Exhibit 7
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of April 24, 1998, by and between NORTHWEST
AIRLINES CORPORATION, a Delaware corporation ("PARENT"), AIR PARTNERS, L.P., a
Texas limited partnership (the "PARTNERSHIP").
W I T N E S S E T H:
WHEREAS, Parent, Newbridge Parent Corporation, a Delaware corporation,
the Partnership, the Partners of the Partnership named therein and the
Transferors named therein entered into an Investment Agreement, dated as of
January 25, 1998 (the "INVESTMENT AGREEMENT");
WHEREAS, pursuant to Section 2.3(a) of the Investment Agreement,
Parent has agreed to extend a loan to the Partnership (the "LOAN") in the
principal amount of TWENTY-EIGHT MILLION THREE HUNDRED FIFTY-SIX THOUSAND
FIFTEEN DOLLARS AND NO CENTS ($28,356,015.00) (the "LOAN AMOUNT") to fund the
purchase of the Warrants, which loan is evidenced by a note (the "NOTE"); and
WHEREAS, the obligation of Parent to make the Loan is conditioned
upon, among other things, the execution and delivery by the Partnership of a
Pledge Agreement in the form hereof;
NOW, THEREFORE, in consideration of the premises and to induce Parent
to make the Loan to the Partnership, the parties agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the
Investment Agreement and used herein shall have the meanings given to them in
the Investment Agreement.
(b) The following terms shall have the following meanings:
"AGREEMENT" means this Pledge Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
"CODE" means the Uniform Commercial Code from time to time in effect in the
State of New York.
"COLLATERAL" means the Pledged Stock and all Proceeds.
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"COLLATERAL ACCOUNT" means any account established to hold money Proceeds,
maintained under the sole dominion and control of the Partnership.
"OBLIGATIONS" means the collective reference to:
(a) the unpaid principal of and interest on the Loan and all other
obligations and liabilities of the Partnership to Parent (including, without
limitation, interest accruing at the then applicable rate provided in the Note
after the maturity of the Loan and interest accruing at the then applicable rate
provided in the Note after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Partnership, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Note, this Agreement or any
other document made, delivered or given in connection therewith; and
(b) all obligations and liabilities of the Partnership which may arise
under or in connection with this Agreement;
in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to Parent that are required to
be paid by the Partnership pursuant to the terms of this Agreement).
"PLEDGED STOCK" means the shares of capital stock listed on Schedule 1
hereto, which shall be all shares of Company Class A Common Stock issued to the
Partnership upon exercise of the Warrants, together with all stock certificates,
securities, options or rights of any nature whatsoever that may be issued or
granted by the Company to the Partnership in respect of the Pledged Stock while
this Agreement is in effect.
"PROCEEDS" means all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Stock, collections thereon or distributions with
respect thereto.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section and paragraph
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Loan. The Partnership hereby confirms its promise to pay the Loan
Amount to the order of Parent at the earlier to occur of (i) the Closing and
(ii) the date the Investment
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Agreement is terminated in accordance with its terms, in cash in the event the
Investment Agreement is terminated in accordance with its terms or in cash
and/or shares of Holdco Sub Class A Common Stock, as the Partners so determine,
in the event the Closing occurs.
3. PLEDGE; GRANT OF SECURITY INTEREST. The Partnership hereby delivers to
Parent all the Pledged Stock and hereby grants to Parent a first security
interest in the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
4. STOCK POWERS. Concurrently with the delivery to Parent of each
certificate representing one or more shares of Pledged Stock, the Partnership
shall deliver an undated stock power covering such certificate, duly executed in
blank by the Partnership.
5. REPRESENTATIONS AND WARRANTIES. The Partnership represents and
warrants that:
(a) The Partnership is the direct and record owner of the Pledged Stock.
The Partnership has, and at the Closing will have, good and valid title to the
Pledged Stock, free and clear of any Liens or Restrictions, except the security
interest arising under this Agreement. The Partnership has the sole voting
power, and sole power of disposition, with respect to the Pledged Stock, and
there are no restrictions on the Partnership's ability to transfer the Pledged
Stock.
(b) Upon delivery to Parent of the stock certificates evidencing the
Pledged Stock, the security interest created by this Agreement will constitute a
valid, perfected first priority security interest in the Collateral, enforceable
in accordance with its terms against all creditors of the Partnership and any
Persons purporting to purchase any Collateral from the Partnership (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including concepts of
materiality, reasonableness, good faith and fair dealing, regardless of whether
in a proceeding at equity or at law).
