).
Section 7.6. OBLIGATIONS ABSOLUTE.
The obligations of the Company hereunder shall remain in full force
and effect without regard to, and shall not be impaired by, (a) any
bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or the like of the Company, except to the extent
that the enforceability thereof may be limited by any such event; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Mortgage or any other Credit Document,
except as specifically set forth in a waiver granted pursuant to Section 7.5;
or (c) any amendment to or modification of any Credit Document or any
security for any of the Obligations; whether or not the Company shall have
notice or knowledge of any of the foregoing, except as specifically set forth
in an amendment or modification executed pursuant to Section 7.5.
Section 7.7. SUCCESSORS AND ASSIGNS.
This Mortgage shall be binding upon each Assignor and its
successors and assigns and shall inure to the benefit of the Collateral Agent
and each Secured Creditor and their respective successors and assigns;
PROVIDED, that the Company may not transfer or assign any or all of its
rights or obligations hereunder without the prior written consent of the
Collateral Agent. All agreements, statements, representations and warranties
made by the Company herein or in any certificate or other instrument
delivered by the Company or on its behalf under this Mortgage shall be
considered to have been relied upon by the Secured Creditors and shall
survive the execution and delivery of this Mortgage and the other Credit
Documents regardless of any investigation made by the Secured Creditors or on
their behalf.
Section 7.8. HEADINGS DESCRIPTIVE.
The headings of the several sections of this Mortgage are inserted
for convenience only and shall not in any way affect the meaning or
construction of any provision of this Mortgage.
-34-
<PAGE>
Section 7.9. SEVERABILITY.
Any provision of this Mortgage which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
Section 7.10. GOVERNING LAW.
THIS MORTGAGE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND BE CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW
PRINCIPLES THAT WOULD DICTATE THE APPLICATION OF THE LAW OF ANOTHER
JURISDICTION.
Section 7.11. COMPANY'S DUTIES.
It is expressly agreed, anything herein contained to the contrary
notwithstanding, that the Company shall remain liable to perform all of the
obligations, if any, assumed by it with respect to the Collateral and the
Collateral Agent shall not have any obligations or liabilities with respect
to any Collateral by reason of or arising out of this Mortgage, nor shall the
Collateral Agent be required or obligated in any manner to perform or fulfill
any of the obligations of the Company under or with respect to any Collateral.
Section 7.12. TERMINATION; RELEASE.
(a) After the Termination Date, this Agreement shall terminate
(provided that all indemnities set forth herein including, without
limitation, in Section 5.1 hereof shall survive such termination) and the
Collateral Agent, at the request and expense of the Company, will promptly
execute and deliver to the Company a proper instrument or instruments
(including Uniform Commercial Code termination statements on form UCC-3)
acknowledging the satisfaction and termination of this Mortgage, and will
duly assign, transfer and deliver to the Company (without recourse and
without any representation or warranty) such of its Collateral as may be in
the possession of the Collateral Agent and as has not theretofore been sold
or otherwise applied or released pursuant to this Mortgage. As used in this
Mortgage, "Termination Date" shall mean the date upon which the Total Loan
Commitment has been terminated, no Note is outstanding (and all Loans have
been paid in full), and all other Obligations then owing have been paid in
full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by the Credit Agreement or is otherwise
released at the direction of the Required Banks (or all the Banks if required
by Section 11.12 of the Credit Agreement) and the proceeds of such sale or
sales or from such release are applied in accordance with the terms of the
Credit
-35-
<PAGE>
Agreement, such Collateral will be sold free and clear of the Liens created
by this Mortgage and the Collateral Agent, at the request and expense of the
Company, will duly assign, transfer and deliver to the Company (without
recourse and without any representation or warranty) such of the Collateral
of the Company as is then being (or has been) so sold or released and as may
be in the possession of the Collateral Agent and has not theretofore been
released pursuant to this Mortgage.
(c) At any time that the Company desires that Collateral be
released as provided in the foregoing Section 7.12(a) or (b), it shall
deliver to the Collateral Agent a certificate signed by its chief financial
officer or another authorized senior officer stating that the release of the
respective Collateral is permitted pursuant to Section 7.12(a) or (b). If
requested by the Collateral Agent (although the Collateral Agent shall have
no obligation to make any such request), the Company shall furnish
appropriate legal opinions (from counsel, which may be in-house counsel,
acceptable to the Collateral Agent) to the effect set forth in the
immediately preceding sentence. The Collateral Agent shall have no liability
whatsoever to any Secured Creditor as the result of any release of Collateral
by it as permitted by this Section 7.
Section 7.13. COUNTERPARTS.
This Mortgage may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by
all the parties hereto shall be lodged with the Company and the Collateral
Agent.
Section 7.14. THE COLLATERAL AGENT.
The Collateral Agent will hold in accordance with this Mortgage all
items of the Collateral at any time received under this Mortgage. It is
expressly understood and agreed by the parties hereto and each Secured
Creditor, by accepting the benefits of this Mortgage, acknowledges and agrees
that the obligations of the Collateral Agent as holder of the Collateral and
interests therein and with respect to the disposition thereof, and otherwise
under this Mortgage, are only those expressly set forth in this Mortgage.
The Collateral Agent shall act hereunder on the terms and conditions set
forth in Section 10 of the Credit Agreement.
Section 7.15. LIMITED OBLIGATIONS.
It is the desire and intent of the Company, the Collateral Agent
and the Secured Creditors that this Mortgage shall be enforced against the
Company to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which enforcement is sought. If and to the
extent that the obligations of the Company under this Mortgage shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers, which laws would determine the solvency
of the Company by reference to the full amount of the Obligations at the time
of the execution and delivery of this Mortgage), then the amount of the
Obligations of
-36-
<PAGE>
the Company shall be deemed to be reduced and the Company shall pay the
maximum amount of the Obligations which would be permissible under the
applicable law.
-37-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Mortgage to
be duly executed by their respective officers, as the case may be, there unto
duly authorized, as of the day and year first above written.
NORTHWEST AIRLINES, INC.
By: /s/ Rolf S. Andresen
---------------------------------
Title: Vice President - Finance
and Chief Accounting Officer
THE CHASE MANHATTAN BANK,
as Collateral Agent
By: /s/ Mathew Massie
---------------------------------
Title: Managing Director
<PAGE>
APPENDIX A
DEFINITIONS RELATING TO THE
AIRCRAFT MORTGAGE AGREEMENT
Unless otherwise defined herein, terms used in the Mortgage shall
have the meaning provided thereto in the "Credit Agreement" as defined
herein. The definitions stated herein shall apply equally to both the
singular and plural forms of the terms defined.
"ADDITIONAL PARTS" has the meaning given such term in Section
3.4(d) of the Mortgage.
"AGENT" has the meaning given to such term in the Credit Agreement.
"AIRCRAFT" means each of the Airframes (or any Replacement
Airframes substituted therefor pursuant to Section 3.5 of the Mortgage)
together with the Engines (if any) installed thereon (or any Replacement
Engines substituted for said Engines pursuant to Section 3.4 of the
Mortgage), whether or not any of such initial or substitute Engines may from
time to time be installed on such Airframe or may be installed on any other
airframe or on any other aircraft.
"AIRFRAMES" means each of the airframes described in Section 2.1(a)
of the Mortgage, and any Replacement Airframe that may from time to time be
replaced pursuant to Section 3.5 of the Mortgage, for such Airframe, together
with any and all Parts (other than Engines or engines) so long as the same
shall be incorporated or installed in or attached thereto.
"APPRAISAL" means the appraisal of the Collateral required under
Section 4A.11 of the Credit Agreement.
"APPRAISED VALUE" means the value of the Aircraft as of the
Effective Date as set forth in the Appraisal.
"BALANCE DUE" has the meaning given such term in Section 3.6(b) of
the Mortgage.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended from time to time, and any successor provisions thereof.
"BANKS" has the meaning provided such term in the Credit Agreement.
"CERTIFICATED AIR CARRIER" means a Citizen of the United States
holding a carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code, for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more
of cargo.
"CITIZEN OF THE UNITED STATES" has the meaning specified in Section
40102(a)(15) of Title 49 of the United States Code.
<PAGE>
"CIVIL RESERVE AIR FLEET PROGRAM" means the Civil Reserve Air Fleet
Program, currently administered by the United States Air Force Military
Command pursuant to Executive Order No. 11490, as amended, or any
substantially similar program.
"COLLATERAL" has the meaning given to such term in Section 2.1 of
the Mortgage.
"COLLATERAL AGENT" has the meaning specified in the preamble to the
Mortgage.
"COMPANY" has the meaning specified in the preamble to the Mortgage.
"CONTRACT RIGHTS" means all of the Company's right, title and
interest in and to any purchase agreement, modification agreement and
buyer-furnished equipment agreement, as and to the extent that the same
relates to any Aircraft and the operation thereof, including, without
limitation, (a) all claims for damages in respect of any Aircraft arising as
a result of any default by the manufacturer or the seller under any purchase
agreement, modification agreement and buyer-furnished equipment agreement, in
respect of such Aircraft, including, without limitation, all warranty,
service life policy, aircraft performance guarantee and indemnity provisions
in such agreements in respect of any Aircraft and all claims thereunder and
(b) any and all rights of the Company to compel performance of the terms of
any purchase agreement, modification agreement and buyer-furnished equipment
agreement, in respect of any Aircraft.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of May 12,
1998, among Northwest Airlines Corporation, NWA Inc., the Company, the
lenders from time to time party thereto and The Chase Manhattan Bank, as
agent, as amended, modified and/or supplemented from time to time.
"DEFAULT" means an event which, with the giving of notice, lapse of
time or both would become an Event of Default.
"DOLLARS" and "$" means the lawful currency of the United States of
America.
"ENGINES" means each of the engines described in Section 2.1(a) of
the Mortgage whether or not from time to time installed on any Airframe or on
any other aircraft, and any Replacement Engine that may from time to time be
substituted, pursuant to Section 3.4 of the Mortgage, for such Engine;
together in each case with any and all Parts incorporated or installed in or
attached thereto.
"EVENT OF DEFAULT" has the meaning given such term in Section 4.1
of the Mortgage.
