<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1998
REGISTRATION NO. 333-41579
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
NORTHWEST AIRLINES NORTHWEST AIRLINES,
CORPORATION INC.
(Exact name of Registrants as specified in their charters)
DELAWARE MINNESOTA
(State or other jurisdiction of incorporation or organization)
4512 4512
(Primary Standard Industrial Classification Code Number)
95-4205287 41-0449230
(I.R.S. Employer Identification Number)
--------------
2700 LONE OAK PARKWAY
EAGAN, MINNESOTA 55121
(612) 726-2111
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
------------------
DOUGLAS M. STEENLAND, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
NORTHWEST AIRLINES CORPORATION
2700 LONE OAK PARKWAY
EAGAN, MINNESOTA 55121
(612) 726-2111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
COPY TO:
WILSON S. NEELY, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3954
(212) 455-2000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
(CONTINUED ON FOLLOWING PAGE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Pursuant to Rule 429 of the Rules and Regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended, the Forms of
Prospectus included in this Registration Statement also relate to an aggregate
remaining amount of $304,191,000 of the classes of Securities covered by such
Forms of Prospectus previously registered under the Registration Statements on
Form S-3 (File Nos. 333-13307 and 333-28649). A filing fee of $86,206.90 was
paid on October 2, 1996 and November 12, 1996 in connection with the remaining
amount of Securities registered under the Registration Statement on Form S-3
(File No. 333-13307), and a filing fee of $86,206.90 was paid on June 5, 1997 in
connection with the remaining amount of Securities registered under the
Registration Statement on Form S-3 (File No. 333-28649). This Registration
Statement is a new Registration Statement, constitutes Post-Effective Amendment
No. 7 to Registration Statement No. 333-13307 and Post-Effective Amendment No. 4
to Registration Statement No. 333-28649, and such Post-Effective Amendments
shall hereafter become effective concurrently with the effectiveness of this
Registration Statement and in accordance with Section 8(c) of the Securities Act
of 1933, as amended.
--------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
--------------
<PAGE>
Information contained in this preliminary prospectus supplement is subject to
completion or amendment. These securities may not be sold nor may offers to buy
be accepted prior to the time a final prospectus supplement is delivered. This
preliminary prospectus supplement and the accompanying prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
<PAGE>
FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NO. 333-41579
REGISTRATION NO. 333-41579-01
PROSPECTUS SUPPLEMENT (SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998)
(TO PROSPECTUS, SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998)
$400,000,000
[LOGO]
NORTHWEST AIRLINES, INC.
FULLY AND UNCONDITIONALLY GUARANTEED BY
NORTHWEST AIRLINES CORPORATION
$200,000,000 7 5/8% NOTES DUE 2005
$200,000,000 7 7/8% NOTES DUE 2008
----------------
INTEREST PAYABLE MARCH 15 AND SEPTEMBER 15
-------------------
THE NOTES DUE 2005 AND THE NOTES DUE 2008 (COLLECTIVELY, THE "NOTES") WILL
MATURE ON MARCH 15, 2005 AND MARCH 15, 2008, RESPECTIVELY. THE NOTES MAY BE
REDEEMED AT ANY TIME, AT THE OPTION OF NORTHWEST AIRLINES, INC. ("NORTHWEST"),
IN WHOLE OR IN PART, AT A PRICE EQUAL TO 100% OF THE PRINCIPAL AMOUNT PLUS
ACCRUED AND UNPAID INTEREST, IF ANY, TO THE DATE OF REDEMPTION PLUS A
MAKE-WHOLE PREMIUM, IF ANY, RELATING TO THE THEN PREVAILING TREASURY
YIELD AND THE REMAINING LIFE OF THE NOTES. THE NOTES WILL RANK PARI
PASSU WITH ALL UNSECURED AND UNSUBORDINATED INDEBTEDNESS OF
NORTHWEST. THE NOTES WILL BE FULLY AND UNCONDITIONALLY GUARANTEED ON
A SENIOR BASIS BY NORTHWEST AIRLINES CORPORATION ("NWA CORP." AND,
TOGETHER WITH ITS SUBSIDIARIES, THE "COMPANY"), THE INDIRECT
PARENT OF NORTHWEST.
AS OF DECEMBER 31, 1997, NORTHWEST HAD $2,099.2 MILLION OF LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS WHICH WOULD RANK PARI PASSU IN RIGHT OF PAYMENT WITH
THE NOTES, OF WHICH $1,587.4 MILLION WAS SECURED BY NORTHWEST'S ASSETS, AND
NO LONG-TERM DEBT OR CAPITAL LEASE OBLIGATIONS WHICH WOULD RANK SENIOR IN
RIGHT OF PAYMENT TO THE NOTES. AS OF THE SAME DATE, NWA CORP. HAD $729.8
MILLION OF LONG-TERM DEBT OBLIGATIONS (CONSISTING ENTIRELY OF NWA
CORP.'S GUARANTEES OF THE INDEBTEDNESS OF SUBSIDIARIES) WHICH WOULD
RANK PARI PASSU IN RIGHT OF PAYMENT WITH THE PARENT GUARANTY OF THE
NOTES, NONE OF WHICH WAS SECURED BY NWA CORP.'S ASSETS.
THE NOTES WILL BE REPRESENTED BY ONE OR MORE GLOBAL NOTES IN FULLY REGISTERED
FORM, WITHOUT COUPONS, DEPOSITED WITH A CUSTODIAN FOR AND REGISTERED IN THE
NAME OF A NOMINEE OF THE DEPOSITORY TRUST COMPANY ("DTC"). EXCEPT AS
DESCRIBED HEREIN, BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL BE SHOWN
ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS
MAINTAINED BY DTC AND ITS DIRECT OR INDIRECT PARTICIPANTS. SEE
"DESCRIPTION OF DEBT SECURITIES--GLOBAL DEBT SECURITIES" IN THE
ACCOMPANYING PROSPECTUS.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-7 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
NOTES DUE 2005 - PRICE 99.615% AND ACCRUED INTEREST, IF ANY
NOTES DUE 2008 - PRICE 99.920% AND ACCRUED INTEREST, IF ANY
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) NORTHWEST(1)(3)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
PER NOTE DUE 2005.............................. 99.615% 1.250% 98.365%
TOTAL.......................................... $199,230,000 $2,500,000 $196,730,000
PER NOTE DUE 2008.............................. 99.920% 1.500% 98.420%
TOTAL.......................................... $199,840,000 $3,000,000 $196,840,000
</TABLE>
- ------------------
(1) PLUS ACCRUED INTEREST, IF ANY, FROM MARCH 4, 1998.
(2) NORTHWEST AND NWA CORP. HAVE AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST
CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SEE "UNDERWRITERS."
(3) BEFORE DEDUCTING ESTIMATED EXPENSES OF $550,000 PAYABLE BY NORTHWEST.
------------------------
THE NOTES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY SHEARMAN &
STERLING, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY OF THE
NOTES WILL BE MADE ON OR ABOUT MARCH 4, 1998 THROUGH THE BOOK-ENTRY FACILITIES
OF DTC AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
---------------------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
BT ALEX. BROWN
CHASE SECURITIES INC.
FEBRUARY , 1998
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF NORTHWEST OR NWA CORP. SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITERS."
--------------
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the accompanying Prospectus include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements other than statements of historical facts included in
the Prospectus Supplement and the accompanying Prospectus, including, without
limitation, statements regarding the Company's future financial position, as
well as certain of those relating to transactions regarding or with Continental
Airlines, Inc. and KLM Royal Dutch Airlines and the U.S.-Japan bilateral
aviation agreement are forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will be correct.
Important factors that could cause actual results to differ materially from the
Company's expectations are disclosed under "Risk Factors", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Prospectus Supplement and the accompanying Prospectus.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
NWA Corp. and Northwest................................................... S-3
Recent Developments....................................................... S-3
Use of Proceeds........................................................... S-4
Summary Consolidated Financial and Operating Data......................... S-5
Risk Factors.............................................................. S-7
Capitalization............................................................ S-11
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. S-12
Description of Notes...................................................... S-21
Underwriters.............................................................. S-24
Legal Opinions............................................................ S-25
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 3
Ratio of Earnings to Fixed Charges........................................ 3
Description of Debt Securities............................................ 3
Description of Warrants................................................... 13
Plan of Distribution...................................................... 15
Legal Opinions............................................................ 16
Experts................................................................... 16
</TABLE>
S-2
<PAGE>
NWA CORP. AND NORTHWEST
Northwest, the principal wholly-owned indirect subsidiary of NWA Corp.,
operates the world's fourth largest airline (as measured by 1996 revenue
passenger miles ("RPMs")) and is engaged principally in commercial
transportation of passengers and cargo. Northwest's business focuses on the
development of a global airline network through the optimization of its domestic
hubs at Detroit, Minneapolis/St. Paul and Memphis, an extensive Pacific route
system with hubs at Tokyo and Osaka, and a transatlantic alliance with KLM Royal
Dutch Airlines ("KLM"), which operates through a hub in Amsterdam.
Northwest operates substantial domestic and international route networks. As
of December 31, 1997, Northwest directly served more than 150 cities in 18
countries on the continents of North America, Asia and Europe. Northwest had
more than 54 million enplanements and flew over 72 billion RPMs in 1997.
RECENT DEVELOPMENTS
CONTINENTAL AIRLINES, INC.
On January 25, 1998, Northwest and Continental Airlines, Inc.
("Continental") entered into an agreement providing for a global strategic
operating alliance (the "alliance agreement"). The thirteen year alliance, when
fully implemented, will connect the two carriers' networks and will include
code-sharing, frequent flyer program reciprocity, cooperation between
Continental and KLM and other cooperative activities. Full implementation of the
alliance agreement is contingent on approval under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), approval of the
Department of Transportation and the successful conclusion of negotiations with
Northwest's pilots' union. The two airlines have no plans to merge their
operations and will retain separate boards, management and headquarters. No
layoffs, mergers of workforces, transfers of flying or assets or closures of
facilities are planned.
On January 25, 1998, NWA Corp. entered into an Investment Agreement pursuant
to which NWA Corp. will acquire the beneficial ownership of 8,535,868 shares of
Class A Common Stock of Continental. These shares represent approximately 14
percent of Continental's common stock equity and 52 percent of its outstanding
common stock voting power. The aggregate consideration was valued at
approximately $519 million and is expected to consist of $311 million in cash
and 4.1 million shares of newly issued common stock. The transaction, which is
expected to close by the end of 1998, is subject to customary closing
conditions, including approval under HSR. For additional information regarding
the formation of a new holding company and the related corporate restructuring,
see Note S to the Consolidated Financial Statements (as defined herein)
incorporated by reference in the accompanying Prospectus.
In connection with the Investment Agreement and the alliance agreement, NWA
Corp. entered into a Governance Agreement with Continental for a six-year term.
The Governance Agreement contains certain restrictions on NWA Corp.'s ability to
acquire additional shares of Continental common stock and to vote such shares
and restrictions on NWA Corp.'s ability to affect the composition and conduct of
Continental's Board of Directors.
KLM
In September 1997, the Company and KLM expanded their joint venture alliance
by entering into an enhanced commercial and operational alliance providing for a
minimum term of 13 years. In connection with the expanded alliance agreement,
NWA Corp. entered into an agreement to repurchase the shares of NWA Corp. common
stock held by KLM over a three year period. On January 16, 1998, NWA Corp. and
KLM reached an agreement in principle to accelerate NWA Corp.'s repurchase of
KLM's remaining 18,177,874 shares of NWA Corp. common stock. The estimated
purchase price of $775 million will be paid with a combination of senior
unsecured notes in the aggregate principal amount of approximately
S-3
<PAGE>
$440 million and cash in the amount of approximately $335 million. The notes
will have principal amounts of approximately $204 million, $136 million and $100
million and will mature on September 29, 1998, 1999 and 2000, respectively. The
closing of the repurchase will occur no later than May 1, 1998 and is subject to
the approval of the NWA Corp. board of directors and the KLM supervisory board.
Under certain limited circumstances (the failure of the alliance to maintain
certain antitrust immunity or Northwest's default under the alliance agreement),
KLM will have an option to buy back from NWA Corp. up to the number of shares
being repurchased by NWA Corp.
LEGAL MATTERS
In January 1998, Northwest received a civil investigative demand ("CID")
from the Antitrust Division of the Department of Justice ("DOJ") related to an
antitrust investigation to determine whether there are, have been or may be
violations of Sections 1 and 2 of the Sherman Act related to, among other
things, monopolization of hub markets. Northwest understands that this is part
of a larger DOJ investigation of competitive practices in the airline industry.
The CID is a request for information in the course of a civil antitrust
investigation and does not constitute the institution of legal proceedings.
Northwest anticipates filing information with the DOJ that it believes will be
responsive to the CID.
USE OF PROCEEDS
Net proceeds from the sale of the Notes will be used for general corporate
purposes.
S-4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents summary consolidated financial data and
operating statistics of NWA Corp. The annual historical financial data were
derived from NWA Corp.'s Consolidated Financial Statements incorporated by
reference in the accompanying Prospectus and should be read in conjunction
therewith. See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1997 1996 1995
---------- -------------- ----------
<S> <C> <C> <C>
STATEMENT OF INCOME DATA (IN MILLIONS):
Operating revenues
Passenger........................................................... $ 8,822.1 $ 8,598.3 $ 7,762.0
Cargo............................................................... 789.4 745.8 751.2
Other............................................................... 614.3 536.4 571.7
---------- -------------- ----------
10,225.8 9,880.5 9,084.9
---------- -------------- ----------
Operating expenses
Salaries, wages and benefits........................................ 3,023.9 2,709.4 2,412.1
Stock-based employee compensation................................... -- 242.8 478.0
Aircraft fuel and taxes............................................. 1,393.8 1,396.9 1,083.8
Commissions......................................................... 855.2 868.4 840.5
Aircraft maintenance materials and repairs.......................... 620.4 556.2 395.4
Other rentals and landing fees...................................... 456.7 454.0 476.2
Aircraft rentals.................................................... 358.9 346.3 338.9
Depreciation and amortization....................................... 396.0 377.7 358.1
Other............................................................... 1,963.7 1,875.0 1,788.5
---------- -------------- ----------
9,068.6 8,826.7 8,171.5
---------- -------------- ----------
Operating income...................................................... 1,157.2 1,053.8 913.4
Other income (expense)
Interest expense.................................................... (244.7) (269.8) (401.2)
Other--net.......................................................... 72.1 88.4 31.3
---------- -------------- ----------
(172.6) (181.4) (369.9)
---------- -------------- ----------
Income before extraordinary item(1):.................................. $ 605.8 $ 536.1 $ 342.1
---------- -------------- ----------
---------- -------------- ----------
Earnings per common share(2):.........................................
Basic............................................................... $ 5.89 $ 5.05 $ 3.11
Diluted............................................................. $ 5.29 $ 4.52 $ 2.90
---------- -------------- ----------
---------- -------------- ----------
OTHER DATA (IN MILLIONS EXCEPT FINANCIAL RATIO DATA):
Ratio of earnings to fixed charges.................................... 3.05x 2.74x 1.90x(3)
Cash provided by operating activities................................. $ 1,607.3 $ 1,372.3 $ 1,460.6
Cash used in investing activities..................................... (885.9) (1,241.9) (245.7)
Cash used in financing activities..................................... (540.4) (421.9) (832.0)
EBIT(4)............................................................... 1,218.7 1,134.9 930.8
EBITDA(5)............................................................. 1,614.7 1,512.6 1,288.9
EBITDAR(6)............................................................ 1,973.6 1,858.9 1,627.8
EBIT/interest expense................................................. 5.2x 4.3x 2.4x
EBITDA/interest expense............................................... 6.9 5.8 3.3
EBITDAR/interest expense and aircraft rentals......................... 3.3 3.1 2.2
</TABLE>
(FOOTNOTES TO TABLE ON NEXT PAGE)
S-5
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1997 1996 1995
OPERATING STATISTICS(7): --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Scheduled Service:
Available seat miles (millions)(8).................... 96,963.6 93,913.7 87,472.0
Revenue passenger miles (millions)(9)................. 72,031.3 68,639.1 62,515.2
Passenger load factor(%)(10).......................... 74.3 73.1 71.5
Revenue passengers (millions)......................... 54.7 52.7 49.3
Revenue yield per passenger mile (cents)(11).......... 12.11 12.53 12.42
Passenger revenue per scheduled ASM (cents)........... 9.00 9.16 8.87
Operating revenue per total ASM (cents)(12)............. 9.76 9.85 9.58
Operating expense per total ASM (cents)(12)............. 8.63 8.78 8.66
Cargo ton miles (millions)(13).......................... 2,282.8 2,215.8 2,246.3
Cargo revenue per ton mile (cents)...................... 34.5 33.7 33.4
Fuel gallons consumed (millions)........................ 1,996.3 1,945.1 1,846.2
Average fuel cost per gallon (cents).................... 64.86 67.21 55.66
Number of operating aircraft at year-end................ 405 399 380
Full-time equivalent employees at year-end.............. 48,984 47,536 45,124
</TABLE>
<TABLE>
<CAPTION>
AT AT
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
BALANCE SHEET DATA (IN MILLIONS):
Cash, cash equivalents & unrestricted short-term investments....................... $ 1,039.9 $ 752.1
Total assets....................................................................... 9,336.2 8,511.7
Long-term debt, including current maturities....................................... 2,069.3 2,060.4
Long-term obligations under capital leases, including current obligations.......... 705.3 772.2
Mandatorily redeemable preferred security of subsidiary............................ 486.3 549.2
Redeemable stock:
Preferred........................................................................ 306.2 602.6
Common........................................................................... 848.5 --
Common stockholders' equity (deficit).............................................. (311.0) 92.9
</TABLE>
- --------------------
(1) The 1997 and 1995 extraordinary items were $(9.3) million and $49.9
million, respectively.
(2) Excludes the effects of the 1997 extraordinary loss ($.10 per basic share
and $.08 per diluted share), the 1996 preferred stock transaction ($.75 per
basic share and $.68 per diluted share), the 1995 preferred stock
transaction ($.64 per basic share and $.58 per diluted share) and the 1995
extraordinary gain ($.55 per basic share and $.50 per diluted share).
(3) Calculated after reclassification of interest of mandatorily redeemable
preferred security holder to other income (expense).
(4) EBIT represents income before extraordinary items plus the sum of interest
expense (net of capitalized interest) and income tax expense.
(5) EBITDA represents EBIT, as defined in (4) above, plus depreciation and
amortization.
(6) EBITDAR represents EBITDA, as defined in (5) above, plus aircraft rentals.
EBIT, EBITDA and EBITDAR are presented because each is a widely accepted
financial indicator of a company's ability to incur and service debt.
However, EBIT, EBITDA and EBITDAR should not be considered in isolation, as
a substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity.
(7) All statistics exclude Express Airlines I, Inc.
(8) "Available seat miles" ("ASMs") represents the number of seats available
for passengers multiplied by the number of scheduled miles the seats are
flown.
(9) "Revenue passenger miles" represents the number of miles flown by revenue
passengers in scheduled service.
(10) "Passenger load factor" is calculated by dividing revenue passenger miles
by available seat miles, and represents the percentage of aircraft seating
capacity utilized.
(11) "Revenue yield per passenger mile" represents the average revenue received
from each mile a passenger is flown in scheduled service.
(12) Excludes the estimated revenues and expenses associated with the operation
of Northwest's fleet of eight 747 freighter aircraft and MLT Inc.
(13) "Cargo ton miles" represents the tonnage of freight and mail carried
multiplied by the number of miles flown.
S-6
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes should carefully review the information
contained elsewhere in this Prospectus Supplement and the accompanying
Prospectus and should particularly consider the following matters.
COMPANY AND NOTE RELATED RISKS
INDEBTEDNESS
As of December 31, 1997, the Company had long-term debt (47% of which bears
interest at floating rates) and capital lease obligations of $2.5 billion
(excluding current maturities of $283 million). Maturities of long-term debt as
of December 31, 1997 were $227 million in 1998, $185 million in 1999 and $47
million in 2000. As of December 31, 1997, future minimum lease payments under
capital leases and noncancellable operating leases with initial or remaining
terms of more than one year were $586 million in 1998, $566 million in 1999 and
$542 million in 2000. These amounts do not include, as of December 31, 1997, (i)
mandatory redemption obligations in an aggregate amount equal to $306.2 million
in respect of its Series C Preferred stock beginning in 2003, (ii) the
mandatorily redeemable preferred security of NWA Corp.'s subsidiary in an amount
equal to $486.3 million and (iii) $848.5 million to acquire all NWA Corp. common
stock currently held by KLM. See "Recent Developments" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Reserves" for a discussion of 1998 anticipated
funding requirements.
As of December 31, 1997, Northwest had $2,099.2 million of long-term debt
and capital lease obligations which would rank PARI PASSU in right of payment
with the Notes, of which $1,587.4 million was secured by Northwest's assets, and
no long-term debt or capital lease obligations that would rank senior in right
of payment to the Notes. As of the same date, NWA Corp. had $729.8 million of
indebtedness which would rank PARI PASSU in right of payment with the full and
unconditional guarantee by NWA Corp. of the Notes (the "Parent Guaranty"), none
of which indebtedness was secured by NWA Corp.'s assets, and no long-term debt
that would rank senior in right of payment to the Parent Guaranty.
The Notes will rank PARI PASSU in right of payment to all other unsecured
and unsubordinated indebtedness of Northwest, and the Parent Guaranty will rank
PARI PASSU with all other unsecured and unsubordinated indebtedness of NWA Corp.
The Notes are effectively subordinated to the claims of Northwest's secured
lenders, and the Parent Guaranty is effectively subordinated to the claims of
NWA Corp.'s secured lenders and claims against NWA Corp.'s subsidiaries.
ABSENCE OF CERTAIN COVENANTS
The terms of the Notes and the Parent Guaranty do not limit Northwest's or
NWA Corp.'s ability to incur additional indebtedness that may be PARI PASSU in
right of payment to the Notes or the Parent Guaranty, to incur liens or to pay
dividends or make other distributions on, or redeem or repurchase, NWA Corp.'s
capital stock. In addition, the Notes do not contain provisions that would give
holders of the Notes the right to require Northwest to repurchase their Notes in
the event of a change of control of Northwest or a decline in the credit rating
of Northwest's or NWA Corp.'s debt securities from a takeover, recapitalization
or similar restructuring or any other reason.
FOREIGN CURRENCY EXPOSURE
A significant portion of the Company's operations is conducted in foreign
locations. Consequently, the Company has operating revenues and, to a lesser
extent, operating expenses, as well as assets and liabilities, denominated in
foreign currencies, particularly in Japanese yen. Its operating performance can
therefore be significantly affected by fluctuations in such foreign currencies.
From time to time, the Company uses options and forward contracts to hedge a
portion of its anticipated yen-denominated net
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cash flows. As of December 31, 1997, the Company had entered into $523.5 million
(67.5 billion yen) in purchased yen put options to hedge approximately 90% of
its 1998 yen net cash flows.
POSSIBLE LIMITATION ON NOL CARRYFORWARDS
The Company utilized net operating loss carryforwards ("NOLs") of
approximately $1.2 billion in 1994 through 1996 and alternative minimum tax net
operating loss carryforwards ("AMTNOLs") of approximately $590 million in 1993
through 1996. Sections 382 and 383 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder impose limitations on the
carryforward amounts of NOLS, AMTNOLs and credits that can be used to offset
taxable income (or used as a credit) in any single tax year if the corporation
experiences more than a 50% ownership change, as defined therein, over a
three-year testing period ending on any testing date. In general, if such an
"ownership change" occurs, Section 382 limits the amount of NOLs, AMTNOLs and
credits which may be carried forward from pre-ownership change years that can be
used in any one post-change year to an amount equal to the product of the value
of the corporation's stock for tax purposes immediately before the change
multiplied by the "long-term tax-exempt rate" as determined by the Internal
Revenue Service (the "IRS") for the month of the change. Management believes
that an offering of outstanding common stock by existing stockholders in
November 1995 triggered an ownership change, but that no ownership change
occurred prior to such offering. If such an ownership change in fact occurred as
a result of the November 1995 offering, management believes that, even as
limited by Sections 382 and 383 of the Code, the NOLs, AMTNOLs and credits would
be used significantly earlier than their expiration, and the annual limitations
would not have an adverse impact on the Company. However, if the IRS were to
successfully assert that an ownership change had occurred on any prior date,
including August 1, 1993 (the date of the Company's labor agreements), the
impairment of the Company's ability to use its NOLs, AMTNOLs and credit
carryforwards would be significant because the value of NWA Corp.'s stock on
certain prior testing dates, which adversely affects the annual limitation
described above, was relatively low.
OTHER TAX MATTERS
In November 1995, the IRS issued proposed adjustments to the tax returns of
the Company for the 1988 through 1991 tax years. Certain of these proposed
adjustments result from a disagreement between the Company and the IRS as to the
timing of the recognition of approximately $385 million of taxable income. The
Company disagrees with the IRS' proposals. The Company is vigorously contesting
these proposed adjustments and believes its positions are correct. To the extent
the IRS were to prevail on any of these issues, the Company would recognize
taxable income and utilize net operating loss carryforwards sooner than
otherwise scheduled. For financial reporting purposes, any adjustments to
taxable income would largely be accounted for as temporary differences and would
not result in a material change to the Company's income tax expense.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
The Notes will be new securities for which there currently is no market.
Although the Underwriters have informed Northwest that they currently intend to
make a market in the Notes, they are not obligated to do so, and any such market
making may be discontinued at any time without notice. If the Underwriters cease
to act as a market maker for the Notes for any reason, there can be no assurance
that another firm or person will make a market in the Notes. There can be no
assurance that an active market for the Notes will develop or, if a market does
develop, at what price the Notes will trade. Northwest does not intend to apply
for listing of the Notes on any securities exchange or for quotation through the
Nasdaq National Market.
NEGATIVE NET WORTH
NWA Corp. had a common stockholders' equity deficit as of December 31, 1997
of $311.0 million. There may be investors and lenders who have policies that
limit or preclude their investment in or lending
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to companies with a common stockholders' equity deficit, and therefore NWA
Corp.'s common stockholders' equity deficit may affect its ability to obtain
additional financing in the future.
LABOR AGREEMENTS
The Company's labor contract with each of its unions became amendable in
1996. Consequently, labor wage rates and costs are subject to collective
bargaining. While the Company cannot predict the wage rates that will ultimately
be in effect (since such rates will be determined by collective bargaining),
management believes that the Company's labor costs will remain competitive in
comparison to other large U.S. airlines. The Company cannot, however, predict
the ultimate outcome of the negotiations at this time.
INDUSTRY RELATED RISKS
INDUSTRY CONDITIONS AND COMPETITION
The airline industry is highly competitive and susceptible to price
discounting. Airline profit levels are highly sensitive to, and from 1990 to
1992 were severely impacted by, adverse changes in fuel costs, average yield
(fare levels) and passenger demand. Passenger demand and yields were adversely
affected during this period by, among other things, the general state of the
economy, the Persian Gulf War and actions taken by carriers with respect to
fares. As a result of this adverse operating environment, from 1990 to 1992 the
domestic airline industry, including the Company, incurred unprecedented losses.
The emergence in recent years of several new carriers, typically with low
cost structures, has further increased the competitive pressures on the major
U.S. airlines. In some cases, the new entrants have initiated or triggered price
discounting. Aircraft, skilled labor and gates at most airports continue to be
available to start-up carriers. The commencement of service by new carriers on
Northwest's routes could negatively impact Northwest's operating results. In
addition, certain existing U.S. domestic carriers compete primarily by offering
low-cost air service on route networks that do not employ hub-and-spoke systems.
These discount air carriers could affect the yields of major domestic carriers
such as Northwest.
Although the domestic airline industry has at present abandoned deeply
discounted general pricing structures, and fare levels have continued to
increase from 1992 levels, significant industry-wide discounts could be
reimplemented at any time, and the introduction of broadly available, deeply
discounted fares by a major U.S. airline would result in lower yields for the
entire industry and could have a material adverse effect on the Company's
operating results.
The increased competitive environment resulting from the recently signed
Memorandum of Consultation between the U.S. and Japan and the general economic
environment in Asia may adversely impact Northwest's Pacific revenues in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Other Information." In addition, an outbreak of
hostilities in the Persian Gulf could have a material adverse effect on the
Company's operating results.
AIRCRAFT FUEL COSTS
Because fuel costs are a significant portion of the Company's operating
costs (approximately 15.4% for 1997), significant changes in fuel costs would
materially affect the Company's operating results. Fuel prices continue to be
susceptible to, among other factors, political events, and the Company cannot
control near or longer-term fuel prices. In the event of a fuel supply shortage
resulting from a disruption of oil imports or otherwise, higher fuel prices or
curtailment of scheduled service could result. A one cent change in the cost per
gallon of fuel (based on 1997 consumption) would impact operating expense by
approximately $1.7 million per month. Changes in fuel prices may have a greater
impact on Northwest than some of its competitors because of the composition of
its fleet.
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REGULATORY MATTERS
In the last several years, the Federal Aviation Administration (the "FAA")
has issued a number of maintenance directives and other regulations relating to,
among other things, collision avoidance systems, airborne windshear avoidance
systems, noise abatement and increased inspection requirements. Northwest
expects to continue to incur expenditures for the purpose of complying with the
FAA's noise and aging aircraft regulations.
Additional laws and regulations have been proposed from time to time that
could significantly increase the cost of airline operations by, for instance,
imposing additional requirements or restrictions on operations. Laws and
regulations also have been considered from time to time that would prohibit or
restrict the ownership and/or transfer of airline routes or takeoff and landing
slots. Also, the award of international routes to U.S. carriers (and their
retention) is regulated by treaties and related agreements between the United
States and foreign governments which are amended from time to time. Northwest
cannot predict what laws and regulations will be adopted or what changes to
international air transportation treaties will be effected, if any, or how they
will affect Northwest.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of NWA Corp. on a
consolidated basis at December 31, 1997. The table should be read in conjunction
with NWA Corp.'s Consolidated Financial Statements incorporated by reference in
the accompanying Prospectus. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
--------------------
(IN MILLIONS)
<S> <C>
Cash, cash equivalents and unrestricted short-term investments.............................. $ 1,039.9
--------
--------
Short-term debt:
Short-term borrowings..................................................................... $ 53.7
Current maturities of long-term debt...................................................... 227.4
Current obligations under capital leases.................................................. 55.9
--------
Total short-term debt................................................................... $ 337.0
--------
--------
Long-term debt and capital lease obligations:
Term loan................................................................................. $ 150.0
Equipment pledge notes.................................................................... 225.0
Secured notes due through 2009............................................................ 348.9
Sale-leaseback financing obligations...................................................... 223.0
Unsecured notes........................................................................... 249.7
NWA Trust No. 1 Notes..................................................................... 195.1
NWA Trust No. 2 Notes..................................................................... 258.4
Term certificates......................................................................... 135.0
Long-term obligations under capital leases................................................ 649.4
Other..................................................................................... 56.8
--------
Total long-term debt and capital lease obligations...................................... 2,491.3
--------
Mandatorily Redeemable Preferred Security of subsidiary which holds solely non-recourse
obligation of Northwest................................................................... 486.3
Series C Preferred Stock, $.01 par value; authorized 25,000,000 shares, 6,628,566 issued and
outstanding............................................................................... 306.2
Common Stock subject to repurchase; 18,177,874 shares....................................... 848.5
Common stockholders' equity (deficit):
Common Stock $.01 par value; 315,000,000 shares authorized; 103,780,875 shares issued and
outstanding............................................................................. 1.0
Additional paid-in capital.................................................................. 1,273.8
Accumulated deficit and other............................................................... (464.2)
Treasury stock; 6,800,000 shares and 18,177,874 shares to be repurchased.................... (1,121.6)
--------
Total common stockholders' equity (deficit)............................................. (311.0)
--------
Total capitalization.................................................................... $ 3,821.3
--------
--------
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
REFERENCES TO THE "CONSOLIDATED FINANCIAL STATEMENTS" MEAN THE COMPANY'S
AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO FOR THE YEAR ENDED
DECEMBER 31, 1997 INCORPORATED BY REFERENCE IN THE ACCOMPANYING PROSPECTUS. SEE
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" IN THE ACCOMPANYING
PROSPECTUS.
NWA Corp. reported record net income of $596.5 million and operating income
of $1.16 billion for the year ended December 31, 1997. Diluted earnings per
share were $5.21 compared with $5.20 per diluted share in 1996. Excluding the
impact of the 1997 extraordinary item and 1996 preferred stock transaction,
diluted earnings per share were $5.29 in 1997 compared with $4.52 in 1996, a 17%
improvement. Operating income increased by $103.4 million compared with 1996,
with operating margin increasing to 11.3% from 10.7% in 1996.
The Company completed several transactions in 1997 to strengthen its
long-term financial position and enhance earnings as described in "Liquidity and
Capital Resources." As of December 31, 1997, total available liquidity was $2.12
billion, the highest level in Company history.
Northwest is the principal indirect operating subsidiary of NWA Corp.,
accounting for more than 95% of the Company's 1997 consolidated operating
revenues and expenses. The Company acquired Express Airlines I, Inc. ("Express")
on April 1, 1997 and the operating results of Express are included in the
consolidated financial statements commencing on that date. The Company's
operating results are significantly impacted by both general and industry
economic environments. Small fluctuations in revenue per available seat mile
("RASM") and cost per available seat mile ("CASM") can have significant impacts
on the Company's profitability.
RESULTS OF OPERATIONS--1997 COMPARED TO 1996
OPERATING REVENUES. Operating revenues were $10.23 billion, an improvement
of $345.3 million (3.5%). Operating revenue per total service available seat
mile ("ASM") decreased .9%. System passenger revenue increased $223.8 million
(2.6%) due to a 3.2% increase in scheduled service ASMs and the inclusion of
Express revenues of $100.1 million. These increases were offset by a 1.7%
decrease in passenger RASM driven by unfavorable foreign currency translation
and the reinstatement of federal ticket taxes in March 1997.
The composition of the Company's operating revenues in each of the past
three years is summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Passenger revenue
Domestic......................................................... 57.5% 57.9% 56.1%
Pacific.......................................................... 21.5 22.8 23.8
Atlantic......................................................... 6.3 6.4 5.5
Express.......................................................... 1.0 -- --
--------- --------- ---------
Total passenger revenue............................................ 86.3 87.1 85.4
Cargo revenue........................................................ 7.7 7.5 8.3
Other revenue........................................................ 6.0 5.4 6.3
--------- --------- ---------
Total operating revenues......................................... 100.0% 100.0% 100.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Domestic passenger revenue, excluding Express, increased $165.5 million
(2.9%) to $5.88 billion. A 2.2% increase in scheduled service ASMs and a .7%
increase in passenger RASM resulted in the improved performance. The Company
increased frequencies to ten cities and entered six new markets which
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<PAGE>
accounts for the increase in scheduled service ASMs. The increase in RASM was
due to a 2.6% (1.8 points) increase in passenger load factor offset by a 2.0%
decrease in yield due to the reinstatement of federal taxes on airline tickets
and international departures. The Company benefited from the absence of ticket
taxes for only two months in 1997 versus eight months in 1996. See also "Other
Information-- U.S. TRANSPORTATION TAXES."
Pacific passenger revenue decreased $58.4 million (2.6%) to $2.19 billion
due to a 7.7% decrease in Pacific passenger RASM which was partially offset by a
5.6% increase in scheduled service ASMs related to initiation of Minneapolis/St.
