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 ("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.
"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 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
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 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
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 (1) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Collateral, (2) 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 (3) 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 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 next 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 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 no
to assert any rights or privileges which it may acquire under Section 9-112 of
the Code.
10. Registration Rights; Private Sales. (a) 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 (1) 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, (2) 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 (3) to make all
amendments thereto and/or to the related prospectus which, in the option 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 reasonably 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
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 the 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 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 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) subjects 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 agreement when one or more counterparts have been
signed by each party and delivered to the other.
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:
Name:
Title:
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
Stock Certificate
Issuer Class of Stock No. No. of Shares
Continental Class A
Airlines, Inc. Common Stock 3,039,468
