**EXHIBIT 10.1**

 

 

 

 

MANAGEMENT COMPENSATION AGREEMENT

 

between

 

NORTHWEST AIRLINES, INC.

 

and

 

DOUGLAS M. STEENLAND

 

dated as of

 

September 14, 2005

 

 

 

 

 

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MANAGEMENT COMPENSATION AGREEMENT

 

MANAGEMENT COMPENSATION AGREEMENT made as of the 14th day ofSeptember, 2005 between Northwest Airlines, Inc., a Delaware corporation (the “Company”)and Douglas M. Steenland (the “Executive”).

 

PREAMBLE

 

Whereas, since the execution of the Prior Agreement, Executive has beenpromoted to the position of Chief Executive Officer of the Company and serveson the Board of Directors of the Company; and

 

Whereas, Executive and the Company wish to update the Prior Agreementto reflect the changes applicable to Executive in his new position as ChiefExecutive Officer; and

 

Whereas, Executive has accepted a reduction in his compensationeffective December 1, 2004 associated with the Company’s overall efforts torealize labor cost savings; and

 

Whereas, Executive and the Company do not intend in this Agreement anymaterial changes in Executive’s overall current compensation levels, asreflected in the Prior Agreement and current practice and this Agreement istherefore largely a restatement of the Prior Agreement; and

 

Whereas, Company acknowledges that Executive has a colorable claim ofbreach under the Prior Agreement as a result of the Company’s failure to paycompensation due Executive as a result of the Airline-Related Assistance underthe Emergency War Time Supplemental Appropriations Act, 2003 and that shouldsuch breach have occurred and be asserted, that Executive might be entitled toterminate the Prior Agreement and collect severance thereunder; and

 

Whereas, Executive and the Company agree that Executive, by enteringinto this Agreement, waives any claims that he may have for any such breach bythe Company; and

 

Whereas, Executive and the Company, given the financial situation ofthe Company and the airline industry generally, wish to include in theAgreement certain provisions that would be applicable should Company file forreorganization under Title 11, United States Code, as amended (the “BankruptcyCode”).

 

Accordingly, as of the date hereof, the Company and Executive haveagreed to replace the Prior Agreement with this Agreement, which shallsupersede the Prior Agreement in all respects.

 

1.             Termsof Employment.

 

1.1           Employment.  The Company agrees to continue to employExecutive, and Executive agrees to continue to serve the Company, on the termsand conditions set forth herein.

 

 

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1.2           Position and Duties.  Executive shall continue to have his title,powers and duties as on the Effective Date and shall have such other powers andduties as may from time to time be prescribed by the Board, providedthat such powers and duties are consistent with or represent a promotion fromExecutive’s duties as of the Effective Date, unless otherwise consented to inwriting by Executive.  Executive shalldevote substantially all his working time and efforts to the business andaffairs of the Company and its subsidiaries, and shall report exclusively tothe Board.  The Company shall causeExecutive to be nominated for election as a director of the Company and shalluse its best efforts to continue to secure such election during the term ofExecutive’s employment hereunder.

 

2.             Compensation.During the term of Executive’s employment hereunder, Executive shall receivethe compensation and benefits set forth in this Section 2.

 

2.1           Base Salary.  Executive’s Base Salary shall be his annualbase salary in effect on the Effective Date, as increased thereafter by theCompany.  Executive’s Base Salary shallbe payable in accordance with the Company’s normal payroll policies.

 

2.2           IncentiveCompensation.

 

### (a)           Executive shall beentitled to participate in the Company’s Key Employee Cash Incentive BonusProgram (“KEACIP”), the Company’s 2003 Long-Term Incentive Compensation Program(“LTIP”) and any successor or additional incentive and/or retentioncompensation plans, the terms and conditions of which shall be established bythe Board from time to time; provided that any successor plans shall be no lessfavorable to the Executive than the respective plans in effect on the EffectiveDate; and provided further that Executive’s target incentive compensation underthe KEACIP shall be no less than 100%, and under the LTIP shall be no less than150%, of Executive’s Base Salary.  Inaddition, Executive’s target awards under the KEACIP and the LTIP, and anysuccessor or additional incentive and/or retention plans, shall not be lessthan the target awards applicable to any other Company employee.

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### (b)           Executive shall beentitled to receive the benefits provided by the Company’s E-Commerce Plan (the“E-Commerce Plan”), the terms of which are hereby incorporated by referenceinto this Agreement.

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2.3           Expenses.  Executive shall be entitled to receive promptreimbursements for all reasonable expenses incurred in performing serviceshereunder, provided that Executive properly accounts therefor inaccordance with written Company policy.

 

2.4           Compensation and Benefit Programsof the Company.  Executive shallparticipate in the Company’s employee compensation, benefit and perquisiteprograms (or any successor programs) at levels in effect on the Effective Date;provided, however, that Executive shall not participate in any severancepay plan maintained by the Company except to the extent necessary to receiveany severance or incentive compensation payments specifically provided forhereunder.

