CONFORMED COPY
NORTHWEST AIRLINES CORPORATION COMMON STOCK OPTION AGREEMENT
COMMON STOCK OPTION AGREEMENT, dated as of May 1, 1998 (this "OPTION
AGREEMENT"), between NORTHWEST AIRLINES CORPORATION, a Delaware corporation
("NWA CORP.") and KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a Netherlands
corporation ("KLM").
W I T N E S S E T H :
WHEREAS, NWA Corp. and KLM are parties to a Common Stock Repurchase
Agreement dated as of September 29, 1997, as amended (the "ORIGINAL
REPURCHASE AGREEMENT");
WHEREAS, pursuant to the Original Repurchase Agreement, on September 29,
1997 NWA Corp. repurchased from KLM 6,800,000 shares of NWA Corp.'s Class A
Common Stock, par value $.01 per share, and agreed to repurchase from KLM an
additional 18,177,874 Shares over the next three years;
WHEREAS, the parties wish to accelerate to the repurchase by NWA Corp.
from KLM of such additional 18,177,874 Shares, and to that end have entered
into the Accelerated Common Stock Repurchase Agreement, dated as of May 1,
1998 (the "ACCELERATED REPURCHASE AGREEMENT"; capitalized terms used herein
and not otherwise defined shall have the meanings given to them in the
Accelerated Repurchase Agreement) to provide for such accelerated repurchase
and certain other matters; and
WHEREAS, as an inducement to the willingness of KLM to agree to the
terms of the Accelerated Repurchase Agreement, NWA Corp. has agreed to grant
KLM the Options (as hereinafter defined) and to enter into this Option
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Accelerated Repurchase
Agreement, the parties hereto agree as follows:
ARTICLE I
GRANT OF OPTIONS
1.1 FIRST OPTION. (a) NWA Corp. hereby grants to KLM an
irrevocable option (the "FIRST OPTION") to purchase, subject to the terms
hereof, and subject to adjustment in accordance with Section 2.2(a) and
2.2(b), an aggregate of 13,277,874 Shares (the "FIRST OPTION SHARES") upon
the occurrence of a First Option Trigger Event (as defined below).
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(b) The price at which the First Option is exercisable is equal to:
(i) $237,694,888.24, which equals the sum of the aggregate
original principal amount of the promissory notes issued pursuant to
Sections 2.1(a)(ii) ("NOTE 2") and 2.1(a)(iii)(1) ("NOTE 3") of the
Accelerated Repurchase Agreement; PLUS
(ii) the sum of (A) an accretion factor at a 5% per annum rate
applied to the principal amounts of Note 2 and Note 3 outstanding from
time to time, with such accretion factor calculated based on the period
from and after the Closing Date and ending on (x) to the extent
outstanding or repaid on the First Option Closing Date, the First Option
Closing Date or (y) to the extent any portion of such principal amounts
is repaid prior to the First Option Closing Date, on such earlier date
or dates on which such repayments occur, plus (B) in the event any such
repayments occur prior to the First Option Closing Date, an accretion
factor (compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 2 and/or Note 3 that may be made from time
to time prior to the First Option Closing Date, with such accretion
factor calculated based, in respect of each such principal repayment, on
the period from and after the respective dates of such principal
repayments and ending on the First Option Closing Date; PLUS
(iii) to the extent any interest payments have been made on
Note 2 or Note 3 prior to the First Option Closing Date, an amount
calculated by applying a 5% per annum accretion factor, compounded
annually, to the portion of each such interest payment representing
interest accrued at a rate equal to 5% per annum, such accretion to be
calculated from the date of each such interest payment to the First
Option Closing Date; PLUS
(iv) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor (compounded annually) from
the Closing Date to the First Option Closing Date; LESS
(v) $28,052,064.10 if the First Option Closing Date is
September 29, 1999, or such amount decreased by a 5% per annum accretion
factor (compounded annually) if the First Option Closing Date is prior
to such date or increased by a 5% per annum accretion factor (compounded
annually) if the First Option Closing Date is after such date.
