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EXHIBIT 10.3
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REDEMPTION OPTION AGREEMENT
BETWEEN
CALAIR L.L.C.
AND
CHASE EQUITY ASSOCIATES, L.P.
dated as of
April 17, 1998
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REDEMPTION OPTION AGREEMENT
This Redemption Option Agreement (this "Agreement") is made and
entered into by and between CALAIR L.L.C. ("Calair"), a limited liability
company organized and existing under the laws of the State of Delaware and
CHASE EQUITY ASSOCIATES, L.P. ("CEA"), a California limited partnership.
RECITALS
Effective as of March 30, 1998, CALFINCO Inc. ("Calfinco") entered
into a limited liability company agreement (the "Original LLC Agreement")
forming Calair. Calair's certificate of formation was filed with the Secretary
of State of Delaware on March 31, 1998. Of even date herewith, CEA and
Calfinco are amending and restating the Original LLC Agreement (as amended and
restated, the "LLC Agreement"). Each capitalized term not otherwise defined in
this Agreement shall have the meaning ascribed to such term in the LLC
Agreement.
As an inducement to Calfinco's becoming a member in Calair, CEA agreed
to grant Calair certain rights to redeem CEA's Member Interest, as more
particularly set forth below.
NOW THEREFORE, in consideration of the foregoing premises, and paid
Ten and No/100 Dollars ($10.00) in hand paid, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, CEA
and Calair hereby agree as follows:
1. On the fifth anniversary of the Closing Date (the "Fifth
Anniversary"), or if the Fifth Anniversary is not a Business Day, on the first
(1st) Business Day thereafter, Calfinco, regardless of whether Calfinco is then
the Managing Member, shall have the right to cause Calair to redeem one-half
of CEA's Member Interest for $5,558,000, payable in immediately available
funds.
2. CEA shall have the right, at any time not more than two
hundred seventy (270) days prior to the Tenth Anniversary, to give Calair
notice (the "Redemption Notice") requesting that Calair elect whether to
exercise Calair's option to redeem all of CEA's remaining Member Interest.
Calfinco, regardless of whether Calfinco is then the Managing Member, shall
have the right to cause Calair to redeem all of CEA's remaining Member Interest
by notifying CEA of Calair's election to so redeem CEA's Member Interest within
ten (10) Business Days after receipt of the Redemption Notice. If Calair so
notifies CEA of Calair's election to redeem CEA's Member Interest, the
redemption shall occur on the Tenth Anniversary, or if the Tenth Anniversary is
not a Business Day, on the first (1st) Business Day thereafter. The purchase
price for such redemption shall be (i) $6,834,200, if Calair has previously
exercised its right pursuant to Section 1 hereof, or (ii) $13,668,400, if
Calair failed to exercise its right pursuant to Section 1 hereof. If Calair
notifies CEA that Calair elects not to redeem the remainder of CEA's Member
Interest, or if Calair fails to notify CEA of any election by Calair within
such ten (10) Business Day period following the Redemption Notice, Calair shall
be deemed to have waived its right to redeem CEA's remaining Member Interest.
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3. (a) Within five (5) Business Days after (i) CEA refuses
to consent to the taking of any action under Section 4.3 of the LLC Agreement
that Calfinco, as the Managing Member, requests CEA to consent to (provided
this clause (i) shall not apply to any request for consent that CEA refuses
prior to the second anniversary of the Closing Date), or (ii) Calfinco's
receipt of a "Trigger Event Notice" pursuant to Section 4.4(a) of the LLC
Agreement, Calfinco, regardless of whether Calfinco is then the Managing
Member, shall have the right to cause Calair to tender to CEA a notice (a
"Conditional Exercise Notice") of Calair's intent to redeem all of CEA's
remaining Member Interest.
