Document:

EXHIBIT 10.37

 

AMENDMENT

 

                THIS
AGREEMENT made effective as of October 8, 2003, between Anika Therapeutics,
Inc. (“ANIKA”) and MedChem Products, Inc. (“MEDCHEM”).

 

                WHEREAS,
ANIKA and MEDCHEM are parties to that Sublease effective November 1, 2001 (the
“SUBLEASE”);

 

                WHEREAS,
ANIKA and MEDCHEM are desirous of amending the SUBLEASE;

 

                NOW,
THEREFORE, in consideration of the above premises, the parties agree to amend
the SUBLEASE as follows:

 

1.                          Section 1 is
deleted in its entirety and replaced by the following: 

 

            “1. Sublandlord hereby leases to
Subtenant, and Subtenant hereby takes and leases from Sublandlord, the
Subleased Premises for an initial term which commences on November 1, 2001 (the
“Commencement Date”) and ends on October 31, 2004.  After the expiration of the initial term, this Sublease shall
thereafter remain in effect until terminated by one party upon at least ninety
(90) days prior written notice to the other party.  The Subleased Premises are to be delivered to Subtenant in their
“as is” condition and the Subleased Premises shall be treated as delivered on
the Commencement Date.”

 

2.                          In all other
respects, the SUBLEASE shall remain in full force and effect.

 

                IN
WITNESS WHEREOF, the parties have caused their duly authorized representatives
to execute this Amendment.

 

 

	
  Anika Therapeutics, Inc.

  	
   

  	
  MedChem Products, Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ William J. Knight

  	
   

  	
  By:

  	
  /s/ Brian P. Kelly

  
	
   

  	
   

  	
   

  	
  Brian P. Kelly

  
	
  Title:

  	
  CFO

  	
   

  	
   

  	
  Vice PresidentExhibit 10.1

 

Preliminary Confirmation

 

October 29,
2003

 

Northwest
Airlines Corporation

2700 Lone Oak Parkway

Eagan, Minnesota 55121

 

This Preliminary Confirmation
confirms the economic terms and conditions of a transaction (the “Transaction”) that you have agreed to enter
into with Citibank, N.A. (“Citibank”).  This is a summary that includes the basic
economic and other terms of the Transaction; full documentation will be in the
form of a final trade confirmation (the “Confirmation”),
which will incorporate the terms of the Agreement (as defined below) and be
governed by the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the
International Swaps and Derivatives Association (copies of which are available
from us upon request and if not previously furnished to you by us, will
accompany the Confirmation).  This
Preliminary Confirmation constitutes a binding confirmation under the 1992
(Multicurrency-Cross Border) ISDA Master Agreement (the “Agreement”), dated as of January 15,
1997 between us, and will be replaced and superseded by the Confirmation upon
execution thereof.  Capitalized terms
used herein but not defined herein shall have the meanings set forth in the
Agreement or the Equity Definitions, as the case may be.

 

	
  Party A:

  	
   

  	
  Citibank

  
	
   

  	
   

  	
   

  
	
  Party B:

  	
   

  	
  Northwest Airlines Corporation

  
	
   

  	
   

  	
   

  
	
  Calculation Agent:

  	
   

  	
  Party A

  
	
   

  	
   

  	
   

  
	
  Trade Date:

  	
   

  	
  October 29, 2003

  
	
   

  	
   

  	
   

  
	
  Tranches:

  	
   

  	
  The Transaction will be divided into individual Tranches, each with
  the terms set forth herein and the Expiration Date, Base Amount and
  Additional Base Amount set forth below. 
  The payments and deliveries to be made upon settlement of the
  Transaction will be determined separately for each Tranche as if each Tranche
  were a separate Transaction under the Agreement.

  

 

	
  Tranche

  	
   

  	
  Expiration
  Date

  	
   

  	
  Base Amount

  	
   

  	
  Additional
  Base

  Amount

  
	
  1

  	
   

  	
  November 3,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  2

  	
   

  	
  November 6,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  3

  	
   

  	
  November 7,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  4

  	
   

  	
  November 8,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  5

  	
   

  	
  November 9,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  6

  	
   

  	
  November 10,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  7

  	
   

  	
  November 13,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  8

  	
   

  	
  November 14,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  9

  	
   

  	
  November 15,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  10

  	
   

  	
  November 16,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  11

  	
   

  	
  November 17,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  12

  	
   

  	
  November 20,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  13

  	
   

  	
  November 21,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  14

  	
   

  	
  November 22,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  15

  	
   

  	
  November 27,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  16

  	
   

  	
  November 28,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  17

  	
   

  	
  November 29,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  18

  	
   

  	
  November 30,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  19

  	
   

  	
  December 1,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  20

  	
   

  	
  December 4,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  21

  	
   

  	
  December 5,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  

 

 

	
  22

  	
   

  	
  December 6,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  23

  	
   

  	
  December 7,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  24

  	
   

  	
  December 8,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  25

  	
   

  	
  December 11,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  26

  	
   

  	
  December 12,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  27

  	
   

  	
  December 13,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  28

  	
   

  	
  December 14,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  29

  	
   

  	
  December 15,
  2006

  	
   

  	
  327,511

  	
   

  	
  65,502

  
	
  30

  	
   

  	
  December 18,
  2006

  	
   

  	
  327,504

  	
   

  	
  65,507

  

 

	
  Settlement Dates:

  	
   

  	
  For any Expiration Date, the date that falls one ordinary settlement
  cycle following that Expiration Date

  
	
   

  	
   

  	
   

  
	
  Exchange:

  	
   

  	
  The Nasdaq National Market of the Nasdaq Stock Market, Inc.

  
	
   

  	
   

  	
   

  
	
  Shares:

  	
   

  	
  The common stock of Northwest Airlines
  Corporation, par value $0.01 per share (Exchange symbol “NWAC”)

  
	
   

  	
   

  	
   

  
	
  Final Share Price:

  	
   

  	
  For any Expiration Date, the Official
  NASDAQ Closing Price (NOCP) of the Shares as reported by the Exchange on such
  Expiration Date

  
	
   

  	
   

  	
   

  
	
  Lower Strike Price:

  	
   

  	
  $22.9000

  
	
   

  	
   

  	
   

  
	
  Upper Strike Price:

  	
   

  	
  $29.3355

  
	
   

  	
   

  	
   

  
	
  Initial
  Payment Date:

  	
   

  	
  The
  settlement date for the convertible notes offering to be priced by Party B on
  or immediately after the Trade Date (the “Convertible
  Notes Offering”), expected to be November 4, 2003

  
	
   

  	
   

  	
   

  
	
  Initial
  Payment:

  	
   

  	
  $10,068,200.12,
  such amount to be paid to Party A by Party B no later than the Initial
  Payment Date, by wire transfer of immediately available funds to an account
  designated by Party A

  
	
   

  	
   

  	
   

  
	
  Initial
  Purchaser Option:

  	
   

  	
  If
  Citigroup Global Markets Inc., as initial purchaser of the Convertible Notes
  Offering, exercises its option to purchase up to an additional $45,000,000
  principal amount of convertible notes (the “Initial
  Purchaser Option”), the number of Shares subject to each Tranche
  shall be increased, pro rata (with such adjustments as may be agreed by the
  parties hereto to allocate such Shares among Tranches in appropriate
  multiples) with the amount of the Initial Purchaser Option exercised, on the
  same terms (including, without limitation, the Lower Strike Price, the Upper
  Strike Price, and the pro rata portion of the Initial Payment) specified in
  the Transaction.

  
	
   

  	
   

  	
   

  
	
  Settlement:

  	
   

  	
  On
  each Settlement Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)

  	
  if
  the Final Share Price for the Expiration Date corresponding to such
  Settlement Date is less than the Upper Strike Price, the parties shall make
  payment or delivery pursuant to one of the three settlement options set forth
  below, such settlement option to be selected by Party B:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (1)

  	
  Party
  A shall make a cash payment to Party B, by wire transfer of immediately
  available funds to an account designated by Party B, in an amount (the “Lower Settlement Amount”) equal to the
  product of (a) the Base Amount times
  (b) the excess, if any, of (i) such Final Share Price over (ii) the Lower Strike Price;

  
											

 

2

 

	
   

  	
   

  	
   

  	
  (2)

  	
  Party
  A shall deliver to Party B Shares with a value equal to the Lower Settlement
  Amount; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (3)

  	
  Party
  B shall make a cash payment to Party A, by wire transfer of immediately available
  funds to an account designated by Party A, in an amount equal to the product
  of (a) the Base Amount times
  (b) the Lower Strike Price, and Party A shall deliver to Party B a number of
  Shares equal to the Base Amount;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
  if
  the Final Share Price for the Expiration Date corresponding to such
  Settlement Date is greater than or equal to the Upper Strike Price, but less
  than or equal to $61.5130, the parties shall make payment or delivery
  pursuant to one of the four settlement options set forth below, such
  settlement option to be selected by Party B:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (1)

  	
  Party
  A shall make a cash payment to Party B, by wire transfer of immediately
  available funds to an account designated by Party B, in an amount (the “Intermediate Settlement Amount”) equal to
  (a) the product of (i) the Base Amount times
  (ii) (A) the Upper Strike Price minus (B)
  the Lower Strike Price, minus
  (b) the product of (i) the Additional Base Amount times (ii) (A) such Final Share Price minus (B) the Upper Strike Price;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (2)

  	
  Party
  A shall deliver to Party B Shares with a value equal to the Intermediate
  Settlement Amount;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (3)

  	
  Party
  B shall make a cash payment to Party A, by wire transfer of immediately
  available funds to an account designated by Party A, in an amount equal to
  the product of (a) the Base Amount times (b)
  the Lower Strike Price, and Party A shall deliver to Party B a number of
  Shares equal to (i) the Base Amount minus
  (ii) a number of Shares with a value equal to the product of (A) the
  Additional Base Amount times (B)
  (x) such Final Share Price, minus
  (y) the Upper Strike Price; or

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (4)

  	
  Party
  B shall make a cash payment to Party A, by wire transfer of immediately
  available funds to an account designated by Party A, in an amount equal to
  (a) the product of (i) the Base Amount times
  (ii) the Lower Strike Price, plus
  (b) the product of (i) the Additional Base Amount times (ii) (A) such Final Share Price minus the Upper Strike Price, and Party
  A shall deliver to Party B a number of Shares equal to the Base Amount; and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)

  	
  if
  the Final Share Price on the Expiration Date corresponding to such Settlement
  Date is greater than $61.5130, Party B shall make payment or delivery
  pursuant to one of the two settlement options set forth below, such settlement
  option to be selected by Party B:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (1)

  	
  Party
  B shall make a cash payment to Party A, by wire transfer of immediately
  available funds to an account designated by Party A, in an amount (the “Upper Settlement Amount”) equal to (a)
  the product of (i) the Additional Base Amount times (ii) (A) such Final Share Price minus (B) the Upper Strike Price, minus (b) the product of (i) the Base
  Amount times
  (ii) (A) the Upper Strike Price minus (B)
  the Lower Strike Price; or

  

 

3

 

	
   

  	
   

  	
   

  	
  (2)

  	
  Party
  B shall deliver to Party A Shares with a value equal to the Upper Settlement
  Amount, subject to the provisions set forth below.