"EVENT OF LOSS" with respect to the Aircraft, the Airframes, or the
Engines means any of the following events with respect to such property:
(i) the loss of such property or the use thereof due to the
destruction of or damage to such property which renders repair uneconomic
or which renders such property
-2-
<PAGE>
permanently unfit for normal use by the Company for any reason whatsoever;
(ii) any damage to such property which results in an insurance
settlement with respect to such property on the basis of a total loss, or a
constructive or compromised total loss;
(iii) the theft or disappearance of such property, or the
confiscation, condemnation. or seizure of, or requisition of title to, or
use of, such property by any governmental or purported governmental
authority (other than a requisition for use by the United States government
or any other government of registry of an Aircraft, or any agency or
instrumentality of any thereof which in the case of any event referred to
in this clause (iii) (other than a requisition of title) shall have
resulted in the loss of possession of such property by the Company for a
period in excess of 180 consecutive days or, in the case of a requisition
of title, the requisition of title shall not have been reversed within 90
days from the date of such requisition of title;
(iv) as a result of any law, rule, regulation, order or other action
by the Federal Aviation Administration or other governmental body of the
government of registry of an Aircraft having jurisdiction, the use of such
property in the normal course of the business of air transportation shall
have been prohibited for a period of 180 consecutive days; and
(v) any divestiture of title to an Engine treated as an Event of Loss
pursuant to Section 3.2(a) of the Mortgage. An Event of Loss with respect
to an Aircraft shall be deemed to have occurred if an Event of Loss occurs
with respect to the relevant Airframe.
"FEDERAL AVIATION ACT" means that portion of the United States Code
comprising those provisions formerly referred to as the Federal Aviation Act of
1958, as amended, or any subsequent legislation that amends, supplements or
supersedes such provisions.
"FEDERAL AVIATION ADMINISTRATION" and "FAA" mean the United States
Federal Aviation Administration, and any agency or instrumentality of the United
States government succeeding to its functions.
"FOREIGN AIR CARRIER" means any air carrier which is not a U.S. Air
Carrier and which performs maintenance, preventative maintenance and inspections
for an Aircraft, an Airframe, the Parts and/or the related Engines or engines to
standards which are approved by, or which are substantially equivalent to those
required by, the Federal Aviation Administration, the Civil Aviation Authority
of United Kingdom, the Direction Generale de l'Aviation Civile of the French
Republic, the Luftfahrt Bundesamt of the Federal Republic of Germany, the
Rijflauchtraatdienst of the Kingdom of the Netherlands, the Ministry of
Transportation of Japan or the Federal Ministry of Transport of Canada (or any
agency or instrumentality of the applicable government succeeding to the
jurisdiction of the foregoing entities).
"GUARANTOR" or "GUARANTORS" has the meaning provided in the Credit
Agreement.
-3-
<PAGE>
"LEASE" means any lease permitted by the terms of Section 3.2(a)(x) of
the Mortgage.
"LESSEE" means any lessee permitted by the terms of Section 3.2(a)(x)
of the Mortgage.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
security deposit arrangement, encumbrance, lien (statutory or other) or other
security agreement or lien of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any capital lease having substantially
the same economic effect as any of the foregoing).
"LOANS" means "Revolving Loans" as defined in the Credit Agreement.
"MORTGAGE" means the Aircraft Mortgage and Security Agreement covering
the Collateral, dated as of May 12, 1998, between the Company and the Collateral
Agent, as the same may be amended, modified or supplemented from time to time.
"MORTGAGE SUPPLEMENT" means any Mortgage and Security Agreement
Supplement substantially in the form of EXHIBIT A to the Mortgage, and any other
supplement to the Mortgage, from time to time executed and delivered.
"NOTES" means "Revolving Notes" as defined in the Credit Agreement.
"OBLIGATIONS" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and indebtedness (including, without limitation, indemnities, fees
and interest thereon) of the Company and each Guarantor owing to the Secured
Creditors, now existing or hereafter incurred under, arising out of or in
connection with any Credit Document and the due performance and compliance by
the Company and each Guarantor with the terms of each such Credit Document;
(ii) any and all sums advanced by the Collateral Agent in order to preserve the
Collateral or preserve its security interest in the Collateral and (iii) in the
event of any proceeding for the collection or enforcement of any indebtedness,
obligations, or liabilities referred to in clauses (i) and (ii) above, after an
Event of Default shall have occurred and be continuing, the reasonable expenses
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by the
Collateral Agent of its rights hereunder, together with reasonable attorneys'
fees and court costs.
"OBSOLETE PARTS" has the meaning given such term in Section 3.4(d) of
the Mortgage.
-4-
<PAGE>
"OFFICER'S CERTIFICATE" means, as to any Person, a certificate signed
by the Chairman, the Vice Chairman, the President, any Executive Vice President,
any Director, any Senior Vice President, any Vice President, any Assistant Vice
President, the Treasurer or any Assistant Treasurer, the Secretary, or any
Assistant Secretary of such Person.
"PARTS" means any and all appliances, parts, instruments,
appurtenances, accessories, furnishings, seats, buyer furnished equipment, and
other equipment of whatever nature (other than (a) complete Engines or engines,
(b) items leased by the Company from a third party and (c) cargo containers)
which may from time to time be incorporated or installed in or attached to any
Airframe or any Engine.
"PERMITTED INVESTMENTS" means (i) direct obligations of the United
States of America and agencies guaranteed by the United States government having
a final maturity of 90 days or less from date of purchase thereof; (ii)
certificates of deposit issued by, bankers' acceptances of, or time deposits
with, any bank, trust company or national banking association incorporated under
the laws of the United States of America or one of the states thereof having
combined capital and surplus and retained earnings as of its last report of
condition of at least $500,000,000 and having a rating of Aa or better by
Moody's Investors Service, Inc. ("MOODY'S") or AA or better by Standard & Poor's
Corporation ("S&P") and having a final maturity of 90 days or less from date of
purchase thereof; and (iii) commercial paper of any holding company of a bank,
trust company or national banking association described in (ii) and commercial
paper of any corporation or finance company incorporated or doing business under
the laws of the United States of America or any state thereof having a rating
assigned to such commercial paper of Al by S&P or P1 by Moody's and having a
final maturity of 90 days or less from the date of purchase thereof; provided
that the aggregate amount at any one time so invested in certificates of deposit
issued by any one bank shall not be in excess of 5% of such bank's capital and
surplus.
"PERMITTED LESSEE" means any air carrier domiciled in a country listed
in SCHEDULE III to the Mortgage.
"PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"REPLACEMENT AIRCRAFT" means any Aircraft of which a Replacement
Airframe is part.
"REPLACEMENT AIRFRAME" means an aircraft (except Engines or engines
from time to time installed thereon), which shall have been made subject to the
Lien of the Mortgage pursuant to Section 3.5 thereof.
"REPLACEMENT CLOSING DATE" has the meaning given such term in Section
3.5(c) of the Mortgage.
"REPLACEMENT ENGINE" means an aircraft engine suitable for
installation and use
-5-
<PAGE>
on the relevant Airframe and which has a value, utility and remaining useful
life (except for maintenance cycle condition) at least equal to the Engine
which it is replacing, assuming such Engine was of the value, utility and
remaining useful life (except for maintenance cycle condition) required by
the terms of the Mortgage, and which shall have been made subject to the Lien
of the Mortgage pursuant to Section 3.4 or 3.5 of the Mortgage.
"REQUIRED BANKS" has the meaning given such term in the Credit
Agreement.
"SECURED CREDITORS" has the meaning given such term in the preamble to
the Mortgage.
"TERMINATION DATE" has the meaning given to such term in Section 7.12
of the Mortgage.
"TOTAL LOAN COMMITMENT" means "Total Revolving Loan Commitment" as
defined in the Credit Agreement.
"U.S. AIR CARRIER" means any Certificated Air Carrier as to which
there is in force an air carrier operating certificate issued pursuant to Part
121 of the regulations under the Federal Aviation Act, or which may operate as
an air carrier by certification or otherwise under any successor or substitute
provisions therefor or in the absence thereof.
"WET LEASE" means any arrangement whereby the Company (or any Lessee)
agrees to furnish any Airframe and the Engines or engines installed thereon to a
third party pursuant to which such Airframe and Engines or engines (i) shall be
operated solely by regular employees of the Company (or any Lessee) possessing
all current certificates and licenses that would be required under the Federal
Aviation Act or, if the Aircraft is not registered in the United States, all
certificates and licenses required by the laws of the jurisdiction of registry,
for the performance by such employees of similar functions within the United
States of America or such other jurisdiction of registry (it is understood that
cabin attendants need not be regular employees of the Company (or any Lessee)
and (ii) shall be maintained by the Company (or any Lessee) in accordance with
its normal maintenance practices.
-6-
<PAGE>
EXHIBIT A
FORM OF AIRCRAFT MORTGAGE AND SECURITY
AGREEMENT SUPPLEMENT NO.___
Aircraft Mortgage and Security Agreement Supplement No._______dated
___________ ("MORTGAGE SUPPLEMENT") of NORTHWEST AIRLINES, INC. (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Aircraft and Security Mortgage Agreement, dated as of May
12, (the "MORTGAGE"), between the Company and The Chase Manhattan Bank, as
Collateral Agent (the "COLLATERAL AGENT"), provides for the execution and
delivery of supplements thereto substantially in the form hereof which shall
particularly describe the Aircraft (such term and other defined terms in the
Mortgage being used herein with the same meanings), and shall specifically grant
a security interest in the Aircraft to the Collateral Agent; and
WHEREAS, the Company has, as provided in the Mortgage, heretofore
executed and delivered to the Collateral Agent _ Mortgage Supplement(s) for the
purpose of specifically subjecting to the Lien of the Mortgage certain airframes
and/or engines therein described, which Mortgage Supplement(s) is/are dated and
has/have been duly recorded with the FAA as set forth below, to wit:
DATE RECORDATION DATE FAA DOCUMENT NUMBER
NOW, THEREFORE, in order to secure the prompt payment of the
Obligations, subject to the terms and conditions of the Mortgage, and in
consideration of the premises and of the covenants contained in the Mortgage,
and of other good and valuable consideration given to the Company at or before
the delivery hereof, the receipt whereof is hereby acknowledged, the Company has
mortgaged, assigned, pledged, hypothecated and granted, and does hereby
mortgage, assign, pledge, hypothecate and grant, a continuing security interest
in, and mortgage lien on, the property comprising all its right, title and
interest in and to the Airframes and Engines described in Annex A attached
hereto, whether or not such Engines shall be installed in or attached to the
Airframes or any other aircraft, to the Collateral Agent, its successors and
assigns, for the benefit and security of the Secured Creditors;
To have and to hold all and singular the aforesaid property unto the
Collateral Agent, its successors and assigns, for the benefit and security of
the Secured Creditors and for the uses and purposes and subject to the terms and
provisions set forth in the Mortgage.