 

2.5           Medical Benefits.  Executive shall be reimbursed by the Companyfor all out of pocket medical expenses incurred by him and not otherwise paidor provided for under any medical plan maintained for the benefit of Executive.

 

 

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2.6           ExcessPlan; SERP.

 

#### (a)           Executive shall be a participant in the Company’s ExcessPension Plan for Salaried Employees (the “Excess Plan”) and the Company’sSupplemental Retirement Program (the “SERP”) on terms and conditions no lessthan those in effect of the Effective Date, copies of which are attached heretoand incorporated by reference, and Executive shall be entitled to receive thebenefits provided for therein.  Neitherthe Excess Plan nor the SERP may be amended or discontinued in a manner thatwould reduce or otherwise adversely affect the benefits of Executive accruedprior to the date of such amendment or termination.

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#### (b)           In addition to benefits provided to Executive under theSERP, Executive is hereby granted one (1) additional year of Benefit Servicefor each actual year of employment completed commencing on and after April 1, 2006,not to exceed six (6) additional years of Benefit Service.

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#### (c)           A pre-retirement death benefit shall be payable in theevent of Executive’s death while employed hereunder, to the individual who wasExecutive’s spouse on the date of death. Such benefit shall be in an amount equal to 50% of the Executive’s BaseSalary at the time of his death and such amount shall be payable annually for amaximum of ten (10) years or, if earlier, until the Executive would haveattained age 65.

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2.7           PotentialReductions in Compensation. Executive and the Company acknowledge that in December of 2004,Executive agreed to certain reductions in compensation, including a 15%reduction in Base Salary, in connection with Company-wide decreases inmanagement compensation.  Executivefurther consents to participate in such further prospective reductions in basesalary and incentive compensation as may be imposed by the Company onexecutives of the Company generally so that such reductions shall not ofthemselves give rise to Good Reason under this Agreement.

 

3.             OtherBenefits and Agreements.

 

3.1           Airline Pass, Barter TravelBenefits.  This hereby confirms thatExecutive has, and shall be entitled to, a lifetime F-1 airline pass for thepersonal use of such Executive and his spouse and children (hereinafter, “EligibleIndividuals”).  Such airline pass(the “Airline Pass”) entitles Executive and Eligible Individuals totravel on regularly scheduled Northwest domestic and international flights withboarding priority of F-1 or the equivalent thereof and on terms and conditionsno less favorable than those applicable to Executive on the date hereof.  Executive shall be entitled to use, for theremainder of his lifetime, all barter travel benefits earned to the date ofthis Agreement, plus $25,000 annually in value of such benefits.

 

3.2           Other Medical Benefits.  Executive and his spouse and covereddependents (only as long as they shall remain dependents) shall be entitled tomedical and dental coverage at the levels presently provided to Executive underthe Company’s medical plans without cost to Executive for the life of Executiveand his spouse; provided, however, if and for so long asExecutive is employed by another employer, medical coverage hereunder willbecome secondary to any coverage provided by the new employer.

 

 

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3.3           Life Insurance.  The Company shall continue to pay theremaining annual premium payments under the existing life insurance policies onExecutive with Northwestern Mutual Life Insurance Company dated as of March 19,2002 and September 16, 2004, respectively.

 

4.             Terminationof Employment.

 

4.1           Upon Death.  Executive’s employment hereunder shallterminate upon his death.

 

4.2           By the Company.  The Company may terminate Executive’semployment hereunder at any time with or without Cause.

 

4.3           By the Executive.  Executive may terminate his employmenthereunder at any time for any reason.

 

4.4           Notice of Termination, Payments.  Any termination of Executive’s employmenthereunder (other than by death) shall be communicated by thirty (30) days’advance written Notice of Termination by the terminating party to the otherparty to this Agreement; provided that no advance Notice of Terminationof Executive for Cause by the Company is required.  Unless otherwise provided in Section 5,any amounts owed by the Company to Executive pursuant to Section 5 shallbe paid on the Date of Termination.

 

5.             Paymentsin the Event of Termination of Employment.

 

5.1           Payments in the Event ofTermination by the Company for Cause or Voluntary Termination by Executive.  Except as provided in Section 5.3, ifExecutive’s employment hereunder is terminated by the Company for Cause or byExecutive other than for Good Reason, the Company shall pay Executive(a) his accrued and unpaid Base Salary through the Date of Termination and(b) any payments or other rights or benefits Executive may be otherwiseentitled to receive pursuant to the terms of (i) any retirement, pensionor other employee benefit or compensation plan maintained by the Company at thetime or times provided therein or (ii) Sections 2.6 and 3 hereof.

