Exhibit 10.32


 


 


 


 


NORTHWEST AIRLINES CORPORATION


 


KEY EMPLOYEE ANNUAL CASH INCENTIVE PROGRAM


 


PLAN
DOCUMENT


 


 





















 


1.              Program
Objective


 


Northwest Airlines
Corporation (“Northwest”) has adopted this Key Employee Annual Cash Incentive
Program (“Program”) to retain key employees at its subsidiary companies, to
encourage teamwork and individual performance, and to support a diverse work
force.


 


2.              Definitions


 


A.           “Base Salary”
is a Participant’s annual salary exclusive of any bonus, incentive plan
payment, pension or other employer-paid benefit and all other items of
extraordinary compensation, but shall include for purposes of the Program, 1)
the amount of any reduction in Base Salary to which a Participant has agreed as
part of any deferred arrangement under Internal Revenue Code Section 401(k);
and 2) payments made to a Participant for absence from work due to illness,
injury, or approved medical leaves of absence.


 


B.             “Committee” is
the Compensation and Stock Option Committee of the Board of Directors.


 


C.             “Participant”
is a full time salaried employee of a Participating Employer designated to
participate in the Program.


 


D.            “Participating
Employer” is Northwest Airlines, Inc. and any other subsidiary of Northwest
that has elected to be a Participating Employer with approval of such
subsidiaries’ Board of Directors and the President and CEO of Northwest.


 


E.              “Performance
Formula” is the equation or table used to establish a relationship between
specific levels of achievement of the Performance Goals established under
paragraph (a) of section 4 of this Program and specified levels of payment,
expressed as a percentage of the Target Incentive Level.


 


F.              “Program Year”
is the fiscal year of Northwest.


 


G.             “Target
Incentive Level” is that amount approved by the Committee as the percentage of
salary paid to Participants for completion of the Performance Goals established
under paragraph (a) of section 4 of this Program.


 


H.            “Total and
Permanent Disability” of a Participant is the cessation of employment of such
Participant under circumstances where the Participant is eligible to receive a
monthly disability benefit pursuant to the long-term group disability insurance
program sponsored by his/her Participating Employer; or would be eligible to
receive such a benefit if he/she was a Participant in said program.


 


3.              Participation


 


a)                                     Eligibility; Participation


A Participant is a key
employee of a Participating Employer who is compensated by salary and who has
been approved by the Participating Employer as a participant in the Program for
the Program Year.  Participation in one
Program Year shall not be determinative of an employee’s eligibility to
participate in subsequent Program Years.


 


b)                                     Key Employee Groups


Upon the recommendation of
the President & CEO of Northwest, the Committee may designate one or more
employee groups as participants in the Program.


 





















 


4.              Program
Performance Terms


 


Subject
to the terms hereof, Participants shall receive awards within three months
after the conclusion of a Program Year. 
Awards, if any, shall be based on eligibility and performance against
goals established under paragraph (a) of this section.


 


a)                                     Performance Measures


Performance Goals shall be
established for each Participant at the commencement of each Program Year.  Annual Performance Goals shall be established
for each Participant, for each of the following Performance Measures:


 


(1)        Subsidiary
Financial Performance


The financial performance
goal for each subsidiary shall be established at the discretion of the
President & CEO of Northwest and approved by the Committee.


 


(2)        Individual
Objective Performance


Individual eligible
Participants shall, in conjunction with the appropriate supervisor, establish
individual performance objectives (MBOs). 
Such MBOs shall be approved at the discretion of the appropriate
supervisor.


 


(3)        Diversity
Goal Performance


Hiring, promotion, and
affirmative action goals with respect to protected classes of workers shall be
established by individual eligible Participants, in conjunction with the
appropriate supervisor, and approved by the appropriate Human Resources unit.


 


b)                                     Performance Measure Weightings


Each Participant in the
Program shall be assigned weightings for each of the three Performance Measures
established under paragraph (a) of this section.  The sum of these three weightings shall equal
100%.


 


c)                                      Target Incentive Level


Each Participant in the
Program shall be assigned a Target Incentive Level at the discretion of the
President & CEO of Northwest and approved by the Committee.


 


d)                                     Performance Formula


A Performance Formula shall
be established at the discretion of the President & CEO of Northwest and
approved by the Committee at the commencement of each Program Year.  Such Performance Formula shall establish the
relationship between specific levels of achievement of the Performance Goals
established under paragraph (a) of this section and specified levels of
payment.


