**Exhibit 10.16**

 

*Execution Copy*

 

MANAGEMENT COMPENSATION AGREEMENT

 

between

 

NORTHWEST AIRLINES, INC.

 

and

 

DAVID M. DAVIS

 

dated as of

 

April 14, 2008

 

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MANAGEMENT COMPENSATION AGREEMENT

 

MANAGEMENT COMPENSATION AGREEMENT made as ofthe 14th day of April, 2008 between Northwest Airlines, Inc., aMinnesota corporation (the “Company”) and David M. Davis (the “Executive”).

 

WITNESSETH:

 

WHEREAS, Executive and the Company areparties to a Management Compensation Agreement dated as of September 13,2005 (the “Prior Agreement”);

 

WHEREAS, since the execution of the PriorAgreement, Executive has been promoted to the position of Executive VicePresident and Chief Financial Officer of the Company;

 

WHEREAS, Executive and the Company desire toenter into a new Management Compensation Agreement to reflect certain changesapplicable to Executive in his new position.

 

NOW, THEREFORE, as of the date hereof, theCompany and Executive have agreed to terminate the Prior Agreement as of thedate hereof and replace the Prior Agreement with this Agreement, which shallsupersede the Prior Agreement in all respects.

 

1.     Terms of Employment.

 

1.1     Employment.  The Company agrees to employ Executive, andExecutive agrees to be employed by the Company, on the terms and conditions setforth herein.

 

1.2     Positionand Duties.  During the term ofExecutive’s employment hereunder, Executive shall serve as an Executive VicePresident of the Company and shall have such powers and duties as may from timeto time be prescribed by the Company. Executive shall devote substantially all his working time and effort tothe business and affairs of the Company and its affiliates.

 

2.     Compensation.  During the term of Executive’s employmenthereunder, Executive shall receive the compensation and benefits set forth inthis Section 2.

 

2.1     BaseSalary.  Executive’s Base Salaryshall be his base salary in effect on the Effective Date, as may be increasedfrom time to time thereafter by the Company, provided that Executive’s BaseSalary may be reduced in connection with one or more base wage reductions generallyapplicable to salaried employees of the Company.  Executive’s Base Salary shall be payable inaccordance with the Company’s payroll policies.

 

2.2     IncentiveCompensation.  Executive shall beentitled to participate in the Company’s Key Employee Annual Cash IncentivePlan (the “KEACIP”) and the Company’s Long-Term Cash Incentive Plan (“LTIP”), tothe extent such plans continue in effect, or any successor incentivecompensation plans on the terms and conditions to be established from time totime by the Board of Directors or a committee thereof.

 

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2.3     Expenses.  During the term of Executive’s employmenthereunder, Executive shall be entitled to receive prompt reimbursements for allreasonable business expenses incurred in performing services hereunder inaccordance with the Company’s business expense reimbursement policies in effectfrom time to time.

 

2.4     Employee BenefitPrograms of the Company.  Executiveshall be entitled to participate while employed hereunder in the Company’semployee benefit programs at levels in effect from time to time for salariedemployees at a level comparable to Executive, provided that Executive shall notparticipate in any severance pay plan maintained by the Company except to theextent necessary to receive any severance payments specifically provided forhereunder.

####  

3.     Other Benefits.

 

3.1     AirlinePass.  In the event (A) Executiveremains an active full-time employee of the Company continuously from theEffective Date through August 16, 2009 or (B) Executive’s employmentwith the Company is terminated by the Company other than for Cause or byExecutive for Good Reason on or before August 16, 2009, then Executiveshall be entitled to receive, upon termination of employment, lifetime airlinepass privileges for the personal use of Executive and his spouse or registereddomestic partner and dependent children so long as spouses, registered domesticpartners and dependent children of employees generally are eligible fornon-revenue travel pursuant to the Company’s pass policies (hereinafter, “EligibleIndividuals”).  Such airline passprivileges (the “Airline Pass”) shall entitle Executive and EligibleIndividuals to travel on regularly scheduled domestic and international flightsoperated by the Company, subject to all charges and fees then applicable toactive management employees of the Company and their dependents and pursuant tothe Company’s pass policies in effect from time to time, with boarding priorityof F-1 or the equivalent thereof for a period of ten (10) years fromand after the date such pass is issued and F-1R thereafter.  Executive shall be responsible for anypersonal income tax liability arising from such pass travel.  Notwithstanding the foregoing, all benefitsunder this Section 3.1 shall immediately and permanently cease in theevent Executive violates the Company’s pass policies in connection with suchtravel and/or in the event that Executive is or becomes, at any time thereafter,an employee of any air carrier that competes with the Company (or any of itsaffiliates).

