EX-10.40



 








Exhibit 10.40




ASSUMPTION AND CLAIM RESOLUTION AGREEMENT





     THIS ASSUMPTION AND CLAIM RESOLUTION AGREEMENT (this “Agreement”) is made as of this
20th day of December, 2006 by and between (i) Pinnacle Airlines, Inc., a Georgia
corporation (together with its successors and assigns, “Pinnacle”) and Pinnacle Airlines Corp., a
Delaware corporation (together with its successors and assigns, “Pinnacle Corp.”), and (ii)
Northwest Airlines, Inc., a Minnesota corporation (together with its successors and assigns,
“Northwest”).



RECITALS




     WHEREAS, on September 14, 2005 (the “Petition Date”), Northwest and its affiliated debtors
(collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of Title 11 of
the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the
Southern District of New York (the “Bankruptcy Court”), under the jointly administered case number
05-17930 (the “Bankruptcy Case”);



     WHEREAS, Northwest, Pinnacle and Pinnacle Corp. are parties to a pre-petition executory
Airline Services Agreement dated as of January 14, 2003 (the “Existing ASA”);



     WHEREAS, contemporaneously with the execution of this Agreement, the parties will enter into
an Amended and Restated Airline Services Agreement (as amended, modified or altered from time to
time, and including all supplements, exhibits and attachments thereto, the “ASA”), a Share Purchase
Agreement (the “Share Purchase Agreement”), and amendments to Aircraft Sublease Agreements (the
“Sublease Amendments”) (this Agreement, together with the ASA, the Share Purchase Agreement and the
Sublease Amendments, are collectively hereinafter referred to as the “Transaction Documents”);



     WHEREAS, on or before August 16, 2006, Pinnacle and Pinnacle Corp. filed the proof(s) of claim
listed on Annex A attached hereto in the amount(s) specified in Annex A asserting
claims under, in connection with, or related to, without limitation, the ASA (collectively, the
“Filed Claims”);



     WHEREAS, the Debtors dispute the Filed Claims and intend to file or have filed an objection
with respect thereto;



     WHEREAS, Northwest is authorized under the Order Pursuant To Sections 502, 363 and 105 of the
Bankruptcy Code and Rules 3007, 9019 and 2002 of the Bankruptcy Rules Establishing Procedures for
(i) Omnibus Objections to Proofs of Claim and (ii) Compromising Disputed Proofs of Claim (the
“Claims Resolution Order”), Docket No. 3546, to enter into agreements to resolve the Filed Claims
and any and all other claims (as defined in the Bankruptcy Code) that Pinnacle and/or Pinnacle
Corp. have or had against any Debtor including, but not limited to, the Filed Claims (collectively,
the “Claims”);



 









 





     WHEREAS, on October 28, 2005, the Bankruptcy Court entered the Final Order Pursuant to
Sections 105, 362 and 541 of the Bankruptcy Code and Bankruptcy Rule 3001 Establishing Notification
and Hearing Procedures for Trading in Claims and Equity Securities (the “Claims Trading Order”),
Docket No. 836; and



     WHEREAS, Northwest and Pinnacle desire to enter into this Agreement to provide for the
assumption of the ASA in Northwest’s Bankruptcy Case and to resolve all Claims held by Pinnacle
against any of the Debtors on the terms and conditions set forth herein.



     NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and conditions
contained herein and in connection with the execution of the ASA, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:



     1. Resolution of Claims. In accordance with the Claims Resolution Order, the parties
hereby agree as follows:




     (a) (i) Subject to Sections 1(a)(ii) and 1(a)(iii) hereof, upon the “Effective
Date” (as such term is defined in the ASA), and in full and final satisfaction of
any and all Claims (including without limitation any Claim arising under the Tax
Indemnity Agreement, but specifically excluding any Claim that may arise under this
Agreement or any other Transaction Document and any claim for amounts payable by
Northwest to Pinnacle pursuant to the Existing ASA for products or services actually
provided to Northwest after the Petition Date), claim number 10898, which was filed
by Pinnacle, shall be liquidated and fixed in the amount of Three Hundred Seventy
Seven Million Five Hundred Thousand and 00/100 Dollars ($377,500,000) (the “Allowed
Amount”) and shall be allowed and treated as a general unsecured claim against the
estate of Northwest (the “Allowed Claim”), and any amount in excess of the Allowed
Amount shall be disallowed in its entirety. All Filed Claims other than the Allowed
Claim are deemed withdrawn (with prejudice), and shall be deemed disallowed and expunged upon
the Effective Date without the requirement for any further action by any party.