(c) In the event a Control Transaction is consummated which results
in a payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates only to Shares subject to repurchase
pursuant to Section 2.1(a)(ii) (and does not relate to Shares subject to
repurchase pursuant to Section 2.1(a)(iii)) of the Accelerated Repurchase
Agreement, the number of First Option Shares shall be reduced to 10,055,335,
and the price at which the First Option is exercisable will be equal to:
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(i) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(ii) the sum of (A) an accretion factor at a 5% per annum
rate applied to the principal amount of Note 3 outstanding from time to
time, with such accretion factor calculated based on the period from and
after the Closing Date and ending on (x) to the extent outstanding or
repaid on the First Option Closing Date, the First Option Closing Date
or (y) to the extent any portion of such principal amount is repaid
prior to the First Option Closing Date, on such earlier date or dates on
which such repayments occur, plus (B) in the event any such repayments
occur prior to the First Option Closing Date, an accretion factor
(compounded annually) at a 5% per annum rate applied to the principal
repayments of Note 3 that may be made from time to time prior to the
First Option Closing Date, with such accretion factor calculated based,
in respect of each such principal repayment, on the period from and
after the respective dates of such principal repayments and ending on
the First Option Closing Date; PLUS
(iii) to the extent any interest payments have been made on
Note 3 prior to the First Option Closing Date, an amount calculated by
applying a 5% per annum accretion factor, compounded annually, to the
portion of each such interest payment representing interest accrued at a
rate equal to 5% per annum, such accretion to be calculated from the
date of each such interest payment to the First Option Closing Date; PLUS
(iv) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor (compounded annually) from
the Closing Date to the First Option Closing Date; LESS
(v) $23,160,543.81 if the First Option Closing Date is
September 29, 1999, or such amount decreased by a 5% per annum accretion
factor (compounded annually) if the First Option Closing Date is prior
to such date or increased by a 5% per annum accretion factor (compounded
annually) if the First Option Closing Date is after such date.
(d) In the event a Control Transaction is consummated which results
in a payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates to Shares subject to repurchase pursuant
to Section 2.1(a)(ii) and 2.1(a)(iii) of the Accelerated Repurchase
Agreement, the First Option shall be immediately null and void.
1.2 SECOND OPTION. (a) NWA Corp. hereby grants to KLM an
irrevocable option (the "SECOND OPTION") to purchase, subject to the terms
hereof, an aggregate of 10,055,335 Shares (the "SECOND OPTION SHARES") upon
the occurrence of a Second Option Trigger Event (as defined below).
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(b) The price at which the Second Option is exercisable is equal to:
(i) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(ii) the sum of (A) an accretion factor at a 5% per annum
rate applied to the principal amount of Note 3 outstanding from time to
time, with such accretion factor calculated based on the period from and
after the Closing Date and ending on (x) to the extent outstanding or
repaid on the Second Option Closing Date, the Second Option Closing Date
or (y) to the extent any portion of such principal amount is repaid
prior to the Second Option Closing Date, on such earlier date or dates
on which such repayments occur, plus (B) in the event any such
repayments occur prior to the Second Option Closing Date, an accretion
factor (compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 3 that may be made from time to time prior
to the Second Option Closing Date, with such accretion factor calculated
based, in respect of each such principal repayment, on the period from
and after the respective dates of such principal repayments and ending
on the Second Option Closing Date; PLUS
(iii) to the extent any interest payments have been made on
Note 3 prior to the Second Option Closing Date, an amount calculated by
applying a 5% per annum accretion factor, compounded annually, to the
portion of each such interest payment representing interest accrued at a
rate equal to 5% per annum, such accretion to be calculated from the
date of each such interest payment to the Second Option Closing Date;
PLUS
(iv) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor (compounded annually) from
the Closing Date to the First Option Closing Date; LESS
(v) $24,318,571.00 if the Second Option Closing Date is
September 29, 2000, or such amount decreased by a 5% per annum accretion
factor (compounded annually) if the Second Option Closing Date is prior
to such date or increased by a 5% per annum accretion factor (compounded
annually) if the Second Option Closing Date is after such date.
(c) In the event a Control Transaction is consummated which results
in a payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates to Shares subject to repurchase pursuant
to Section 2.1(a)(iii) of the Accelerated Repurchase Agreement, the Second
Option shall be immediately null and void.