This Mortgage Supplement shall be construed as supplemental to the
Mortgage and shall form a part thereof, and the Mortgage is hereby incorporated
by reference herein and is hereby ratified, approved and confirmed and terms not
otherwise defined herein shall have the meaning provided in the Mortgage.
<PAGE>
EXHIBIT A
Page 2
THIS MORTGAGE SUPPLEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK
AND SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THAT WOULD
DICTATE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.
<PAGE>
EXHIBIT A
Page 3
IN WITNESS WHEREOF, the Company has caused this Supplement No. _ to be
duly executed by one of its duly authorized officers, as of the day and year
first above written.
NORTHWEST AIRLINES, INC.
By:__________________________
Title:
<PAGE>
ANNEX A
TO MORTGAGE
SUPPLEMENT NO. ______
DESCRIPTION OF AIRFRAME AND ENGINES
AIRFRAME
<PAGE>
SCHEDULE I
to
MORTGAGE
--------
SCHEDULE OF AIRFRAMES AS PART OF THE COLLATERAL
-----------------------------------------------
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------- ----- ---------------- --------------
<S> <C> <C> <C>
McDonnell Douglas DC-9-31 N8929E 45866
McDonnell Douglas DC-9-31 N8928E 45865
McDonnell Douglas DC-9-15 N9348 45787
McDonnell Douglas DC-9-14 N948L 47049
McDonnell Douglas DC-9-14 N930RC 45729
McDonnell Douglas DC-9-14 N8908E 45749
McDonnell Douglas DC-9-14 N8909E 45770
McDonnell Douglas DC-9-14 N8911E 45825
McDonnell Douglas DC-9-14 N8912E 45829
McDonnell Douglas DC-9-41 N750NW 47114
McDonnell Douglas DC-9-41 N751NW 47115
McDonnell Douglas DC-9-41 N752NW 47116
McDonnell Douglas DC-9-41 N753NW 47117
McDonnell Douglas DC-9-41 N754NW 47178
McDonnell Douglas DC-9-41 N755NW 47179
McDonnell Douglas DC-9-41 N756NW 47180
McDonnell Douglas DC-9-41 N758NW 47286
McDonnell Douglas DC-9-41 N759NW 47287
McDonnell Douglas DC-9-41 N760NW 47288
McDonnell Douglas DC-9-41 N762NW 47395
McDonnell Douglas DC-9-41 N763NW 47396
McDonnell Douglas DC-9-51 N760NC 47708
McDonnell Douglas DC-9-51 N761NC 47709
McDonnell Douglas DC-9-51 N762NC 47710
McDonnell Douglas DC-9-51 N763NC 47716
McDonnell Douglas DC-9-51 N764NC 47717
McDonnell Douglas DC-9-51 N765NC 47718
McDonnell Douglas DC-9-51 N766NC 47739
McDonnell Douglas DC-9-51 N767NC 47724
McDonnell Douglas DC-9-51 N768NC 47729
McDonnell Douglas DC-9-51 N775NC 47785
McDonnell Douglas DC-9-51 N776NC 47786
McDonnell Douglas DC-9-51 N777NC 47787
McDonnell Douglas DC-9-51 N787NC 48149
McDonnell Douglas DC-9-51 N600TR 47783
Boeing 727-251 N201US 22154
Boeing 727-251 N202US 22155
Boeing 727-251 N203US 22543
Boeing 727-251 N204US 22544
Boeing 727-251 N275US 21154
</TABLE>
<PAGE>
SCHEDULE I
Page 2
<TABLE>
<CAPTION>
Manufacturer's
Manufacturer Model Registration No. Serial No.
------------- ----- ---------------- --------------
<S> <C> <C> <C>
Boeing 727-251 N284US 21323
Boeing 727-251 N285US 21324
Boeing 727-251 N286US 21325
Boeing 727-251 N287US 21375
Boeing 727-251 N288US 21376
Boeing 727-251 N289US 21377
Boeing 727-251 N290US 21378
Boeing 727-251 N291US 21379
Boeing 727-251 N295US 21506
Boeing 727-251 N296US 21788
Boeing 727-251 N297US 21789
Boeing 727-251 N298US 22152
Boeing 727-251 N299US 22153
Boeing 727-2S7 N716RC 22021
Boeing 727-2S7 N718RC 22344
Boeing 727-2S7 N719RC 22490
Boeing 727-2S7 N720RC 22491
Boeing 727-2S7 N721RC 22492
Boeing 727-2M7 N722RW 21201
Boeing 727-2M7 N728RW 21741
Boeing 727-2M7 N729RW 21742
</TABLE>
<PAGE>
SCHEDULE II
to
MORTGAGE
--------
SCHEDULE OF ENGINES AS PART OF THE COLLATERAL
---------------------------------------------
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
Serial No. Serial No.
- ------------ ----- -------------- ------------ ----- --------------
<S> <C> <C> <S> <C> <C>
Pratt & Whitney JT8D-7B (H) 653816 Pratt & Whitney JT8D-7B (H) 655396
Pratt & Whitney JT8D-7B (H) 655450 Pratt & Whitney JT8D-7B (H) 655397
Pratt & Whitney JT8D-7B 653510 Pratt & Whitney JT8D-7B 653679
Pratt & Whitney JT8D-7B 655129 Pratt & Whitney JT8D-7B 654107
Pratt & Whitney JT8D-7B 655302 Pratt & Whitney JT8D-7B 649539
Pratt & Whitney JT8D-7B 653658 Pratt & Whitney JT8D-7B 653642
Pratt & Whitney JT8D-7B (H) 649121 Pratt & Whitney JT8D-7B (H) 657535
Pratt & Whitney JT8D-7B 657626 Pratt & Whitney JT8D-7B 648879
Pratt & Whitney JT8D-7B 649545 Pratt & Whitney JT8D-7B 649472
Pratt & Whitney JT8D-11 666740 Pratt & Whitney JT8D-11 676171
Pratt & Whitney JT8D-11 (H) 666744 Pratt & Whitney JT8D-11 (H) 676154
Pratt & Whitney JT8D-11 666657 Pratt & Whitney JT8D-11 676250
Pratt & Whitney JT8D-11 666670 Pratt & Whitney JT8D-11 666694
Pratt & Whitney JT8D-11 676185 Pratt & Whitney JT8D-11 676179
Pratt & Whitney JT8D-11 676192 Pratt & Whitney JT8D-11 676199
Pratt & Whitney JT8D-11 (H) 676228 Pratt & Whitney JT8D-11 (H) 676170
Pratt & Whitney JT8D-11 676224 Pratt & Whitney JT8D-11 676209
Pratt & Whitney JT8D-11 676231 Pratt & Whitney JT8D-11 676239
Pratt & Whitney JT8D-11 676245 Pratt & Whitney JT8D-11 676244
Pratt & Whitney JT8D-11 676256 Pratt & Whitney JT8D-11 676258
Pratt & Whitney JT8D-11 (H) 676230 Pratt & Whitney JT8D-11 (H) 676246
Pratt & Whitney JT8D-17 688206 Pratt & Whitney JT8D-17 688211
Pratt & Whitney JT8D-17 688231 Pratt & Whitney JT8D-17 688212
Pratt & Whitney JT8D-17 688232 Pratt & Whitney JT8D-17 688249
Pratt & Whitney JT8D-17 688295 Pratt & Whitney JT8D-17 688294
Pratt & Whitney JT8D-17 688299 Pratt & Whitney JT8D-17 688716
Pratt & Whitney JT8D-17 688764 Pratt & Whitney JT8D-17 688760
Pratt & Whitney JT8D-17 688767 Pratt & Whitney JT8D-17 688772
Pratt & Whitney JT8D-17 688776 Pratt & Whitney JT8D-17 688773
Pratt & Whitney JT8D-17 688777 Pratt & Whitney JT8D-17 688784
Pratt & Whitney JT8D-17 688792 Pratt & Whitney JT8D-17 688785
Pratt & Whitney JT8D-17 688793 Pratt & Whitney JT8D-17 688796
Pratt & Whitney JT8D-17 688827 Pratt & Whitney JT8D-17 688816
Pratt & Whitney JT8D-17 688828 Pratt & Whitney JT8D-17 688830
Pratt & Whitney JT8D-17 688832 Pratt & Whitney JT8D-17 688831
Pratt & Whitney JT8D-7B (H) 649094 Pratt & Whitney JT8D-7B (H) 657672
Pratt & Whitney JT8D-7B (H) 654825
Pratt & Whitney JT8D-15 649511
</TABLE>
<PAGE>
SCHEDULE II
Page 2
<TABLE>
<CAPTION>
Manufacturer Model Manufacturer's Manufacturer Model Manufacturer's
Serial No. Serial No.
