Exhibit 10.38


 


 


(Bridge Letter of Agreement 3)


LETTER OF AGREEMENT


among


NORTHWEST AIRLINES CORPORATION


and NORTHWEST AIRLINES, INC.


and the


AIR LINE PILOTS


in the service of


NORTHWEST AIRLINES, INC.


as represented by the


AIR LINE PILOTS ASSOCIATION, INTERNATIONAL


 


__________________________________________________________


 


2004 PILOTS’ BRIDGE STOCK OPTION PLAN


 


__________________________________________________________


 


THIS LETTER OF AGREEMENT is made and entered into in
accordance with the provisions of Title II of the Railway Labor Act, as
amended, by and among Northwest Airlines Corporation (“NWA Corp.”) and Northwest
Airlines, Inc. (“Northwest Airlines”) (collectively referred to as the “Company”)
and the Air Line Pilots in the service of the Company as represented by the Air
Line Pilots Association, International (the “Association”).


 


The Company and the Association have agreed that NWA
Corp. will adopt a pilot stock option plan to be known as “The Northwest
Airlines Corporation 2004 Pilots’ Bridge Stock Option Plan” (the “Plan”), as
set forth herein. The Plan shall constitute a subplan under the Northwest
Airlines Corporation 1999 Stock Incentive Plan (the “1999 Management Plan”). The
Plan grants pilots the opportunity to acquire shares of the common stock of NWA
Corp. through the exercise of the stock options granted in accordance with the
terms of this Plan. The Plan shall be part of the Pilots Agreement and shall
continue in full force and effect until all options under the Plan either have
expired or have been exercised.


 


The Company and the Association agree as follows:


 


I.                                         DEFINITIONS


 


The following terms shall be defined as set forth
below for purposes of this Letter of Agreement:


 


1.1                                 “Common Stock” shall mean the Common
Stock, par value $0.01 per share, of NWA Corp.


 


1.2                                 “Exercise Period” shall mean the
period of time commencing on the Grant Date and ending at the close of business
on the day immediately preceding the tenth (10th) anniversary of the Grant Date.


 


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1.3                                 “Exercise Price” shall mean the price
at which a share of Common Stock covered by an Option may be purchased as set
forth in Section 5.2 below.


 


1.4                                 “Fair Market Value” shall mean the average
of the high and low sale price of the Common Stock as reported on the Nasdaq
National Market on the applicable date, or, in the absence of any sale on the
applicable date, the average of the high and low sale price on the last
previous day on which a sale was reported.


 


1.5                                 “Grant Date” shall mean the date on
which the Options are awarded under the Plan, which shall be the later of October 12,
2004 or the date the Options are approved by the Compensation Committee (or a
subcommittee thereof, the “Committee”) of the Board of Directors of NWA Corp.
in accordance with the 1999 Management Plan.


 


1.6                                 “Option” shall mean an option to
purchase shares of Common Stock granted pursuant to Article V below. All
Options granted pursuant to the Plan shall be deemed “non-qualified” stock
options and are not intended to be incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended, or any successor thereto.


 


1.7                                 “Participant” shall mean a Pilot
employed by Northwest Airlines on the Grant Date who receives an Option on the
Grant Date pursuant to allocation principles to be determined by the Association.


 


1.8                                 “Pilot” shall mean a pilot whose name
appears on the Northwest Airlines Pilot System Seniority List, other than
pilots who have assumed disability retirement status.


 


1.9                                 “Pilots Agreement” shall mean the
basic collective bargaining agreement together with all effective amendments,
supplemental agreements, letters of agreement, and letters of understanding
between Northwest Airlines and the Association in existence as of the execution
date of this Plan and as may be amended or supplemented after that date.


 


II.                                     ADMINISTRATION AND DISPUTE RESOLUTION


 


2.1                                 Administration. The Plan shall be administered by the Committee.
The Committee may authorize and establish reasonable rules and regulations to
implement and administer the Plan but shall take no action that is inconsistent
with the provisions of either this Plan or the Pilots Agreement. The Committee
shall provide reasonable notice to and shall consult with the Association
before issuing any rules or policies of general applicability to the Plan or
the Participants.


 


2.2                                 Dispute Resolution. All disputes arising out of the Plan shall
be subject to the grievance and System Board of Adjustment procedures of the
Pilots Agreement.