1.3 DEFAULT OPTION. (a) NWA Corp. hereby grants to KLM an
irrevocable option (the "DEFAULT OPTION") to purchase, subject to the terms
hereof, and subject to adjustment in accordance with Section 2.4, the
relevant number, as of the date of exercise of the Default Option, of Default
Option Shares upon the occurrence of a Default Option Trigger
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Event. The number of "DEFAULT OPTION SHARES" shall initially be 18,177,847
Shares and shall be reduced (on a cumulative basis) by
(i) 4,900,000 Shares on the later of (x) the date of repayment
in full of Note 1, (y) September 29, 1998 or (z) in the event on or
prior to September 29, 1998, KLM has delivered to Northwest Airlines,
Inc. ("Northwest") a notice under Section 1.04(b) of the Alliance
Implementation Agreement of a Material Default on the part of Northwest,
the date of either (A) Northwest's cure of such Material Default, (B) a
determination by the arbitrator(s) appointed pursuant to Section 9.08 of
the Alliance Implementation Agreement that no such a Material Default
exists, or (C) if such arbitrator(s) make a determination that a
Material Default on the part of Northwest exists but KLM does not
thereafter give notice of termination of the Alliance Implementation
Agreement within the three-month period specified in Section 1.04 of
such Alliance Implementation Agreement, then immediately upon the
expiration of such three-month period, it being the case that if clause
(z) is applicable and neither subclauses (A), (B) or (C) occurs, the
reduction provided by this subparagraph (i) shall not occur; PROVIDED,
that upon consummation of a Control Transaction that results in a
payment to KLM pursuant to Section 2.2(d) of the Accelerated Repurchase
Agreement, and such payment relates to Shares subject to repurchase
pursuant to Section 2.1(a)(i) of the Accelerated Repurchase Agreement,
the reduction provided by this subparagraph (i) shall occur concurrently
with such payment;
(ii) 3,222,559 Shares on the later of (x) the date of
repayment in full of Note 2, (y) September 29, 1999 or (z) in the event
on or prior to September 29, 1999, KLM has delivered to Northwest a
notice under Section 1.04(b) of the Alliance Implementation Agreement of
a Material Default on the part of Northwest, the date of either (A)
Northwest's cure of such Material Default, (B) a determination by the
arbitrator(s) appointed pursuant to Section 9.08 of the Alliance
Implementation Agreement that no such a Material Default exists, or (C)
if such arbitrator(s) make a determination that a Material Default on
the part of Northwest exists but KLM does not thereafter give notice of
termination of the Alliance Implementation Agreement within the
three-month period specified in Section 1.04 of such Alliance
Implementation Agreement, then immediately upon the expiration of such
three-month period, it being the case that if clause (z) is applicable
and neither subclauses (A), (B) or (C) occurs, the reduction provided by
this subparagraph (ii) shall not occur; PROVIDED, that upon consummation
of a Control Transaction that results in a payment to KLM pursuant to
Section 2.2(d) of the Accelerated Repurchase Agreement, and such payment
relates to Shares subject to repurchase pursuant to Section 2.1(a)(ii)
of the Accelerated Repurchase Agreement, the reduction provided by this
subparagraph (ii) shall occur concurrently with such payment; and
(iii) 10,055,335 Shares on the later of (x) the date of
repayment in full of Note 3, (y) September 29, 2000 or (z) in the event
on or prior to September 29, 2000, KLM has delivered to Northwest a
notice under Section 1.04(b) of the Alliance Implementation Agreement of
a Material Default on the part of Northwest, the date of either (A)
Northwest's cure of such Material Default, (B) a determination by the
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arbitrator(s) appointed pursuant to Section 9.08 of the Alliance
Implementation Agreement that no such a Material Default exists, or (C)
if such arbitrator(s) make a determination that a Material Default on
the part of Northwest exists but KLM does not thereafter give notice of
termination of the Alliance Implementation Agreement within the
three-month period specified in Section 1.04 of such Alliance
Implementation Agreement, then immediately upon the expiration of such
three-month period, it being the case that if clause (z) is applicable
and neither subclauses (A), (B) or (C) occurs, the reduction provided by
this subparagraph (iii) shall not occur; PROVIDED, that upon
consummation of a Control Transaction that results in a payment to KLM
pursuant to Section 2.2(d) of the Accelerated Repurchase Agreement, and
such payment relates to Shares subject to repurchase pursuant to Section
2.1(a)(iii) of the Accelerated Repurchase Agreement, the reduction
provided by this subparagraph (ii) shall occur concurrently with such
payment.