     (ii) In the event Northwest designates pursuant to Section 3.02(a)(ii)(B) of
the ASA a three (3) or ten (10) year term for the aircraft placed with Pinnacle
pursuant to the first sentence of Section 3.02(a)(i) of the ASA, then the Allowed
Amount of the Allowed Claim shall be reduced by the following: (A) if such term is
ten (10) years, the Allowed Amount shall be reduced by the product of $2.5 million
multiplied by the number of such aircraft, and (B) if such term is three (3) years,
the Allowed Amount shall be reduced by the product of $0.8 million multiplied by the
number of such aircraft (any such reduction in the Allowed Amount is hereinafter
referred to as the “Reduction”); provided, however, if the Allowed Claim, or any
portion thereof, has been assigned, transferred, or conveyed by Pinnacle prior to
the occurrence of any Reduction (the aggregate amount of the Allowed Claim, or
portion thereof, so transferred, the “Transferred Amount”) and the Reduction exceeds
the Allowed Amount less the Transferred Amount (the difference between the Allowed
Amount and the Transferred Amount, the “Retained Amount,” and the difference between
the



 









 






     Reduction and the Retained Amount, the “Excess Reduction”), then, (i) the
Retained Amount of the Allowed Claim shall be reduced to zero, and (ii) Pinnacle
shall pay to Northwest, at the time of the designation by Northwest referenced in
this paragraph, an amount equal to (x) the Excess Reduction multiplied by (y) a
fraction, the numerator of which is the total amount of proceeds or other
consideration received by Pinnacle in connection with such assignment, transfer or
conveyance of the Transferred Amount and the denominator of which is the amount of
the Transferred Amount.




     (iii) In the event Northwest exercises its right pursuant to Section
3.02(a)(ii)(E) of the ASA to remove aircraft from Pinnacle’s fleet, then the
Allowed Amount of the Allowed Claim shall be:




	 	(A)	 	increased by the amount of the operating profit
that would have been earned by Pinnacle under the ASA with respect to
the operation of any removed aircraft that constitute all or part of
the Twenty-Four Aircraft (as defined in the ASA) during the remaining
term of the ASA if Northwest had not exercised such right and, if
Northwest has, as of such date, designated pursuant to Section
3.01(a)(ii)(B) of the ASA a term for the Seventeen Aircraft (as defined
in the ASA) that has resulted in a reduction in the Allowed Amount of
the Allowed Claim pursuant to Section 1(a)(ii) hereof, then the Allowed
Amount of the Allowed Claim shall also be increased by the amount of
the operating profit that would have been earned by Pinnacle under the
ASA with respect to the operation of the removed Seventeen Aircraft
during the remaining portion of the designated term for such aircraft
if Northwest had not exercised such right; and
	 
	 	(B)	 	decreased by the amount of any reduction in the
Purchase Price (as defined in the Share Purchase Agreement) pursuant to
Section 2.1 of the Share Purchase agreement resulting from the exercise
of such right by Northwest, but in no event shall the amount of any
decrease pursuant to this clause (B) exceed the amount of any increase
with respect to the Twenty-Four Aircraft pursuant to clause (A) above,
even if the reduction in the Purchase Price is greater than the
aggregate amount of operation profit referenced above.






     (iv) To the extent at any time the Allowed Amount of the Allowed Claim is
reduced pursuant to this Section 1(a), Pinnacle agrees to withdraw with prejudice
the portion of the Allowed Claim equal to such reduction and any such portion of the
Allowed Claim shall be deemed expunged without the requirement for any further act
by any party.




     (b) Pinnacle and Pinnacle Corp. each represents and warrants that (i) the only Claims
filed by it in the Bankruptcy Case are listed on Annex A attached hereto, (ii) it is the
owner of those Filed Claims filed by it, and (iii) it has not transferred any Filed Claim or
any other Claim.



 









 






     (c) Pinnacle agrees it will not transfer any portion of the Allowed Claim unless the
transfer is expressly subject to this Agreement. Northwest and Pinnacle agree that the
Allowed Claim is a divisible claim which, subject hereto, may be assigned in whole or in
part or may have an interest granted therein in whole or in part by Pinnacle. Pinnacle and
any assignee or transferee of the Allowed Claim, or portion thereof or interest therein
(collectively, “Holders”), each agree that by virtue of holding all or any portion of or
interest in the Allowed Claim, the Holder shall be subject to the provisions of the Claims
Trading Order and nothing herein will limit the Debtors’ right to request authority to issue
a “sell down order” under the Claims Trading Order.