- ------------ ----- -------------- ------------ ----- --------------
<S> <C> <C> <S> <C> <C>
Pratt & Whitney JT8D-15 648910 Pratt & Whitney JT8D-15 700413
Pratt & Whitney JT8D-15 653605 Pratt & Whitney JT8D-15 653863
Pratt & Whitney JT8D-15 700419 Pratt & Whitney JT8D-15 654302
Pratt & Whitney JT8D-15 654024 Pratt & Whitney JT8D-15 700421
Pratt & Whitney JT8D-15 654676 Pratt & Whitney JT8D-15 654702
Pratt & Whitney JT8D-15 700519 Pratt & Whitney JT8D-15 655124
Pratt & Whitney JT8D-15 654918 Pratt & Whitney JT8D-15 700796
Pratt & Whitney JT8D-15 656885 Pratt & Whitney JT8D-15 656928
Pratt & Whitney JT8D-15 655874 Pratt & Whitney JT8D-15 656984
Pratt & Whitney JT8D-15 656971 Pratt & Whitney JT8D-15 657142
Pratt & Whitney JT8D-15 657054 Pratt & Whitney JT8D-15 657077
Pratt & Whitney JT8D-15 695254 Pratt & Whitney JT8D-15 657151
Pratt & Whitney JT8D-15 657143 Pratt & Whitney JT8D-15 656110
Pratt & Whitney JT8D-15 657207 Pratt & Whitney JT8D-15 657278
Pratt & Whitney JT8D-15 657072 Pratt & Whitney JT8D-15 657428
Pratt & Whitney JT8D-15 657301 Pratt & Whitney JT8D-15 657283
Pratt & Whitney JT8D-15 657510 Pratt & Whitney JT8D-15 657513
Pratt & Whitney JT8D-15 667143 Pratt & Whitney JT8D-15 657545
Pratt & Whitney JT8D-15 657531 Pratt & Whitney JT8D-15 695245
Pratt & Whitney JT8D-15 657695 Pratt & Whitney JT8D-15 665600
Pratt & Whitney JT8D-15 695251 Pratt & Whitney JT8D-15 695204
Pratt & Whitney JT8D-15 674407 Pratt & Whitney JT8D-15 695252
Pratt & Whitney JT8D-15 695303 Pratt & Whitney JT8D-15 696466
Pratt & Whitney JT8D-15 695258 Pratt & Whitney JT8D-15 696495
Pratt & Whitney JT8D-15 696475 Pratt & Whitney JT8D-15 695289
Pratt & Whitney JT8D-17 655285 Pratt & Whitney JT8D-17 688207
Pratt & Whitney JT8D-17 688833 Pratt & Whitney JT8D-17 688230
Pratt & Whitney JT8D-17 688216 Pratt & Whitney JT8D-17 688846
Pratt & Whitney JT8D-17 688251 Pratt & Whitney JT8D-17 688298
Pratt & Whitney JT8D-17 695275 Pratt & Whitney JT8D-17 688761
Pratt & Whitney JT8D-17 688719 Pratt & Whitney JT8D-17 696530
Pratt & Whitney JT8D-17 696773 Pratt & Whitney JT8D-17 707902
Pratt & Whitney JT8D-17 696664
Pratt & Whitney JT8D-17R 689862 Pratt & Whitney JT8D-17R 689858
Pratt & Whitney JT8D-17R 689871 Pratt & Whitney JT8D-17R 689864
Pratt & Whitney JT8D-17R 689866 Pratt & Whitney JT8D-17R 689872
Pratt & Whitney JT8D-17R 689870 Pratt & Whitney JT8D-17R 689868
Pratt & Whitney JT8D-17R 689937
</TABLE>
<PAGE>
Schedule III
to
MORTGAGE
--------
SCHEDULE OF COUNTRIES FOR PERMITTED LESSEES
-------------------------------------------
Argentina Switzerland
Australia Thailand
Austria Tobago
Bahamas Trinidad
Belgium United Kingdom
Brazil Venezuela
Canada
Chile
Denmark
Egypt
Finland
France
Germany
Greece
Hungary
Iceland
India
Indonesia
Ireland
Italy
Japan
Luxembourg
Malaysia
Mexico
Malta
Morocco
Netherlands
New Zealand
Norway
Paraguay
People's Republic of China
Philippines
Portugal
Republic of China (Taiwan)
Singapore
South Africa
South Korea
Spain
Sweden
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1.
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2.
SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1. Grant of Security Interest . . . . . . . . . . . . . . . . . . 1
ARTICLE 3.
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . 4
Section 3.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Necessary Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Other Financing Statements. . . . . . . . . . . . . . . . . . . . . . . 4
(d) Chief Executive Office; Records . . . . . . . . . . . . . . . . . . . . 5
(e) Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2. Possession, Operation and Use, Maintenance and Registration. . 6
(a) POSSESSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) OPERATION AND USE. . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) MAINTENANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) IDENTIFICATION OF COLLATERAL AGENT'S INTEREST. . . . . . . . . . . . 10
(e) REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.3. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.4. Replacement and Pooling of Parts; Alterations, Modifications
and Additions; Substitution of Engines . . . . . . . . . . 11
(a) REPLACEMENT OF PARTS . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) PARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) POOLING OF PARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) ALTERATIONS; MODIFICATIONS AND ADDITIONS . . . . . . . . . . . . . . 12
(e) SUBSTITUTION OF ENGINES. . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.5. Loss, Destruction or Requisition . . . . . . . . . . . . . . . 15
(i)
<PAGE>
Page
----
<S> <C>
(a) EVENT OF LOSS WITH RESPECT TO AIRFRAMES. . . . . . . . . . . . . . .15
(b) EFFECT OF REPLACEMENT. . . . . . . . . . . . . . . . . . . . . . . .15
(c) CONDITIONS TO AIRFRAME REPLACEMENT . . . . . . . . . . . . . . . . .16
(d) NON-iNSURANCE PAYMENTS RECEIVED ON ACCOUNT OF AN EVENT OF LOSS . . .18
(e) REQUISITION OF USE . . . . . . . . . . . . . . . . . . . . . . . . .19
(f) APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OF DEFAULT . . . .19
Section 3.6. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .19
(a) PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE . . . . . . . . . . .19
(b) INSURANCE AGAINST LOSS OR DAMAGE TO THE AIRCRAFT . . . . . . . . . .21
(c) REPORTS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(d) SELF-INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(e) ADDITIONAL INSURANCE BY THE COLLATERAL AGENT AND THE COMPANY . . . .24
(f) INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE . . . . . . . . .24
(g) APPLICATION OF PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT. . .25
Section 3.7. Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE 4.
REMEDIES OF THE COLLATERAL AGENT
UPON AN EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 4.1. Event of Default . . . . . . . . . . . . . . . . . . . . . . .25
Section 4.2. Remedies with Respect to Collateral. . . . . . . . . . . . . .26
(a) REMEDIES AVAILABLE . . . . . . . . . . . . . . . . . . . . . . . . .26
(b) NOTICE OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . . .28
(c) RECEIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
(d) CONCERNING SALES . . . . . . . . . . . . . . . . . . . . . . . . . .28
Section 4.3. Waiver of Appraisement, etc., Laws . . . . . . . . . . . . . .28
Section 4.4. Application of Proceeds. . . . . . . . . . . . . . . . . . . .29
Section 4.5. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . .29
Section 4.6. Discontinuance of Proceedings. . . . . . . . . . . . . . . . .30
ARTICLE 5.
INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 5.1. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 5.2. Indemnity Obligations Secured by Collateral; Survival. . . . .31
ARTICLE 6.
INVESTMENT OF SECURITY FUNDS . . . . . . . . . . . . . . . . . . . . . . . .32
(ii)
<PAGE>
Page
----
<S> <C>
Section 6.1. Investment of Security Funds . . . . . . . . . . . . . . . . .32
ARTICLE 7.
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 7.1. No Legal Title to Collateral in Noteholder . . . . . . . . . .32
Section 7.2. Sale of the Aircraft by Collateral Agent is Binding. . . . . .32
Section 7.3. Benefit of Mortgage. . . . . . . . . . . . . . . . . . . . . .33
Section 7.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Section 7.5. Waiver; Amendment. . . . . . . . . . . . . . . . . . . . . . .34
Section 7.6. Obligations Absolute . . . . . . . . . . . . . . . . . . . . .34
Section 7.7. Successors and Assigns . . . . . . . . . . . . . . . . . . . .34
Section 7.8. Headings Descriptive . . . . . . . . . . . . . . . . . . . . .34
Section 7.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 7.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . .35
Section 7.11. Company's Duties. . . . . . . . . . . . . . . . . . . . . . .35
Section 7.12. Termination; Release. . . . . . . . . . . . . . . . . . . . .35
Section 7.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .36
Section 7.14. The Collateral Agent. . . . . . . . . . . . . . . . . . . . .36
Section 7.15. Limited Obligations . . . . . . . . . . . . . . . . . . . . .36
(iii)
<PAGE>
Page
----
<S> <C>
Appendix A Definitions
Exhibit A Form of Aircraft Mortgage and Security Agreement
Supplement
Schedule I Schedule of Airframes as part of the Collateral
Schedule II Schedule of Engines as part of the Collateral
Schedule III Schedule of Countries for Permitted Lessees
</TABLE>
(iv)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ROUTE SECURITY AGREEMENT
between
NORTHWEST AIRLINES, INC.
and
THE CHASE MANHATTAN BANK,
as Collateral Agent
__________________________________
Dated as of May 12, 1998
__________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2. Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 3. No Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 4. Representation, Warranties and Covenants . . . . . . . . . . . . . . . .2
Section 5. Supplements, Further Assurances. . . . . . . . . . . . . . . . . . . . .4
Section 6. Provisions Concerning Pledged Collateral . . . . . . . . . . . . . . . .4
(i) Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
(ii) Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . .4
(iii) Compliance with Laws and Regulations . . . . . . . . . . . . . . . . .5
(iv) Notice of Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 7. Collateral Agent Appointed Attorney-in-Fact. . . . . . . . . . . . . . .5
Section 8. Collateral Agent May Perform . . . . . . . . . . . . . . . . . . . . . .6
Section 9. The Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 10. Events of Default, Remedies . . . . . . . . . . . . . . . . . . . . . .6
A. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
B. Remedies; Obtaining the Collateral Upon Event of Default . . . . . . . .6
C. Remedies; Disposition of the Collateral. . . . . . . . . . . . . . . . .7
Section 11. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . .8
Section 12. No Waiver; Discontinuance of Proceeding . . . . . . . . . . . . . . . .9
Section 13. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 14. Amendments, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(i)
<PAGE>
Section 15. Termination; Release. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 16. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 18. Continuing Security Interest; Transfer of Notes . . . . . . . . . . . 13
Section 19. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 20. Consent to Jurisdiction and Service of Process. . . . . . . . . . . . 14
Section 21. Security Interest Absolute. . . . . . . . . . . . . . . . . . . . . . 14
Section 22. Severability of Provisions. . . . . . . . . . . . . . . . . . . . . . 14
Section 23. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 24. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . 15
Section 25. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . 15
Section 26. The Pledgor's Duties. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 27. Limited Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 15
Schedule I Pledged Routes
</TABLE>
(ii)
<PAGE>
ROUTE SECURITY AGREEMENT
ROUTE SECURITY AGREEMENT, dated as of May 12, 1998 (as amended,
modified or supplemented from time to time, the "Agreement"), between
NORTHWEST AIRLINES, INC., a Minnesota corporation (the "Pledgor") and THE
CHASE MANHATTAN BANK, as Collateral Agent (the "Collateral Agent"), for the
benefit of the Banks and the Agent under, and any other lender from time to
time party to the Credit Agreement herein referred to (such Banks, the Agent
and the other lenders, if any, are hereinafter called the "Secured
Creditors"). Except as otherwise defined herein, terms used herein and
defined in the Credit Agreement shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth in
the Credit Agreement, the Banks have agreed to make available the Revolving
Loans to the Pledgor provided for therein;
WHEREAS, it is a condition precedent to the above-described
extension of credit that the Pledgor shall have executed and delivered to the
Collateral Agent this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
Section 1. PLEDGE. The Pledgor hereby pledges to the Collateral
Agent and grants to the Collateral Agent for the benefit of the Secured
Creditors a security interest in all of the following (the "Collateral"), to
secure all of the Obligations:
(i) all of the right, title and interest of the Pledgor in, to and
under each and every Pledged Route, and all non-United States "slots" and
take off and landing rights related thereto, now existing or hereafter
arising from time to time; and
(ii) all Proceeds of any and all of the foregoing;
Section 2. OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, the Obligations.