(b) The price at which the Default Option is exercisable is equal
to:
(i) If the number of Default Option Shares is 18,177,847, an
amount equal to:
(A) $443,671,591.16, which equals the sum of the aggregate
original principal amount of Note 2, Note 3 and the promissory note
issued pursuant to Section 2.1(a)(i) ("NOTE 1") of the Accelerated
Repurchase Agreement; PLUS
(B) the sum of (x) an accretion factor (compounded annually)
at a 5% per annum rate applied to the principal amounts of Note 1,
Note 2 and Note 3 outstanding from time to time, with such
accretion factor calculated based on the period from and after the
Closing Date and ending on (1) to the extent outstanding or repaid
on the Default Option Closing Date, the Default Option Closing Date
or (2) to the extent any portion of such principal amounts is
repaid prior to the Default Option Closing Date, on such earlier
date or dates on which such repayments occur, plus (y) in the event
any such repayments occur prior to the Default Option Closing Date,
an accretion factor (compounded annually) at a 5% per annum rate
applied to the principal repayments of Note 1, Note 2 and/or Note 3
that may be made from time to time prior to the Default Option
Closing Date, with such accretion factor calculated based, in
respect of each such principal repayment, on the period from and
after the respective dates of such principal repayments and ending
on the Default Option Closing Date; PLUS
(C) to the extent any interest payments have been made on
Note 1, Note 2 or Note 3 prior to the Default Option Closing Date,
an amount calculated by applying a 5% per annum accretion factor,
compounded annually, to the portion of each such interest payment
representing interest accrued at a rate equal to 5% per annum, such
accretion to be calculated from the date of each such interest
payment to the Default Option Closing Date; PLUS
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(D) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor from the Closing Date
to the Default Option Closing Date; LESS
(E) $28,052,064.10 if the Default Option Closing Date is
September 29, 1999, or such amount decreased by a 5% per annum
accretion factor if the Default Option Closing Date is prior to
such date or increased by a 5% per annum accretion factor if the
Default Option Closing Date is after such date.
(ii) If the number of Default Option Shares is 10,055,335,
an amount equal to:
(A) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(B) the sum of (x) an accretion factor (compounded annually)
at a 5% per annum rate applied to the principal amount of Note 3
outstanding from time to time, with such accretion factor
calculated based on the period from and after the Closing Date and
ending on (1) to the extent outstanding or repaid on the Default
Option Closing Date, the Default Option Closing Date or (2) to the
extent any portion of such principal amount is repaid prior to the
Default Option Closing Date, on such earlier date or dates on which
such repayments occur, plus (y) in the event any such repayments
occur prior to the Default Option Closing Date, an accretion factor
(compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 2 and/or Note 3 that may be made from
time to time prior to the Default Option Closing Date, with such
accretion factor calculated based, in respect of each such
principal repayment, on the period from and after the respective
dates of such principal repayments and ending on the Default Option
Closing Date; PLUS
(C) to the extent any interest payments have been made on
Note 3 prior to the Default Option Closing Date, an amount
calculated by applying a 5% per annum accretion factor, compounded
annually, to the portion of each such interest payment representing
interest accrued at a rate equal to 5% per annum, such accretion to
be calculated from the date of each such interest payment to the
Default Option Closing Date; PLUS
(D) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor from the Closing Date
to the Default Option Closing Date; LESS
(E) $24,318,571.00 if the Default Option Closing Date is
September 29, 2000, or such amount decreased by a 5% per annum
accretion factor if the
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Default Option Closing Date is prior to such date or increased
by a 5% per annum accretion factor if the Second Option Closing
Date is after such date.
(iii) If the number of Default Option Shares is 10,055,335,
an amount equal to:
(A) $100,000,000.00, which equals the original principal
amount of Note 3; PLUS
(B) the sum of (x) an accretion factor (compounded annually)
at a 5% per annum rate applied to the principal amount of Note 3
outstanding from time to time, with such accretion factor
calculated based on the period from and after the Closing Date and
ending on (1) to the extent outstanding or repaid on the Default
Option Closing Date, the Default Option Closing Date or (2) to the
extent any portion of such principal amount is repaid prior to the
Default Option Closing Date, on such earlier date or dates on which
such repayments occur, plus (y) in the event any such repayments
occur prior to the Default Option Closing Date, an accretion factor
(compounded annually) at a 5% per annum rate applied to the
principal repayments of Note 2 and/or Note 3 that may be made from
time to time prior to the Default Option Closing Date, with such
accretion factor calculated based, in respect of each such
principal repayment, on the period from and after the respective
dates of such principal repayments and ending on the Default Option
Closing Date; PLUS
(C) to the extent any interest payments have been made on
Note 3 prior to the Default Option Closing Date, an amount
calculated by applying a 5% per annum accretion factor, compounded
annually, to the portion of each such interest payment representing
interest accrued at a rate equal to 5% per annum, such accretion to
be calculated from the date of each such interest payment to the
Default Option Closing Date; PLUS
(D) $336,730,772.35, which equals the amount stated in
Section 2.1(a)(iii)(2) of the Accelerated Repurchase Agreement,
increased by a 5% per annum accretion factor from the Closing Date
to the Default Option Closing Date; LESS
(E) $24,318,571.00 if the Default Option Closing Date is
September 29, 2000, or such amount decreased by a 5% per annum
accretion factor if the Default Option Closing Date is prior to
such date or increased by a 5% per annum accretion factor if the
Second Option Closing Date is after such date.