 

3.2     Medicaland Dental Benefits.  In the event (A) Executiveremains an active full-time employee of the Company continuously from theEffective Date through June 1, 2011 or (B) Executive’s employmentwith the Company is terminated by the Company other than for Cause or byExecutive for Good Reason on or before June 1, 2011, then, followingExecutive’s termination of employment and thereafter during the Executive’slifetime, Executive and his eligible dependents shall be entitled toparticipate in the Company’s group medical and dental plans generallyapplicable to salaried employees of the Company under the same terms andconditions as shall apply to such salaried employees; provided, however, thatsuch coverage shall be secondary to Medicare or any other government insuranceprogram in which Executive may be entitled to participate, and providedfurther, if Executive becomes employed by another employer, such coverage shallbecome secondary to any coverage provided by such employer for the period inwhich Executive is entitled to such coverage. In addition, while employed by the Company hereunder and so long as suchprogram continues in effect, Executive shall be entitled 

 

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to participate in the Company’sMedical Expense Reimbursement Program on the same terms and conditionsgenerally applicable to other executives of the Company.

 

4.     Termination of Employment.

 

4.1     UponDeath.  Executive’s employmenthereunder shall terminate upon his death.

 

4.2     By theCompany.  The Company may terminateExecutive’s employment hereunder at any time with or without Cause.

 

4.3     By theExecutive.  Executive may terminatehis employment hereunder at any time for any reason.

 

4.4     Notice ofTermination.  Any termination ofExecutive’s employment hereunder by Executive (other than by death or Disability)shall be communicated by thirty (30) days’ advance written notice of terminationto the Company.

 

4.5     Board/CommitteeResignation.  Executive’s terminationof employment for any reason, shall constitute, as of the date of suchtermination and to the extent applicable, a resignation as an officer of theCompany and a resignation from the Board (and any committees thereof) and theBoard of Directors (and any committees thereof) of any of the Company’saffiliates and from the board of directors or similar governing body of anycorporation, limited liability company or other entity in which the Company orany affiliate holds an equity interest and with respect to which board orsimilar governing body Executive serves as the Company’s or such affiliate’sdesignee or other representative.

 

5.     Payments in the Event ofTermination of Employment.

 

5.1     Paymentsin the Event of Termination by the Company for Cause or Voluntary Terminationby Executive.  If Executive’semployment hereunder is terminated by the Company for Cause, as a result ofdeath or Disability or by Executive other than for Good Reason, the Companyshall pay Executive (a) his accrued and unpaid Base Salary through theDate of Termination and (b) any vested or accrued and unpaid payments,rights or benefits Executive may be otherwise entitled to receive pursuant tothe terms of any written retirement, pension or other employee benefit orcompensation plan maintained by the Company at the time or times providedtherein.

 

5.2     Paymentsin the Event of Any Other Termination of Employment.  If Executive’s employment hereunder isterminated by the Company other than for Cause, or by Executive for GoodReason:

 

#### (a)   The Company shall pay Executive (i) his accruedand unpaid Base Salary through the Date of Termination, (ii) any incentivepayment under the Key Employee Annual Cash Incentive Program, or any successorannual incentive plan, (the “Incentive Payment”) for any calendar yearended before the Date of Termination, (iii) a pro rata share (based ondays employed during the applicable year) of the Incentive Payment Executivewould otherwise have received with respect to the year in which the Date of 

 

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#### Termination occurs, payable at the time the Incentive Payment wouldotherwise be payable to Executive; provided, however, that 100%of the Incentive Payment shall be determined solely with reference to thefinancial performance of the Company for the year (based on the goalspreviously established with respect thereto) (rather than a portion of theIncentive Payment determined on the basis of individual performance); provided,further, in the event that Company’s performance exceeds 100% of thefinancial performance target for the year, that portion of the Incentive Paymentthat would have, but for this Section 5.2(a), related to the achievementof the individual performance target shall be 100% and (iv) any vested oraccrued and unpaid payments, rights or benefits Executive may be otherwiseentitled to receive pursuant to the terms of any written retirement, pension orother employee benefit or compensation plan maintained by the Company at thetime or times provided therein.

