Start Printed Page 49801. On May 16, 2003, Mr. William S. Swelbar, Managing Director of Eclat, responded to the Department concerning questions on the two valuations of Pinnacle. The Proposed Exemption was requested in an application filed on Start Printed Page 49793behalf of Northwest pursuant to section 408(a) of the Act and section 4975(c)(2) of the Code, and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, August 10, 1990). Thus, almost all of the Series C Preferred Stock that remains in the Employee Stock Plan is allocated to the accounts of employees represented by the IAM and IBT. documents in the last year, 825 The Independent Fiduciary represents that after extensive negotiations during November and December, 2002, and January, 2003, Fiduciary Counselors and Northwest, along with Pinnacle and NWA Corp., Northwest's ultimate parent company, entered into an Omnibus Agreement, dated January 15, 2003, which sets forth the terms and conditions pursuant to which Fiduciary Counselors will accept the Pinnacle Stock (the Contribution).[6]. Archived News Release Caution: Information may be out of date. Northwest provided the funded status of each Plan as of 1/1/03 as shown in the following table. The Employee Stock Plan was established through labor negotiations between Northwest and its unions in 1993 to hold contributions of Northwest Airlines Corporation Series C Preferred Stock. [3] regulatory information on FederalRegister.gov with the objective of Other employee groups at the carrier are left with a 401(k) plan that offers no guarantee and places the investment risk on employ-ees themselves. The right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. (c) The term control means the power to exercise a controlling influence over the management or policies of a person other than an individual. In its determinations, the Independent Fiduciary has also taken into account Northwest's request for a minimum funding waiver with respect to Plan contributions in 2003 and 2004, and considered the likelihood that such waiver will be granted. Northwest noted that under the terms of the Omnibus Agreement, Northwest is responsible for making up the difference, if any, between the IPO price and the original contribution value. The IF Report states that Eclat expects that low-cost carriers will expand and gain share in the future but feels that Northwest is in the best shape of any network carrier to compete. [7] More frequent notice will be required based on Northwest's liquidity and the value of the Pinnacle Stock contributed to the Plans. The Independent Fiduciary must investigate the facts and assumptions underlying the appraisals to ensure that stock contributions are not valued at more than fair market value. does steven weber have a brother; charlie bears lantern; My Cart. The Department has, in transactions of this nature, placed emphasis on the need for an Independent Fiduciary and on such Independent Fiduciary's considered and objective evaluation of the transactions. The Independent Fiduciary must ensure that all of the conditions above are satisfied with respect to any past contributions of Pinnacle Stock, as well as any future contributions. Number of retired or separated participants receiving benefits. documents in the last year, 24 As noted in the June 27, 2003 letter from Northwest and ALPA to the Department, Northwest states that the Letter Agreement will be executed in connection with the voluntary contribution. A federal judge has denied dismissal of a lawsuit in which five former employees of Delta Air Lines allege Delta and its administrative committee improperly Document Drafting Handbook legal research should verify their results against an official edition of The Independent Fiduciary and its advisors reviewed various documents relevant to the Contribution, including without limitation, Northwest's certificate of incorporation; Northwest's corporate bylaws; the certificate of incorporation of Pinnacle; the Master Trust agreement pursuant to which the Plan assets are currently held and managed; audited financial statements of the Plans for 2000 and 2001; the current Plan documents; the Plans' annual reports on Forms 5500 for 2000 and 2001; other information provided by Northwest regarding the Plans' assets (including the Plans' investment guidelines and portfolio composition); a statement prepared by the Plans' actuaries of the Plans' liquidity needs to pay benefits and administrative expenses in the near future and the sources of funds (other than the Pinnacle Stock) available to satisfy such liquidity needs; and certain of Pinnacle's collective bargaining agreements. This voluntary contribution will eliminate the funding requirements under the Code and ERISA for the 2003 Plan Year that would otherwise be payable with respect to the Pilot Plan. The IF Report states that Eclat's clients come from