 


e)                                      Award Determination


Individual Objective
Performance and Diversity Goal Performance against goals established under
paragraph (a) of this section shall be evaluated by the appropriate supervisor
of each Participant within three months after the end of the Program Year in
question.  Subsidiary Financial
Performance against goals established under paragraph (a) of this section shall
be approved by the Committee.  Based on
such evaluations, a cash award shall be calculated for each Participant.  All award evaluations and calculations shall
be subject to review by the President & CEO of Northwest and approval by
the Committee.


 


5.              Termination
and Change of Status


 


a)                                     Termination Rule


Except as otherwise provided
herein, in order for a Participant to receive an award for Program Year, the
eligible Participant must be an active, full-time employee of a Participating
employer at the time awards are distributed. 
Employees who resign, terminate, or, otherwise discontinue employment
during the Program Year or prior to actual distribution of any award shall be
ineligible 


 





















 


to receive an award.  Employees who are subject to a reduction in
force shall not receive an award, nor shall any employee who receives a
severance package as a part of termination of employment.


 


b)                                     Exceptions


(1)                    Retirement —
If, during a Program Year, a Participant retires in accordance with the
Participating Employer’s retirement policies, the Participant may, nonetheless,
be eligible to receive an award for the Program Year provided the Participant
receives Executive Vice President approval (for Directors and Managing
Directors) or President & CEO approval (for Vice Presidents, Sr. Vice
Presidents and Executive Vice Presidents). 
Such awards shall be based on the Base Salary paid to such Participant.


 


(2)                    Death or Total
and Permanent Disability — If, during a Program Year, a Participant dies or
becomes permanently disabled, the Participant shall be eligible to receive an
award for the Program Year, which shall be prorated based on the Base Salary
paid to such Participant.


 


6.              Payment of
Cash Awards


 


a)                                     Payment Date


Within three months after
awards have been calculated for the Program Year and the calculations have been
approved by the Committee or the President & CEO of Northwest,
Participating Employers shall pay cash awards to eligible Participants.


 


b)                                     Payment Upon Death


In the event of a
Participant’s death, payment of any awards to which the Participant may be
entitled pursuant to Section 5 shall be made to the legal representative of the
decedent’s estate.


 


7.              Administration
and Miscellaneous


 


a)                                     Amendment; Termination


The committee shall have the
sole discretion and authority to amend or terminate the Program at any
time.  Amendment or termination shall
extinguish the rights of Participants or beneficiaries to receive payment
attributable to the Program.


 


b)                                     Status of Participants’ Claims


All payments under this Program
are made from the general assets of the Participating Employer.  All Awards under this Program are unfunded,
unsecured, general contractual obligations of the Participating Employer.  The Program does not create any lien on, or
security in, any property of Northwest or its subsidiaries.


 


c)                                      Not an Employment Contract


Neither this Program nor
participation in this Program shall be construed as creating any agreement as
to continued employment with Northwest. 
All Participants herein are “at will employees” subject to the rules and
regulations of the Participating Employers.


 


d)                                     Withholding of Taxes


There shall be deducted from
all distributions under the Program the amount of any taxes or other deductions
that the Participating Employer may be required to withhold by any federal,
state, or local government.  Participants
shall be responsible for payment of any and all federal, state, local, foreign
or other taxes imposed on amounts paid under the Program.  Participating Employers assume no
responsibility for the tax consequences to the Participant for his/her
participation in the Program.


 





















 


e)                                      Effective Date of Program


 


This Program shall be
effective as of January 1, 1993 and shall continue until terminated by the
President & CEO of Northwest or the Committee, with or without prior
notice.


 





















 


 


NORTHWEST AIRLINES


 


KEY EMPLOYEE ANNUAL CASH


 


INCENTIVE PROGRAM


 


SUMMARY


 





















 


NORTHWEST AIRLINES CORPORATION


KEY EMPLOYEE ANNUAL CASH
INCENTIVE PROGRAM


SUMMARY


 


A.            PROGRAM
OBJECTIVES


 


The Key Employee Annual Cash Incentive Program has the
following corporate objectives:


 


•                  To
retain and reward key employees by delivering competitive total annual cash
compensation.


