Maintaining liquidity is key to Northwest's strategy for avoiding bankruptcy. Additionally, Northwest will maintain a subaccount for each Plan within the Master Trust for so long as that Plan holds Pinnacle Stock. documents in the last year, 28 Similar considerations will be taken into account by Fiduciary Counselors in determining whether to accept any future contribution of Pinnacle Stock. Once Pinnacle Stock is publicly traded, the Put Option will be suspended if all of the remaining shares of Pinnacle Stock held by the Plans have a market value not less than 110% of the Floor Price and such shares are freely tradable. (g) a description of the nature of Pinnacle's business and history. The Proposed Exemption included specific conditions that ensure that the independent fiduciary is free from conflicts of interest. Page 49 of 61. 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. Northwest also noted that it assumes the investment risk associated with any investment by the Plans, including the investment in Pinnacle Stock, and must make up any investment losses through future contributions to the Plans. Each share of the Series C Preferred Stock is convertible at any time into 1.364 shares of NWA Corp. Common Stock (Common Stock). Wendy M. McColough of the Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor, telephone (202) 693-8540. We discussed the Series C Preferred Stock buy back at length in our regularly scheduled April and June board meetings, and held two special meetings in July devoted exclusively to the Series C issue * * *. If, on August 1, 2003, NWA Corp. decides not to repurchase the Series C Preferred Stock, beginning on August 1, 2003 and on each succeeding quarter end date, NWA Corp. must use all Available Cash (a defined term in the Agreements) to effect partial repurchases of the Series C Preferred Stock, but only if and to the extent NWA Corp. is not prohibited from making such repurchases under applicable Delaware corporate law or any loan agreement to which NWA Corp. is a party. The Term Sheet did not provide for the Additional Initial Contribution. A number of commenters asked, if Pinnacle Stock is contributed to the Plans, how would this affect the manner in which other Plan assets are invested? Northwest may not terminate Fiduciary Counselors as the Independent Fiduciary without the consent of ALPA and may not appoint a new Independent Fiduciary without the consent of ALPA. However, Northwest has proposed to contribute Pinnacle Stock because it believes that it is a superior investment for the Plans. 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. 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 this regard, beginning at such time as the Plans hold more than 50% of the issued and outstanding Pinnacle Stock, and until the earlier of (i) the date the Plans hold less than 25% of such shares or (ii) the Put Option with respect to such shares has terminated, the affirmative vote of the Plan s director will be required to (1) approve the election, appointment and compensation of any new Chief Executive Officer (CEO), (2) approve any modification or other changes to the Note Pinnacle has issued to Northwest (3) approve any amendment to Pinnacle s bylaws that affects the Plans shares of Pinnacle Stock in a manner different from other shares of Pinnacle Stock or otherwise amends the Series A Preferred Stock, and (4) unless Pinnacle is publicly traded, approve the issuance of shares of capital stock of Pinnacle or otherwise effect changes in the capital structure of Pinnacle. Eclat used the Black-Scholes option-pricing model to determine the value of the Put Option. (This is not a toll-free number.). We provide retirement plan recordkeeping, administration, actuarial, consulting, compliance and participant services to over 1,100 companies with 425,000 participants and $45 billion in retirement savings. Aon Consulting internally allocated 25% of the fee to Fiduciary Counselors, which comprised less than 5% of its annual gross revenue in 2002. The Independent Fiduciary represents that the description of the valuation by Eclat Consulting (Eclat) of Pinnacle in the Proposed Exemption commencing in the second column of 68 FR 2580 (the Eclat Report) should be updated to reflect Eclat's valuation of Pinnacle as of January 15, 2003. At the present time, the Board was unable to make this finding. The exemption permits: (1) The in-kind contribution(s) of the common stock of Pinnacle Airlines Corp.[1] In 1993, Northwest Airlines and its mechanics union agreed to an "escalator clause" within its retirement plan. During the Hearing, the Department asked Northwest to provide information concerning the funded status of the Pilot Plan, Contract Plan and Salaried Plan at the end of 2002. Thus, the Put Option serves to protect the Plans from declines in the value of Pinnacle Stock and the liquidity notice feature ensures that the Independent Fiduciary has sufficient notice so that it may exercise the Put Option at a time when Northwest has sufficient financial resources to meet its obligation under the Put Option. Eclat was also provided with unaudited interim and full year financial information for 2002. We devoted substantial time and effort to this issue. These negotiations resulted in agreements (Agreements) between Northwest and each of its unions under which Northwest would contribute to the Employee Stock Plan a newly created, special class of stock (the Series C Preferred Stock) in an amount that would equal the monetary value of certain wage and other concessions agreed to by the unions. 4. The IF Report explains that, because Pinnacle's operations are so entwined with Northwest's, Eclat evaluated Northwest as well as Pinnacle in its November 27, 2002 report to the PBGC (The Eclat Report). The Independent Fiduciary will have the sole responsibility to determine whether to acquire, hold or dispose of Pinnacle Stock on behalf of the Plans and whether to exercise the Put Option with respect to Pinnacle Stock. Reported by Rebecca Moore Northwest's filing with the Securities and Exchange Commission says that participants' benefits accruals were frozen as of August 31. Argentina Australia Belgi (Nederlands) Belgique (Franais) Brasil In contrast, under its new ownership, neither Fiduciary Counselors nor any affiliate will accept any other engagement from Northwest while it is independent fiduciary for the Plans. Once the Plans own 50% of the Pinnacle Stock, the Plans' director will exercise additional approval rights relating to the company's bylaws and capital structure. The Northwest Airlines Corporation Employee Stock Plan (Employee Stock Plan) was established in 1993. charles schwab ac144; quel aliment pour avoir des jumeaux; lesser lodge catskills. In addition, Delaware law would not restrict NWA Corp., a Delaware corporation, from repurchasing the Pinnacle Stock as the guarantor of the Put Option. 