(c)(i) The execution, delivery and performance by the Partnership of this
Agreement and its obligations hereunder have been duly authorized by all
necessary Partnership action, and by all necessary action on the part of each
Partner; (ii) no consent or authorization of, filing with, notice to or other
act by or in respect of, any governmental authority or any other person is
required in connection with the execution, delivery, performance, validity or
enforceability of this Agreement except consents, authorizations, filings and
notices that have been obtained or made and are in full force and effect; (iii)
this Agreement constitutes a valid and binding obligation of the Partnership,
enforceable against the Partnership in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally from time
to time in effect and to general principles of equity, including concepts of
materiality, reasonableness, good faith and fair dealing, regardless of whether
in a proceeding at equity or at law) and (iv) the execution, delivery and
performance by the Partnership of this Agreement
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and the compliance by the Partnership with any of the provisions hereof will not
violate any material requirement of law or any material contractual obligation
of the Partnership or conflict with or result in any breach of any applicable
trust or other organizational documents applicable to the Partnership.
6. COVENANTS. The Partnership covenants and agrees with Parent that, from
and after the date of this Agreement until this Agreement is terminated and the
security interests created hereby are released:
(a) Without in any way limiting Section 4.2(b) of the Investment
Agreement, which is incorporated herein in its entirety, without the prior
written consent of Parent, the Partnership will not sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to, the
Collateral, create, incur or permit to exist any Lien or Restriction in favor
of, or any claim of any Person with respect to, any of the Collateral, or any
interest therein, except for the security interests created by this Agreement or
enter into any agreement or undertaking restricting the right or ability of the
Partnership or Parent to sell, assign or transfer any of the Collateral.
(b) The Partnership shall maintain the security interest created by this
Agreement as a first, perfected security interest and shall defend such security
interest against claims and demands of all Persons whomsoever. At any time and
from time to time, upon the written request of Parent and at the sole expense of
the Partnership, the Partnership will promptly and duly execute or cause to be
executed and deliver such further instruments and documents and take such
further actions as Parent may reasonably request for the purposes of obtaining
or preserving the full benefits of this Agreement and of the rights and powers
herein granted.
(c) The Partnership shall pay, and save Parent harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
7. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default shall have
occurred and be continuing and Parent shall have given notice to the Partnership
of Parent's intent to exercise its corresponding rights pursuant to Section 8
below, the Partnership shall be permitted to receive all cash dividends paid in
the normal course of business of the Company and consistent with past practice
in respect of the Pledged Stock and, subject to the provisions of the Investment
Agreement, to exercise all voting and corporate rights with respect to the
Pledged Stock; PROVIDED, HOWEVER, that no vote shall be cast or corporate right
exercised or other action taken which, in Parent's reasonable judgment, would
impair the Collateral or which would be inconsistent with or result in any
violation of any provision of the Note or this Agreement.
8. RIGHTS OF PARENT. If an Event of Default (as defined in the Note)
shall occur, (1) Parent shall have the right to receive any and all cash
dividends paid in respect of the
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Pledged Stock and make application thereof to the Obligations in such order as
Parent may determine, and (2) subject to applicable law (including the HSR Act
and any other governmental approvals that may be required in connection
therewith), all shares of the Pledged Stock shall be registered in the name of
Parent or its nominee, and Parent or its nominee may thereafter exercise (A) all
voting, corporate and other rights pertaining to such shares of the Pledged
Stock at any meeting of shareholders of the Company or otherwise and (B) any and
all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as if it
were the absolute owner thereof, all without liability except to account for
property actually received by it, but Parent shall have no duty to the
Partnership to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
9. REMEDIES. (a) If an Event of Default shall have occurred, at any
time at Parent's election, Parent may apply all or any part of Proceeds held in
any Collateral Account in payment of the Obligations in such order as Parent may
elect.
(b) If an Event of Default shall have occurred, Parent may exercise all
other rights and remedies granted in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Obligations, and all rights
and remedies of a secured party under the Code. Without limiting the generality
of the foregoing, Parent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Partnership or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of Parent or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. Parent shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Partnership, which right or equity is
hereby waived or released. Parent shall apply any Proceeds from time to time
held by it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of Parent hereunder, including, without limitation, reasonable
attorneys' fees and disbursements of counsel to Parent, to the payment in whole
or in part of the Obligations, in such order as Parent may elect, and only after
such application and after the payment by Parent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need Parent account for the surplus, if any, to the Partnership. To the
extent permitted by applicable law, the Partnership waives all claims, damages
and demands it may acquire against Parent arising out of the exercise by
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them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Partnership waives and agrees not to assert any rights or
privileges which it may acquire under Section 9-112 of the Code.