 


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III.                                 COMMON STOCK SUBJECT TO THE PLAN


 


3.1                                 Reservation of Common Stock. The total number of shares of Common Stock
reserved and available for issuance under the Plan shall be 3,500,000, subject
to adjustment as provided in Section 3.2 and Section 3.3. Such shares
of Common Stock may consist, in whole or in part, of either authorized and
unissued shares or shares held in the treasury of the Company.


 


3.2                                 Certain Changes in Corporate Structure. If NWA Corp. pays a stock dividend on the
Common Stock, if shares of the Common Stock are split, combined, reclassified,
changed into, or exchanged for, a different number or kind of securities of NWA
Corp., or if shares of the Common Stock are changed into, or are exchanged for,
any other class or series of capital stock or cash, securities or other
property pursuant to a recapitalization, reclassification, merger,
consolidation, or combination, then the Board shall make such adjustments as
are necessary to reflect such change so as to prevent the diminution or
enlargement of a Participant’s rights under the Plan, including but not limited
to, adjustments in the aggregate number of shares reserved for issuance under
the Plan, and adjustments in the number and class of and/or price of shares
subject to outstanding Options granted under the Plan; provided that the number
of shares subject to any Option shall always be a whole number. (Numbers below
..5 shall be rounded down and numbers of .5 or above shall be rounded up.)


 


3.3                                 Adjustment of Other Employee Options. In the event NWA Corp. adjusts any of the
terms of any other outstanding employee stock options at any time during the
Exercise Period as a result of an event described in Section 3.2
(including without limitation any adjustments in the exercise price or the
number or class of shares issuable on exercise), then all unexercised Options
under this Plan shall be adjusted in a manner that is no less favorable (on a
per share basis) to holders of such Options than the adjustment provided to the
holders of other employee stock options.


 


IV.                                 ALLOCATION


 


The number of whole shares of Common Stock with
respect to which each Participant shall be awarded an Option on the Grant Date
shall be determined in accordance with Appendix A to this Plan.


 


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V.                                     OPTIONS


 


5.1                                 Grant. On the Grant Date, NWA Corp. shall award Options covering an
aggregate of 3,500,000 shares of Common Stock to the Participants.  A Participant’s Option shall entitle the
Participant to purchase from NWA Corp. on the terms and conditions set forth
herein the number of shares of Common Stock determined in accordance with
Appendix A at the Exercise Price. The Options shall be evidenced by a written
agreement, acknowledgment, or other form of documentation executed on behalf of
NWA Corp. and delivered to each Participant, in a form determined by the Company,
setting forth the Exercise Price, the number of shares subject to the Option
and the Exercise Period.


 


5.2                                 Exercise Price. The Exercise Price for each share of Common
Stock subject to an Option shall be the Fair Market Value of a share of Common
Stock on the Grant Date.


 


5.3                                 Exercisability and Term. An Option granted to a Participant shall be
exercisable as to one-half of the shares of Common Stock that are subject to
such Option on the thirtieth (30th) day after the Company and the
Association finalize the list of Pilots to receive Options hereunder and the
number of shares of Common Stock subject to each Option as determined in accordance
with Appendix A attached hereto, as evidenced by an authorized officer of the
Company and the Association signing a final copy of such list, or if such date
is not a business day, then on the next business day following such date; and such
Option shall become exercisable as to the remaining one-half of the shares of
Common Stock that are subject to such Option on the first anniversary of such
date.  The Option shall expire on, and no
shares of Common Stock may be purchased thereunder, after the expiration of the
Exercise Period.


 


5.4                                 Method of Exercise. To exercise an Option, the holder thereof
must give irrevocable notice of exercise to the Secretary of NWA Corp. (or the
Secretary’s designated agent) in a form determined by the Company, identifying
a whole number of shares of Common Stock (which shall not be less than the
lesser of (a) 50 shares or (b) the number of shares then subject to such
Option) with respect to which Option is being exercised. The Exercise Price for
the shares of Common Stock with respect to which the Option is being exercised
(the “Aggregate Exercise Price”) must be paid in full to NWA Corp. prior to
issuance of the Common Stock.


 


5.5                                 Withholding Taxes. The Participant shall be required to pay to
Northwest Airlines, or make arrangements satisfactory to Northwest Airlines,
regarding the payment of, the amount of any foreign, federal (including FICA),
state, or local taxes of any kind required by law to be withheld with respect
to the grant or exercise of an Option.