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ARTICLE II
EXERCISABILITY OF OPTIONS
2.1 COMMENCEMENT OF EXERCISABILITY. (a) KLM may exercise the
First Option, the Second Option or the Default Option (each, an "Option")
only upon the occurrence of a First Option Trigger Event, a Second Option
Trigger Event or a Default Option Trigger Event, respectively (each, a
"Trigger Event").
(b) The deadline for providing notice of exercise of an Option
following the occurrence of a Trigger Event shall be as follows:
(i) In the case of a First Option Trigger Event described in
paragraph (a) of Section 2.2, written notice of exercise of the First
Option must be delivered by KLM to NWA Corp. no later than March 27,
2000; PROVIDED, on the date such notice is delivered the relevant
Adverse U.S. Condition or Adverse European Condition (as defined below),
as applicable, shall be continuing.
(ii) In the case of a First Option Trigger Event described in
paragraph (b) of Section 2.2, written notice of exercise of the First
Option must be delivered by KLM to NWA Corp. during the 30 day period
following the date on which Northwest gave KLM notice of termination of
the Alliance Implementation Agreement as contemplated by said paragraph
(b).
(iii) In the case of a Second Option Trigger Event, written
notice of exercise of the Second Option must be delivered by KLM to NWA
Corp. no later than March 28, 2001; PROVIDED, on the date such notice is
delivered the relevant Adverse U.S. Condition or Adverse European
Condition, as applicable, shall be continuing.
(iv) In the case of a Default Option Trigger Event, written
notice of exercise of the Default Option must be delivered by KLM to NWA
Corp. no later than ten Business Days after KLM has given notice to
Northwest of its termination of the Alliance Implementation Agreement as
contemplated by Section 2.4.
2.2 FIRST OPTION TRIGGER EVENT. A "FIRST OPTION TRIGGER EVENT"
shall mean the occurrence of either of the following:
(a) On September 29, 1999, (A) the antitrust immunity
presently granted to the Northwest/KLM commercial alliance by the U.S.
Department of Transportation pursuant to Order 93-1-11 shall not have
been renewed or otherwise maintained or such antitrust immunity shall
not have been renewed and/or modified on terms as favorable in all
material respects as the terms of the antitrust immunity granted to (1)
the United-Lufthansa commercial alliance by the U.S. Department of
Transportation pursuant to Order 96-5-27 and (2) the
Delta/Swissair/Austrian/Sabena commercial alliance by the U.S.
Department of Transportation pursuant to Order 96-6-33 or (B) the
European Commission shall have imposed conditions on the
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Northwest/KLM commercial alliance equivalent to the conditions proposed
with respect to the pending commercial alliance between British Airways
and American Airlines, the terms of which were reported in the media on
or about August and/or September of 1997 prior to September 29, 1997
such that KLM's and Northwest's abilities to operate as contemplated in
the Alliance Implementation Agreement shall have been materially
adversely affected (the events described in (A) and (B) above being
referred to as "ADVERSE U.S. CONDITION" and the "ADVERSE EUROPEAN
CONDITION", respectively), AND KLM shall not have exercised the First
Option pursuant to Section 2.2(b) or the Default Option with respect to
any number of Shares other than 10,055,335; PROVIDED, that if KLM shall
have exercised the Default Option with respect to 10,055,335 Shares
prior to exercising the First Option, KLM shall only have the right to
exercise the First Option with respect to 3,222,559 Shares, and the
aggregate price set forth in Section 1.1(b) for the purchase of such
First Option Shares will be adjusted accordingly; or
(b) Within three months after the later of (i) September 29,
1998 and (ii) the completion of any arbitration proceedings referred to
in the fourth paragraph of the Hub Restrictions Letter (as defined
below), Northwest shall have given KLM notice of termination of the
Alliance Implementation Agreement entered into by KLM and Northwest on
September 29, 1997 in accordance with the letter agreement dated as of
September 29, 1997 between Northwest and KLM (the "HUB RESTRICTIONS
LETTER"), AND KLM shall not have exercised the First Option pursuant to
Section 2.2(a) or the Default Option with respect to any number of
Shares other than 10,055,335; PROVIDED, that if KLM shall have exercised
the Second Option or the Default Option with respect to 10,055,335
Shares prior to exercising the First Option, KLM shall only have the
right to exercise the First Option with respect to 3,222,559 Shares, and
the aggregate price set forth in Section 1.1(b) for the purchase of such
First Option Shares will be adjusted accordingly.