Paul-Osaka service and additional trans-Pacific frequencies, mainly for the
Minneapolis/St. Paul-Tokyo service. The decrease in Pacific RASM was primarily
due to a 7.4% decrease in yield which was largely attributable to a weaker
Japanese yen. The average yen per United States ("U.S.") dollar exchange rate
for the twelve months ended December 31, 1997 and 1996 was 120 and 108,
respectively, a weakening of the yen of 11.2%. Atlantic passenger revenue
increased $16.6 million (2.6%) to $647.1 million due to a 1.7% increase in
scheduled service ASMs and an increase in passenger RASM of .9%.
Cargo revenue increased $43.6 million (5.8%) due to a 2.6% increase in cargo
revenue per ton mile and 3.0% more cargo ton miles primarily due to the
development of a more efficient freighter schedule. The increase in cargo
revenue per ton mile was primarily due to increased import sales driven by the
continued strength of the U.S. dollar versus Asian currencies. Other revenue
increased $77.9 million (14.5%) due to settlements under the joint venture
alliance with KLM and increased charter activity.
OPERATING EXPENSES. Operating expenses increased $241.9 million (2.7%)
compared to the 3.3% capacity increase to 97.1 billion total service ASMs.
Operating expense per total service ASM decreased for the first time in four
years from 8.78 cents per total service ASM to 8.63 cents, a decrease of 1.7%.
Salaries, wages and benefits increased $314.5 million (11.6%) due primarily to
the end of the Wage Savings Period as discussed under "Liquidity and Capital
Resources--LABOR AGREEMENTS" and an increase in average full-time equivalent
employees of 3.3%. The increase in full-time equivalent employees was
attributable to the increased flying of 3.3% and increased traffic of 3.7%.
Offsetting the increased salaries, wages and benefits expense was $49.2 million
in lower pension expense due to a higher pension discount rate applied in 1997
compared to 1996. Aircraft fuel and taxes decreased $3.1 million (.2%) due to a
3.5% decrease in the average fuel price per gallon from 67.21 cents to 64.86
cents offset by an increase of 2.6% in fuel gallons consumed. Commissions
decreased $13.2 million (1.5%) primarily due to increased domestic revenue where
effective commission rates are lower than those paid internationally and also
due to changes in the Company's commission structure beginning in September 1997
which reduced commissions paid from 10% to 8% on tickets purchased in the U.S.
or Canada for travel to destinations outside North America. Aircraft maintenance
materials and repairs increased $64.2 million (11.5%) due primarily to $19.1
million (3.4%) related to Express and an increased number of scheduled airframe
and engine overhauls in accordance with the Company's maintenance program. The
Company contracted for some of its additional maintenance work with outside
suppliers, resulting in labor costs that would normally be classified as
salaries and wages to be included in maintenance materials and repairs expense.
Other expenses (the principal components of which include outside services,
selling and marketing expenses, passenger food, personnel, advertising and
promotional expenses, communication expenses and supplies) increased $88.7
million (4.7%), due primarily to increased volume and rates for outside
services, selling and marketing fees and personnel expenses.
OTHER INCOME AND EXPENSE. Interest expense-net decreased $28.4 million
(10.8%) primarily due to the retirement of debt prior to scheduled maturity and
lower interest rates on debt. The foreign currency gain for the twelve months
ended December 31, 1997 was primarily attributable to balance sheet
remeasurement of foreign currency-denominated assets and liabilities.
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EXTRAORDINARY ITEM. The Company repurchased for $78.7 million certain NWA
Trust No. 2 aircraft notes in January 1998 pursuant to a tender offer. An
extraordinary loss of $9.3 million, net of tax, was recorded in 1997 as 99% of
the notes were tendered by December 31, 1997.
RESULTS OF OPERATIONS--1996 COMPARED TO 1995
OPERATING REVENUES. Operating revenues were $9.88 billion, an improvement
of $795.6 million (8.8%). Operating revenue per total service ASM increased
2.8%. System passenger revenue increased 10.8% due to a 7.4% increase in
scheduled service ASMs and a 3.3% increase in passenger RASM which was
attributable to a .9% increase in system yield and a 2.2% (1.6 points) increase
in passenger load factor.
Domestic passenger revenue of $5.72 billion increased $618.1 million
(12.1%). A 6.3% increase in scheduled service ASMs and a 5.4% increase in RASM
resulted in the improved performance. The increase in scheduled service ASMs
resulted primarily from the addition of 19 aircraft, which allowed the Company
to increase frequencies to 23 cities and enter seven new markets. The increase
in RASM was largely driven by a 4.6% increase in yield which was favorably
impacted by the lapsed federal ticket taxes. See "Other Information--U.S.
TRANSPORTATION TAXES."
Pacific passenger revenue increased $92.4 million (4.3%) to $2.25 billion
due to an 8.3% increase in scheduled service ASMs resulting primarily from new
service to Beijing, China and additional frequencies due to higher utilization
of existing aircraft. However, RASM decreased by 3.8% because of a 7.5% decrease
in yield which was somewhat mitigated by a 4.1% (3.1 points) increase in
passenger load factor. The Pacific yield decreased primarily because of a weaker
Japanese yen. The average yen per U.S. dollar exchange rate for the years ended
December 31, 1996 and 1995 was 108 and 94, respectively, a weakening of the yen
of 14.9%. Atlantic passenger revenue increased $125.9 million (24.9%) to $630.5
million, due to a 12.0% increase in scheduled service ASMs and an 11.5% increase
in RASM which was largely yield related.
Cargo revenue decreased $5.4 million (.7%) due to 1.4% fewer cargo ton
miles. Cargo capacity was reduced because of increased passenger loads. Other
revenue decreased $35.3 million (6.2%) due primarily to decreased charter
activity.
OPERATING EXPENSES. Operating expenses increased $655.2 million (8.0%).
While operating capacity increased 7.3% to 94.0 billion total service ASMs,
operating expense per total service ASM increased 1.4% largely related to higher
fuel prices and increased maintenance costs somewhat offset by lower stock-based
compensation. Salaries, wages and benefits increased $297.3 million (12.3%) due
primarily to an increase in average full-time equivalent employees of 4.7% and
the end of the Wage Savings Period. The increase in full-time equivalent
employees was attributable to the increased flying of 7.3% and increased traffic
of 6.8%. Additionally, included in the increased salaries, wages and benefits
expense was a $73.8 million unfavorable impact of pension expense due to a lower
pension discount rate applied in 1996 compared to 1995. Non-cash stock-based
employee compensation expense is a function of shares earned by employees and
the period-ending common stock price. The 1996 stock-based compensation expense
decreased to $242.8 million from $478.0 million for 1995 because fewer shares
were earned by employees in 1996 (7.2 million common equivalent shares compared
with 9.4 million common equivalent shares earned in 1995) and the common stock
price used to measure expense decreased to a weighted average of $33.77 per
share for 1996 from $51.00 per share for 1995. Aircraft fuel and related taxes
increased 28.9% from $1.08 billion to $1.40 billion. A 20.8% increase in average
fuel cost per gallon and an excise tax increase which was effective October 1995
caused $256.6 million of the increase with the balance attributable to increased
flying. Commissions increased $27.9 million (3.3%) as a result of a 10.8%
increase in passenger revenue somewhat offset by the impact of a decrease in the
effective domestic commission rate. Aircraft maintenance materials and repairs
increased $160.8 million (40.7%) due to a number of factors including the timing
of maintenance activities, increased flying, higher engine overhaul costs and
the impact of favorable vendor settlements in 1995. Other rentals and landing
fees decreased $22.2 million (4.7%) due
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<PAGE>
primarily to the weakening of the Japanese yen. Other expenses increased $86.5
million (4.8%), due primarily to increased volume and rates for outside
services, promotional and personnel expenses.
OTHER INCOME AND EXPENSE. Interest expense-net decreased $124.8 million
(32.2%) primarily due to the retirement of debt prior to scheduled maturity and
the October 1995 restructuring of the Company's financing arrangement related to
certain property in Japan. The foreign currency gain of $19.1 million was
attributable to balance sheet remeasurement of foreign currency-denominated
assets and liabilities. The $18.0 million benefit in other-net was largely due
to a $25.5 million increase in income related to an equity investment in an
affiliate offset by the payment of $10.9 million made related to the travel
agency litigation settlement.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of $740.4
million, unrestricted short-term investments of $299.5 million, borrowing
capacity of $839.2 million under its revolving credit facility and the ability
under another facility to borrow up to $240 million using existing aircraft as
collateral, providing total available liquidity of $2.12 billion.
Cash flows from operating activities were $1.61 billion for 1997 which
included higher than normal sale proceeds of frequent flyer miles in excess of
revenue, in the amount of $387.7 million. Such higher than normal sale proceeds
were due to a 1997 bulk sale of such miles to the Company's frequent flyer
partners. Cash flows from operating activities were $1.37 billion for 1996 and
$1.46 billion for 1995. Net cash used in investing and financing activities
during 1997, 1996 and 1995 was $1.43 billion, $1.66 billion and $1.08 billion,
respectively.
INVESTING ACTIVITIES. Investing activities in 1997 consisted primarily of
costs to commission aircraft before entering revenue service, aircraft deposits,
the refurbishment of DC-9 aircraft, engine hushkitting, ground equipment
purchases, the acquisition of Express, the purchase off lease of four aircraft
and the purchase of eight RJ85 aircraft, one DC 10-30 aircraft and three DC 9-30
aircraft. Investing activities in 1996 pertained primarily to the acquisition of
13 Boeing 757 aircraft, seven DC9-30 aircraft, three DC10-30 aircraft and two
747-200 aircraft; the purchase off lease of 22 aircraft; and the refurbishment
of DC-9 aircraft. Capital expenditures for 1995 pertained primarily to aircraft
modifications, the acquisition of two Boeing 757 aircraft for sale and
leaseback, the acquisition of 14 DC-9 aircraft and deposits on ordered aircraft.
On January 25, 1998, NWA Corp. entered into an Investment Agreement pursuant
to which NWA Corp. will acquire the beneficial ownership of 8,535,868 shares of
Class A Common Stock of Continental. These shares represent approximately 14% of
Continental's common stock and 52% of its outstanding common stock voting power.
The aggregate consideration was valued at approximately $519 million and is
expected to consist of $311 million in cash and 4.1 million shares of newly
issued common stock. The cash is expected to be funded from the Company's
general working capital which may be supplemented by the proceeds of unsecured
borrowings in the public capital markets. 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.
FINANCING ACTIVITIES. Financing activities in 1997 pertained primarily to
NWA Corp.'s repurchases of its common stock and Series A and B Preferred Stock,
the issuance of $250 million of unsecured notes, the sale and leaseback of eight
RJ85 aircraft and the payment of debt and capital lease obligations. In December
1997, the Company repurchased $39 million of its sale-leaseback financing
obligations. The Company's Credit Agreement was amended in December 1997 to
increase its existing unsecured revolving credit facility from $500 million to
$675 million and to extend the availability period to December 2002, and to add
a new $175 million 364-day unsecured revolving credit facility. If the 364-day
facility is not
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renewed for an additional 364-day period, the Company may borrow up to the
entire amount of the facility and all such borrowings mature in December 2002.
On September 29, 1997, the Company entered into agreements to repurchase for
$1.12 billion over three years the 25 million shares of NWA Corp. common stock
held by KLM. On that date, 6.8 million of such shares were repurchased for
$273.1 million. Concurrently, all of NWA Corp.'s Series A and B Preferred Stock
held by KLM and other holders was repurchased for $251.3 million. Both
repurchases were funded using existing cash resources. The remaining 18.2
million shares of common stock to be repurchased were reclassified to redeemable
common stock from common stockholders' equity, as required for such stock
transactions. However, earnings per share calculations will continue to include
the 18.2 million shares until actually repurchased. The Company and KLM also
expanded their alliance by entering into an enhanced commercial and operational
alliance providing for a minimum term of 13 years.
Subsequently, on January 16, 1998, NWA Corp. reached an agreement in
principle with KLM to accelerate the repurchase of the remaining 18.2 million
shares of common stock. The agreement in principle is subject to the execution
of definitive documentation and the approval of the respective boards of NWA
Corp. and KLM. The estimated purchase price of $775 million will be paid with a
combination of approximately $335 million of cash and three senior unsecured
notes for the remainder. The cash is expected to be funded from the Company's
general working capital which may be supplemented by the proceeds of unsecured
borrowings in the public capital markets. The transaction is expected to close
before May 1, 1998 at which time the 18.2 million remaining common shares will
be repurchased and excluded from the earnings per share calculations. See Note H
to the Consolidated Financial Statements.
Northwest sells certain receivables on an ongoing basis to Northwest Capital
Funding Corp., pursuant to a receivable financing program (the "Receivable
Program"). The Receivable Program provides for the early retirement of the
related term certificates upon the occurrence of certain events, one of which
occurred on January 25, 1998. Accordingly, the Company advised the trustee for
the certificateholders that these certificates will be paid in full on February
25, 1998.
Financing activities in 1996 pertained primarily to the sale and leaseback
of seven Boeing 757 aircraft and the payment of debt and capital lease
obligations, including prepayments of $180 million. In October 1996, the Credit
Agreement was amended to increase the term loan to $150 million and extend the
final maturity to 2002. In July 1996, NWA Corp. acquired from KLM 3,691.2 shares
of NWA Corp. Series A Preferred Stock and 2,962.8 shares of NWA Corp. Series B
Preferred Stock in exchange for $379 million of unsecured promissory notes which
were repaid in December 1996.
In October 1995 the Company completed a restructuring of its financing
arrangement related to certain property the Company owns in Japan. As a result,
long-term debt decreased by $695.9 million and was replaced by a $622.0 million
yen-denominated non-recourse obligation with longer maturities which is
reflected in the Company's balance sheet as a Mandatorily Redeemable Preferred
Security of Subsidiary which holds a solely non-recourse obligation of Company.
In December 1995 the Company retired the 1989 acquisition loan by prepaying the
remaining $837 million loan outstanding using proceeds from a new credit
facility and available funds. Also during 1995, Bankers Trust New York
Corporation exchanged 1,727 shares of NWA Corp.'s Series B Preferred Stock for
2,050,000 shares of NWA Corp.'s common stock.
See Note D to the Consolidated Financial Statements for maturities of
long-term debt for the five years subsequent to December 31, 1997.
CAPITAL COMMITMENTS. The current aircraft delivery schedule provides for
the acquisition of 115 aircraft over the next eight years. See Notes K and O to
Consolidated Financial Statements for additional discussion of aircraft capital
commitments. Other capital expenditures, including costs to commission presently
owned aircraft that have not yet entered revenue service, are projected for 1998
to be approximately $395 million which the Company anticipates funding primarily
with cash from operations.
The Company has adopted programs to hushkit and modify 173 DC-9 aircraft to
meet noise and aging aircraft requirements. As of December 31, 1997, the Company
had hushkitted 89 of these 173 DC-9 aircraft. Capital expenditures for engine
hushkits and aging aircraft modifications were $51 million in 1997
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and are expected to aggregate $360 million during the next five years for these
aircraft. The Company has also elected to upgrade aircraft systems and refurbish
interiors for the 173 DC-9 aircraft. Capital expenditures associated with
upgrading systems and interior refurbishment were $74 million in 1997 and are
expected to aggregate $54 million during the next five years.
The Company has commenced its program, adopted in 1996, to refurbish the
interiors of its international 747 and DC-10 aircraft, estimated to aggregate
$120 million over the next five years. In 1996, the Company adopted a program to
hushkit and modify 29 Boeing 727-200 aircraft, estimated to cost approximately
$65 million over the next two years.
LABOR AGREEMENTS. The labor cost savings discussed in Note C to
Consolidated Financial Statements which improved the Company's 1993 to 1996 cash
flow from operating activities ended on July 31, 1996 for flight attendants,
September 30, 1996 for mechanics, ground personnel and management and October
30, 1996 for pilots. The Company's agreements with the employee unions provided
that wage scales at the end of the Wage Savings Period snapback to August 1,
1993 levels and snap-up pursuant to formulae based in part on wage rates and
wage rate increases at other large U.S. airlines. Consequently, at the end of
the Wage Savings Period, salaries and wages increased by approximately $340
million on an annualized basis including $50 million for snap-ups.
The Company's labor contract with each of its unions became amendable as
each labor cost savings agreement ended. Consequently, future labor wage rates
and costs are subject to collective bargaining. While the Company cannot predict
the wage rates that will ultimately be in effect (since such rates will be
determined by collective bargaining), management believes that its labor costs
will remain competitive in comparison to other large U.S. airlines. The Company
cannot predict the ultimate outcome of the negotiations at this time.
WORKING CAPITAL. The Company operates, like its competitors, with a working
capital deficit which aggregated $674.2 million at December 31, 1997. The
working capital deficit is primarily attributable to the $1.22 billion air
traffic liability for advance ticket sales.
MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS
The risk inherent in the Company's market risk sensitive instruments and
positions is the potential loss arising from adverse changes in the price of
fuel, foreign currency exchange rates and interest rates as discussed below. The
sensitivity analyses presented do not consider the effects that such adverse
changes may have on overall economic activity nor do they consider additional
actions management may take to mitigate its exposure to such changes. Actual
results may differ. See Notes A and P to the Consolidated Financial Statements
for accounting policies and additional information, respectively.
AIRCRAFT FUEL. The Company's earnings are affected by changes in the price
and availability of aircraft fuel. In order to provide a measure of control over
price and supply, the Company trades and ships fuel and maintains fuel storage
facilities to support its flight operations. The Company also manages the price
risk of fuel costs primarily utilizing futures contracts traded on regulated
exchanges. Market risk is estimated as a hypothetical 10% increase in the
December 31, 1997 cost per gallon of fuel based on projected 1998 fuel usage
which would result in an increase to aircraft fuel expense of approximately $90
million in 1998, net of gains realized from fuel hedge instruments outstanding
at December 31, 1997. Gains or losses on hedge contracts are deferred until the
related fuel inventory is expensed. As of December 31, 1997, the Company had
hedged approximately 28% of its 1998 fuel requirements, including 63% of the
first quarter.
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. From time to time, the Company uses options and forward contracts
to hedge its anticipated yen-denominated net cash flows. The result of a uniform
10%
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strengthening in the value of the U.S. dollar from December 31, 1997 levels
relative to each of the currencies in which the Company's sales and expenses are
denominated would result in a decrease in operating income of approximately $48
million for the year ending December 31, 1998, net of gains realized from yen
hedge instruments outstanding at December 31, 1997, due to the Company's
foreign-denominated revenues exceeding its foreign-denominated expenses. The
increase to other income due to the remeasurement of net foreign
currency-denominated liabilities and the increase to common stockholders' equity
deficit due to the translation of net yen-denominated liabilities resulting from
a 10% strengthening in the value of the U.S. dollar is not material. This
sensitivity analysis was prepared based upon projected 1998 foreign
currency-denominated revenues and expenses and foreign currency-denominated
assets and liabilities as of December 31, 1997.
In 1997, the Company's yen-denominated revenues exceeded its yen-denominated
expenses by approximately 75 billion yen (approximately $625 million) and its
yen-denominated liabilities exceeded its yen-denominated assets by an average of
13.3 billion yen ($109 million) during 1997. In general, each time the yen
strengthens (weakens), the Company's on-going operating income is favorably
(unfavorably) impacted due to net yen-denominated cash flows and a nonoperating
foreign currency loss (gain) is recognized due to the remeasurement of net
yen-denominated liabilities. The Company's operating income was negatively
impacted by approximately $70 million due to a weaker yen in 1997 compared to
1996. The yen to U.S. dollar exchange rate at December 31, 1997, 1996 and 1995
was 131 yen to $1, 116 yen to $1 and 103 yen to $1, respectively. There was no
material impact on 1997 earnings associated with the Japanese yen collar option
and forward contracts. As of December 31, 1997, the Company had purchased put
options to hedge approximately 90% of its 1998 net yen-denominated cash flows.
INTEREST. The Company's earnings are also affected by changes in interest
rates due to the impact those changes have on its interest income from cash
equivalents and short-term investments and its interest expense from
variable-rate debt instruments. The Company has mitigated this risk by limiting
its variable-rate debt instruments to approximately 47% of long-term debt at
December 31, 1997. If long-term interest rates average 10% more in 1998 than
they did during 1997, the Company's net interest expense would increase by
approximately $7 million. If short-term interest rates average 10% more in 1998
than they did during 1997, the Company's interest income from cash equivalents
and short-term investments would increase by approximately $7 million. These
amounts are determined by considering the impact of the hypothetical interest
rates on the Company's variable-rate long-term debt and cash equivalent and
short-term investment balances at December 31, 1997.
Market risk for fixed-rate long-term debt is estimated as the potential
increase in fair value resulting from a hypothetical 10% decrease in interest
rates and amounts to approximately $45 million. The fair values of the Company's
long-term debt were estimated using quoted market prices or discounted future
cash flows based on the Company's incremental borrowing rates for similar types
of borrowing arrangements.
OTHER INFORMATION
INCOME TAXES. Sections 382 and 383 of the Internal Revenue Code of 1986
(the "Code") and the regulations thereunder impose limitations on the
carryforward amounts of net operating losses ("NOLs"), alternative minimum tax
net operating losses ("AMTNOLs") and credits that can be used to offset taxable
income (or used as a credit) in any single year if the corporation experiences
more than a 50% ownership change, as defined therein, over a three-year testing
period ending on any testing date. See Note J to the Consolidated Financial
Statements for information regarding income taxes and NOLs, AMTNOLs and credits.
Management believes that an offering of outstanding common stock by existing
stockholders in November 1995 triggered an ownership change, but that no
ownership change occurred prior to such offering. If such an ownership change in
fact occurred as a result of the November 1995 offering,
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management believes that even as limited by Sections 382 and 383 of the Code,
the NOLs, AMTNOLs and credits would be used significantly earlier than their
expiration, and the annual limitation would not have an adverse impact on the
Company. However, if the Internal Revenue Service (the "IRS") were to
successfully assert that an ownership change had occurred on any prior date,
including August 1, 1993 (the date of the labor agreements), the impairment of
the Company's ability to use its NOLs, AMTNOLs and credit carryforwards would be
significant because the value of the Company's stock on certain prior testing
dates (which adversely affects the annual limitation) was relatively low.
U.S. TRANSPORTATION TAXES. The United States 10% passenger ticket tax
applicable to domestic travel, the 6.25% domestic cargo waybill tax and the $6
per passenger international departure tax expired on December 31, 1995.
Consequently, the Company ceased collecting these taxes on January 1, 1996.
These taxes were reinstated for tickets sold subsequent to August 27, 1996 for
travel through December 31, 1996. These taxes lapsed again on December 31, 1996
and were reinstated for tickets sold from March 7, 1997 to September 30, 1997.
The Company estimates that the reinstatement of the transportation taxes had
approximately a $183 million adverse impact on passenger revenues for the year
ended December 31, 1997.
The Taxpayer Relief Act enacted by Congress revised transportation taxes and
instituted new taxes for tickets for travel from October 1, 1997 to December 31,
2007. The legislation included a reduction in the domestic passenger ticket tax
to 7.5% over three years (the rate decreased to 9% on October 1, 1997) with
certain rural airports subject to a 7.5% tax throughout the life of the bill.
The $6 international departure tax increased to $12 and a new $12 international
arrival tax was imposed (both began for tickets sold on or after August 13, 1997
for travel commencing on or after October 1, 1997). The departure tax on travel
between the U.S. 48 states and Alaska or Hawaii remained at $6. A new segment
fee applicable to domestic travel began at $1 for the period from October 1,
1997 to September 30, 1998 and will gradually increase to $3 for the calendar
year 2002. Rural airports are exempt from this segment fee, but travel between
the U.S. 48 states and Alaska or Hawaii is subject to this new tax. Both the
international departure and arrival taxes and the segment fee will be indexed
each year to the consumer price index. In addition, a 7.5% tax on the sale of
frequent flyer miles was included in the legislation. The impact of the changes
is expected to increase annualized U.S. transportation taxes collected by
Northwest from current levels by approximately $50 million resulting in an
undetermined dilution of future passenger revenue.
U.S.--JAPAN AVIATION BILATERAL. On January 30, 1998, the U.S. and Japan
signed a Memorandum of Consultation ("MOC"). The MOC outlines the agreement to
modify the 1952 U.S.--Japan bilateral aviation agreement until a final
Memorandum of Understanding is executed. Among other things, the MOC (1)
confirms Northwest's "fifth freedom" rights between Japan and other Asian
destinations, (2) provides unlimited opportunities to fly between any point in
the U.S. and any point in Japan, (3) allows certain code-sharing rights, (4)
provides opportunities for competitive pricing, (5) provides one additional
Japanese passenger airline and one additional Japanese all-cargo airline with
certificate authority issued pursuant to the 1952 aviation agreement and (6)
permits expanded frequencies for U.S. and Japan airlines not holding certificate
authority issued pursuant to the 1952 aviation agreement. In addition, the U.S.
has received assurances that Northwest will retain all 316 of its weekly takeoff
and landing slots at Tokyo's slot-constrained Narita International Airport,
along with Northwest's allocation of 142 slots at Osaka's Kansai Airport and
will have access to new slots as they become available. As a result of the MOC,
Northwest expects its U.S. and Japan airline competitors to add capacity between
the U.S. and Japan. Northwest expects to respond to the increased competition
and to take advantage of its affirmed and additional rights resulting from the
MOC. The increased competitive environment resulting from the MOC and the
general economic environment in Asia may adversely impact the Company's Pacific
revenues in 1998.
DETROIT MIDFIELD TERMINAL. In October 1996, the Company and Wayne County,
Michigan (the "County") entered into an agreement pursuant to which, subject to
the satisfaction of certain conditions set forth in the agreement, the Company
will manage and supervise the design and construction of a
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$960 million terminal at Detroit Metropolitan Wayne County Airport. The new
terminal is scheduled to be completed in 2001 and is anticipated to be funded
from federal and State of Michigan grants, passenger facility charges and the
County's issuance of airport bonds payable primarily from future passenger
facility charges. The Company and the County have entered into agreements
pursuant to which the Company will lease space in the new terminal for a term of
30 years from the date the terminal opens.
YEAR 2000 ISSUE. The Company uses a significant number of computer software
programs and embedded operating systems that are essential to its operations. As
a result, the Company implemented a Year 2000 project in 1996 to ensure that the
Company's computer systems will function properly in the Year 2000 and
thereafter. The Company anticipates completing its Year 2000 project in early
1999 and believes that with modifications to its existing software and systems
and/or conversions to new software, the Year 2000 Issue will not pose
significant operational problems for its computer systems.
The Company has also initiated communications with its significant suppliers
and vendors with whom the Company's systems interface and exchange data or upon
whom the Company's business depends and is coordinating efforts with these
outside third parties to minimize the extent to which its business will be
vulnerable to such third parties' failure to remediate their own Year 2000
Issues. The Company's business is also dependent upon certain governmental
organizations or entities which provide essential aviation industry
infrastructure, such as the Federal Aviation Administration ("FAA"). There can
be no assurance that the systems of such third parties on which the Company's
business relies (including those of the FAA) will be modified on a timely basis.
The Company's business, financial condition or results of operations could be
materially adversely affected by the failure of its systems or those operated by
other parties to operate properly beyond 1999. To the extent possible, the
Company will be developing and executing contingency plans designed to allow
continued operation in the event of failure of the Company's or third parties'
systems.
The total cost of the Company's Year 2000 project is currently estimated at
$55 million (of which $10 million has been spent and expensed) and is being
funded through cash from operations. The remaining costs for the Year 2000
project will be expensed as incurred. The costs of the Company's Year 2000
project and the date on which the Company believes it will be completed are
based on management's best estimates and include assumptions regarding third
party modification plans. However, in particular due to the potential impact of
third party modification plans, there can be no assurance that these estimates
will be achieved and actual results could differ materially from those
anticipated.
NEW ACCOUNTING STANDARDS. See Note A to the Consolidated Financial
Statements for recent accounting standards that impact future financial
statement disclosure requirements.
FORWARD-LOOKING STATEMENTS. Certain statements made in this Prospectus
Supplement and the accompanying Prospectus are forward-looking and are based
upon information available to the Company on the date hereof. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
These statements deal with the Company's expectations about the future and are
subject to a number of factors that could cause actual results to differ
materially from our expectations.
It is not reasonably possible to itemize all of the many factors and
specific events that could affect the outlook of an airline operating in the
global economy. Some factors that could significantly impact expected capacity,
load factors, revenues, expenses and cash flows include the airline pricing
environment, fuel costs, labor negotiations both at the Company and other
carriers, low-fare carrier expansion, capacity decisions of other carriers,
actions of the U.S. and foreign governments, foreign currency exchange rate
fluctuation, inflation, the general economic environment in the U.S. and other
regions of the world and other factors discussed herein.
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DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY (REFERRED TO IN THE PROSPECTUS AS "SENIOR DEBT SECURITIES") SUPPLEMENTS,
AND TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE DESCRIPTION OF THE
GENERAL TERMS AND PROVISIONS OF SENIOR DEBT SECURITIES SET FORTH IN THE
PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE. THE FOLLOWING SUMMARY
OF CERTAIN TERMS OF THE NOTES AND THE SENIOR INDENTURE DOES NOT PURPORT TO BE
COMPLETE AND IS SUBJECT TO, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO,
THE TRUST INDENTURE ACT OF 1939, AS AMENDED (THE "TIA"), AND TO ALL OF THE
PROVISIONS OF THE SENIOR INDENTURE AND THOSE TERMS MADE A PART OF THE SENIOR
INDENTURE BY REFERENCE TO THE TIA AS IN EFFECT ON THE DATE OF THE CLOSING OF THE
OFFERING OF THE NOTES.
GENERAL
The 7 5/8% Notes due 2005 (the "Notes due 2005") and the 7 7/8% Notes due
2008 (the "Notes due 2008", and, together with the Notes due 2005, the "Notes")
are each a series of Senior Debt Securities described in the accompanying
Prospectus.
The Notes will be general unsecured obligations of Northwest. The Notes due
2005 will mature on March 15, 2005, and will be limited to an aggregate
principal amount of $200,000,000, and the Notes due 2008 will mature on March
15, 2008, and will be limited to an aggregate principal amount of $200,000,000,
although the Senior Indenture provides that additional Senior Debt Securities
may be issued thereunder up to the aggregate principal amount, which is not
limited by the Senior Indenture (as defined in the Prospectus), authorized from
time to time by Northwest's Board of Directors. The Notes will bear interest at
the respective rates per annum shown on the cover of this Prospectus Supplement
from March 4, 1998 or from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semiannually on March 15 and
September 15 of each year, commencing September 15, 1998, to the person in whose
name the Note (or any predecessor Note) is registered at the close of business
on March 1 or September 1, as the case may be, next preceding such Interest
Payment Date. (Indenture Sections 3.1 and 3.7). The Notes will be issued in
fully registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. The Notes will be represented by one or more permanent global
Notes registered in the name of the The Depository Trust Company ("DTC") or its
nominee, as described below.
The Notes will be issued under an Indenture dated as of March 1, 1997 (the
"Senior Indenture"), among Northwest, as issuer, NWA Corp., as guarantor, and
State Street Bank and Trust Company, as trustee (the "Trustee").
The Notes will be fully and unconditionally guaranteed on an unsecured basis
by NWA Corp., which guarantee shall rank PARI PASSU with all future unsecured
and unsubordinated indebtedness of NWA Corp. and senior in right of payment to
all subordinated indebtedness of NWA Corp.
As discussed below, payment of principal of, and interest on, Notes
represented by one or more permanent global Notes registered in the name of or
held by DTC or its nominee, as the case may be, will be made in immediately
available funds to DTC or its nominee, as the case may be, as the registered
owner and holder of such permanent global Note or Notes.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the option of Northwest, at any time in
whole or from time to time in part, upon not less than 30 and not more than 60
days' notice mailed to each holder of Notes to be redeemed at the holder's
address appearing in the Register (as defined in the Senior Indenture), on any
date prior to maturity at a price equal to 100% of the principal amount thereof
plus accrued interest to the Redemption Date (as defined in the Senior
Indenture) (subject to the right of holders of record on the relevant record
date to receive interest due on an interest payment date that is on or prior to
the Redemption Date) plus a Make-Whole Premium (as defined below), if any (the
"Redemption Price"). In
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no event will the Redemption Price ever be less than 100% of the principal
amount of the Notes plus accrued interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Note (or portion
thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption Date, of:
(A) each interest payment that, but for such redemption, would have been
payable on the Note (or portion thereof) being redeemed on each
Interest Payment Date occurring after the Redemption Date (excluding
any accrued interest for the period prior to the Redemption Date);
and
(B) the principal amount that, but for such redemption, would have been
payable at the final maturity of the Note (or portion thereof) being
redeemed;
over
(ii) the principal amount of the Note (or portion thereof) being redeemed.
The present values of interest and principal payments referred to in clause
(i) above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield (as defined below) plus 37.5
basis points, in the case of the Notes due 2005, or 50.0 basis points, in the
case of the Notes due 2008.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by Northwest; provided, that
if Northwest fails to make such appointment at least 45 business days prior to
the Redemption Date, or if the institution so appointed is unwilling or unable
to make such calculation, such calculation will be made by Morgan Stanley & Co.
Incorporated or, if such firm is unwilling or unable to make such calculation,
by an independent investment banking institution of national standing appointed
by the Trustee (in any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means a
rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Notes, calculated to the nearest 1/12th of
a year (the "Remaining Term"). The Treasury Yield will be determined as of the
third business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be determined
by reference to the most recent statistical release published by the Federal
Reserve Bank of New York and designated "H.15(519) Selected Interest Rates" or
any successor release (the "H.15 Statistical Release"). If the H.15 Statistical
Release sets forth a weekly average yield for United States Treasury Notes
having a constant maturity that is the same as the Remaining Term, then the
Treasury Yield will be equal to such weekly average yield. In all other cases,
the Treasury Yield will be calculated by interpolation, on a straight-line
basis, between the weekly average yields on the United States Treasury Notes
that have a constant maturity closest to and greater than the Remaining Term and
the United States Treasury Notes that have a constant maturity closest to and
less than the Remaining Term (in each case as set forth in the H.15 Statistical
Release). Any weekly average yields so calculated by interpolation will be
rounded to the nearest 1/100th of 1%, with any figure of 1/200% or above being
rounded upward. If weekly average yields for United States Treasury Notes are
not available in the H.15 Statistical Release or otherwise, then the Treasury
Yield will be calculated by interpolation of comparable rates selected by the
Independent Investment Banker.
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If less than all of the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed by such method as the Trustee shall deem fair and
appropriate. The Trustee may select for redemption Notes and portions of Notes
in amounts of $1,000 or whole multiples of $1,000.
The Notes will not be entitled to the benefit of any sinking fund or other
mandatory redemption provisions.
GLOBAL NOTES
The Notes will be issued in whole or in part in the form of one or more
global Notes for each series (each, a "Global Note") deposited with, or on
behalf of, DTC and registered in the name of a nominee of DTC. Except under the
limited circumstances described in the Prospectus under "Description of Debt
Securities--Global Debt Securities," owners of beneficial interests in Global
Notes will not be entitled to physical delivery of Notes in certificated form.
Global Notes may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee
to a successor of DTC or a nominee of such successor. A further description of
DTC's procedures with respect to the Global Notes is set forth in the Prospectus
under "Description of Debt Securities--Global Debt Securities." It is
anticipated that DTC will confirm to Northwest, NWA Corp., the Underwriters and
the Trustee that it intends to follow such procedures.