almost every sector of the aviation industryairports, airlines, labor organizations and aerospace/aeronautics corporations. WebThe Pension Plan is a tax-qualified defined benefit pension plan for the benefit of eligible union- represented employees of Northwest Airlines. This change generally reduces the length of the available Deferral when the Plans hold more than $325 million in Pinnacle Stock (measured as of the date of each contribution). [8] better and aid in comparing the online edition to the print edition. In connection with the change in ownership of Fiduciary Counselors, Fiduciary Counselors and AIC have agreed that future payments will be allocated in the same proportions. Northwest noted that, as reflected in the Term Sheet, Fiduciary Counselors will determine the fair market value of the Pinnacle Stock contributed to the Plans on an annual basis and in advance of each contribution to the Plans. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. The requirement (detailed in the last bullet point in the second column of the Proposed Exemption at 68 FR 2585) that Plan shares of Pinnacle Stock be voted in favor of certain corporate actions is now set to expire upon the occurrence of an Early Termination Event. An Initial Contribution was made in the amount of $41,149,911. Future contributions of Pinnacle Stock will continue to be subject to independent review and valuation. documents in the last year, 9 In addition, in the paragraph immediately following subparagraph (iii) in the second column of 68 FR 2580, the reference to the price of Pinnacle Stock being determined as of the exercise date should be expanded to reflect these concepts. Equally important, Fiduciary Counselors negotiated for special rights associated with the Plans' acquisition of Pinnacle Stock that limit the risks associated with Pinnacle Stock. As with all domestic U.S. carriers, Northwest has been hit by the drop in revenue due to lower overall yields and depressed passenger levels. The Independent Fiduciary and its advisors also met with the senior officers of Pinnacle. Reliance solely on the valuation provided by the appraiser would not be sufficient to meet this prudence requirement. 5,105. The ASA was revised to provide that the acquisition or disposition of shares of Pinnacle Stock pursuant to the terms of the Omnibus Agreement does not constitute a Change of Control (as defined in the ASA). WebNWA works closely with plan sponsors and their professional advisors to establish and/or maintain customized retirement programs for both defined benefit and defined contribution plans. (l) An analysis of the market price of securities of corporations engaged in the same or similar lines of business as Pinnacle, which are actively traded on a recognized exchange or automated broker-dealer quotation system. While the U.S. market has suffered tremendous losses due to the slowdown in the U.S. economy and the terrorist attacks of 9/11, the global market has rebounded much quicker. As a condition of the Proposed Exemption, Fiduciary Counselors, using the services of its independent appraisal firm Eclat, Start Printed Page 49802determined the value of Pinnacle Stock. The Pinnacle Stock contributed to the Pilot Plan will be held in a separate, segregated subaccount of the Master Trust and held for the exclusive benefit of the Pilot Plan. To exercise the Put Option, the Independent Fiduciary must provide written notice to Northwest of its election to put to Northwest any or all of the shares of Pinnacle Stock then held by the Plans. has no substantive legal effect. Furthermore, the fact that a transaction is subject to an administrative or statutory exemption is not dispositive of whether the transaction is in fact a prohibited transaction; and, (5) The availability of this exemption is subject to the express condition that the material facts and representations contained in the application are true and complete and accurately describe all material terms of the transactions, which are the subjects of the exemption. 2009-01-01. It is not an official legal edition of the Federal documents in the last year, 37 The Department asked the Independent Fiduciary if the January 15, 2003 Valuation was based on audited financial statements. As Pinnacle grows to 95 aircraft, the number of passengers and revenue will more than double. As a result of its review, certain changes were incorporated in the new Airline Services Agreement entered into on January 14, 2003 (ASA). 