2.3 SECOND OPTION TRIGGER EVENT. A "SECOND OPTION TRIGGER EVENT"
shall occur if on September 29, 2000 an Adverse U.S. Condition or an Adverse
European Condition shall have occurred and be continuing, AND KLM shall not
have exercised the First Option or the Default Option.
2.4 DEFAULT OPTION TRIGGER EVENT. A "DEFAULT OPTION TRIGGER EVENT"
shall occur if, after requisite notice and opportunity to cure having been
provided to Northwest in accordance with the terms of the Alliance
Implementation Agreement, KLM has exercised its right under the Alliance
Implementation Agreement to terminate such Alliance Implementation Agreement
as a result of a Material Default on the part of Northwest (as such term is
defined in such Alliance Implementation Agreement), any arbitration
proceedings under Section 9.08 of such Alliance Implementation Agreement have
been concluded and such Alliance Implementation Agreement has been terminated
in accordance with its terms; PROVIDED, that if KLM shall have exercised the
First Option prior to exercising the Default Option, KLM shall only have the
right to exercise the Default Option with respect to a number of Shares equal
to the number of Shares which KLM would have had the right to purchase
pursuant to the Default Option had it not exercised the First Option minus
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13,277,874 (if such calculation results in a number that is not a positive
number, KLM's right to exercise the Default Option shall immediately
terminate), and the aggregate price set forth in Section 1.3(b) for the
purchase of such Default Option Shares will be adjusted accordingly;
PROVIDED, FURTHER, that if KLM shall have exercised the Second Option prior
to exercising the Default Option, KLM shall only have the right to exercise
the Default Option with respect to a number of Shares equal to the number of
Shares which KLM would have had the right to purchase pursuant to the Default
Option had it not exercised the Second Option minus 10,055,335 (if such
calculation results in a number that is not a positive number, KLM's right to
exercise the Default Option shall immediately terminate), and the aggregate
price set forth in Section 1.3(b) for the purchase of such Default Option
Shares will be adjusted accordingly.
2.5 MANNER OF EXERCISE. (a) To exercise the First Option, the
Second Option or the Default Option, KLM shall on or prior to the deadline
set forth in Section 2.1 deliver written notice to NWA Corp. of KLM's
exercise of the relevant option. Such notice shall describe in reasonable
detail the basis upon which the relevant Trigger Event is deemed to have
occurred, and the Option Closing Date shall be 15 Business Days after the
date of the notice of exercise. On such Option Closing Date, KLM shall pay
the applicable exercise price in Cash, against delivery by NWA Corp. to KLM
of one or more stock certificates and/or other property comprising the
Shares. To the extent that KLM is the holder of one or more outstanding
Notes, KLM may demand prepayment of such Note(s) held by it (including
accrued and unpaid interest but without any obligation on the part of NWA
Corp. to pay any Make-Whole Premium thereunder), and the amount owed by KLM
to NWA Corp. in connection with the relevant option exercise may be offset
against the amount owed by NWA Corp. to KLM under such Note(s) (including any
accrued and unpaid interest thereon) being prepaid.
(b) Shares acquired upon KLM's exercise of the First Option, the
Second Option or the Default Option are referred to as "OPTION SHARES".
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF NWA CORP. NWA Corp.
represents and warrants to KLM as follows:
(a) NWA Corp. has all requisite corporate power and authority
to execute and deliver this Option Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Option Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by NWA Corp.'s Board of
Directors and no other corporate proceedings on the part of NWA Corp.
are necessary to authorize the execution and delivery of this Option
Agreement or to consummate the transactions contemplated hereby. This
Option Agreement has been duly and validly executed and delivered by NWA
Corp. and constitutes the legal, valid and binding agreement of NWA
Corp., enforceable
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against NWA Corp. in accordance with its terms, except to the extent
that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regarding the availability of remedies.