 

5.2           Payments in the Event of Any OtherTermination of Employment.  Except asprovided in Section 5.3, if Executive’s employment hereunder is terminatedby the Company other than for Cause, as a result of death or Disability or byExecutive for Good Reason:

 

#### (a)           The Company shall pay Executive (i) his accrued andunpaid Base Salary through the Date of Termination, (ii) any incentivecompensation under the KEACIP, the LTIP, or any successor incentivecompensation plans, for any calendar year or other period ended before the Dateof Termination, (iii) a pro rata share (based on days employed during theapplicable year) of the incentive compensation under the KEACIP, the LTIP orany successor incentive compensation plans Executive would otherwise havereceived with respect to the year or other period in which the Date ofTermination occurs, payable at the time the annual incentive compensation wouldotherwise be payable to Executive; provided, however, that 100%of the KEACIP (or successor annual plan) incentive compensation shall bedetermined solely with reference to the financial 

 

 

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#### performance of the Companyfor the year (based on the goals previously established with respect thereto)(rather than a portion of the annual incentive bonus determined on the basis ofindividual performance); provided, further, in the event thatCompany’s performance exceeds 100% of the financial performance target for theyear, that portion of the annual incentive bonus that would have, but for thisSection 5.2(a), related to the achievement of the individual performancetarget shall be 100% and provided further that the amount payable under theLTIP (or any successor long-term plan) shall be a pro-rata portion of thetarget incentive compensation under the LTIP determined by comparing the daysof employment during the applicable performance period to the total number ofdays in such period, (iv) any payments or other rights or benefitsExecutive may be otherwise entitled to receive pursuant to the terms of(x) any retirement, pension or other employee benefit or compensation planmaintained by the Company at the time or times provided therein or(y) Sections 2.6 and 3 hereof.

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#### (b)           In addition to the compensation and benefits described inSection 5.2(a):

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##### (i)            The Company shall pay Executive, as soon as practicable(but in no event later than ten (10) days) following Executive’stermination of employment, a lump sum amount equal to three (3) times thesum of (i) Executive’s Base Salary and (ii) the target annualincentive compensation, pursuant to Section 2.2, for Executive with respect tothe year in which the Date of Termination occurs (or if no target has been setfor that year, the target annual incentive compensation for the immediatelypreceding year); provided that in no event shall the target annualincentive compensation be less than 100% of Base Salary.

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##### (ii)           (A)  Executive shallbe entitled to all benefits accrued under the SERP and the Excess Plan,including, in the case of the SERP, of (i) six over (ii) the number ofadditional years of Benefit Service Executive is entitled to receive pursuantto Section 2.6(b).

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                (B)           Any amounts accrued with respect toExecutive under the E-Commerce Plan, whether then vested or unvested, currentlypayable or payable in the future, shall be paid to Executive in cash as soon aspracticable (but in no event later than ten (10) days) following Executive’stermination of employment, in a lump sum.

 

##### (iii)          With regard to group life insurance and group disabilityinsurance, until the earlier of the third anniversary of Executive’s Date ofTermination or the date Executive is employed by a new employer, Executive, hisdependents, beneficiaries and estate shall be entitled to all benefits undersuch group life insurance and group disability insurance as if Executive werestill employed by the Company hereunder during such period.  If any such benefits cannot be provided toExecutive for any reason, the Company shall pay to Executive, or pay Executivethe cost of obtaining, such benefits.

 

 

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##### (iv)          The Company shall reimburse Executive for all relocationexpenses associated with the relocation of Executive and his family more thanfifty (50) miles from Executive’s primary residence on the Date ofTermination that occurs within 36 months of the Date of Termination consistentwith the Company’s senior executive relocation policies.

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#### (c)           Executive shall not be required to mitigate the amount ofany payment provided for in this Section 5.2 by seeking other employmentor otherwise, and no such payment shall be offset or reduced as a result ofExecutive obtaining new employment.

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#### (d)           Notwithstanding anything else to the contrary in thisAgreement, the Company’s obligation to make the payments provided for inSections 5.2(a)(iii) and 5.2(b)(i), (ii) and (iii) is expressly conditionedupon the execution and delivery of a release in the form attached hereto asAppendix A.

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5.3           Payments for Certain Terminationsof Employment After a Change in Control or Emergence Date.  If Executive elects to terminate hisemployment for any reason during the six month period commencing on the firstanniversary of the Change in Control or during the 30-day period commencing onthe first anniversary of the effective date of a confirmed plan ofreorganization for the Company under the Bankruptcy Code, Executive shallreceive all of the payments, and shall be accorded all of the rights, set forthin Section 5.2 as soon as practicable (but in no event later thanten (10) days following such termination of employment.  All other terminations of Executive’semployment shall be governed by Sections 4 and 5 of this Agreementirrespective of a Change of Control.