  

 

	
  Settlement Modification:

  	
   

  	
  The parties hereto acknowledge and agree that prior to any Settlement
  Date, the Calculation Agent may advise Party B that the settlement option
  selected by Party B for such Settlement Date is inappropriate or inadvisable
  (based on prevailing market conditions, including market liquidity and the
  market price of the Shares and the potential effect thereon from any hedging
  or hedge unwind activities in connection with the Transaction).  In such case, Party B agrees to consider
  such advice and negotiate in good faith with Party A to reach a mutual
  agreement to (a) elect to change the settlement option for one or more
  remaining Settlement Dates, (b) modify the method of determining the payments
  or deliveries to be made on one or more remaining Settlement Dates or (c)
  make such other changes to the terms of the Transaction to which the parties
  may mutually agree.

  
	
   

  	
   

  	
   

  
	
  Delivery
  of Shares:

  	
   

  	
  If, in respect of the Transaction,
  Party B shall owe Party A any amount (i) pursuant to Sections 12.7 or 12.9 of
  the Equity Definitions (except in the event of an Insolvency,
  Nationalization, Tender Offer or Merger Event, in each case, in which the
  consideration or proceeds to be paid to holders of Shares as a result of such
  event consists solely of cash) or (ii) pursuant to Section 6(d)(ii) of
  the Agreement (except in the event of an Event of Default in which Party B is
  the Defaulting Party or a Termination Event in which Party B is the Affected
  Party, other than an Event of Default of the type described in
  Section 5(a)(iii), (v), (vi) or (vii) of the Agreement or a Termination
  Event of the type described in Section 5(b)(i), (ii), (iii), (iv), or
  (v) of the Agreement that, in the case of either such an Event of Default or
  such a Termination Event, resulted from an event or events outside Party B’s
  control) (a “Payment Obligation”),
  Party B may, in its sole discretion, satisfy such Payment Obligation by
  delivery of Shares.

  
	
   

  	
   

  	
   

  
	
  Status
  of Share Delivered:

  	
   

  	
  If
  (a) Party B elects to satisfy a Payment Obligation by delivery of Shares or
  (b) Party B elects to deliver Shares
  pursuant to the provisions set forth above opposite the caption “Settlement,”
  then, (i) such Shares shall be, at the time of such delivery, freely tradeable, (ii) such Shares
  shall be, at the time of such delivery, covered by an effective registration
  statement of Party B for immediate resale by Party A or (iii) if such Shares
  are not freely tradeable or so registered, the value of such Shares as
  determined by the Calculation Agent shall be reduced to reflect an
  appropriate liquidity discount, and, in the case of either clause (ii) or
  clause (iii), the parties hereto shall enter into transaction documentation
  customary for an underwritten public offering or a private placement, as the
  case may be, including without limitation the delivery of accountants’
  comfort letters and disclosure and closing opinions and the opportunity to
  conduct an appropriate due diligence investigation.

  
	
   

  	
   

  	
   

  
	
  Share Adjustments:

  	
   

  	
  Calculation Agent Adjustment

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Consequences of Merger Events:

  	
   

  	
  Share-for-Share: Cancellation and Payment (Calculation Agent Determination)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Share-for-Other: Cancellation and Payment (Calculation Agent
  Determination)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Share-for-Combined: Cancellation and Payment (Calculation Agent
  Determination)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tender Offer:

  	
   

  	
  Applicable

  

 

4

 

	
  Consequences of Tender Offers:

  	
   

  	
  Share-for-Share: Cancellation and Payment (Calculation Agent
  Determination)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Share-for-Other: Cancellation and Payment (Calculation Agent
  Determination)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Share-for-Combined: Cancellation and Payment (Calculation Agent
  Determination)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Composition of Combined Consideration:

  	
   

  	
  Not Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nationalization, Insolvency or Delisting:

  	
   

  	
  Cancellation and Payment (Calculation Agent Determination)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Additional Disruption Events:

  	
   

  	
  Change in Law:  Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Failure to Deliver:  Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Insolvency Filing:  Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hedging Disruption:  Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Increased Cost of Hedging:  Not
  Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
  Loss of Stock Borrow:  Applicable;
  provided that, notwithstanding
  any provision of the Equity Definitions to the contrary, if a Loss of Stock
  Borrow occurs, then (a) Party B shall be entitled to loan Shares to Party A
  pursuant to Section 12.9(b)(iv)(A) of the Equity Definitions only if (i)
  such Shares shall be, at the time of any delivery pursuant to any such loan,
  covered by an effective registration statement of Party B for immediate
  resale by Party A (it being understood an agreed that such registration shall
  satisfy the requirement in Section 12.9(b)(viii) of the Equity
  Definitions that such Shares be freely tradeable without restrictions under
  the federal securities laws), (ii) the parties hereto shall have entered into
  transaction documentation customary for an underwritten public offering,
  including without limitation the delivery of accountants’ comfort letters and
  disclosure and closing opinions, (iii) Party A and its affiliates shall have
  been afforded the opportunity to conduct an appropriate due diligence
  investigation and the results of such investigation shall be reasonably
  satisfactory to Party A, and (iv) Party B shall reimburse Party A for all
  reasonable out-of-pocket costs and expenses (including reasonable legal fees)
  incurred in connection with such loan, registration, documentation and
  investigation, (b) any such Share loan provided by Party B to Party A shall
  be at a rate equal to 0.15% per annum, (c) Party B shall pay Party A a fee
  equal to $0.05 per Share so loaned, and (d) if the second and third sentences
  of Section 12.9(b)(iv) of the Equity Definitions are applicable, then in
  lieu of terminating the entire Transaction, the parties shall negotiate in
  good faith to reduce the Additional Base Amount for one or more Tranches so
  that it is no longer necessary or advisable for Party A to borrow Shares with
  respect to the Transaction, and the Determining Party will then determine the
  Cancellation Amount payable by one party to the other party in respect of
  such reduction.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Maximum Stock Loan
  Rate:  2.00%

  

 

5

 

	
   

  	
   

  	
  Increased Cost of Stock Borrow: 
  Applicable; provided
  that, notwithstanding any provision of the Equity Definitions to the
  contrary, Party A shall use commercially reasonable efforts to borrow Shares
  in respect of the Transaction at a rate that is not greater then the Initial
  Stock Loan Rate; and provided further that,
  if an Increased Cost of Stock Borrow occurs, then (a) Party B shall be
  entitled to loan Shares to Party A pursuant to Section 12.9(b)(v)(X) of
  the Equity Definitions only if (i) such Shares shall be, at the time of any
  delivery pursuant to any such loan, covered by an effective registration
  statement of Party B for immediate resale by Party A (it being understood an
  agreed that such registration shall satisfy the requirement in
  Section 12.9(b)(viii) of the Equity Definitions that such Shares be
  freely tradeable without restrictions under the federal securities laws),
  (ii) the parties hereto shall have entered into transaction documentation customary
  for an underwritten public offering, including without limitation the
  delivery of accountants’ comfort letters and disclosure and closing opinions,
  (iii) Party A and its affiliates shall have been afforded the opportunity to
  conduct an appropriate due diligence investigation and the results of such
  investigation shall be reasonably satisfactory to Party A, and (iv) Party B
  shall reimburse Party A for all reasonable out-of-pocket costs and expenses
  (including reasonable legal fees) incurred in connection with such loan,
  registration, documentation and investigation, (b) any such Share loan
  provided by Party B to Party A shall be at a rate equal to 0.15% per annum,
  (c) Party B shall pay Party A a fee equal to $0.05 per Share so loaned, and
  (d) if the second and third sentences of Section 12.9(b)(v) of the
  Equity Definitions are applicable, then in lieu of terminating the entire
  Transaction, the parties shall negotiate in good faith to reduce the
  Additional Base Amount for one or more Tranches so that it is no longer
  necessary or advisable for Party A to borrow Shares with respect to the
  Transaction, and the Determining Party will then determine the Cancellation
  Amount payable by one party to the other party in respect of such reduction.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Initial Stock Loan
  Rate:  0.30%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hedging Party:  Party A

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Determining Party:

  	
   

  	
  Party A

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Non-Reliance:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Agreements and Acknowledgments Regarding Hedging Activities:

  	
   

  	
  Applicable

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Additional Acknowledgments:

  	
   

  	
  Applicable

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Payments on Early Termination:

  	
   

  	
  For purposes of the Transaction, Second Method and Loss Apply

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Non-Confidentiality:

  	
   

  	
  Party A and Party B agree that (i) Party B is not obligated to Party A
  to keep confidential from any and all persons or otherwise limit the use of
  any element of Party A’s descriptions relating to tax aspects of the
  transaction and any part of the structure necessary to understand those tax
  aspects, and (ii) Party A does not assert any claim of proprietary ownership
  in respect of such descriptions contained herein of the use of any entities,
  plans or arrangements to give rise to significant U.S. federal income tax
  benefits for Party B.

  

 

6

 

	
  No Material, Non-Public Information:

  	
   

  	
  Party B is not entering into the Transaction while in possession of
  material, non-public information concerning itself.

  
	
   

  	
   

  	
   

  
	
  Delivery of Opinion:

  	
   

  	
  On or
  prior to the Initial Payment Date, Party B shall deliver to Party A customary
  opinions of counsel as to due authorization, execution and delivery and
  non-contravention.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Early Unwind:

  	
   

  	
  In
  the event the Convertible Notes Offering is not consummated with Citigroup
  Global Markets Inc. pursuant to the Purchase Agreement dated as of October 29, 2003 among Party B and Citigroup Global Markets Inc., as
  initial purchaser, for any reason by the close of business in New York on
  November 4, 2003 (or such later date as agreed upon by the parties,
  which in no event shall be later than November 11, 2003) (November 4, 2003 or such later date being the “Early Unwind Date”), the Transaction
  shall automatically terminate (the “Early
  Unwind”) on the Early Unwind Date and the parties shall negotiate
  in good faith the terms of such termination, taking into account any hedging
  transaction that will be unwound.

  
	
   

  	
   

  	
   

  
	
  Designation
  by Party A:

  	
   

  	
  Notwithstanding
  any other provision in this Preliminary Confirmation to the contrary
  requiring or allowing Party A to purchase, sell, receive or deliver any
  Shares or other securities to or from Party B, Party A may designate any of
  its US affiliates to purchase, sell, receive or deliver such Shares or
  securities and otherwise to perform Party As obligations in respect of the
  Transaction and any such designee may assume such obligations, Party A shall
  be discharged of its obligations to Party B to the extent of such
  performance.

  
	
   

  	
   

  	
   

  
	
  Transfer:

  	
   

  	
  Notwithstanding anything to the contrary in the Agreement, Party B may
  assign its rights and obligations under the Transaction, in whole or in part
  and without liability hereunder, with the prior written consent of Party A
  (which consent shall not be unreasonably withheld, it being understood that
  in granting or withholding such consent, Party A may consider such factors as
  it deems appropriate, which may include the credit quality of the proposed
  transferee and Party A’s and its affiliates’ existing credit exposure to such
  proposed transferee).

  

 

You acknowledge that we will enter into hedging
transactions in reliance on your agreement to this Preliminary Confirmation. You agree that you will return a signed copy
of the Confirmation within thirty (30) days of the date the Confirmation is
delivered to you and if you fail to do so, Party A may elect to terminate the
Transaction.  In the event of such a termination,
the parties shall negotiate in good faith the terms of
such termination, taking into account any hedging transaction that will be
unwound.

 

7

 

Please indicate your understanding of and agreement with the above
terms and conditions and your instruction for Citibank to complete execution by
signing below, and returning to Mr. Herman Hirsch by fax at (212) 723-8328 and
by returning originals to the attention of Mr. Herman Hirsch at:

 

Citibank, N.A.

c/o Citigroup
Global Markets Inc.