4 of 1978 (5 U.S.C. Ellen A. Hennessy will continue to be the primary person at Fiduciary Counselors handling its responsibilities as independent fiduciary to the Northwest Airlines defined benefit plans. on 1 0 obj<> endobj 3 0 obj<>stream Northwest states that, in this regard, some refinements were made to the provisions of the Term Sheet when the parties negotiated and entered into the final Omnibus Agreement (executed on January 15, 2003). With PBGC's consent, Eclat was subsequently retained by the Independent Fiduciary to value the Pinnacle Common Stock. Northwest Airlines Pension Plan 3 employees reported this benefit 2.0 1 Rating Available to US-based employees Change location Employee As of June 30, 2003, Fiduciary Counselors was acquired by Fiduciary Group, Inc., in a management-led buyout. The Department asked whether Northwest intends to contribute cash or some other asset to satisfy the balance of the calendar year 2003 funding requirements of the Salaried and Contract Plans that will not be met by the Pinnacle Stock contribution as a result of the Letter Agreement. informational resource until the Administrative Committee of the Federal This table of contents is a navigational tool, processed from the Total cost is only $ 299.00. The allocation method made pursuant to the Letter Agreement will result in a modest change in the percentage of the Contract and Salaried Plans' assets invested in Pinnacle Stock compared to the ratable allocation contemplated by the Proposed Exemption. In this event, a majority of the independent directors may require a fairness opinion from a nationally recognized investment banking firm. Some commenters asked if Northwest would be willing to guarantee the Plans a minimum rate of return on the Pinnacle Stock such as a rate equal to the inflation rate. 612-726-3774. Although the Plan's option is exercisable at anytime, unlike a normal option, Northwest does not have to immediately settle. Comment: A number of comments expressed concerns that Pinnacle Stock is a risky and illiquid investment and hard to value because there is no established market for the security. More information and documentation can be found in our The Special Conversion Option expired on February 9, 1994. Northwest provided that the Omnibus Agreement guarantees that the Plans always receive the greater of the initial contribution value of Pinnacle Stock or the value of the stock at the time of an IPO or the exercise of the Put Option. WebNorthwest Airlines Retirees This booklet includes summaries of the benefits covered under the Northwest Retiree Benefit Trust for NWA Retirees, eligible Dependents and In the Proposed Exemption, it was noted that the length of the Deferral would be shortened if Pinnacle Stock was publicly traded at the time that the Put Option is exercised. Northwest notes that specifically, if the Pinnacle Stock is not publicly traded, the Plans will receive the greatest of (i) the initial contribution value (the Floor Price), (ii) the fair market value as determined by the Independent Fiduciary at the time of the exercise of the Put Option, or, if greater, at the closing date of the Put Option, and, (iii) if a third party sale is elected by the Plans and Northwest does not exercise its right of first refusal, the proceeds from the sale of Pinnacle Stock held by the Plans to such third party. 4. Maintaining liquidity is key to Northwest's strategy for avoiding bankruptcy. Specifically, the Independent Fiduciary negotiated a limited period for the transfer restrictions (until July 1, 2006) and the elimination of such restrictions upon the occurrence of an Early Termination Event. Any transaction involving Northwest outside the ordinary course of business that involves more than $2 million and any ordinary course transaction that involves more than $5 million must be approved by a majority of the independent directors. This feature is not available for this document. He also filed a claim for long-term disability benefits under Northwest Airlines Long Term Disability Plan ("LTD Plan"). The value of the transaction is enhanced due to the downside protection that this Put Option provides. The monthly contributions required to be made to the Pilot Plan pursuant to the pilot collective bargaining agreement are waived for the 2004 and 2005 Plan Year. This period could range between 30 and 180 days depending on Northwest's liquidity position. This exemption is conditioned upon adherence to the material facts and representations described herein and upon satisfaction of the following requirements: (a) The Plans acquire the Pinnacle Stock through one or more contributions by Northwest during the calendar years 2003 and 2004; (b) An independent qualified fiduciary (the Independent Fiduciary), acting on behalf of the Plans, represents the Plans' interests for all purposes with respect to the Pinnacle Stock, and determines, prior to entering into any of the transactions described herein, that each such transaction, including the contribution of the Pinnacle Stock, is in the interests of the Plans; (c) The Independent Fiduciary negotiates and approves the terms of any of the transactions between the Plans and Northwest that relate to the Pinnacle Stock; (d) The Independent Fiduciary manages the holding and disposition of the Pinnacle Stock and takes whatever actions it deems necessary to protect the rights of the Plans with respect to the Pinnacle Stock; (e) The terms of any transactions between the Plans and Northwest are no less favorable to the Plans than terms negotiated at arm's-length under similar circumstances between unrelated third parties; (f) The Independent Fiduciary determines the fair market value of the Pinnacle Stock contributed to each plan as of the date of each such contribution. