Document:

EXHIBIT 10.1

 

 

 

 

MANAGEMENT COMPENSATION AGREEMENT

 

between

 

NORTHWEST AIRLINES, INC.

 

and

 

DOUGLAS M. STEENLAND

 

dated as of

 

September 14, 2005

 

 

 

 

 

 

MANAGEMENT COMPENSATION AGREEMENT

 

MANAGEMENT COMPENSATION AGREEMENT made as of the 14th day of
September, 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 been
promoted to the position of Chief Executive Officer of the Company and serves
on the Board of Directors of the Company; and

 

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

 

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

 

Whereas, Executive and the Company do not intend in this Agreement any
material changes in Executive’s overall current compensation levels, as
reflected in the Prior Agreement and current practice and this Agreement is
therefore largely a restatement of the Prior Agreement; and

 

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

 

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

 

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

 

Accordingly, as of the date hereof, the Company and Executive have
agreed to replace the Prior Agreement with this Agreement, which shall
supersede the Prior Agreement in all respects.

 

1.             Terms
of Employment.

 

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

 

 

 

 

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 and
duties as may from time to time be prescribed by the Board, provided
that such powers and duties are consistent with or represent a promotion from
Executive’s duties as of the Effective Date, unless otherwise consented to in
writing by Executive.  Executive shall
devote substantially all his working time and efforts to the business and
affairs of the Company and its subsidiaries, and shall report exclusively to
the Board.  The Company shall cause
Executive to be nominated for election as a director of the Company and shall
use its best efforts to continue to secure such election during the term of
Executive’s employment hereunder.

 

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

 

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

 

2.2           Incentive
Compensation.

 

(a)           Executive shall be
entitled to participate in the Company’s Key Employee Cash Incentive Bonus
Program (“KEACIP”), the Company’s 2003 Long-Term Incentive Compensation Program
(“LTIP”) and any successor or additional incentive and/or retention
compensation plans, the terms and conditions of which shall be established by
the Board from time to time; provided that any successor plans shall be no less
favorable to the Executive than the respective plans in effect on the Effective
Date; and provided further that Executive’s target incentive compensation under
the KEACIP shall be no less than 100%, and under the LTIP shall be no less than
150%, of Executive’s Base Salary.  In
addition, Executive’s target awards under the KEACIP and the LTIP, and any
successor or additional incentive and/or retention plans, shall not be less
than the target awards applicable to any other Company employee.

 

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

 

2.3           Expenses.  Executive shall be entitled to receive prompt
reimbursements for all reasonable expenses incurred in performing services
hereunder, provided that Executive properly accounts therefor in
accordance with written Company policy.

 

2.4           Compensation and Benefit Programs
of the Company.  Executive shall
participate in the Company’s employee compensation, benefit and perquisite
programs (or any successor programs) at levels in effect on the Effective Date;
provided, however, that Executive shall not participate in any severance
pay plan maintained by the Company except to the extent necessary to receive
any severance or incentive compensation payments specifically provided for
hereunder.

 

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

 

 

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2.6           Excess
Plan; SERP.

 

(a)           Executive shall be a participant in the Company’s Excess
Pension Plan for Salaried Employees (the “Excess Plan”) and the Company’s
Supplemental Retirement Program (the “SERP”) on terms and conditions no less
than those in effect of the Effective Date, copies of which are attached hereto
and incorporated by reference, and Executive shall be entitled to receive the
benefits provided for therein.  Neither
the Excess Plan nor the SERP may be amended or discontinued in a manner that
would reduce or otherwise adversely affect the benefits of Executive accrued
prior to the date of such amendment or termination.

 

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

 

(c)           A pre-retirement death benefit shall be payable in the
event of Executive’s death while employed hereunder, to the individual who was
Executive’s spouse on the date of death. 
Such benefit shall be in an amount equal to 50% of the Executive’s Base
Salary at the time of his death and such amount shall be payable annually for a
maximum of ten (10) years or, if earlier, until the Executive would have
attained age 65.