 

5.4           Gross-upPayment.

 

### (a)           Excise Tax.

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##### (i)            If any payment or distribution by the Company to or forthe benefit of Executive (whether paid or payable pursuant to this Agreement orotherwise (a “Payment”)) is subject to the excise tax imposed bySection 4999 of the Internal Revenue Code of 1986, as amended (the “Code”)or any interest or penalties thereon (together, the “Excise Tax”) thenExecutive shall be entitled to an additional payment (a “Gross-Up Payment”)in an amount such that, after payment by Executive of all taxes including,without limitation, any income taxes (together with any interest or penaltiesthereon, the “Additional Income Tax”) or any Excise Tax, imposed uponthe Gross-Up Payment Executive retains an amount of the Gross-Up Payment equalto the Excise Tax imposed upon the Payments.

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##### (ii)           Subject to Section 5.4(a)(iii), all determinationsrequired to be made under this Section 5.4, including whether a Gross-UpPayment is required and the amount of such Gross-Up Payment, shall be made bythe firm of independent public accountants selected by the Company to audit itsfinancial statements (the “Accounting Firm”) which shall provide detailedsupporting calculations both to the Company and Executive withinfifteen (15) business days after the receipt of notice from Executive thatthere has been a Payment, or such 

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##### earlier time as is requestedby the Company.  All fees and expenses ofthe Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuantto this Section 5.4, shall be paid to Executive within five (5)business days after the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firmshall be binding upon the Company and Executive.  As a result of the uncertainty in theapplication of Section 4999 of the Code at the time of the initialdetermination by the Accounting Firm hereunder, it is possible that additionalGross-Up Payments should have been made by the Company (an “Underpayment”).  If the Company exhausts its remedies pursuantto Section 5.4(a)(iii) and Executive thereafter is required to make apayment of any Excise Tax, the Accounting Firm shall determine the amount ofthe Underpayment that has occurred and any such Underpayment shall be promptlypaid by the Company to or for the benefit of Executive.

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##### (iii)          Executive shall notify the Company in writing of any claimby the Internal Revenue Service that, if successful, would require the paymentby the Company of the Gross-Up Payment. Such notice shall be given as soon as practicable but no later thanten (10) business days after Executive knows of such Claim and shallapprise the Company of the nature and date of requested payment of suchclaim.  Executive shall not pay suchclaim before the earlier of (x) the date thirty (30) days afterExecutive’s notice to the Company or (y) the date on which payment of taxeswith respect to such claim is due.  Ifthe Company notifies Executive in writing prior to the expiration of suchperiod that it desires to contest such claim, Executive shall:

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###### (A)                              give theCompany any reasonably requested information relating to such claim;

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###### (B)                                take suchaction in connection with contesting such claim as the Company shall reasonablyrequest in writing from time to time, including, without limitation, acceptinglegal representation with respect to such claim by an attorney reasonably selectedby the Company;

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###### (C)                                cooperate withthe Company in good faith in order to effectively contest such claim; and

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###### (D)                               permit theCompany to participate in any proceedings relating to such claim; provided,however, that the Company shall bear and pay directly all costs andexpenses (including additional interest and penalties) incurred in connectionwith such contest and shall indemnify and hold such Executive harmless, on anafter-tax basis, for any Excise Tax or additional Income Tax imposed as a resultof such representation and payment of costs and expenses.  Without limiting this Section 5.4(iii),the Company shall control all proceedings taken in connection with such 

 

 

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######                                                 contest and, atits sole option, may (1) pursue or forgo any and all administrativeappeals, proceedings, hearings and conferences with the taxing authority inrespect of such claim and (2) either direct Executive to pay the taxclaimed and sue for a refund or contest the claim in any permissiblemanner.  Executive agrees to prosecutesuch contest to a determination before any administrative tribunal, in a courtof initial jurisdiction and in one or more appellate courts, as the Companyshall determine; provided, however, that if the Company directssuch Executive to pay such claim and sue for a refund, the Company shalladvance the amount of such payment to Executive, on an interest-free basis, andshall indemnify and hold Executive harmless, on an after-tax basis, from anyExcise Tax or Income Tax imposed with respect to such advance; and furtherprovided that any extension of the statute of limitations for the taxable yearof Executive with respect to which such contested amount is claimed to be dueis limited to issues with respect to which a Gross-Up Payment would be payablehereunder and Executive shall be entitled to settle or contest any other issueraised by the Internal Revenue Service or any other taxing authority.

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##### (iv)          If, after the receipt by Executive of any amount advancedby the Company pursuant to Section 5.4(a)(iii), Executive becomes entitledto receive any refund with respect to such claim, Executive shall (subject tothe Company’s complying with the requirements of Section 5.4(a)(iii))promptly pay to the Company the amount of such refund (together with anyinterest paid or credited thereon after taxes applicable thereto).  If, after the receipt by Executive of anamount advanced by the Company pursuant to Section 5.4(a)(iii), adetermination is made that such Executive shall not be entitled to any refundwith respect to such claim and the Company does not notify Executive in writingof its intent to contest such denial of refund prior to the expiration ofthirty (30) days after such determination, then such advance shall beforgiven and shall not be required to be repaid and the amount of such advanceshall offset, to the extent thereof, the amount of any Gross-Up Paymentrequired to be paid.