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. In this case, the Omnibus Agreement provides the Plans with a Put Option that allows Fiduciary Counselors at any time to put Pinnacle Stock back to Northwest at the greater of the price at the time the stock was contributed or the price at the time of the put. by the Education Department Since Northwest was prohibited from investing the Pilot Plan's assets in employer stock, the Pilot Plan at that time, did not participate in the investment fund. This prototype edition of the Lastly, the Department notes that the above described responsibilities to be undertaken by the Independent Fiduciary are material factors in the Department's determination to grant a final exemption. 4. Similarly, in the second column of 68 FR 2588 (third full paragraph), the reference in subclause (II) to the closing price of Pinnacle shares on the closing date should refer to the last trading day before the closing date. The notice also invited interested persons to submit comments on the proposed exemption and/or to request that a public hearing be held. Northwest explained that the Omnibus Agreement granted the Plans additional rights in order to protect their interest in the Pinnacle Stock. The Omnibus Agreement further requires that Northwest provide regular notice of its liquidity to Fiduciary Counselors. The IF Report provides that the Independent Fiduciary and its advisors participated in numerous telephone conferences with representatives of Northwest and Pinnacle through November, December and early January concerning the Independent Fiduciary's engagement, the proposed Contribution, the status of Northwest's minimum funding waiver applications to the Internal Revenue Service and the Proposed Exemption. Federal Register. The President of the United States manages the operations of the Executive branch of Government through Executive orders. 04/28/2023, 153 In addition, Northwest will provide the Independent Fiduciary with the information required to be provided to its lenders under its credit agreement. rY0bR' u) The terms of the transaction negotiated between the Independent Fiduciary and Northwest were embodied in a Term Sheet, which was provided to the Department on January 10, 2003. Indeed, during the 1990's, Northwest contributed to its pension plans millions of dollars more than the required amount of contributions. The total value of the Initial Contribution and Additional Initial Contributions made to the Contract Plan was $43,821,894. The closing date of the purchase and sale of shares with respect to which the Put Option has been exercised will be the 30th calendar day after such notice is given. In discharging its obligations under section 404(a)(1), the independent fiduciary must take steps calculated to obtain the most accurate valuation available. Additionally, Northwest notes that the Letter Agreement between Northwest and ALPA relating to a voluntary contribution of Pinnacle Stock would provide ALPA with a role in reviewing and approving the termination, and any replacement, of the independent fiduciary. In negotiating the terms of the Contributions and determining whether to accept the Initial Contribution, the Independent Fiduciary, with its financial advisors and legal counsel, reviewed those documents that it deemed relevant, participated in meetings and telephone conferences with officers and other representatives of Northwest, and considered aspects of the Contribution that it deemed pertinent to its engagement, including without limitation Northwest's current and future ability to honor the Put Option. The IF Report notes that in the Eclat Report, Eclat's valuation of the Pinnacle Common Stock was considerably lower than the value it ultimately determined for the Independent Fiduciary in the January 15, 2003 Valuation. The information addressed, among other issues, how the possibility of a Northwest bankruptcy was factored into the valuation, how the valuation was stress tested for other assumptions contained in the valuation, and the reasons for the selection of a 15% liquidity discount. Under the Letter Agreement, the Salaried and Contract Plans will instead hold Pinnacle Stock with a value equal to approximately 8% of their respective assets. The stock has long term upside potential because of the planned IPO. The Term Sheet did not provide for the Additional Initial Contribution. 