 

2.7           Potential
Reductions 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 in
management compensation.  Executive
further consents to participate in such further prospective reductions in base
salary and incentive compensation as may be imposed by the Company on
executives of the Company generally so that such reductions shall not of
themselves give rise to Good Reason under this Agreement.

 

3.             Other
Benefits and Agreements.

 

3.1           Airline Pass, Barter Travel
Benefits.  This hereby confirms that
Executive has, and shall be entitled to, a lifetime F-1 airline pass for the
personal use of such Executive and his spouse and children (hereinafter, “Eligible
Individuals”).  Such airline pass
(the “Airline Pass”) entitles Executive and Eligible Individuals to
travel on regularly scheduled Northwest domestic and international flights with
boarding priority of F-1 or the equivalent thereof and on terms and conditions
no less favorable than those applicable to Executive on the date hereof.  Executive shall be entitled to use, for the
remainder of his lifetime, all barter travel benefits earned to the date of
this Agreement, plus $25,000 annually in value of such benefits.

 

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

 

 

3

 

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

 

4.             Termination
of Employment.

 

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

 

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

 

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

 

4.4           Notice of Termination, Payments.  Any termination of Executive’s employment
hereunder (other than by death) shall be communicated by thirty (30) days’
advance written Notice of Termination by the terminating party to the other
party to this Agreement; provided that no advance Notice of Termination
of 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 shall
be paid on the Date of Termination.

 

5.             Payments
in the Event of Termination of Employment.

 

5.1           Payments in the Event of
Termination by the Company for Cause or Voluntary Termination by Executive.  Except as provided in Section 5.3, if
Executive’s employment hereunder is terminated by the Company for Cause or by
Executive 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 otherwise
entitled to receive pursuant to the terms of (i) any retirement, pension
or other employee benefit or compensation plan maintained by the Company at the
time or times provided therein or (ii) Sections 2.6 and 3 hereof.

 

5.2           Payments in the Event of Any Other
Termination of Employment.  Except as
provided in Section 5.3, if Executive’s employment hereunder is terminated
by the Company other than for Cause, as a result of death or Disability or by
Executive for Good Reason:

 

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

 

 

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

 

(b)           In addition to the compensation and benefits described in
Section 5.2(a):

 

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

 

(ii)           (A)  Executive shall
be 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 of
additional years of Benefit Service Executive is entitled to receive pursuant
to Section 2.6(b).

 

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

 

(iii)          With regard to group life insurance and group disability
insurance, until the earlier of the third anniversary of Executive’s Date of
Termination or the date Executive is employed by a new employer, Executive, his
dependents, beneficiaries and estate shall be entitled to all benefits under
such group life insurance and group disability insurance as if Executive were
still employed by the Company hereunder during such period.  If any such benefits cannot be provided to
Executive for any reason, the Company shall pay to Executive, or pay Executive
the cost of obtaining, such benefits.

 

 

5

 

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

 

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

 

(d)           Notwithstanding anything else to the contrary in this
Agreement, the Company’s obligation to make the payments provided for in
Sections 5.2(a)(iii) and 5.2(b)(i), (ii) and (iii) is expressly conditioned
upon the execution and delivery of a release in the form attached hereto as
Appendix A.

 

5.3           Payments for Certain Terminations
of Employment After a Change in Control or Emergence Date.  If Executive elects to terminate his
employment for any reason during the six month period commencing on the first
anniversary of the Change in Control or during the 30-day period commencing on
the first anniversary of the effective date of a confirmed plan of
reorganization for the Company under the Bankruptcy Code, Executive shall
receive all of the payments, and shall be accorded all of the rights, set forth
in Section 5.2 as soon as practicable (but in no event later than
ten (10) days following such termination of employment.  All other terminations of Executive’s
employment shall be governed by Sections 4 and 5 of this Agreement
irrespective of a Change of Control.

 

5.4           Gross-up
Payment.

 

(a)           Excise Tax.

 

(i)            If any payment or distribution by the Company to or for
the benefit of Executive (whether paid or payable pursuant to this Agreement or
otherwise (a “Payment”)) is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”)
or any interest or penalties thereon (together, the “Excise Tax”) then
Executive 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 penalties
thereon, the “Additional Income Tax”) or any Excise Tax, imposed upon
the Gross-Up Payment Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.