(b) If Calair gives CEA a Conditional Exercise Notice,
Calair shall cause the fair market value of the Slots to be determined by an
appraisal (the "Appraisal") performed by an appraiser reasonably acceptable to
Calfinco and CEA within ten (10) Business Days after delivery of the
Conditional Exercise Notice. Unless Calair notifies CEA of Calair's rescission
of the Conditional Exercise Notice within ten (10) Business Days after delivery
of the Conditional Exercise Notice, Calair shall be obligated to redeem all of
CEA's remaining Member Interest for the purchase price described in Paragraph
3(c) within thirty (30) days after delivery of the Conditional Exercise Notice.
(c) The purchase price payable by Calair for CEA's
remaining Member Interest, if redeemed pursuant to this paragraph 3, shall be
equal to the sum of (i) CEA's Sharing Ratio prior to giving effect to such
redemption multiplied by all due and unpaid Net Rent (as defined below), if
any, together with interest thereon at the Net Rent Default Rate (as defined
below), plus (ii) (A) if such redemption occurs after the Fifth Anniversary,
CEA's Sharing Ratio prior to giving effect to such redemption, multiplied by
the Net Rent that would have been payable by CAL under the Slot Lease for the
remainder of the term of the Slot Lease, or (B) if such redemption occurs prior
to the Fifth Anniversary, (1) CEA's Sharing Ratio prior to giving effect to
such redemption (i.e. twenty-four percent (24%)), multiplied by the Net Rent
that would have been payable by CAL under the Slot Lease to, but excluding, the
Fifth Anniversary, plus (2) twelve percent (12%) multiplied by the Net Rent
that would have been payable by CAL under the Slot Lease from and including the
Fifth Anniversary through the Tenth Anniversary, with each rental stream
described in clauses (ii)(A), (ii)(B)(1), and (ii)(B)(2) being discounted to
present value using as the discount rate, seventy-five (75) basis points in
excess of the yield reported, as of 10:00 a.m. (New York City time) on the day
preceding the day of redemption, on the display designated as "Page 678" on the
Telerate Access Service (or such other display as may replace Page 678 on the
Telerate Access Service), for actively traded U.S. Treasury securities,
interpolated to correspond to the weighted average maturity of CEA's share of
the Net Rent payable to CEA during the remaining term of the Slot Lease
(calculated as stated above in clause (ii)(A) or (ii)(B)) (the "Discount
Rate"), plus (iii) the greater of (x) the purchase price that would be
associated with Calair's redemption of CEA's remaining Member Interest on the
first date or dates that the redemption of such Member Interest would be
possible pursuant to Sections 1 and 2 hereof, discounted to present value using
the Discount Rate, and (y) CEA's Sharing Ratio prior to giving effect to such
redemption, multiplied by the amount by which (1) the then fair market value of
the Slots, as set forth in the Appraisal, plus the then outstanding principal
balance of any loans made by Calair to a Member, or an Affiliate of a Member,
pursuant
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to, and in accordance with the terms and conditions contained in, Section 7.1
of the LLC Agreement, plus any cash then being retained by Calair, exceeds (2)
the principal balance of, together with any accrued interest on, the
Indebtedness of Calair as of the date of redemption.
(d) By way of example and not by way of limitation, the
amount described in clause (iii)(x) of paragraph 3(c) above would be calculated
as follows:
(i) If the redemption occurs on or prior to the
Fifth Anniversary, the amount would be the sum of (A)
$5,558,000, discounted from the Fifth Anniversary back to the
actual date of redemption at the Discount Rate, plus (B)
$6,834,200, discounted from the Tenth Anniversary back to the
actual date of redemption at the Discount Rate.
(ii) If the redemption occurs after the Fifth
Anniversary and Calair has previously exercised its redemption
option described in paragraph 1, the amount would be
$6,834,200, discounted from the Tenth Anniversary back to the
actual date of redemption at the Discount Rate.
(iii) If the redemption occurs after the Fifth
Anniversary and Calair has not exercised its redemption option
described in paragraph 1, the amount would be $13,668,400,
discounted from the Tenth Anniversary back to the actual date
of redemption at the Discount Rate.