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#### (b)   In addition to the compensation and benefitsdescribed in Section 5.2(a), the Company shall pay Executive, no laterthan thirty (30) days following the Date of Termination, a lump sum amount equalto the product of two (2) times the sum of (i) Executive’s annualBase Salary and (ii) the target Incentive Payment for Executive withrespect to the year in which the Date of Termination occurs (or if no targethas been set for that year, the target Incentive Payment for the immediatelypreceding year).

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#### (c)   Executive shall not be required to mitigate theamount of any payment provided for in this Section 5.2 by seeking otheremployment or otherwise, and no such payment shall be offset or reduced as aresult of Executive’s obtaining new employment.

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#### (d)   Notwithstanding anything else to the contrary inthis Agreement, the Company’s obligation regarding the payments and benefits continuationprovided for in this Section 5.2 is expressly conditioned upon theexecution, delivery and non-revocation of a general release in the formattached hereto as Attachment A.

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5.3     Compliancewith the Provisions of Code Section 409A.  Notwithstanding anything in this Agreement tothe contrary, any payment under this Agreement to Executive shall be deferred,if necessary, until the first date that such payment could be made withoutsubjecting Executive to taxes imposed by reason of Code Section 409A.

 

6.     Confidentiality;Non-Compete; Non-Solicitation; Non-Disparagement.

 

(a)  While employed by the Company andthereafter, Executive shall not disclose any Confidential Information eitherdirectly or indirectly, to anyone (other than appropriate Company employees andadvisors), or use such information for his own account, or for the account ofany other person or entity, without the prior written consent of the Company orexcept as required by law.  Thisconfidentiality covenant has no temporal or geographical restriction.  For purposes of this Agreement, “ConfidentialInformation” shall mean all non-public information respecting the Company’sbusiness, including, but not limited to, its services, pricing, scheduling,products, research and development, processes, customer lists, marketing plansand strategies, financing plans and the terms and provisions of this Agreement,but excluding information that is, or becomes, available to the public (unlesssuch availability occurs through an unauthorized act on the part of theExecutive).  Upon termination of thisAgreement, 

 

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Executiveshall promptly supply to the Company all property and any other tangibleproduct or document that has been produced by, received by or otherwisesubmitted to Executive during or prior to his term of employment, and shall notretain any copies thereof.

 

(b)  Executive acknowledges that hisservices are of special, unique and extraordinary value to the Company.  Accordingly, Executive shall not at any timeprior to the first anniversary of the Date of Termination (i) become anemployee, consultant, officer, partner or director of any air carrier whichcompetes with the Company (or any of its affiliates) or (ii) whether onExecutive’s own behalf or on behalf of or in conjunction with any person,company, business entity or other organization whatsoever, directly orindirectly solicit or encourage any employee of the Company or its affiliatesto leave the employment of the Company or its affiliates.

 

(c)  While employed by the Company andthereafter, Executive agrees not to directly or indirectly make any disparagingcommunication, or release any information or encourage others to make anycommunication or release any information, that is designed to embarrass ordisparage the Company, its affiliates, their predecessors or successors or anyof their past or present officers, directors, stockholders, partners, members,agents or employees or the Company’s business practices, operations orpersonnel policies or practices to any of the Company’s customers, clients,competitors, suppliers, investors, directors, consultants, employees, formeremployees, or the press or other media in any country.

 

(d)  Executive agrees that any breach ofthe terms of this Section 6 would result in irreparable injury and damagefor which there would be no adequate remedy at law, and that, in the event ofsaid breach or any threat of breach, the Company shall be entitled to animmediate injunction and restraining order to prevent such breach or threatenedbreach, without having to prove damages, in addition to any other remedies towhich the Company may be entitled at law or in equity. Executive further agreesthat the provisions of the covenant not to compete are reasonable.  Should a court determine, however, that anyprovision of the covenant not to compete is unreasonable, either in period oftime, geographical area, or otherwise, the parties hereto agree that thecovenant should be interpreted and enforced to the maximum extent such courtdeems reasonable.  The provisions of thisSection 6 shall survive any termination of this Agreement and Executive’sterm of employment.  The existence of anyclaim or cause of action or otherwise, shall not constitute a defense to theenforcement of the covenants and agreements of this Section 6.

 

7.     Successorsand Assigns.

 

### (a)   This Agreement shall bind anysuccessor to the Company, whether by purchase, merger, consolidation orotherwise, in the same manner and to the same extent that the Company would beobligated under this Agreement if no such succession had taken place.