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### (b)           Income Tax.  The Company shall provide Executive with agross-up payment for any personal income tax liability arising from (i) theAirline Pass (and travel thereon) described in Section 3.1 or (ii)reimbursed relocation expenses pursuant to Section 5.2(b)(iv) (the “RelocationExpenses”), such that after the payment of all income tax liability associatedwith the Airline Pass and travel or the Relocation Expenses (including anyincome taxes on the gross-up payment) Executive retains an amount of thegross-up payment equal to the personal tax liability arising from Airline Pass andtravel or the Relocation Expenses, respectively.

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6.             Confidentiality;Non-Compete.

 

While employed by the Company and thereafter, Executive shall notdisclose any confidential information either directly or indirectly, to anyone(other than the Company, its employees and advisors), or use such informationfor his own account, or for the account of any other person or entity, withoutthe prior written consent of the company or except as required by law.  This confidentiality covenant has no temporalor geographical restriction.  Upontermination of this Agreement, Executive shall promptly supply to the Companyall property and any other tangible product or document which has been producedby, received by or otherwise submitted to Executive during or prior to his termof employment, and shall not retain any copies thereof.

 

Executive acknowledges that his services are of special, unique andextraordinary value to the Company. Accordingly, in the event Executive resigns without Good Reason or isterminated for Cause during the term hereof, Executive shall not at any timeprior to the first anniversary of the Date of Termination become an employee,consultant, officer, partner or director of any air carrier which competes withthe Company (or any of its affiliates) or have any significant interest (i.e.,10% or more of the voting stock) in any such air carrier.

 

Executive agrees that any breach of the terms of this Section 6would result in irreparable injury and damage for which there would be noadequate remedy at law, and that, in the event of said breach or any threat ofbreach, the Company shall be entitled to an immediate injunction andrestraining order to prevent such breach or threatened breach, without havingto prove damages, in addition to any other remedies to which the Company may beentitled at law or in equity.  Executivefurther agrees that the provisions of the covenant not to compete arereasonable.  Should a court determine,however, that any provision of the covenant not to compete is unreasonable,either in period of time, geographical area, or otherwise, the parties heretoagree that the covenant should be interpreted and enforced to the maximumextent which such court deems reasonable. The provisions of this Section 6 shall survive any termination ofthis Agreement and Executive’s term of employment.  The existence of any claim or cause of actionor otherwise, shall not constitute a defense to the enforcement of thecovenants and agreements of this Section 6.

 

7.             Successorsand Assigns.

 

### (a)           This Agreement shallbind any successor to the Company or to Significant Assets, whether bypurchase, merger, consolidation or otherwise, in the same manner and to thesame extent that the Company would be obligated under this Agreement if no suchsuccession had taken place. Notwithstanding that a successor to Significant Assets becomes bound tothis Agreement, the Company shall continue to be liable for the obligationshereunder as a guarantor.  In anyagreement providing for succession to Significant Assets, the Company shallcause each and every successor expressly and unconditionally to assume andagree to perform the Company’s obligations under this Agreement.

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### (b)           In the event thatanother air carrier directly or indirectly acquires Significant Assets, theCompany shall cause such airline to provide Executive and Eligible 

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### Individualswith pass privileges equivalent to those provided under the Airline Passdescribed in Section 3.1.

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### (c)           This Agreement andall rights of Executive hereunder shall inure to the benefit of and beenforceable by, Executive’s personal or legal representatives, executors,administrators, successors, heirs, distributes, devises and legatees.

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8.             Term.

 

### (a)           The term of thisAgreement shall commence on the Effective Date and end upon the Executive’stermination of employment.  The rightsand obligations of the Company and Executive shall survive the termination ofthis Agreement to the fullest extent necessary to give effect to the termshereof.

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### (b)           The Company agreesthat within fifteen (15) days after entry of an order for relief for theCompany under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Case”), theCompany shall make a motion under sections 363, 365 and 503(b) of theBankruptcy Code (the “Compensation Continuation Motion”) seeking the entry of afinal order, in form and substance satisfactory to Executive (the “Order”), (i)providing for the assumption of this Agreement, (ii) granting Executive anadministrative expense priority claim for all amounts paid, accrued and to beaccrued and payable under employee benefit and compensation plans in whichExecutive has participated, or in which he participates as of the commencementof such Chapter 11 Case (the “Commencement Date Benefit Plans”) and (iii)authorizing the Company to (A) continue the Commencement Date Benefit Plans asto Executive on a postpetition, administrative basis and make all paymentsrequired to be made thereunder or (B) establish replacement plans providingExecutive with benefits no less favorable to Executive than those that wouldhave accrued and become payable under the Commencement Date Benefit Plans butfor the commencement of the Chapter 11 Case. In the event that the Company files the Motion and obtains entry of theOrder, Executive shall be deemed to have provided all consents required undersection 365(c)(1)(B) and 365(e)(2)(A)(ii) of the Bankruptcy Code.