It is anticipated that DTC will advise Northwest and the Underwriters as
follows. DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC's participants include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations and certain other organizations, some of which
(and/or their representatives) own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
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UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated the date hereof, the Underwriters named below have severally
agreed to purchase, and Northwest has agreed to sell to them, severally, the
respective principal amounts of the Notes set forth opposite their respective
names below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
NAME NOTES DUE 2005 NOTES DUE 2008
-------------- --------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated................................................ $ 100,000,000 $ 100,000,000
Goldman, Sachs & Co. ............................................................ 40,000,000 40,000,000
BT Alex. Brown Incorporated...................................................... 30,000,000 30,000,000
Chase Securities Inc............................................................. 30,000,000 30,000,000
-------------- --------------
Total........................................................................ $ 200,000,000 $ 200,000,000
-------------- --------------
-------------- --------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
Notes, if any are taken.
The Underwriters propose to initially offer the Notes in part directly to
the public at the public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of .250% of the principal amount of the Notes. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of .125% of
the principal amount of the Notes to certain brokers and dealers. After the
Notes are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
Northwest does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market-making may be discontinued at any time by the
Underwriters at their sole discretion. Accordingly, no assurance can be given as
to the liquidity of, or trading market for, the Notes.
In order to facilitate the offering of the Notes, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriters may overallot in connection with the
offering of the Notes, creating a short position in the Notes for their own
accounts. In addition, to cover overallotments or to stabilize the price of the
Notes, the Underwriters may bid for, and purchase, the Notes in the open market.
Finally, in the offering of the Notes, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Notes in the offering if the syndicate repurchases previously distributed Notes
in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of the Notes above independent market levels. The Underwriters are
not required to engage in these activities and may end any of these activities
at any time.
NWA Corp. and Northwest have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
Certain of the Underwriters and their affiliates have provided from time to
time, and expect to provide in the future, financial advisory, general financing
and banking and investment banking services to Northwest and NWA Corp. and its
affiliates, for which such Underwriters have received and will receive customary
fees and commissions. In addition, BT Alex. Brown Incorporated is an affiliate
of Bankers Trust Company of New York ("BTNY") and Bankers Trust Company
("BTCo."). George J. Vojta, who is a director of NWA Corp., is Vice Chairman and
a director of both BTNY and BTCo.
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LEGAL OPINIONS
The validity of the Notes being offered hereby and the Parent Guaranty by
NWA Corp. will be passed upon for Northwest and NWA Corp. by Simpson Thacher &
Bartlett, New York, New York. In rendering such opinion, Simpson Thacher &
Bartlett will rely as to matters of Minnesota law on an opinion from the Office
of the General Counsel of NWA Corp. and Northwest. Certain legal matters will be
passed upon for the Underwriters by Shearman & Sterling, New York, New York.
S-25
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998
PROSPECTUS
$1,500,000,000
NORTHWEST AIRLINES, INC.
DEBT SECURITIES AND WARRANTS TO PURCHASE DEBT SECURITIES
-------------
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST FULLY AND UNCONDITIONALLY
GUARANTEED BY
NORTHWEST AIRLINES CORPORATION
Northwest Airlines, Inc. ("Northwest") may from time to time offer, together
or separately, its debt securities, consisting of debentures, notes and/or other
evidences of indebtedness representing unsecured obligations of Northwest (the
"Debt Securities"), and warrants (the "Warrants") to purchase Debt Securities
(collectively, the "Securities"), in amounts, at prices and on terms to be
determined at the time of offering. The Debt Securities offered pursuant to this
Prospectus may be issued as unsecured and unsubordinated Debt Securities
("Senior Debt Securities") or as unsecured and subordinated Debt Securities
("Senior Subordinated Debt Securities"), in one or more series and, together
with any Warrants, will be limited to $1,500,000,000 aggregate public offering
price and exercise price (or its equivalent (based on the applicable exchange
rate at the time of sale) in one or more foreign currencies or currency units).
The specific terms of the particular Securities in respect of which this
Prospectus is being delivered (the "Offered Securities") will be set forth in a
supplement to this Prospectus (the "Prospectus Supplement") which will be
delivered together with this Prospectus, including, where applicable, in the
case of Debt Securities, the specific designation (including whether the Offered
Securities are Senior Debt Securities or Senior Subordinated Debt Securities),
aggregate principal amount, the denomination, maturity, premium, if any, the
rate (which may be fixed or variable), time and method of calculating payments
of interest, if any, the place or places where principal of, premium, if any,
and interest, if any, on such Debt Securities will be payable, the currency in
which principal of, premium, if any, and interest, if any, on such Debt
Securities will be payable, any terms of redemption at the option of Northwest
or the holder, any sinking fund provisions, the initial public offering price
and other special terms and, in the case of Warrants, the specific designation,
aggregate number, duration, initial public offering price, exercise price,
currency in which the exercise price is payable, detachability of any Warrants,
description of the Debt Securities for which such Warrants are exercisable,
terms of any mandatory or optional call and other special terms, together with
any other terms in connection with the offering and sale of the Offered
Securities, and the net proceeds to Northwest from such offering. This
Prospectus, together with the Prospectus Supplement relating to any Warrants
that have been issued, may also be delivered in connection with the issuance of
the Debt Securities for which such Warrants are exercised.
The Securities may be denominated in United States dollars or, at the option
of Northwest if so specified in the applicable Prospectus Supplement, in one or
more foreign currencies or currency units. The Debt Securities may be issued in
registered form or bearer form, or both. If so specified in the applicable
Prospectus Supplement, Debt Securities of a series may be issued in whole or in
part in the form of one or more temporary or permanent global securities.
The Senior Debt Securities will rank on a parity with all unsecured and
unsubordinated indebtedness of Northwest, and the Senior Subordinated Debt
Securities will be subordinated in right of payment to all Senior Indebtedness
(as hereinafter defined). See "Description of Securities--Subordination of
Senior Subordinated Debt Securities." The Senior Debt Securities and the Senior
Subordinated Debt Securities will be fully and unconditionally guaranteed (the
"Parent Guaranty") by Northwest Airlines Corporation ("NWA Corp." and, together
with its subsidiaries, the "Company"), the indirect parent of Northwest, on a
senior basis and a senior subordinated basis, respectively.
As of December 31, 1997, Northwest had $2,099.2 million of long-term debt
and capital lease obligations which would rank PARI PASSU in right of payment
with the Senior Debt Securities, of which $1,587.4 million was secured by
Northwest's assets and no long-term debt or capital lease obligations which
would rank senior in right of payment to the Senior Debt Securities. As of the
same date, Northwest had no long-term debt or capital lease obligations which
would rank PARI PASSU in right of payment with the Senior Subordinated Debt
Securities and $2,099.2 million of long-term debt and capital lease obligations
which would rank senior in right of payment to the Senior Subordinated Debt
Securities, of which $1,587.4 million was secured by Northwest's assets. As of
the same date, NWA Corp. had $729.8 million of long-term debt obligations
(consisting entirely of NWA Corp.'s guarantees of the indebtedness of
subsidiaries) which would rank PARI PASSU in right of payment with the Parent
Guaranty of the Senior Debt Securities, none of which was secured by NWA Corp.'s
assets, and which would rank prior in right of payment to the Parent Guaranty of
the Senior Subordinated Debt Securities. As of such date, NWA Corp. had no
obligations which would rank senior in right of payment to the Parent Guaranty
of the Senior Debt Securities and no obligations which would rank PARI PASSU in
right of payment with the Parent Guaranty of the Senior Subordinated Debt
Securities.
------------------
Northwest may sell the Securities to or through underwriters, through
dealers or agents or directly to purchasers. See "Plan of Distribution." The
Prospectus Supplement will set forth the names of any underwriters, dealers or
agents involved in the sale of the Offered Securities in respect of which this
Prospectus is being delivered, the proposed amounts, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters or agents.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES OR
WARRANTS UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is February , 1998.
<PAGE>
AVAILABLE INFORMATION
NWA Corp. and Northwest together have filed with the Securities and Exchange
Commission (the "Commission") Registration Statements on Form S-3 (together with
all amendments and exhibits, the "Registration Statements") under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Securities
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statements, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statements, reference is made to the exhibit
for a more complete description of the matter involved.
NWA Corp. is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Commission. Such
reports and other information, as well as the Registration Statement, including
exhibits and schedules filed therewith, may be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, Room 1024, and at the regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Northwest is not required to file
separate reports, proxy and information statements or other information with the
Commission pursuant to the requirements of the Exchange Act. Instead,
information with respect to Northwest is provided, to the extent required, in
filings made by NWA Corp.
Separate financial statements of Northwest are not being provided because
all of the securities being issued by Northwest under this prospectus are fully
and unconditionally guaranteed by NWA Corp. and such financial statements are
therefore not deemed material.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of NWA Corp., which have been filed with the
Commission, are hereby incorporated by reference in this Prospectus:
(a) NWA Corp.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) NWA Corp.'s Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997; and
(c) NWA Corp.'s Current Reports on Form 8-K dated March 6, 1997, November
25, 1997, January 25, 1998 and February 19, 1998.
All documents filed by NWA Corp. pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the respective dates of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. The Exchange Act file number is 0-23642.
NWA Corp. will provide without charge to any person to whom a copy of this
Prospectus has been delivered, upon written or oral request, a copy of any or
all of the foregoing documents incorporated herein by reference (other than
exhibits to such documents). Requests should be directed to the Secretary's
Office, NWA Corp., 5101 Northwest Drive, Dept. A1180, St. Paul, Minnesota
55111-3034, telephone number (612) 726-2111.
2
<PAGE>
THE COMPANY
Northwest, the principal wholly-owned indirect subsidiary of NWA Corp.,
operates the world's fourth largest airline (as measured by 1996 revenue
passenger miles ("RPMs")) and is engaged principally in commercial
transportation of passengers and cargo. Northwest's business focuses on the
development of a global airline network through the optimization of its domestic
hubs at Detroit, Minneapolis/St. Paul and Memphis, an extensive Pacific route
system with hubs at Tokyo and Osaka, and a transatlantic alliance with KLM Royal
Dutch Airlines ("KLM"), which operates a hub through Amsterdam.
Northwest operates substantial domestic and international route networks. As
of December 31, 1997, Northwest directly served more than 150 cities in 18
countries on the continents of North America, Asia and Europe. Northwest had
more than 54 million enplanements and flew over 72 billion RPMs in 1997.
NWA Corp. was originally formed under the name Wings Holdings Inc. The
Company's principal executive offices are located at 2700 Lone Oak Parkway,
Eagan, Minnesota 55121; its mailing address is 5101 Northwest Drive, St. Paul,
Minnesota 55111-3034 and its telephone number is (612) 726-2111.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds to Northwest from the sale of the Securities offered hereby will be
added to the working capital of Northwest and will be available for general
corporate purposes, among which may be the repayment of outstanding indebtedness
and financing of capital expenditures. The Company does not currently expect to
discharge any such indebtedness or finance any such capital expenditures with
the proceeds of the sale of Securities offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
NWA Corp. and its consolidated subsidiaries for the periods indicated. The ratio
of earnings to fixed charges represents the number of times that fixed charges
were covered by earnings. In computing the ratio, earnings represent
consolidated earnings (loss) before income taxes, cumulative effect of
accounting change and fixed charges (excluding capitalized interest). Fixed
charges consist of interest expense (including capitalized interest), one-third
of rental expense, which is considered representative of the interest factor,
and amortization of debt discount and expense.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- -----------------------------------------------------
1997 1996 1995 1994 1993
- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
3.05 2.74 1.90 1.88 (a)
</TABLE>
- ---------
(a) Earnings did not cover fixed charges by $121.5 million for the year ended
December 31, 1993. Excluding non-recurring special charges of $94.3 million
for the year ended December 31, 1993, earnings did not cover fixed charges
by $27.2 million.
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities are to be issued under an Indenture, dated as of
March 1, 1997, among Northwest, as issuer, NWA Corp., as guarantor, and State
Street Bank and Trust Company, as Trustee (the "Senior Indenture"). The Senior
Subordinated Debt Securities are to be issued under an Indenture, dated as of
July 1, 1995, among Northwest, as issuer, NWA Corp., as guarantor, and State
Street Bank & Trust Company, as Trustee (the "Subordinated Indenture"). The
Senior Indenture and the Subordinated Indenture are referred to herein
individually as an "Indenture" and collectively as the "Indentures." A
3
<PAGE>
copy of the form of each Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
A series of Debt Securities may be offered contemporaneously with an
offering of Warrants to purchase an additional portion of such or another series
of Debt Securities. Warrants to purchase a series of Debt Securities may also be
offered independently of any offering of Debt Securities. See "Description of
Warrants." The statements herein relating to the Debt Securities and the
Indentures are summaries and reference is made to the detailed provisions of the
Indentures, including the definitions therein of certain terms capitalized in
this Prospectus. Where no distinction is made between the Senior Debt Securities
and the Senior Subordinated Debt Securities or between the Senior Indenture and
the Subordinated Indenture, such summaries refer to any Debt Securities and
either Indenture. Whenever particular defined terms of the Indentures are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference.
The anticipated market for the Debt Securities and the specific use of
proceeds of an offering of such securities will be set forth in the applicable
Prospectus Supplement.
TO THE EXTENT THAT ANY PROVISION IN ANY PROSPECTUS SUPPLEMENT IS
INCONSISTENT WITH ANY PROVISION IN THIS SUMMARY, THE PROVISION OF SUCH
PROSPECTUS SUPPLEMENT WILL CONTROL.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provide that Debt Securities may
be issued from time to time in one or more series. The Senior Debt Securities
will be unsecured and unsubordinated obligations of Northwest and will rank on a
parity with all other unsecured and unsubordinated indebtedness of Northwest.
The Senior Subordinated Debt Securities will be unsecured obligations of
Northwest and, as set forth below under "Subordination of Senior Subordinated
Debt Securities," will be subordinated in right of payment to all Senior
Indebtedness of Northwest.
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for a description of the specific series of Debt Securities being
offered thereby or, if Warrants are being offered thereby, the Debt Securities
to be issued upon exercise of such Warrants, including: (1) the specific
designation of such Debt Securities, including whether the Debt Securities are
Senior Debt Securities or Senior Subordinated Debt Securities; (2) any limit
upon the aggregate principal amount of such Debt Securities; (3) the date or
dates on which the principal of such Debt Securities will mature or the method
of determining such date or dates; (4) the rate or rates (which may be fixed or
variable) at which such Debt Securities will bear interest, if any, or the
method of calculating such rate or rates; (5) the date or dates from which
interest, if any, will accrue or the method by which such date or dates will be
determined; (6) the date or dates on which interest, if any, will be payable and
the record date or dates therefor; (7) the place or places where principal of,
premium, if any, and interest, if any, on such Debt Securities will be payable;
(8) the period or periods within which, the price or prices at which, the
currency or currencies (including currency units) in which, and the terms and
conditions upon which, such Debt Securities may be redeemed, in whole or in
part, at the option of Northwest; (9) the obligation, if any, of Northwest to
redeem or purchase such Debt Securities pursuant to any sinking fund or
analogous provisions, upon the happening of specified events, or at the option
of a holder thereof and the period or periods within which, the price or prices
at which and the terms and conditions upon which, such Debt Securities shall be
redeemed or purchased, in whole or in part, pursuant to such obligations; (10)
the denominations in which such Debt Securities are authorized to be issued;
(11) the currency or currency units for which Debt Securities may be purchased
or in which Debt Securities may be denominated and/or the currency or currency
units in which principal of, premium, if any, and/or interest, if any, on such
Debt Securities will be payable or redeemable and whether Northwest or the
holders of any such Debt Securities may elect to receive payments in respect of
such Debt Securities in a currency or currency units other than that in which
such Debt Securities are stated to be payable or
4
<PAGE>
redeemable; (12) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities which will be payable upon declaration
of the acceleration of the maturity thereof or the method by which such portion
shall be determined; (13) the person to whom any interest on any such Debt
Security shall be payable if other than the person in whose name such Debt
Security is registered on the applicable record date; (14) any addition to, or
modification or deletion of, any Event of Default or any covenant of Northwest
or NWA Corp. specified in the Indenture with respect to such Debt Securities;
(15) the application, if any, of such means of defeasance or covenant defeasance
as may be specified for such Debt Securities and coupons; (16) whether such Debt
Securities are to be issued in whole or in part in the form of one or more
temporary or permanent global securities and, if so, the identity of the
depositary for such global security or securities; (17) the terms and conditions
relating to Warrants issued by Northwest in connection with or for the purchase
of such Debt Securities; (18) any index used to determine the amount of payments
of principal of (and premium, if any) and interest, if any, on such Debt
Securities; (19) any provisions relating to the exchange of such Debt
Securities; and (20) any other special terms pertaining to such Debt Securities.
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will not be listed on any securities exchange.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully registered form without coupons. Where Debt
Securities of any series are issued in bearer form, the special restrictions and
considerations, including special offering restrictions and special Federal
income tax considerations, applicable to any such Debt Securities and to payment
on and transfer and exchange of such Debt Securities will be described in the
applicable Prospectus Supplement. Bearer Debt Securities will be transferable by
delivery.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Certain Federal income tax consequences and
special considerations applicable to any such Debt Securities will be described
in the applicable Prospectus Supplement.
If the purchase price of any Debt Securities is payable in one or more
foreign currencies or currency units or if any Debt Securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium, if any, or interest, if any, on any Debt Securities is payable in one
or more foreign currencies or currency units, the restrictions, elections,
certain Federal income tax considerations, specific terms and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
DENOMINATIONS, PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Registered Securities will be issuable in denominations of $1,000 and
integral multiples of $1,000, and Bearer Securities will be issuable in the
denomination of $5,000 or, in each case, in such other denominations and
currencies as may be in the terms of the Debt Securities of any particular
series. Unless otherwise provided in the applicable Prospectus Supplement,
payments in respect of the Debt Securities will be made, subject to any
applicable laws and regulations, in the designated currency at the office or
agency of Northwest maintained for that purpose as Northwest may designate from
time to time, except that, at the option of Northwest, interest payments, if
any, on Debt Securities in registered form may be made (i) by checks mailed by
the Trustee to the holders of Debt Securities entitled thereto at their
registered addresses or (ii) by wire transfer to an account maintained by the
Person entitled thereto as specified in the Register. Unless otherwise indicated
in an applicable Prospectus Supplement, payment of any installment of interest
on Debt Securities in registered form will be made to the Person in whose name
such Debt Security is registered at the close of business on the regular record
date for such interest.
Payment in respect of Debt Securities in bearer form will be payable in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as Northwest may appoint from time to
5
<PAGE>
time. The paying agents outside the United States, if any, initially appointed
by Northwest for a series of Debt Securities will be named in the applicable
Prospectus Supplement. Northwest may at any time designate additional Paying
Agents or rescind the designation of any paying agents, except that, if Debt
Securities of a series are issuable as Registered Securities, Northwest will be
required to maintain at least one paying agent in each Place of Payment for such
series and, if Debt Securities of a series are issuable as Bearer Securities,
Northwest will be required to maintain a Paying Agent in a Place of Payment
outside the United States where Debt Securities of such series and any coupons
appertaining thereto may be presented and surrendered for payment. Northwest
will have the right to require a holder of any Debt Security, in connection with
the payment of the principal of, premium, if any, and interest, if any, on such
Debt Security, to certify information to Northwest or, in the absence of such
certification, Northwest will be entitled to rely on any legal presumption to
enable Northwest to determine its duties and liabilities, if any, to deduct or
withhold taxes, assessments or governmental charges from such payment.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of Northwest maintained for such purpose as designated by Northwest from time to
time. Debt Securities may be transferred or exchanged without service charge,
other than any tax or other governmental charge imposed in connection therewith.
In the event of any redemption in part, Northwest shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and ending at the
close of business on (A) if Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Debt Securities of the series are issuable as Bearer Securities, the
day of the first publication of the relevant notice of redemption or, if Debt
Securities of the series are also issuable as Registered Securities and there is
no publication, the mailing of the relevant notice of redemption; (ii) register
the transfer of or exchange any Registered Securities, or portion thereof,
called for redemption or otherwise surrendered for repayment, except the
unredeemed or unrepaid portion of any Registered Security being redeemed or
repaid in part; or (iii) exchange any Bearer Security called for redemption,
except to exchange such Bearer Security for a Registered Security of that series
and like tenor which is immediately surrendered for redemption.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES
The obligation of Northwest to make payment on account of the principal of,
premium, if any, and interest, if any, on the Senior Subordinated Debt
Securities will be subordinated and junior in right of payment, as set forth in
the Subordinated Indenture, to the prior payment in full of all Senior
Indebtedness of Northwest. The Senior Subordinated Debt Securities will rank
PARI PASSU with any future Indebtedness of Northwest which by its terms states
that it will rank PARI PASSU with the Senior Subordinated Debt Securities. The
Senior Subordinated Debt Securities will rank senior to all other existing and
future subordinated Indebtedness or other subordinated obligations of Northwest.
Notwithstanding the foregoing, payment from the money or the proceeds of U.S.
Government Obligations held in any defeasance trust described under "Defeasance"
below is not subordinate to any Senior Indebtedness or subject to the
restrictions described herein.
"Senior Indebtedness" of Northwest means all Indebtedness of Northwest
(other than the Senior Subordinated Debt Securities) unless such Indebtedness,
by its terms or the terms of the instrument creating or evidencing it, is
subordinate in right of payment to or PARI PASSU with the Senior Subordinated
Debt Securities; PROVIDED, HOWEVER, that such Senior Indebtedness does not
include (x) any Indebtedness, guarantee or other obligation of Northwest that is
subordinate or junior in any respect to any other Indebtedness of Northwest or
(y) any Indebtedness of Northwest to any of its Subsidiaries or to any Person of
which Northwest is a Subsidiary. "Indebtedness" of any Person means, without
duplication, the principal of, premium, if any, and accrued and unpaid interest
(including post-petition interest, whether or not allowable as a claim in
bankruptcy) on (i) indebtedness of such Person for money borrowed, (ii)
guarantees
6
<PAGE>
by such Person of indebtedness for money borrowed by any other Person, (iii)
indebtedness of such Person evidenced by notes, debentures, bonds or other
instruments of indebtedness for payment of which such Person is responsible or
liable, (iv) obligations for the reimbursement of any obligor on any letter of
credit, bankers' acceptance or similar credit transaction, (v) obligations of
such Person under Capital Leases and Flight Equipment leases, (vi) obligations
under interest rate and currency swaps, caps, collars options, forward or spot
contracts or similar arrangements or with respect to foreign currency hedges or
aircraft fuel hedges, (vii) commitment and other bank financing fees under
contractual obligations associated with bank debt, (viii) any indebtedness
representing the deferred and unpaid purchase price of any property or business,
and (ix) all deferrals, renewals, extensions and refundings of any such
indebtedness or obligations; PROVIDED, HOWEVER, that Indebtedness shall not
include amounts owed to trade creditors in the ordinary course of business,
nonrecourse indebtedness secured by real property located outside the United
States or operating lease rental payments (other than Flight Equipment lease
rental payments) in the ordinary course of business.
No payment on account of principal of, premium, if any, or interest on the
Senior Subordinated Debt Securities or deposit pursuant to the provisions
described under "Defeasance" below may be made if (i) any Senior Indebtedness is
not paid when due (following the expiration of any applicable grace period) or
(ii) any other default on Senior Indebtedness occurs and the maturity of any
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (a) such failure to pay or acceleration relates to Senior
Indebtedness in an aggregate amount equal to or less than $20 million, (b) the
default has been cured or waived or has ceased to exist, (c) such acceleration
has been rescinded, or (d) such Senior Indebtedness has been paid in full. A
failure to make any payment with respect to the Senior Subordinated Debt
Securities as a result of the foregoing provisions will not limit the right of
the holders of the Senior Subordinated Debt Securities to accelerate the
maturity thereof as a result of such payment default.
Upon any distribution of the assets of Northwest upon any dissolution, total
or partial liquidation or reorganization of or similar proceeding relating to
Northwest, the holders of Senior Indebtedness will be entitled to receive
payment in full before the holders of the Senior Subordinated Debt Securities
are entitled to receive any payment. By reason of such subordination, in the
event of insolvency, creditors of Northwest who are holders of Senior
Indebtedness or of other unsubordinated Indebtedness may recover more, ratably,
than the holders of the Senior Subordinated Debt Securities.
THE PARENT GUARANTY
NWA Corp. will unconditionally guarantee, pursuant to Indentures, the due
and punctual payment of the principal of, premium, if any, and interest on the
Debt Securities when the same shall become due, whether by acceleration or
otherwise. The Parent Guaranty will be enforceable without any need first to
enforce Debt Securities against Northwest. The Parent Guaranty of the Senior
Subordinated Debt Securities will be subordinated and junior in right of
payment, as set forth in the Senior Subordinated Debt Securities Indenture, to
the prior payment in full of all Senior Indebtedness of NWA Corp. The terms of
such subordination will parallel the subordination terms applicable to the
Senior Subordinated Debt Securities as set forth above under "Subordination of
Senior Subordinated Debt Securities," except that, for purposes of the Parent
Guaranty, Senior Indebtedness of NWA Corp. means all Indebtedness of NWA Corp.
(other than the Parent Guaranty) unless such Indebtedness, by its terms or by
the terms of the instrument creating or evidencing it, is subordinate in right
of payment to or PARI PASSU with the Parent Guaranty; PROVIDED, HOWEVER, that
such Senior Indebtedness does not include any Indebtedness of NWA Corp. to any
of its subsidiaries. The Parent Guaranty of the Senior Subordinated Debt
Securities will rank PARI PASSU with any future Indebtedness of NWA Corp. which
by its terms states that it will rank PARI PASSU with the Parent Guaranty of the
Senior Subordinated Debt Securities. The Parent Guaranty of the Senior
Subordinated Debt Securities will rank senior to all other existing and future
subordinated Indebtedness or other subordinated obligations of NWA Corp.
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GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depositary (the "Depositary") or with a
nominee for the Depositary identified in the applicable Prospectus Supplement.
In such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive certificated
form, a Registered Global Security may not be registered for transfer or
exchange except as a whole by the Depositary for such Registered Global Security
to a nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor Depositary for such series or a nominee of such
successor Depositary and except in the circumstances described in the applicable
Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global Security
will be described in the applicable Prospectus Supplement. Northwest expects
that the following provisions will apply to depositary arrangements.
Upon the issuance of any Registered Global Security, and the deposit of such
Registered Global Security with or on behalf of the Depositary for such
Registered Global Security, the Depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of the Debt
Securities represented by such Registered Global Security to the accounts of
institutions ("participants") that have accounts with the Depositary or its
nominee. The accounts to be credited will be designated by the underwriters or
agents engaging in the distribution of such Debt Securities or by Northwest, if
such Debt Securities are offered and sold directly by Northwest. Ownership of
beneficial interests in a Registered Global Security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests by participants in such Registered Global Security will
be shown on, and the transfer of that ownership interest will be effected only
through, records maintained by the Depositary for such Registered Global
Security or by its nominee. Ownership of beneficial interests in such Registered
Global Security by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such
Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under the Indentures. Unless otherwise specified in the applicable
Prospectus Supplement and except as specified below, owners of beneficial
interests in such Registered Global Security will not be entitled to have Debt
Securities of the series represented by such Registered Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certificated form and will not be
considered the holders thereof for any purposes under the Indentures.
Accordingly, each person owning a beneficial interest in such Registered Global
Security must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under the
Indentures. The Depositary may grant proxies and otherwise authorize
participants to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action which a holder is entitled to give or
take under the Indentures. Northwest understands that, under existing industry
practices, if Northwest requests any action of holders or an owner of a
beneficial interest in which Registered Global Security desires to give any
notice or take any action a holder is entitled to give or take under the
Indentures, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize
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beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
Unless otherwise specified in the applicable Prospectus Supplement, payments
with respect to principal, premium, if any, and interest, if any, on Debt
Securities represented by a Registered Global Security registered in the name of
a Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global Security.
Northwest expects that the Depositary for any Debt Securities represented by
a Registered Global Security, upon receipt of any payment of principal, premium
or interest, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Registered Global Security as shown on the records of such
Depositary. Northwest also expects that payments by participants to owners of
beneficial interests in such Registered Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with the securities held for the accounts of customers
registered in "street names," and will be the responsibility of such
participants. None of Northwest, NWA Corp., the Trustee or any agent of
Northwest shall have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Registered Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any Debt Securities represented by a Registered Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by Northwest within ninety days, Northwest will
issue such Debt Securities in definitive certificated form in exchange for such
Registered Global Security. In addition, Northwest may at any time and in its
sole discretion determine not to have any of the Debt Securities of a series
represented by one or more Registered Global Securities and, in such event, will
issue Debt Securities of such series in definitive certificated form in exchange
for all of the Registered Global Securities representing such Debt Securities.
Further, if Northwest so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Registered Global Security
representing Debt Securities of such series may, on terms acceptable to
Northwest and the Depositary for such Registered Global Security, receive Debt
Securities of such series in definitive form registered in the name of such
beneficial owner or its designee.
CONSOLIDATION, MERGER OR SALE BY NORTHWEST OR NWA CORP.
Each Indenture provides that neither Northwest nor NWA Corp. may merge or
consolidate with or into any other corporation or sell, convey, transfer, lease
or otherwise dispose of all or substantially all of its assets to any Person,
unless (i) (a) in the case of a merger or consolidation, Northwest or NWA Corp.
is the surviving corporation, as the case may be, or (b) in the case of a merger
or consolidation where Northwest or NWA Corp. is not the surviving corporation
and in the case of such a sale, conveyance or other disposition, the resulting,
successor or acquiring Person is a corporation organized and existing under the
laws of the United States of America or a State thereof or the District of
Columbia and such corporation expressly assumes by supplemental indenture all
the obligations of Northwest under the Debt Securities and any coupons
appertaining thereto (or of NWA Corp. under the Parent Guaranty, as the case may
be) and the obligations of Northwest or NWA Corp., as the case may be, under the
Indentures, (ii) immediately after giving effect to such merger or
consolidation, or such sale, conveyance, transfer, lease or other disposition
(including, without limitation, any Debt directly or indirectly incurred or
anticipated to be incurred in connection with or in respect of such
transaction), no Default or Event of Default shall have occurred and be
continuing and (iii) certain other conditions are met. In the event a successor
corporation assumes the obligations of Northwest or NWA Corp., as the case may
be, such successor corporation shall succeed to and be substituted for Northwest
or NWA Corp. as the case may be, under the Indentures and under the Debt
Securities and any coupons appertaining thereto and all obligations of Northwest
or NWA Corp., as the case may be, shall terminate. In the event of any such
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permitted consolidation, merger, sale, conveyance, disposition or other change
of control transaction (including a highly leveraged transaction), the holders
of the Debt Securities will not have the right to require redemption thereof or
similar rights unless otherwise provided in the applicable Prospectus
Supplement.
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
Events of Default with respect to Debt Securities of any series issued
thereunder are defined in the Indentures as being: default for thirty days in
payment of any interest on any Debt Security of that series or any coupon
appertaining thereto or any additional amount payable with respect to Debt
Securities of such series as specified in the applicable Prospectus Supplement
when due; default in payment of principal, premium, if any, or on redemption or
otherwise, or in the making of a mandatory sinking fund payment of any Debt
Securities of that series when due; default for sixty days after notice to
Northwest and NWA Corp. by the Trustee, or to Northwest, NWA Corp. and the
Trustee by the holders of 25% in aggregate principal amount of the Debt
Securities of such series then outstanding, in the performance of any other
agreement applicable to the Debt Securities of that series, in the Indenture or
in any supplemental indenture or board resolution referred to therein under
which the Debt Securities of that series may have been issued; and certain
events of bankruptcy, insolvency or reorganization of Northwest or NWA Corp. Any
other Events of Default applicable to a specified series of Debt Securities will
be described in the applicable Prospectus Supplement. An Event of Default with
respect to a particular series of Debt Securities will not necessarily be an
Event of Default with respect to any other series of Debt Securities.
The Indentures provide that, if an Event of Default specified therein occurs
with respect to the Debt Securities of any series issued thereunder and is
continuing, the Trustee for such series or the holders of 25% in aggregate
principal amount of all of the outstanding Debt Securities of that series, by
written notice to Northwest and NWA Corp. (and to the Trustee for such series,
if notice is given by such holders of Debt Securities), may declare the
principal (or, if the Debt Securities of that series are original issue discount
Debt Securities or indexed Debt Securities, such portion of the principal amount
specified in the applicable Prospectus Supplement) of all the Debt Securities of
that series to be due and payable.
The Indentures provide that the Trustee for any series of Debt Securities
shall, within ninety days after the occurrence of a Default known to it with
respect to Debt Securities of that series, give to the holders of the Debt
Securities of that series notice of all such uncured Defaults; PROVIDED, that
such notice shall not be given until 60 days after the occurrence of a Default
with respect to Debt Securities of that series involving a failure to perform a
covenant other than the obligation to pay principal, premium, if any, or
interest or make a mandatory sinking fund payment; and PROVIDED FURTHER, that,
except in the case of default in payment on the Debt Securities of that series,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers (as defined therein) in good faith determines that
withholding such notice is in the interest of the holders of the Debt Securities
of that series. "Default" means any event which is, or, after notice or passage
of time or both, would be, an Event of Default.
The Indentures provide that the Trustee will be under no obligation to
exercise any of its rights or powers under such Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. Subject to such provisions for indemnification of
the Trustee, the Indentures provide that the holders of not less than a majority
in aggregate principal amount of the Debt Securities of each series affected
(with each such series voting as a class) may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee for such
series, or exercising any trust or power conferred on such Trustee.
The Indentures include a covenant that Northwest will file annually with the
Trustee a certificate as to Northwest's compliance with all conditions and
covenants of the applicable Indenture.
The holders of not less than a majority in aggregate principal amount of any
series of Debt Securities by notice to the Trustee for such series may waive, on
behalf of the holders of all Debt Securities of such series, any past Default or
Event of Default with respect to that series and its consequences, and may
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rescind and annul a declaration of acceleration with respect to that series
(unless a judgment or decree based on such acceleration has been obtained and
entered), except a Default or Event of Default in the payment of the principal
of, premium, if any, or interest, if any, on any Debt Security (and any
acceleration resulting therefrom) and certain other defaults.
MODIFICATION OF THE INDENTURES
The Indentures contain provisions permitting Northwest, NWA Corp. and the
Trustee to enter into one or more supplemental indentures without the consent of
the holders of any of the Debt Securities in order (i) to evidence the
succession of another corporation to Northwest or NWA Corp. and the assumption
of the covenants of Northwest or NWA Corp. by a successor; (ii) to add to the
covenants of Northwest or NWA Corp. or surrender any right or power of Northwest
or NWA Corp. and to make the occurrence, or the occurrence and continuance, of a
default in any of such additional covenants, restrictions or conditions a
Default or an Event of Default permitting the enforcement of all or any of the
several remedies provided in this Indenture as herein set forth; provided,
however, that in respect of any such additional covenant, restriction or
condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provided for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default; (iii) to add additional Events of Default with respect to any series;
(iv) to add or change any provisions to such extent as necessary to permit or
facilitate the issuance of Debt Securities in bearer form or in global form; (v)
under certain circumstances to add to, change or eliminate any provision
affecting Debt Securities not yet issued; (vi) to secure the Debt Securities;
(vii) to add to the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of Securities,
as herein set forth, other conditions, limitations and restrictions thereafter
to be observed; (viii) to establish the form or terms of Debt Securities; (ix)
to evidence and provide for successor Trustees; (x) if allowed without penalty
under applicable laws and regulations, to permit payment in respect of Debt
Securities in bearer form in the United States; (xi) to correct or supplement
any inconsistent provisions or to make any other provisions with respect to
matters or questions arising under the Indentures, PROVIDED that such action
does not adversely affect the interests of any holder of Debt Securities of any
series issued under such Indentures in any material respect; (xii) to cure any
ambiguity or correct any mistake; or (xiii) to supplement any of the provisions
of the Indentures to such extent as shall be necessary to permit or facilitate
the defeasance and discharge of any series of Debt Security; provided that any
such action shall not adversely affect the interests of the Holders of any such
series or any other series of Debt Securities or any related coupons in any
material respect.