 


•                  To
encourage teamwork and drive individual performance by providing rewards for
achievement of corporate performance goals as well as individual performance
objectives.


 


B.            ELIGIBILITY FOR PARTICIPATION


 


Participation in the Key Employee Annual Cash
Incentive Program (the “Program”) is restricted to employees who regularly and
directly make or influence decisions which significantly influence the
financial and operating performance of the company.  Participation in the plan is subject to
review and approval on an annual basis by the Compensation Committee of the
Board of Directors (the “Committee”).


 


C.            TARGET INCENTIVE LEVELS


 


The size of the potential cash incentive
awards varies by employee group.  Each
employee group has a Target Incentive Level, which is the percentage of salary
paid to participants for completion of established financial and individual
goals.  Target Incentive Levels are
established by the Committee from time to time and are expressed as a
percentage of base salary.


 


D.            PERFORMANCE MEASURES


 


The Program includes the following two
performance measures, with the weightings on each measure dependent upon the
employee group involved.


 


Airline Financial Performance


 


As measured by Northwest Airlines
Corporation’s income contribution (an indicator of profitability excluding the
cost of ownership).  Performance below
the threshold set for the plan year results in no cash incentive award being
distributed, including the Individual Goal Performance portion of the award.  


 


Individual
Performance


 


As measured under the Company’s Performance
Management System.  Participants who
achieve a rating lower than 3.0 on either the MBO or Competency component of
the Individual Performance Rating will receive no payout from the incentive
program unless otherwise approved by the Compensation Committee.  Performance on this component is driven by
individual performance against goals that are in alignment with Northwest’s
corporate and strategic objectives.


 


E.             PERFORMANCE MEASURE WEIGHTINGS


 


The relative weighting of the components vary
by employee level.  For employees at the
officer level, 75% of the individual target will be weighted on Airline
Financial Performance and 25% weighted on individual performance.  For employees below the officer level, 50%
will be weighted on Airline Financial Performance, and the remaining 50% will
be weighted on individual performance.


 





















 


F.             AWARD DETERMINATION


 


Incentive awards are determined for each
participant based on actual performance against goals established for each of
the performance measures.  Award pay-outs
are made in cash.


 


(1)           Airline
Financial Performance


 


The Airline Financial portion of the cash
incentive award is based on the degree to which Northwest Airlines Corporation
meets its income contribution target for the year.  A Performance Formula is established
annually, which specifies levels of payment for specific levels of income
contribution, expressed as a percentage of the Target Incentive Level amount.


 


Income contribution that falls below the
threshold for a given year results in no cash incentive awards being
distributed (including the Individual Goal Performance portion of the
award).  Payouts above target require
that a Net Profitability Threshold
be met.  The Net Profitability Threshold is established by the
Compensation Committee annually.


 


(2)           Individual
Performance


 


The Individual Performance portion of the
award is based on an assessment of each participant’s individual performance
using the Company’s Performance Management System.  The Overall Performance Rating, which is a
combination of the Goal Rating and the Competency Rating, determines a participant’s
payout for the Individual Performance factor relative to the target
payout.  Participants who receive less
than 3.0 on either the MBO or Competency components of the Overall Performance
Rating are not eligible for any payment under the Program unless approved by
the Compensation Committee.  The maximum
payout percentage a participant could achieve would be 200% of the target
payout.  A participant’s actual payout
percentage is based on his or her performance relative to other participants in
the respective Division, the Division’s overall performance and the Division’s
total pool of incentive dollars available for distribution.


 


G.            CASH INCENTIVE APPROVAL


 


Preliminary awards are determined by the
senior management of each division and are submitted to Human Resources for
evaluation and reporting to the CEO. 
Payouts under the Plan must be approved by the Compensation Committee of
the Board of Directors.


 


H.            DISTRIBUTION OF AWARDS


 


Incentive awards are generally calculated in
January, following the completion of individual performance reviews and the
determination of airline financial results, and checks are distributed to
eligible participants in mid-February in the year following the incentive
year, with the appropriate amount of tax and other deductions withheld.  To be eligible to receive an award, a
participant must be actively employed in an incentive-eligible position at the
time awards are distributed. 
Participants who are hired or promoted into incentive-eligible positions
during the plan year are eligible for participation on a prorated basis
providing they are in their position for a minimum of 90 days.