 


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5.6                                 Payment. Payment of the Aggregate Exercise Price and any tax withholding
obligation must be made by cashier’s check, through electronic funds transfer,
or through a broker-assisted cashless Option exercise program which NWA Corp.
shall establish (the “Cashless Exercise Program”), or by the withholding of
shares of Common Stock otherwise to be delivered upon exercise of the Option
with a Fair Market Value equal to the Aggregate Exercise Price and any tax
withholding obligation. No shares of Common Stock will be delivered to the
Participant until all such amounts have been paid. The Participant will be
responsible for all brokerage commissions, interest and other expenses, if any,
associated with an exercise and sale pursuant to the Cashless Exercise Program
or other sale of the shares issued upon exercise of the Option.


 


5.7                                 Nontransferability. An Option granted pursuant to the Plan
shall not be transferable by the Participant except through the laws of descent
and distribution and shall be exercisable during the Participant’s lifetime
only by such Participant. Notwithstanding the foregoing, the designation of a
beneficiary by a Participant shall not constitute a transfer.


 


5.8                                 Recordkeeping and Reporting. NWA Corp. shall maintain or cause its agent
to maintain an account statement for each Participant (an “Account Statement”)
that contains the following information: (a) the number of shares (exercisable
and non-exercisable) with respect to which the Option held by the Participant
is unexercised, (b) the number of shares (exercisable and non-exercisable) with
respect to which the Option held by the Participant has been exercised, (c) the
Exercise Price for the Option, and (d) the Exercise Period for the Option. NWA
Corp. shall provide or cause its agent to provide to all holders of Options:
(i) an Account Statement within thirty (30) days of the Grant Date and (ii) either
on-line access through the internet to such holder’s account information or an
Account Statement within thirty (30) days of each anniversary of the Grant Date
until the expiration of the Options.


 


VI.                                 SEPARATION OF EMPLOYMENT OR DEATH


 


If a Participant separates from employment with
Northwest Airlines during the Exercise Period, the Option held by the Participant
at the time of such separation of employment shall continue to be exercisable
during the Exercise Period. If a Participant dies during the Exercise Period,
any Options held by the Participant at death shall be exercisable by the
Participant’s estate or beneficiaries during the Exercise Period.


 


VII.                             COMPLIANCE WITH THE SECURITIES ACT


 


NWA Corp. shall use its best efforts to maintain an
effective Registration Statement on Form S-8 (the “Registration Statement”)
pursuant to the Securities Act of 1933, as amended (the “Securities Act”)
covering the Common Stock to be


 


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offered pursuant to the Plan to permit holders of
Options to exercise them. In the event there is no Registration Statement on
file, the Participant, by acceptance of any Option granted under the Plan, will
represent and warrant to NWA Corp. that the purchase or receipt of shares of
Common Stock upon the exercise thereof will be for investment and not with a
view to distribution.


 


NWA Corp. shall take all actions necessary and
appropriate to satisfy applicable provisions of the Securities Act, the
Securities Exchange Act of 1934, as amended, state securities laws, rules and
regulations under any of the foregoing and applicable requirements of any
securities exchange upon which NWA Corp.’s Common Stock is listed.


 


NWA Corp. may endorse an appropriate legend
referring to the foregoing restrictions upon the certificate or certificates
representing any shares of Common Stock issued to a Participant upon the
exercise of any Option granted under the Plan.


 


VIII.                         MISCELLANEOUS


 


8.1                                 Amendments. The Plan may only be amended or modified in a written agreement among
the Association, Northwest Airlines, and NWA Corp.


 


8.2                                 Governing Law. This Agreement and the Plan, to the extent
not preempted by federal securities laws, shall be governed by and construed in
accordance with the Railway Labor Act and the internal laws of the State of Delaware
without regard to the choice of law principles thereof.


 


8.3                                 No Employment Rights. The establishment of the Plan and
participation in the Plan shall not confer upon any Participant any right to
continued employment with the Company, nor, subject to the Pilots Agreement,
shall it interfere in any way with the right of the Company to terminate the
employment of any Participant at any time.


 


8.4                                 Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded”
plan. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.


 


8.5                                 Effect of Income Realized by Participant. The income realized through the exercise of
an Option shall not be taken into account for purposes of calculating any
benefit otherwise payable to a Participant under the terms of any employee
benefit, compensation, pension or insurance plan, program or arrangement of the
Company in which the Participant may participate from time to time.


 


8.6                                 No Stockholder Rights. Nothing in the Plan or in any Option
granted under the Plan shall confer upon any Participant or his executors,


 


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administrators or legal representatives any of the
rights of a stockholder of NWA Corp. with respect to the shares of Common Stock
subject to an Option until such shares have been issued upon an exercise of the
Option.