 

(ii)           Subject to Section 5.4(a)(iii), all determinations
required to be made under this Section 5.4, including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment, shall be made by
the firm of independent public accountants selected by the Company to audit its
financial statements (the “Accounting Firm”) which shall provide detailed
supporting calculations both to the Company and Executive within
fifteen (15) business days after the receipt of notice from Executive that
there has been a Payment, or such 

 

 

6

 

earlier time as is requested
by the Company.  All fees and expenses of
the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant
to 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 Firm
shall be binding upon the Company and Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that additional
Gross-Up Payments should have been made by the Company (an “Underpayment”).  If the Company exhausts its remedies pursuant
to Section 5.4(a)(iii) and Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of Executive.

 

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

 

(A)                              give the
Company any reasonably requested information relating to such claim;

 

(B)                                take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected
by the Company;

 

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

 

(D)                               permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold such Executive harmless, on an
after-tax basis, for any Excise Tax or additional Income Tax imposed as a result
of 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 

 

 

7

 

                                                contest and, at
its sole option, may (1) pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and (2) either direct Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner.  Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs
such Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive, on an interest-free basis, and
shall indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or Income Tax imposed with respect to such advance; and further
provided that any extension of the statute of limitations for the taxable year
of Executive with respect to which such contested amount is claimed to be due
is limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest any other issue
raised by the Internal Revenue Service or any other taxing authority.

 

(iv)          If, after the receipt by Executive of any amount advanced
by the Company pursuant to Section 5.4(a)(iii), Executive becomes entitled
to receive any refund with respect to such claim, Executive shall (subject to
the Company’s complying with the requirements of Section 5.4(a)(iii))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto).  If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 5.4(a)(iii), a
determination is made that such Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify Executive in writing
of its intent to contest such denial of refund prior to the expiration of
thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of any Gross-Up Payment
required to be paid.

 

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

 

 

8

 

6.             Confidentiality;
Non-Compete.

 

While employed by the Company and thereafter, Executive shall not
disclose any confidential information either directly or indirectly, to anyone
(other than the Company, its employees and advisors), or use such information
for his own account, or for the account of any other person or entity, without
the prior written consent of the company or except as required by law.  This confidentiality covenant has no temporal
or geographical restriction.  Upon
termination of this Agreement, Executive shall promptly supply to the Company
all property and any other tangible product or document which has been produced
by, received by or otherwise submitted to Executive during or prior to his term
of employment, and shall not retain any copies thereof.

 

Executive acknowledges that his services are of special, unique and
extraordinary value to the Company. 
Accordingly, in the event Executive resigns without Good Reason or is
terminated for Cause during the term hereof, Executive shall not at any time
prior to the first anniversary of the Date of Termination become an employee,
consultant, officer, partner or director of any air carrier which competes with
the 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 6
would result in irreparable injury and damage for which there would be no
adequate remedy at law, and that, in the event of said breach or any threat of
breach, the Company shall be entitled to an immediate injunction and
restraining order to prevent such breach or threatened breach, without having
to prove damages, in addition to any other remedies to which the Company may be
entitled at law or in equity.  Executive
further agrees that the provisions of the covenant not to compete are
reasonable.  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 hereto
agree that the covenant should be interpreted and enforced to the maximum
extent which such court deems reasonable. 
The provisions of this Section 6 shall survive any termination of
this Agreement and Executive’s term of employment.  The existence of any claim or cause of action
or otherwise, shall not constitute a defense to the enforcement of the
covenants and agreements of this Section 6.

 

7.             Successors
and Assigns.

 

(a)           This Agreement shall
bind any successor to the Company or to Significant Assets, whether by
purchase, merger, consolidation or otherwise, in the same manner and to the
same extent that the Company would be obligated under this Agreement if no such
succession had taken place. 
Notwithstanding that a successor to Significant Assets becomes bound to
this Agreement, the Company shall continue to be liable for the obligations
hereunder as a guarantor.  In any
agreement providing for succession to Significant Assets, the Company shall
cause each and every successor expressly and unconditionally to assume and
agree to perform the Company’s obligations under this Agreement.