###  

### (b)   This Agreement shall not beassignable by Executive.  This Agreementand all 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.

 

The term of this Agreement shall commence onthe Effective Date and end upon the Executive’s termination of employment.  The rights and obligations of the Company andExecutive shall survive the termination of this Agreement to the fullest extentnecessary to give effect to the terms hereof.

 

9.     Notices.

 

Notices and other communications provided forin this Agreement shall be in writing (which shall include notice by facsimiletransmission) and shall be delivered or mailed, addressed as follows:

 

#### (a)   if to Executive, to the address set forth on thesignature page hereto, and

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#### (b)   if to the Company, c/o Northwest Airlines, Inc.,2700 Lone Oak Parkway, Dept. A1180, Eagan, Minnesota 55121, Attention:  General Counsel,

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or, in each case, to such otheraddress as a party may from time to time designate in writing in accordance withthis Section 9.  All notices andother communications given to any party hereto in accordance with theprovisions of this Agreement shall be deemed to have been given when deliveredif delivered by hand, when transmission confirmation is received if deliveredby facsimile, three business days after mailing if mailed, and one business dayafter deposit with an overnight courier service if delivered by overnightcourier.  Notwithstanding the foregoing,if a notice or other communication is actually received after 5:00 p.m. atthe recipient’s designated address, such notice or other communication shall bedeemed to have been given the later of (i) the next business day or (ii) thebusiness day on which such notice or other communication is deemed to have beengiven pursuant to the immediately preceding sentence.

 

10.   Withholding.

 

All payments required to be made by theCompany hereunder shall be subject to the withholding and/or deduction of suchamounts as are required to be withheld or deducted pursuant to any applicablelaw or regulation.  The Company shallhave the right and is hereby authorized to withhold or deduct from anycompensation or other amount owing to Executive, applicable withholding taxesand deductions and to take such action as may be necessary in the opinion ofthe Company to satisfy all obligations for the payment of such taxes ordeductions.

 

11.   Certain Defined Terms.

 

As used herein, the following terms have thefollowing meanings:

 

“Agreement” shall mean this ManagementCompensation Agreement, as the same may be amended, supplemented or otherwisemodified from time to time in accordance herewith.

 

“Base Salary” shall mean the annual salaryof the Executive in effect from time to time under Section 2.1.

 

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

 

“Cause” shall mean with respect totermination by the Company of Executive’s employment hereunder (i) an actor acts of dishonesty by Executive resulting in, or intended to result in,directly or indirectly, any personal enrichment of Executive, (ii) an actor acts of dishonesty by Executive intended to cause substantial injury to theCompany, (iii) material breach (other than as a result of a Disability) byExecutive of Executive’s obligations under this Agreement which action was (a) undertakenwithout a reasonable belief that the action was in the best interests of theCompany and (b) not remedied within a reasonable period of time afterreceipt of written notice from the Company specifying the alleged breach, (iv) Executive’sconviction of, or plea of nolo contendere to, a crime constituting (a) afelony under the laws of any country, the United States or any state thereof or(b) a misdemeanor involving moral turpitude or (v) a material breachof (a) the Company’s Code of Business Conduct or (b) the provisionsof this Agreement.

 

“Date of Termination” shall mean, withrespect to Executive, the date of termination of Executive’s employmenthereunder in accordance with the terms of this Agreement.

 

“Disability” shall mean Executive’sphysical or mental condition which prevents continued performance of his dutieshereunder, if Executive establishes by medical evidence that such conditionwill be permanent and continuous during the remainder of Executive’s life or islikely to be of at least three (3) years duration.

 

“Effective Date” shall mean the dateof this Agreement, as set forth above.

 

“Good Reason” shall mean with respectto an Executive, any one or more of the following:

 

#### (a)           amaterial reduction in Executive’s Base Salary or level of target incentivepayment under the KEACIP or any successor annual incentive compensation plan(except as permitted hereunder);

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#### (b)           anysubstantial and sustained diminution in Executive’s authority orresponsibilities hereunder, provided that the Company shall be permittedfrom time to time to transfer a portion of Executive’s oversightresponsibilities without the consent of Executive as long as Executive retainsa substantial portion of his then current oversight responsibilities;

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#### (c)           therelocation of the Company’s principal executive offices to a location outsidethe Minneapolis-St. Paul Metropolitan Area; or

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#### (d)           amaterial breach by the Company of this Agreement;

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provided,however, that the foregoing events shall constitute Good Reason only ifthe Company fails to cure such event within thirty (30) days after receipt fromExecutive of written notice of the event which constitutes Good Reason; provided,further, that “Good Reason” shall cease to 

 

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exist for an event on the 60thday following the later of its occurrence or Executive’s knowledge thereof,unless Executive has given the Company written notice thereof prior to suchdate.