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9.             Notices.

 

Notices and all other communications provided for in this Agreementshall be in writing and shall be deemed to have been duly given when deliveredto and mailed by United States mail, addressed:

 

#### (a)           if to Executive, to the home address of Executivecontained in the Company’s records, and

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#### (b)           if to the Company, c/o Northwest Airlines, Inc.,5101 Northwest Drive, St. Paul, Minnesota 55111-3034, Attention:  General Counsel, or to such other address asmay have been furnished in writing.

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10.           CounselFees and Indemnification.

 

### (a)           The Company shallpay, or promptly reimburse on an as-incurred basis to Executive, the reasonablefees and expenses of Executive’s legal counsel for its services rendered 

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### inconnection with Executive’s enforcement of this Agreement; provided, however,that if Executive institutes any proceeding to enforce this Agreement and thejudge, arbitrator or other individual presiding over the proceedingaffirmatively finds that Executive instituted the proceeding in bad faith,Executive shall pay all costs and expenses, including attorney’s fees, ofExecutive and the Company.

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### (b)           The Company shallindemnify and hold Executive harmless, to the maximum extent permitted by law,against judgments, fines, amounts paid in settlement and reasonable expenses,including attorney’s fees incurred by Executive, in connection with any actionor proceeding (or any appeal from any action or proceeding) with respect to theCompany or activities engaged in by Executive in the course of employment withthe Company in which Executive is made, or is threatened to be made, a party ora witness.

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11.           Withholding.

 

All payments required to be made by the Company hereunder shall besubject to the withholding of such amounts as are required to be withheldpursuant to any applicable law or regulation.

 

12.           CertainDefined Terms.

 

As used herein, the following terms have the following meanings:

 

“Agreement” shall mean this Management Compensation Agreement,as the same may be amended, supplemented or otherwise modified from time totime.

 

“Base Salary” shall mean the annual salary of the Executive ineffect from time to time under Section 2.1.

 

“Board” shall mean the Board of Directors of the Company.

 

“Cause” shall mean with respect to termination of Executive’semployment hereunder (i) an act or acts of personal dishonesty byExecutive intended to result in substantial personal enrichment of Executive atthe expense of the Company, (ii) an act or acts of personal dishonesty byExecutive intended to cause substantial injury to the Company,(iii) material breach (other than as a result of a Disability) byExecutive of Executive’s obligations under this Agreement which action was(a) undertaken without a reasonable belief that the action was in the bestinterest of the Company and (b) not remedied within a reasonable period oftime after receipt of written notice from the Company specifying the allegedbreach, or (iv) the conviction of Executive of a felony.

 

“Change in Control” means any one of the following:

 

#### (a)           The acquisition by any individual, entity or group (withinthe meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Actof 1934 (the “Exchange Act”)) (a “Person”) of beneficialownership (within the mean of Rule 13d-3 promulgated under the ExchangeAct) of 25% or more of either (i) the then outstanding shares of CommonStock of Parent (the “Outstanding Parent Common Stock”) or (ii) thecombined voting 

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#### power of the thenoutstanding voting securities of Parent entitled to vote generally in theelection of directors (the “Outstanding Parent Voting Securities”); or

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#### (b)           Individuals who, as of the Effective Date, constitute theBoard of Directors of Parent (the “Incumbent Board”) cease for anyreason to constitute at least a majority of such Board; provided, however,that any individual becoming a director subsequent to June 1, 1994, whoseelection, or nomination for election by Parent’s shareholders, was approved bya vote of at least a majority of the directors then comprising the IncumbentBoard shall be considered as though such individual were a member of theIncumbent Board, but excluding, for this purpose, any such individual whoseinitial assumption of office occurs as a result of an actual or threatenedelection contest with respect to the election or removal of directors or otheractual or threatened solicitation of proxies or consents by or on behalf of aPerson other than the Board of Directors of Parent; or

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#### (c)           Consummation of a reorganization, merger or consolidation(a “Business Combination”), in each case, unless, following suchBusiness Combination, (i) all or substantially all of the individuals andentities who were the beneficial owners, respectively, of the OutstandingParent Common Stock and Outstanding Parent Voting Securities immediately priorto such Business Combination beneficially own, directly or indirectly, morethan 50% of, respectively, the then outstanding shares of commons stock and thecombined voting power of the then outstanding voting securities entitled tovote generally in the election of directors, as the case may be, of thecorporation resulting from such Business Combination (including, withoutlimitation, a corporation which as a result of such transaction owns Parentthrough one or more subsidiaries) in substantially the same proportions astheir ownership immediately prior to such Business Combination of theOutstanding Parent Stock and Outstanding Parent Voting Securities, as the casemay be and (ii) at least a majority of the members of the board ofdirectors of the corporation resulting from such Business Combination weremembers of the Incumbent Board at the time of the execution of the initialagreement or of the action of such board, providing for such BusinessCombination; or