Equity Derivatives

390 Greenwich Street, 5th Floor

New York, NY 
10013

Telephone No.: 212-723-7361

 

	
  Agreed to and accepted by:

  
	
   

  
	
  NORTHWEST AIRLINES CORPORATION

  
	
   

  
	
   

  
	
  /s/ Daniel B. Matthews

  	
   

  
	
  Name:

  
	
  Authorized Signatory

  

 

	
   

  	
  Agreed to and accepted by:

  
	
   

  	
   

  
	
   

  	
  CITIBANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ William Ortner

  	
   

  
	
   

  	
  Name: 
  /s/ William Ortner

  
	
   

  	
  Authorized Representative

  

 

8

 

(Multicurrency - Cross Border)

 

ISDA®

International Swap Dealers Association. Inc.

 

MASTER AGREEMENT

dated as of January 15, 1997

 

Citibank, N. A., New York and Northwest Airlines, Inc. have entered
and/or anticipate entering into one or more transactions (each a “Transaction”)
that are or will be governed by this Master Agreement, which includes the
schedule (the “Schedule”), and the documents and other confirming evidence
(each a “Confirmation”) exchanged between the parties confirming those
Transactions.

 

Accordingly, the parties agree as follows:-

 

1. Interpretation

 

(a)          Definitions. The terms defined in
Section 14 and in the Schedule will have the meanings therein
specified for the purpose of this Master Agreement.

 

(b)         Inconsistency. In the event of any
inconsistency between the provisions of the Schedule and the other provisions
of this Master Agreement, the Schedule will prevail. In the event of any
inconsistency between the provisions of any Confirmation and this Master
Agreement (including the Schedule), such Confirmation will prevail for the
purpose of the relevant Transaction.

 

(c)          Single Agreement. All Transactions are
entered into in reliance on the fact that this Master Agreement and all
Confirmations form a single agreement between the parties (collectively
referred to as this “Agreement”), and the parties would not otherwise enter
into any Transactions.

 

2. 
Obligations

 

(a)          General Conditions.

 

(i) 
Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.

 

(ii) Payments under this Agreement will be
made on the due date for value on that date in the place of the account
specified in the relevant Confirmation or otherwise pursuant to this Agreement,
in freely transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment),
such delivery will be made for receipt on the due date in the manner customary
for the relevant obligation unless otherwise specified in the relevant
Confirmation or elsewhere in this Agreement.

 

(iii) Each obligation of each party under
Section 2(a)(i) is subject to (1) the condition precedent that no Event of
Default or Potential Event of Default with respect to the other party has
occurred and is continuing, (2) the condition precedent that no Early

 

9

 

Termination Date in respect of the relevant
Transaction has occurred or been effectively designated and (3) each other
applicable condition precedent specified in this Agreement.

 

(b)         Change of Account. Either party may change its
account for receiving a payment or delivery by giving notice to the other party
at least five Local Business Days prior to the scheduled date for the payment
or delivery to which such change applies unless such other party gives timely
notice of a reasonable objection to such change.

 

(c)          Netting. If on any date amounts would
otherwise be payable:-

 

(i) in the same currency; and

 

(ii) in respect of the same Transaction,

 

by each party to the other, then, on such date, each party’s obligation
to make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been payable
by one party exceeds the aggregate amount that would otherwise have been
payable by the other party, replaced by an obligation upon the party by whom
the larger aggregate amount would have been payable to pay to the other party
the excess of the larger aggregate amount over the smaller aggregate amount.

 

The parties may elect in respect of two or more Transactions that a net
amount will be determined in respect of all amounts payable on the same date in
the same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be
made in the Schedule or a Confirmation by specifying that subparagraph
(ii) above will not apply to the Transactions identified as being subject to
the election, together with the starting date (in which case subparagraph (ii)
above will not, or will cease to, apply to such Transactions from such date).
This election may be made separately for different groups of Transactions and
will apply separately to each pairing of offices through which the parties make
and receive payments or deliveries.

 

(d)         Deduction or Withholding for Tax.

 

(i) Gross-Up. All payments under this
Agreement will be made without any deduction or withholding for or on account
of any Tax unless such deduction or withholding is required by any applicable law,
as modified by the practice of any relevant governmental revenue authority,
then in effect. If a party is so required to deduct or withhold, then that
party (“X”) will:-

 

(1) promptly notify the other party (“Y”) of
such requirement;

 

(2) pay to the relevant authorities the full
amount required to be deducted or withheld (including the full amount required
to be deducted or withheld from any additional amount paid by X to Y under this
Section 2(d)) promptly upon the earlier of determining that such deduction
or withholding is required or receiving notice that such amount has been
assessed against Y;

 

(3) promptly forward to Y an official receipt
(or a certified copy), or other documentation reasonably acceptable to Y,
evidencing such

 

10

 

payment to such authorities; and

 

(4) if such Tax is an Indemnifiable Tax, pay
to Y, in addition to the payment to which Y is otherwise entitled under this
Agreement, such additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether assessed
against X or Y) will equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not be required to pay
any additional amount to Y to the extent that it would not be required to be
paid but for:-

 

(A) the failure by Y to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

 

(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true unless such failure would
not have occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (II) a Change in Tax Law.

 

(ii) Liability. If:-

 

(1) X is required by any applicable law, as
modified by the practice of any relevant governmental revenue authority, to
make any deduction or withholding in respect of which X would not be required
to pay an additional amount to Y under Section 2(d)(i)(4);

 

(2) X does not so deduct or withhold; and

 

(3) a liability resulting from such Tax is
assessed directly against X,

 

then, except to the extent Y has satisfied or
then satisfies the liability resulting from such Tax, Y will promptly pay to X
the amount of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to comply
with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d)).

 

(e)          Default interest; Other Amounts. Prior to the
occurrence or effective designation of an Early Termination Date in respect of
the relevant Transaction, a party that defaults in the performance of any
payment obligation will, to the extent permitted by law and subject to
Section 6(c), be required to pay interest (before as well as after
judgment) on the overdue amount to the other party on demand in the same
currency as such overdue amount, for the period from (and including) the
original due date for payment to (but excluding) the date of actual payment, at
the Default Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed. If, prior to the occurrence
or effective designation of an Early Termination Date in respect of the
relevant Transaction, a party defaults in the performance of any obligation
required to be settled by delivery, it will compensate the other party on
demand if and to the extent provided for in the relevant Confirmation or
elsewhere in this Agreement.

 

11

 

3. Representations

 

Each party represents to the other party (which representations will be
deemed to be repeated by each party on each date on which a Transaction is
entered into and, in the case of the representations in Section 3(f), at
all times until the termination of this Agreement) that:-

 

(a)          Basic Representations.

 

(i) Status. It is duly organized and validly
existing under the laws of the jurisdiction of its organizaion or incorporation
and, if relevant under such laws, in good standing;

 

(ii) Powers. It has the power to execute this
Agreement and any other documentation relating to this Agreement to which it is
a party, to deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform its
obligations under this Agreement and any obligations it has under any Credit
Support Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;

 

(iii) No Violation or Conflict. Such
execution, delivery and performance do not violate or conflict with any law
applicable to it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to it or any of
its assets or any contractual restriction binding on or affecting it or any of
its assets;

 

(iv) Consents. All governmental and other
consents that are required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party have been
obtained and are in full force and effect and all conditions of any such
consents have been complied with; and

 

(v) Obligations Binding. Its obligations
under this Agreement and any Credit Support Document to which it is a party
constitute its legal, valid and binding obligations, enforceable in accordance
with their respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors’ rights generally
and subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).

 

(b)         Absence of Certain Events. No Event of Default
or Potential Event of Default or, to its knowledge, Termination Event with
respect to it has occurred and is continuing and no such event or circumstance
would occur as a result of its entering into or performing its obligations
under this Agreement or any Credit Support Document to which it is a party.

 

(c)          Absence of Litigation. There is not pending
or, to its knowledge, threatened against it or any of its Aftiliates any
action, suit or proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official or any arbitrator that is likely to
affect the legality, validity or enforceability against it of this Agreement or
any Credit Support Document to which it is a party or its ability to perform
its obligations

 

12

 

under this Agreement or such Credit Support
Document.

 

(d)         Accuracy of Specified Information. All
applicable information that is furnished in writing by or on behalf of it to
the other party and is identified for the purpose of this Section 3(d) in
the Schedule is, as of the date of the information, true, accurate and
complete in every material respect.

 

(e)          Payer Tax Representation. Each representation
specified in the Schedule as being made by it for the purpose of this
Section 3(e) is accurate and true.

 

(f)            Payee Tax Representations. Each
representation specified in the Schedule as being made by it for the purpose
of this Section 3(f) is accurate and true.

 

4.  Agreements

 

Each party agrees with the other that, so long as either party has or
may have any obligation under this Agreement or under any Credit Support
Document to which it is a party:-

 

(a)          Furnish Specified Information. It will
deliver to the other party or, in certain cases under subparagraph (iii) below,
to such government or taxing authority as the other party reasonably directs:-

 

(i) any forms, documents or certificates
relating to taxation specified in the Schedule or any Confirmation;

 

(ii) any other documents specified in the
Schedule or any Confirmation; and

 

(iii) upon reasonable demand by such other
party, any form or document that may be required or reasonably requested in
writing in order to allow such other party or its Credit Support Provider to
make a payment under this Agreement or any applicable Credit Support Document
without any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially prejudice
the legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner reasonably
satisfactory to such other party and to be executed and to be delivered with
any reasonably required certification,

 

in each case by the date specified in the Schedule or such
Confimnation or, if none is specified, as soon as reasonably practicable.

 

(b)         Maintain Authorizations. It will use all
reasonable efforts to maintain in full force and effect all consents of any
governmental or other authority that are required to be obtained by it with
respect to this Agreement or any Credit Support Document to which it is a party
and will use all reasonable efforts to obtain any that may become necessary in
the future.

 

(c)          Comply with Laws. It will comply in all
material respects with all applicable laws and orders to which it may be
subject if failure so to comply would materially impair its ability to perform
its obligations under this Agreement or any Credit Support Document to which it
is a party.

 

13

 

(d)         Tax Agreement. It will give notice of any failure
of a representation made by it under Section 3(f) to be accurate and true
promptly upon learning of such failure.

 

(e)          Payment of Stamp Tax. Subject to
Section 11, it will pay any Stamp Tax levied or imposed upon it or in
respect of its execution or performance of this Agreement by a jurisdiction in
which it is incorporated, organised, managed and controlled, or considered to
have its seat, or in which a branch or office through which it is acting for
the purpose of this Agreement is located (“Stamp Tax Jurisdiction”) and will
indemnify the other party against any Stamp Tax levied or imposed upon the
other party or in respect of the other party’s execution or performance of this
Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.

 

5.  Events of Default and
Termination Events

 

(a)          Events of Default. The occurrence at any time
with respect to a party or, if applicable, any Credit Support Provider of such
party or any Specified Entity of such party of any of the following events
constitutes an event of default (an “Event of Default”) with respect to such
party:-

 

(i) Failure to Pay or Deliver. Failure by the
party to make, when due, any payment under this Agreement or delivery under
Section2(a)(i) or 2(e) required to be made by it if such failure is not
remedied on or before the third Local Business Day after notice of such failure
is given to the party;

 

(ii) Breach of Agreement. Failure by the
party to comply with or perform any agreement or obligation (other than an
obligation to make any payment under this Agreement or delivery under
Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any
agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be
complied with or performed by the party in accordance with this Agreement if
such failure is not remedied on or before the thirtieth day after notice of
such failure is given to the party;

 

(iii) Credit Support Default.