The Indentures also contain provisions permitting Northwest, NWA Corp. and
the Trustee, with the consent of the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected by
such supplemental indenture, to execute supplemental indentures adding any
provisions to or changing or eliminating any of the provisions of the Indentures
or any supplemental indenture or modifying the rights of the holders of Debt
Securities of such series, except that no such supplemental indenture may,
without the consent of the holder of each Debt Security so affected, (i) change
the time for payment of principal or interest on any Debt Security; (ii) reduce
the principal of, or any installment of principal of, or interest on any Debt
Security; (iii) reduce the amount of premium, if any, payable upon the
redemption of any Debt Security; (iv) reduce the amount of principal payable
upon acceleration of the maturity of an Original Issue Discount Debt Security;
(v) change the coin or currency in which any Debt Security or any premium or
interest thereon is payable; (vi) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security; (vii) reduce
the percentage in principal amount of the outstanding Debt Securities of any
series the consent of whose holders is required for modification or amendment of
the Indentures or for waiver of compliance with certain provisions of the
Indentures or for waiver of certain defaults; (viii) change the obligation of
Northwest to maintain an office or agency in the places and for the purposes
specified in the Indentures;
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(ix) modify the obligations of NWA Corp. to make payment under the Parent
Guaranty; or (x) modify any of the foregoing provisions.
DEFEASANCE
If indicated in the applicable Prospectus Supplement, Northwest may elect
either (i) to defease and be discharged from any and all obligations with
respect to the Debt Securities of or within any series (except as described
below) ("defeasance") or (ii) to be released from its obligations with respect
to certain covenants applicable to the Debt Securities of or within any series
("covenant defeasance"), upon the deposit with the Trustee for such series (or
other qualifying trustee), in trust for such purpose, of money and/or Government
Obligations which through the payment of principal and interest in accordance
with their terms will provide money in the amount sufficient to pay the
principal of, premium, if any, and interest on such Debt Securities to Maturity
or redemption, as the case may be, and any mandatory sinking fund or analogous
payments thereon. Upon the occurrence of a defeasance, Northwest will be deemed
to have paid and discharged the entire indebtedness represented by such Debt
Securities and any coupons appertaining thereto and to have satisfied all of its
other obligations under such Debt Securities and any coupons appertaining
thereto (except for (i) the rights of holders of such Debt Securities to
receive, solely from the trust funds deposited to defease such Debt Securities,
payments in respect of the principal of, premium, if any, and interest, if any,
on such Debt Securities or any coupons appertaining thereto when such payments
are due and (ii) certain other obligations as provided in the Indentures). Upon
the occurrence of a covenant defeasance, Northwest will be released only from
its obligations to comply with certain covenants contained in the Indenture
relating to such Debt Securities, will continue to be obligated in all other
respects under such Debt Securities and will continue to be contingently liable
with respect to the payment of principal, interest, if any, and premium, if any,
with respect to such Debt Securities.
Unless otherwise specified in the applicable Prospectus Supplement and
except as described below, the conditions to both defeasance and covenant
defeasance are as follows: (i) such defeasance or covenant defeasance must not
result in a breach or violation of, or constitute a Default or Event of Default
under, the applicable Indenture, or result in a breach or violation of, or
constitute a default under, any other material agreement or instrument of
Northwest or NWA Corp.; (ii) certain bankruptcy related Defaults or Events of
Default with respect to Northwest or NWA Corp. must not have occurred and be
continuing during the period commencing on the date of the deposit of the trust
funds to defease such Debt Securities and ending on the 91st day after such
date; (iii) Northwest must deliver to the Trustee an Opinion of Counsel to the
effect that the holders of such Debt Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to Federal income tax on the same
amounts and in the same manner and at all the same times as would have been the
case if such defeasance or covenant defeasance had not occurred (such Opinion of
Counsel, in the case of defeasance, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable Federal income tax law
occurring after the date of the Indentures); (iv) Northwest must deliver to the
Trustee an Officers' Certificate and an Opinion of Counsel with respect to
compliance with the conditions precedent to such defeasance or covenant
defeasance and with respect to certain registration requirements under the
Investment Company Act of 1940, as amended; and (v) any additional conditions to
such defeasance or covenant defeasance which may be imposed on Northwest
pursuant to the applicable Indenture. The Indentures require that a nationally
recognized firm of independent public accountants deliver to the Trustee a
written certification as to the sufficiency of the trust funds deposited for the
defeasance or covenant defeasance of such Debt Securities. The Indentures do not
provide the holders of such Debt Securities with recourse against such firm. If
indicated in the applicable Prospectus Supplement, in addition to obligations of
the United States or an agency or instrumentality thereof, Government
Obligations may include obligations of the government or any agency or
instrumentality of the government issuing the currency in which Debt Securities
of such series are payable. In the event that Government Obligations deposited
with the Trustee for the defeasance of such Debt Securities decrease in value or
default subsequent to their being deposited, Northwest will have no further
obligation, and the
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holders of such Debt Securities will have no additional recourse against
Northwest, as a result of such decrease in value or default. As described above,
in the event of a covenant defeasance, Northwest remains contingently liable
with respect to the payment of principal, interest, if any, and premium, if any,
with respect to the Debt Securities.
Northwest may exercise its defeasance option with respect to such Debt
Securities notwithstanding its prior exercise of its covenant defeasance option.
If Northwest exercises its defeasance option, payment of such Debt Securities
may not be accelerated because of a Default or an Event of Default. If Northwest
exercises its covenant defeasance option, payment of such Debt Securities may
not be accelerated by reason of a Default or an Event of Default with respect to
the covenants to which such covenant defeasance is applicable. However, if such
acceleration were to occur, the realizable value at the acceleration date of the
money and Government Obligations in the defeasance trust could be less than the
principal and interest then due on such Debt Securities, in that the required
deposit in the defeasance trust is based upon scheduled cash flow rather than
market value, which will vary depending upon interest rates and other factors.
The applicable Prospectus Supplement may further describe the provisions, if
any, applicable to defeasance or covenant defeasance with respect to Debt
Securities of a particular series.
THE TRUSTEE
State Street Bank and Trust Company is the Trustee under the Indentures.
Northwest and NWA Corp. also maintain banking and other commercial relationships
with State Street Bank and Trust Company and its affiliates in the ordinary
course of business and State Street Bank and Trust Company acts as Trustee under
several other indentures for NWA Corp. and Northwest.
DESCRIPTION OF WARRANTS
Northwest may issue Warrants for the purchase of Debt Securities. Warrants
may be issued together with or separately from any Debt Securities offered by
any Prospectus Supplement and, if issued together with Debt Securities, may be
attached to or separate from such Debt Securities. The Warrants are to be issued
under one or more separate Warrant Agreements (a "Warrant Agreement") to be
entered into between Northwest and State Street Bank and Trust Company,
successor to The First National Bank of Boston, as Warrant Agent, all as set
forth in the Prospectus Supplement relating to the particular issue of Warrants.
The Warrant Agent will act solely as an agent of Northwest in connection with
the Warrants and will not assume any obligation or relationship of agency or
trust for or with any holders of Warrants or beneficial owners of Warrants. The
statements herein relating to the Warrants and the Warrant Agreements are
summaries and reference is made to the detailed provisions of the Warrant
Agreements. A form of Warrant Agreement for Warrants Sold Attached to Debt
Securities and a form of Warrant Agreement for Warrants Sold Alone have been
incorporated by reference as exhibits to the Registration Statement.
GENERAL
If Warrants are offered, reference is made to the applicable Prospectus
Supplement which accompanies this Prospectus for a description of the specific
terms of the Warrants being offered thereby, including (i) the specific
designation and aggregate number of such Warrants, (ii) the offering price and
the currency or composite currencies for which Warrants may be purchased, (iii)
the designation (including whether the Debt Securities are Senior Debt
Securities or Senior Subordinated Debt Securities), aggregate principal amount,
currency or composite currencies and terms of the Debt Securities purchasable
upon exercise of the Warrants, (iv) if applicable, the designation and terms of
the Debt Securities with which the Warrants are issued and the number of
Warrants issued with the minimum denomination of each such Debt Security, (v) if
applicable, the date on and after which the Warrants and the related Debt
Securities will be separately transferable, (vi) the principal amount of Debt
Securities purchasable upon exercise of
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one Warrant and the price or the manner of determining the price and currency or
composite currencies or other consideration (which may include Debt Securities)
for which such principal amount of Debt Securities may be purchased upon such
exercise, (vii) the date on which the right to exercise the Warrants shall
commence and the date on which such right shall expire (the "Expiration Date"),
(viii) the terms of any mandatory or optional redemption by Northwest, (ix)
certain Federal income tax consequences, (x) whether the certificates for
Warrants will be issued in registered or unregistered form, and (xi) any other
special terms pertaining to such Warrants. Unless otherwise specified in the
applicable Prospectus Supplement, the Warrants will not be listed on any
securities exchange.
Warrant certificates may be exchanged for new Warrant certificates of
different denominations, may (if in registered form) be presented for
registration of transfer and exchange and may be exercised at an office or
agency of the Warrant Agent maintained for that purpose (the "Warrant Agent
Office"). No service charge will be made for any transfer or exchange of Warrant
certificates, but Northwest may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. Prior to the
exercise of their Warrants, holders of Warrants will not have any of the rights
of holders of the Debt Securities purchasable upon such exercise, including the
right to receive payments of principal of, premium, if any, or interest, if any,
on the Debt Securities purchasable upon such exercise or to enforce covenants in
the Indenture.
The Warrant Agent will act solely as an agent of Northwest in connection
with the Warrants and will not assume any obligation or relationship of agency
or trust for or with any holders of Warrants or beneficial owners of Warrants.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase such principal amount of
Debt Securities at such exercise price, for such consideration and during such
period or periods as shall in each case be set forth in, or calculable from, the
Prospectus Supplement relating to the Warrants. Warrants may be exercised at any
time during such period up to 5:00P.M. New York City time on the Expiration Date
set forth in the Prospectus Supplement relating to such Warrants. After the
close of business on the Expiration Date (or such later date to which such
Expiration Date may be extended by Northwest), unexercised Warrants will become
void.
Warrants may be exercised by delivery to the Warrant Agent of payment as
provided in the applicable Prospectus Supplement of the amount required to
purchase the Debt Securities purchasable upon such exercise together with
certain information set forth on the reverse side of the Warrant certificate.
Unless otherwise provided in the applicable Prospectus Supplement, upon receipt
of such payment and the Warrant certificate properly completed and duly executed
at the Warrant Agent Office or any other office or agency indicated in the
applicable Prospectus Supplement, Northwest will, as soon as practicable, issue
and deliver the Debt Securities purchasable upon such exercise. If fewer than
all of the Warrants represented by such Warrant certificate are exercised, a new
Warrant certificate will be issued for the amount of unexercised Warrants.
MODIFICATION OF WARRANT AGREEMENTS
The Warrant Agreements contain a provision permitting Northwest and the
Warrant Agent, without the consent of any Warrantholder, to supplement or amend
the Warrant Agreement in order to cure any ambiguity, and to correct or
supplement any provision contained therein which may be defective or
inconsistent with any other provisions or to make other provisions in regard to
matters or questions arising thereunder which Northwest and the Warrant Agent
may deem necessary or desirable and which do not adversely affect the interests
of the Warrantholders.
WARRANT AGENT
State Street Bankand Trust Company will act as the Warrant Agent under the
Warrant Agreement. Northwest and NWA Corp. maintain banking and other commercial
relationships with State Street Bankand Trust Company and its affiliates in the
ordinary course of business.
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PLAN OF DISTRIBUTION
Northwest may sell Securities to one or more underwriters for public
offering and sale by them or may sell Securities to investors or other persons
directly or through one or more dealers or agents. Any such underwriter, dealer
or agent involved in the offer and sale of the Offered Securities will be named
in an applicable Prospectus Supplement.
The Offered Securities may be sold at a fixed price or prices, which may be
changed, or from time to time at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Dealer trading may take place in certain of the Offered Securities, including
Offered Securities not listed on any securities exchange. Northwest also may,
from time to time, authorize underwriters acting as Northwest's agents to offer
and sell the Offered Securities upon the terms and conditions as shall be set
forth in any Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from
Northwest in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Securities for whom they may act
as agent. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions (which may be changed from
time to time) from the purchasers for whom they may act as agent.
If a dealer is used directly by Northwest in the sale of Offered Securities
in respect of which this Prospectus is delivered, Northwest will sell such
Offered Securities to the dealer, as principal. The dealer may then resell such
Offered Securities to the public at varying prices to be determined by such
dealer at the time of resale. Any such dealer and the terms of any such sale
will be set forth in the Prospectus Supplement relating thereto.
Offered Securities may be offered and sold through agents designated by
Northwest from time to time. Any such agent involved in the offer or sale of the
Offered Securities in respect of which this Prospectus is delivered will be
named in, and any commissions payable by Northwest to such agent will be set
forth in, the applicable Prospectus Supplement. Unless otherwise indicated in
the applicable Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
Offers to purchase Offered Securities may be solicited directly by Northwest
and sales thereof may be made by Northwest directly to institutional investors
or others who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale thereof. The terms of any such sales
will be described in the Prospectus Supplement relating thereto. Except as set
forth in the applicable Prospectus Supplement, no director, officer or employee
of Northwest or NWA Corp. will solicit or receive a commission in connection
with direct sales by Northwest of the Offered Securities, although such persons
may respond to inquiries by potential purchasers and perform ministerial and
clerical work in connection with any such direct sales.
Any underwriting compensation paid by Northwest to underwriters, dealers or
agents in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements with
Northwest, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by Northwest for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, NWA Corp., Northwest and NWA Corp.'s other subsidiaries in the
ordinary course of business.
15
<PAGE>
If so indicated in an applicable Prospectus Supplement and subject to
existing market conditions, Northwest will authorize dealers acting as
Northwest's agents to solicit offers by certain institutions to purchase Offered
Securities from Northwest at the public offering price set forth in such
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date or dates stated in such
Prospectus Supplement. Each Contract will be for an amount not less than, and
the aggregate principal amount of Offered Securities sold pursuant to Contracts
shall not be less nor more than, the respective amounts stated in such
Prospectus Supplement. Institutions with whom Contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to the approval of Northwest.
Contracts will not be subject to any conditions except the purchase by an
institution of the Offered Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject. A commission indicated in the
applicable Prospectus Supplement will be granted to underwriters and agents
soliciting purchases of Offered Securities pursuant to Contracts accepted by
Northwest. Agents and underwriters will have no responsibility in respect of the
delivery or performance of Contracts.
The Offered Securities may or may not be listed on a national securities
exchange or a foreign securities exchange. If an underwriter or underwriters are
utilized in the sale of any Offered Securities, the applicable Prospectus
Supplement will contain a statement as to the intention, if any, of such
underwriters at the date of such Prospectus Supplement to make a market in the
Offered Securities. No assurances can be given that there will be a market for
the Offered Securities.
The place and time of delivery for the Offered Securities in respect of
which this Prospectus is delivered will be set forth in the applicable
Prospectus Supplement. Debt Securities issuable upon exercise of Warrants will
be issued upon payment of the exercise price and otherwise in accordance with
the relevant terms applicable to such Warrants and described in the relevant
Prospectus Supplement.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Debt Securities (and the Parent Guaranty) and Warrants offered
hereby will be passed upon for Northwest and NWA Corp. by Simpson Thacher &
Bartlett, New York, New York. In rendering such opinion, Simpson Thacher &
Bartlett will be relying as to matters of Minnesota law on an opinion from the
Office of the General Counsel of NWA Corp. and Northwest.
EXPERTS
The consolidated financial statements and schedule of NWA Corp. appearing or
incorporated by reference in NWA Corp.'s Annual Report (Form 10-K) for the year
ended December 31, 1996 and the consolidated financial statements for the year
ended December 31, 1997 of NWA Corp. included in NWA Corp.'s Current Report
(Form 8-K) dated February 19, 1998 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included or
incorporated by reference therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY RELATED PROSPECTUS
SUPPLEMENT AND/OR PRICING SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN
THIS PROSPECTUS AND SUCH PROSPECTUS SUPPLEMENT AND/OR PRICING SUPPLEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY NORTHWEST, NWA CORP. OR ANY UNDERWRITERS, AGENTS OR
DEALERS. THIS PROSPECTUS AND ANY RELATED PROSPECTUS SUPPLEMENT AND/OR PRICING
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AND ANY RELATED
PROSPECTUS SUPPLEMENT AND/OR PRICING SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF NORTHWEST OR NWA CORP. SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 3
Ratio of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................ 4
Description of Warrants................................................... 14
Plan of Distribution...................................................... 16
Legal Opinions............................................................ 17
Experts................................................................... 17
</TABLE>
$1,500,000,000
NORTHWEST
AIRLINES, INC.
DEBT SECURITIES AND
WARRANTS TO PURCHASE
DEBT SECURITIES
FULLY AND
UNCONDITIONALLY GUARANTEED BY
NORTHWEST AIRLINES
CORPORATION
---------------------
PROSPECTUS
---------------------
FEBRUARY , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998
PROSPECTUS
$1,500,000,000
NORTHWEST AIRLINES, INC.
PASS THROUGH CERTIFICATES
-----------
APPLICABLE UNDERLYING PAYMENTS
FULLY AND UNCONDITIONALLY GUARANTEED BY
NORTHWEST AIRLINES CORPORATION
Up to $1,500,000,000 aggregate public offering price of Pass Through
Certificates (the "Certificates") (or its equivalent (based on the applicable
exchange rate at the time of sale) in one or more foreign currencies or currency
units) may be offered for sale from time to time pursuant to this Prospectus and
related Prospectus Supplements (as defined below). Certificates may be issued in
one or more series in amounts, at prices and on terms to be determined at the
time of the offering. In respect of each offering of Certificates, a separate
Northwest Airlines Pass Through Trust for each series of Certificates being
offered (each, a "Trust") will be formed pursuant to one or more Pass Through
Trust Agreements (each, a "Basic Agreement") and one or more supplements thereto
(each, a "Trust Supplement") relating to such Trust to be entered into among
Northwest Airlines, Inc. ("Northwest"), Northwest Airlines Corporation ("NWA
Corp." and, together with its subsidiaries, the "Company") and the trustee named
therein (the "Trustee"), as trustee under each Trust. Each Certificate in a
series will represent a fractional undivided interest in the related Trust and
will have no rights, benefits or interests in respect of any other Trust. The
property of the Trusts will consist of equipment notes issued (a) on a
nonrecourse basis by one or more owner trustees pursuant to separate leveraged
lease transactions (the "Leased Aircraft Notes") to finance or refinance a
portion of the equipment cost of aircraft, including engines (each, a "Leased
Aircraft" and, collectively, the "Leased Aircraft"), which have been or will be
leased to Northwest pursuant to a separate lease agreement (each such lease
agreement, a "Lease") for each Leased Aircraft, or (b) with recourse to
Northwest (the "Owned Aircraft Notes" and, together with any Leased Aircraft
Notes, the "Equipment Notes") to finance all or a portion of the equipment cost
of, or to purchase all or a portion of the outstanding debt with respect to,
aircraft, including engines (each, an "Owned Aircraft" and, collectively, the
"Owned Aircraft"; together with Leased Aircraft, the "Aircraft"), which have
been or will be purchased and owned by Northwest. NWA Corp. will fully and
unconditionally guarantee (the "Parent Guaranty") to the holders from time to
time of Certificates (i) with respect to related Owned Aircraft Notes, the full
and prompt payment of principal, premium, if any, and interest thereon when and
as the same shall become due and payable, whether at maturity, upon redemption
or otherwise and (ii) with respect to related Leased Aircraft Notes, the full
and prompt payment of all amounts payable by Northwest under the related Lease
when and as the same shall become due and payable.
The specific terms of the particular Certificates in respect of which this
Prospectus is being delivered will be set forth in a supplement to this
Prospectus (the "Prospectus Supplement") which will be delivered together with
this Prospectus, including, where applicable, the specific designation, form,
aggregate principal amount, initial public offering price and distribution dates
relating to such Certificates, the currency in which such Certificates will be
payable, the Trust or Trusts relating to such Certificates, the Equipment Notes
to be purchased by such Trust or Trusts, the Aircraft relating to such Equipment
Notes, the leveraged lease transactions or financing arrangements, as the case
may be, relating to such Equipment Notes and other special terms relating to
such Certificates and the net proceeds from the offering of such Certificates.
The Certificates shall be issued in registered form only and may, if so
specified in the applicable Prospectus Supplement, be issued in accordance with
a book-entry system.
With respect to one or more Aircraft, Equipment Notes may be issued, each of
which may have a different interest rate, final maturity date and ranking in
respect of priority of payment. For each series of Certificates, the Trustee
will purchase one or more Equipment Notes issued with respect to one or more
Aircraft such that all of the Equipment Notes held in the related Trust will
have identical ranking and identical interest rates (in each case equal to the
rate applicable to the Certificates issued by such Trust), and such that the
latest maturity date for such Equipment Notes will occur on or before the final
distribution date for such Certificates. Interest paid on the Equipment Notes
held in each Trust will be passed through to the holders of the Certificates
relating to such Trust on the dates and at the rate per annum set forth in the
Prospectus Supplement relating to such Certificates until the final distribution
date for such Trust. Principal paid on the Equipment Notes held in each Trust
will be passed through to the holders of the Certificates relating to such Trust
in scheduled amounts on the dates set forth in the Prospectus Supplement
relating to such Certificates until the final distribution date for such Trust.
The Equipment Notes issued with respect to any Aircraft will be secured by a
security interest in such Aircraft and, in the case of the Leased Aircraft, by a
security interest in the Lease relating thereto, including the right to receive
rentals payable in respect of such Leased Aircraft by Northwest. Although
neither the Certificates nor the Leased Aircraft Notes will be direct
obligations of, or guaranteed by, Northwest, the amounts unconditionally payable
by Northwest for lease of Leased Aircraft will be sufficient to pay in full when
due all payments required to be made on the corresponding Leased Aircraft Notes.
The Certificates may be sold to or through underwriters, through dealers or
agents or directly to purchasers. See "Plan of Distribution." The Prospectus
Supplement will set forth the names of any underwriters, dealers or agents
involved in the sale of the Certificates in respect of which this Prospectus is
being delivered, the proposed amounts, if any, to be purchased by underwriters
and the compensation, if any, of such underwriters or agents. See "Plan of
Distribution" for information concerning secondary trading of the Certificates.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is February , 1998.
<PAGE>
AVAILABLE INFORMATION
NWA Corp. and Northwest together have filed with the Securities and Exchange
Commission (the "Commission") Registration Statements on Form S-3 (together with
all amendments and exhibits, the "Registration Statements") under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Certificates
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statements, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statements, reference is made to the exhibit
for a more complete description of the matter involved.
NWA Corp. is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Commission. Such
reports and other information, as well as the Registration Statement, including
exhibits and schedules filed therewith, may be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, Room 1024, and at the regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Northwest is not required to file
separate reports, proxy and information statements or other information with the
Commission pursuant to the requirements of the Exchange Act. Instead,
information with respect to Northwest is provided, to the extent required, in
filings made by NWA Corp.
Separate financial statements of Northwest are not being provided because
all of the Certificates being issued by Northwest under this Prospectus will be
supported by full and unconditional guarantees by NWA Corp. and, therefore, such
financial statements are not deemed material.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of NWA Corp., which have been filed with the
Commission, are hereby incorporated by reference in this Prospectus:
(a) NWA Corp.'s Annual Report on Form 10-K for the fiscal year ended December
31, 1996; and
(b) NWA Corp.'s Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997; and
(c) NWA Corp.'s Current Reports on Form 8-K dated March 6, 1997, November 25,
1997, January 25, 1998 and February 19, 1998.
All documents filed by NWA Corp. pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Certificates offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Exchange Act file number is
0-23642.
2
<PAGE>
NWA Corp. will provide without charge to any person to whom a copy of this
Prospectus has been delivered, upon written or oral request, a copy of any or
all of the foregoing documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to the Secretary's
Office, NWA Corp., 5101 Northwest Drive, Dept. A1180, St. Paul, Minnesota
55111-3034; telephone number (612) 726-2111.
THE COMPANY
Northwest, the principal wholly-owned indirect subsidiary of NWA Corp.,
operates the world's fourth largest airline (as measured by 1996 revenue
passenger miles ("RPMs")) and is engaged principally in commercial
transportation of passengers and cargo. Northwest's business focuses on the
development of a global airline network through the optimization of its domestic
hubs at Detroit, Minneapolis/St. Paul and Memphis, an extensive Pacific route
system with hubs at Tokyo and Osaka, and a transatlantic alliance with KLM Royal
Dutch Airlines ("KLM"), which operates a hub through Amsterdam.
Northwest operates substantial domestic and international route networks. As
of December 31, 1997, Northwest directly served more than 150 cities in 18
countries on the continents of North America, Asia and Europe. Northwest had
more than 54 million enplanements and flew over 72 billion RPMs in 1997.
NWA Corp. was originally formed under the name Wings Holdings Inc. The
Company's principal executive offices are located at 2700 Lone Oak Parkway,
Eagan, Minnesota 55121; its mailing address is 5101 Northwest Drive, St. Paul,
Minnesota 55111-3034 and its telephone number is (612) 726-2111.
GENERAL OUTLINE OF TRUST STRUCTURE
In respect of each offering of Certificates, one or more Trusts will be
formed, and the related Certificates issued, pursuant to separate Trust
Supplements to be entered into among the Trustee, NWA Corp. and Northwest in
accordance with the terms of the Basic Agreement. Concurrently with the
execution and delivery of each Trust Supplement, the Trustee, on behalf of the
Trust formed thereby, will enter into one or more purchase or refunding
agreements (each such agreement being herein referred to as a "Note Purchase
Agreement") pursuant to which it will purchase one or more Equipment Notes
relating to one or more of the Aircraft described in the applicable Prospectus
Supplement. Pursuant to the applicable Note Purchase Agreement or Note Purchase
Agreements, the Trustee, on behalf of each Trust, will purchase one or more
Equipment Notes such that the Equipment Notes that constitute the property of
such Trust will have identical interest rates (in each case equal to the rate
applicable to the Certificates issued by such Trust) and identical priority of
payment relative to each of the other Equipment Notes issued under the Related
Indentures (as defined below). The maturity dates of the Equipment Notes
acquired by each Trust will occur on or before the final distribution date
applicable to the Certificates that will be issued by such Trust. The Trustee
will distribute the amount of payments of principal, premium, if any, and
interest received by it as holder of the Equipment Notes to the
Certificateholders of the Trust in which such Equipment Notes are held. See
"Description of the Certificates" and "Description of the Equipment Notes."
USE OF PROCEEDS
Except as set forth in a Prospectus Supplement for a specific offering of
Certificates, the Certificates will be issued in order to facilitate (a) the
financing or refinancing of the debt portion and, in certain cases, the
refinancing of some of the equity portion of one or more separate leveraged
lease transactions entered into by Northwest, as lessee, with respect to the
Leased Aircraft as described in the applicable Prospectus Supplement, and (b)
the financing or refinancing of the aggregate principal amount of debt to be
issued, or the purchase of the aggregate principal amount of the debt previously
issued, by Northwest in respect of the Owned Aircraft as described in the
applicable Prospectus
3
<PAGE>
Supplement. The proceeds from the sale of Certificates in respect of such Owned
or Leased Aircraft is not expected to exceed 80% of the appraised value of such
Owned or Leased Aircraft at the time of financing or refinancing. Except as set
forth in a Prospectus Supplement for a specific offering of Certificates, the
proceeds from the sale of the Certificates will be used by the Trustee on behalf
of the applicable Trust or Trusts to purchase either (a) Leased Aircraft Notes
issued by the respective Owner Trustee or Owner Trustees to finance or refinance
(as specified in the applicable Prospectus Supplement) the related Leased
Aircraft, or (b) Owned Aircraft Notes issued by Northwest to finance or
refinance (as specified in the applicable Prospectus Supplement) the related
Owned Aircraft. Any portion of the proceeds from the sale of Certificates not
used by the Trustee to purchase Equipment Notes on or prior to the date
specified therefor in the applicable Prospectus Supplement will be distributed
on a Special Distribution Date (as defined below) to the applicable
Certificateholders, together with interest, but without premium. See
"Description of Certificates--Special Distribution Upon Unavailability of
Aircraft."
The Leased Aircraft Notes will be issued under separate trust indentures
(the "Leased Aircraft Indentures") between a bank, trust company or other
institution specified in the related Prospectus Supplement, as trustee
thereunder (in such capacity, herein referred to as the "Loan Trustee"), and an
institution specified in the related Prospectus Supplement acting, not in its
individual capacity, but solely as owner trustee (an "Owner Trustee") of a
separate trust for the benefit of one or more institutional investors (each, an
"Owner Participant"). With respect to each Leased Aircraft, the related Owner
Participant will have provided or will provide from sources other than the
Leased Aircraft Notes a portion of the equipment cost of the related Leased
Aircraft. No Owner Participant, however, will be personally liable for any
amount payable under the related Leased Aircraft Indenture or the Leased
Aircraft Notes issued thereunder. Simultaneously with the acquisition of each
Leased Aircraft, the related Owner Trustee leased or will lease such Aircraft to
Northwest pursuant to a separate Lease. The Owned Aircraft Notes will be issued
under separate trust indentures (the "Owned Aircraft Indentures" and, together
with any Leased Aircraft Indentures, the "Indentures") between the applicable
Loan Trustee and Northwest.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
NWA Corp. and its consolidated subsidiaries for the periods indicated. The ratio
of earnings to fixed charges represents the number of times that fixed charges
were covered by earnings. In computing the ratio, earnings represent
consolidated earnings (loss) before income taxes, cumulative effect of
accounting change and fixed charges (excluding capitalized interest). Fixed
charges consist of interest expense (including capitalized interest), one-third
of rental expense, which is considered representative of the interest factor,
and amortization of debt discount and expense.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- -----------------------------------------------------
1997 1996 1995 1994 1993
- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
3.05 2.74 1.90 1.88 (a)
</TABLE>
- --------------
(a) Earnings did not cover fixed charges by $121.5 million for the year ended
December 31, 1993. Excluding non-recurring special charges of $94.3 million
for the year ended December 31, 1993, earnings did not cover fixed charges
by $27.2 million.
4
<PAGE>
DESCRIPTION OF THE CERTIFICATES
In connection with each offering of Certificates, one or more separate
Trusts will be formed and one or more series of Certificates will be issued
pursuant to the Basic Agreement and one or more separate Trust Supplements to be
entered into among Northwest, NWA Corp. and the Trustee. The statements made
under this caption are summaries and reference is made to the detailed
provisions of the Basic Agreement, the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
summaries relate to the Basic Agreement and each of the Trust Supplements, the
Trusts to be formed thereby and the Certificates to be issued by each Trust
except to the extent, if any, described in the applicable Prospectus Supplement.
The Prospectus Supplement that accompanies this Prospectus contains a glossary
of the material terms used with respect to the specific series of Certificates
being offered thereby. The Trust Supplement relating to each series of
Certificates and the forms of the related Note Purchase Agreement, Indenture,
Lease, Trust Agreement, Participation Agreement, Refunding Agreement,
Intercreditor Agreement and Revolving Credit Agreement, as applicable, will be
filed as exhibits to a post-effective amendment to the Registration Statement of
which this Prospectus is a part, a Current Report on Form 8-K, a Quarterly
Report on Form 10-Q or an Annual Report on Form 10-K, as applicable, filed by
NWA Corp. with the Commission.
The Certificates offered pursuant to this Prospectus will be limited to
$1,500,000,000 aggregate public offering price (or its equivalent (based on the
applicable exchange rate at the time of sale) in one or more foreign currencies
or currency units).
TO THE EXTENT THAT ANY PROVISION IN ANY PROSPECTUS SUPPLEMENT IS
INCONSISTENT WITH ANY PROVISION IN THIS SUMMARY, THE PROVISION OF SUCH
PROSPECTUS SUPPLEMENT WILL CONTROL.
GENERAL
Each Certificate will represent a fractional undivided interest in the Trust
created by the Trust Supplement pursuant to which such Certificate was issued
and all payments and distributions shall be made only from the related Trust
Property (as defined below). The property of each Trust (the "Trust Property")
will include the Equipment Notes held in such Trust, all monies at any time paid
thereon and all monies due and to become due thereunder and funds from time to
time deposited with the Trustee in accounts relating to such Trust and, if so
specified in the Prospectus Supplement related to a series of Certificates,
rights under intercreditor agreements relating to cross-subordination
arrangements and monies receivable under a liquidity facility. Each Certificate
will represent a pro rata share of the outstanding principal amount of the
Equipment Notes held in the related Trust and, unless otherwise specified in the
applicable Prospectus Supplement, will be issued in minimum denominations of
$1,000 or any integral multiple thereof (except that one Certificate of each
Trust may be issued in an odd amount, due to the fact that the aggregate amount
offered by such Trust may not represent an integral multiple of $1,000). The
Certificates do not represent an interest in or obligation of Northwest, NWA
Corp., the Trustee, any of the Loan Trustees or Owner Trustees in their
individual capacities, any Owner Participant, or any affiliate of any thereof.
Each Certificateholder by its acceptance of a Certificate agrees to look solely
to the income and proceeds from the Trust Property as provided in the Basic
Agreement and the applicable Trust Supplement.
The Equipment Notes issued under an Indenture may be held in more than one
Trust and one Trust may hold Equipment Notes issued under more than one
Indenture (each Indenture the Equipment Notes of which are held in a Trust, a
"Related Indenture"). Unless otherwise provided in a Prospectus Supplement, only
Equipment Notes having the same priority of payment (the Equipment Notes of any
such priority, a "Class") may be held in the same Trust.
Interest will be passed through to Certificateholders of each Trust at the
rate per annum payable on the Equipment Notes held in such Trust, as set forth
for such Trust on the cover page of the applicable Prospectus Supplement.
5
<PAGE>
Reference is made to the Prospectus Supplement that accompanies this
Prospectus for a description of the specific series of Certificates being
offered thereby, including: (1) the specific designation and title of such
Certificates; (2) the Regular Distribution Dates (as defined below) and Special
Distribution Dates (as defined below) applicable to such Certificates; (3) the
currency or currencies (including currency units) in which such Certificates may
be denominated; (4) the specific form of such Certificates, including whether or
not such Certificates are to be issued in accordance with a book-entry system;
(5) a description of the Equipment Notes to be purchased by such Trust,
including (a) the period or periods within which, the price or prices at which,
and the terms and conditions upon which such Equipment Notes may or must be
redeemed or defeased in whole or in part, by Northwest or, with respect to
Leased Aircraft Notes, the Owner Trustee, (b) the payment priority of such
Equipment Notes in relation to any other Equipment Notes issued with respect to
the related Aircraft, (c) any additional security or liquidity enhancements
therefor and (d) any intercreditor or other rights or limitations between or
among the holders of Equipment Notes of different priorities issued by the same
Owner Trustee; (6) a description of the related Aircraft, including whether such
Aircraft is a Leased Aircraft or an Owned Aircraft; (7) a description of the
related Note Purchase Agreement and Related Indentures, including a description
of the events of default under the Related Indentures, the remedies exercisable
upon the occurrence of such events of default and any limitations on the
exercise of such remedies with respect to such Equipment Notes; (8) if such
Certificates relate to Leased Aircraft, a description of the related Lease,
Trust Agreement and Participation Agreement, including (a) the names of the
related Owner Trustees, (b) a description of the events of default under the
related Leases, the remedies exercisable upon the occurrence of such events of
default and any limitations on the exercise of such remedies with respect to
such Leased Aircraft Notes, and (c) the rights of the related Owner Trustee, if
any, and/or Owner Participant, if any, to cure failures of Northwest to pay rent
under the related Lease; (9) the extent, if any, to which the provisions of the
operative documents applicable to such Equipment Notes may be amended by the
parties thereto without the consent of the holders of, or only upon the consent
of the holders of a specified percentage of aggregate principal amount of, such
Equipment Notes; (10) cross-default or cross-collateralization provisions in the
Related Indentures; (11) subordination provisions among the holders of
Certificates, including any cross-subordination provisions among the holders of
Certificates in separate Trusts; and (12) any other special terms pertaining to
such Certificates.