 


8.7                                 Effective Date and Term of the Plan. The Plan shall become effective on the Grant
Date and shall remain in full force and effect through and including the
expiration of the Exercise Period.


 


IN WITNESS WHEREOF, the parties have signed this
Letter of Agreement as of th3 12th day of October, 2004.


 


	
  NORTHWEST AIRLINES CORPORATION

  	
  AIR LINE PILOTS ASSOCIATION

  INTERNATIONAL

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael L. Miller

  	
   

  	
  By:

  	
  /s/ Mark A. McClain

  	
   

  
	
   

  	
  Name: Michael L. Miller

  	
   

  	
  Name: Mark A. McClain

  
	
   

  	
  Title: Vice President – Law & Secretary

  	
   

  	
  Title: Chairman, NWA MEC

  
	
   

  	
   

  
	
   

  	
   

  
	
  NORTHWEST AIRLINES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert A. Brodin

  	
   

  	
  By:

  	
  /s/ Duane E. Woerth

  	
   

  
	
   

  	
  Name: Robert A. Brodin

  	
   

  	
  Name: Duane E. Woerth

  
	
   

  	
  Title: Senior Vice President – Labor

  Relations

  	
   

  	
  Title: President

  
									



 


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LETTER OF AGREEMENT


 


between

NORTHWEST AIRLINES, INC.

and

THE AIR LINE PILOTS

in the service of

NORTHWEST AIRLINES, INC.

as represented by

AIR LINE PILOTS ASSOCIATION, INTERNATIONAL


 


This
Letter of Agreement is made and entered into in accordance with the provisions
of Title II of the Railway Labor Act, as amended, by and among Northwest
Airlines Corporation (“NWA Corp.”), Northwest Airlines, Inc., (the “Company”)
and the Air Line Pilots in the service of Northwest Airlines, Inc. as
represented by the Air Line Pilots Association, International ( “ALPA”) and
constitutes an amendment to that certain Letter of Agreement dated as of October 12,
2004 (the “Original Agreement”), by and among NWA Corp., the Company and ALPA,
which sets forth the terms and conditions of the 2004 Pilots’ Bridge Stock
Option Plan (as modified and amended from time to time, the “Plan”).


 


The Original Agreement
and the Plan are hereby amended as follows:


 


1.                                       Section 1.8
of the Plan is hereby deleted in its entirety and replaced with the following:


 


“1.8                           “Pilot”
shall mean a pilot whose name appears on the Northwest Airlines Pilot System
Seniority List, other than (i) pilots who were on disability retirement status
on December 1, 2004, and (ii) pilots who were on an unpaid medical leave
of absence on December 1, 2004, and who as of that date either (x) had an
application for disability retirement approved by the Retirement Board, or (y)
had an application for disability retirement denied by the Retirement Board, or
(z) had an application for a disability retirement pending before the
Retirement Board.”


 


2.                                       Except as herein provided, the Original
Agreement and the Plan (together with all exhibits and attachments thereto)
shall remain unchanged and in full force and effect. This Letter of Agreement
may be executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument and either of the parties hereto
may execute this Letter of Agreement by signing any such counterpart.


 


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IN WITNESS WHEREOF, the
parties have signed this Letter of Agreement this 12th day of October, 2004.


 


 


	
  NORTHWEST AIRLINES CORPORATION

  	
  AIR LINE PILOTS ASSOCIATION

  INTERNATIONAL

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael L. Miller

  	
   

  	
  By:

  	
  /s/ Mark A. McClain

  	
   

  
	
   

  	
  Name: Michael L. Miller

  	
   

  	
  Name: Mark A. McClain

  
	
   

  	
  Title: Vice President – Law & Secretary

  	
   

  	
  Title: Chairman, NWA MEC

  
	
   

  	
   

  
	
   

  	
   

  
	
  NORTHWEST AIRLINES, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert A. Brodin

  	
   

  	
  By:

  	
  /s/ Duane E. Woerth

  	
   

  
	
   

  	
  Name: Robert A. Brodin

  	
   

  	
  Name: Duane E. Woerth

  
	
   

  	
  Title: Senior Vice President – Labor

  Relations

  	
   

  	
  Title: President

  
									



 


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APPENDIX A:


 


OPTION ALLOCATION PRINCIPLES


 


NWA
Corp. shall award Options on the Grant Date as follows:


 


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