(b) NWA Corp. has taken all necessary corporate action to
authorize and reserve and to permit it to issue or sell out of its
treasury, as the case may be, and at all times from the date hereof
through the termination of this Option Agreement in accordance with its
terms will have reserved for issuance or sale out of its treasury upon
the exercise of any Option, that number of shares of Common Stock equal
to the maximum number of shares of Common Stock at any time and from
time to time subject to an Option, and all such Shares of Common Stock,
upon issuance pursuant hereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all
claims, liens, encumbrances and security interests and not subject to
any preemptive rights.
3.2 REPRESENTATIONS AND WARRANTIES OF KLM. KLM represents and
warrants to NWA Corp. as follows:
(a) KLM is acquiring the Options and will be acquiring the
Option Shares for its own account for investment with no intention of
distributing or reselling such Options or Option Shares or any part
thereof in any transaction which would be in violation of the securities
laws of the United States of America or any state thereof or any other
jurisdiction, without prejudice, however, to its right at all times to
sell or otherwise dispose of all or any part of such Option Shares in
compliance with the transfer restrictions described in Section 4.2.
(b) KLM acknowledges that the Options and Option Shares to be
issued to it are being offered and sold without registration under the
Securities Act of 1933 (the "SECURITIES ACT") in reliance upon the
exemption provided in Section 4(2) of the Securities Act.
ARTICLE IV
MISCELLANEOUS
4.1 STATUS OF OPTION SHARES. KLM covenants and agrees that all
Option Shares held by KLM shall not be registered on the Foreign Stock
Registry of NWA Corp. so long as such Option Shares are held by KLM or any of
its Affiliates.
4.2 SECURITIES LAW REQUIREMENTS. (a) No Option Shares may be sold,
transferred or otherwise disposed of (any such sale, transfer or other
disposition, a "sale") unless the holder thereof shall have given written
notice to NWA Corp. or its successor of the holder's intention to effect the
sale describing the manner and circumstances thereof (which circumstances
shall include the sale of at least 5,000 Shares) and shall have represented
in
13
such notice that the proposed sale may be effected without registration under
the Securities Act or under applicable blue sky laws. Such proposed sale may
be effected only if NWA Corp. shall have received such notice and such
representation and notified the holder in writing that either (i) NWA Corp.
accepts such representation or (ii) NWA Corp. requires a written opinion of
counsel reasonably satisfactory to NWA Corp. addressed to NWA Corp. to the
effect that the proposed sale may be effected without registration under the
Securities Act or under applicable blue sky laws. Upon delivery by NWA Corp.
of the notice described in clause (i) of the preceding sentence or receipt by
NWA Corp. of a reasonably satisfactory legal opinion as contemplated by
clause (ii) of the preceding sentence, the holder shall be entitled to effect
a sale of Option Shares as described in and in accordance with the terms of
the notice delivered by the holder to NWA Corp. The holder will cause any
proposed transferee of Option Shares to agree to take and hold such Option
Shares subject to the provisions and upon the conditions specified herein.
Such Option Shares transferred as provided above shall bear the legend set
forth in subparagraph (b) below.
(b) The certificates representing the Option Shares shall bear the
following legend:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THESE SHARES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
(c) The certificates representing the Option Shares, and each
certificate issued in transfer or exchange thereof, shall also bear any
legend required under any applicable securities or blue sky laws.
(d) NWA Corp. may make a notation on its records or give
instructions to any transfer agents of the Common Stock in order to implement
the restrictions on transfer set forth in this Section 4.2. NWA Corp. shall
not incur any liability for any delay in recognizing any transfer of Option
Shares if NWA Corp. reasonably believes that such transfer may have been or
would be in violation of the provisions of the Securities Act or applicable
blue sky laws.
(e) The provisions of Section 4.2 shall not apply to any sale of
Option Shares pursuant to an effective registration statement under the
Securities Act.
4.3 CHOICE OF LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN. THE PARTIES TO
THIS OPTION AGREEMENT HEREBY AGREE TO SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS OPTION AGREEMENT.
14
4.4 COUNTERPARTS. This Option Agreement may be executed in two or
more counterparts, and by different parties on separate counterparts, each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument.