 

In addition, in order for Executive’stermination of his employment to be considered for Good Reason, suchtermination must occur within one (1) year after the event givingrise to such Good Reason.  Executive’scontinued employment shall not constitute consent to, or a waiver of rightswith respect to, any circumstance constituting Good Reason hereunder.

 

12.   Executive Representation.

 

Executive hereby represents to the Companythat the execution and delivery of this Agreement by Executive and the Companyand the performance by Executive of Executive’s duties hereunder shall notconstitute a breach of, or otherwise contravene, the terms of any employmentagreement or other agreement or policy to which Executive is a party orotherwise bound.

 

13.   Amendment.

 

No provision of this Agreement may bemodified, waived or discharged unless such waiver, modification or discharge isagreed to in writing signed by Executive and an authorized officer of theCompany.

 

14.   Governing Law.

 

The validity, interpretation, constructionand performance of this Agreement shall be governed by the laws of the State ofMinnesota, without regard to principles of conflicts of laws.

 

15.   Validity.

 

#### The invalidity orunenforceability of any provision or provisions of this Agreement shall not affectthe validity or enforceability of any other provision of this Agreement whichshall remain in full force and effect.

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16.   Arbitration.

 

Except as otherwise provided in Section 17of this Agreement, all disputes and controversies arising from or in conjunctionwith Executive’s employment with, or any termination from, the Company and alldisputes and controversies arising under or in connection with this Agreement(except claims for vested benefits brought under ERISA) shall be settled bymandatory arbitration conducted before one arbitrator having knowledge ofemployment law in accordance with the rules for expedited resolution ofemployment disputes of the American Arbitration Association then ineffect.  The arbitration shall be held inthe Minneapolis/St. Paul metropolitan area at a location selected by theCompany.  The determination of thearbitrator shall be made within thirty (30) days following the close ofthe hearing on any dispute or controversy and shall be final and binding on theparties.  The parties hereby waive theirright to a trial of any and all claims arising out of this Agreement or breachof this Agreement.  All costs 

 

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and expensesincurred in connection with any arbitration including, without limitation,arbitrator and attorney’s fees, shall be paid by the nonprevailing party in thearbitration unless the arbitrator determines that such expenses must beotherwise allocated under applicable law to maintain the validity of this Section 16.

 

17.   Specific Performance.

 

Notwithstanding Section 16 of thisAgreement, if Executive breaches or threatens to commit a breach of Section 6of this Agreement, the Company shall have the right to specific performance(i.e., the right and remedy to have the terms and conditions of Section 6specifically enforced by any court of competent jurisdiction), it being agreedthat any breach or threatened breach of Section 6 would cause irreparableinjury and that money damages may not provide an adequate remedy.

 

18.   Cooperation.

 

Executive shall provide his reasonablecooperation in connection with any investigation, action or proceeding (or anyappeal from any action or proceeding) which relates to events occurring duringExecutive’s employment hereunder.  Thisprovision shall survive any termination of this Agreement.

 

19.   Entire Agreement.

 

This Agreement, together with the Release,and the Company’s employee benefit plans in which Executive will continue toparticipate as provided in this Agreement, contain the entire understandingbetween the Company and Executive with respect to Executive’s employment withthe Company and supersedes in all respects any prior or other agreement orunderstanding between the Company or any affiliate of the Company and Executivewith respect to Executive’s employment.

 

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IN WITNESSWHEREOF, the Company and Executive have executed this Agreement as of the dayand year first above written.

 

 
|   | NORTHWEST AIRLINES, INC.                       |
|--------|------------------------------------------------|
|   |                                           |
|   |                                           |
|   | By:                                            | *   /*s*/* Douglas M. Steenland |
|   |                                           |   Douglas M. Steenland |
|   |                                           |   President & Chief  Executive Officer |
|   |                                           |
|   |                                           |
|   | EXECUTIVE:                                     |
|   |                                           |
|   |                                           |
|   | *    /*s*/* David M. Davis |
|   | David M. Davis                                 |
|   |                                           |
|   | Executive’s Address:                      |

 

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