(e) As used in paragraph 3(c) above, (i) "Net Rent", for
any period, means the amount by which the aggregate rent payable under the Slot
Lease exceeds the interest payable for such period in respect of the
Indebtedness evidenced by the Credit Documents, or any refinancing of such
Indebtedness pursuant to Section 4.3(r) of the LLC Agreement, and (ii) "Net
Rent Default Rate" shall mean 9% per semi-annual period, prorated for any
partial period based on the actual number of days since the immediately
preceding April 1st or October 1st, as applicable, in each case, divided by 182
or 183, as applicable.
4. Within thirty (30) days after Calfinco obtains knowledge that
CEA's Member Interest has been Transferred pursuant to the foreclosure of a
security interest granted by CEA on its Member Interest, Calfinco, regardless
of whether Calfinco is then the Managing Member, shall have the right to cause
Calair to redeem all of CEA's remaining Member Interest for a purchase price
equal to the price described in clause 5 below. Calair shall notify CEA of
Calair's election to exercise Calair's rights to redeem CEA's remaining Member
Interest, and Calair shall consummate such redemption, within such thirty (30)
day period after Calair obtains knowledge that CEA's Member Interest has been
so Transferred.
5. Within thirty (30) days after Calfinco's receipt of a
"Termination Notice" pursuant to Section 11.1(b) of the LLC Agreement as a
result of the occurrence of any event described in clause (ii) of the
definition of Termination Event, Calfinco, regardless of whether Calfinco is
then the Managing Member, shall have the right to cause Calair to redeem all of
CEA's remaining
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Member Interest for a purchase price equal to the amount described in clauses
3(c)(i), the applicable portion of clause 3(c)(ii), and clause 3(c)(iii)(x)
above, except that the phrase "one hundred fifty (150) basis points" shall be
substituted for the phrase "seventy-five (75) basis points" in the definition
of "Discount Rate." Calair shall notify CEA of Calair's election to exercise
Calair's right to redeem CEA's remaining Member Interest, and Calair shall
consummate such redemption, within such thirty (30) day period after receipt of
such Termination Notice.
6. At any time after Calfinco's receipt of a "Termination Notice"
pursuant to Section 11.1(b) of the LLC Agreement as a result of the occurrence
of an event described in clause (xi) of the definition of Termination Event and
prior to the Tenth Anniversary, Calfinco, regardless of whether Calfinco is
then the Managing Member, shall have the right to cause Calair to tender to CEA
a Conditional Exercise Notice and to proceed with the redemption of CEA's
Member Interest in accordance with Paragraph 3 above, except that the purchase
price payable to CEA for such redemption shall be reduced by the amount of any
Distributions made by the Company Liquidator to CEA from the proceeds of the
sale of Slots pursuant to Section 11.7(d) of the LLC Agreement.
Notwithstanding anything to the contrary contained in this Section 6, (a) the
tender of a Conditional Exercise Notice under this Section 6 shall not
prohibit, nor is it intended to prohibit, Calair from selling its assets in
accordance with Sections 11.1 and 11.7 of the LLC Agreement, and (b) no event,
including, without limitation, the commencement of a case under Title 11 of the
United States Code by or against Calfinco, Calair or CAL, other than
consummation of the redemption option contained herein, shall inhibit the sale
of assets in accordance with Sections 11.1 and 11.7 of the LLC Agreement.
7. (a) Within five (5) Business Days after Calfinco's
receipt of a "Termination Notice" pursuant to Section 11.1(b) of the LLC
Agreement as a result of the occurrence of any event other than as described in
clauses (ii) of the definition of Termination Event, Calfinco, regardless of
whether Calfinco is then the Managing Member, shall have the right to cause
Calair to tender to CEA a Conditional Exercise Notice and to proceed with the
redemption of CEA's Member Interest in accordance with Paragraph 3 above.