 

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

 

 

9

 

Individuals
with pass privileges equivalent to those provided under the Airline Pass
described in Section 3.1.

 

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

 

8.             Term.

 

(a)           The term of this
Agreement shall commence on the Effective Date and end upon the Executive’s
termination of employment.  The rights
and obligations of the Company and Executive shall survive the termination of
this Agreement to the fullest extent necessary to give effect to the terms
hereof.

 

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

 

9.             Notices.

 

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

 

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

 

(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 as
may have been furnished in writing.

 

10.           Counsel
Fees and Indemnification.

 

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

 

 

10

 

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

 

(b)           The Company shall
indemnify 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 action
or proceeding (or any appeal from any action or proceeding) with respect to the
Company or activities engaged in by Executive in the course of employment with
the Company in which Executive is made, or is threatened to be made, a party or
a witness.

 

11.           Withholding.

 

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

 

12.           Certain
Defined 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 to
time.

 

“Base Salary” shall mean the annual salary of the Executive in
effect 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’s
employment hereunder (i) an act or acts of personal dishonesty by
Executive intended to result in substantial personal enrichment of Executive at
the expense of the Company, (ii) an act or acts of personal dishonesty by
Executive intended to cause substantial injury to the Company,
(iii) material breach (other than as a result of a Disability) by
Executive of Executive’s obligations under this Agreement which action was
(a) undertaken without a reasonable belief that the action was in the best
interest of the Company and (b) not remedied within a reasonable period of
time after receipt of written notice from the Company specifying the alleged
breach, 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 (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934 (the “Exchange Act”)) (a “Person”) of beneficial
ownership (within the mean of Rule 13d-3 promulgated under the Exchange
Act) of 25% or more of either (i) the then outstanding shares of Common
Stock of Parent (the “Outstanding Parent Common Stock”) or (ii) the
combined voting 

 

 

11

 

power of the then
outstanding voting securities of Parent entitled to vote generally in the
election of directors (the “Outstanding Parent Voting Securities”); or

 

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

 

(c)           Consummation of a reorganization, merger or consolidation
(a “Business Combination”), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of commons stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns Parent
through one or more subsidiaries) in substantially the same proportions as
their ownership immediately prior to such Business Combination of the
Outstanding Parent Stock and Outstanding Parent Voting Securities, as the case
may be and (ii) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of such board, providing for such Business
Combination; or

 

(d)           Consummation of (i) a complete liquidation or
dissolution of Parent or (ii) the sale or other disposition of all or
substantially all of the assets of Parent, other than to a corporation with
respect to which following such sale or other disposition, (X) more than
50% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners respectively, of the Outstanding Parent Common Stock and Outstanding Parent
Voting Securities immediately prior to such sale or other disposition of the
Outstanding Parent Common Stock and Outstanding Parent Voting Securities, as
the case may be and (Y)  at least a majority of the members of the board
of directors of such corporation were members of the Incumbent Board at the
time 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 were
elected, appointed or nominated by the Incumbent Board.

 

 

12

Notwithstanding the foregoing, following entry of an order for relief
by Parent under Chapter 11 of the Bankruptcy Code, in no event shall a Change
in 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 than
a Change in Control arising under clause (a) above, by reason of the receipt of
securities pursuant to a plan of reorganization of Parent which constitutes 25%
or more of the outstanding Parent Common Stock or the Outstanding Parent Voting
Securities, which were received on account of any claims acquired after the
date hereof and held as of the consummation of the plan of reorganization by
any person, entity or group of associated persons or entities acting in
concert, acquiring such claims with the intent to control the management and
policies of Parent on an ongoing basis following reorganization, or under
clause (c) above, by reason of a merger or consolidation with another
commercial airline company which results in the holders of claims and/or
interests in Parent outstanding immediately prior to the merger or
consolidation receiving or continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or any parent thereof) less than 50% of the combined voting power of the
securities of Parent or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or under clause (d)(ii) above,
by reason of the sale of assets to another commercial airline, unless such sale
results in either (x) creditors or interestholders of Parent receiving in
consideration or exchange for their claims and/or interests in Parent at least
50% of the combined voting power of the acquirer, or (y) Parent receiving at
least 50% of the combined voting power of the acquirer.