     2. Agreement to Assume the ASA. Northwest hereby agrees that any plan of
reorganization it or any Debtor files or consents in writing to in the Bankruptcy Case that
contemplates that Northwest will remain in the passenger air transportation business (the “Plan of
Reorganization”), shall provide for the assumption of the ASA pursuant to 11 U.S.C. § 365 and the
provisions of this Agreement. Each of Northwest (on behalf of itself and the other Debtors), and
Pinnacle and Pinnacle Corp. each agrees not to oppose or cause any opposition to any such
assumption. Pinnacle shall have the right to vote the Allowed Amount of its Allowed Claim to the
extent that Pinnacle has not transferred all or a portion of the Allowed Claim in accordance with
this Agreement in connection with the Plan of Reorganization. In addition, Northwest shall not
take any action to reject the Existing ASA prior to the Effective Date or the ASA thereafter unless
and until (i) a filing by Northwest of a plan of reorganization that contemplates that Northwest
will not remain in the passenger air transportation business or (ii) the conversion of the
Bankruptcy Case to Chapter 7 of the Bankruptcy Code. Notwithstanding the foregoing, (A) if
Northwest or any other Debtor files a plan of reorganization that contemplates that Northwest will
not remain in the passenger air transportation business or the Bankruptcy Case is converted to
Chapter 7 of the Bankruptcy Code, then Pinnacle and/or Pinnacle Corp., as applicable, shall have
the right to seek an order from the Bankruptcy Court to
compel Northwest or the Chapter 7 trustee, as applicable, to assume or reject the ASA (if
after the Effective Date or the Existing ASA if before the Effective Date) on an expedited basis,
and (B) if the ASA is rejected, then Northwest (on behalf of itself and the other Debtors) agrees
that Pinnacle shall have the right to file a claim against Northwest for rejection of the ASA in
accordance with the requirements set forth in the Order Pursuant to Sections 105 and 365(A) of the
Bankruptcy Code Establishing Procedures for the Rejection of Executory Contracts and Unexpired
Leases with the Exception of Agreements Relating to Aircraft and Aircraft Engines Governed by
Section 1110 of the Bankruptcy Code, Docket No. 1477, and the parties further agree that neither
the execution of this Agreement nor the execution of the ASA shall alter the pre-petition nature of
the ASA for the purposes of Northwest’s Bankruptcy Case or the validity or priority of any claims
of Pinnacle and/or Pinnacle Corp., as applicable, against Northwest that may arise as a result of
any such rejection; provided, however, that the amount of any such rejection damages claim shall be
in respect of the ASA (and not the Existing ASA) and in addition to the Allowed Claim (it being
understood that the Allowed Claim is intended to compensate Pinnacle and Pinnacle Corp. for, among
other things, the reduction in the operating profit that would have been earned by Pinnacle under
the ASA as compared to the operating profit that would have been earned by Pinnacle under the
Existing ASA during the remaining term thereof if this Agreement and the ASA had not been entered
into, and that the assumption or rejection of the ASA shall not affect the agreement of the parties
set forth in Section 1(a) above regarding the Allowed Claim and the Allowed Amount). Northwest
agrees that its obligation to



 









 




pay for goods and/or services actually provided to Northwest after
the Petition Date pursuant to the ASA will be entitled to treatment as administrative priority
expenses of Northwest’ bankruptcy estate pursuant to section 503 of the Bankruptcy Code.




     3. Treatment of Cure Amount. In connection with any assumption of the ASA in
Northwest’s Bankruptcy Case, provided that Northwest is in compliance with this Agreement and
subject to the reservation of rights set forth in Section 2 hereof, Northwest’s monetary defaults
relating to amounts due under the ASA for the period preceding the Petition Date will be deemed
“cured” by the allowance of the Allowed Claim as an allowed general unsecured claim in Northwest’s
Bankruptcy Case as provided in Section 1 hereof and the treatment of the Allowed Claim as provided
in Section 2 hereof shall satisfy Northwest’s obligation to cure any and all pre-petition defaults
under the ASA. The performance by Northwest of its obligations contained herein and the allowance
of such general unsecured claim in the Allowed Amount shall be in full and final satisfaction of
all amounts owed by Northwest for goods and/or services provided to Northwest under the ASA prior
to the Petition Date.



     4. Notices. All notices and other communications under this Agreement shall be
in writing and addressed to the parties at the following addresses and shall be effective on the
business day after receipt via overnight courier, hand delivery or facsimile:



	 	 	 
	To Northwest:

	 	With a copy to:
	 
	 	 
	Northwest Airlines, Inc.