(b) If Calair does not tender a Conditional Exercise Notice to CEA
with such five (5) Business Day period, then CEA shall have the right to notify
Calfinco of CEA's intent to cause Calair to terminate, wind up, and liquidate
(the "Liquidation Notice"). Within five (5) Business Days after Calfinco's
receipt of a Liquidation Notice, Calfinco, regardless of whether Calfinco is
then the Managing Member, shall have the right to cause Calair to tender to CEA
a Conditional Exercise Notice and to proceed with the redemption of CEA's
Member Interest in accordance with Paragraph 3 above.
(c) If Calair does not tender a Conditional Exercise Notice to CEA
pursuant to this Paragraph 7, and consummate the redemption of CEA's Member
Interest in accordance with Paragraph 3 above, CEA shall have the right to
cause the termination, winding up, and liquidation of Calair in accordance with
Section 11.1 of the LLC Agreement.
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8. Within thirty (30) days after Calfinco's receipt of notice or
otherwise becoming aware that CEA's Member Interest has been Transferred
pursuant to a Transfer that was not a Permitted Transfer, Calfinco, regardless
of whether Calfinco is then the Managing Member, shall have the right to cause
Calair to redeem all of CEA's and/or the transferee's Member Interest for a
purchase price equal to (a) if such transferee is not a foreign or domestic air
carrier or an Affiliate of such an air carrier, the amount paid by the
transferee for such Member Interest, stated in terms of cash, or if payment was
made in part by a promissory note, in terms of cash and a promissory note in
like amount from Calair, or (b) if such transferee is a foreign or domestic air
carrier or an Affiliate of such an air carrier, the lesser of (i) the amount
described in clause 8(a), and (ii) the sum of the amounts described in clauses
3(c)(i) and 3(c)(iii)(y) above.
9. Notwithstanding anything contained in this Agreement or any
other Operative Document, the options and rights of Calair granted hereunder
shall expire on the first (1st) Business Day after the Tenth Anniversary, or if
the Tenth Anniversary is not a Business Day, on the second (2nd) Business Day
after the Tenth Anniversary.
10. Each party hereto agrees that the other party would be
irreparably damaged if any of the provisions of this Agreement were not
performed in accordance with their specific terms and that monetary damages
would not provide an adequate remedy in such an event. The parties hereto
agree that time is of the essence with respect to performance of the provisions
of this Agreement. Accordingly, the parties hereto agree that, in addition to
any other remedy to which the non-breaching party may be entitled, whether at
law or in equity, the non-breaching party shall be entitled to injunctive
relief to prevent breaches of the provisions of this Agreement and specifically
to enforce the terms and provisions of this Agreement and any action instituted
in any court of the United States or any state thereof having subject matter
jurisdiction.
11. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to the
principles of conflict of laws thereof (other than Section 5-1401 of the New
York General Obligations Law).
12. This Agreement may not be amended except by an instrument in
writing signed by all of the parties hereto.
13. All notices, directions and other communications provided for
hereunder shall be in writing and may be personally delivered, mailed (by
registered or certified mail, postage prepaid) or sent by telecopy, telegraph
or other direct written electronic means, to the applicable party at the
address indicated below:
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If to Calair L.L.C.:
Calair L.L.C.
c/o Continental Airlines, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President - Treasury Operations
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
If to CEA:
c/o Chase Capital Partners, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
or as to any party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the
terms of this paragraph 13. All such notices, when personally delivered shall
be deemed to have been validly and effectively given on the date of such
delivery, when transmitted by telegraph, telecopy or other direct written
electronic means shall be deemed to have been validly and effectively given on
the day on which it is transmitted, or, if mailed, shall be deemed to have been
validly and effectively given when deposited in the mail.
14. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and
the same agreement. Upon execution of this Agreement, counterpart signature
pages may be delivered by facsimile transmission.
15. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their successor and assigns. Without
limiting the generality of the foregoing, if CEA Transfers its Member Interest
to another Person, Calair's redemption rights shall apply to the Member
Interest of such other Person.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers, managers, or members thereunto duly authorized, as
of the date and year first above written.
CHASE EQUITY ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS, its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
CALAIR L.L.C.
By: CALFINCO Inc.,
Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President - Treasury Operations
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