10. REGISTRATION RIGHTS; PRIVATE SALES. If Parent shall determine to
exercise its right to sell any or all of the Pledged Stock pursuant to Section 9
hereof, and if in the opinion of Parent it is necessary or advisable to have the
Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act, the Partnership will use its reasonable best
efforts to cause the Company to execute and deliver, and cause the directors
and officers of the Company to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of Parent, necessary or advisable to register the Pledged Stock, or that
portion thereof to be sold, under the provisions of the Securities Act, to use
its best efforts to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Pledged Stock, or that portion thereof to be sold,
and to make all amendments thereto and/or to the related prospectus which, in
the opinion of Parent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. The Partnership agrees
to use its best efforts to cause the Company to comply with the provisions of
the securities or "Blue Sky" laws of any and all jurisdictions which Parent
shall designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Partnership recognizes that Parent may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, by reason
of other rules and regulations of Governmental Authorities or otherwise, and may
be compelled to resort to one or more private sales thereof to a restricted
group of purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not with a view
to the distribution or resale thereof. The Partnership acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. Parent shall be under no obligation to delay a
sale of any of the Pledged Stock for the period of time necessary to permit the
Company to register such securities for public sale under the Securities Act, or
under applicable state securities laws, even if the Company would agree to do
so.
(c) The Partnership further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock pursuant to this Section valid and
binding and in compliance with any and all other applicable requirements of law.
The Partnership further agrees that a breach of any of
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the covenants contained in this Section will cause irreparable injury to Parent,
that Parent has no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against the Partnership, and the Partnership hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred under the Note.
11. PARENT APPOINTMENT AS ATTORNEY-IN-FACT. (a) The Partnership hereby
irrevocably constitutes and appoints, upon the occurrence of an Event of
Default, Parent and any officer or agent of Parent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in its place and stead, in its name or in Parent's own name,
from time to time in Parent's discretion, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, including, without limitation, any
financing statements, endorsements, assignments or other instruments of
transfer.
(b) The Partnership hereby ratifies all that said attorneys shall lawfully
do or cause to be done pursuant to the power of attorney granted in paragraph
11(a). All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
12. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the
Code, the Partnership authorizes Parent to file financing statements with
respect to the Collateral without the signature of the Partnership in such form
and in such filing offices as Parent reasonably determines appropriate to
perfect the security interests of Parent under this Agreement.
13. SEVERABILITY. If any provision of this Agreement shall be declared by
any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
14. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. (a) None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Partnership
and Parent.
(b) Parent shall not by any act (except by a written instrument pursuant
to paragraph 14(a) hereof), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have acquiesced in any Event
of Default or in any breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the part of Parent, any
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by
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Parent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Parent would otherwise have on
any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
15. SECTION HEADINGS. The titles and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties without the
prior written consent of the other party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS
ENTERED AND TO BE PERFORMED IN NEW YORK AND WITHOUT REGARD TO THE APPLICATION OF
PRINCIPLES OF CONFLICTS OF LAWS.
18. TERMINATION AND RELEASE. This Agreement and the security interests
granted hereby shall terminate when all the Obligations have been indefeasibly
paid in full in accordance with the Note in cash and/or shares of Holdco Sub
Class A Common Stock, as the case may be.
19. SUBMISSION TO JURISDICTION. The Partnership hereby irrevocably and
unconditionally (i) submits for itself and its property in any legal action or
proceeding relating to or arising from this Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the United States of America sitting in the
Southern District of New York or, in the absence of Federal jurisdiction, the
Commercial Part of the Supreme Court of the State of New York for New York
County, and appellate courts from any thereof; (ii) consents that any such
action or proceeding may be brought in such courts and waives any objection that
it may now or hereafter have to the venue of any such action or proceeding in
any such court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same; (iii) agrees that service of
process in any such action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to the Partnership at its address previously notified to
Parent; and (iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to xxx in any other appropriate jurisdiction.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding
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agreement when one or more counterparts have been signed by each party and
delivered to the other party.
[Rest of page intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly
executed and delivered as of the date first above written.
NORTHWEST AIRLINES CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President, General
Counsel and Secretary
AIR PARTNERS, L.P.
By: 1992 Air GP, managing general
partner
By: 1992 Air, Inc., managing
partner
By: /s/ Xxxxx X. X'Xxxxx
----------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Vice President
SCHEDULE 1 TO
PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Class of Stock Certificate No. of
Issuer Stock No. Shares
------ --------- ----------------- -------
Continental Airlines, Inc. Class A 3,039,468
Common Stock