 

(1) Failure by the party or any Credit
Support Provider of such party to comply with or perform any agreement or
obligation to be complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable grace
period has elapsed;

 

(2) the expiration or termination of such
Credit Support Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this Agreement (in
either case other than in accordance with its terms) prior to the satisfaction
of all obligations of such party under each Transaction to which such Credit
Support Document relates without the written consent of the other party; or

 

(3) the party or such Credit Support Provider
disaffirms,

 

14

 

disclaims, repudiates or rejects, in whole or
in part, or challenges the validity of, such Credit Support Document;

 

(iv) Misrepresentation. A representation
(other than a representation under Section 3(e) or (f)) made or repeated
or deemed to have been made or repeated by the party or any Credit Support
Provider of such party in this Agreement or any Credit Support Document proves
to have been incotrrect or misleading in any material respect when made or
repeated or deemed to have been made or repeated;

 

(v) Default under Specified Transaction. The
party, any Credit Support Provider of such party or any applicable Specified
Entity of such party (1) defaults under a Specified Transaction and, after
giving effect to any applicable notice requirement or grace period, there
occurs a liquidation of, and acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving effect
to any applicable notice requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date of, or any payment
on early termination of, a Specified Transaction (or such default continues for
at least three Local Business Days if there is no applicable notice requirement
or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any person or
entity appointed or empowered to operate it or act on its behalf);

 

(vi) Cross Default. If “Cross Default” is specified
in the Schedule as applying to the party, the occurrence or existence of
(I) a default, event of default or other similar condition or event (however
described) in respect of such party, any Credit Support Provider of such party
or any applicable Specified Entity of such party under one or more agreements
or instruments relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less than the applicable
Threshold Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it would
otherwise have been due and payable or (a) a default by such party, such Credit
Support Provider or such Specified Entity (individually or collectively) in
making one or more payments on the due date thereof in an aggregate amount of
not less than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or grace
period);

 

(vii) Bankruptcy. The party, any Credit
Support Provider of such party or any applicable Specified Entity of such
party:-

 

(1) is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability generally to pay its
debts as they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or insolvency law or other
similar law affecting creditors’ rights, or a petition is presented for its winding-up
or liquidation, and, in the case of any such proceeding or petition

 

15

 

instituted or presented against it, such
proceeding or petition (A) results in a judgment of insolvency or bankruptcy or
the entry of an order for relief or the making of an order for its winding-up
or liquidation or (B) is not dismissed, discharged, stayed or restrained in
each case within 30 days of the institution or presentation thereof; (5) has a
resolution passed for its winding-up, official management or liquidation (other
than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official for it or
for all or substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied, enforced or sued on or
against all or substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8) causes or is subject to
any event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified in clauses
(1) to (7) (inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
foregoing acts; or

 

(viii) Merger Without Assumption. The party
or any Credit Support Provider of such party consolidates or amalgamates with,
or merges with or into, or transfers all or substantially all its assets to,
another entity and, at the time of such consolidation, amalgamation, merger or
transfer:-

 

(1) the resulting, surviving or transferee
entity fails to assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this Agreement; or

 

(2) the benefits of any Credit Support
Document fail to extend (without the consent of the other party) to the performance
by such resulting, surviving or transferee entity of its obligations under this
Agreement.

 

(b)         Termination Events. The occurrence at any time
with respect to a party or, if applicable, any Credit Support Provider of such
party or any Specified Entity of such party of any event specified below
constitutes an Illegality if the event is specified in (i) below, a Tax Event
if the event is specified in (ii) below or a Tax Event Upon Merger if the event
is specified in (iii) below, and, if specified to be applicable, a Credit Event
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:-

 

(i) Illegality. Due to the adoption of, or
any change in, any applicable law after the date on which a Transaction is
entered into, or due to the promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority with competent
jurisdiction of any applicable law after such date, it becomes unlawful (other
than as a result of a breach by the party of Section 4(b)) for such party

 

16

 

(which hill be the Affected Party):-

 

(1) to perform any absolute or contingent
obligation to make a payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or

 

(2) to perform, or for any Credit Support
Provider of such party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit Support Document
relating to such Transaction:

 

(ii) Tax Event. Due to (x) any action taken
by a taxing authority, or brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into (regardless of whether
such action is taken or brought with respect to a party to this Agreement) or
(y) a Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (l) be required to pay to the other party an additional
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except
in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2)
receive a payment from which an amount is required to be deducted or withheld
for or on account of a Tax (except in respect of interest under
Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be
paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason
of Section 2(d)(i)(4)(A) or (B));

 

(iii) Tax Event Upon Merger. The party (the
“Burdened Party”) on the next succeeding Scheduled Payment Date will either (l)
be required to pay an additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under
Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an
amount has been deducted or withheld for or on account of any Indemnifiable Tax
in respect of which the other party is not required to pay an additional amount
(other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as
a result of a party consolidating or amalgamating with, or merging with or
into, or transferring all or substantially all its assets to, another entity
(which will be the Affected Party) where such action does not constitute an
event described in Section 5(a)(viii);

 

(iv) Credit Event Upon Merger. If “Credit
Event Upon Merger” is specified in the Schedule as applying to the party,
such party (“X”), any Credit Support Provider of X or any applicable Specified
Entity of X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and such
action does not constitute an event described in Section 5(a)(viii) but
the creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action (and, in
such event, X or its successor or transferee, as appropriate, will be the
Affected Party); or

 

(v) Additional Termination Event. If any
“Additional Termination Event” is specified in the Schedule or any
Confirmation as applying, the

 

17

 

occurrence of such event (and, in such event,
the Affected Party or Affected Parties shall be as specified for such
Additional Termination Event in the Schedule or such Confirmation).

 

(c)          Event of Default and Illegality. If an event
or circumstance which would otherwise constitute or give rise to an Event of
Default also constitutes an Illegality, it will be treated as an Illegality and
will not constitute an Event of Default.

 

6. Early Termination

 

(a)          Right to Terminate Following Event of
Default. If at any time an Event of Default with respect to a party (the
“Defaulting Party”) has occurred and is then continuing, the other party (the
“Non-defaulting Party”) may, by not more than 20 days notice to the Defaulting
Party specifying the relevant Event of Default, designate a day not earlier
than the day such notice is effective as an Early Termination Date in respect
of all outstanding Transactions. If, however, “Automatic Early Termination” is specified
in the Schedule as applying to a party, then an Early Termination Date in
respect of all outstanding Transactions will occur immediately upon the
occurrence with respect to such party of an Event of Default specified in
Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto,
(8), and as of the time immediately preceding the institution of the relevant
proceeding or the presentation of the relevant petition upon the occurrence
with respect to such party of an Event of Default specified in
Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).

 

(b)         Right to Terminate Following Termination
Event.

 

(i) Notice. If a Termination Event occurs, an
Affected Party will, promptly upon becoming aware of it, notify the other
party, specifying the nature of that Termination Event and each Affected
Transaction and will also give such other information about that Termination
Event as the other party may reasonably require.

 

(ii) Transfer to Avoid Termination Event. If
either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and
there is only one Affected Party, or if a Tax Event Upon Merger occurs and the
Burdened Party is the Affected Party, the Affected Party will, as a condition
to its right to designate an Early Termination Date under
Section 6(b)(iv), use all reasonable efforts (which will not require such
party to incur a loss, excluding immaterial, incidental expenses) to transfer
within 20 days after it gives notice under Section 6(b)(i) all its rights
and obligations under this Agreement in respect of the Affected Transactions to
another of its Offices or Affiliates so that such Termination Event ceases to
exist.

 

If the Affected Party is not able to make
such a transfer it will give notice to the other party to that effect within
such 20 day period, whereupon the other party may effect such a transfer within
30 days after the notice is given under Section 6(b)(i).

 

Any such transfer by a party under this
Section 6(b)(ii) will be subject to and conditional upon the prior written
consent of the other party, which consent will not be withheld if such other
party’s policies in

 

18

 

effect at such time would permit it to enter
into transactions with the transferee on the terms proposed.

 

(iii) Two Affected Parties. If an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected
Parties, each party will use all reasonable efforts to reach agreement within
30 days after notice thereof is given under Section 6(b)(i) on action to
avoid that Termination Event.

 

(iv) Right to Terminate. If:-

 

(1) a transfer under Section 6(b)(ii) or
an agreement under Section 6(b)(iii), as the case may be, has not been
effected with respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or

 

(2) an Illegality under
Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional
Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened
Party is not the Affected Party,

 

either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
or an Additional Termination Event if there is more than one Affected Party, or
the party which is not the Affected Party in the case of a Credit Event Upon
Merger or an Additional Termination Event if there is only one Affected Party
may, by not more than 20 days notice to the other party and provided that the
relevant Termination Event is then continuing, designate a day not earlier than
the day such notice is effective as an Early Termination Date in respect of all
Affected Transactions.

 

(c)          Effect of Designation.

 

(i) If notice designating an Early
Termination Date is given under Section 6(a) or (b), the Early Termination
Date will occur on the date so designated, whether or not the relevant Event of
Default or Termination Event is then continuing.

 

(ii) Upon the occurrence or effective
designation of an Early Termination Date, no further payments or deliveries
under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions
will be required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early Termination
Date shall be determined pursuant to Section 6(e).

 

(d)         Calculations.

 

(i) Statement. On or as soon as reasonably
practicable following the occurrence of an Early Termination Date, each party
will make the calculations on its part, if any, contemplated by
Section 6(e) and will provide to the other party a statement (1) showing,
in reasonable detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid. In the
absence of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of

 

19

 

the party obtaining such quotation will be conclusive
evidence of the existence and accuracy of such quotation.

 

(ii) Payment Date. An amount calculated as
being due in respect of any Early Termination Date under Section 6(e) will
be payable on the day that notice of the amount payable is effective (in the
case of an Early Termination Date which is designated or occurs as a result of
an Event of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event). Such
amount will be paid together with (to the extent permitted under applicable
law) interest thereon (before as well as after judgment) in the Termination
Currency, from (and including) the relevant Early Termination Date to (but
excluding) the date such amount is paid, at the Applicable Rate. Such interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed.

 

(e)          Payments on Early Termination. If an Early
Termination Date occurs, the following provisions shall apply based on the
parties’ election in the Schedule of a payment measure, either “Market
Quotation” or’’Loss”, and a payment method, either the “First Method’’ or the
Second Method”. If the parties fail to designate a payment measure or payment
method in the Schedule, it will be deemed that “Market Quotation” or the
“Second Method”, as the case may be, shall apply. The amount, if any, payable
in respect of an Early Termination Date and determined pursuant to this
Section will be subject to any Set-off.

 

(i) Events of Default. If the Early
Termination Date results from an Event of Default:-

 

(1) First Method and Market Quotation. If the
First Method and Market Quotatation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the sum of the
Settlement Amount (determined by the ‘on-defaulting Party) in respect of the
Terminated Transactions and the Termination Currency Equivalent of the Unpaid
Amounts owing to the Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party.

 

(2) First Method and Loss. If the First
Method and Loss apply, the Defaulting Party will pay to the Non-defaulting
Party, if a positive number, the Non-defaulting Party’s Loss in respect of this
Agreement.