5. The concerns expressed generally related to the proposed contribution of Pinnacle Stock instead of a cash contribution to the Plans; the value and method of valuation of the Pinnacle Stock; the effects of the proposed transactions on the Plans; and the adequacy of the proposed safeguards that are intended to protect the Plans' interests. # A1430. Pinnacle contributed over $500 million in revenue to Northwest in 2002 and is expected to grow its regional jet flying approximately 30 percent per year through 2005. The Independent Fiduciary negotiated a comprehensive set of representations and warranties relating to both Pinnacle Corp. and Northwest and its affiliates relating to Northwest's ability to honor the Put Option and to the value of Pinnacle Corp. The Northwest Airlines Pension Plan for Contract Employees is approximately forty percent of the Master Trust. The Omnibus Agreement provided for two contributions to be made to the Contract Plan on January 15, 2003. Fiduciary Counselors also obtained a determination from Northwest's Pension Investment Committee that the holding of Pinnacle Stock would not impair the liquidity of the Plans and that the Plans would be able to pay benefits and expenses when due. Northwest stated that the language at section 5.1(b) of the Omnibus Agreement contains a representation that Northwest has the corporate and legal authority to meet its obligations under the agreement, including the Put Option. WebPortuguese products available Online we mail to all lower 48 states. If the Pinnacle Stock is publicly traded, the Plans will receive the greater of (i) the Floor Price, or (ii) the average closing price for the stock on the public market for the 10 trading days preceding the exercise date or, if greater, the closing price on the day before the Put Option closing date. The goal of the Pinnacle Stock contribution is to (1) provide the Plans with a valuable security, (2) meet near term pension funding obligations, and (3) allow Northwest to preserve cash to withstand the current economic environment. Fiduciary Counselors asserts that the sale of Fiduciary Counselors will, if anything, increases their independence. On June 27, 2003, ALPA and Northwest provided the Department with a Letter of Agreement between Northwest and the Northwest airline pilots represented by ALPA (the Letter Agreement) regarding the acquisition and holding of Pinnacle stock by the Northwest Pension Plan for Pilot Employees (the Pilot Plan). Moreover, to the extent that Northwest has assets to secure the contributions, such assets will be used to maintain the liquidity necessary for Northwest to weather the ongoing economic challenges. (m) An analysis of the marketability, or lack thereof of the Pinnacle Stock, with specific reference to any restrictions, understandings, agreements, or obligations limiting the Plans' ability to dispose of the Pinnacle Stock. documents in the last year. Eclat was also provided with unaudited interim and full year financial information for 2002. Northwest Response: Northwest responded that Northwest recognizes that it and the airline industry face significant financial challenges. District 143 members at The terms of the ASA and related agreements are more favorable to Pinnacle than an arm's length transaction between unrelated parties, and substantially determine and enhance the value of Pinnacle. Pinnacle Airlines Corp. is the holding company of Pinnacle Airlines, Inc. 2. In this regard, as long as the Plans hold at least 5 percent of the Pinnacle Stock, the Plans will have the right to designate one nominee to Pinnacle's board of directors, and Northwest will vote the Series A Preferred Share held by it in favor of such designee. documents in the last year, 84 Statement Income Company. Northwest states, as noted in the Proposed Exemption, that the Master Trust is established in a manner such that all Plans hold an undivided and commingled interest in the assets of the Trust. This is primarily due to the fact that Southwest Airlines does not serve 2 of the 3 Northwest hubsMemphis (Pinnacle's largest market) and Minneapolis. For purposes of this requirement, the term employer real property means real property leased to, and the term employer securities means securities issued by, an employer any of whose employees are covered by the Plans or by an affiliate of such employer; and. All transactions involving the Plans in connection with the contribution of Pinnacle shares will be no less favorable to the Plans than arm's length transactions involving unrelated parties. Webnorthwest airlines retirement savings plan for contract employees Examples of this type of plan are 401(k), 401(a), Employee Stock Ownership Plan (ESOP), Savings Plans endstream endobj 4 0 obj<> endobj 5 0 obj[/Separation/PANTONE#20368#20C/DeviceCMYK 3 0 R] endobj 6 0 obj<> endobj 7 0 obj<> endobj 9 0 obj<>stream An additional provision that would prohibit Northwest from using its rights under the Series A Preferred Share to block a Transfer of Pinnacle Stock following an Early Termination Event. Recursos Humanos. At that time, the Pilot Plan did not participate in the Pinnacle Stock Investment Fund.