	 	Northwest Airlines, Inc.
	2700 Lone Oak Parkway (Dept. A6100)

	 	2700 Lone Oak Parkway (Dept. A1180)
	Eagan, MN 55121-1534

	 	Eagan, MN 55121-1534
	Fax No. (612) _______________

	 	Fax No. (612) 726-7123
	Attention: Vice President — Network Planning

	 	Attention: General Counsel
	 
	 	 
	 

	 	And to:
	 
	 	 
	 

	 	Cadwalader, Wickersham & Taft LLP
	 

	 	One World Financial Center
	 

	 	New York, NY 10281
	 

	 	Fax No.: (212) 504-6666
	 

	 	Attention: Bruce Zirinsky, Esq.
	 
	 	 
	To Pinnacle:

	 	With a copy to:
	 
	 	 
	Pinnacle Airlines, Inc.

	 	Vinson & Elkins LLP
	1689 Nonconnah Blvd., Suite 111

	 	3700 Trammell Crow Center
	Memphis, TN 38132

	 	Dallas, Texas 75201
	Fax: (901) 348-4103

	 	Fax: (214) 999-7905
	Attention: Peter D. Hunt

	 	Attention: William Wallander, Esq. and
	 

	 	Kevin Lewis, Esq.






 









 






	 	 	 
	To Pinnacle Corp.:

	 	With a copy to:
	 
	 	 
	Pinnacle Airlines Corp.

	 	Vinson & Elkins LLP
	1689 Nonconnah Blvd., Suite 111

	 	3700 Trammell Crow Center
	Memphis, TN 38132

	 	Dallas, Texas 75201
	Fax: (901) 348-4103

	 	Fax: (214) 999-7905
	Attention: Peter D. Hunt

	 	Attention: William Wallander, Esq. and
	 

	 	Kevin Lewis, Esq.






     Either party may change the address at which notice is to be made by providing notice of the
change to the other party in the manner provided for in this Section 4.



     5. Condition Precedent. A condition precedent to the obligations and rights of
Northwest, Pinnacle and Pinnacle Corp. under this Agreement is the entry of a final and
non-appealable order of the Bankruptcy Court approving the Transaction Documents in form and
substance reasonably satisfactory to Northwest, Pinnacle and Pinnacle Corp. Promptly following the
execution of this Agreement, Northwest shall use its reasonable efforts to file with the Bankruptcy
Court an appropriate motion seeking approval of the Transaction Documents.



     6. Miscellaneous.




     (a) This Agreement contains the entire agreement by and between the parties hereto with
respect to the subject matter hereof, and all prior understandings or agreements, if any,
are merged into this Agreement.




     (b) This Agreement shall be binding upon (i) all successors and assigns of each of the
parties to the Agreement, (ii) any transferee of any Claim, and (iii) any subsequently
appointed Chapter 11 trustee or Chapter 7 trustee to the extent one is appointed.




     (c) Neither this Agreement, nor the settlement provided for herein, nor any statement
made, action or position taken, or document prepared or executed in connection with the
negotiation, execution or implementation of this Agreement and the settlement provided for
herein shall be deemed to be, or construed as, an admission by any party hereto of any
liability, wrongdoing, act or matter or that any claim or defense has or lacks merit.




     (d) Each of the parties hereto agrees that any dispute with respect to this Agreement
shall be resolved by the Bankruptcy Court or such other court as has jurisdiction of
Northwest’s Bankruptcy Case.




     (e) This Agreement shall be construed and interpreted in accordance with the laws of
the State of New York, without regard to the choice of law principles of the State of New
York. For purposes of construing this Agreement, none of the parties hereto shall be deemed
to have been the drafter of the Agreement.




     (f) Facsimile copies of signatures on this Agreement are acceptable, and a facsimile
copy of a signature on this Agreement is deemed an original.



 









 






     (g) This Agreement may only be changed, modified or otherwise altered in a writing
executed by all the parties to this Agreement. Oral modifications are not permitted.




     (h) This Agreement may be executed in counterparts, each of which is deemed an
original, but when taken together constitute one and the same document.




     (i) In the event of a conflict between this Agreement and any other agreement between
the parties hereto, the provisions of this Agreement shall govern.