If any Certificates are denominated in one or more foreign currencies or
currency units, the restrictions, certain United States federal income tax
considerations, specific terms and other information with respect to such
Certificates and such foreign currency or currency units will be set forth in
the applicable Prospectus Supplement.
BOOK-ENTRY REGISTRATION
GENERAL
If specified in the applicable Prospectus Supplement, the Certificates will
be subject to the provisions described below and under the caption "--Definitive
Certificates." Upon issuance, each series of Certificates will be represented by
one fully registered global certificate. Each global certificate will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of Cede & Co. ("Cede"), or its nominee. No person
acquiring an interest in such Certificates ("Certificate Owner") will be
entitled to receive a certificate representing such person's interest in such
Certificates, except as set forth below under "--Definitive Certificates."
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions by Certificateholders
shall refer to actions taken by DTC upon instructions from DTC Participants (as
defined below), and all references herein to distributions, notices, reports and
statements to Certificateholders shall refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of such Certificates, or to DTC Participants for distribution to
Certificate Owners in accordance with DTC procedures.
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Northwest has been advised that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and "clearing agency" registered pursuant to section 17A
of the Exchange Act. DTC was created to hold securities for its participants
("DTC Participants") and to facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic
book-entries, thereby eliminating the need for physical transfer of
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a DTC Participant
either directly or indirectly ("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, the Certificates may do so only through DTC Participants and
Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal and interest from the Trustee through DTC
Participants or Indirect Participants, as the case may be. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, because such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments in same-day funds to DTC
Participants who are credited with ownership of the Certificates in amounts
proportionate to the principal amount of each such DTC Participant's respective
holdings of beneficial interests in the Certificates. DTC Participants will
thereafter forward payments to Indirect Participants or Certificate Owners, as
the case may be, in accordance with customary industry practices. The forwarding
of such distributions to the Certificate Owners will be the responsibility of
such DTC Participants. Unless and until the Definitive Certificates are issued
under the limited circumstances described herein, the only "Certificateholder"
will be Cede, as nominee of DTC. Certificate Owners will not be recognized by
the Trustee as Certificateholders, as such term is used in the Basic Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Certificates among DTC Participants on whose behalf it acts with respect to
the Certificates and to receive and transmit distributions of principal,
premium, if any, and interest with respect to the Certificates. DTC Participants
and Indirect Participants with which Certificate Owners have accounts with
respect to the Certificates similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective customers.
Accordingly, although Certificate Owners will not possess the Certificates, the
Rules provide a mechanism by which Certificate Owners will receive payments and
will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
the Certificates to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Certificates, may be limited
due to the lack of a physical certificate for such Certificates.
DTC has advised Northwest that it will take any action permitted to be taken
by a Certificateholder under the Basic Agreement only at the direction of one or
more DTC Participants to whose accounts with DTC the Certificates are credited.
Additionally, DTC has advised Northwest that in the event any action requires
approval by Certificateholders of a certain percentage of beneficial interest in
each Trust, DTC will take such action only at the direction of and on behalf of
DTC Participants whose holders include undivided interests that satisfy any such
percentage. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of DTC
Participants whose holders include such undivided interests.
Neither Northwest, NWA Corp. nor the Trustee will have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Certificates held by
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Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The applicable Prospectus Supplement will specify any additional book-entry
registration procedures applicable to Certificates denominated in a currency
other than United States dollars.
SAME-DAY SETTLEMENT AND PAYMENT
So long as the Certificates are registered in the name of Cede, as nominee
for DTC, all payments made by Northwest to the Loan Trustee under any Lease or
any Owned Aircraft Indentures will be in immediately available funds. Such
payments, including the final distribution of principal with respect to the
Certificates of any Trust, will be passed through to DTC in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, secondary
trading in pass through certificates is generally settled in immediately
available or same-day funds. Any Certificates registered in the name of Cede, as
nominee for DTC, will trade in DTC's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Certificates will
therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in same-day funds
on trading activity in the Certificates.
DEFINITIVE CERTIFICATES
Certificates will be issued in certificated form ("Definitive Certificates")
to Certificate Owners or their nominees, rather than to DTC or its nominee, only
if (i) Northwest advises the Trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with respect to
such Certificates and Northwest is unable to locate a qualified successor, (ii)
Northwest, at its option, elects to terminate the book-entry system through DTC
or (iii) after the occurrence of certain events of default or other events
specified in the related Prospectus Supplement. Certificate Owners with
fractional undivided interests aggregating not less than a majority in interest
in such Trust advise the Trustee, Northwest and DTC through DTC Participants in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the Certificate Owners' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all Certificate Owners through
DTC Participants of the availability of Definitive Certificates. Upon surrender
by DTC of the certificates representing the Certificates and receipt of
instructions for re-registration, the Trustee will reissue the Certificates as
Definitive Certificates to Certificate Owners.
Distributions of principal, premium, if any, and interest with respect to
Certificates will thereafter be made by the Trustee directly in accordance with
the procedures set forth in the Basic Agreement and the applicable Trust
Supplements, to holders in whose names the Definitive Certificates were
registered at the close of business on the applicable record date. Such
distributions will be made by check mailed to the address of such holder as it
appears on the register maintained by the Trustee. The final payment on any
Certificate, however, will be made only upon presentation and surrender of such
Certificate at the office or agency specified in the notice of final
distribution to Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will be
imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge shall be required.
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PAYMENTS AND DISTRIBUTIONS
Subject to the effect of any cross-subordination provisions set forth in the
Prospectus Supplement for a series of Certificates, payments of principal,
premium, if any, and interest with respect to the Equipment Notes held in each
Trust will be distributed by the Trustee, upon receipt, to Certificateholders of
such Trust on the dates and in the currency specified in the applicable
Prospectus Supplement, except in certain cases when some or all of such
Equipment Notes are in default as described in the applicable Prospectus
Supplement. Payments of principal of, and interest on, the unpaid principal
amount of the Equipment Notes held in each Trust will be scheduled to be
received by the Trustee on the dates specified in the applicable Prospectus
Supplement (such scheduled payments of interest and principal on the Equipment
Notes to the Trustee are herein referred to as "Scheduled Payments," and the
dates specified in the applicable Prospectus Supplement for distribution of
Scheduled Payments to the Trustee are herein referred to as "Regular
Distribution Dates"). See "Description of the Equipment Notes General." Subject
to the effect of any cross-subordination provisions set forth in the Prospectus
Supplement for a series of Certificates, each Certificateholder of each Trust
will be entitled to receive a pro rata share of any distribution in respect of
Scheduled Payments of principal and interest made on the Equipment Notes held in
the Trust.
Payments of principal, premium, if any, and interest received by the Trustee
on account of the early redemption, if any, of the Equipment Notes relating to
one or more Aircraft held in a Trust, and payments, other than Scheduled
Payments received on a Regular Distribution Date, received by the Trustee
following default in respect of Equipment Notes held in a Trust relating to one
or more Aircraft ("Special Payments") will be distributed on the date determined
pursuant to the applicable Prospectus Supplement (a "Special Distribution Date")
except that, unless otherwise specified in the applicable Prospectus Supplement,
payments received by the Trustee following default in respect of the Equipment
Notes on a Regular Distribution Date as a result of a drawing under any
liquidity facility specified in the applicable Prospectus Supplement (each, a
"Liquidity Facility"), provided for the benefit of the Certificateholders shall
be distributed on such Regular Distribution Date. The Trustee will mail notice
to the Certificateholders of record of the applicable Trust not less than 20
days prior to the Special Distribution Date on which any Special Payment is
scheduled to be distributed by the Trustee stating such anticipated Special
Distribution Date.
POOL FACTORS
Unless there has been an early redemption, a purchase of an issue of
Equipment Notes by the related Owner Trustee after an Indenture Default (as
defined below), a default in the payment of principal in respect of one or more
issues of the Equipment Notes held in a Trust or certain actions have been taken
following a default thereon, as described in the applicable Prospectus
Supplement, the Pool Factor (as defined below) for the Trusts will decline in
proportion to the scheduled repayments of principal on the Equipment Notes held
in such Trust as described in the applicable Prospectus Supplement. In the event
of such redemption, purchase or default, the Pool Factor and the Pool Balance
(as defined below) of each Trust so affected will be recomputed after giving
effect thereto and notice thereof will be mailed to the Certificateholders of
such Trust. Each Trust will have a separate Pool Factor.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Trust or for the Certificates issued by any Trust
indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust other than payments made in respect of
interest or premium thereon or reimbursement of any costs and expenses in
connection therewith. The Pool Balance for each Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or other
Trust Property held in such Trust and the distribution thereof to be made on
that date.
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Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Trust as of any Regular Distribution Date or Special
Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the aggregate original
principal amount of the Equipment Notes held in such Trust. The Pool Factor for
each Trust as of any Regular Distribution Date or Special Distribution Date
shall be computed after giving effect to the payment of principal, if any, on
the Equipment Notes held in such Trust and distribution thereof to be made on
that date. The Pool Factor for each Trust will initially be 1.0000000;
thereafter, the Pool Factor for each Trust will decline as described above to
reflect reductions in the Pool Balance of such Trust. The amount of a
Certificateholder's pro rata share of the Pool Balance of a Trust can be
determined by multiplying the original denomination of the holder's Certificate
of such Trust by the Pool Factor for such Trust as of the applicable Regular
Distribution Date or Special Distribution Date. The Pool Factor and the Pool
Balance for each Trust will be mailed to Certificateholders of such Trust on
each Regular Distribution Date and Special Distribution Date.
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, the Trustee
will include with each distribution of a Scheduled Payment or Special Payment to
Certificateholders of the related Trust a statement, giving effect to such
distribution to be made on such Regular Distribution Date or Special
Distribution Date, setting forth the following information (per $1,000 aggregate
principal amount of Certificate for such Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the amount
allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Trust.
So long as the Certificates are registered in the name of Cede, as nominee
for DTC, on the record date prior to each Regular Distribution Date and Special
Distribution Date, the Trustee will request from DTC a Securities Position
Listing setting forth the names of all DTC Participants reflected on DTC's books
as holding interests in the Certificates on such record date. On each Regular
Distribution Date and Special Distribution Date, the Trustee will mail to each
such DTC Participant the statement described above and will make available
additional copies as requested by such DTC Participant for forwarding to
Certificate Owners.
In addition, after the end of each calendar year, the Trustee will prepare
for each Certificateholder of each Trust at any time during the preceding
calendar year a report containing the sum of the amounts determined pursuant to
clauses (i) and (ii) above with respect to the Trust for such calendar year or,
in the event such person was a Certificateholder during only a portion of such
calendar year, for the applicable portion of such calendar year, and such other
items as are readily available to the Trustee and which a Certificateholder
shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax returns. Such report
and such other items shall be prepared on the basis of information supplied to
the Trustee by the DTC Participants and shall be delivered by the Trustee to
such DTC Participants to be available for forwarding by such DTC Participants to
Certificate Owners in the manner described above.
At such time, if any, as the Certificates are issued in the form of
Definitive Certificates, the Trustee will prepare and deliver the information
described above to each Certificateholder of record of each Trust as the name
and period of beneficial ownership of such Certificateholder appears on the
records of the registrar of the Certificates.
VOTING OF EQUIPMENT NOTES
Subject to the effect of any cross-subordination provisions set forth in the
related Prospectus Supplement, the Trustee, as holder of the Equipment Notes
held in each Trust, has the right to vote and
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give consents and waivers with respect to such Equipment Notes under the Related
Indentures. The Basic Agreement and related Trust Supplement set forth (i) the
circumstances in which the Trustee may direct any action or cast any vote as the
holder of the Equipment Notes held in the applicable Trust at its own
discretion, (ii) the circumstances in which the Trustee shall seek instructions
from the Certificateholders of such Trust and (iii) the percentage of
Certificateholders required to direct the Trustee to take any such action. If
specified in the related Prospectus Supplement, the right of a Trustee to vote
and give consents and waivers with respect to the Equipment Notes held in the
related Trust may, in the circumstances set forth in an intercreditor agreement
to be executed by such Trustee, be exercisable by another person specified in
such Prospectus Supplement.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Prospectus Supplement will specify the events of default under the Basic
Agreement (an "Event of Default") and the Related Indentures (an "Indenture
Default"). The Indenture Defaults will include events of default under the
related Leases (a "Lease Event of Default"). With respect to any Equipment Notes
which are supported by a Liquidity Facility the Indenture Defaults or Events of
Default may include events of default under such Liquidity Facility. Unless
otherwise provided in a Prospectus Supplement, all of the Equipment Notes issued
under the same Indenture will relate to a specific Aircraft and there will be no
cross-collateralization or cross-default provisions in the Indentures, and
events resulting in an Indenture Default under any particular Indenture will not
necessarily result in an Indenture Default occurring under any other Indenture.
If an Indenture Default occurs in fewer than all of the Indentures,
notwithstanding the treatment of Equipment Notes issued under any Indenture
under which an Indenture Default has occurred, payments of principal and
interest on the Equipment Notes issued pursuant to Indentures with respect to
which an Indenture Default has not occurred will continue to be made as
originally scheduled. As described below under "--Cross-Subordination Issues," a
Prospectus Supplement may provide the terms of any cross-subordination
provisions among Certificateholders of separate Trusts. If such provisions are
so provided, payments made pursuant to a Related Indenture under which an
Indenture Default has not occurred may be distributed first to the holders of
the Certificates issued under the Trust which holds the most senior Equipment
Notes issued under all Related Indentures.
The ability of the applicable Owner Trustee or Owner Participant under the
Related Indenture to cure Indenture Defaults, including Indenture Defaults that
result from the occurrence of a Lease Event of Default under the related Lease
will be described in the Prospectus Supplement. Unless otherwise provided in a
Prospectus Supplement, with respect to any Certificates or Equipment Notes
entitled to the benefits of a Liquidity Facility, a drawing under any such
Liquidity Facility for the purpose of making a payment of interest as a result
of the failure by Northwest to have made a corresponding payment will not cure
an Indenture Default related to such failure by Northwest.
The Prospectus Supplement related to a series of Certificates will describe
the circumstances under which the Trustee of the related Trust may vote some or
all of the Equipment Notes issued under the applicable Indenture or issued under
any Related Indentures. Such Prospectus Supplement will also set forth (i) the
percentage of Certificateholders of such Trust entitled to direct the Trustee to
take any action with respect to such Equipment Notes and, if applicable,
Equipment Notes issued under any other Related Indenture. If the Equipment Notes
outstanding under an Indenture are held by more than one Trust, then the ability
of the Certificateholders issued with respect to any one Trust to cause the Loan
Trustee with respect to any Equipment Notes held in such Trust to accelerate the
Equipment Notes under the Related Indenture or to direct the exercise of
remedies by the Loan Trustee under the Related Indenture will depend, in part,
upon the proportion between the aggregate principal amount of the Equipment
Notes outstanding under such Indenture and held in such Trust and the aggregate
principal amount of all Equipment Notes outstanding under such Indenture. In
addition, if cross-subordination provisions are applicable to any series of
Certificates, then the ability of the Certificateholders of any one Trust
holding Equipment Notes issued under Related Indentures to cause the Loan
Trustee with respect to any Equipment Notes held in such Trust to accelerate the
Equipment Notes under the Related Indenture or to
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direct the exercise of remedies by the Loan Trustee under the Related Indenture
will depend, in part, upon the Class of Notes held in such Trust. If the
Equipment Notes outstanding under an Indenture are held by more than one Trust,
then each Trust will hold Equipment Notes with different terms from the
Equipment Notes held in the other Trusts and therefore the Certificateholders of
a Trust may have divergent or conflicting interests from those of the
Certificateholders of the other Trusts holding Equipment Notes relating to the
same Indenture. In addition, so long as the same institution acts as Trustee of
each Trust, in the absence of instructions from the Certificateholders of any
such Trust, the Trustee for such Trust could for the same reason be faced with a
potential conflict of interest upon an Indenture Default. In such event, the
Trustee has indicated that it would resign as Trustee of one or all such Trusts,
and a successor trustee would be appointed in accordance with the terms of the
Basic Agreement.
The Prospectus Supplement for a series of Certificates will specify whether
and under what circumstances the Trustee may or shall sell for cash to any
person all or part of such Equipment Notes. Any proceeds received by the Trustee
upon any such sale shall be deposited in an account established by the Trustee
for the benefit of the Certificateholders of such Trust for the deposit of such
Special Payments (the "Special Payments Account") and shall be distributed to
the Certificateholders of such Trust on a Special Distribution Date. The market
for Equipment Notes in default may be very limited, and there can be no
assurance that they could be sold for a reasonable price. Furthermore, so long
as the same institution acts as Trustee of multiple Trusts, it may be faced with
a conflict in deciding from which Trust to sell Equipment Notes to available
buyers. If the Trustee sells any such Equipment Notes with respect to which an
Indenture Default exists for less than their outstanding principal amount, the
Certificateholders of such Trust will receive a smaller amount of principal
distributions than anticipated and will not have any claim for the shortfall
against Northwest, any Owner Trustee, Owner Participant or the Trustee.
Furthermore, neither the Trustee nor the Certificateholders of such Trust could
take any action with respect to any remaining Equipment Notes held in such Trust
so long as no Indenture Defaults exist with respect thereto.
Any amount, other than Scheduled Payments received on a Regular Distribution
Date, distributed to the Trustee of any Trust by the Loan Trustee under any
Indenture on account of the Equipment Notes held in such Trust following an
Indenture Default under such Indenture shall be deposited in the Special
Payments Account for such Trust and shall be distributed to the
Certificateholders of such Trust on a Special Distribution Date. In addition, if
a Prospectus Supplement provides that the applicable Owner Trustee may, under
circumstances specified therein, redeem or purchase the outstanding Equipment
Notes issued under the Related Indenture, the price paid by such Owner Trustee
to the Trustee of any Trust for the Equipment Notes issued under such Indenture
and held in such Trust shall be deposited in the Special Payments Account for
such Trust and shall be distributed to the Certificateholders of such Trust on a
Special Distribution Date.
Any funds representing payments received with respect to any Equipment Notes
held in a Trust in default, or the proceeds from the sale by the Trustee of any
such Equipment Notes, held by the Trustee in the Special Payments Account for
such Trust shall, to the extent practicable, be invested and reinvested by the
Trustee in Permitted Investments pending the distribution of such funds on a
Special Distribution Date. "Permitted Investments" will be specified in the
related Prospectus Supplement.
The Basic Agreement provides that the Trustee of each Trust shall, within 90
days after the occurrence of a default in respect of such Trust, give to the
Certificateholders of such Trust notice, transmitted by mail, of all uncured or
unwaived defaults with respect to such Trust known to it, provided that, except
in the case of default in the payment of principal, premium, if any, or interest
on any of the Equipment Notes held in such Trust, the Trustee shall be protected
in withholding such notice if it in good faith determines that the withholding
of such notice is in the interests of such Certificateholders. The term
"default" as used in this paragraph only means the occurrence of an Event of
Default with respect to a Trust as described above, except that in determining
whether any such Event of Default has occurred, any grace period or notice in
connection therewith shall be disregarded.
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The Basic Agreement contains a provision entitling the Trustee of each
Trust, subject to the duty of the Trustee during a default to act with the
required standard of care, to be offered reasonable security or indemnity by the
Certificateholders of such Trust before proceeding to exercise any right or
power under the Basic Agreement at the request of such Certificateholders.
The Prospectus Supplement for a series of Certificates will specify the
percentage of Certificateholders entitled to waive, or to instruct the Trustee
to waive, any past Event of Default with respect to such Trust and thereby annul
any direction given with respect thereto. The Prospectus Supplement for a series
of Certificates will also specify the percentage of Certificateholders (and
whether of such Trust or of any other Trust holding Equipment Notes issued under
Related Indentures) entitled to waive, or to instruct the Trustee or the Loan
Trustee to waive, any past Indenture Default with respect to the Equipment Notes
held in such Trust and thereby annul any direction given with respect thereto.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Northwest will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an entirety
to any other corporation unless (i) the surviving successor or transferee
corporation shall (a) be a "citizen of the United States" (as defined in Section
40102(a)(15) of Title 49 of the United States Code) 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 10 or more
individuals or 6,000 pounds or more of cargo and with respect to which there is
in force an air carrier operating certificate issued pursuant to Part 121 of the
regulations under the sections of Title 49, United States Code, relating to
aviation and (b) expressly assume all of the obligations of Northwest contained
in the Basic Agreement and any Trust Supplement, the Note Purchase Agreements
and the Indentures and, with respect to the Leased Aircraft Notes, the
Participation Agreements and the Leases, and any other operative documents; (ii)
immediately after giving effect to such transaction, no Indenture Default (with
respect to the Owned Aircraft Notes) or Lease Event of Default (with respect to
the Leased Aircraft Notes) shall have occurred and be continuing; and (iii)
Northwest shall have delivered a certificate and an opinion or opinions of
counsel indicating that such transaction, in effect, complies with such
conditions.
MODIFICATIONS OF THE BASIC AGREEMENT
The Basic Agreement contains provisions permitting Northwest, NWA Corp. and
the Trustee of each Trust to enter into a supplemental trust agreement, without
the consent of the holders of any of the Certificates of such Trust, (i) to
provide for the formation of such Trust and the issuance of a series of
Certificates, (ii) to evidence the succession of another corporation to
Northwest or NWA Corp. and the assumption by such corporation of Northwest's or
NWA Corp.'s obligations under the Basic Agreement and the applicable Trust
Supplement, (iii) to add to the covenants of Northwest or NWA Corp. for the
benefit of holders of such Certificates, or to surrender any right or power in
the Basic Agreement conferred upon Northwest or NWA Corp., (iv) to cure any
ambiguity or correct or supplement any defective or inconsistent provision of
the Basic Agreement or the applicable Trust Supplement or to make any other
provisions with respect to matters or questions arising thereunder, provided
such action shall not adversely affect the interests of the holders of such
Certificates, or to cure any ambiguity or correct any mistake, (v) to modify,
eliminate or add to the provisions of the Basic Agreement to the extent as shall
be necessary to continue the qualification of the Basic Agreement (including any
supplemental agreement) under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") and to add to the Basic Agreement such other provisions
as may be expressly permitted by the Trust Indenture Act, (vi) to provide for a
successor Trustee or to add to or change any provision of the Basic Agreement as
shall be necessary to facilitate the administration of the Trusts thereunder by
more than one Trustee, (vii) to add, eliminate or change any provisions under
such Basic Agreement that will not adversely affect the Certificateholders in
any material respect, provided that in each case, such modification does not
cause the corresponding Trust to become taxable as an "association" within the
meaning of Treasury Regulation Section 301.7701-2 or a "publicly traded
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partnership" within the meaning of Section 7704 of the Code taxable as a
corporation and (viii) to make any other amendments or modifications to the
Basic Agreement, provided such amendments or modifications shall only apply to
Certificates issued thereafter.
The Basic Agreement also contains provisions permitting Northwest, NWA Corp.
and the Trustee of each Trust, with the consent of the Certificateholders of
such Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, and, with respect to any Leased Aircraft,
with the consent of the applicable Owner Trustee (such consent not to be
unreasonably withheld), to execute supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of the Basic
Agreement, to the extent relating to such Trust, and the applicable Trust
Supplement, or modifying the rights of the Certificateholders, except that no
such supplemental trust agreement may, without the consent of each
Certificateholder so affected thereby, (a) reduce in any manner the amount of,
or delay the timing of, any receipt by the Trustee of payments on the Equipment
Notes held in such Trust or distributions in respect of any Certificate related
to such Trust, or change the date or place of any payment in respect of any
Certificate, or make distributions payable in coin or currency other than that
provided for in such Certificates, or impair the right of any Certificateholder
of such Trust to institute suit for the enforcement of any such payment when
due, (b) permit the disposition of any Equipment Note held in such Trust, except
as provided in the Basic Agreement or the applicable Trust Supplement, or
otherwise deprive any Certificateholder of the benefit of the ownership of the
applicable Equipment Notes, (c) reduce the percentage of the aggregate
fractional undivided interests of the Trust provided for in the Basic Agreement
or the applicable Trust Supplement, the consent of the holders of which is
required for any such supplemental trust agreement or for any waiver provided
for in the Basic Agreement or such Trust Supplement, (d) modify any of the
provisions relating to the rights of the Certificateholders in respect of the
waiver of events of default or receipt of payment or (e) cause the Trust to
become taxable as an "association" within the meaning of Treasury Regulation
Section 301.7701-2 or a "publicly traded partnership" within the meaning of
Section 7704 of the Code taxable as a corporation.
MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
The Prospectus Supplement will specify the Trustee's obligations in the
event that the Trustee, as the holder of any Equipment Notes held in a Trust,
receives a request for its consent to any amendment, modification or waiver
under the Indenture or other documents relating to such Equipment Notes
(including any Lease with respect to Leased Aircraft Notes or any Liquidity
Facility).
CROSS-SUBORDINATION ISSUES
The Equipment Notes issued under an Indenture may be held in more than one
Trust and one Trust may hold Equipment Notes issued under more than one Related
Indenture. Unless otherwise provided in a Prospectus Supplement, only Equipment
Notes of the same Class may be held in the same Trust. In such event, payments
made on account of a subordinate Class of Equipment Notes issued under a Related
Indenture may, under circumstances described in the related Prospectus
Supplement, be subordinated to the prior payment of all amounts owing to
Certificateholders of a Trust which holds senior Equipment Notes issued under
all Related Indentures. The Prospectus Supplement related to an issuance of
Certificates will describe any such "cross-subordination" provisions and any
related terms, including the percentage of Certificateholders under any Trust
which are permitted to (i) grant waivers of defaults under any Related
Indenture, (ii) consent to the amendment or modification of any Related
Indentures or (iii) direct the exercise of remedial actions under any Related
Indentures.
TERMINATION OF THE TRUSTS
The obligations of Northwest, NWA Corp. and the Trustee with respect to a
Trust will terminate upon the distribution to Certificateholders of such Trust
of all amounts required to be distributed to them pursuant to the Basic
Agreement and the applicable Trust Supplement and the disposition of all
property
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held in such Trust. The Trustee will send to each Certificateholder of record of
such Trust notice of the termination of such Trust, the amount of the proposed
final payment and the proposed date for the distribution of such final payment
for such Trust. The final distribution to any Certificateholder of such Trust
will be made only upon surrender of such Certificateholder's Certificates at the
office or agency of the Trustee specified in such notice of termination.
DELAYED PURCHASE
In the event that, on the delivery date of any Certificates, all of the
proceeds from the sale of such Certificates are not used to purchase the
Equipment Notes contemplated to be held in the related Trust, such Equipment
Notes may be purchased by the Trustee at any time on or prior to the date
specified in the applicable Prospectus Supplement. In such event, the Trustee
will hold the proceeds from the sale of such Certificates not used to purchase
Equipment Notes in an escrow account pending the purchase of the Equipment Notes
not so purchased. Such proceeds will be invested at the direction and risk of,
and for the account of, Northwest in certain specified investments, which may
include: (i) obligations of, or guaranteed by, the United States Government or
agencies thereof, (ii) open market commercial paper of any corporation
incorporated under the laws of the United States of America or any State thereof
rated at least P-2 or its equivalent by Moody's Investors Service, Inc. or at
least A-2 or its equivalent by Standard & Poor's Corporation, (iii) certificates
of deposit issued by commercial banks organized under the laws of the United
States or of any political subdivision thereof having a combined capital and
surplus in excess of $500,000,000 which banks or their holding companies have a
rating of A or its equivalent by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, provided, however, that the aggregate amount at any one time
so invested in certificates of deposit issued by any one bank shall not exceed
5% of such bank's capital and surplus, (iv) U.S. dollar denominated offshore
certificates of deposit issued by, or offshore time deposits with, any
commercial bank described in clause (iii) above or any subsidiary thereof and
(v) repurchase agreements with any financial institution having combined capital
and surplus of at least $500,000,000 with any of the obligations described in
(i) through (iv) as collateral; provided that if all of the above investments
are unavailable, the entire amounts to be invested may be used to purchase
federal funds from an entity described in clause (iii) above; and provided
further that no investment shall be eligible as a "specified investment" unless
the final maturity date or date of return of such investment is on or before (x)
the scheduled date for the purchase of such Equipment Notes, or (y) if no date
has been scheduled for the purchase of such Equipment Notes, the next Business
Day, or (z) if Northwest has given notice that such Equipment Notes will not be
purchased, the next applicable Special Distribution Date. Earnings on such
investments in the escrow account for each Trust will be paid to Northwest
periodically, and Northwest will be responsible for any losses.
On the next Regular Distribution Date specified in the applicable Prospectus
Supplement, Northwest will pay to the Trustee an amount equal to the interest
that would have accrued on any Equipment Notes purchased after the date of the
issuance of such Certificates from the date of the issuance of such Certificates
to, but excluding, the date of the purchase of such Equipment Notes by the
Trustee.
SPECIAL DISTRIBUTION UPON UNAVAILABILITY OF AIRCRAFT
To the extent that, due to a casualty to, or other event causing the
unavailability of, one or more Aircraft, the full amount of the proceeds from
the sale of any Certificates held in the escrow account referred to above is not
used to purchase Equipment Notes on or prior to the date specified in the
applicable Prospectus Supplement, an amount equal to the unused proceeds will be
distributed by the Trustee to the holders of record of such Certificates on a
pro rata basis upon not less than 20 days' prior notice to them on a Special
Distribution Date, together with interest thereon at a rate equal to the rate
applicable to such Certificates, but without premium, and Northwest will pay to
the Trustee on such date an amount equal to such interest.
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THE PARENT GUARANTY
NWA Corp. will unconditionally guarantee (i) with respect to related Owned
Aircraft Notes, the full and prompt payment of principal, premium, if any, and
interest thereon when and as the same shall become due and payable, whether at
maturity, upon redemption or otherwise, and (ii) with respect to related Leased
Aircraft Notes, the full and prompt payment of all amounts payable by Northwest
under the related Lease when and as the same shall become due and payable. The
Parent Guaranty will be enforceable without any need first to enforce any Owned
Aircraft Note or Lease against Northwest. The Parent Guaranty will be an
unsecured obligation of NWA Corp.
LIQUIDITY FACILITY
The related Prospectus Supplement may provide that one or more payments of
interest on the Certificates of one or more series will be supported by a
Liquidity Facility issued by an institution identified in the related Prospectus
Supplement. The provider of such Liquidity Facility will have a claim senior to
the Certificateholders' as specified in the related Prospectus Supplement.
THE TRUSTEE
The Trustee for each series of Certificates will be identified in the
Prospectus Supplement. With certain exceptions, the Trustee makes no
representations as to the validity or sufficiency of the Basic Agreement, the
Trust Supplements, the Certificates, the Equipment Notes, the Indentures, the
Leases or other related documents. The Trustee shall not be liable with respect
to any series of Certificates, for any action taken or omitted to be taken by it
in good faith in accordance with the direction of the holders of a majority in
principal amount of outstanding Certificates of such series issued under the
Basic Agreement. Subject to such provisions, such Trustee shall be under no
obligation to exercise any of its rights or powers under the Basic Agreement at
the request of any holders of Certificates issued thereunder unless they shall
have offered to the Trustee indemnity satisfactory to it. The Basic Agreement
provides that the Indenture Trustee in its individual or any other capacity may
acquire and hold Certificates issued thereunder and, subject to certain
conditions, may otherwise deal with Northwest and, with respect to the Leased
Aircraft, with any Owner Trustee with the same rights it would have if it were
not the Trustee.
The Trustee may resign with respect to any or all of the Trusts at any time,
in which event Northwest will be obligated to appoint a successor trustee. If
the Trustee ceases to be eligible to continue as Trustee with respect to a Trust
or becomes incapable of acting as Trustee or becomes insolvent, Northwest may
remove such Trustee, or any Certificateholder of such Trust for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of such Trustee and the
appointment of a successor trustee. Any resignation or removal of the Trustee
with respect to a Trust and appointment of a successor trustee for such Trust
does not become effective until acceptance of the appointment by the successor
trustee. Pursuant to such resignation and successor trustee provisions, it is
possible that a different trustee could be appointed to act as the successor
trustee with respect to each Trust. All references in this Prospectus to the
Trustee should be read to take into account the possibility that the Trusts
could have different successor trustees in the event of such a resignation or
removal.
The Basic Agreement provides that Northwest will pay the Trustee's fees and
expenses and indemnify the Trustee against certain liabilities.
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DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries and reference is made
to the entire Prospectus and detailed information appearing in the applicable
Prospectus Supplement. Where no distinction is made between the Leased Aircraft
Notes and the Owned Aircraft Notes or between their respective Indentures, such
statements refer to any Equipment Notes and any Indenture.
TO THE EXTENT THAT ANY PROVISION IN ANY PROSPECTUS SUPPLEMENT IS
INCONSISTENT WITH ANY PROVISION IN THIS SUMMARY, THE PROVISION OF SUCH
PROSPECTUS SUPPLEMENT WILL CONTROL.
GENERAL
All Equipment Notes will be issued under a separate Indenture either (a)
between the related Owner Trustee of a trust for the benefit of the Owner
Participant who is the beneficial owner of the related Aircraft, and the related
Loan Trustee, or (b) between Northwest and the related Loan Trustee. The
Equipment Notes issued pursuant to clause (a) of the preceding sentence will be
nonrecourse obligations of the applicable Owner Trust. Each Equipment Note will
be authenticated under an Indenture by the Loan Trustee. All Equipment Notes
issued under the same Indenture will relate to, and be secured by, one or more
Aircraft identified and described in the related Prospectus Supplement and
which, in the case of Equipment Notes issued as described in such clause (a),
are leased to Northwest pursuant to a Lease between the Owner Trustee under the
applicable Owner Trust and Northwest or, in the case of Equipment Notes issued
as described in clause (b), owned by Northwest.
With respect to each Leased Aircraft, the related Owner Trustee has acquired
or will acquire such Aircraft from Northwest or the manufacturer of such
Aircraft, as the case may be, has granted or will grant a security interest in
such Aircraft to the related Loan Trustee as security for the payments of the
related Leased Aircraft Notes, and has leased or will lease such Aircraft to
Northwest pursuant to the related Lease which has been or will be assigned to
the related Loan Trustee. Pursuant to each such Lease, Northwest will be
obligated to make or cause to be made rental and other payments to the related
Loan Trustee on behalf of the related Owner Trustee in amounts that will be
sufficient to make payments of the principal, interest and premium, if any,
required to be made in respect of such Leased Aircraft Notes when and as due and
payable.