Section 3. NO RELEASE. Nothing set forth in this Agreement shall
relieve the Pledgor from the performance of any term, covenant, condition or
agreement on the Pledgor's
<PAGE>
part to be performed or observed under or in respect of any of the Collateral
or from any liability to any Person under or in respect of any of the
Collateral or impose any obligation on the Collateral Agent or any Secured
Party to perform or observe any such term, covenant, condition or agreement
on the Pledgor's part to be so performed or observed or impose any liability
on the Collateral Agent or any Secured Creditor for any act or omission on
the part of the Pledgor relating thereto or for any breach of any
representation or warranty on the part of the Pledgor contained in this
Agreement, or in respect of the Collateral or made in connection herewith or
therewith. This Section shall survive the termination of this Agreement and
the discharge of the Pledgor's other obligations hereunder and under the
Credit Documents.
Section 4. REPRESENTATION, WARRANTIES AND COVENANTS. The Pledgor
represents, warrants and covenants as follows:
(i) All filings, registrations and recordings necessary or
reasonably requested by the Collateral Agent to create, preserve, protect
and perfect the security interests granted by the Pledgor to the Collateral
Agent hereby in respect of the Collateral have been accomplished by the
Pledgor. The security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to this instrument in and to the
Collateral constitute and hereafter will constitute a perfected security
interest therein superior and prior to the rights of all other Persons
therein and subject to no other Liens, except for Permitted Liens and
subject to the Federal Aviation Act and is entitled to all the rights,
priorities and benefits afforded by the Uniform Commercial Code or other
relevant law as enacted in any relevant jurisdiction to perfected security
interests.
(ii) The Pledgor is, and as to Collateral acquired by it from time
to time after the date hereof the Pledgor will be, the owner of all
Collateral free from any Lien except for the Lien and security interest
created by this Agreement, Permitted Liens and subject to the Federal
Aviation Act. The Pledgor will, at or before the time it subjects any
property to the Lien of this Agreement, cause evidence of its title to be
duly recorded, filed, or filed for recording, to the extent permitted or
required under any applicable law, by the Pledgor as owner. Pledgor shall
defend the Collateral against any and all claims and demands of all Persons
at any time claiming any interest therein adverse to the Collateral Agent
or any Secured Creditor.
(iii) There is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) on the date
hereof, covering or purporting to cover any interest of any kind in the
Collateral, and so long as the Credit Agreement has not been terminated or
any of the Obligations remain, the Pledgor shall not execute or authorize
to be filed in any public office any financing statement (or similar
statement or instrument of registration under the law of any jurisdiction),
or statements relating to the Collateral, except financing statements filed
or to be filed in respect of and covering the security interests granted
hereby by the Pledgor and except as may be otherwise permitted by the
Credit Agreement.
-2-
<PAGE>
(iv) The chief executive offices of the Pledgor as of the date of
this Agreement are located at 2700 Lone Oak Parkway, Eagan, MN 55121. The
Pledgor shall not move its chief executive office except to such new
location as the Pledgor may establish in accordance with this Section
4(iv). The Pledgor shall not establish any other location for its chief
executive office until (i) it shall have given to the Collateral Agent not
less than 45 days' prior written notice of its intention so to do, clearly
describing such new location (which shall be within the continental United
States of America), and providing such other information in connection
therewith as the Collateral Agent may reasonably request, and (ii) with
respect to such new location, it shall have taken all action reasonably
satisfactory to the Collateral Agent to maintain the perfection and
priority of the security interest of the Collateral Agent on behalf of the
Secured Creditors in the Collateral intended to be granted hereby.
(v) Set forth on Schedule I is a true, correct and complete list of
the Pledged Routes, including a copy of each certificate or order issued by
the DOT and the applicable Foreign Aviation Authority representing such
Pledged Routes. The Pledgor represents and warrants that it holds the
requisite authority to operate over each of the Pledged Routes pursuant to
the Federal Aviation Act and all rules and regulations promulgated
thereunder, subject only to the regulations of the DOT, the FAA and the
applicable Foreign Aviation Authority, and that it has, at all times after
obtaining each such Pledged Route, complied in all material respects with
all of the terms, conditions and limitations of each such certificate or
order issued by the DOT and the applicable Foreign Aviation Authority and
with all applicable provisions of the Federal Aviation Act and applicable
rules and regulations promulgated thereunder and that there exists no
material violation of such terms, conditions or limitations that gives the
FAA, DOT or the applicable Foreign Aviation Authority the right to
terminate, cancel, withdraw or modify the rights of the Pledgor in any such
Pledged Routes.
(vi) The Pledgor is a Citizen of the United States and a Certified
Air Carrier. All material licenses, permits, authorizations, certificates
of compliance, certificates of public convenience and necessity and other
certificates (including, without limitation, air carrier operating
certificates and operations specifications issued by the FAA pursuant to 14
C.F.R. Part 121) which are required by the DOT or the FAA and which are
adequate for the conduct of the business of the Pledgor are in force and
duly issued to the Pledgor. There are no license fees owed on the
Pledgor's DOT or FAA licenses, certificates or authorizations. The Pledgor
is in compliance with all material requirements of the certificates and
authorizations issued to it by the DOT or the FAA.
(vii) The Pledgor has full corporate power and authority and legal
right to pledge all the Collateral pursuant to this Agreement.
(viii) No consent of any other party (including, without limitation,
stockholders or creditors of the Pledgor), and no consent, authorization,
approval, or other action by, and (except in connection with the perfection
of the Lien created hereby) no notice to or filing with, any Governmental
Authority or other Person is required either (x) for the
-3-
<PAGE>
pledge by the Pledgor of the Collateral pursuant to this Agreement or
for the execution, delivery or performance of this Agreement or (y) for
the exercise by the Collateral Agent of the rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement; PROVIDED, HOWEVER, that the transfer of Pledged Routes is
subject to the consent of the DOT and may be subject to the consent of
the applicable Foreign Aviation Authority as set forth in Section 10B
below.
(ix) All information set forth herein relating to the Collateral is
accurate in all material respects as of the date hereof.
(x) This Agreement is made with full recourse to the Pledgor and
pursuant to and upon all the warranties, representations, covenants and
agreements on the part of the Pledgor contained herein, in the other Credit
Documents, and otherwise in writing in connection herewith or therewith.
Section 5. SUPPLEMENTS, FURTHER ASSURANCES. The Pledgor agrees that
at any time and from time to time, at the expense of the Pledgor, the Pledgor
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be required or that the Collateral Agent
reasonably deems necessary, in order to perfect, preserve and protect any
security interest granted or purported to be granted hereby or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
Section 6. PROVISIONS CONCERNING PLEDGED COLLATERAL.
(i) MAINTENANCE. Except as otherwise provided in this Section
6(i), Pledgor will do or cause to be done all things necessary to preserve
and keep in full force and effect its material rights in and to use its
Pledged Routes. Without in any way limiting the foregoing, the Pledgor
shall promptly take all such steps as may be necessary to obtain renewal of
each such Pledged Route authority from the DOT and the applicable Foreign
Aviation Authority, within a commercially reasonable time prior to the
expiration of such authority, and shall take all such other steps as may be
necessary to maintain, renew and obtain any and all takeoff and landing
rights and schedules (collectively "Slots") as are necessary to the
continued and future operation of the Pledgor over the Pledged Routes,
which are now allocated or as may hereafter be allocated by the
governmental agency or authority charged with such allocation at each
airport which serves as a point of origin or destination for each Pledged
Route. The Pledgor shall further take all actions necessary or, in the
reasonable judgment of Collateral Agent, advisable in order to maintain the
Pledgor's material rights in and the Pledgor's right to use the Pledged
Routes. Nothing in this provision shall be interpreted to prevent the
Pledgor from modifying or discontinuing service on any of the Pledged
Routes due to a determination made by the Pledgor that it is commercially
reasonable not to maintain or otherwise perform such service on any of the
Pledged Routes as specified above; PROVIDED, HOWEVER, the Pledgor shall
give the Collateral Agent thirty days prior notice of any discontinuation
or material modification of service on any Pledged Routes.
-4-
<PAGE>
(ii) FINANCING STATEMENTS. The Pledgor shall sign and deliver to
the Collateral Agent such financing and continuation statements, in form
and substance acceptable to the Collateral Agent, as may from time to time
be required or necessary to grant, continue and maintain a valid,
enforceable, first priority security interest in the Collateral as provided
herein, and the other rights, as against third parties, provided hereby,
all in accordance with the Uniform Commercial Code as enacted in any and
all relevant jurisdictions or any other relevant law. The Pledgor shall
pay any applicable filing fees and other expenses related to the filing of
such financing and continuation statements. The Pledgor authorizes the
Collateral Agent to file any such financing or continuation statements
without the signature of the Pledgor where permitted by law.