4.5 NOTICES. All notices, requests, demands or other
communications provided herein shall be made in writing and shall be deemed
to have been duly given if delivered as follows:
If to NWA Corp.:
0000 Xxxx Xxx Xxxxxxx
Xxxxx, Xxxxxxxxx 00000
Attention: Senior Vice President, General Counsel
and Secretary
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
If to KLM:
Xxxxxxxxxxx Xxxxxxxxxx Xxxxxxxxxxxx X.X.
Xxxxxxxxxxxxxx 00
1192 G P Amstelveen
The Netherlands
Attention: Senior Vice President and General
Counsel
Fax: 000-0000-000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Fax: (000) 000-0000
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on (i) the date of
delivery if sent by messenger, (ii) on the Business Day following
15
the Business Day on which delivered to a recognized courier service if sent
by overnight courier or (iii) on the date received, if sent by fax.
4.6 ASSIGNMENT; SUCCESSORS. The Options shall not be transferable.
Neither KLM nor NWA Corp. may assign any of its rights or obligations under
this Agreement without the prior written consent of the other party hereto;
PROVIDED, that if Shares shall at any time consist not of Common Stock but of
shares or other securities issued by a person other than NWA Corp., NWA Corp.
may assign its rights and obligations hereunder to such other person if such
person undertakes in writing to perform NWA Corp.'s obligations hereunder and
NWA Corp. unconditionally guarantees the performance by such assignee of NWA
Corp.'s obligations hereunder pursuant to a written agreement satisfactory to
KLM, and such other person shall assume the rights and obligations of NWA
Corp. hereunder as though it were a party hereto. Any assignment in
contravention of this provision shall be void. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors in interest and assigns.
4.7 ENTIRE AGREEMENT; NO ORAL WAIVER. This Agreement together with
the Accelerated Repurchase Agreement, constitutes the entire agreement
between the parties pertaining to the subject matter hereof and supersede all
prior and contemporaneous agreements, understandings and representations,
whether oral or written, of the parties in connection therewith. No covenant
or condition or representation not expressed in this Agreement shall affect
or be effective to interpret, change or restrict this Agreement. No prior
drafts of this Agreement and no words or phrases from any such prior drafts
shall be admissible into evidence in any action, suit or other proceeding
involving this Agreement or the transactions contemplated hereby. This
Agreement may not be changed or terminated orally, nor shall any change,
termination or attempted waiver of any of the provisions of this Agreement be
binding on any party unless in writing signed by the parties hereto. No
modification, waiver, termination, rescission, discharge or cancellation of
this Agreement and no waiver of any provision of or default under this
Agreement shall affect the right of any party thereafter to enforce any other
provision or to exercise any right or remedy in the event of any other
default, whether or not similar.
4.8 SEVERABILITY. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected
and shall remain in full force and effect.
4.9 SUBMISSION TO JURISDICTION. Each of the parties hereto hereby
irrevocably unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to or arising from this Agreement, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the United States of
America sitting in the Southern District of New York;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such
16
action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to
its address set forth in Section 4.6; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to xxx in any other appropriate jurisdiction.
4.10 REMEDIES. Each of the parties hereto acknowledges that the
rights granted to the other party hereto in this Agreement are of a special,
unique and extraordinary character, and that any breach of this Agreement by
the other party hereto could not be compensated for by damages. Accordingly,
in the event of any failure or refusal by the other party hereto to comply
with any covenant or agreement contained in this Agreement each of the
parties hereto shall be entitled, in addition to any other remedies that such
party may have, to enforcement of this Agreement by a decree of specific
performance requiring the other party hereto to fulfill its obligations under
this Agreement.
4.11 INTERPRETATION. To the extent any ambiguity arises concerning
the interpretation of this Agreement, the parties agree that this Agreement,
together with the other documents and instruments contemplated hereby, is
intended to preserve the rights and obligations of the parties under the
Original Repurchase Agreement to the fullest extent possible, assuming that
the accelerated repurchase transactions contemplated by Section 2.1 of the
Accelerated Repurchase Agreement take place, and, accordingly, any such
ambiguity hereunder shall be resolved in light of such intent.
IN WITNESS WHEREOF, the parties have executed, delivered and
entered into this Option Agreement as of the day and year first above written.
NORTHWEST AIRLINES CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Vice President
and Chief Financial Officer
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President,
General Counsel and Secretary
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.
By: /s/ X. X. Xxxxxxxxxxx
----------------------------------
Name: X. X. Xxxxxxxxxxx
Title: Director Corporate Finance