[4]. Director, Office of Exemption Determinations, Employee Benefits Security Administration, Department of Labor. Additionally, the Independent Fiduciary corrects language in the fifth paragraph of the Voting Provisions of the Proposed Exemption that states a majority of Pinnacle's board is needed for the approval of compensation of Pinnacle's CEO. (b) A statement that the appraiser is independent of Pinnacle and Northwest, and that the appraiser has no interest in the securities issued by Pinnacle or Northwest. Fiduciary Counselors adds that AIC, which remains a subsidiary of Aon, will continue to act as advisor in connection with this engagement. These tools are designed to help you understand the official document The Delaware law applicable to the repurchase of the Series C stock requires the Board to make a finding that NWA Corp. has adequate surplus, defined as the net asset value of the corporation in excess of its capital. Northwest Response: Northwest states that, because there is a potential for a conflict of interest, the Proposed Exemption required that Northwest appoint an independent fiduciary who is vested with the discretion to determine whether the Plans should acquire, hold or dispose of Pinnacle Stock. 1. Websurrey accident today 176 street; Servicios. documents in the last year, 83 On that day, ALPA, TWUA, NAMA, ATSA and the Company on behalf of its management and non-contract employees exercised the Special Conversion Option, with the IAM and IBT electing not to exercise the Special Conversion Option (63 shares are still owned by the ALPA trust). For purposes of the funding standard account of each Plan, the value of the shares of Pinnacle Stock contributed to each Plan will be determined by the Independent Fiduciary. In valuing the Pinnacle shares, it was necessary to assign a value, not only to Pinnacle, but also to the Put Option. Fiduciary Counselors and Eclat represent that Eclat was originally retained by PBGC to value Pinnacle and to evaluate the financial viability of Northwest. Current and former employees report that Northwest Airlines provides the following benefits. Employee Benefits Security Administration [Prohibited Transaction Exemption (PTE) 2003-26, Exemption Application Numbers D-11137, 11138, and 11139] Northwest Airlines Pension Plan for Salaried Employees (Salaried Plan), the Northwest Airlines Pension Plan for Pilot Employees (Pilot Plan), and the Northwest Airlines case no. provide legal notice to the public or judicial notice to the courts. Northwest represents that it will make any such contributions in cash. Northwest noted that, as is the case for sponsors of defined benefit plans, Northwest has adopted investment guidelines and asset allocation strategies that guide the investment of the Plans' assets. See Omnibus Agreement at section 8.8. The Independent Fiduciary retained an independent, expert airlines valuation firm, Eclat, to provide valuation services. ALPA and Northwest informed the Department that the Letter Agreement will be executed by the parties in connection with a proposed voluntary contribution of Pinnacle Stock (described below). 2004) on CaseMine. The changes incorporated into the Omnibus Agreement were requested and approved by Fiduciary Counselors. Ioane John Opeta appeals the district court's judgment that he is not "totally and permanently" disabled, and therefore ineligible for a disability pension benefit under the Northwest Airlines Pension Plan for Contract Employees (the "Plan"), which is administered by Northwest Airlines ("Northwest") and regulated by the Employee on FederalRegister.gov In particular, the risk and the liquidity of the Pinnacle Stock were taken into account and are explained in the reports issued by Fiduciary Counselors and Eclat. dA/Wojz~kfW_o~B][l(psMbfc;|\Q@o~>]}_?>.o_~UYxHB)oP"dJjn Northwest asserts that, if its current cash needs were not so great, Northwest would make its pension contributions in cash as it has in the past. Start Printed Page 49808. Page 49 of 61. James, a former reservations agent for Northwest Airlines, was injured in a car accident and filed a claim for disability pension benefits under Northwest Airlines Pension Plan for Contract Employees (the "Pension Plan"). Several commenters asked if Northwest would manage Pinnacle in a manner that maximizes its value. See Omnibus Agreement at section 6.3. Since September 10, 2001, regional airlines have lost 48% of their value while the major airlines have lost 78% (excluding U.S. Airways and United that have filed for Chapter 11 bankruptcy protection).