(iii) COMPLIANCE WITH LAWS AND REGULATIONS. The Pledgor shall
promptly comply in all material respects with all laws, ordinances, orders,
rules, regulations, and requirements of all Federal, state, municipal or
other governmental or quasi-governmental authorities or bodies including,
without limitation, Foreign Aviation Authorities, then having jurisdiction
over the Collateral (or any part thereof) and/or the use thereof by the
Pledgor, of every nature and kind (the "Requirements") including any of the
same which relate to or require changes or requirements incident to or as
the result of any use thereof or otherwise, and the Pledgor shall so
comply, whether or not such Requirements shall now exist or shall hereafter
be enacted or promulgated and whether or not the same may be said to be
within the present contemplation of the parties hereto. Notwithstanding
the foregoing, if the Pledgor contests a Requirement, it shall not be
obligated to comply with such Requirement to the extent such non-compliance
or deferral is consistent with law and does not have a materially adverse
effect on the Collateral or the security interest therein.
(iv) NOTICE OF LAWS. The Pledgor agrees to give the Collateral
Agent notice of any violations of any Requirement enacted, passed,
promulgated, made, issued or adopted by any of the governmental departments
or agencies or authorities hereinbefore mentioned affecting the Collateral
or the Pledgor's use thereof, a copy of which is served upon or received by
the Pledgor, or otherwise brought to the attention of the Pledgor, by
mailing within thirty (30) business days after such service, receipt, or
after the same otherwise comes to the attention of the Pledgor, a copy of
each and every one thereof to the Collateral Agent. At the same time, the
Pledgor will inform the Collateral Agent as to the work or steps which the
Pledgor proposes to do or take in order to correct the violation.
Notwithstanding the foregoing, however, if such work or step would require
any alterations which would, in the Collateral Agent's reasonable opinion,
reduce the value of the Collateral or change the general character or use
of the Collateral, the Pledgor may, with the consent of the Collateral
Agent, defer compliance therewith, as long as such deferral is consistent
with applicable law in order that the Pledgor may, with the consent of the
Collateral Agent, at the Pledgor's expense, contest or seek modification of
or other relief with respect to such Requirements, but nothing herein shall
relieve the Pledgor of the duty and obligation, at the Pledgor's expense,
to comply with such Requirements, or such Requirements as modified,
whenever the Collateral Agent shall so direct.
-5-
<PAGE>
Section 7. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor
hereby appoints the Collateral Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Collateral Agent's discretion to take any
action and to execute any instrument which the Collateral Agent may reasonably
deem necessary or advisable to accomplish the purposes of this Agreement, which
appointment as attorney-in-fact is coupled with an interest.
Section 8. COLLATERAL AGENT MAY PERFORM. If the Pledgor fails to
perform any agreement contained herein after receipt of a written request to do
so from the Collateral Agent, the Collateral Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Collateral
Agent, including, without limitation, the fees and expenses of its counsel,
incurred in connection therewith, shall be payable by the Pledgor and shall be
considered Obligations.
Section 9. The Collateral Agent . It is expressly understood and
agreed by the parties hereto and each Secured Creditor, by accepting the
benefits of this Agreement, acknowledges and agrees that the obligations of the
Collateral Agent as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are only
those expressly set forth in this Agreement. The Collateral Agent shall act
hereunder on the terms and conditions set forth in Section 10 of the Credit
Agreement.
Section 10. EVENTS OF DEFAULT, REMEDIES.
A. EVENTS OF DEFAULT. It shall be an Event of Default hereunder if
under the Credit Agreement an "Event of Default" (as such term is defined in
such Agreement) shall occur.
B. REMEDIES; OBTAINING THE COLLATERAL UPON EVENT OF DEFAULT. If any
Event of Default shall have occurred and be continuing, then and in every such
case, the Collateral Agent (acting at the direction and with the consent of the
Required Banks) may, at any time or from time to time during such Event of
Default:
(i) Declare the entire right, title and interest of the Pledgor in
and to each Pledged Route vested, subject to the requirements imposed by
the Federal Aviation Act and the DOT, in which event such rights, title and
interest shall immediately vest in the Collateral Agent, in which case the
Pledgor agrees to execute and deliver such deeds of conveyance, assignments
and other documents or instruments (including any notices or applications
to the DOT, FAA, applicable Foreign Aviation Authorities or any other
governmental or regulatory authority having jurisdiction over any such
Pledged Route or the use thereof) as shall be requested by the Collateral
Agent in order to effectuate the transfer of such Pledged Routes, together
with copies of the certificates or orders issued by the DOT and the Foreign
Aviation Authorities representing same and any other rights of the Pledgor
with respect thereto, to any designee or designees selected by the
Collateral Agent and approved by the DOT, it being understood that, as of
the date hereof, the DOT may approve transfers only to duly certificated
U.S. citizen "air carriers"; it being further understood that the Pledgor's
obligation to deliver such Collateral and such documents and instruments
with respect thereto is of the essence of
-6-
<PAGE>
this Agreement and that, accordingly, upon application to a court of
equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by the Pledgor of said
obligations; and
(ii) Sell or otherwise liquidate, or direct the Pledgor to sell or
otherwise liquidate, any or all of the Collateral or any part thereof,
subject to the requirements imposed by the Federal Aviation Act and the DOT
and take possession of the proceeds of any such sale or liquidation.
C. REMEDIES; DISPOSITION OF THE COLLATERAL. (i) The Collateral
Agent may from time to time exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it and to the extent not in violation of applicable law,
including the Federal Aviation Act, and subject to the approval of the DOT or
its successor or nominee, all the rights and remedies of a secured party on
default under the Uniform Commercial Code (the "Code") in effect in all
relevant jurisdictions at the time of an Event of Default, and the Collateral
Agent may also in its sole discretion, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Collateral Agent may deem commercially reasonable. To the extent not
inconsistent with the Federal Aviation Act and the DOT requirements, the
Collateral Agent or any other Secured Creditor may be the purchasers of any
or all of the Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at such sale, to use and apply any
of the Obligations owed to such Person as a credit on account of the purchase
price of any Collateral payable by such Person at such sale. Each purchaser
at any such sale shall acquire the property sold absolutely free from any
claim or right on the part of the Pledgor, and the Pledgor hereby waives, to
the fullest extent permitted by law, all rights of redemption, stay or
appraisal which it now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted. The Pledgor agrees
that, to the extent notice of sale shall be required by law, at least ten
days' notice to the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Collateral
Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
The Pledgor hereby waives, to the full extent permitted by law, any claims
against the Collateral Agent arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than
the price which might have been obtained at a public sale.
(ii) Except as otherwise provided herein, the Pledgor hereby waives,
to the fullest extent permitted by applicable law, notice or judicial hearing in
connection with the Collateral Agent's taking possession or the Collateral
Agent's disposition of any of the Collateral, including, without limitation, any
and all prior notice and hearing for any prejudgment remedy or remedies and any
such right which the Pledgor would otherwise have
-7-
<PAGE>
under law, and the Pledgor hereby further waives to the fullest extent
permitted by applicable law: (a) all damages occasioned by such taking of
possession; (b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and (c) all rights of redemption, appraisement,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable law. Any sale of, or the grant of options to purchase, or any
other realization upon, any Collateral shall operate to divest all right,
title, interest, claim and demand, either at law or in equity, of the Pledgor
therein and thereto, and shall be a perpetual bar both at law and in equity
against the Pledgor and against any and all Persons claiming or attempting to
claim the Collateral so sold, optioned or realized upon, or any part thereof,
from, through and under the Pledgor.
Section 11. APPLICATION OF PROCEEDS. (a) Any cash held by the
Collateral Agent as Collateral and all cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral pursuant to the exercise
by the Collateral Agent of its remedies as a secured creditor as provided in
Section 10 of this Agreement shall be applied from time to time by the
Collateral Agent:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (ii) and (iii) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors, with each Secured
Creditor receiving an amount equal to its outstanding Obligations or, if
the proceeds are insufficient to pay in full all such Obligations, its Pro
Rata Share of the amount remaining to be distributed; and
(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Agreement pursuant to Section 15 hereof to the Pledgor
or as required by applicable law.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Creditor's Obligations and the
denominator of which is the then outstanding amount of all Obligations.
(c) If any payment to any Secured Creditor of its Pro Rata Share of
any distribution would result in overpayment to such Secured Creditor, such
excess amount shall instead be distributed in respect of the unpaid Obligations
of the other Secured Creditors, with each Secured Creditor whose Obligations
have not been paid in full to receive an amount equal to such excess amount
multiplied by a fraction the numerator of which is the unpaid Obligations of
such Secured Creditor and the denominator of which is the unpaid Obligations of
all Secured Creditors entitled to such distribution.
-8-
<PAGE>
(d) It is understood that the Company shall remain liable to the
extent of any deficiency between the amount of the proceeds of the Collateral
and the aggregate amount of the sums referred to in clauses (i) and (ii) of
Section 11(a).
Section 12. NO WAIVER; DISCONTINUANCE OF PROCEEDING. (a) Each
and every right, power and remedy hereby specifically given to the Collateral
Agent or otherwise in this Agreement shall be cumulative and shall be in
addition to every other right, power and remedy specifically given under this
Agreement or the other Credit Documents now or hereafter existing at law, in
equity or by statute and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time or simultaneously and as often and in such order as may be deemed
expedient by the Collateral Agent. All such rights, powers and remedies
shall be cumulative and the exercise or the beginning of the exercise of one
shall not be deemed a waiver of the right to exercise any other or others.
No delay or omission of the Collateral Agent in the exercise of any such
right, power or remedy and no renewal or extension of any of the Obligations
shall impair any such right, power or remedy or shall be construed to be a
waiver of any default or Event of Default or an acquiescence therein. No
notice to or demand on the Pledgor in any case shall entitle it to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Collateral Agent to any other or further
action in any circumstances without notice or demand. In the event that the
Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts
thereof shall be included in such judgment.
(b) In the event the Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the Pledgor,
the Collateral Agent and each holder of any of the Obligations shall to the
extent permitted by applicable law be restored to their respective former
positions and rights hereunder with respect to the Collateral, and all
rights, remedies and powers of the Collateral Agent and the Secured Parties
shall continue as if no such proceeding had been instituted.