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#### (d)           Consummation of (i) a complete liquidation ordissolution of Parent or (ii) the sale or other disposition of all orsubstantially all of the assets of Parent, other than to a corporation withrespect to which following such sale or other disposition, (X) more than50% of, respectively, the then outstanding shares of common stock of suchcorporation and the combined voting power of the then outstanding votingsecurities of such corporation entitled to vote generally in the election ofdirectors is then beneficially owned, directly or indirectly, by all orsubstantially all of the individuals and entities who were the beneficialowners respectively, of the Outstanding Parent Common Stock and Outstanding ParentVoting Securities immediately prior to such sale or other disposition of theOutstanding Parent Common Stock and Outstanding Parent Voting Securities, asthe case may be and (Y)  at least a majority of the members of the boardof directors of such corporation were members of the Incumbent Board at thetime of the execution of the initial agreement, or other action of such Board,providing for such sale or other disposition of assets of Parent or wereelected, appointed or nominated by the Incumbent Board.

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Notwithstanding the foregoing, following entry of an order for reliefby Parent under Chapter 11 of the Bankruptcy Code, in no event shall a Changein Control be deemed to occur as a result of any event which occurs prior to,or on account of, consummation of a plan of reorganization of Parent other thana Change in Control arising under clause (a) above, by reason of the receipt ofsecurities pursuant to a plan of reorganization of Parent which constitutes 25%or more of the outstanding Parent Common Stock or the Outstanding Parent VotingSecurities, which were received on account of any claims acquired after thedate hereof and held as of the consummation of the plan of reorganization byany person, entity or group of associated persons or entities acting inconcert, acquiring such claims with the intent to control the management andpolicies of Parent on an ongoing basis following reorganization, or underclause (c) above, by reason of a merger or consolidation with anothercommercial airline company which results in the holders of claims and/orinterests in Parent outstanding immediately prior to the merger orconsolidation receiving or continuing to represent (either by remainingoutstanding or by being converted into voting securities of the survivingentity or any parent thereof) less than 50% of the combined voting power of thesecurities of Parent or such surviving entity or any parent thereof outstandingimmediately after such merger or consolidation, or under clause (d)(ii) above,by reason of the sale of assets to another commercial airline, unless such saleresults in either (x) creditors or interestholders of Parent receiving inconsideration or exchange for their claims and/or interests in Parent at least50% of the combined voting power of the acquirer, or (y) Parent receiving atleast 50% of the combined voting power of the acquirer.

 

“Common Stock” shall mean all issued and outstanding commonstock, of all classes, of the Parent, including any outstanding securitiesconvertible into such common stock.

 

“Date of Termination” shall mean, with respect to Executive, thedate of termination of Executive’s employment hereunder after the notice periodprovided by Section 4.4.

 

“Disability” shall mean Executive’s physical and mentalcondition which prevents continued performance of his duties hereunder, ifExecutive establishes by medical evidence that such condition will be permanentand continuous during the remainder of Executive’s life or is likely to be ofat least three (3) years duration.

 

“Effective Date” shall mean September 14, 2005.

 

“F-1” shall mean confirmed, positive space seating in firstclass or business class if first class is not offered, with the highestboarding priority including (i) ahead of the categories specified belowcategory “F-1” on Exhibit A attached hereto and (ii) within category “F-1,”based on seniority with the Company.

 

“Good Reason” shall mean with respect to an Executive, any oneor more of the following:

 

#### (a)           a material reduction in Executive’s compensation or otherbenefits;

####  

#### (b)           any change in Executive’s title or any material change inExecutive’s job responsibilities, other than the appointment of a new presidentof the Company;

####  

 

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#### (c)           without Executive’s prior consent, the relocation of theCompany’s principal executive offices to a location outside the Minneapolis-St.Paul Metropolitan Area;

####  

#### (d)           a failure by the Company to comply with any provision ofthis Agreement which has not been cured within ten (10) days after theCompany knows or has notice of such noncompliance.

####  

#### (e)           (i)  if the Companybecomes a debtor under the Bankruptcy Code, the failure of the Company to filethe Compensation Continuation Motion within fifteen (15) days after entry of anorder for relief under Chapter 11 of the Bankruptcy Code;

####  

##### (ii)           unless Executive agrees to extend the time periodset forth in this clause (ii), if at any time after the thirtieth (30th) dayafter the Company has filed the Compensation Continuation Motion, theBankruptcy Court has not entered a provisional or final Order approving thisAgreement; or

#####  

##### (iii)          unless Executive agrees to extend the time period set forthin this clause (iii), if at any time after the forty-fifth (45th) day after theCompany has filed the Compensation Continuation Motion, the BankruptcyCourt has not entered a final Order approving this Agreement.