 

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

 

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

 

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

 

“Effective Date” shall mean September 14, 2005.

 

“F-1” shall mean confirmed, positive space seating in first
class or business class if first class is not offered, with the highest
boarding priority including (i) ahead of the categories specified below
category “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 one
or more of the following:

 

(a)           a material reduction in Executive’s compensation or other
benefits;

 

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

 

 

13

 

(c)           without Executive’s prior consent, the relocation of the
Company’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 of
this Agreement which has not been cured within ten (10) days after the
Company knows or has notice of such noncompliance.

 

(e)           (i)  if the Company
becomes a debtor under the Bankruptcy Code, the failure of the Company to file
the Compensation Continuation Motion within fifteen (15) days after entry of an
order for relief under Chapter 11 of the Bankruptcy Code;

 

(ii)           unless Executive agrees to extend the time period
set forth in this clause (ii), if at any time after the thirtieth (30th) day
after the Company has filed the Compensation Continuation Motion, the
Bankruptcy Court has not entered a provisional or final Order approving this
Agreement; or

 

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

 

The
Company 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 section
365(e)(2) of the Bankruptcy Code, and (ii) the consents of Executive required
under section 365(c)(1)(B) and 365(e)(2)(A)(ii) of the Bankruptcy Code are
conditioned on the timely satisfaction of the foregoing time period
restrictions.

 

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

 

“Notice of Termination” shall mean a notice specifying the Date
of Termination, which notice shall (i) indicate the specific termination
provision (if any) in this Agreement applicable to the termination, and
(ii) set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive’s employment under the provision
so 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 organization
or a government or any agency, instrumentally or political subdivision thereof.

 

 

14

 

“Significant Assets” shall mean (i) all of substantially
all of the assets and/or business or outstanding voting securities of the
Company (ii) all or substantially all of Northwest’s routes between the
United 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 elect
a majority of the board of directors (if a corporation) or to select a majority
of the board of directors (if a corporation) or to select a trustee or
equivalent controlling interest, shall at the time such reference becomes
operative, be directly or indirectly owned or controlled by such Person or one
or more of the other subsidiaries of such Person or any combination thereof.

 

13.           Miscellaneous.

 

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

 

14.           Validity.

 

The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision 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 other
hand, breaches or threatens to commit a breach of the terms and conditions
hereof, the party shall have the following rights and remedies:

 

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

 

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

 

15

 

16.           Parent
Undertaking.

 

Northwest
Airlines Corporation, as parent corporation to the Company, hereby agrees to
cause the Company to perform all of its obligations hereunder and Executive
shall be deemed to have entered into this Agreement in reliance upon the
undertaking set forth herein.

 

17.           Compliance
with the Provisions of Code Section 409A.

 

Notwithstanding anything in this Agreement to the
contrary, any payment under this Agreement to Executive shall be deferred, if
necessary, until the first date that such payment could be made without
subjecting 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

  	
   

  

 

 

16EXHIBIT
10.2

 

July 1, 2005

 

Mr. J. Timothy Griffin

18060 Shavers Lane

Woodland, MN 
55391

 

 

Re:                               Northwest
Airlines Corporation E-Commerce Incentive Compensation Program Award Agreement
dated as of April 23, 2004 (the “Award Agreement”) by and between Northwest
Airlines Corporation (the “Company”) and J. Timothy Griffin

 

 

Dear
Mr. Griffin:

 

On April 23, 2004, you were
granted an award (the “Award”) under the Northwest Airlines Corporation
E-Commerce Incentive Compensation Program (the “E-Commerce Plan”) for 20
Points, the terms and conditions of which were evidenced by the
above-referenced Award Agreement.  The
Compensation Committee of the Board of Directors of the Company has approved
certain amendments to your Award that are set forth in this letter agreement (the
“Agreement”).  You and the Company have
agreed as follows:

 