Section 13. INDEMNIFICATION. (a) The Pledgor agrees to indemnify,
reimburse and hold the Collateral Agent, each Secured Creditor and their
respective successors, permitted assigns, employees, agents and servants
(hereinafter in this Section 13 referred to individually as "Indemnitee," and
collectively as "Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all reasonable costs, expenses or disbursements (including
reasonable attorneys' fees and expenses) (for the purposes of this Section 13
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any other Credit Document or any
other document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of the terms of, or the preservation of any
rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
-9-
<PAGE>
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent
or other defects, whether or not discoverable), the violation of the laws of
any country, state or other governmental body or unit, any tort (including,
without limitation, claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of any Person
(including any Indemnitee), or property damage); provided that no Indemnitee
shall be indemnified pursuant to this Section 13(a) for losses, damages or
liabilities to the extent caused by the gross negligence or willful
misconduct of such Indemnitee. The Pledgor agrees that upon written notice
by any Indemnitee of the assertion of such a liability, obligation, damage,
injury, penalty, claim, demand, action, suit or judgment, the Pledgor shall
assume full responsibility for the defense thereof. Each Indemnitee agrees
to use its best efforts to promptly notify the Pledgor of any such assertion
of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 13(a), the
Pledgor agrees to pay, or reimburse the Collateral Agent for, any and all
reasonable fees, costs and expenses of whatever kind or nature incurred in
connection with the creation, preservation or protection of the Collateral
Agent's Liens on, and security interest in, the Collateral, including,
without limitation, all fees and taxes in connection with the recording or
filing of instruments and documents in public offices, payment or discharge
of any taxes or Liens upon or in respect of the Collateral, premiums for
insurance with respect to the Collateral and all other reasonable fees, costs
and expenses in connection with protecting, maintaining or preserving the
Collateral and the Collateral Agent's interest therein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits or proceedings arising out of or relating to the Collateral.
(c) If and to the extent that the obligations of the Pledgor
under this Section 13 are unenforceable for any reason, the Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of
such obligations which is permissible under applicable law.
(d) Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Obligations
secured by the Collateral. The indemnity obligations of the Pledgor
contained in this Section 13 shall continue in full force and effect
notwithstanding the full payment of all the Revolving Notes issued under the
Credit Agreement and the payment of all other Obligations and notwithstanding
the discharge thereof.
Section 14. AMENDMENTS, ETC. This Agreement may not be amended,
modified or waived except with the written consent of the Pledgor and the
Collateral Agent (with the consent of the Required Banks or, to the extent
required by Section 11.12 of the Credit Agreement, all of the Banks). Any
amendment, modification or supplement of or to any provision of this
Agreement, any termination or waiver of any provision of this Agreement and
any consent to any departure by the Pledgor from the terms of any provision
of this Agreement shall be effective only in the specific instance and for
the specific purpose for which made or given. No notice to or demand upon
the Pledgor in any instance hereunder shall entitle the Pledgor to any other
or further notice or demand in similar or other circumstances.
-10-
<PAGE>
Section 15. TERMINATION; RELEASE. (a) After the Termination
Date, this Agreement shall terminate (provided that all indemnities set forth
herein shall survive) and the Collateral Agent, at the request and expense of
the Pledgor, will promptly execute and deliver to the Pledgor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of
this Agreement, and will duly assign, transfer and deliver to the Pledgor
(without recourse and without any representation or warranty) such of its
Collateral as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Revolving Loan Commitment has been terminated, no
Revolving Note is outstanding (and all Revolving Loans have been paid in
full), and all other Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold in
connection with a sale permitted by the Credit Agreement or this Agreement or
is otherwise released at the direction of the Required Banks (or all the
Banks if required by Section 11.12 of the Credit Agreement) and the proceeds
of such sale or sales or from such release are applied in accordance with the
terms of the Credit Agreement, such Collateral will be sold free and clear of
the Liens created by this Agreement and the Collateral Agent, at the request
and expense of the Pledgor, will duly assign, transfer and deliver to the
Pledgor (without recourse and without any representation or warranty) such of
the Collateral of the Pledgor as is then being (or has been) so sold or
released and as may be in the possession of the Collateral Agent and has not
theretofore been released pursuant to this Agreement.
(c) At any time that the Pledgor desires that Collateral be
released as provided in the foregoing Section 15(a) or (b), it shall deliver
to the Collateral Agent a certificate signed by its chief financial officer
or another authorized senior officer stating that the release of the
respective Collateral is permitted pursuant to Section 15(a) or (b). If
requested by the Collateral Agent (although the Collateral Agent shall have
no obligation to make any such request), the Pledgor shall furnish
appropriate legal opinions (from counsel, which may be in-house counsel,
acceptable to the Collateral Agent) to the effect set forth in the
immediately preceding sentence. The Collateral Agent shall have no liability
whatsoever to any Secured Creditor as the result of any release of Collateral
by it as permitted by this Section 15.
Section 16. DEFINITIONS. The following terms shall have the
following meanings. Such definitions shall be equally applicable to the
singular and plural forms of the terms defined.
"Agreement" has the meaning provided in the preamble hereto.
"Collateral" has the meaning provided in Section 1 hereof.
"Credit Agreement" shall mean the Credit Agreement, dated as of May
12, 1998, among Northwest Airlines Corporation, NWA Inc., the Pledgor, the
lenders from time to time party thereto and The Chase Manhattan Bank, as
agent, as amended, modified and/or supplemented from time to time.
-11-
<PAGE>
"DOT" shall mean the United States Department of Transportation.
"Event of Default" has the meaning provided in Section 10.A hereof.
"Foreign Aviation Authority" shall mean the foreign governmental
agency which exercises jurisdiction over the issuance or authorization of the
foreign terminus of each of the Pledged Routes.
"Governmental Authority" shall mean any federal, state, local or
other governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body located in the United States.
"Indemnitee" shall have the meaning provided in Section 13 hereof.
"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations and indebtedness (including, without limitation, indemnities,
fees and interest thereon) of the Pledgor and each Guarantor owing to the
Secured Creditors, now existing or hereafter incurred under, arising out of
or in connection with any Credit Document and the due performance and
compliance by the Pledgor and each Guarantor with the terms of each such
Credit Document; (ii) any and all sums advanced by the Collateral Agent in
order to preserve the Collateral or preserve its security interest in the
Collateral; and (iii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred to in
clauses (i) and (ii) above, after an Event of Default shall have occurred and
be continuing, the reasonable expenses of re-taking, holding, preparing for
sale or lease, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Collateral Agent of its rights
hereunder, together with reasonable attorneys' fees and court costs.
"Pledged Routes" shall mean the route authorities identified as
such on Schedule I.
"Pledgor" has the meaning provided in the preamble hereto.
"Proceeds" shall have the meaning assigned that term under the
Uniform Commercial Code as in effect in any relevant jurisdiction or under
other relevant law and, in any event, shall include, but not be limited to,
any and all (i) proceeds of any insurance, indemnity, warranty or guarantee
payable to the Collateral Agent or to the Pledgor or any affiliate of the
Pledgor from time to time with respect to any of the Collateral, (ii)
payments (in any form whatsoever), made or due and payable to the Pledgor
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by
any Governmental Authority (or any Person acting under color of Governmental
Authority), (iii) instruments representing obligations to pay amounts in
respect of the Collateral, (iv) products of the Collateral and (v) other
amounts from time to time paid or payable under or in connection with any of
the Collateral.
-12-
<PAGE>
"Requirements" has the meaning provided in Section 6(iii) hereof.
"Revolving Notes" has the meaning provided in the Credit Agreement.
"Secured Creditors" has the meaning provided in the preamble hereto.
"Termination Date" has the meaning provided in Section 15 hereof.
Section 17. NOTICES. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and shall be delivered, mailed,
telegraphed, telexed, facsimile transmitted or cabled, addressed:
(a) if to the Pledgor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent to its office at:
One Chase Manhattan Plaza
Loan and Agency Services Group
8th Floor
New York, New York 10081
Telecopy (212) 552-5650
Attention: Jesus Sang
with a copy to:
Matthew Massie
Aerospace Group
270 Park Avenue
38th Floor
New York, New York 10017
Telecopy (212) 270-5100
(c) if to any Bank, either (x) to the Agent, at the address of the
Agent specified in the Credit Agreement or (y) at such address as such Bank
shall have specified in the Credit Agreement;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder. All such
notices and communications shall, when mailed, telegraphed, telexed, facsimile
transmitted or cabled or sent by overnight courier, be effective on the third
Business Day following deposit in the U.S. mails, certified, return receipt
requested, when delivered to the telegraph company, cable company or on the day
following delivery to an overnight courier, as the case may be, or sent by telex
or facsimile device, except that notices and communications to the Collateral
Agent shall not be effective until received by the Collateral Agent.
-13-
<PAGE>
Section 18. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until payment in full in cash of
all Obligations, (ii) be binding upon the Pledgor, its successors and
assigns, and (iii) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral Agent and each
other Secured Creditor and each of their respective successors, transferees
and assigns; no other persons (including, without limitation, any other
creditor of the Pledgor) shall have any interest herein or any right or
benefit with respect hereto. Without limiting the generality of the foregoing
clause (iii) and subject to the provisions of the Credit Agreement, any
Secured Creditor may assign or otherwise transfer any indebtedness held by it
secured by this Agreement to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits in
respect thereof granted to such Secured Creditor herein or otherwise,
subject, however, to the provisions of the Credit Agreement.
Section 19. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
Section 20. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All
judicial proceedings brought against the Pledgor with respect to this
Agreement may be brought in any state or federal court of competent
jurisdiction in the State of New York and by execution and delivery of this
Agreement, the Pledgor accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. The Pledgor designates
and appoints CT Corporation System, 1633 Broadway, New York, New York 10019
and such other Persons as may hereafter be selected by the Pledgor
irrevocably agreeing in writing to so serve, as its agent to receive on its
behalf service of all process in any such proceedings in any such court, such
service being hereby acknowledged by the Pledgor to be effective and binding
service in every respect. A copy of any such process so served shall be
mailed by registered mail to the Pledgor at the address set forth on the
signature page of this Agreement, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity
of service of process. If any agent appointed by the Pledgor refuses to
accept service, the Pledgor hereby agrees that service upon it by mail shall
constitute sufficient notice. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of the
Collateral Agent to bring proceedings against the Pledgor in the courts of
any other jurisdiction.
