documents in the last year, 1401 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. 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. Because the value of the Pinnacle Stock is based on the financial performance of Pinnacle, the Independent Fiduciary reviewed and considered the business of Pinnacle, and the contractual relationship between Pinnacle and Northwest. In addition, section 404(a)(1)(C) requires that fiduciaries diversify plan investments so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. In this regard, the Independent Fiduciary represented that it negotiated terms that it determined were no less favorable to the Plans than terms negotiated at arm's length with an unrelated third party under similar circumstances. Without modification to the pilot collective bargaining agreement, the Proposed Exemption contemplated that the Salaried and Contract Plans could hold Pinnacle Stock equal up to 10% of each Plan's assets. These can be useful Accordingly, based upon the representations made by the Applicant, the written comments received in response to the Proposed Exemption, the record of the public hearing, and the analysis conducted by the Independent Fiduciary, the Department has determined to grant the exemption. The length of the Deferral varies based upon a function of (1) the liquidity of Northwest (as defined in the Omnibus Agreement) and (2) the value of Pinnacle Stock contributed to the Plans. The Independent Fiduciary and its advisors also met with the senior officers of Pinnacle. In addition, Pinnacle has an independent Board of Directors with one member appointed by Fiduciary Counselors, and the Fiduciary Counselors-appointed Board member is entitled to special voting rights on certain matters. 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. NWA Corp. has the option to repurchase such shares in cash, by the issuance of additional Common Stock, or by the use of cash and stock. charles schwab ac144; quel aliment pour avoir des jumeaux; lesser lodge catskills. Each of Northwest's three main unions at the time of the Agreements also was granted the right to appoint one director to the Northwest board of directors. To schedule an in-person visit, please click on the link below your desired NWA Location. Learn about Northwest Airlines Pension Plan, including a description from the employer, and comments and ratings provided anonymously by current and former Northwest Airlines employees. This is because a cash contribution is not a viable alternative given the company's liquidity needs. In accordance with section 408(a) of the Act and section 4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon the entire record, the Department finds that the exemption is: (b) In the interests of the plans and their participants and beneficiaries; and. documents in the last year, by the Energy Department Information about this document as published in the Federal Register. daily Federal Register on FederalRegister.gov will remain an unofficial (n) An analysis of the degree to which actual control (both in form and in substance) will pass to any of the Plans as a result of any of the contemplated transactions, (o) To the extent that Pinnacle's current or projected revenues and expenses are related to, or dependent upon, contracts, agreements, or understandings between Northwest and Pinnacle, an analysis of Northwest's financial condition, the likelihood of a Northwest bankruptcy, and the potential impact of a Northwest bankruptcy on those contracts, agreements, or understandings, and on the market value of Pinnacle Stock, and. The notice also invited interested persons to submit comments on the proposed exemption and/or to request that a public hearing be held. Northwest asserts that its beliefs in this regard have been independently verified. Comments: Commenters expressed a concern that the contribution of Pinnacle Stock involves a conflict of interest on the part of Northwest. For a complete statement of the facts and representations supporting the Department's decision to grant this exemption, refer to the January 17, 2003 Notice of Proposed Exemption at 68 FR 2578. The right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. Eclat will furnish a similar valuation report with respect to each subsequent contribution. (a) The term independent fiduciary means a fiduciary who is: (1) independent of and unrelated to Northwest and its affiliates, and (2) appointed to act on behalf of the Plans for all purposes related to, but not limited to, (A) the in-kind contribution of the Pinnacle Stock by Northwest to the Plans, (B) the holding of the Pinnacle Stock by the Plans; (C) the acquisition, holding, and exercise by the Plans of the Put Option, and (D) any sale of the Pinnacle Stock by the Plans. Register documents. Northwest appointed Fiduciary Counselors investment manager of the Investment Fund and Fiduciary Counselors has accepted this appointment. The Term Sheet did not provide for the Additional Initial Contribution. (This is not a toll-free number.). As further noted in the Preamble, the parties to the Agreement shall notify the Department within 30 days of any decision regarding the resignation, termination or change in control of the Independent Fiduciary. The Master Trust, all pension assets are, $4,146,038,000. Fiduciary Counselors notes that under section 404(a)(1) of ERISA, a fiduciary must discharge its duties with respect to a plan solely in the interest of plan participants and