NWA puts $3.6 million on table to keep Steenland until merger

Northwest Airlines CEO Doug Steenland has been awarded stock-based incentives valued at about $3.6 million designed to retain him through the completion of a Northwest merger with Delta Air Lines, according to a regulatory filing Friday.

In his employment contract, Steenland could have left the Eagan-based carrier during June and would have been eligible to receive a $3.27 million one-time severance payment on top of other compensation, including previously earned pension benefits.

But Steenland agreed to waive that June exit clause in his contract in exchange for the 375,000 "restricted retention units," which are a form of stock-based compensation.

Based on Northwest's stock closing price Friday of $9.69 per share, the award is valued at $3.6 million. But the actual value of the package will not be known until Steenland either leaves the carrier or until the units fully vest.

Delta and Northwest executives hope to secure Justice Department approval of their merger proposal by the end of this year. If that occurs, Steenland is expected to leave Northwest when the transaction closes.

The cash value of his restricted retention units would be based on Northwest's stock price at the time the merger transaction closes, but the stock value was capped at $22 a share by the airline's board.

"The board is obviously extremely interested in making sure that Northwest's best interests are looked after," Mike Becker, senior vice president of human resources and labor relations, said Friday.

However, in the event the merger proposal is rejected, Steenland's retention units would vest over four years.

In Friday's regulatory filing, the company also reported that Steenland must abide by a one-year noncompete clause barring him from going to work for certain Northwest competitors after he leaves the carrier unless he buys out that clause.

If Delta acquires Northwest, Steenland would have a seat on the board of directors, but he would not serve in an executive position with the new company.

Northwest will be required to file a new proxy statement in the coming days, which is expected to more precisely quantify Steenland's severance payments and benefits.

Based on the old proxy, Steenland's severance payments and benefits were worth an estimated $7.8 million.

If Steenland leaves in January upon the closing of a merger, he would be entitled to get an extra $4 million from the acceleration of restricted stock previously granted him. Those shares would vest immediately upon a change of control of the company. That dollar value is based on an estimate of the stock being at $10 per share.

Also Friday, Northwest reported that there is a merger termination fee of $165 million in the agreement with Delta.

If either airline walks away from the deal under certain circumstances, that carrier would be required to pay the fee.