Section 21. SECURITY INTEREST ABSOLUTE. The obligations of the
Pledgor hereunder shall remain in full force and effect without regard to, and
shall not be impaired by, (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of the Pledgor,
except to the extent that the enforceability thereof may be limited by any such
event; (b) any exercise or non-exercise, or any waiver of, any right, remedy,
power or privilege under or in respect of this Agreement or any other Credit
Document, except as
-14-
<PAGE>
specifically set forth in a waiver granted pursuant to Section 14; (c) any
amendment to or modification of any Credit Document or any security for any
of the Obligations, whether or not the Pledgor shall have notice or knowledge
of any of the foregoing, except as specifically set forth in an amendment or
modification executed pursuant to Section 14; (d) any lack of validity or
enforceability of the Credit Agreement or any other agreement or instrument
relating thereto; or (e) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, the Pledgor.
Section 22. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 23. HEADINGS. Section headings used in this Agreement are
for convenience of reference only and shall not affect the construction of
this Agreement.
Section 24. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same Agreement. A
set of the counterparts executed by all the parties hereto shall be lodged
with the Pledgor and the Collateral Agent.
Section 25. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the Pledgor and its successors and assigns and shall inure to
the benefit of the Collateral Agent and each Secured Creditor and their
respective successors and assigns; PROVIDED that the Pledgor may not transfer
or assign any or all of its rights or obligations hereunder without the prior
written consent of the Collateral Agent. All agreements, statements,
representations and warranties made by the Pledgor herein or in any
certificate or other instrument delivered by the Pledgor or on its behalf
under this Agreement shall be considered to have been relied upon by the
Secured Creditors and shall survive the execution and delivery of this
Agreement and the other Credit Documents regardless of any investigation made
by the Secured Creditors or on their behalf.
Section 26. THE PLEDGOR'S DUTIES. It is expressly agreed,
anything herein contained to the contrary notwithstanding, that the Pledgor
shall remain liable to perform all of the obligations, if any, assumed by it
with respect to the Collateral and the Collateral Agent shall not have any
obligations or liabilities with respect to any Collateral by reason of or
arising out of this Agreement, nor shall the Collateral Agent be required or
obligated in any manner to perform or fulfill any of the obligations of the
Pledgor under or with respect to any Collateral.
Section 27. LIMITED OBLIGATIONS. It is the desire and intent of
the Pledgor, the Collateral Agent and the Secured Creditors that this
Agreement shall be enforced against the Pledgor to the fullest extent
permissible under the laws and public policies applied in each jurisdiction
in which enforcement is sought. If and to the extent that the obligations of
the Pledgor under this Agreement shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers, which laws would determine the solvency of the Pledgor by
-15-
<PAGE>
reference to the full amount of the Obligations at the time of the execution
and delivery of this Agreement), then the amount of the Obligations of the
Pledgor shall be deemed to be reduced and the Pledgor shall pay the maximum
amount of the Obligations which would be permissible under the applicable
law.
-16-
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NORTHWEST AIRLINES, INC.
By: /s/ ROLF S. ANDRESEN
------------------------------------------
Title: Vice President - Finance and Chief
Accounting Officer
Notice Address:
Northwest Airlines, Inc.
2700 Lone Oak Parkway
Eagan, Minnesota 55121
Attention: General Counsel
THE CHASE MANHATTAN BANK
as Collateral Agent
By: /s/ Matthew Massie
----------------------------------------
Title: Vice President
-17-
<PAGE>
SCHEDULE I
SCHEDULE OF PLEDGED ROUTES
<TABLE>
<CAPTION>
Route
Number of
Certificate Certificate Current
Route to or Exemption Containing Issued by Expiration
be Pledged Authority Authority DOT/CAB Order Date
---------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
U.S.-Pacific Certificate Route 129 Order 90-6-44 None
(U.S.-Japan/Asia/Pacific Order 92-3-38 None
Certificate Amendment (Amended to add
Application Pending) Indonesia and
integrate Malaysia)
U.S.-Japan and beyond Exemption Notice of Action 3/31/00
with open intermediates Taken in Docket
OST-98-3653
Guam/Saipan/Northern Certificate Route 539 Order 93-4-39 5/20/98
Marianas-Tokyo (Renewal Application
Pending)
Guam/Saipan/Northern Certificate Route 579 Order 95-9-23 10/28/00
Marianas-Nagoya/
Fukuoka
Guam/Saipan/Northern Certificate Route 580 Order 96-5-9 6/12/01
Marianas-Naha
Honolulu-Nagoya/ Certificate Route 584 Order 96-5-9 6/12/01
Fukuoka
U.S.-China (Named U.S. Certificate Route 378 Order 93-4-39 5/20/98
gateways to named (Renewal Application
points in China, via Pending)
Japan)
Detroit-Beijing added Order 96-10-44 12/5/01
as Segment 2
U.S.-China 9 weekly Frequency Order 97-1-13 12/24/98
roundtrip frequencies Allocation
<PAGE>
SCHEDULE I
Page 2
Route
Number of
Certificate Certificate Current
Route to or Exemption Containing Issued by Expiration
be Pledged Authority Authority DOT/CAB Order Date
---------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
U.S.-Thailand 5 weekly Frequency Order 97-9-20 8/29/98
roundtrip all-cargo Allocation
frequencies
(Application for
Extension of Dormancy
Condition on 5th
frequency pending)
U.S.-Philippines 14 Frequency Order 96-9-11 9/30/98
weekly roundtrip Allocation
combination frequencies
U.S.-Philippines 2 Frequency Order 97-8-22 10/1/98
weekly roundtrip all- Allocation
cargo frequencies
</TABLE>
<PAGE>
EXHIBIT 12.1
NORTHWEST AIRLINES CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- ---------------------
1998 1997 1998 1997
------- -------- ------- --------
<S> <C> <C> <C> <C>
EARNINGS:
Income before income taxes $ 80.7 $ 222.4 $ 195.7 $ 327.0
Less: Income from less than 50%
owned investees 5.4 6.4 6.2 13.8
Add:
Rent expense representative of interest (1) 48.8 50.4 96.2 97.2
Interest expense net of capitalized interest 63.3 57.8 116.3 113.8
Interest of mandatorily redeemable
preferred security holder 5.3 5.9 11.0 12.0
Amortization of debt discount and expense 3.5 1.4 5.8 2.6
Amortization of interest capitalized 0.9 0.7 1.7 1.4
------- -------- ------- --------
ADJUSTED EARNINGS $ 197.1 $ 332.2 $ 420.5 $ 540.2
------- -------- ------- --------
------- -------- ------- --------
FIXED CHARGES:
Rent expense representative of interest (1) $ 48.8 $ 50.4 $ 96.2 $ 97.2
Interest expense net of capitalized interest 63.3 57.8 116.3 113.8
Interest of mandatorily redeemable
preferred security holder 5.3 5.9 11.0 12.0
Amortization of debt discount and expense 3.5 1.4 5.8 2.6
Capitalized interest 4.1 3.0 7.1 5.4
------- -------- ------- --------
FIXED CHARGES $ 125.0 $ 118.5 $ 236.4 $ 231.0
------- -------- ------- --------
------- -------- ------- --------
RATIO OF EARNINGS TO FIXED CHARGES 1.58 2.80 1.78 2.34
------- -------- ------- --------
------- -------- ------- --------
</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 SIX MONTHS ENDED
JUNE 30 JUNE 30
----------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EARNINGS:
Income before income taxes $ 80.7 $ 222.4 $ 195.7 $ 327.0
Less: Income from less than 50%
owned investees 5.4 6.4 6.2 13.8
Add:
Rent expense representative of interest (1) 48.8 50.4 96.2 97.2
Interest expense net of capitalized interest 63.3 57.8 116.3 113.8
Interest of mandatorily redeemable
preferred security holder 5.3 5.9 11.0 12.0
Amortization of debt discount and expense 3.5 1.4 5.8 2.6
Amortization of interest capitalized 0.9 0.7 1.7 1.4
------- ------- ------- -------
ADJUSTED EARNINGS $ 197.1 $ 332.2 $ 420.5 $ 540.2
------- ------- ------- -------
------- ------- ------- -------
FIXED CHARGES AND PREFERRED STOCK REQUIREMENTS:
Rent expense representative of interest (1) $ 48.8 $ 50.4 $ 96.2 $ 97.2
Interest expense net of capitalized interest 63.3 57.8 116.3 113.8
Interest of mandatorily redeemable
preferred security holder 5.3 5.9 11.0 12.0
Preferred stock requirements 0.3 8.3 0.7 16.4
Amortization of debt discount and expense 3.5 1.4 5.8 2.6
Capitalized interest 4.1 3.0 7.1 5.4
------- ------- ------- -------
FIXED CHARGES AND PREFERRED
STOCK REQUIREMENTS $ 125.3 $ 126.8 $ 237.1 $ 247.4
------- ------- ------- -------
------- ------- ------- -------
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK REQUIREMENTS 1.57 2.62 1.77 2.18
------- ------- ------- -------
------- ------- ------- -------
</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> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998
<CASH> 1,034 898
<SECURITIES> 108 113
<RECEIVABLES> 595 597
<ALLOWANCES> 20 24
<INVENTORY> 387 410
<CURRENT-ASSETS> 2,480 2,393
<PP&E> 4,984 5,261
<DEPRECIATION> 1,983 2,059
<TOTAL-ASSETS> 9,531 9,696
<CURRENT-LIABILITIES> 3,094 3,536
<BONDS> 2,173 2,678
275 266
0 0
<COMMON> 849 1
<OTHER-SE> (201) (65)
<TOTAL-LIABILITY-AND-EQUITY> 9,531 9,696
<SALES> 2,215 4,502
<TOTAL-REVENUES> 2,429 4,905
<CGS> 0 0
<TOTAL-COSTS> 2,272 4,628
<OTHER-EXPENSES> 41 81
<LOSS-PROVISION> 2 5
<INTEREST-EXPENSE> 58 129
<INCOME-PRETAX> 115 196
<INCOME-TAX> 44 76
<INCOME-CONTINUING> 71 120
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 71 120
<EPS-PRIMARY> .72 1.29
<EPS-DILUTED> .66 1.17
</TABLE>