1.             As the result of the disposition in November 2004 by
Northwest Airlines, Inc. (“Northwest”), the principal operating subsidiary of
the Company, of certain shares of common stock of Orbitz, Inc. (“Orbitz”),
which is one of the e-commerce businesses covered by the Award, you were
entitled, upon vesting of the Award, to a redemption payment (the “Redemption
Amount”), plus interest from the date of such disposition to the payment
date.  The Award Agreement provides that
the Award will vest, subject to your continued employment with Northwest and
the achievement of a financial target related to Northwest’s e-commerce
revenues, in three equal installments on April 23, 2005, April 23, 2006 and April
23, 2007.  The financial target related
to Northwest’s e-commerce revenues has been satisfied.  The first installment of the Redemption
Amount vested on April 23, 2005 and was paid to you in April 2005.  Notwithstanding the provisions of the Award
Agreement, the Company hereby agrees to pay you within ten (10) business days
after the date of this Agreement an amount equal to the remaining, unvested
portion of the Redemption Payment, which equals $1,850,034, plus interest on
such amount at the rate specified in the E-Commerce Plan from the date of
Northwest’s disposition of the Orbitz shares to the date of such payment (collectively,
the “Payment Amount”).

 

 

 

2.             In the event that, on or before the first or second
anniversary of the date of this Agreement (as the case may be) your employment
with Northwest is terminated by the Company for Cause (as defined in Exhibit A
attached hereto) or by you without Good Reason (as defined in Exhibit A
attached hereto), you agree that you shall pay to the Company in cash within
ten (10) days after the date of such termination (i) 125% of the Payment Amount
if such termination occurs on or before the first anniversary of the date of
this Agreement or (ii) 62.5% of the Payment Amount if such termination occurs
after the first anniversary of the date of this Agreement and on or before the
second anniversary of the date of this Agreement.   If you fail to pay to the Company any amount
required to be paid by you pursuant to this Section 2, you agree that the
Company or any affiliate of the Company shall be permitted to off-set any such
amounts against other amounts that are owed to you by the Company or such
affiliate.

 

3.             You agree as follows:

 

(a)           While employed by Northwest and
thereafter, you shall not disclose any confidential information either directly
or indirectly, to anyone (other than the Company or an affiliate of the Company
and their respective employees and advisors), or use such information for your
own account, or for the account of any other person or entity, without the
prior written consent of the Company or except as required by law.  This confidentiality covenant has no temporal
or geographical restriction.  Upon
termination of your employment with Northwest, you shall promptly supply to the
Company all property and any other tangible product or document which has been
produced by, received by or otherwise submitted to you during or prior to your
term of employment, and shall not retain any copies thereof.

 

(b)          You acknowledge that your services are
of special, unique and extraordinary value to the Company.  Accordingly, you agree that you shall not at
any time prior to the first anniversary of the date of your termination of
employment with Northwest become an employee, consultant, officer, partner or
director of any air carrier which competes with the 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.

 

(c)           You agree that any breach of the
terms of this Section 3 would result in irreparable injury and damage for which
there would be no adequate remedy at law, and that, in the event of said breach
or any threat of breach, the Company shall be entitled to an immediate
injunction and restraining order to prevent such breach or threatened breach,
without having to prove damages, in addition to any other remedies to which the
Company may be entitled at law or in equity. 
You further agree that the provisions of the covenant not to compete set
forth in Section 3(b) hereof are reasonable. 
Should a court determine, however, 

 

 

1

 

that any provision of the
covenant not to compete is unreasonable, either in period of time, geographical
area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent that such court deems
reasonable.  The provisions of this
Section 3 shall survive any termination of your employment with Northwest.  The existence of any claim or cause of action
or otherwise, shall not constitute a defense to the enforcement of the
covenants and agreements of this Section 3.

 

4.             Any redemption amount payable to you pursuant to the
provisions of the E-Commerce Plan and the Award Agreement with respect to any
e-commerce investment other than Orbitz shall not be modified or affected in
any way by any of the provisions contained herein.