beneficiaries. Eclat was provided with Pinnacle's audited financial statements for the years 2000 and 2001. The Independent Fiduciary negotiated a comprehensive set of governance rights accorded to the Plans as a condition of acceptance of Pinnacle Stock. In the case of United Airlines, for example, the airline has not rejected the ASAs it has entered into with its regional airline partners Atlantic Coast Airlines, SkyWest and Air Wisconsin. In 1994 through 1997, Northwest made annual contributions of Series C Preferred Stock to the Employee Stock Plan for the benefit of employees represented by the IAM and IBT (the other labor groups had converted their right to receive Series C Preferred Stock into Common Stock under the Special Conversion Option described below). However, the Omnibus Agreement revises this provision to provide that, if Pinnacle Stock is publicly traded, the Deferral will be reduced, in each case, by thirty days except that in no event shall Northwest have less than a 30 day Deferral in which to close the transactions contemplated by the Put Option. For ease of reference, Northwest refers to the Employee Stock Plan, but the factual discussion of the Series C Preferred Stock remains accurate after the merger with the Northwest 401(k) plans. While all of the Big 6 network airlines are losing money, Northwest has suffered the smallest loss of any carrier. Northwest guarantees the principal attributable to the investment in Pinnacle Stock. Federal Register. It is not an official legal edition of the Federal Each of these plans is a Code section 401(k) plan that is tax qualified under section 401(a) of the Code and subject to ERISA. This repetition of headings to form internal navigation links 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. In discharging its obligations under section 404(a)(1), the independent fiduciary must take steps calculated to obtain the most accurate valuation available. (i) An analysis of Pinnacle's financial condition and earning capacity. From a fiduciary standpoint, Independent Fiduciary was required to determine whether the terms it negotiated in the Omnibus Agreement and its decision whether to accept the Contribution were prudent, for the benefit of, and in the interest of, Plan participants and their beneficiaries. 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. On August 1, 2003, in response to the Department's questions concerning the legal restrictions that prevented Northwest from repurchasing the Series C Preferred Stock and whether these legal restrictions were tied to Northwest's financial condition, Northwest explained that in making the Series C stock repurchase decision, the board of NWA Corp. was subject to a Delaware law that applies only to NWA Corp.'s repurchase of its own stock. Accordingly, the fiduciaries of a plan must act prudently, solely in the interest of the plan's participants and beneficiaries, and with a view to the need to diversify plan assets when deciding whether to accept an in-kind contribution. for better understanding how a document is structured but 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. There were significant changes made to the original valuation performed for the PBGC (the Eclat Report) based on this agreement that proved to be more conservative with respect to the ultimate valuation. A provision providing that the exercise price of any options on Pinnacle Stock granted to its executive employees under its stock incentive plan at the time of an IPO would be at the greater of the value of the stock at the time it was contributed to the Plans or the IPO price. The Independent Fiduciary must not simply defer to the conclusions reached by the appraiser, but rather will take appropriate action to ensure: (a) That the appraisal is based upon complete, accurate, and current data; (b) That the appraiser is appropriately qualified to conduct the valuation; (c) That the valuation methodologies are appropriate and adequately explained and that the appraiser has adequately justified its decision not to use alternative methodologies; (d) That any variables used in the valuation analysis such as projected revenues, expenses, operating margins, depreciation, discount rates, capitalization rates, and multipliers are adequately supported by market data; (e) That the stock's value is calculated with appropriate discounts for lack of marketability and control after a reasoned evaluation of the relevant market data concerning such discounts, as well as of each Plan's actual ability to effectively dispose of its stock or to control Pinnacle; (f) That the appraisal's reasoning and assumptions are consistent, logical, and supported by appropriate financial and economic data and that any calculations are accurate; (g) That the valuation is based on complete, accurate, and audited financial statements, which have been properly analyzed; (h) That the assumptions underpinning the valuation are properly identified, and a careful analysis is performed of the impact of changes in those assumptions on the value of Pinnacle Stock; (i) That the valuation has appropriately considered Northwest's financial condition in valuing Pinnacle Stock, as well as the impact of a Northwest bankruptcy on the value of Pinnacle Stock; and. For example, Fiduciary Counselors appointed a director to Pinnacle's board who sits on the board's audit committee. In this environment, it is necessary to maintain high liquidity reserves to ensure the viability of the airline and protect the long-term interests of the pension plans and plan participants. A decision to issue only additional Common Stock must be approved by a majority of the three directors elected by the holders of the Series C Preferred Stock. During the Hearing, employees of Northwest referenced an employee stock program that was established by the company in 1993. On December 2, 2002, the Employee Stock Plan was divided into three components, which were then merged into the existing Northwest Airlines Retirement Savings Plan for Pilot Employees, Northwest Airlines Retirement Savings Plan for Contract Employees and Northwest Airlines Retirement Savings Plan for Salaried Employees. 