The rental obligations of Northwest under each Lease and the obligations of
Northwest under each Owned Aircraft Indenture and under the Owned Aircraft Notes
will be general obligations of Northwest. Except in certain circumstances
involving Northwest's purchase of a Leased Aircraft and the assumption of the
Leased Aircraft Notes related thereto, the Leased Aircraft Notes are not
obligations of, or guaranteed by, Northwest.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Trustee on the Equipment Notes held in each Trust
will be passed through to the Certificateholders of such Trust on the dates and
at the rate per annum set forth in the applicable Prospectus Supplement until
the final distribution for such Trust. Principal received by the Trustee on the
Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust in scheduled amounts on the dates set forth in
the applicable Prospectus Supplement until the final distribution date for such
Trust.
If any date scheduled for any payment of principal, premium, if any, or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be made on the next succeeding Business Day without any additional
interest.
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REDEMPTION
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the Equipment Notes may be
redeemed or purchased prior to the stated maturity date thereof, in whole or in
part, the premium, if any, applicable upon certain redemptions or purchases and
other terms applying to the redemptions or purchases of such Equipment Notes.
SECURITY
The Leased Aircraft Notes will be secured by (i) an assignment by the
related Owner Trustee to the related Loan Trustee of such Owner Trustee's rights
(except for certain rights, including those described below) under the Lease or
Leases with respect to the related Aircraft, including the right to receive
payments of rent thereunder, (ii) a mortgage granted to such Loan Trustee in
such Aircraft, subject to the rights of Northwest under such Lease or Leases and
(iii) an assignment to such Loan Trustee of certain of such Owner Trustee's
rights with respect to such Aircraft under the purchase agreement between
Northwest and the related manufacturer. Under the terms of each Lease,
Northwest's obligations in respect of each Leased Aircraft will be those of a
lessee under a "net lease." Accordingly, Northwest will be obligated, among
other things and at its expense, to cause each Leased Aircraft to be duly
registered, to pay all costs of operating such Aircraft and to maintain,
service, repair and overhaul (or cause to be maintained, serviced, repaired and
overhauled) such Aircraft. With respect to the Leased Aircraft, the assignment
by the related Owner Trustee to the related Loan Trustee of its rights under the
related Lease will exclude, among other things, rights of such Owner Trustee and
the related Owner Participant relating to indemnification by Northwest for
certain matters, insurance proceeds payable to such Owner Trustee in its
individual capacity and to such Owner Participant under liability insurance
maintained by Northwest pursuant to such Lease or by such Owner Trustee or such
Owner Participant, insurance proceeds payable to such Owner Trustee in its
individual capacity or to such Owner Participant under certain casualty
insurance maintained by such Owner Trustee or such Owner Participant pursuant to
such Lease and any rights of such Owner Participant or such Owner Trustee to
enforce payment of the foregoing amounts and their respective rights to the
proceeds of the foregoing.
The Owned Aircraft Notes will be secured by (i) a mortgage granted to the
related Loan Trustee of all of Northwest's right, title and interest in and to
such Owned Aircraft and (ii) an assignment to such Loan Trustee of certain of
Northwest's rights with respect to such Aircraft under the purchase agreement
between Northwest and the related manufacturer. Under the terms of each Owned
Aircraft Indenture, Northwest will be obligated, among other things and at its
expense, to cause each Owned Aircraft to be duly registered, to pay all costs of
operating such Aircraft and to maintain, service, repair and overhaul (or cause
to be maintained, serviced, repaired and overhauled) such Aircraft.
The Prospectus Supplement will specify the required insurance coverage with
respect to the Aircraft.
Northwest will be required, except under certain circumstances, to keep each
Aircraft registered under the Federal Aviation Act of 1958, as amended (the
"Federal Aviation Act"), and to record the Indenture and the Lease, if
applicable, among other documents, with respect to each Aircraft under the
Federal Aviation Act. Such recordation of the Indenture, the Lease, if
applicable, and other documents with respect to each Aircraft will give the
related Loan Trustee a perfected security interest in the related Aircraft
whenever it is located in the United States or any of its territories and
possessions; the Convention on the International Recognition of Rights in
Aircraft (the "Convention") provides that such security will also be recognized,
with certain limited exceptions, in those jurisdictions that have ratified or
adhere to the Convention. Although Northwest has no current intention to do so,
Northwest will have the right, subject to certain conditions, at its own expense
to register each Aircraft in countries other than the United States. Unless
otherwise specified in the applicable Prospectus Supplement, prior to any such
change in the jurisdiction of registry, the related Loan Trustee shall have
received an opinion of
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Northwest's counsel that, among other things, confirms the perfected status of
the lien of the Related Indenture and, in the case of Leased Aircraft, confirms
the validity and enforceability of the related Lease in such jurisdiction, in
each case subject, in certain cases, to certain filings, recordations or other
actions. Each Aircraft may also be operated by Northwest or under lease,
sublease or interchange arrangements in countries that are not parties to the
Convention. The extent to which the related Loan Trustee's security interest
would be recognized in an Aircraft located in a country that is not a party to
the Convention, and the extent to which such security interest would be
recognized in a jurisdiction adhering to the Convention if the Aircraft is
registered in a jurisdiction not a party to the Convention, is uncertain.
Moreover, in the case of an Indenture Default, the ability of the related Loan
Trustee to realize upon its security interest in an Aircraft could be adversely
affected as a legal or practical matter if such Aircraft were registered or
located outside the United States.
Unless otherwise specified in the applicable Prospectus Supplement, the
Equipment Notes will not be cross-collateralized and consequently the Equipment
Notes issued in respect of any one Aircraft will not be secured by any other
Aircraft or, in the case of Leased Aircraft Notes, the Lease related thereto.
Unless and until an Indenture Default with respect to a Leased Aircraft has
occurred and is continuing, the related Loan Trustee may exercise only limited
rights of the related Owner Trustee under the related Lease.
Funds, if any, held from time to time by the Loan Trustee with respect to
any Aircraft, prior to the distribution thereof, will be invested and reinvested
by such Loan Trustee. Such investment and reinvestment will be at the direction
of Northwest (except, with respect to a Leased Aircraft, in the case of a Lease
Event of Default under the applicable Lease or, with respect to an Owned
Aircraft, in the case of an Indenture Default under the applicable Indenture),
in certain investments described in the Related Indenture. The net amount of any
loss resulting from any such investments will be paid by Northwest.
Section 1110 of the Bankruptcy Code provides that, in reorganization cases
under Chapter 11 of the Bankruptcy Code, the right of a lessor with respect to,
and of the holder of a security interest in, aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo (subject to certain
limitations in the case of any such aircraft first placed in service on or prior
to October 22, 1994) leased to or subject to a security interest granted by a
citizen of the United States (as defined in the Federal Aviation Act) holding an
air carrier operating certificate issued by the Secretary of Transportation
pursuant to the Federal Aviation Act for such aircraft (a certificate which
Northwest presently possesses) to take possession of such aircraft in compliance
with the provisions of the lease or security agreement is not affected by (a)
the automatic stay provision of the Bankruptcy Code, which provision generally
enjoins the taking of any action against a debtor by a creditor, (b) the
provision of the Bankruptcy Code allowing the trustee or debtor-in-possession to
use, sell or lease property of the estate and (c) any power of the bankruptcy
court to enjoin a repossession. Section 1110 provides, however, that the right
of a lessor or secured party to take possession of an aircraft in compliance
with the provisions of the lease or security agreement in the event of a default
may not be exercised for 60 days following the date of commencement of the
reorganization proceedings (unless specifically permitted by the bankruptcy
court) and may not be exercised at all if, within such 60-day period, the
trustee or debtor-in-possession agrees to perform the debtor's obligations that
become due on or after such date and cures all existing defaults (other than
defaults resulting solely from the financial condition, bankruptcy, insolvency
or reorganization of the debtor). Section 1110 does not prevent the trustee or
debtor-in-possession from rejecting a lease (including any Lease) or demanding a
renegotiation of such lease as a condition to not rejecting such lease. In
addition, if more than one aircraft are leased pursuant to a master lease and
accompanying lease supplement, the applicability of Section 1110 would be
determined on an aircraft-by-aircraft basis. Assuming Section 1110 is applicable
to all aircraft subject to a master lease, Section 1110 does not prevent the
trustee or debtor-in-possession from complying with the provisions of Section
1110 with respect to some lease supplements, and thereby retaining possession of
the related
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aircraft, and not complying with the provisions of Section 1110 with respect to
other lease supplements, and thereby enabling a repossession of other aircraft.
In connection with any issuance of Certificates under this Prospectus and
the applicable Prospectus Supplement, Northwest shall have received an opinion
from its counsel to the effect that (i) with respect to any Leased Aircraft, the
related Owner Trustee, as lessor under the related Lease, and the related Loan
Trustee, upon foreclosure of the Owner Trustee's interest in such Lease as
assignee of such Owner Trustee's rights under such Lease pursuant to the Related
Indenture, would be entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the Aircraft initially delivered under such Lease and
subjected to the Related Indenture or (ii) with respect to any Owned Aircraft,
the related Loan Trustee under the Related Indenture would be entitled to the
benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft
initially subjected to the Related Indenture. Such opinions will not address the
possible replacement of an Aircraft after an Event of Loss (as defined in the
Indenture) in the future.
RANKING OF EQUIPMENT NOTES
Some of the Equipment Notes related to one or more Aircraft, as described in
the related Prospectus Supplement, may be subordinated and junior in right of
payment to other Equipment Notes related to the same Aircraft. The terms of such
subordination, if any, will be described in the related Prospectus Supplement.
PAYMENTS AND LIMITATION OF LIABILITY
Each Leased Aircraft will be leased by the related Owner Trustee to
Northwest for a term commencing on the delivery date thereof to such Owner
Trustee and expiring on a date not earlier than the latest maturity date of the
related Leased Aircraft Notes, unless previously terminated as permitted by the
terms of the related Lease. The basic rent and other payments under each such
Lease will be payable by Northwest in accordance with the terms specified in the
applicable Prospectus Supplement, and will be assigned by the related Owner
Trustee under the Related Indenture to the Loan Trustee to provide the funds
necessary to pay principal of, premium, if any, and interest due from such Owner
Trustee on the Leased Aircraft Notes issued under such Indenture. In certain
cases, the basic rent payments under a Lease may be adjusted, but each Lease
will provide that under no circumstances will rent payments by Northwest be less
than the scheduled payments on the related Leased Aircraft Notes. The balance of
any basic rent payment under each Lease, after payment of amounts due on the
Leased Aircraft Notes issued under the Indenture corresponding to such Lease,
will be paid over to the applicable Owner Participant. Northwest's obligation to
pay rent and to cause other payments to be made under each Lease will be general
obligations of Northwest.
With respect to the Leased Aircraft Notes, except in certain circumstances
involving Northwest's purchase of a Leased Aircraft and the assumption of the
Leased Aircraft Notes related thereto, the Leased Aircraft Notes will not be
obligations of, or guaranteed by, Northwest. With respect to the Leased Aircraft
Notes, none of the Owner Trustees, the Owner Participants or the Loan Trustees
shall be personally liable to any holder of such Leased Aircraft Notes for
amounts payable under such Leased Aircraft Notes, or, except as provided in the
Indentures relating thereto in the case of the Owner Trustees and the Loan
Trustees, for any liability under such Indentures. Except in the circumstances
referred to above, all amounts payable under any Leased Aircraft Notes (other
than payments made in connection with an optional redemption or purchase by the
related Owner Trustee or the related Owner Participant) will be made only from
(i) the assets subject to the lien of the Related Indenture with respect to such
Aircraft or the income and proceeds received by the related Loan Trustee
therefrom (including rent payable by Northwest under the related Lease) or (ii)
if so provided in the related Prospectus Supplement, the applicable Liquidity
Facility.
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With respect to the Leased Aircraft Notes, except as otherwise provided in
the Related Indentures, no Owner Trustee shall be personally liable for any
amount payable or for any statements, representations, warranties, agreements or
obligations under such Indentures or under such Leased Aircraft Notes except for
its own willful misconduct or gross negligence. None of the Owner Participants
shall have any duty or responsibility under the Leased Aircraft Indentures or
under such Leased Aircraft Notes to the related Loan Trustee or to any holder of
any such Leased Aircraft Note.
Northwest's obligations under each Owned Aircraft Indenture and under the
Owned Aircraft Notes will be general obligations of Northwest.
DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable Prospectus Supplement, the
applicable Indenture provides that the obligations of the related Loan Trustee
and, with respect to any Leased Aircraft Notes, the related Owner Trustee or,
with respect to any Owned Aircraft Notes, Northwest under the applicable
Indenture shall be deemed to have been discharged and paid in full (except for
certain obligations, including the obligations to register the transfer or
exchange of Equipment Notes, to replace stolen, lost, destroyed or mutilated
Equipment Notes and to maintain paying agencies and hold money for payment in
trust) on the 91st day after the date of irrevocable deposit with the related
Loan Trustee of money or certain obligations of the United States or any agency
or instrumentality thereof the payment of which is backed by the full faith and
credit of the United States which, through the payment of principal and interest
in respect thereof in accordance with their terms, will provide money in an
aggregate amount sufficient to pay when due (including as a consequence of
redemption in respect of which notice is given on or prior to the date of such
deposit) principal of, premium, if any, and interest on all Equipment Notes
issued thereunder in accordance with the terms of such Indenture. Such discharge
may occur only if, among other things, there has been published by the Internal
Revenue Service a ruling to the effect that holders of such Equipment Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to federal income
tax on the same amount and in the same manner and at the same time as would have
been the case if such deposit, defeasance and discharge had not occurred.
Upon such defeasance, or upon payment in full of the principal of, premium,
if any, and interest on all Equipment Notes issued under any Indenture on the
maturity date therefor or deposit with the applicable Loan Trustee of money
sufficient therefor no earlier than one year prior to the date of such maturity,
the holders of such Equipment Notes will have no beneficial interest in or other
rights with respect to the related Aircraft or other assets subject to the lien
of such Indenture and such lien shall terminate.
ASSUMPTION OF OBLIGATIONS BY NORTHWEST
Unless otherwise specified in the applicable Prospectus Supplement with
respect to Leased Aircraft, upon the exercise by Northwest of any purchase
options it may have under the related Lease prior to the end of the term of such
Lease, Northwest may assume on a full recourse basis all of the obligations of
the Owner Trustee (other than its obligations in its individual capacity) under
the Indenture with respect to such Aircraft, including the obligations to make
payments in respect of the related Leased Aircraft Notes. In such event, certain
relevant provisions of the related Lease, including (among others) provisions
relating to maintenance, possession and use of the related Aircraft, liens,
insurance and events of default will be incorporated into such Indenture, and
the Leased Aircraft Notes issued under such Indenture will not be redeemed and
will continue to be secured by such Aircraft. It is a condition to such
assumption that, if such Aircraft is registered under the laws of the United
States, an opinion of counsel be delivered at the time of such assumption
substantially to the effect that the related Loan Trustee under such Indenture
should, immediately following such assumption, be entitled to the benefits of
Section 1110 of the Bankruptcy Code with respect to such Aircraft (including the
engines related
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thereto), but such opinion need not be delivered to the extent that the benefits
of such Section 1110 are not available to the Loan Trustee with respect to such
Aircraft or any engine related thereto immediately prior to such assumption.
LIQUIDITY FACILITY
The related Prospectus Supplement may provide that one or more payments of
interest on the related Equipment Notes of one or more series or distributions
made by the Trustee of the related Trust will be supported by a Liquidity
Facility issued by an institution identified in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement, the
provider of the Liquidity Facility will have a senior claim upon the assets
securing the Equipment Notes.
INTERCREDITOR ISSUES
Equipment Notes may be issued in different Classes, which means that the
Equipment Notes may have different payment priorities even though they are
issued by the same Owner Trustee and relate to the same Aircraft. In such event,
the related Prospectus Supplement will describe the priority of distributions
among such Equipment Notes (and any Liquidity Facilities therefor), the ability
of any Class to exercise and/or enforce any or all remedies with respect to the
related Aircraft (and, if the Equipment Notes are Leased Aircraft Notes, the
Lease related thereto) and certain other intercreditor terms and provisions.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion represents the opinion of Cadwalader, Wickersham &
Taft as to the principal U.S. federal income tax consequences to
Certificateholders of the purchase, ownership and disposition of the
Certificates. Except as otherwise specified, the discussion is addressed to
beneficial owners of Certificates ("U.S. Certificateholders") that are citizens
or residents of the United States, corporations, partnerships or other entities
created or organized in or under the laws of the United States or any State,
estates the income of which is subject to U.S. federal income taxation
regardless of its source or, generally, trusts if a court within the United
States is able to exercise primary supervision over the administration of such
trust, and one or more of the foregoing persons have the authority to control
all substantial decisions of such trust ("U.S. Persons") that will hold the
Certificates as capital assets. This discussion does not address the tax
treatment of U.S. Certificateholders that may be subject to special tax rules,
such as banks, insurance companies, dealers in securities or commodities,
tax-exempt entities, holders that will hold Certificates as part of a straddle
or holders that have a "functional currency" other than the U.S. Dollar, nor
does it address the tax treatment of U.S. Certificateholders that do not acquire
Certificates as part of the initial offering. This discussion does not describe
any tax consequences arising under the laws of any State, locality or taxing
jurisdiction other than the United States.
This discussion is based upon the tax laws of the United States as in effect
on the date of this Prospectus, as well as judicial and administrative
interpretations thereof (in final or proposed form) available on or before such
date. All of the foregoing are subject to change or differing interpretations,
which could apply retroactively. Prospective investors should note that no
rulings have been or will be sought from the Internal Revenue Service (the
"IRS") with respect to any of the federal income tax consequences discussed
below, and no assurance can be given the IRS will not take contrary positions.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE CERTIFICATES.
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<PAGE>
TAX STATUS OF THE TRUSTS
In the opinion of Cadwalader, Wickersham & Taft, special tax counsel to
Northwest, in the case of each Series of Certificates, each Trust will be
classified as a grantor trust under subpart E, Part I of Subchapter J of the
Internal Revenue Code of 1986, as amended (the "Code") and not as an association
taxable as a corporation for U.S. federal income tax purposes. Accordingly, each
U.S. Certificateholder will be subject to federal income taxation as if it owned
directly a pro rata undivided interest in each asset owned by the corresponding
Trust and paid directly its share of fees and expenses paid by such Trust.
TAXATION OF CERTIFICATEHOLDERS GENERALLY
A U.S. Certificateholder will be treated as owning its pro rata undivided
interest in each of the Equipment Notes and any other property held by the
related Trust. Accordingly, each U.S. Certificateholder's share of interest paid
on the Equipment Notes will be taxable as ordinary income, as it is paid or
accrued, in accordance with such owner's method of accounting for U.S. federal
income tax purposes and a U.S. Certificateholder's share of premium, if any,
paid on the Equipment Notes will be treated as capital gain. Any amounts
received by a Trust from Interest Drawings under the relevant Liquidity Facility
will be treated for U.S. federal income tax purposes as having the same
characteristics as the payments they replace.
Each U.S. Certificateholder will be entitled to deduct, consistent with its
method of accounting, its pro rata share of fees and expenses paid or incurred
by the corresponding Trust as provided in Section 162 or 212 of the Code.
Certain fees and expenses, including fees paid to the Trustee and the Liquidity
Provider, will be borne by parties other than the Certificateholders. It is
possible that such fees and expenses will be treated as constructively received
by the Trust, in which event a U.S. Certificateholder will be required to
include in income and will be entitled to deduct its pro rata share of such fees
and expenses. If a U.S. Certificateholder is an individual, estate or trust, the
deduction for such holder's share of such fees or expenses will be allowed only
to the extent that all of such holder's miscellaneous itemized deductions,
including such holder's share of such fees and expenses, exceed 2% of such
holder's adjusted gross income. In addition, in the case of U.S.
Certificateholders who are individuals, certain otherwise allowable itemized
deductions will be subject generally to additional limitations on itemized
deductions under the applicable provisions of the Code.
EFFECT OF SUBORDINATION OF SUBORDINATED CERTIFICATEHOLDERS
If any Trust with respect to a Series are subordinated with respect to other
Trusts of the same Series (such Trusts being the "Subordinated Trusts" and the
related Certificates being the "Subordinated Certificates") receives less than
the full amount of the receipts of principal or interest paid with respect to
the Equipment Notes held by it (any shortfall in such receipts being the
"Shortfall Amounts") because of the subordination of the Equipment Notes held by
such Trust under the Intercreditor Agreement, the corresponding owners of
beneficial interests in the Subordinated Certificates (the "Subordinated
Certificateholders") would probably be treated for federal income tax purposes
as if they had (1) received as distributions their full share of such receipts,
(2) paid over to the relevant preferred class of Certificateholders an amount
equal to their share of such Shortfall Amount, and (3) retained the right to
reimbursement of such amounts to the extent of future amounts payable to such
Subordinated Certificateholders with respect to such Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest or
other income of the corresponding Subordinated Trust that was a component of the
Shortfall Amount, even though such amount was in fact paid to the relevant
preferred class of Certificateholders, (2) a loss would only be allowed to such
Subordinated Certificateholders when their right to receive reimbursement of
such Shortfall Amount became worthless (i.e., when it becomes clear that funds
will not be available from any source to reimburse such loss), and
23
<PAGE>
(3) reimbursement of such Shortfall Amount prior to such a claim of
worthlessness would not be taxable income to Subordinated Certificateholders
because such amount was previously included in income. These results should not
significantly affect the inclusion of income for Subordinated Certificateholders
on the accrual method of accounting, but could accelerate inclusion of income to
Subordinated Certificateholders on the cash method of accounting by, in effect,
placing them on the accrual method.
ORIGINAL ISSUE DISCOUNT
The Equipment Notes may be issued with original issue discount ("OID"),
which may require U.S. Certificateholders to include such OID in gross income in
advance of the receipt or accrual of the stated interest on such Equipment
Notes. The Prospectus Supplement will state whether any Equipment Notes to be
held by the related Trust will be issued with OID. Generally, a holder of a debt
instrument issued with original issue discount that is not DE MINIMIS must
include such original issue discount in income for federal income tax purposes
as it accrues, in advance of the receipt of the cash attributable to such
income, under a method that takes into account the compounding of interest.
MARKET DISCOUNT
Generally, the term "market discount" means the excess of the remaining
principal amount of a Certificate over the holder's tax basis in such
Certificate immediately after its acquisition, subject to a DE MINIMIS
exception.
A holder who acquires a Certificate at a market discount will be required to
treat any gain realized on the disposition of such Certificate, except in
certain nonrecognition transactions, as ordinary income to the extent of the
market discount that accrued during the period that such holder held such
Certificate. Further, a disposition of a Certificate by gift (and in certain
other circumstances) could result in the recognition of market discount income,
computed as if such Certificate had been sold for its fair market value.
In the case of a partial principal payment on indebtedness subject to the
market discount rules, Section 1276 of the Code requires that such payment be
included in gross income as ordinary income to the extent such payment does not
exceed the market discount that has accrued during the period such indebtedness
was held. The amount of any accrued market discount later required to be
included in income upon a disposition, or subsequent partial principal payment,
will be reduced by the amount of accrued market discount previously included in
income.
Until Treasury regulations are issued, the explanatory Conference Committee
Report to the Tax Reform Act of 1986 (the "Conference Report") indicates that
holders of installment obligations (such as the Equipment Notes) with market
discount may elect to accrue market discount either (i) on the basis of a
constant interest rate or (ii) in the ratio to the total amount of remaining
market discount that the amount of stated interest paid in the accrual period
bears to the total amount of stated interest remaining to be paid on the
installment obligation as of the beginning of such period. Under Section 1277 of
the Code, if in any taxable year interest paid or accrued on indebtedness
incurred or continued to purchase or carry indebtedness subject to the market
discount rules exceeds the interest currently includable in income with respect
to such indebtedness, deduction of the excess interest must be deferred to the
extent of the market discount allocable to the taxable year. The deferred
portion of any interest expense will generally be deductible when such market
discount is included in income upon the sale or other disposition (including
repayment) of the indebtedness.
A holder of a Certificate acquired at a market discount may elect under
Section 1278 of the Code, in the manner provided by Revenue Procedure 92-67,
1992-34 I.R.B. 6, to include such discount in income as it accrues. The current
inclusion election applies to all market discount obligations acquired on or
after the first day to which the election applies, and may not be revoked
without the consent of the IRS. If a holder of a Certificate elects to include
market discount in income as it accrues, the foregoing rules of
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<PAGE>
Section 1276 and 1277 of the Code with respect to the recognition of ordinary
income on a sale or other disposition of such Certificate and the deferral of
interest deductions on indebtedness related to such Certificate would not apply.
The IRS is authorized to issue regulations to implement the market discount
provisions of the Code. No such regulations have been issued or proposed. It is
impossible to anticipate what effect, if any, such regulations could have on the
Certificateholders.
AMORTIZABLE BOND PREMIUM
A U.S. Certificateholder should generally be considered to have acquired an
interest in an Equipment Note at a premium to the extent the purchaser's tax
basis allocable to such interest exceeds the remaining principal amount of the
Equipment Note allocable to such interest. In that event, a U.S.
Certificateholder who holds a Certificate as a capital asset may elect to
amortize that premium as an offset to interest income under Section 171 of the
Code with corresponding reductions in the U.S. Certificateholder's tax basis in
its Certificate. In the case of installment obligations (such as the Equipment
Notes), the Conference Report indicates a Congressional intent that amortization
will be in accordance with the same rules that will apply to the accrual of
market discount on installment obligations (see discussion above).
Under certain circumstances, amortizable bond premium may be determined by
reference to any early call date. It is unclear how the amortizable bond premium
rules apply where, as in the case with the Equipment Notes, the amount of
redemption premium payable on an early call date is unknown. In addition, the
treatment of any unamortized bond premium remaining at the time of an early call
is unclear. The U.S. Certificateholders are urged to consult their own tax
advisors as to the treatment of any amortizable bond premiums.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a Certificate, a U.S.
Certificateholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the disposition (other than any amount
attributable to accrued interest which will be taxable as ordinary income) and
the U.S. Certificateholder's adjusted tax basis in the related Equipment Notes
and any other assets held by the corresponding Trust. A U.S. Certificateholder's
adjusted tax basis will equal the holder's cost for its Certificate, plus any
accrued OID or market discount previously included in income or less any
amortized bond premium or any previously recognized losses or prior principal
payments. Any gain or loss generally will be capital gain or loss (other than
accrued market discount not previously included in income) if the Certificate
was held as a capital asset.
FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of principal
and interest on the Equipment Notes to, or on behalf of, any beneficial owner of
a Certificate that is not a U.S. Person (a "Non-U.S. Certificateholder") will
not be subject to U.S. federal withholding tax; PROVIDED, in the case of
interest, that (i) such Non-U.S. Certificateholder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of the stock of any Owner Participant or any transferee of such interest, (ii)
such Non-U.S. Certificateholder is not a controlled foreign corporation for U.S.
tax purposes that is related to an Owner Participant and (iii) either (A) the
Non-U.S. Certificateholder certifies, under penalties of perjury, that it is not
a U.S. Person and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Certificate certifies, under penalties of perjury,
that such statement has been received from the Non-U.S. Certificateholder by it
or by another financial institution and furnishes the payor with a copy thereof.
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<PAGE>
Any capital gain realized upon the sale, exchange, retirement or other
disposition of a Certificate or upon receipt of premium paid on an Equipment
Note by a Non-U.S. Certificateholder will not be subject to U.S. federal income
or withholding taxes if (i) such gain is not effectively connected with a U.S.
trade or business of the holder and (ii) in the case of an individual, such
holder is not present in the United States for 183 days or more in the taxable
year of the sale, exchange, retirement or other disposition or receipt.
BACKUP WITHHOLDING
Payments made on the Certificates and proceeds from the sale of Certificates
will not be subject to a backup withholding tax of 31% unless, in general, the
Certificateholder fails to comply with certain reporting procedures or otherwise
fails to establish an exemption from such tax under applicable provisions of the
Code.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Certificates may, subject to certain legal restrictions, be purchased and held
by an employee benefit plan (a "Plan") subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or an individual
retirement account or an employee benefit plan subject to section 4975 of the
Code. A fiduciary of a Plan must determine that the purchase and holding of a
Certificate is consistent with its fiduciary duties under ERISA and does not
result in a non-exempt prohibited transaction as defined in section 406 of ERISA
or section 4975 of the Code. Employee benefit plans which are governmental plans
(as defined in section 3(32) of ERISA) and certain church plans (as defined in
section 3(33) of ERISA) are not subject to Title I of ERISA or section 4975 of
the Code. The Certificates may, subject to certain legal restrictions, be
purchased and held by such plans.
PLAN OF DISTRIBUTION
Certificates may be sold to one or more underwriters for public offering and
sale by them or to investors or other persons directly or through one or more
dealers or agents. Any such underwriter, dealer or agent involved in the offer
and sale of the Certificates will be named in an applicable Prospectus
Supplement.
The Certificates may be sold at a fixed price or prices, which may be
changed, or from time to time at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Dealer trading may take place in certain of the Certificates, including
Certificates not listed on any securities exchange. Northwest does not intend to
apply for listing of the Certificates on a national securities exchange.
Northwest also may, from time to time, authorize underwriters acting as
Northwest's agents to offer and sell the Certificates upon the terms and
conditions as shall be set forth in any Prospectus Supplement. In connection
with the sale of Certificates, underwriters may be deemed to have received
compensation from Northwest in the form of underwriting discounts or commissions
and may also receive commissions from purchasers of Certificates for whom they
may act as agent. Underwriters may sell Certificates to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions (which may be changed from
time to time) from the purchasers for whom they may act as agent.
If a dealer is used directly by Northwest in the sale of Certificates in
respect of which this Prospectus is delivered, such Certificates will be sold to
the dealer, as principal. The dealer may then resell such Certificates to the
public at varying prices to be determined by such dealer at the time of resale.
Any such dealer and the terms of any such sale will be set forth in the
Prospectus Supplement relating thereto.
Certificates may be offered and sold through agents designated by Northwest
from time to time. Any such agent involved in the offer or sale of the
Certificates in respect of which this Prospectus is delivered will be named in,
and any commissions payable by Northwest to such agent will be set forth in,
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<PAGE>
the applicable Prospectus Supplement. Unless otherwise indicated in the
applicable Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
Offers to purchase Certificates may be solicited directly by Northwest and
sales thereof may be made by Northwest directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the Securities
Act with respect to any resale thereof. The terms of any such sales will be
described in the Prospectus Supplement relating thereto. Except as set forth in
the applicable Prospectus Supplement, no director, officer or employee of
Northwest or NWA Corp. will solicit or receive a commission in connection with
direct sales by Northwest of the Certificates, although such persons may respond
to inquiries by potential purchasers and perform ministerial and clerical work
in connection with any such direct sales.
Any underwriting compensation paid by Northwest to underwriters, dealers or
agents in connection with the offering of Certificates, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Certificates may be deemed
to be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Certificates may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements with Northwest, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by
Northwest for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, NWA Corp. and its subsidiaries in the ordinary course of business.
If so indicated in an applicable Prospectus Supplement and subject to
existing market conditions, Northwest will authorize dealers acting as
Northwest's agents to solicit offers by certain institutions to purchase
Certificates at the public offering price set forth in such Prospectus
Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for
payment and delivery on the date or dates stated in such Prospectus Supplement.
Each Contract will be for an amount not less than, and the aggregate principal
amount of Certificates sold pursuant to Contracts shall not be less nor more
than, the respective amounts stated in such Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of Northwest. Contracts will not be subject to any conditions
except the purchase by an institution of the Certificates covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject. A
commission indicated in the applicable Prospectus Supplement will be granted to
underwriters and agents soliciting purchases of Certificates pursuant to
Contracts accepted by Northwest. Agents and underwriters will have no
responsibility in respect of the delivery or performance of Contracts.
If an underwriter or underwriters are utilized in the sale of any
Certificates, the applicable Prospectus Supplement will contain a statement as
to the intention, if any, of such underwriters at the date of such Prospectus
Supplement to make a market in the Certificates. No assurances can be given that
there will be a market for the Certificates.
The place and time of delivery for the Certificates in respect of which this
Prospectus is delivered will be set forth in the applicable Prospectus
Supplement.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Certificates and the Parent Guaranty will be passed upon for
Northwest by Simpson Thacher & Bartlett, New York, New York. Unless otherwise
indicated in the applicable Prospectus Supplement, Simpson Thacher &
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<PAGE>
Bartlett will rely on the opinion of counsel for the Trustee as to certain
matters relating to the authorization, execution and delivery of such
Certificates by, and the valid and binding effect thereof on, such Trustee.
Certain federal income tax matters will be passed upon by Cadwalader, Wickersham
& Taft, New York, New York, special tax counsel to Northwest.
EXPERTS
The consolidated financial statements and schedule of Northwest Airlines
Corporation, appearing or incorporated by reference in NWA Corp's Annual Report
(Form 10-K) for the year ended December 31, 1996 and the consolidated financial
statements of NWA Corp. for the year ended December 31, 1997 included in NWA
Corp.'s Current Report (Form 8-K) dated February 19, 1998 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
included or incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements and schedule are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY RELATED PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND SUCH
PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY NORTHWEST, NWA CORP. OR ANY
UNDERWRITERS, AGENTS OR DEALERS. THIS PROSPECTUS AND ANY RELATED PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AND ANY RELATED
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF NORTHWEST OR NWA CORP. SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
General Outline of Trust Structure........................................ 3
Use of Proceeds........................................................... 3
Ratio of Earnings to Fixed Charges........................................ 4
Description of the Certificates........................................... 5
Description of the Equipment Notes........................................ 17
United States Federal Income Tax Consequences............................. 22
ERISA Considerations...................................................... 26
Plan of Distribution...................................................... 26
Legal Opinions............................................................ 27
Experts................................................................... 28
</TABLE>
$1,500,000,000
NORTHWEST
AIRLINES, INC.
PASS THROUGH CERTIFICATES
-----------
APPLICABLE UNDERLYING PAYMENTS
FULLY AND UNCONDITIONALLY GUARANTEED BY
NORTHWEST AIRLINES
CORPORATION
---------------------
PROSPECTUS
---------------------
FEBRUARY , 1998
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions, are set forth in the following table.
<TABLE>
<S> <C>
Securities and Exchange Commission fee...................... $ 352,764
Printing and engraving expenses............................. 600,000*
Accountants' fees and expenses.............................. 90,000*
Legal fees and expenses..................................... 1,200,000*
Blue Sky fees and expenses.................................. 60,000*
Trustees' fees and expenses................................. 30,000*
Rating Agency fees.......................................... 495,000*
Miscellaneous............................................... 172,236*
---------
Total................................................... $3,000,000*
---------
---------
</TABLE>
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*Estimated and subject to future contingencies.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Business Corporation Act (the "Minnesota
Law") requires a Minnesota corporation to indemnify a person made or threatened
to be made a party to a proceeding by reason of the former or present official
capacity of the person against judgments, penalties, fines and reasonable
expenses (including attorneys' fees), provided that the person has not otherwise
been indemnified, was acting in good faith, received no improper personal
benefit as a result of the conduct in question, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful and,
depending upon the capacity in which such person was acting, believed that the
conduct was in the best interests of the corporation or was not considered to be
opposed to the best interests of the corporation. Under Minnesota Law, the
termination of a proceeding by judgment, order, settlement, conviction or upon a
pleading of NOLO CONTENDERE or its equivalent does not, of itself, establish
that a person is not eligible for indemnification. Minnesota corporations are
permitted to include provisions in their bylaws or articles of incorporation
that prohibit or limit indemnification otherwise required by Minnesota law.