 

5.             All payments required to be made by the Company
hereunder shall be subject to the withholding of such amounts as are required
to be withheld pursuant to any applicable law or regulation.

6.             Except as otherwise provided in
Section 3(c) of this Agreement, all disputes and controversies arising
under or in connection with this Agreement shall be settled by mandatory
arbitration conducted before one arbitrator having knowledge of employment law
in accordance with the rules for expedited resolution of employment disputes of
the American Arbitration Association then in effect.  The arbitration shall be held in the
Minneapolis/St. Paul metropolitan area at a location selected by the
Company.  The determination of the
arbitrator shall be made within thirty (30) days following the close of
the hearing on any dispute or controversy and shall be final and binding on the
parties.  The parties hereby waive their
right to a trial of any and all claims arising out of this Agreement or breach
of this Agreement.  All costs and
expenses incurred in connection with any arbitration including, without
limitation, arbitrator and attorney’s fees, shall be paid by the non-prevailing
party in the arbitration unless the arbitrator determines that such expenses
must be otherwise allocated under applicable law to maintain the validity of
this Section 6.

7.             No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and an authorized officer of the Company.  The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Minnesota, without regard to principles of conflicts of laws.  This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

Please indicate your acceptance and agreement with the provisions of
this Agreement by signing in the space provided below.

 

 

2

 

	
   

  	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Douglas M. Steenland

  
	
   

  	
   

  	
  Douglas M. Steenland

  
	
   

  	
   

  	
  President & Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  ACCEPTED
  AND AGREED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
       /s/ J. Timothy Griffin

  	
   

  	
   

  
	
       J. Timothy Griffin

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

Date:   July 1, 2005

 

3

 

Exhibit A

 

 

                                “Cause”
shall mean with respect to termination by Northwest of your employment
(i) an act or acts of dishonesty by you resulting in, or intended to
result in, directly or indirectly, any personal enrichment of you, (ii) an
act or acts of dishonesty by you intended to cause substantial injury to the
Company or any of its affiliates, (iii) material breach (other than as a
result of a Disability (as defined below)) by you of your obligations under any
Management Compensation Agreement between you and Northwest, which action was
(a) undertaken without a reasonable belief that the action was in the best
interests of the Company or any of its affiliates and (b) not remedied
within a reasonable period of time after receipt of written notice from
Northwest specifying the alleged breach, (iv) your conviction of, or plea
of nolo contendere to, a crime constituting (a) a felony under the laws of
any country, the United States or any state thereof or (b) a misdemeanor
involving moral turpitude or (v) a material breach of (a) the Company’s
Code of Business Conduct or (b) the provisions of any Management
Compensation Agreement between you and Northwest.

 

“Disability” shall
mean your physical or mental condition which prevents continued performance of
your duties for Northwest, if you establish by medical evidence that such
condition will be permanent and continuous during the remainder of your life or
is likely to be of at least three (3) years duration.

“Good Reason” shall
mean any one or more of the following:

(a)           a material reduction in your base
salary or level of target bonus under the KEACIP or any successor bonus plan
(except to the extent of any reduction in connection with a base wage reduction
for salaried employees of Northwest, by an amount not to exceed 20% of your
base salary in effect on the date of such wage reduction);

(b)           any substantial and sustained
diminution in your authority or responsibilities for Northwest (provided,
however, that as long as you retain a substantial portion of your then
current oversight responsibility, Northwest shall be permitted to transfer a
portion of your oversight responsibility without your consent; or

(c)           the relocation of the Company’s
principal executive offices to a location outside the Minneapolis-St. Paul
Metropolitan Area.

provided, however,
that the foregoing events shall constitute Good Reason only if Northwest fails
to cure such event within thirty (30) days after receipt from you of written
notice of the event which constitutes Good Reason; provided, further,
that “Good Reason” shall cease to exist for an event on the 60th day
following the later of its occurrence or your knowledge thereof, unless you
have given Northwest written notice thereof prior to such date.

 

 

4

 

 In order for the termination of your
employment to be considered for Good Reason, such termination must occur within
one (1) year after the event giving rise to such Good Reason.  Your continued employment shall not
constitute consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder.

 

 

5

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