 

(3) Second Method and Market Quotation. If
the Second Method and Market Quotation apply, an amount will be payable equal
to (A) the sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party. If that amount is a positive number, the Defaulting Party will pay it to
the Non-defaulting Party; if it is a negative number, the Non-defaulting Party
will pay the absolute value of that amount to the Defaulting Party.

 

20

 

(4) Second Method and Loss. If the Second
Method and Loss apply, an amount will be payable equal to the Non-defaulting
Party’s Loss in respect of this Agreement. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.

 

(ii) Termination Events. If the Early
Termination Date results from a Termination Event:-

 

(1) One Affected Party. If there is one
Affected Party, the amount payable will be determined in accordance with
Section 6(e)(i)(3), if Market Quotation applies, or
Section 6(e)(i)(4), if Loss applies, except that, in either case,
references to the Defaulting Party and to the Non-defaulting Party will be
deemed to be references to the Affected Party and the party which is not the
Affected Party, respectively, and, if Loss applies and fewer than all the
Transactions arc being terminated, Loss shall be calculated in respect of all
Terminated Transactions.

 

(2) Affected Parties. If there are two
Affected Parties:-

 

(A) if Market Quotation applies, each party
will determine a Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a) one-half of the
difference between the Settlement Amount of the party with the higher
Settlement Amount (“X”) and the Settlement Amount of the party with the lower
Settlement Amount (“Y”) and (b) the Termination Currency Equivalent of the
Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and

 

(B) if Loss applies, each party will
determine its Loss in respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all Terminated Transactions)
and an amount will be payable equal to one-half of the difference between the
Loss of the party with the higher Loss (“X”) and the Loss of the party with the
lower Loss (“Y”).

 

If the amount payable is a positive number, Y
will pay it to X; if it is a negative number, X will pay the absolute value of
that amount to Y.

 

(iii) Adjustment for Bankruptcy. In
circumstances where an Early Termination Date occurs because “Automatic Early
Termination” applies in respect of a party, the amount determined under this
Section 6(e) will be subject to such adjustments as are appropriate and
permitted by law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during the period
from the relevant Early Termination Date to the date for payment determined
under Section 6(d)(ii).

 

(iv) Pre-Estimate. The parties agree that if
Market Quotation applies an amount recoverable under this Section 6(e) is
a reasonable pre-estimate of loss and not a penalty. Such amount is payable for

 

21

 

the loss of bargain and the loss of
protection against future risks and except as otherwise provided in this
Agreement neither party will be entitled to recover any additional damages as a
consequence of such losses.

 

7.  Transfer

 

Subject to Section 6(b)(ii), neither this Agreement nor any
interest or obligation in or under this Agreement may be transferred (whether
by way of security or otherwise) by either party without the prior written
consent of the other partly except that:-

 

(a)          a party may make such a transfer of this
Agreement pursuant to a consolidation or amalgamation with, or merger with or
into, or transfer of all or substantially all its assets to, another entity
(but without prejudice to any other right or remedy under this Agreement); and

 

(b)         a party may make such a transfer of all or any
part of its interest in any amount payable to it from a Defaulting Party under
Section 6(e).

 

Any purported transfer that is not in compliance with this
Section will be void.

 

8.  Contractual Currency

 

(a)          Payment In the Contractual Currency. Each
payment under this Agreement will be made in the relevant currency specified in
this Agreement for that payment (the “Contractual Currency”). To the extent
permitted by applicable law, any obligation to make payments under this
Agreement in the Contractual Currency will not be discharged or satisfied by
any tender in any currency other than the Contractual Currency, except to the
extent such tender results in the actual receipt by the party to which payment
is owed, acting in a reasonable manner and in good faith in converting the
currency so tendered into the Contractual Currency, of the full amount in the
Contractual Currency of all amounts payable in respect of this Agreement. If
for any reason the amount in the Contractual Currency so received falls short
of the amount in the Contractual Currency payable in respect of this Agreement,
the party required to make the payment will, to the extent permitted by
applicable law, immediately pay such additional amount in the Contractual
Currency as may be necessary to compensate for the shortfall. If for any reason
the amount in the Contractual Currency so received exceeds the amount in the
Contractual Currency payable in respect of this Agreement, the party receiving
the payment will refund promptly the amount of such excess.

 

(b)         Judgments. To the extent permitted by
applicable law, if any judgment or order expressed in a currency other than the
Contractual Currency is rendered (i) for the payment of any amount owing in
respect of this Agreement, (ii) for the payment of any amount relating to any
early termination in respect of this Agreement or (iii) in respect of a
judgment or order of another court for the payment of any amount described in
(i) or (ii) above, the party seeking recovery, after recovery in full of the
aggregate amount to which such party is entitled pursuant to the judgment or
order, will be entitled to receive immediately from the other party the amount
of any shortfall of the Contractual Currency received by such party as a
consequence of sums paid in such other currency and will refund promptly to the
other party any excess of the Contractual Currency received by such party as a
consequence of sums paid 

 

22

 

in such other currency if such shortfall or
such excess arises or results from any variation between the rate of exchange
at which the Contractual Currency is converted into the currency of the
judgment or order for the purposes of such judgment or order and the rate of
exchange at which such party is able, acting in a reasonable manner and in good
faith in converting the currency received into the Contractual Currency, to
purchase the Contractual Currency with the amount of the currency of the
judgment or order actually received by such party. The term “rate of exchange”
includes, without limitation, any premiums and costs of exchange payable in
connection with the purchase of or conversion into the Contractual Currency.

 

(c)          Separate Indemnities. To the extent permitted
by applicable law, these indemnities constitute separate and independent
obligations from the other obligations in this Agreement, will be enforceable
as separate and independent causes of action, will apply notwithstanding any
indulgence granted by the party to which any payment is owed and will not be
affected by judgment being obtained or claim or proof being made for any other
sums payable in respect of this Agreement.

 

(d)         Evidence of Loss. For the purpose of this
Section 8, it will be sufficient for a party to demonstrate that it would
have suffered a loss bad an actual exchange or purchase been made.

 

9.  Miscellaneous

 

(a)          Entire Agreement. This Agreement constitutes
the entire agreement and understanding of the parties with respect to its
subject matter and supersedes all oral communication and prior writings with
respect thereto.

 

(b)         Amendments. No amendment, modification or
waiver in respect of this Agreement will be effective unless in writing
(including a writing evidenced by a facsimile transmission) and executed by
each of the parties or confirmed by an exchange of telexes or electronic
messages on an electronic messaging system.

 

(c)          Survival of Obligations. Without prejudice to
Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this
Agreement will survive the termination of any Transaction.

 

(d)         Remedies Cumulative. Except as provided in
this Agreement, the rights, powers, remedies and privileges provided in this
Agreement are cumulative and not exclusive of any rights, powers, remedies and
privileges provided by late.

 

(e)          Counterparts and Confirmations.

 

(i) This Agreement (and each amendment,
modification and waiver in respect of it) may be executed and delivered in
counterparts (including by facsimile transmission), each of which will be
deemed an original.

 

(ii) The parties intend that they are legally
bound by the terms of each Transaction from the moment they agree to those
terms (whether orally or otherwise). A Confirmation shall be entered into as
soon as practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of telexes
or by an exchange of electronic messages on an electronic messaging system,
which in each case will be sufficient for all purposes to evidence

 

23

 

a binding supplement to this Agreement. The
parties will specify therein or through another effective means that any such
counterpart, telex or electronic message constitutes a Confirmation.

 

(f)            No Waiver of Rights. A failure or delay in
exercising any right, power or privilege in respect of this Agreement will not
be presumed to operate as a waiver, and a single or partial exercise of any
right, power or privilege will not be presumed to preclude any subsequent or
further exercise, of that right, power or privilege or the exercise of any
other right, power or privilege.

 

(g)         Headings. The headings used in this Agreement
are for convenience of reference only and are not to affect the construction of
or to be taken into consideration in interpreting this Agreement.

 

10. Offices; Multibranch Parties

 

(a)          If Section 10(a) is specified in the
Schedule as applying, each party that enters into a Transaction through an
Office other than its head or home office represents to the other party that,
notwithstanding the place of booking office or jurisdiction of incorporation or
organization of such party, the obligations of such party are the same as if it
had entered into the Transaction through its head or home office. This
representation will be deemed to be repeated by such party on each date on
which a Transaction Is entered into.

 

(b)         Neither party may change the Office through
which it makes and receives payments or deliveries for the purpose of a
Transaction without the prior written consent of the other party.

 

(c)          If a party is specified as a Multibranch Party
in the Schedule, such Multibranch Party may make and receive payments or
deliveries under any Transaction through any Office listed in the Schedule, and
the Office through which it makes and receives payments or deliveries with
respect to a Transaction will be specified in the relevant Confirmation.

 

11. Expenses

 

A Defaulting Party will, on demand, indemnify and hold harmless the
other party for and against all reasonable out-of-pocket expenses, including
legal fees and Stamp Tax, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement or any Credit
Support Document to which the Defaulting Party is a party or by reason of the
early termination of any Transaction, including, but not limited to, costs of
collection.

 

12. Notices

 

(a)          Effectiveness. Any notice or other
communication in respect of this Agreement may be given in any manner set forth
below (except that a notice or other communication under Section 5 or 6
may not be given by facsimile transmission or electronic messaging system) to
the address or number or in accordance with the electronic messaging system
details provided (see the Schedule) and will be deemed effective as indicated:-

 

(i) if in writing and delivered in person or
by courier, on the date it is delivered;

 

24

 

(ii) if sent by telex, on the date the
recipient’s answerback is received:

 

(iii) if sent by facsimile transmission, on
the date that transmission is received by a responsible employee of the
recipient in legible form (it being agreed that the burden of proving receipt
will be on the sender and will not be met by a transmission report generated by
the sender’s facsimile machine);

 

(iv) if sent by certified or registered mail
(airmail, if overseas) or the equivalent (return receipt requested), on the
date that mail is delivered or its delivery is attempted; or

 

(v) if sent by electronic messaging system,
on the date that electronic message is received, unless the date of that delivery
(or attempted delivery) or that receipt, as applicable, is not a Local Business
Day or that communication is delivered (or attempted) or received, as
applicable, after the close of business on a Local Business Day, in which case
that communication shall be deemed given and effective on the first following
day that is a Local Business Day.

 

(b)         Change of Addresses. Either party may by
notice to the other change the address, telex or facsimile number or electronic
messaging system details at which notices or other communications are to be
given to it.

 

13. Governing Law and Jurisdiction

 

(a)          Governing law. This Agreement will be
governed by and construed in accordance with the law specified in the Schedule.

 

(b)         Jurisdiction. With respect to any suit, action
or proceedings relating to this Agreement (“Proceedings”), each party
irrevocably:-

 

(i) submits to the jurisdiction of the
English courts, if this Agreement is expressed to be governed by English law,
or to the non-exclusive jurisdiction of the courts of the State of New York;
and the United States District Count located in the Borough of Manhattan in New
York City, if this Agreement is expressed to be governed by the laws of the
State of New York; and

 

(ii) waives any objection which it may have
at any time to the laying of venue of any Proceedings brought in any such
court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceedings, that such court does not have any jurisdiction over such party.

 

Nothing in this Agreement precludes either party from bringing
Proceedings in any other jurisdiction (outside, if this Agreement is expressed
to be governed by English law, the Contracting States, as defined in Section 1(3)
of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension
or re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.