Section 7 of Northwest Airlines, Inc.'s ("Northwest") bylaws (filed as
Exhibit 4(o)) requires Northwest to indemnify any persons, including officers
and directors as permitted by Section 302A.521 of the Minnesota Law. In
addition, Section 7 also specifies that Northwest shall indemnify its officers
and directors against all costs and expenses incurred in connection with or
arising out of any action, suit or proceeding in which such officer or director
may be involved as a result of being or having been a director or officer of
Northwest. However, Section 7 prohibits indemnification when an action, suit or
proceeding results in an officer or director being adjudicated derelict in the
performance of his or her duties as an officer or director, or when a settlement
or compromise is effected when the total cost of such settlement substantially
exceeds the expense which might reasonably be incurred in litigating the matter
to a final conclusion.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was
II-1
<PAGE>
serving at the request of such corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided that
such officer, director, employee or agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests,
and, for criminal proceedings, had no reasonable cause to believe his conduct
was unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.
In accordance with Section 102(b)(7) of the Delaware Law, the Second Amended
and Restated Certificate of Incorporation of Northwest Airlines Corporation
("NWA Corp.") provides that the directors of NWA Corp. shall not be personally
liable to NWA Corp. or its stockholders for monetary damages for violations of
their fiduciary duty.
Article VIII of the bylaws, as amended and restated, of NWA Corp. (filed as
Exhibit 4(m)) provides for indemnification of the officers and directors of NWA
Corp. to the full extent permitted by applicable law.
ITEM 16. EXHIBITS
The following Exhibits are filed as part of this Registration Statement:
<TABLE>
<S> <C>
Exhibit 1(a) Form of Underwriting Agreement for Debt Securities or Warrants to Purchase
Debt Securities of Northwest (filed as Exhibit 1(a) to the Registration
Statement on Form S-3 (File No. 333-13307, and hereinafter "Registration
Statement No. 333-13307") and incorporated herein by reference).
Exhibit 1(b) Underwriting Agreement, dated February 26, 1998, among Northwest, NWA
Corp. and Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., BT
Alex. Brown Incorporated and Chase Securities Inc. (filed herewith).
Exhibit 1(c) Form of Underwriting Agreement for Pass Through Certificates of Northwest
(filed as Exhibit 1(b) to the Registration Statement on Form S-3 (File No.
33-74772, and hereinafter "Registration Statement No. 33-74772") and
incorporated herein by reference).
Exhibit 4(a) Senior Debt Securities Indenture, dated as of March 1, 1997, among
Northwest, NWA Corp. and State Street Bank & Trust Company ("State
Street"), as Trustee, relating to the Senior Debt Securities of Northwest
(filed as Exhibit 4(a) to the Registration Statement No. 333-13307 and
incorporated herein by reference).
Exhibit 4(b) Form of Senior Subordinated Debt Securities Indenture among Northwest, NWA
Corp. and State Street, as Trustee, relating to the Senior Subordinated
Debt Securities of Northwest (filed as Exhibit 4(b) to Registration
Statement No. 33-74772 and incorporated herein by reference).
Exhibit 4(c) Form of Senior Debt Securities of Northwest (filed as Exhibit 4(c) to the
Registration Statement No. 333-13307 and incorporated herein by
reference).
Exhibit 4(d) Form of Senior Subordinated Debt Securities of Northwest (filed as Exhibit
4(d) to the Registration Statement No. 333-13307 and incorporated herein
by reference).
</TABLE>
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<TABLE>
<S> <C>
Exhibit 4(e) Form of Warrant Agreement for Warrants to Purchase Debt Securities of
Northwest that are Sold Attached to Debt Securities of Northwest (filed as
Exhibit 4(g) to Registration Statement No. 33-74772 and incorporated
herein by reference).
Exhibit 4(f) Form of Warrant to Purchase Debt Securities of Northwest that are Sold
Attached to Debt Securities of Northwest (included as part of Exhibit 4(e)
and incorporated herein by reference).
Exhibit 4(g) Form of Warrant Agreement for Warrants to Purchase Debt Securities of
Northwest that are Sold Alone (filed as Exhibit 4(i) to Registration
Statement No. 33-74772 and incorporated herein by reference).
Exhibit 4(h) Form of Warrant to Purchase Debt Securities of Northwest that are Sold
Alone (included as part of Exhibit 4(g) and incorporated herein by
reference).
Exhibit 4(i) Pass Through Trust Agreement, dated as of June 3, 1996, among NWA Corp.,
Northwest and State Street, as Trustee, relating to Pass Through
Certificates of Northwest (filed as Exhibit 4(i) to Registration Statement
No. 333-13307 and incorporated herein by reference).
Exhibit 4(j) Form of Pass Through Certificate (included as part of Exhibit 4(i)) (filed
as Exhibit 4(j) to Registration Statement No. 333-13307 and incorporated
herein by reference).
Exhibit 4(k) Second Amended and Restated Certificate of Incorporation of NWA Corp.
(filed as Exhibit 3.1 to NWA Corp.'s Registration Statement on Form S-1
(File No. 33-74210, and hereinafter the "S-1") and incorporated herein by
reference).
Exhibit 4(l) Certificate of Amendment to the Second Amended and Restated Certificate of
Incorporation of NWA Corp. (filed as Exhibit 3.3 to the S-1 and
incorporated herein by reference).
Exhibit 4(m) Amended and Restated By-Laws of NWA Corp. (filed as Exhibit 3.2 to the S-1
and incorporated herein by reference).
Exhibit 4(n) Restated Certificate of Incorporation of Northwest (filed as Exhibit 4(s)
to Registration Statement No. 33-74772 and incorporated herein by
reference).
Exhibit 4(o) Bylaws of Northwest (filed as Exhibit 4(t) to the Registration Statement
on Form S-3 (File No. 333-2516) and incorporated herein by reference).
Exhibit 4(p) Amended and Restated Certificate of Designation of Series A Preferred
Stock of NWA Corp. (included in Exhibit 4(k) and incorporated herein by
reference).
Exhibit 4(q) Amended and Restated Certificate of Designation of Series B Preferred
Stock of NWA Corp. (included in Exhibit 4(k) and incorporated herein by
reference).
Exhibit 4(r) Certificate of Designation of Series C Preferred Stock of NWA Corp.
(included in Exhibit 4(k) and incorporated herein by reference).
Exhibit 4(s) Certificate of Designation of Series D Junior Participating Preferred
Stock of NWA Corp. (filed as Exhibit A to Exhibit 1 to NWA Corps.'s
Current Report on Form 8-K dated November 16, 1995 and incorporated herein
by reference).
Exhibit 4(t) The Registrants hereby agree to furnish to the Commission, upon request,
copies of certain instruments defining the rights of holders of long-term
debt of the kind described in Item 601(b)(4) of Regulation S-K.
Exhibit 5 Opinion of Simpson Thacher & Bartlett as to the legality of the Securities
(filed with Amendment No. 1 to this Registration Statement and
incorporated herein by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
Exhibit 8 Tax Opinion of Cadwalader, Wickersham & Taft relating to Pass Through
Certificates (filed with Amendment No. 1 to this Registration Statement
and incorporated herein by reference).
Exhibit 10(a) Investment Agreement among NWA Corp., Newbridge Parent Corporation, Air
Partners, L.P., the Partners of Air Partners identified on the signature
pages thereto, Bonderman Family Limited Partnership, 1992 Air, Inc. and
Air Saipan, Inc., dated as of January 25, 1998 (without exhibits or
schedules) (filed as Exhibit 2.1 to NWA Corp.'s Current Report on Form 8-K
dated January 25, 1998 and incorporated herein by reference).
Exhibit 10(b) Governance Agreement among NWA Corp., Newbridge Parent Corporation and
Continental Airlines, Inc., dated as of January 25, 1998 (filed as Exhibit
2.2 to NWA Corp.'s Current Report on Form 8-K dated January 25, 1998 and
incorporated herein by reference).
Exhibit 10(c) Merger Agreement among NWA Corp., Newbridge Parent Corporation and
Newbridge Merger Corporation, dated as of January 25, 1998 (without
exhibits) (filed as Exhibit 2.3 to NWA Corp.'s Current Report on Form 8-K
dated January 25, 1998 and incorporated herein by reference).
Exhibit 23(a) Consent of Ernst & Young LLP (filed herewith).
Exhibit 23(b) Consent of Simpson Thacher & Bartlett (included as part of Exhibit 5,
filed with Amendment No. 1 to this Registration Statement and incorporated
herein by reference).
Exhibit 23(c) Consent of Cadwalader, Wickersham & Taft (included as part of Exhibit 8,
filed with Amendment No. 1 to this Registration Statement and incorporated
herein by reference).
Exhibit 24 Powers of Attorney (included in signature pages II-6 and II-8 of
Registration Statement No. 333-13307 as initially filed and incorporated
herein by reference).
Exhibit 25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), of State Street, as Trustee under
the Senior Debt Securities Indenture of Northwest and NWA Corp. (filed as
Exhibit 25.1 to NWA Corp.'s Current Report on Form 8-K, dated March 6,
1997, and incorporated herein by reference).
Exhibit 25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of State
Street, as Trustee under the Senior Subordinated Debt Securities Indenture
of Northwest and NWA Corp. and the Pass Through Trust Agreement of NWA
Corp. and Northwest (filed as Exhibit 25(b) to Registration Statement No.
333-13307 and incorporated herein by reference).
</TABLE>
ITEM 17. UNDERTAKINGS
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
II-4
<PAGE>
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by NWA Corp. pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each of the undersigned registrants hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of NWA
Corp.'s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Each of the undersigned registrants hereby undertakes if securities are
to be offered pursuant to competitive bidding (1) to use its best efforts to
distribute prior to the opening of bids, to prospective bidders, underwriters
and dealers, a reasonable number of copies of a prospectus which at that time
meets the requirements of section 10(a) of the Securities Act, and relating to
the securities offered at competitive bidding, as contained in this Registration
Statement, together with any supplements thereto, and (2) to file an amendment
to this Registration Statement reflecting the results of bidding, the terms of
the reoffering and related matters to the extent required by the applicable
form, not later than the first use, authorized by the issuer after the opening
of bids, of a prospectus relating to the securities offered at competitive
bidding, unless no further public offering of such securities by the issuer and
no reoffering of such securities by purchasers is proposed to be made.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by a registrant of expenses incurred or paid
by a director, officer or controlling person of such registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the applicable registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question
II-5
<PAGE>
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(e) Each of the undersigned registrants hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
(f) Each of the undersigned registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, NORTHWEST
AIRLINES, INC. HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF EAGAN, STATE OF MINNESOTA,
ON FEBRUARY 27, 1998.
NORTHWEST AIRLINES, INC.
By: /s/ DOUGLAS M. STEENLAND
------------------------------------------
Douglas M. Steenland
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------------- --------------------
<C> <S> <C>
* President, Chief Executive Officer and
----------------------------------- Director (Principal Executive Officer) February 27, 1998
John H. Dasburg
* Executive Vice President and Chief Financial
----------------------------------- Officer (Principal Financial Officer) February 27, 1998
James A. Lawrence
* Vice President and Chief Accounting Officer
----------------------------------- (Principal Accounting Officer) February 27, 1998
Rolf S. Andresen
*
----------------------------------- Chairman of the Board of Directors February 27, 1998
Gary L. Wilson
----------------------------------- Director
Richard C. Blum
*
----------------------------------- Director February 27, 1998
Alfred A. Checchi
*
----------------------------------- Director
Marvin L. Griswold
*
----------------------------------- Director February 27, 1998
Dennis F. Hightower
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------------- --------------------
<C> <S> <C>
----------------------------------- Director
Doris Kearns Goodwin
*
----------------------------------- Director February 27, 1998
Thomas L. Kempner
----------------------------------- Director
George J. Kourpias
*
----------------------------------- Director February 27, 1998
Frederic V. Malek
*
----------------------------------- Director February 27, 1998
Walter F. Mondale
*
----------------------------------- Director February 27, 1998
V.A. Ravindran
*
----------------------------------- Director February 27, 1998
Leo M. Van Wijk
*
----------------------------------- Director February 27, 1998
George J. Vojta
*
----------------------------------- Director February 27, 1998
Duane E. Woerth
</TABLE>
*By: /s/ DOUGLAS M.
STEENLAND
-------------------------
Douglas M. Steenland
ATTORNEY-IN-FACT
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, NORTHWEST
AIRLINES CORPORATION HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF EAGAN, STATE OF
MINNESOTA, ON FEBRUARY 27, 1998.
NORTHWEST AIRLINES CORPORATION
By: /s/ DOUGLAS M. STEENLAND
------------------------------------------
Douglas M. Steenland
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------------- --------------------
<C> <S> <C>
* President, Chief Executive Officer and
----------------------------------- Director (Principal Executive Officer) February 27, 1998
John H. Dasburg
* Executive Vice President and Chief Financial
----------------------------------- Officer (Principal Financial Officer) February 27, 1998
James A. Lawrence
* Vice President and Chief Accounting Officer
----------------------------------- (Principal Accounting Officer) February 27, 1998
Rolf S. Andresen
*
----------------------------------- Chairman of the Board of Directors February 27, 1998
Gary L. Wilson
----------------------------------- Director
Richard C. Blum
*
----------------------------------- Director February 27, 1998
Alfred A. Checchi
----------------------------------- Director
Marvin L. Griswold
*
----------------------------------- Director February 27, 1998
Dennis F. Hightower
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------------------------- --------------------
<C> <S> <C>
----------------------------------- Director
Doris Kearns Goodwin
*
----------------------------------- Director February 27, 1998
Thomas L. Kempner
----------------------------------- Director
George J. Kourpias
*
----------------------------------- Director February 27, 1998
Frederic V. Malek
*
----------------------------------- Director February 27, 1998
Walter F. Mondale
*
----------------------------------- Director February 27, 1998
V.A. Ravindran
*
----------------------------------- Director February 27, 1998
Leo M. Van Wijk
*
----------------------------------- Director February 27, 1998
George J. Vojta
*
----------------------------------- Director February 27, 1998
Duane E. Woerth
</TABLE>
*By: /s/ DOUGLAS M.
STEENLAND
-------------------------
Douglas M. Steenland
ATTORNEY-IN-FACT
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------- ----------------------------------------------------------------------------------
<S> <C> <C>
Exhibit 1(a) Form of Underwriting Agreement for Debt Securities or Warrants to Purchase Debt
Securities of Northwest (filed as Exhibit 1(a) to the Registration Statement on
Form S-3 (File No. 333-13307, and hereinafter "Registration Statement No.
333-13307") and incorporated herein by reference).
Exhibit 1(b) Underwriting Agreement dated February 26, 1998 among Northwest, NWA Corp. and
Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., BT Alex. Brown
Incorporated and Chase Securities Inc. (filed herewith).
Exhibit 1(c) Form of Underwriting Agreement for Pass Through Certificates of Northwest (filed
as Exhibit 1(b) to the Registration Statement on Form S-3 (File No. 33-74772, and
hereinafter "Registration Statement No. 33-74772") and incorporated herein by
reference).
Exhibit 4(a) Senior Debt Securities Indenture, dated as of March 1, 1997, among Northwest, NWA
Corp. and State Street Bank & Trust Company ("State Street"), as Trustee, relating
to the Senior Debt Securities of Northwest (filed as Exhibit 4(a) to the
Registration Statement No. 333-13307 and incorporated herein by reference).
Exhibit 4(b) Form of Senior Subordinated Debt Securities Indenture among Northwest, NWA Corp.
and State Street, as Trustee, relating to the Senior Subordinated Debt Securities
of Northwest (filed as Exhibit 4(b) to Registration Statement No. 33-74772 and
incorporated herein by reference).
Exhibit 4(c) Form of Senior Debt Securities of Northwest (filed as Exhibit 4(c) to the
Registration Statement No. 333-13307 and incorporated herein by reference).
Exhibit 4(d) Form of Senior Subordinated Debt Securities of Northwest (filed as Exhibit 4(d) to
the Registration Statement No. 333-13307 and incorporated herein by reference).
Exhibit 4(e) Form of Warrant Agreement for Warrants to Purchase Debt Securities of Northwest
that are Sold Attached to Debt Securities of Northwest (filed as Exhibit 4(g) to
Registration Statement No. 33-74772 and incorporated herein by reference).
Exhibit 4(f) Form of Warrant to Purchase Debt Securities of Northwest that are Sold Attached to
Debt Securities of Northwest (included as part of Exhibit 4(e) and incorporated
herein by reference).
Exhibit 4(g) Form of Warrant Agreement for Warrants to Purchase Debt Securities of Northwest
that are Sold Alone (filed as Exhibit 4(i) to Registration Statement No. 33-74772
and incorporated herein by reference).
Exhibit 4(h) Form of Warrant to Purchase Debt Securities of Northwest that are Sold Alone
(included as part of Exhibit 4(g) and incorporated herein by reference).
Exhibit 4(i) Pass Through Trust Agreement, dated as of June 3, 1996, among NWA Corp., Northwest
and State Street, as Trustee, relating to Pass Through Certificates of Northwest
(filed as Exhibit 4(j) to Registration Statement No. 333-13307 and incorporated
herein by reference).
Exhibit 4(j) Form of Pass Through Certificate (included as part of Exhibit 4(i)) (filed as
Exhibit 4(i) to Registration Statement No. 333-13307 and incorporated herein by
reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------- ----------------------------------------------------------------------------------
<S> <C> <C>
Exhibit 4(k) Second Amended and Restated Certificate of Incorporation of NWA Corp. (filed as
Exhibit 3.1 to NWA Corp.'s Registration Statement on Form S-1 (File No. 33-74210,
and hereinafter the "S-1") and incorporated herein by reference).
Exhibit 4(l) Certificate of Amendment to the Second Amended and Restated Certificate of
Incorporation of NWA Corp. (filed as Exhibit 3.3 to the S-1 and incorporated
herein by reference).
Exhibit 4(m) Amended and Restated By-Laws of NWA Corp. (filed as Exhibit 3.2 to the S-1 and
incorporated herein by reference).
Exhibit 4(n) Restated Certificate of Incorporation of Northwest (filed as Exhibit 4(s) to
Registration Statement No. 33-74772 and incorporated herein by reference).
Exhibit 4(o) Bylaws of Northwest (filed as Exhibit 4(t) to the Registration Statement on Form
S-3 (File No. 333-2516) and incorporated herein by reference).
Exhibit 4(p) Amended and Restated Certificate of Designation of Series A Preferred Stock of NWA
Corp. (included in Exhibit 4(k) and incorporated herein by reference).
Exhibit 4(q) Amended and Restated Certificate of Designation of Series B Preferred Stock of NWA
Corp. (included in Exhibit 4(k) and incorporated herein by reference).
Exhibit 4(r) Certificate of Designation of Series C Preferred Stock of NWA Corp. (included in
Exhibit 4(k) and incorporated herein by reference).
Exhibit 4(s) Certificate of Designation of Series D Junior Participating Preferred Stock of NWA
Corp. (filed as Exhibit A to Exhibit 1 to NWA Corps.'s Current Report on Form 8-K
dated November 16, 1995 and incorporated herein by reference).
Exhibit 4(t) The Registrants hereby agree to furnish to the Commission, upon request, copies of
certain instruments defining the rights of holders of long-term debt of the kind
described in Item 601(b)(4) of Regulation S-K.
Exhibit 5 Opinion of Simpson Thacher & Bartlett as to the legality of the Securities (filed
with Amendment No. 1 to this Registration Statement and incorporated herein by
reference).
Exhibit 8 Tax Opinion of Cadwalader, Wickersham & Taft relating to Pass Through Certificates
(filed with Amendment No. 1 to this Registration Statement and incorporated herein
by reference).
Exhibit 10(a) Investment Agreement among NWA Corp., Newbridge Parent Corporation, Air Partners,
L.P., the Partners of Air Partners identified on the signature pages thereto,
Bonderman Family Limited Partnership, 1992 Air, Inc. and Air Saipan, Inc., dated
as of January 25, 1998 (without exhibits or schedules) (filed as Exhibit 2.1 to
NWA Corp.'s Current Report on Form 8-K dated January 25, 1998 and incorporated
herein by reference).
Exhibit 10(b) Governance Agreement among NWA Corp., Newbridge Parent Corporation and Continental
Airlines, Inc., dated as of January 25, 1998 (filed as Exhibit 2.2 to NWA Corp.'s
Current Report on Form 8-K dated January 25, 1998 and incorporated herein by
reference).
Exhibit 10(c) Merger Agreement among NWA Corp., Newbridge Parent Corporation and Newbridge
Merger Corporation, dated as of January 25, 1998 (without exhibits) (filed as
Exhibit 2.3 to NWA Corp.'s Current Report on Form 8-K dated January 25, 1998 and
incorporated herein by reference).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------------- ----------------------------------------------------------------------------------
<S> <C> <C>
Exhibit 23(a) Consent of Ernst & Young LLP (filed herewith).
Exhibit 23(b) Consent of Simpson Thacher & Bartlett (included as part of Exhibit 5, filed with
Amendment No. 1 to this Registration Statement and incorporated herein by
reference).
Exhibit 23(c) Consent of Cadwalader, Wickersham & Taft (included as part of Exhibit 8, filed
with Amendment No. 1 to this Registration Statement and incorporated herein by
reference).
Exhibit 24 Powers of Attorney (included in signature pages II-6 and II-8 of Registration
Statement No. 333-13307 as initially filed and incorporated herein by reference).
Exhibit 25(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 (the
"Trust Indenture Act"), as amended, of State Street, as Trustee under the Senior
Debt Securities Indenture of Northwest and NWA Corp., (filed as Exhibit 25.1 to
NWA Corp.'s Current Report on Form 8-K, dated March 6, 1997, and incorporated
herein by reference).
Exhibit 25(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of State Street,
as Trustee under the Senior Subordinated Debt Securities Indenture of Northwest
and NWA Corp. and the Pass Through Trust Agreement of NWA Corp. and Northwest
(filed as Exhibit 25(b) to Registration Statement No. 333-13307 and incorporated
herein by reference).
</TABLE>
<PAGE>
EXHIBIT 1(b)
===============================================================================
NORTHWEST AIRLINES, INC., ISSUER
NORTHWEST AIRLINES CORPORATION, GUARANTOR
7 5/8% NOTES DUE 2005
7 7/8% NOTES DUE 2008
UNDERWRITING AGREEMENT
Dated: February 26, 1998
<PAGE>
NORTHWEST AIRLINES, INC., ISSUER
NORTHWEST AIRLINES CORPORATION, GUARANTOR
7 5/8% Notes due 2005
7 7/8% Notes due 2008
UNDERWRITING AGREEMENT
February 26, 1998
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
BT Alex. Brown Incorporated
Chase Securities Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs:
Northwest Airlines, Inc., a Minnesota corporation (the "Company"),
proposes to issue and sell to the underwriters named in Schedule I hereto (i)
an aggregate of $200,000,000 principal amount of 7 5/8% Notes due 2005 (the
"7 5/8 Notes") and (ii) an aggregate of $200,000,000 principal amount of 7
7/8 Notes due 2008 (the "7 7/8% Notes" and, together with the 7 5/8% Notes,
the "Notes"), each with the guarantee (the "Guarantees") endorsed thereon of
Northwest Airlines Corporation, a Delaware corporation and the ultimate
parent company of the Company (the "Guarantor"). The Notes are to be issued
pursuant to an Indenture dated as of March 1, 1997 (the "Indenture") among
the Company, the Guarantor and State Street Bank and Trust Company, as
trustee (the "Trustee"). As used herein, unless the context otherwise
requires, the term "Underwriters" shall mean the firms named as Underwriters
in Schedule I and the term "you" shall mean Morgan Stanley & Co. Incorporated.
The Guarantor and the Company have filed with the Securities and
Exchange Commission (the "Commission") three shelf registration statements on
Form S-3 (File No. 333-41579, File No. 333-28649 and File No. 333-13307)
relating to certain classes of securities ("Registration Statement
333-41579", "Registration Statement 333-28649" and "Registration Statement
333-13307," respectively; Registration Statement 333-41579, Registration
Statement 333-28649 and Registration Statement 333-13307, collectively,
including the exhibits to each thereto and the documents filed by the
Guarantor with the Commission pursuant to the Securities
<PAGE>
2
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Exchange Act") that are
incorporated by reference therein, as amended at the date hereof, being
herein referred to as the "Registration Statements") and, in each case, the
offering thereof from time to time in accordance with Rule 415 of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"). The Guarantor
and the Company have prepared and will file an amendment to such Registration
Statements, including a final prospectus and a final prospectus supplement,
promptly after execution and delivery of this Agreement. A prospectus
supplement reflecting the terms of the Notes, the terms of the offering
thereof and the other matters set forth therein, as further specified in
Section 5(b) hereof, will be prepared and filed together with the basic
prospectus referred to below (such prospectus supplement, in the form first
furnished to the Underwriters for use in the confirmation of sales of the
Notes, being herein referred to as the "Prospectus Supplement" and any such
prospectus supplement in the form or forms filed prior to the filing of the
Prospectus Supplement being herein referred to as a "Preliminary Prospectus
Supplement"). The basic prospectus included in the Registration Statements
relating to all offerings of debt securities under the Registration
Statements, as supplemented by the Prospectus Supplement, and including the
documents incorporated by reference therein, is herein called the
"Prospectus". Any reference herein to the terms "amendment" or "supplement"
with respect to the Registration Statements, the Prospectus, any Preliminary
Prospectus Supplement or any preliminary prospectus shall be deemed to refer
to and include any documents filed with the Commission under the Exchange Act
after the date hereof, the date the Prospectus is filed with the Commission,
or the date of such Preliminary Prospectus Supplement or preliminary
prospectus, as the case may be, and incorporated therein by reference
pursuant to Item 12 of Form S-3 under the Securities Act.
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Guarantor and the
Company jointly and severally represent and warrant to, and agree with each
Underwriter that:
(a) The Guarantor and the Company meet the requirements for use of
Form S-3 under the Securities Act; on the original effective date of such
Registration Statements, on the effective date of the most recent
post-effective amendment thereto, if any, on the date the Registration
Statements shall have become effective and on the date of the filing by the
Guarantor of any annual report on Form 10-K after the original effective
date of the Registration Statements, the Registration Statements, and any
amendments and supplements thereto complied and will comply in all material
respects with the requirements of the Securities Act and the Registration
Statements did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; as of the date of
the Prospectus or any amendments thereto and on the Closing Date (as
defined below), neither the Prospectus nor any amendments thereof and
supplements thereto, included or will include an untrue statement of a
material fact or omitted or will omit to
<PAGE>
3
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by any Underwriter
expressly for use in the Prospectus or to statements or omissions in those
parts of the Registration Statements which shall constitute the Statement
of Eligibility of the Trustee under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), on Form T-1.
(b) The documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the Securities Act, at the time they
were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Exchange Act.
(c) Ernst & Young LLP, who have reported upon the audited
consolidated financial statements and the financial statement schedules, if
any, included or incorporated by reference in the Registration Statements,
are independent public accountants within the meaning of the Securities
Act.
(d) This Agreement has been duly authorized, executed and delivered
by each of the Company and the Guarantor.
(e) The Company does not have any "significant subsidiaries" as
defined in Regulation S-X, and the Guarantor does not have any significant
subsidiaries (other than the Company).
(f) The consolidated financial statements included or incorporated by
reference in the Registration Statements present fairly the consolidated
financial position of the Guarantor and its consolidated subsidiaries as of
the dates indicated and the consolidated results of operations and cash
flows or changes in financial position of the Guarantor and its
consolidated subsidiaries for the periods specified. Except as stated
therein, such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The financial statement schedules, if
any, included or incorporated by reference in the Registration Statements
present fairly the information required to be stated therein. The summary
consolidated financial data included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited consolidated financial statements included or
incorporated by reference in the Registration Statements.
<PAGE>
4
(g) Each of the Company and the Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Minnesota and Delaware, respectively, with corporate power and
authority under such laws to own, lease and operate its properties and
conduct its business as described in the Prospectus and to perform its
obligations under this Agreement; and each of the Guarantor and the Company
is duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make such
qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the condition (financial or other), earnings, business or prospects of the
Guarantor and its subsidiaries, considered as one enterprise (a "Material
Adverse Effect").
(h) The Company is a "citizen of the United States" (as defined in
Section 40102(a)(15) of Title 49 of the United States Code) and is an air
carrier operating under a certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code, for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more
of cargo. There is in force with respect to the Company an air carrier
operating certificate issued pursuant to Part 121 of the regulations under
the sections of Title 49, United States Code, relating to aviation
(the "Federal Aviation Act"). All of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are
fully paid and non-assessable and are owned by the Guarantor, indirectly
through NWA Inc., a Delaware corporation, free and clear of any pledge,
lien, security interest, charge, claim, equity or encumbrance of any kind.
(i) The Indenture, each supplement thereto, if any, to the date
hereof and the supplement thereto or board resolution setting forth the
terms of the Notes (the Indenture, as so supplemented by such supplement or
supplements and board resolution, being herein referred to as the
"Designated Indenture") have been duly authorized by the Company and the
Guarantor, will be substantially in the form heretofore delivered to you
and, when duly executed and delivered by the Company, the Guarantor and the
Trustee, will constitute a valid and binding obligation of the Company and
the Guarantor, except as may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, (B) general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and (C) an implied covenant of good faith
and fair dealing; the Designated Indenture conforms in all material
respects to the description thereof in the Prospectus. The Indenture as
executed is substantially in the form filed as an exhibit to the
Registration Statements.
<PAGE>
5
(j) When executed, authenticated, issued and delivered in the manner
provided for in the Designated Indenture and sold and paid for as provided
in this Agreement, the Notes and the related Guarantees will constitute
valid and binding obligations of the Company or the Guarantor, as the case
may be, entitled to the benefits of the Designated Indenture and
enforceable against the Company or the Guarantor, as the case may be, in
accordance with their terms, except as may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, (B)
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and (C) an implied covenant
of good faith and fair dealing; each of the Notes and the related
Guarantees conforms in all material respects to the descriptions thereof in
the Prospectus.
(k) Since the respective dates as of which information is given in
the Prospectus, except as otherwise stated therein or contemplated thereby,
there has not been (A) any material adverse change in the condition
(financial or otherwise), earnings, business or prospects of the Guarantor
and its subsidiaries, considered as one enterprise, whether or not arising
in the ordinary course of business; (B) any transaction entered into by the
Company, the Guarantor or any of their respective subsidiaries, other than
in the ordinary course of business, that is material to the Guarantor and
its subsidiaries, considered as one enterprise, or (C) any dividend or
distribution of any kind declared, paid or made by the Company or the
Guarantor on any class of its capital stock (other than dividends or
distributions payable solely in shares of such capital stock).
(l) Neither the Company nor the Guarantor is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which it is a party or by
which it may be bound or to which any of its properties may be subject,
except for such defaults that would not have a Material Adverse Effect.
The execution and delivery by the Company and the Guarantor of this
Agreement and the Designated Indenture, the issuance and delivery of the
Notes and the related Guarantees and the consummation by the Company and
the Guarantor of the transactions contemplated by this Agreement and in the
Prospectus, have been duly authorized by all necessary corporate action on
the part of the Company and the Guarantor and do not and will not result in
any violation of the charter or by-laws of the Company or the Guarantor,
and do not and will not result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or the Guarantor under (A) any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or other
instrument to which the Company or the Guarantor is a party or by which
either may be bound or to which any of its properties may be subject and
which is included or
<PAGE>
6
incorporated by reference as an exhibit to the Guarantor's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, the Guarantor's
Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 and the Guarantor's Current Reports on
Form 8-K dated March 6, 1997, November 25, 1997, January 25, 1998 and
February 19, 1998, or included as an exhibit to the Registration Statement,
except for such breaches, defaults, liens, charges or encumbrances that
would not have a Material Adverse Effect or (B) any existing applicable
law, rule, regulation, judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or the Guarantor or any of their respective
properties (other than the securities or blue sky laws of the various
states), except for such breaches, defaults, liens, charges or encumbrances
that would not have a Material Adverse Effect.
(m) No authorization, approval, consent, order or license of or
filing with or notice to any government, governmental instrumentality or
court, domestic or foreign (other than under the Securities Act, the Trust
Indenture Act and the securities or blue sky laws of the various states and
of any foreign country or jurisdiction), is required for the sale of the
Notes and the related Guarantees or for the consummation of the
transactions contemplated by this Agreement.
(n) Except as disclosed in the Prospectus, there is no action, suit
or proceeding before or by any government, governmental instrumentality or
court, domestic or foreign, now pending or, to the knowledge of the Company
or the Guarantor, threatened against the Company or the Guarantor that is
required to be disclosed in the Prospectus or that could reasonably be
expected to have a Material Adverse Effect or that could reasonably be
expected to materially and adversely affect the consummation of the
transactions contemplated by this Agreement; the aggregate of all pending
legal or governmental proceedings that are not described in the Prospectus
to which the Company or the Guarantor is a party or which affect any of
their respective properties, including ordinary routine litigation
incidental to their business, would not reasonably be expected to have a
Material Adverse Effect.
(o) There are no contracts or documents of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described and filed as
required.
(p) The Company and the Guarantor each possess all adequate
certificates, authorizations and permits issued by appropriate governmental
agencies or bodies which are necessary to conduct, in all material
respects, the business now operated by them and have not received any
notice of proceedings relating to the revocation or modification of
<PAGE>
7
any such certificate, authorization or permit that, if determined adversely
to the Company or the Guarantor, would have, singly or in the aggregate, a
Material Adverse Effect.
(q) No labor dispute with the employees of the Company or the
Guarantor exists or, to the knowledge of the Company and the Guarantor, is
imminent, in either case which might reasonably be expected to have a
Material Adverse Effect.
(r) Neither the Company nor the Guarantor is, and after giving effect
to the application of the proceeds of the sale of the Notes as described in
the Prospectus, neither the Company nor the Guarantor will be, required to
register as an "investment company" under the Investment Company Act of
1940, as amended (the "Investment Company Act").
(s) The Company and the Guarantor have not taken and will not take,
directly or indirectly, any action prohibited by Regulation M under the
Exchange Act in connection with the offering of the Notes and the related
Guarantees.
Any certificate signed by a duly authorized officer of the Company or the
Guarantor and delivered to an Underwriter or to counsel for the Underwriters in
connection with the offering of the Notes and the related Guarantees shall be
deemed a representation and warranty by the Company or the Guarantor, as the
case may be, to the Underwriters as to the matters covered thereby.
SECTION 2. PURCHASE AND SALE. Subject to the terms and conditions set
forth herein and in reliance upon the representations and warranties herein
contained, each of the Company and the Guarantor agree to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company $200,000,000 aggregate principal amount of 7 5/8% Notes, at a
purchase price of 98.365% of the principal amount thereof (plus accrued
interest, if any, from March 4, 1998 to, but excluding, the Closing Date) and
$200,000,000 aggregate principal amount of 7 7/8% Notes at a purchase price of
98.420% of the principal amount thereof (plus accrued interest, if any, from
March 4, 1998 to, but excluding, the Closing Date), the aggregate principal
amounts of Notes set forth opposite the name of such Underwriter on Schedule I.
An amendment to the Registration Statements containing such price information
will be filed before the Registration Statements become effective, which
effectiveness shall not, without your reasonable consent, be later than 2:00
p.m. on the first business day following the date hereof. This Agreement shall
not become effective until the Registration Statements become effective under
the Securities Act.
SECTION 3. DELIVERY OF AND PAYMENT FOR THE NOTES.
<PAGE>
8
(a) Delivery of and payment for the Notes shall be made at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022
at 10:00 A.M. on March 4, 1998 or on such other date, time and place as may be
agreed upon by the Company, the Guarantor and you (such date and time of
delivery and payment for the Notes being herein called the "Closing Date").