#####  

TheCompany agrees that (i) Executive’s right to treat the events described in (e)above as Good Reason shall not constitute an unenforceable “ipso facto”termination provision by virtue of the Executive’s rights under section365(e)(2) of the Bankruptcy Code, and (ii) the consents of Executive requiredunder section 365(c)(1)(B) and 365(e)(2)(A)(ii) of the Bankruptcy Code areconditioned on the timely satisfaction of the foregoing time periodrestrictions.

 

In order for Executive’s termination of his employment to be consideredfor Good Reason, such termination must occur within one (1) year after theevent giving rise to such Good Reason. Executive’s continued employment shall not constitute consent to, or awaiver of rights with respect to, any circumstance constituting Good Reasonhereunder.

 

“Notice of Termination” shall mean a notice specifying the Dateof Termination, which notice shall (i) indicate the specific terminationprovision (if any) in this Agreement applicable to the termination, and(ii) set forth in reasonable detail the facts and circumstances claimed toprovide a basis for termination of Executive’s employment under the provisionso indicated.

 

“Parent” shall mean Northwest Airline Corporation.

 

“Person” shall include an individual, a corporation, a company,a voluntary association, a partnership, a trust, an unincorporated organizationor a government or any agency, instrumentally or political subdivision thereof.

 

 

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“Significant Assets” shall mean (i) all of substantiallyall of the assets and/or business or outstanding voting securities of theCompany (ii) all or substantially all of Northwest’s routes between theUnited States and Japan.

 

“Subsidiary” of a Person shall mean any corporation, partnership(limited or general), trust or other entity of which a majority of the stock(or equivalent ownership or controlling interest) having voting power to electa majority of the board of directors (if a corporation) or to select a majorityof the board of directors (if a corporation) or to select a trustee orequivalent controlling interest, shall at the time such reference becomesoperative, be directly or indirectly owned or controlled by such Person or oneor more of the other subsidiaries of such Person or any combination thereof.

 

13.           Miscellaneous.

 

No provision of this Agreement may be modified, waived or dischargedunless such waiver, modification or discharge is agreed to in writing signed byExecutive and such officer as may be specifically designated by the Board.  There shall be no right of set-off orcounterclaim, in respect of any claim, debt or obligation, against any paymentsto Executive, his dependents, beneficiaries or estate provided for in thisAgreement.  The validity, interpretation,construction and performance of this Agreement shall be governed by the laws ofthe State of Minnesota, without regard to principles of conflicts of laws.

 

14.           Validity.

 

The invalidity or unenforceability of any provision or provisions ofthis Agreement shall not affect the validity or enforceability of any otherprovision of this Agreement which shall remain in full force and effect.

 

15.           Disputes;Remedies.

 

If either the Company, on the one hand, or Executive, on the otherhand, breaches or threatens to commit a breach of the terms and conditionshereof, the party shall have the following rights and remedies:

 

#### (a)           Specific performance (i.e., the right and remedy tohave the terms and conditions hereof specifically enforced by any court ofcompetent jurisdiction), it being agreed that any breach or threatened breachof the terms and conditions hereof would cause irreparable injury and thatmoney damages may not provide an adequate remedy; and

####  

#### (b)           Damages (i.e., the right to receive from anyviolator of the terms and conditions hereof, any and all damages, costs andexpenses incurred by the injured party as a result of the breach of the termsand conditions hereof).

####  

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16.           ParentUndertaking.

#  

NorthwestAirlines Corporation, as parent corporation to the Company, hereby agrees tocause the Company to perform all of its obligations hereunder and Executiveshall be deemed to have entered into this Agreement in reliance upon theundertaking set forth herein.

 

17.           Compliancewith the Provisions of Code Section 409A.

#  

Notwithstanding anything in this Agreement to thecontrary, any payment under this Agreement to Executive shall be deferred, ifnecessary, until the first date that such payment could be made withoutsubjecting Executive to taxes imposed by reason of Code Section 409A.

 
|   | NORTHWEST  AIRLINES, INC.                         |                                                                |
|--------|---------------------------------------------------|---------------------------------------------------------------------|
|   |                                              |                                                                |   |
|   |                                              |                                                                |   |
|   | by:                                               |      /s/ Michael J. Becker                      |   |
|   |                                              | Michael  J. Becker                                                  |   |
|   |                                              | Senior  Vice President — Human Resources & Labor Relations |   |
|   |                                              |                                                                |   |
|   | NORTHWEST AIRLINES CORPORATION                    |                                                                |
|   |                                              |                                                                |   |
|   |                                              |                                                                |   |
|   | by:                                               |      /s/ Michael L. Miller                      |   |
|   |                                              | Michael L. Miller                                                   |   |
|   |                                              | Vice President — Law & Secretary                           |   |
|   |                                              |                                                                |   |
|   |                                              |                                                                |   |
|   |                                              |                                                                |   |
|   |      /s/ Douglas M. Steenland |                                                                |
|   |                                              | Douglas M. Steenland                                                |   |

 

 

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