 

(c)          Service of Process. Each party irrevocably
appoints the Process Agent

 

25

 

(if any) specified opposite its name in the
Schedule to receive, for it and on its behalf, service of process in any
Proceedings. If for any reason any party’s Process Agent is unable to act as
such, such party will promptly notify the other party and within 30 days
appoint a substitute process agent acceptable to the other party. The parties
irrevocably consent to service of process given in the manner provided for
notices in Section 12. Nothing in this Agreement will affect the right of
either party to serve process in any other manner permitted by law.

 

(d)         Waiver of Immunities. Each party irrevocably
waives, to the fullest extent permitted by applicable law, with respect to
itself and its revenues and assets (irrespective of their use or intended use),
all immunity on the grounds of sovereignty or other similar grounds from (i)
suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order
for specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement of
any judgment to which it or its revenues or assets might otherwise be entitled
in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to
the extent permitted by applicable law, that it will not claim any such
immunity in any Proceedings.

 

14. Definitions

 

As used in this Agreement:-

 

“Additional Termination Event” has the meaning specified in
Section 5(b).

 

“Affected Party” has the meaning specified in Section 5(b).

 

“Affected Transactions” means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.

 

“Affiliate” means, subject to the Schedule, in relation to any person,
any entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, “control” of
any entity or person means ownership of a majority of the voting power of the
entity or person.

 

“Applicable Rate” means:-

 

(a)          in respect of obligations payable or
deliverable (or which would have been but for Section 2(a)(iii)) by a
Defaulting Party, the Default Rate;

 

(b)         in respect of an obligation to pay an amount
under Section 6(e) of either party from and after the date (determined in
accordance with Section 6(d)(ii)) on which that amount is payable, the
Default Rate;

 

(c)          in respect of all other obligations payable
or deliverable (or which would have been but for Section 2(a)(iii)) by a
Non-defaulting Party, the Non-default Rate; and

 

(d)         in all other cases, the Termination Rate.

 

26

 

“Burdened Party” has the meaning specified in Section 5(b).

 

“Change in Tax Law” means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Transaction is entered into.

 

“consent” includes a consent, approval, action, authorization,
exemption, notice, filing, registration or exchange control consent.

 

“Credit Event Upon Merger” has the meaning specified in
Section 5(b).

 

“Credit Support Document” means any agreement or instrument that is
specified as such in this Agreement.

 

“Credit Support Provider” has the meaning specified in the Schedule.

 

“Default Rate” means a rate per annum equal to the cost (without proof
or evidence of any actual cost) to the relevant payee (as certified by it) if
it were to fund or of funding the relevant amount plus 1% per annum.

 

“Defaulting Party” has the meaning specified in Section 6(a).

 

“Early Termination Date” means the date determined in accordance with
Section 6(a) or 6(b)(iv).

 

“Event of Default” has the meaning specified in Section 5(a) and,
if applicable, in the Schedule.

 

“Illegality” has the meaning specified in Section 5(b).

 

“Indemnifiable Tax” means any Tax other than a Tax that would not be
imposed in respect of a payment under this Agreement but for a present or
former connection between the jurisdiction of the government or taxation
authority imposing such Tax and the recipient of such payment or a person
related to such recipient (including, without limitation, a connection arising
from such recipient or related person being or having been a citizen or
resident of such jurisdiction, or being or having been organised, present or
engaged in a trade or business in such jurisdiction, or having or having had a
permanent establishment or fixed place of business in such jurisdiction, but
excluding a connection arising solely from such recipient or related person
having executed, delivered, performed its obligations or received a payment
under, or enforced, this Agreement or a Credit Support Document).

 

“law” includes any treaty, law, rule or regulation (as modified, in the
case of tax matters, by the practice of any relevant governmental revenue
authority) and “lawful” and “unlawful” will be construed accordingly.

 

“Local Business Day” means, subject to the Schedule, a day on which
commercial banks are open for business (including dealings in foreign exchange
and foreign currency deposits) (a) in relation to any obligation under
Section 2(a)(i), in the place(s) specified in the relevant Confirmation
or, if not so specified, as otherwise agreed by the parties in writing or
determined pursuant to provisions contained, or incorporated by reference, in
this Agreement, (b) in relation to any other payment, in the place where the
relevant account is located and, if different, in the principal financial

 

27

 

centre, if any, of the currency of such payment, (c) in relation to any
notice or other communication, including notice contemplated under
Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located
and (d) in relation to Section 5(a)(v)(2), in the relevant locations for
performance with respect to such Specified Transaction.

 

“Loss” means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be
its total losses and costs (or gain, in which case expressed as a negative
number) in connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating, liquidating,
obtaining or reestablishing any hedge or related trading position (or any gain resulting
from any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination
Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include
a party’s legal fees and out-of-pocket expenses referred to under
Section 11. A party will determine its Loss as of the relevant Early Termination
Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or
more leading dealers in the relevant markets.

 

“Market Quotation” means, with respect to one or more Terminated
Transactions and a party making the determination, an amount determined on the
basis of quotations from Reference Market-makers. Each quotation will be for an
amount, if any, that would be paid to such party (expressed as a negative
number) or by such party (expressed as a positive number) in consideration of
an agreement between such party (taking into account any existing Credit
Support Document with respect to the obligations of such party) and the quoting
Reference Market-maker to enter into a transaction (the “Replacement
Transaction”) that would have the effect of preserving for such party the
economic equivalent of any payment or delivery (whether the underlying
obligation was absolute or contingent and assuming the satisfaction of each
applicable condition precedent) by the parties under Section 2(a)(i) in
respect of such Terminated Transaction or group of Terminated Transactions that
would, but for the occurrence of the relevant Early Termination Date, have been
required after that date. For this purpose, Unpaid Amounts in respect of the
Terminated Transaction or group of Terminated Transactions are to be excluded
but, without limitation, any payment or delivery that would, but for the
relevant Early Termination Date, have been required (assuming satisfaction of
each applicable condition precedent) after that Early Termination Dare is to be
included. The Replacement Transaction would be subject to such documentation as
such party and the Reference Market-maker may, in good faith, agree. The party
making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as
of the same day and time (without regard to different time zones) on or as soon
as reasonably practicable after the relevant Early Termination Date. The day
and time as of which those quotations are to be obtained will be selected in
good faith by the party obliged to make

 

28

 

a determination under Section 6(e), and, if each party is so
obliged. After consultation with the other. If more than three quotations are
provided, the Market Quotation will be the arithmetic mean of the quotations,
without regard to the quotations having the highest and lowest values. If
exactly three such quotations are provided, the Market Quotation will be the
quotation remaining after disregarding the highest and lowest quotations. For
this purpose, if more than one quotation has the same highest value or lowest
value, then one of such quotations shall be disregarded. If fewer than three
quotations are provided, it will be deemed that the Market Quotation in respect
of such Terminated Transaction or group of Terminated Transactions cannot be
determined.

 

“Non-default Rate” means a rate per annum equal to the cost (without
proof or evidence of any actual cost) to the Non-defaulting Party (as certified
by it) if it were to fund the relevant amount.

 

“Non-defaulting Party” has the meaning specified in Section 6(a)

 

“Office” means a branch or office of a party, which may be such party’s
head or home office.

 

“Potential Event of Default” means any event which, with the giving of
notice or the lapse of time or both, would constitute an Event of Default.

 

“Reference Market-makers” means four leading dealers in the relevant
market selected by the party determining a Market Quotation in good faith (a)
from among dealers of the highest credit standing which satisfy all the
criteria that such party applies generally at the time in deciding whether to
offer or to make an extension of credit and (b) to the extent practicable, from
among such dealers having an office in the same city.

 

“Relevant Jurisdiction” means, with respect to a party, the
jurisdictions (a) in which the party is incorporated, organised, managed and
controlled or considered to have its seat, (b) where an Office through which
the party is acting for purposes of this Agreement is located, (c) in which the
party executes this Agreement and (d) in relation to any payment, from or
through which such payment is made.

 

“Scheduled Payment Date” means a date on which a payment or delivery is
to be made under Section 2(a)(i) with respect to a Transaction.

 

“Set off’ means set-off, offset, combination of accounts, right of
retention or withholding or similar right or requirement to which the payer of
an amount under Section 6 is entitled or subject (whether arising under
this Agreement, another contract, applicable law or otherwise) that is
exercised by, or imposed on, such payer.

 

“Settlement Amount” means, with respect to a party and any Early
Termination Date, the sum of:-

 

(a) the Termination Currency Equivalent of the Market Quotations
(whether positive or negative) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation is determined; and

 

(b) such party’s Loss (whether positive or negative and without
reference to any Unpaid Amounts) for each Terminated Transaction or group of
Terminated

 

29

 

Transactions for which a Market Quotation cannot be determined or would
not (in the reasonable belief of the party making the determination) produce a
commercially reasonable result.

 

“Specified Entity” has the meaning specified in the Schedule.

 

“Specified Indebtedness” means, subject to the Schedule, any obligation
(whether present or future, contingent or otherwise, as principal or surety or
otherwise) in respect of borrowed money.

 

“Specified Transaction” means, subject to the Schedule, (a) any
transaction (including an agreement with respect thereto) now existing or
hereafter entered into between one party to this Agreement (or any Credit
Support Provider of such party or any applicable Specified Entity of such
party) and the other party to this Agreement (or any Credit Support Provider of
such other party or any applicable Specified Entity of such other party) which
is a rate swap transaction, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these transactions),
(b) any combination of these transactions and (c) any other transaction
identified as a Specified Transaction in this Agreement or the relevant
confirmation.

 

“Stamp Tax” means any stamp, registration, documentation or similar
tax.

 

“Tax” means any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any government or other taxing authority in respect
of any payment under this Agreement other than a stamp, registration,
documentation or similar tax.

 

“Tax Event” has the meaning specified in Section 5(b).

 

“Tax Event Upon Merger” has the meaning specified in Section 5(b).

 

“Terminated Transactions” means with respect to any Early Termination
Date (a) if resulting from a Termination Event, all Affected Transactions and
(b) if resulting from an Event of Default, all Transactions (in either case) in
effect immediately before the effectiveness of the notice designating that
Early Termination Date (or, if “Automatic Early Termination” applies,
immediately before that Early Termination Date).

 

“Termination Currency” has the meaning specified in the Schedule.

 

“Termination Currency Equivalent” means, in respect of any amount
denominated in the Termination Currency, such Termination Currency amount and,
in respect of any amount denominated in a currency other than the Termination
Currency (the “Other Currency”), the amount in the Termination Currency
determined by the party making the relevant determination as being required to
purchase such amount of such Other Currency as at the relevant Early
Termination Date, or, if the relevant Market Quotation or Loss (as the case may
be), is determined as of a later date, that later date, with the Termination
Currency at the rate equal to the spot exchange rate of the foreign exchange
agent

 

30

 

(selected as provided below) for the purchase of such Other Currency
with the Termination Currency at or about 11:00 a.m. (in the city in which such
foreign exchange agent is located) on such date as would be customary for the
determination of such a rate for the purchase of such Other Currency for value
on the relevant Early Termination Date or that later date. The foreign exchange
agent will, if only one party is obliged to make a determination under
Section 6(e), be selected in good faith by that party and otherwise will
be agreed by the parties.

 

“Termination Event” means an Illegality, a Tax Event or a Tax Event
Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an
Additional Termination Event.

 

“Termination Rate” means a rate per annum equal to the arithmetic mean
of the cost (without proof or evidence of any actual cost) to each party (as
certified by such party) if it were to fund or of funding such amounts.