Delivery of the Notes shall be made to your account at The Depository Trust
Company for the respective accounts of the several Underwriters against payment
by the Underwriters to or upon the order of the Company of the purchase price by
wire transfer of immediately available funds to the Company's account at Norwest
Bank (National Association) or as otherwise instructed in writing by the
Company. Upon delivery, the Notes shall be in fully registered form in such
denominations and registered in such names, or otherwise, as you shall have
requested in writing at least two full business days in advance of the Closing
Date. The Company and the Guarantor shall not be obligated to deliver any of
the Notes except upon payment for all the Notes to be purchased as provided
herein.
(b) The Company agrees to have one or more global certificates
representing the Notes available for inspection by you in New York, New York not
later than one full business day prior to the Closing Date.
SECTION 4. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase and pay for the Notes pursuant to
this Agreement are subject to the following conditions:
(a) The Registration Statements shall not, without your reasonable
consent, have become effective later than 2:00 p.m.. on the first business
day following the date hereof; on the Closing Date, no stop order
suspending the effectiveness of the Registration Statements shall have been
issued under the Securities Act and no proceedings therefor shall have been
instituted or threatened by the Commission.
(b) On the Closing Date, you shall have received an opinion of
Simpson Thacher & Bartlett, as counsel for the Company and the Guarantor,
dated the Closing Date and in form and substance reasonably satisfactory to
you and counsel for the Underwriters, substantially to the effect set forth
in Exhibit A hereto.
(c) On the Closing Date, you shall have received an opinion of the
General Counsel of the Company and the Guarantor, dated the Closing Date
and in form and substance reasonably satisfactory to you and counsel for
the Underwriters, substantially to the effect set forth in Exhibit B
hereto.
(d) On the Closing Date, you shall have received an opinion of
Shearman & Sterling, as counsel for the Underwriters, dated the Closing
Date, with respect to the
<PAGE>
9
issuance and sale of the Notes and the related Guarantees, the Registration
Statements, the Prospectus and other related matters as the Underwriters
may reasonably require.
(e) At the Closing Date, (i) the Registration Statements, as they may
then be amended or supplemented, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Prospectus, as it may then be amended or supplemented, shall not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made, (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statements, any material
adverse change in the condition (financial or otherwise), earnings,
business or prospects of the Guarantor and its subsidiaries, considered as
one enterprise, whether or not arising in the ordinary course of business,
(iv) the Company and the Guarantor shall have complied with all agreements
and satisfied all conditions on their respective parts to be performed or
satisfied at or prior to the Closing Date, and (v) the other
representations and warranties of the Company and the Guarantor set forth
in Section 1(a) shall be accurate as though expressly made at and as of the
Closing Date. At the Closing Date, you shall have received a certificate
of the President or a Senior or Executive Vice President, and other senior
officers of the Company and the Guarantor approved by you, dated as of the
Closing Date, to such effect.
(f) On the Closing Date, you shall have received the letter or
letters from Ernst & Young LLP specified in Exhibit C at the date hereof
and on the Closing Date.
(g) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading nor
any notice given to the Company or the Guarantor or any public notice
given, in either case by a rating agency described below, of any intended
or potential downgrading or of a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's or the Guarantor's securities, including the Notes and the
related Guarantees, by any "nationally recognized statistical rating
organization", as such term is defined for purposes of Rule 436(g)(2) under
the Securities Act.
(h) The Company and the Guarantor shall have furnished to you and to
counsel for the Underwriters, in form and substance satisfactory to you and
to them, such other documents, certificates and opinions as such counsel
may reasonably request in order to pass upon the matters referred to in
Section 4(d) and in order to evidence the accuracy and completeness of any
of the representations, warranties or statements, the performance of any
covenant by the Company or the Guarantor theretofore to be performed, or
the compliance with any of the conditions herein contained.
<PAGE>
10
If any of the conditions specified in this Section 4 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company and the Guarantor at
any time prior to the Closing Date and such termination shall be without
liability of any party to any other party, except as provided in Section 6.
Notwithstanding any such termination, the provisions of Sections 7 and 11 shall
remain in effect.
SECTION 5. CERTAIN COVENANTS OF THE COMPANY AND THE GUARANTOR. The
Company and the Guarantor covenant with each Underwriter as follows:
(a) To furnish to you as many conformed copies of the Registration
Statements (as originally filed) and of all amendments thereto, whether
filed before or after such Registration Statements became effective, as
many copies of all exhibits and documents filed therewith or incorporated
by reference therein (through the end of the period mentioned in
paragraph (d) below) and one signed and as many conformed copies of all
consents and certificates of experts as you may reasonably request and, if
requested by you, will furnish to you, for each of the Underwriters, one
conformed copy of the Registration Statements (as originally filed) and of
each amendment thereto (including documents incorporated by reference into
the Prospectus but without exhibits).
(b) Promptly following the execution of this Agreement, the Company
and the Guarantor will prepare a Prospectus Supplement that complies with
the Securities Act and that sets forth the principal amount of the Notes
and their terms not otherwise specified in the Preliminary Prospectus
Supplement or the basic prospectus included in the Registration Statements,
the name of each Underwriter participating in the offering and the
principal amount of the Notes that each severally has agreed to purchase,
the name of each Underwriter, if any, acting as a representative of the
Underwriters in connection with the offering, the price at which the Notes
are to be purchased by the Underwriters from the Company, any initial
public offering price, any selling concession and reallowance and any
delayed delivery arrangements, and such other information as you, the
Company and the Guarantor deem appropriate in connection with the offering
of the Notes. The Company and the Guarantor will use their respective best
efforts to cause the Registration Statements to become effective.
(c) Before amending or supplementing the Registration Statements or
the Prospectus, to furnish each Underwriter with a copy of each such
proposed amendment or supplement, and to file no such proposed amendment or
supplement to which you reasonably object by notice to the Company after a
reasonable period of review; PROVIDED that the foregoing shall not prevent
the Guarantor from filing reports required to be filed by it pursuant to
the Exchange Act, and PROVIDED, FURTHER, that the Guarantor shall have
provided you with a copy of any such report prior to its filing with the
Commission.
<PAGE>
11
(d) If, during such period after the first date of the public
offering of the Notes when the Prospectus is required by law to be
delivered in connection with sales of the Notes by an Underwriter or dealer
any event shall occur as a result of which it is necessary, in the
reasonable opinion of counsel for the Underwriters or counsel for the
Company and the Guarantor, to amend the Registration Statements or amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if it is necessary, in the reasonable opinion of either
such counsel, to amend the Registration Statements or amend or supplement
the Prospectus to comply with law, forthwith to prepare and furnish, at its
own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which the Notes may have been
sold by you on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
be misleading or so that the Registration Statements or the Prospectus, as
so amended or supplemented, will comply with law and to cause such
amendments or supplements to be filed promptly with the Commission.
(e) To notify you immediately when the Registration Statements become
effective and, during the period mentioned in paragraph (d) above, to
notify you immediately, (i) of the effectiveness of any amendment to the
Registration Statements, (ii) of the transmittal to the Commission for
filing of any supplement to the Prospectus or any document that would as a
result thereof be incorporated by reference in the Prospectus, (iii) of the
receipt of any comments from the Commission with respect to the
Registration Statements, the Prospectus or the Prospectus Supplement,
(iv) of any request by the Commission for any amendment to the Registration
Statements or any supplement to the Prospectus or for additional
information relating thereto or to any document incorporated by reference
in the Prospectus and (v) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statements, of the
suspension of the qualification of the Notes for offering or sale in any
jurisdiction, or of the institution or threatening of any proceeding for
any of such purposes; and to use every reasonable effort to prevent the
issuance of any such stop order or of any order suspending such
qualification and, if any such order is issued, to obtain the lifting
thereof at the earliest possible moment.
(f) To use their respective reasonable efforts, in cooperation with
the Underwriters, to qualify the Notes and related Guarantees for offer and
sale under the securities laws of such states and other jurisdictions as
you may designate and to maintain such qualifications in effect for so long
as required for the distribution of such Notes and related Guarantees;
PROVIDED, HOWEVER, that neither the Company nor the Guarantor shall be
obligated to file any general consent to service of process or to qualify
as a foreign
<PAGE>
12
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. The
Company and the Guarantor will use their reasonable efforts to file such
statement and reports as may be required by the laws of each jurisdiction
in which the Notes and the related Guarantees have been qualified as above
provided. The Company and the Guarantor will also supply you with such
information as is necessary for the determination of legality of the Notes
and the related Guarantees for investment under the laws of such
jurisdictions as you may reasonably request.
(g) To make generally available to the Guarantor's security holders
as soon as practicable, but not later than 45 days after the close of the
period covered thereby, an earnings statement of the Guarantor (in form
complying with the provisions of Rule 158 of the Securities Act), covering
(i) a period of 12 months beginning after the effective date of the
Registration Statements and any post-effective amendment thereof but not
later than the first day of the Guarantor's fiscal quarter next following
such effective date and (ii) a period of 12 months beginning after the date
of this Agreement but not later than the first day of the Guarantor's
fiscal quarter next following the date of this Agreement.
(h) For a period of two years after the Closing Date, to make
available upon request to the Underwriters, copies of all annual reports,
quarterly reports and current reports filed with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated
by the Commission, and such other documents, reports and information as
shall be furnished by the Company or the Guarantor to the holders of Notes
and the related Guarantees or to their security holders generally provided
that at such time the Guarantor is required to furnish such reports under
the Exchange Act.
(i) Between the date of this Agreement and the Closing Date, the
Company and the Guarantor will not, without your prior written consent,
directly or indirectly offer, sell, or enter into any agreement to sell,
any debt securities issued or guaranteed by the Company or the Guarantor
with a maturity of more than one year in any offering (other than the
Notes).
(j) The Company and the Guarantor shall use the proceeds from the
sale of the Notes in the manner described in the Prospectus Supplement
under the caption "Use of Proceeds."
(k) The Company and the Guarantor, during the period when a
prospectus relating to the Notes is required to be delivered under the
Securities Act, subject to Section 5(c), will file promptly all documents
required to be filed with the Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act.
<PAGE>
13
(l) In connection with the offering, until the completion of the
resale of the Notes by the Underwriters, none of the Company, the Guarantor
or any of their affiliated purchasers (as defined in Rule 100 under the
Exchange Act), either alone or with one or more other persons, will bid for
or purchase, for any account in which it or any of its affiliated
purchasers has a beneficial interest, any Notes, or attempt to induce any
person to purchase any Notes; and neither they nor any of their affiliated
purchasers will make bids or purchases for the purpose of creating actual,
or apparent, active trading in the Notes or of raising the price of the
Notes.
(m) To comply to the best of their abilities with the Securities Act,
the Exchange Act and the Trust Indenture Act so as to permit the completion
of the distribution of the Notes as contemplated in this Agreement and in
the Prospectus.
SECTION 6. PAYMENT OF EXPENSES. The Company and the Guarantor will pay or
cause to be paid all costs and expenses incident to the performance of their
obligations under this Agreement, including, without limitation, (a) the
preparation, printing and filing of the Registration Statements (including
financial statements and exhibits), as originally filed and as amended, the
preliminary prospectuses and the Prospectus and any amendments or supplements
thereto, and the cost of furnishing copies thereof to the Underwriters, (b) the
printing or processing and distribution of this Agreement, the Notes, the Blue
Sky Survey and any Legal Investment Survey, (c) the delivery of the Notes,
(d) the fees and disbursements of counsel and accountants for the Company and
the Guarantor, (e) the qualification of the Notes with the National Association
of Securities Dealers, Inc. (the "NASD") and under the applicable securities
laws in accordance with Section 5(f), including filing fees and reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the Blue Sky Survey, (f) any fees charged by rating agencies for
rating the Notes (including annual surveillance fees relating to the Notes as
long as they are outstanding) and (g) the fees and expenses of the Trustee,
including the reasonable fees and disbursements of counsel for the Trustee, in
connection with the Notes.
If this Agreement is terminated by the Underwriters in accordance with the
provisions of Section 4 or 8 (a)(i), the Company and the Guarantor, jointly and
severally, agree to reimburse the Underwriters for all their reasonable
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriters.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Guarantor, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages and liabilities
<PAGE>
14
(including, without limitation, any legal or other expenses reasonably
incurred by any Underwriter or any such controlling person in connection
with defending or investigating any such action or claim) caused by any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statements or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company or
the Guarantor shall have furnished any amendments or supplements thereto),
or caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through
you expressly for use therein; PROVIDED that such indemnity with respect to
the Prospectus shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) from whom the person asserting any
such loss, claim, damage or liability purchased the Notes which are the
subject thereof if such person was not sent a copy of the Prospectus at or
prior to the confirmation of the sale of such Notes to such person in any
case where such delivery is required by the Securities Act and the untrue
statement or omission of a material fact contained in the Prospectus was
corrected in such subsequent Prospectus, unless such failure to deliver the
Prospectus was a result of noncompliance by the Company and the Guarantor
with their delivery requirements set forth in Section 5(b) hereof.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company and the Guarantor, each of their directors,
each of their officers who signed the Registration Statements and each
person, if any, who controls the Company or the Guarantor within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company
and the Guarantor to such Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use in the
Registration Statements, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to either of the two preceding paragraphs, such person
(the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing. An
indemnifying party may participate at its own expense in the defense of
such action. If it so elects within a reasonable time after receipt of
such notice, an indemnifying party, jointly with any other indemnifying
parties receiving such notice, may, except as provided in the immediately
following sentence, assume the defense of such action, with counsel
reasonably satisfactory to the
<PAGE>
15
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
It is understood that the indemnifying party shall not, in respect of the
legal expenses of any indemnified party in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel)
for all such indemnified parties and that all such fees and expenses shall
be reimbursed as they are incurred. Such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated, in the case of parties
indemnified pursuant to paragraph (a) above, and by the Company or the
Guarantor, in the case of parties indemnified pursuant to paragraph (b).
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss
or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraphs (a) and (b) of
this Section 7 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Guarantor on the one
hand and the Underwriters on the other hand from the offering of the Notes
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Guarantor on the one hand and of the
Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the
<PAGE>
16
Guarantor on the one hand and the Underwriters on the other hand in
connection with the offering of the Notes shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Notes
(before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate public offering price of the Notes. The relative fault of
the Company and the Guarantor on the one hand and of the Underwriters on
the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantor or by the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this
Section 7 are several in proportion to the respective principal amounts of
Notes they have purchased hereunder, and not joint.
(e) The Company, the Guarantor and the Underwriters agree that it
would not be just or equitable if contribution pursuant to this Section 7
were determined by PRO RATA allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in paragraph (d) above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Notes underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for
in this Section 7 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law
or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations and warranties of the Company or the
Guarantor contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter or by or on behalf of the Guarantor or Company,
its officers or directors or any person controlling the Guarantor or the
Company and (iii) acceptance of and payment for any of the Notes.
<PAGE>
17
SECTION 8. TERMINATION OF AGREEMENT. (a) You may terminate this
Agreement, by notice to the Company and the Guarantor, at any time at or prior
to the Closing Date (i) if there has been, since the respective dates as of
which information is given in the Registration Statements, any material adverse
change in the condition (financial or otherwise), earnings, business or
prospects of the Guarantor and its subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of business, (ii) if there has
occurred any outbreak of hostilities or escalation thereof involving the United
States or other calamity or crisis the effect of which is such as to make it, in
your reasonable judgment, impracticable or inadvisable to market the Notes and
the related Guarantees or enforce contracts for the sale of the Notes and the
related Guarantees, (iii) if trading in any securities of the Company or the
Guarantor has been suspended by the Commission, by the NASD, or on any exchange
generally or in the over-the-counter market, or if trading generally on a
national securities exchange or in the over-the-counter market has been
suspended or materially limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
such exchange or by order of the Commission, the NASD or any other governmental
authority, (iv) if a banking moratorium has been declared by either federal or
New York authorities or (v) if there shall have been any downgrading, or any
notice given to the Company or the Guarantor or any public notice given, in
either case by a rating agency described below, of any intended or potential
downgrading or of a possible change that does not indicate the direction of the
possible change in the rating accorded any of the Company's or the Guarantor's
securities, including the Notes and the related Guarantees, by any "nationally
recognized statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 6. Notwithstanding any such termination, the
provisions of Sections 7 and 11 shall remain in effect.
(c) This Agreement may also terminate pursuant to the provisions of
Section 4, with the effect stated in such Section.
SECTION 9. DEFAULT. If, on the Closing Date any one or more of the
Underwriters shall fail or refuse to purchase Notes that it has or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Notes which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate principal amount
of the Notes to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the principal amount of Notes
specified to be purchased by them on Schedule I bears to the aggregate principal
amount of Notes specified to be purchased by all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Notes which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; PROVIDED that in no event shall the principal
amount of
<PAGE>
18
Notes that any Underwriter has agreed to purchase pursuant to Section 2 be
increased pursuant to this Section 9 by an amount in excess of one-ninth of such
principal amount of Notes without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Notes and the aggregate principal amount of Notes with respect to which
such default occurs is more than one-tenth of the aggregate principal amount of
Notes to be purchased on such date, and arrangements satisfactory to you and the
Company for the purchase of such Notes are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Guarantor, except that the
Company and the Guarantor will continue to be liable for the payment of expenses
to the extent set forth in Section 6. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statements and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
SECTION 10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 11. GOVERNING LAW AND TIME. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York.
Specified times of the day refer to New York City time.
SECTION 12. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered, mailed,
or transmitted by any standard form of telecommunication, including telex or
facsimile transmission. Notices to the Underwriters shall be directed to Morgan
Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Telephone
No.: 212-761-2000, Facsimile No.: 212-761-0780, Attention: Debt Syndicate
Department. Notices to the Company shall be directed to it by mail at
Northwest Airlines, Inc., 5101 Northwest Drive, St. Paul, Minnesota 55111, with
a copy to Northwest Airlines Corporation at the same address, attention of
Senior Vice President-Finance and Treasurer, or by delivery to the Company and
the Guarantor at 2700 Lone Oak Parkway, Eagan, Minnesota 55121, attention of
Senior Vice President-Finance and Treasurer.
SECTION 13. PARTIES. This Agreement is made solely for the benefit of the
Underwriters, the Company, the Guarantor and, to the extent expressed, any
person controlling the Company, the Guarantor or the Underwriters within the
meaning of Section 15 of the Securities Act, and their respective executors,
administrators, successors and assigns and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser, as such purchaser, from the
Underwriters of the Notes.
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
will become a binding agreement among the Company, the Guarantor and each
Underwriter in accordance with its terms.
Very truly yours,
NORTHWEST AIRLINES, INC.
By: /s/ Joseph Francht
----------------------------------
Name: Joseph Francht
Title: Senior Vice President
Finance and Treasurer
NORTHWEST AIRLINES
CORPORATION
By: /s/ Joseph Francht
----------------------------------
Name: Joseph Francht
Title: Senior Vice President
Finance and Treasurer
Accepted as of the date first
above written:
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
BT Alex. Brown Incorporated
Chase Securities Inc.
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ Harold Hendershot
-----------------------
Name: Harold Hendershot
<PAGE>
EXHIBIT A
Form of Opinion of
Simpson Thacher & Bartlett
(i) The Guarantor has been duly incorporated and is validly existing
and in good standing as a corporation under the laws of the State of
Delaware and has full corporate power and authority to conduct its business
as described in the Registration Statements, and Prospectus.
(ii) The Guarantees have been duly authorized, executed and issued by
the Guarantor and, upon payment for and delivery of the Notes in accordance
with this Agreement, will constitute valid and legally binding obligations
of the Guarantor; enforceable against the Guarantor in accordance with
their respective terms.
(iii) The Notes have been duly authorized, executed and issued by
the Company and, assuming due authentication thereof by the Trustee and
upon payment and delivery in accordance with this Agreement, will
constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
(iv) The Designated Indenture has been duly authorized, executed and
delivered by the Guarantor and duly qualified under the Trust Indenture
Act, and, assuming due authorization, execution and delivery thereof by the
Trustee, constitutes a valid and legally binding obligation of the Company
and the Guarantor, enforceable against the Company and the Guarantor in
accordance with its terms.
(v) The statements in the Prospectus under the captions "Description
of Notes" and "Description of Debt Securities", insofar as they purport to
constitute summaries of certain terms of the Notes, the Guarantees and the
Designated Indenture specifically referred to therein, constitute accurate
summaries of such terms in all material respects.
(vi) This Agreement has been duly authorized, executed and delivered
by each of the Company and the Guarantor.
(vii) No consent, approval, authorization, order, registration,
qualification of or with any Federal or New York governmental agency or
body or any Delaware governmental agency or body acting pursuant to the
Delaware General Corporation Law or, to our knowledge, any Federal or New
York court or any Delaware court acting pursuant to the Delaware General
Corporation Law is required for issuance and sale of the Notes and the
Guarantees in the manner contemplated by this Agreement, except for the
registration under the Securities Act of the Notes and the Guarantees, and
such consents, approvals,
<PAGE>
A-2
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Notes, and the related Guarantees, by the Underwriters.
(viii) Neither the Company nor the Guarantor is, and, after giving
effect to the application of the proceeds of the sale of the Notes as
described in the Prospectus, neither the Company nor the Guarantor will be,
required to register as an "investment company" within the meaning of and
subject to regulation under the Investment Company Act of 1940, as amended.
(ix) Each of the Registration Statements has become effective under
the Securities Act and, to the knowledge of such counsel, no stop order
suspending the effectiveness of any of the Registration Statements has been
issued or proceeding for that purpose has been instituted or threatened by
the Commission.
(x) Each Registration Statement as of the effective date of
Registration Statement 333-41579 and the Prospectus as of February 27,
1998, (except for the financial statements and other financial data
contained or incorporated by reference therein, as to which such counsel
need express no opinion) complied as to form in all material respects with
the requirements of the Securities Act, the Trust Indenture Act and the
applicable rules and regulations of the Commission thereunder and the
Exchange Act Documents complied as to form when filed in all material
respects with the requirements of the Exchange Act and the applicable rules
and regulations of the Commission thereunder.
Such counsel may state that its opinion set forth in paragraphs (ii),
(iii) and (iv) are subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing. In addition, such counsel shall also state that they
have not independently verified the accuracy, completeness or fairness of the
statements made or included in the Registration Statements or the Prospectus,
including (i) the Annual Report on Form 10-K of the Guarantor for the fiscal
year ended December 31, 1996 and (ii) the Quarterly Reports on Form 10-Q of the
Guarantor for the fiscal quarters ended March 31, 1997, June 30, 1997 and
September 30, 1997 and the Current Reports on Form 8-K of the Guarantor, dated
March 6, 1997, November 25, 1997, January 25, 1997 and February 19, 1998
(collectively, the "Exchange Act Documents") and take no responsibility
therefor, except as and to the extent set forth in paragraph (v) above, and in
the course of the preparation by the Company and the Guarantor of the
Registration Statements, and the Prospectus (excluding the Exchange Act
Documents), such counsel participated in conferences with certain officers and
employees of the Company and the Guarantor, with representatives of the
independent public accountants for the Company and the Guarantor and with
counsel to the Company and the Guarantor. Such counsel
<PAGE>
A-3
may state that they did not prepare the Exchange Act Documents, however, such
counsel discussed the Exchange Act Documents with the Company and the Guarantor
and with counsel to the Company and the Guarantor prior to their filing with the
Commission, and, based upon such counsel's examination of the Registration
Statements, the Prospectus (including the Exchange Act Documents) and the
Designated Indenture, such counsel's investigations made in connection with the
preparation of Registration Statements and the Prospectus (excluding the
Exchange Act Documents) and such counsel's participation in the conferences
referred to above, such counsel has no reason to believe (A) that each
Registration Statement (except for the financial statements and other financial
data contained or incorporated by reference, as to which such counsel need
express no opinion), as of its effective date contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, (B) that
the Prospectus (except for the financial statements and other financial data
contained or incorporated by reference therein or omitted therefrom, as to which
such counsel need express no opinion), at the time the Prospectus was issued and
at the Closing Date contains an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading or (C)
that the documents incorporated by reference in the Prospectus (except for the
financial statements and other financial data contained or incorporated by
reference therein or omitted therefrom, as to which such counsel express no
opinion), as of the dates they were filed with the Commission, included an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading.
Insofar as the opinions expressed herein relate to or are dependent
upon matters governed by the laws of the State of Minnesota, such counsel may
state that it has relied upon the opinion of the Office of the General Counsel
of the Company, delivered to you concurrently herewith.
<PAGE>
EXHIBIT B
Form of Opinion of the General Counsel
of the Guarantor and the Company
(i) The Company has been duly incorporated, is validly existing and
in good standing under the laws of the State of Minnesota with corporate
power and corporate authority under such laws to own, lease and operate its
properties and conduct its business as described in the Prospectus and to
perform its obligations under this Agreement, the Designated Indenture and
the Notes.
(ii) The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which it
owns or leases property of a nature, or transacts business of a type, that
would make such qualification necessary, except to the extent that the
failure to so qualify or be in good standing would not have a Material
Adverse Effect.
(iii) The Guarantor is duly qualified to transact business as a
foreign corporation and is in good standing in the State of Minnesota.
(iv) The Company is a "citizen of the United States" (as defined in
Section 40102(a)(15) of Title 49 of the United States Code) and is an air
carrier operating under a certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of Title 49, United States Code, for
aircraft capable of carrying 10 or more individuals or 6,000 pounds or more
of cargo; there is in force with respect to the Company an air carrier
operating certificate issued pursuant to Part 121 of the regulations under
the Federal Aviation Act; all of the outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable and are owned by the Guarantor, indirectly through NWA
Inc., a Delaware corporation, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind.
(v) To the best of such counsel's knowledge, except as disclosed in
the Exchange Act Documents, there are no pending or threatened legal or
governmental proceedings, required to be described in the Prospectus that
are not described as required, nor any contracts or documents of a
character required to be described or referred to in the Registration
Statements or the Prospectus or to be filed as exhibits to the Registration
Statements that are not described, referred to or filed as required.
(vi) The execution and delivery by the Guarantor and the Company of
this Agreement and the Indenture, the issuance and sale of the Notes and
the related Guarantees, the consummation by the Guarantor and the Company
of the transactions contemplated by this Agreement and the Designated
Indenture and compliance by the Company and the Guarantor with the terms
hereof and thereof do not and will not result in any violation of
<PAGE>
B-2
the charter or by-laws of the Company or the Guarantor, and do not and will
not result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or the
Guarantor under (A) any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument included or incorporated by
reference as an exhibit to the Guarantor's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, the Guarantor's Quarterly Report
on Form 10-Q for the fiscal quarters ended March 31, 1997, June 30, 1997
and September 30, 1997 and the Guarantor's Current Reports on Form 8-K,
dated March 6, 1997, November 25, 1997, January 25, 1998 and February 19,
1998 (collectively, the "Exchange Act Documents") (except for such
breaches, defaults, liens, charges or encumbrances that would not have a
Material Adverse Effect) or included as an exhibit to the Registration
Statements (except for such breaches, defaults, liens, charges or
encumbrances that would not have a Material Adverse Effect), (B) any
existing law, rule or regulation of the State of Minnesota or the United
States of America applicable to the Company or the Guarantor (other than
the securities or Blue Sky laws of the State of Minnesota, as to which such
counsel need express no opinion), or (C) any judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign,
known to such counsel having jurisdiction over the Company or the Guarantor
or any of their respective properties.
(vii) Under any provision of law or regulation applicable to the
Company or the Guarantor of the State of Minnesota or the United States of
America, no authorization, approval, consent, order or license of or filing
with or notice to any governmental agency or body or any court is required
for the valid authorization, issuance and delivery of the Notes or the
related Guarantees, the valid authorization, execution, delivery and
performance by the Company and the Guarantor of, and the performance by the
Company and the Guarantor of their respective obligations under, this
Agreement and the Designated Indenture, except such as are required under
the securities or Blue Sky laws of Minnesota.
(viii) This Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The Designated Indenture has been duly authorized, executed and
delivered by the Company; the Notes have been duly authorized by requisite
corporate action on the part of the Company and have been duly executed and
issued by the Company.
(x) The Exchange Act Documents incorporated by reference in the
Prospectus (except for the financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which such counsel need express no opinion), as of the
dates they were filed with the Commission, or, if any such
<PAGE>
B-3
incorporated document was amended, when such amendment was filed, complied
as to form in all material respects with the requirements of the Exchange
Act.
In addition, counsel shall state that such counsel or lawyers on his
staff have participated in the preparation of the Registration Statements, the
Prospectus and the Exchange Act Documents incorporated or deemed to be
incorporated by reference therein and have participated in conferences with
officers and employees of the Company and the Guarantor, counsel employed by the
Company and the Guarantor, representatives of the independent public accountants
for the Company and the Guarantor, representatives of the Underwriters and
counsel for the Underwriters, at which conferences the contents of the
Registration Statements and Prospectus and related matters were discussed. Such
counsel shall also state that, although such counsel is not passing upon and
does not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statements, the Prospectus or the
Exchange Act Documents and has not made any independent check or verification
thereof, on the basis of the participation of such counsel or lawyers on his
staff in the conferences referred to above and their examination of the
Registration Statements, the Prospectus and the Exchange Act Documents, nothing
has come to such counsel's attention that leads him to believe that the
Registration Statements (including the documents incorporated by reference
therein pursuant to Item 12 of Form S-3) at the time such Registration
Statements became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or the Prospectus (including the
documents incorporated by reference therein pursuant to Item 12 of Form S-3) as
of the date of this Agreement or at the Closing Date contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that such
counsel need express no opinion with respect to the financial statements,
schedules and other financial data included or incorporated or deemed to be
incorporated by reference in the Registration Statements or Prospectus or the
Statement of Qualification on Form T-1.
<PAGE>
EXHIBIT C
Matters to be covered by Letter or Letters of
Independent Auditors
Ernst & Young LLP shall have furnished to the Underwriters letters, dated
as of the date of this Agreement and as of the Closing Date, in form and
substance satisfactory to the Underwriters, confirming that they are independent
auditors with respect to Northwest Airlines Corporation under Rule 101 of the
AICPA's Code of Professional Conduct and its interpretations and rulings and
stating in effect that:
(a) In their opinion, the consolidated financial statements of NWA
Corp. and its subsidiaries and the supporting schedules included or
incorporated by reference in the Registration Statements and the Prospectus
and audited by them comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Exchange
Act and the related published rules and regulations thereunder.
(b) On the basis of a reading of the unaudited consolidated financial
statements of NWA Corp. and its subsidiaries contained in the Quarterly
Report of NWA Corp. on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 incorporated by reference in the
Registration Statements and the Prospectus, and of the latest unaudited
consolidated financial statements made available by NWA Corp. carrying out
certain specified procedures (but not an audit in accordance with generally
accepted auditing standards), a reading of the minutes of the meetings of
the directors of NWA Corp. and inquiries of certain officials of NWA Corp.
and its subsidiaries who have responsibility for financial and accounting
matters of NWA Corp. and its subsidiaries, as to transactions and events
subsequent to the date of the most recent audited consolidated financial
statements incorporated by reference in the Registration Statements and the
Prospectus, nothing came to their attention that caused them to believe
that:
(A) any material modifications should be made to the unaudited
consolidated financial statements of NWA Corp. and its subsidiaries
included or incorporated by reference in the Registration Statements
and the Prospectus for them to be in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial statements
of NWA Corp. and its subsidiaries incorporated by reference in the
Registration Statements and the Prospectus or that such unaudited
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and the Exchange Act and the published instructions,
rules and regulations thereunder;
(B) the unaudited capsule information of NWA Corp. and its
subsidiaries, if any, included or incorporated by reference in the
Registration
<PAGE>
C-2
Statements and the Prospectus does not agree with the amounts set forth in the
unaudited consolidated financial statements of NWA Corp. from which it was
derived or was not determined on a basis substantially consistent with that of
the corresponding financial information in the latest audited financial
statements of NWA Corp. included or incorporated by reference in the
Registration Statements and the Prospectus;
(C) (I) as of the latest date as of which NWA Corp. and its
subsidiaries have monthly financial statements, there was any decrease
in the capital stock or additional paid-in capital, or increase in
long-term indebtedness of NWA Corp. and its subsidiaries, or any
decrease in retained earnings, as compared with the amounts shown in
the most recent consolidated statement of financial condition of NWA
Corp. and its subsidiaries included or incorporated by reference in
the Registration Statements and the Prospectus or (II) with respect to
the period subsequent to the date of the most recent financial
statements included or incorporated by reference in the Registration
Statements and the Prospectus and extending through the latest date as
of which NWA Corp. and its subsidiaries have monthly financial
statements, there was a consolidated net loss; or
(D) as of specified date not more than three business days prior
to the date of the letter, there was any decrease in the capital stock
or additional paid-in capital, or increase in long-term indebtedness
of NWA Corp. and its subsidiaries as compared with the amounts shown
in the most recent consolidated statement of financial condition of
NWA Corp. and its subsidiaries included in the Registration Statements
and the Prospectus;
except in all instances for increases or decreases set forth in such
letter, in which case the letter shall be accompanied by an explanation by
NWA Corp. as to the significance thereof, unless said explanation is not
deemed necessary by the Underwriters.
(c) They have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is expressed in dollars, or
percentages derived from dollar amounts, and has been obtained from the
general accounting records of NWA Corp.) set forth in the Registration
Statements, as amended, and the Prospectus, as amended or supplemented, and
in Exhibit 12 to the Registration Statements, including specified
information, if any, included or incorporated from NWA Corp.'s Annual
Report on Form 10-K incorporated therein or specified information, if any,
included or incorporated from any of NWA Corp.'s Quarterly Reports on Form
10-Q or its current reports on Form 8-K incorporated therein, agrees with
the accounting records of NWA Corp. and its subsidiaries or computations
made therefrom, excluding any questions of legal interpretation.
<PAGE>
SCHEDULE I
UNDERWRITERS PRINCIPAL AMOUNT
7 5/8% NOTES DUE 2005
Morgan Stanley & Co. Incorporated.................... $100,000,000
Goldman, Sachs & Co. ................................ 40,000,000
BT Alex. Brown Incorporated.......................... 30,000,000
Chase Securities Inc................................. 30,000,000
------------
Total $200,000,000
------------
------------
7 7/8% NOTES DUE 2008
Morgan Stanley & Co. Incorporated.................... $100,000,000
Goldman, Sachs & Co.................................. 40,000,000
BT Alex. Brown Incorporated.......................... 30,000,000
Chase Securities Inc................................. 30,000,000
------------
Total $200,000,000
------------
------------
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 3 to the Registration Statement (Form S-3 No. 333-41579) which
Registration Statement also constitutes Post-Effective Amendment No. 7 to the
Registration Statement (Form S-3 No. 333-13307) and Post-Effective Amendment No.
4 to the Registration Statement (Form S-3 No. 333-28649), and related
Prospectuses of Northwest Airlines Corporation and Northwest Airlines, Inc. and
to the incorporation by reference therein of (a) our reports dated January 21,
1997, with respect to the consolidated financial statements of Northwest
Airlines Corporation incorporated by reference in its Annual Report (Form 10-K)
for the year ended December 31, 1996 and the related financial statement
schedule included therein and (b) our report dated January 25, 1998, with
respect to the consolidated financial statements of Northwest Airlines
Corporation for the year ended December 31, 1997 included in its Current Report
(Form 8-K) dated February 19, 1998, filed with the Securities and Exchange
Commission.
<TABLE>
<S> <C>
/s/ ERNST & YOUNG LLP
</TABLE>
Minneapolis, Minnesota
February 26, 1998