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. In the March 5 Comment, Fiduciary Counselors corrected previous information provided to the Department in the Proposed Exemption with reference to employer securities or employer real property in the last sentence of paragraph 14 in column 1 of 68 FR 2584 (emphasis added) and each other place it occurs. Additionally, by letter dated July 15, 2003, Fiduciary Counselors represents that in preparing the valuation for subsequent contributions, Eclat will reexamine the assumptions used in preparing the initial valuation and will continue to stress test the assumptions in its valuation model to reflect the credit-worthiness of Northwest and changing conditions in the regional jet market. Pursuant to the terms of the Omnibus Agreement, Northwest contributed Pinnacle Stock to the Contract Plan. The Initial Contribution was comprised of 1,819,833 shares valued at $22.61 per share. Thus, the ALPA agreement will be formally entered into and effective on the date of the voluntary contribution. Title: NORTHWEST AIRLINES EXCESS PENSION PLAN FOR SALARIED EMPLOYEES Date: 3/16/2007 Industry: Airline Sector: Transportation. Register (ACFR) issues a regulation granting it official legal status. 1. We are an independent firm and are not in the investment advisory or trust business. 03-21162 Filed 8-18-03; 8:45 am], updated on 4:15 PM on Wednesday, January 18, 2023, updated on 8:45 AM on Wednesday, January 18, 2023. The Plans will be granted a Put Option with respect to each share of Pinnacle Stock contributed to the Plans, which may be exercised by the Independent Fiduciary at any time. 5. Northwest Response: Northwest notes that like other major airlines, Northwest is in a temporary period of extraordinary airline revenue weakness and volatility. 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. 3. As of December 31, 2002, the carrier had taken possession of 51 regional jets. The third expert then determines which of the two assessed values should be assigned to such non-cash consideration. This document has been published in the Federal Register. Northwest stated that it would not. The value of the transaction is enhanced due to the downside protection that this Put Option provides. In the March 5 Comment, Fiduciary Counselors noted that, consistent with the statutory requirements of section 404(a) of ERISA, the reference in the Proposed Exemption to the best interests of the Plans participants and beneficiaries (emphasis added) should be changed to the interests of the Plans participants and beneficiaries. Representatives are available to assist you Pinnacle Stock in that amount was transferred to State Street Bank, the trustee for the Northwest Master Trust for Defined Benefit Plans that holds the assets of all of the Northwest Plans (the Master Trust). According to the IF Report, Eclat estimates that Pinnacle's value to the Northwest domestic system is between $520 million and $540 million annually as the carrier exists today. electronic version on GPOs govinfo.gov. Equally important, Fiduciary Counselors negotiated for special rights associated with the Plans' acquisition of Pinnacle Stock that limit the risks associated with Pinnacle Stock. These guidelines contemplate that a certain amount of assets will be allocated to securities with risk and return characteristics similar to Pinnacle Stock. Using the Black-Scholes American option pricing model, Eclat determined the value of the Put Option to be $20,680,684. Accordingly, this final exemption is issued solely by the Department. Driving Directions. 01/18/2023, 41 on Northwest will obtain an amendment of the Omnibus Agreement so that the Independent Fiduciary will have first priority to sell Pinnacle Stock in an initial public offering, if certain conditions exist. 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. Northwest also provided more detail about the final terms of the transactions as agreed to by Northwest and the Plans' independent fiduciary, Aon Fiduciary Counselors, Inc. (Fiduciary Counselors or Independent Fiduciary). 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. We devoted substantial time and effort to this issue. While every effort has been made to ensure that Such techniques were employed by Fiduciary Counselors and Eclat in this circumstance. After that date, the Omnibus Agreement provides Fiduciary Counselors with the right to cause an IPO of Pinnacle Stock. Finally, Fiduciary Counselors requests that in Section III. Additionally, Fiduciary Counselors agreed only to a limited period during which Northwest has the exclusive right to cause an IPO. In valuing the Pinnacle shares, it was necessary to assign a value, not only to Pinnacle, but also to the Put Option. 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