 

“Unpaid Amounts” owing to any party means, with respect to an Early
Termination Date, the aggregate of (a) in respect of all Terminated
Transactions, the amounts that became payable (or that would have become
payable but for Section 2(a)(iii)) to such party under
Section 2(a)(i) on or prior to such Early Termination Date and which
remain unpaid as at such Early Termination Date and (b) in respect of each
Terminated Transaction, for each obligation under Section 2(a)(i) which
was (or would have been but for Section 2(a)(iii)) required to be settled
by delivery to such parry on or prior to such Early Termination Date and which
has not been so settled as at such Early Termination Date, an amount equal to
the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to (but
excluding) such Early Termination Date, at the Applicable Rate. Such amounts of
interest will be calculated on the basis of daily compounding and the actual
number of days elapsed. The fair market value of any obligation referred to in
clause (b) above shall be reasonably determined by the party obliged to make
the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.

 

IN WITNESS WHEREOF the parties have executed this document on the
respective dates specified below with effect from the date specified on the
first page of this document.

 

	
  CITIBANK, N.A.. NEW YORK

  	
   

  	
   

  	
  NORTHWEST AIRLINES, INC.

  	
   

  
	
  (Name of
  Party)

  	
   

  	
   

  	
  (Name of
  Party)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Barbara A. Schweizer

  	
   

  	
   

  	
  By:

  	
  /s/ Joseph E. Francht, Jr.

  	
   

  
	
  Name:

  	
  Barbara A. Schweizer, V.P.

  	
   

  	
  Name:

  	
  Joseph E. Francht, Jr.

  
	
  Title:

  	
  Trading Products Documentation

  Unit

  	
   

  	
  Title:

  	
  Senior Vice President

  Finance and Treasurer

  
	
  Date:

  	
  2/6/97

  	
   

  	
  Date:

  	
  2/12/97

  
												

 

31

 

SCHEDULE

to the

MASTER AGREEMENT

 

dated as of January 15,
1997

 

between Citibank, N.A., New York (“Party A”), a national banking
association organized under the laws of the United States and Northwest
Airlines, Inc. (“Party B”), a corporation organized under the laws of the State
of Minnesota.

 

Scope of
Agreement

 

As of the date of this Agreement, all Transactions entered into
(whether before or after this Agreement is entered into) between the parties to
this Agreement through Offices specified in Part 4(3) of this
Schedule (and the respective rights and obligations of the parties in
respect of those Transactions) shall be governed by, subject to, and determined
in accordance with, the terms and conditions set out in this Agreement and the
related Confirmations.

 

PART 1

Termination
Provisions

 

In this Agreement:

 

(1)          “Specified Entity” does not apply.

 

(2)          “Specified Transaction” will have the meaning
specified in Section l4 of the Agreement.

 

(3)          The “Cross-Default” provisions of
Section 5(a)(vi) of the Agreement will apply to Party A and Party B,
provided, however, that Section 5(a)(vi) is hereby amended by deleting the
following text from the seventh line thereof: “, or becoming capable at such
time of being declared,”.

 

“Specified Indebtedness” means any obligation (whether present or
future, contingent or otherwise, as principal or surety or otherwise) in
respect of borrowed money, other than indebtedness in respect of deposits received
and excluding any obligation under any contract, transaction of financial
arrangement which, if entered into between Party A and Party B, would be a
Specified Transaction.

 

“Threshold Amount” means (i) with respect to Party A, 2% of the
stockholders’ equity of Party A and (ii) with respect to Party B, $50,000,000.

 

(4)          The “Credit Event Upon Merger” provisions of
Section 5(b)(iv) of the Agreement will apply to Party A and Party B.

 

(5)          The “Automatic Early Termination” provision
of Section 6(a) of the Agreement will not apply to Party A or Party B.

 

(6)          Payments on Early Termination. For the
purpose of Section 6(e) of the Agreement:

 

The Second Method and Market Quotation will
apply.

 

(7)          “Termination Currency” means United States
Dollars.

 

32

 

PART 2

Tax
Representations

 

(1)          Payer Representations.
For the purpose of Section 3(e) of the Agreement, Party A and Party B will
make the following representation:

 

It is not required by any applicable law, as modified by the practice
of any relavent governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement)
to be made by it to the other party under this Agreement. In making this
representation, it may rely on:

 

(x) the accuracy of any representation made by the other party pursuant
to Section 3(f) of this Agreement;

 

(y) the satisfaction of the agreement contained in Section 4(a)(i)
or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any
document provided by the other party pursuant to Section 4(a)(i) or
4(a)(iii) of this Agreement; and

 

(z) the satisfaction of the agreement of the other party contained in
Section 4(d) of this Agreement;

 

provided that it
shall not be a breach of this representation where reliance is placed on clause
(y) and the other party does not deliver a form or document under
Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.

 

(2)          Payee Representations.
For the purpose of Section 3(f) of the Agreement, Party A and Party B make
the representations specified below, if any:

 

The following representation will apply to Party A:

 

It is a national banking association organized under the laws of the
United States and its U.S. taxpayer identification number is 13-5266470.

 

The following representation will apply to Party B:

 

It is a corporation created or organized under the laws of the State of
Minnesota and its U.S. taxpayer identification number is 41-0449230.

 

PART 3

Documents to
be Delivered

 

For the purpose of Section 4(a) of the Agreement:

 

(1)          Tax forms, documents or certificates to be
delivered are:

 

IRS Form W-9

 

Party required to deliver: Party B

 

Date by which to be delivered: Upon execution
of this Agreement

 

(2)          Other documents to be delivered are:

 

(a)          Certified copies of all
documents evidencing necessary corporate and other authorizations and approvals
with respect to the execution, delivery and performance by the party of this
Agreement.

 

Party required to deliver: Party A &
Party B

 

Date by which to be delivered: Upon execution
of this Agreement

 

33

 

Covered by Section 3(d) Representation:
Yes

 

(b)         A certificate of an
authorized officer of the party, certifying the names, true signatures and
authority of the officers of the party signing this Agreement.

 

Party required to deliver: Party A &
Party B

 

Date by which to be delivered: Upon execution
of this Agreement

 

Covered by Section 3(d) Representation:
Yes

 

(c)          An opinion of counsel to
the party substantially in the form set forth in Exhibit I or II, as the case
may be, and covering such other matters as reasonably requested by the receiving
part.

 

Party required to deliver: Party A &
Party B

 

Date by which to be delivered: Upon execution
of this Agreement

 

Covered by Section 3(d) Representation:
No

 

(d)         Such other documents as
the other party may reasonably request in connection with each Transaction.

 

Party required to deliver: Party A &
Party B

 

Date by which to be delivered: Promptly upon
request

 

Covered by Section 3(d) Representation:
No, unless otherwise agreed to by the parties at the time such documents are
requested.

 

PART 4

 

Miscellaneous

 

(1) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice
of law doctrine.

 

(2) Process Agent. For the purpose of Section 13(c) of the
Agreement:

 

Party B appoints its Process Agent in the State of New York: CT
Corporation, 1630 Broadway, New York, New York 10019.

 

(3) Offices. The provisions of Section 10(a) of the Agreement will
apply.

 

(4) Multibranch Party. For the purpose of Section 10 of the Agreement:

 

Party A is not a Multibranch Party.

 

Party B is not a Multibranch Party.

 

(5) Address for Notices. For the purpose of Section 12(a) of the
Agreement:

 

34

 

(a) Address for notice or communications to Party A:

 

	
  Citibank, N.A., New York head Office

  
	
  399 Park Avenue, 7th Floor

  
	
  New York, New York 10043

  
	
  Attention: Vice President in Charge of
  Global Derivatives

  

 

(b) Address for notice or communications to Party B:

 

	
  Northwest Airlines, Inc.

  
	
  5105 Northwest Drive

  
	
  Department A4192

  
	
  St. Paul, Minnesota 55111

  

Attention: David Zanussi, Fuel Department

 

	
  Telefax No.: (612) 726-4851

  	
  Telephone No.: (612) 726-7496

  
	
  Courier Address: Northwest Airlines, Inc.
  2700 Lane Oak Parkway, Eagan, Minnesota 55121

  
	
  (For all purposes)

  

 

(6) Calculation Agent. The Calculation Agent is Party A, unless
otherwise specified in a Confirmation in relation to the relevant Transaction.

 

(7) “Affiliate” will have the meaning specified in Section 14 of
the Agreement.

 

(8) Credit Support Document. None

 

(9) The Credit Support Provider. None.

 

(10) Netting of Payments. Subparagraph (ii) of Section 2(c) of the
Agreement will not apply with respect to Transactions entered into by the New
York Office of party A which involve a “Commodity” as such term is defined in
the 1993 ISDA Commodity Derivatives Definitions (as published by the
International Swaps and Derivatives Association).

 

PART 5

Other
Provisions

 

(1)                    Single
Agreement. The phrase “(evidencing Trnasactions heretofore or heareafter
entered into between Party A and Party B)” is here by added after the work
Confirmations” in Section 1(c).

 

(2)                    Confirmations.
Notwithstanding anything to the contrary in the Agreement:

 

(a)                    the parties
hereto agree that with respect to each Transaction hereunder a legally binding
agreement shall exist from the moment that the parties hereto agree on the
essential terms of such Transaction, which the parties anticipate will occur by
telephone.

 

(b)                   For each
Transaction Party A and party B agree to enter into hereunder, Party A shall
promptly send to Party B a Confirmation setting forth the terms of such
Transaction. Party B shall execute and return the Confirmation to Party A or
request correction of any error within three Business Days of receipt. Failure
of Party B to respond within such period shall not affect the validity or
enforceability of such Transaction and shall be deemed to be an affirmation of
such terms.

 

35

 

(3)                    Deferral of
Payments and Deliveries in Connection with Illegality; Interest on Deferred
Payments. The phrase “, Illegality” is hereby added after the word “default”
the first time it appears in Section 2(a(iii). The following is added at
the end of Section 2(a)(iii):

 

“Any obligation deferred pursuant to this Section 2(a)(iii) as a
result of any of the foregoing, where the deferred obligation is subsequently
met by the defaulting party and no early Termination Date in respect thereof
was designated or automatically deemed designated, shall bear interest at the
Non-default Rate from the date such obligation would have been payable or
deliverable (but for this Section to but excluding the date, if any, such
obligation is paid.”

 

(4)                    Absence of
Litigation. Section 3(c) is hereby amended by adding in the second line
thereof after the work “governmental” the words “or regulatory”.

 

(5)                    Accuracy of
Specified Information. Section 3(d) is hereby amended by adding in the
third line thereof after the word “respect” and before the period: “or, in the
case of financial statements, a fair presentation of the financial condition of
the relevant party”.

 

(6)                    Additional
Representations. Section 3 of the Agreement is hereby amended by adding at
the end thereof the following subsections:

 

(g) Eligible Swap Participant. It is an
“eligible swap participant” as that term is defined by the Commodity Futures
Trading Commission at 17 C.F.R. § 35.1 (b)(2).

 

(h) With respect to Party B, it is a
producer, processor, merchandiser or commercial user of the commodity relevant
to each intended option, cap or floor transaction involving commodity prices
and will enter same solely for purposes related to said business.

 

(i) The economic terms of this Agreement and
each Transaction have been individually tailored and negotiated by it; and the
creditworthiness of the other party was or will be a material consideration in
its entering into or determining the terms of this Agreement and such
Transaction.