     (j) Each party represents, warrants and covenants to the other that: (i) it is duly
organized, validly existing and in good standing under the laws of its state of
incorporation; (ii) it has the requisite corporate power and authority to enter into and
perform this Agreement and any other agreements and instruments executed and delivered in
connection herewith, provided that, with respect to Northwest, the foregoing is subject to
any necessary approval by the Bankruptcy Court or compliance with applicable Bankruptcy
Court orders, and (iii) this Agreement has been authorized by all necessary corporate
action.



     IN WITNESS WHEREOF and in agreement herewith, the parties have executed and delivered this
Agreement as of the date first set forth above.



	 	 	 
	NORTHWEST AIRLINES, INC	 	
PINNACLE AIRLINES, INC.
	By: /s/
 
	 	
By: /s/ Philip H. Trenary
 

	Name: Officer
 
	 	
Name: Philip H. Trenary
 

	Title: Officer
 
	 	
Title: President and Chief Executive Officer
 

	 	 	 
	PINNACLE AIRLINES CORP	 	 
	By:  /s/ Philip H. Trenary
 
	 	 
	Name:  Philip H. Trenary
 
	 	 
	Title: President and Chief Executive Officer
 
	 	 






 









 






Annex A




Proofs of Claim Filed by Pinnacle




	 	 	 	 	 	 	 
	Claim	 	 	 	 	 	 
	Number	 	Claimant	 	Debtor	 	Claim Amount
	10898

	 	Pinnacle
	 	Northwest Airlines, Inc.
	 	none stated/unliquidated
	10899

	 	Pinnacle
	 	NWA Aircraft Finance, Inc.
	 	none stated/unliquidated
	10900

	 	Pinnacle
	 	NW Red Baron
	 	none stated/unliquidated
	10901

	 	Pinnacle
	 	NWA Fuel Services Corporation
	 	none stated/unliquidated
	10902

	 	Pinnacle
	 	NWA WorldClub, Inc.
	 	none stated/unliquidated
	10903

	 	Pinnacle
	 	Compass Airlines, Inc. f/k/a Northwest
Airlines Cargo, Inc.
	 	none stated/unliquidated
	10904

	 	Pinnacle
	 	MLT Inc.
	 	none stated/unliquidated
	10905

	 	Pinnacle
	 	Montana Enterprises, Inc.
	 	none stated/unliquidated
	10906

	 	Pinnacle
	 	Northwest Aerospace Training Corp.
	 	none stated/unliquidated
	10907

	 	Pinnacle
	 	Northwest Airlines Holdings Corporation
	 	none stated/unliquidated
	10908

	 	Pinnacle
	 	Northwest Airlines Corporation
	 	none stated/unliquidated
	10909

	 	Pinnacle
	 	NWA Inc.
	 	none stated/unliquidated
	10910

	 	Pinnacle
	 	NWA Retail Sales Inc.
	 	none stated/unliquidated
	10911

	 	Pinnacle
	 	Aircraft Foreign Sales, Inc.
	 	none stated/unliquidated
	10912

	 	Pinnacle Corp.
	 	Northwest Airlines, Inc.
	 	none stated/unliquidated
	10913

	 	Pinnacle Corp.
	 	NWA WorldClub, Inc.
	 	none stated/unliquidated
	10914

	 	Pinnacle Corp.
	 	Compass Airlines, Inc. f/k/a Northwest
Airlines Cargo, Inc.
	 	none stated/unliquidated
	10915

	 	Pinnacle Corp.
	 	Montana Enterprises, Inc.
	 	none stated/unliquidated
	10916

	 	Pinnacle Corp.
	 	MLT Inc.
	 	none stated/unliquidated
	10917

	 	Pinnacle Corp.
	 	Northwest Aerospace Training Corp.
	 	none stated/unliquidated
	10918

	 	Pinnacle Corp.
	 	Northwest Airlines Holdings Corporation
	 	none stated/unliquidated
	10919

	 	Pinnacle Corp.
	 	Northwest Airlines Corporation
	 	none stated/unliquidated
	10920

	 	Pinnacle Corp.
	 	NW Red Baron
	 	none stated/unliquidated
	10921

	 	Pinnacle Corp.
	 	NWA Inc.
	 	none stated/unliquidated
	10922

	 	Pinnacle Corp.
	 	NWA Aircraft Finance, Inc.
	 	none stated/unliquidated
	10923

	 	Pinnacle Corp.
	 	Aircraft Foreign Sales, Inc.
	 	none stated/unliquidated
	10924

	 	Pinnacle Corp.
	 	NWA Retail Sales Inc.
	 	none stated/unliquidated
	10925

	 	Pinnacle Corp.
	 	NWA Fuel Services Corporation
	 	none stated/unliquidated