 

(j) It has entered into this Agreement
(including each Transaction evidenced hereby) in conjunction with its line of
business (including financial intermediation services) or the financing of its
business.

 

(k) The individual(s) executing and
delivering this Agreement and any other documentation (including any
Confirmation) relating to the Agreement to which it is a party or that it is
required to deliver are duly empowered and authorized to do so, and it has duly
executed and delivered this Agreement.

 

(l) In connection with the negotiation of,
the entering into, and the confirming of the execution of, this Agreement, each
Transaction and any other documentation relating to this Agreement to which it
is a party hereto or thereto or that it is required by this Agreement to
deliver: (i) the other party hereto or thereto is not acting as a fiduciary or
financial investment advisor for it; (ii) it is not relying (for purposes of
making any investment decision or otherwise) upon any advice, counsel or
representations (whether written or oral) of the other party hereof or thereto
other than the representations expressly set forth in this Agreement and in any
Confirmation; (iii) the other party hereto or thereto has not given to it
(directly or indirectly through any other person) any assurance, guaranty, or
representation whatsoever as to the expected or projected success,
profitability, return, performance, result, effect, consequence, or benefit
(either legal, regulatory, tax, financial, accounting, or otherwise) of this
Agreement, such Transaction or other documentation; (iv) it has consulted with
its own legal, regulatory, tax, business, investment, financial, and accounting
advisors to the extent it has deemed necessary, and it has made its own
investment, hedging, and trading decisions (including decisions regarding the
suitability of any Transaction pursuant to this Agreement) based upon its own
judgment and upon any advice from such advisors as it has deemed necessary and
not upon any view expressed by the other party hereto or thereto; (v) it has
determined that the rates, prices or amounts and other terms of each
Transaction and the indicative quotations (if any) provided by the other party
hereto or thereto reflect those in the relevant market

 

36

 

for similar transactions, and all trading
decisions have been the result of arm’s length negotiations between the
parties; (vi) it is entering into this Agreement, each Transaction and any
other documentation relating to this Agreement with a fullunderstanding of all
of the items, conditions and risks hereof and thereof (economic and otherwise),
and it is capable of assuming and willing to assume (financially and otherwise)
those risks; and (vii) it is a sophisticated investor.

 

(m) It is entering into this Agreement, each
Transaction and any other documentation relating to this Agreement or any
Transaction as principal (an not as agent or in any other capacity, fiduciary
or otherwise).

 

(7)                    Tax event. The
following is hereby inserted in Section 5(b)(ii) before the words “there
is a substantial likelihood that”: “in the written opinion of counsel of
recognized standing (which may include in-house legal counsel)”.

 

(8)                    Set-off.
Section 6 of the Agreement is amended by adding the following new
subsection 6(f):

 

Setoff and Related Matters. Any amount (the “Early
Termination Amount”) payable to one party (the Payee) by the other party (the
Payer) under Section 6(e), in circumstances where there is a Defaulting
Party will, at the option of the party (‘X’) other than the Defaulting Party
(and without prior notice the Defaulting Party), be reduced by its set-off
against any amount(s) (the “Other Agreement Amount”) payable (whether at such
time or in the future or upon the occurrence of a contingency) by the Payee to
the Payer (irrespective of the currency, place of payment or booking office of
the obligation) under any other agreement(s) between the Payee and the Payer or
instrument(s) or undertaking(s) issued or executed by one party to, or in favor
of, the other party (and the Other Agreement Amount will be discharged promptly
and in all respects to the extent it is so set-off). X will give notice to the
other party of any set-off effected under this Part 5(8).

 

For this purpose, either the Early
Termination Amount or the Other Agreement Amount (or the relevant portion of
such amounts) may be converted by X into the currency in which the other is
denominated at the rate of exchange at which such party would be able, acting
in a reasonable manner and in good faith, to purchase the relevant amount of
such currency.

 

If an obligation is unascertained, X may in
good faith estimate the obligation and set-off in respect of the estimate,
subject to the relevant party accounting to the other when the obligation is
ascertained.

 

Nothing in this Part 5(8) shall be effective to
create a charge or other security interest. This Part 5(8) shall be without
prejudice and in addition to any right of set-off, combination of accounts,
lien or other right to which any party is at any time otherwise entitled
(whether by operation of law, contract or otherwise).

 

(9)                    Netting
Provisions. If an Early Termination Date is designated, amounts determined in
respect of all Terminated Transactions shall, to the fullest extent permitted
by law, be aggregated with and netted against one another in performing the
calculations contemplated by Section 6(e) of this Agreement. Any
Terminated Transaction(s) that cannot be so aggregated and netted pursuant to
the application of the previous sentence shall be aggregated and netted amongst
themselves to the fullest extent permitted by law. Any Terminated Transactions
that cannot be so aggregated and netted amongst themselves shall instead be
(and is hereby agreed always to have been) governed by, and subject to, (i) the
terms and conditions set out in any relevant agreement otherwise superseded by
this Agreement or (ii) if no such agreement exists, the terms and conditions
set out in the relevant Confirmation(s) with respect to such Transaction(s).

 

(10)              Severability. Any
provision of the Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of the Agreement or affecting the

 

37

 

validity or enforceability of such provision
in any other jurisdiction unless such severance shall substantially impair the
benefits of the remaining portions of this Agreement or changes the reciprocal
obligations of the parties. The parties hereto shall endeavor in good faith
negotiations to replace the prohibited or unenforceable provision with a valid
provision, the economic effect of which comes as close as possible to that of
th prohibited or unenforceable provision.

 

(11)            WAIVER OF JURY TRIAL.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
PROCEEDINGS.

 

(12)              Telephonic
Recording. The parties agree, subject to any consent required by applicable
law, that each may electronically record the telephonic conversations between
them and that any such tape recordings may be submitted in evidence in any
Proceedings relating to the Agreement. In the event of any dispute between the
parties as to the terms of a Transaction governed by the Agreement or the obligations
thereby created prior to the execution of a Confirmation for such Transaction,
the parties may use electronic recordings between the persons who entered into
such Transaction as the preferred evidence of the terms of such Transaction.

 

(13)              Transfer.
Any assignment and transfer made in conformity with Section 7 shall
release (i) the transferring party from its obligations under this Agreement
and any Credit Support Document as it relates to any Transaction(s) so assigned
and (ii) any Credit Support Provider of its obligation under any Credit Support
Document as it relates to such Transaction(s) so assigned. Each party shall
consider promptly any request for any required consent to transfer made by the
other party. No person other than the parties hereto and their respective
successor and permitted assigns shall acquire or have any right under, or by
virtue of, this Agreement or any Credit Support Document.

 

(14)              Definitions. This
Agreement and each Transaction are subject to the 1991 ISDA Definitions (except
that references to “Swap Transactions” will be deemed to be references to
“Transactions”), and the 1993 ISDA Commodity Derivatives Definitions (the
“Definitions”), each of which is incorporated herein by reference, and will be
governed by the provisions of the Definitions, without regard to any amendments
to the Definitions subsequent to the date hereof unless agreed to in writing by
the parties hereto. In the event of any inconsistency between the provisions of
any Confirmation and this Agreement or the Definitions, such Confirmation will
prevail for the purpose of the relevant Transaction.

 

IN WITNESS WHEREOF the parties have executed this document on the
respective dates specified below with effect from the date specified on the
first page of this document.

 

	
  CITIBANK, N.A.. NEW YORK

  	
   

  	
   

  	
  NORTHWEST AIRLINES, INC.

  	
   

  
	
  (Name of
  Party)

  	
   

  	
   

  	
  (Name of
  Party)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Barbara A. Schweizer

  	
   

  	
   

  	
  By:

  	
  /s/ Joseph E. Francht, Jr.

  	
   

  
	
  Name:

  	
  Barbara A. Schweizer, V.P.

  	
   

  	
  Name:

  	
  Joseph E. Francht, Jr.

  
	
  Title:

  	
  Trading Products Documentation

  Unit

  	
   

  	
  Title:

  	
  Senior Vice President

  Finance and Treasurer

  
	
  Date:

  	
  2/6/97

  	
   

  	
  Date:

  	
  2/12/97

  
												

 

38

 

EXHIBIT I

 

 

FORM OF
OPINION OF COUNSEL FOR CITIBANK

 

 

(Date satisfactory to
recipient)

 

Address:

 

 

 

Ladies and Gentlemen:

 

This opinion is furnished to you pursuant to the Schedule to the
Master Agreement dated as of
                          
(the “Agreement”), between Citibank, N.A. (“Citibank”) and
                        .
Terms defined in the Agreement and used but not defined herein have the
meanings given to them in the Agreement.

 

I am Legal Counsel to Citibank. In connection with the execution and
delivery of the Agreement, I have examined such documents as I have deemed
necessary or appropriate for the opinions expressed herein.

 

Based on the foregoing and upon such investigation as I have deemed
necessary, I am of the opinion that, so far as the laws of the United States of
America and of the State of New York are concerned:

 

(1)          Citibank is a banking
association duly existing under the laws of the United States of America.

 

(2)          Citibank has full
corporate power to execute and deliver the Agreement and to perform its
obligations thereunder.

 

(3)          Such actions have been
duly authorized by all necessary corporate action, and are not in conflict with
the corporate charter and related documents of Citibank.

 

(4)          No consents,
authorizations or approvals are required for the execution and delivery by
Citibank of the Agreement and the performance of its obligations thereunder,
and no other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for such execution, delivery or
performance.

 

39

 

(5)          The Agreement has been
duly executed and delivered by Citibank and constitutes the legal, valid and
binding obligation of Citibank enforceable in accordance with its terms (except
as enforcement thereof may be limited by bankruptcy, reorganization, insolvency,
moratorium or other laws affecting the enforcement of creditors’ rights
generally and by general principles of equity).

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Legal Counsel

  Citibank

  

 

40

 

EXHIBIT II

 

FORM OF
OPINION OF COUNSEL FOR ý

 

(Date satisfactory to
recipient)

 

Citibank, N.A.

399 Park Avenue

7th Floor

New York, New York 10043

 

Ladies and Gentlemen:

 

This opinion is furnished to you pursuant to the Schedule to the
Master Agreement dated as of
              ,
19    (the “Agreement”) between
                          
(“ý”) and you.
Terms defined in the Agreement and used but not defined herein have the
meanings given to them in the Agreement.

 

We have acted as counsel to ý
in connection with the preparation, execution and delivery of the Agreement. In
that connection we have examined such documents as we have deemed necessary or
appropriate for the opinions expressed herein.

 

Based on the foregoing and upon such investigations as we have deemed
necessary, we are of the opinion that, so far as the laws of
                              
are concerned:

 

(a)                                  ý
is duly organized and validly existing and has the power and authority to
execute and deliver, and to perform its obligations under, the Agreement.

 

(b)                                 The
execution and delivery of the Agreement by ý
and the performance of its obligations thereunder have been and remain duly
authorized by all necessary action and do not contravene any provision of its
certificate of incorporation or by-laws (or equivalent constituent documents)
or any law, regulation or contractual restriction binding on or affecting it or
its property.

 

(c)                                  All
consents, authorizations and approvals (including, without limitation, exchange
control approvals) required for the execution and delivery by ý
of the Agreement and the performance of its obligations thereunder have been
obtained and remain in full force and effect, all conditions thereof have been
duly complied with, and no other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for such execution,
delivery or performance.

 

41

 

(d)                                 The
Agreement is a legal, valid and binding obligation of ý,
enforceable against ý in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).

 

 

	
   

  	
  Very truly yours,

  

 

42

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