1. More frequent notice will be required based on Northwest's liquidity and the value of the Pinnacle Stock contributed to the Plans. The ASA provides a range of revenues to be paid by Northwest to Pinnacle, and Eclat valued the Company based on the minimum revenues, which would result from the ASA. Phone: (206) 329-4900. In the absence of the contribution of Pinnacle Stock, the Plans could suffer from increased underfunding. Ellen A. Hennessy will Start Printed Page 49805continue as President of Fiduciary Counselors and, as majority shareholder of Fiduciary Group, will continue to control management decisions with respect to Fiduciary Counselors. Except for one director appointed by Northwest, Pinnacle's board is independent of Northwest. The Department also questioned whether such restrictions would similarly preclude Northwest from honoring the Put Option. The third expert then determines which of the two assessed values should be assigned to such non-cash consideration. No products in the 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. At that time, the Pilot Plan did not participate in the Pinnacle Stock Investment Fund.[4]. 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). Pursuant to its engagement letter with Northwest, the scope of Fiduciary Counselors' engagement includes determining whether to accept the Contribution on behalf of the Plans, and if so, to value the Pinnacle Stock for Plan funding purposes. The Investment Fund holds Pinnacle Stock on behalf of the Contract Plan and the Salaried Plan. 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. However, if Pinnacle has not yet consummated the IPO by the date that would otherwise be the closing date, Northwest will have the right to defer such closing date for up to 150 days, depending on Northwest's liquidity. Until the ACFR grants it official status, the XML In addition, Northwest will provide the Independent Fiduciary with the information required to be provided to its lenders under its credit agreement. Northwest Airlines, Inc. 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. To schedule an in-person visit, please click on the link below your desired NWA Location. (k) A statement of past transactions involving Pinnacle Stock, including dates, amounts, price, and whether the transactions were at arms-length, as well as a description of any attempts to buy or sell Pinnacle Stock over the last five years, including a description of any previous plans for initial public offerings. The board noted that the company's obligation to the holders of the Series C Preferred Stock continues until Northwest has the ability to repurchase the Series C Preferred Stock. Northwest and ALPA believe that the Letter Agreement also enhances protections for participants in all three Plans by giving the Independent Fiduciary first priority to sell Pinnacle Stock in an IPO where the number of shares sought to be sold exceeds the number that can be sold. As previously mentioned in the March 3 Comment, the changes to the description of the Put Option in the Proposed Exemption are noted by the Independent Fiduciary who adds that the Proposed Exemption should be revised in accordance with the definition of Market Value in section 1.1 and the language of section 8.3 of the Omnibus Agreement. Northwest provided the funded status of each Plan as of 1/1/03 as shown in the following table. At the time the voluntary contribution is made to the Pilot Plan, Northwest also will contribute Pinnacle Stock to the Salaried Plan in an amount such that the amount of the Pinnacle Stock held by the Salaried Plan equals the required minimum funding contribution due under ERISA and the Code on September 15, 2003. Effective December 31, 1978, section 102 of Reorganization Plan No. 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. Accordingly, Northwest notes that, consistent with the Omnibus Agreement's terms, the Additional Initial Contribution will be treated as a credit balance and be applied toward future contributions to the Contract Plan. 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. (d) A statement of the stock's value, the methodologies used in determining the value, the reasons for the valuation in light of the methodologies, and the reasons that the appraiser chose to apply particular valuation methods rather than others. on In addition, changes to the ASA and other significant transactions must be approved by a majority of Pinnacle's directors, which majority must include the Plans' director. However, Northwest notes that it has received the consent of the Air Line Pilots Association (ALPA), the union representing Northwest pilots, to permit the Pilot Plan to hold Pinnacle Stock (see below for discussion of the Northwest and ALPA Letter Agreement). 4. 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. Northwest appointed Fiduciary Counselors investment manager of the Investment Fund and Fiduciary Counselors has accepted this appointment. In addition, the fiduciary obligation to act prudently requires, at a minimum, that the independent fiduciary conduct an objective, thorough, and analytical critique of the valuation. 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. 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. (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. 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. The IF Report states that under the ASA, Northwest has committed 95 regional jet aircraft financed by Bombardier to be delivered to Pinnacle by December 31, 2004. You are here: . In this regard, the Plans acquired Pinnacle Stock at a favorable price and the Plans obtained voting and management rights, anti-dilution rights, limits on Northwest's ability to terminate the ASA, rights to sell the Pinnacle Stock or dispose of it in an IPO in a variety of circumstances, and a protective Put Option. The holders of outstanding Series C Preferred Stock have a put right in 2003 to require NWA Corp. to repurchase such shares for an amount equal to the actual wage savings achieved under the 1993 labor agreement (projected to be $226 million at the August 1, 2003 put date). The voluntary contribution to the Pilot Plan will consist entirely of Pinnacle Stock. Agency Employee Benefits Security Administration Date January 16, 2003 Release Number 03-3 The IF Report summarizes that, in order to determine the value of Pinnacle, Eclat created a model based on the Three-Stage Free Cash Flow to Equity valuation technique. documents in the last year. The Master Trust, all pension assets are, $4,146,038,000. 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. Northwest explained that the Omnibus Agreement granted the Plans additional rights in order to protect their interest in the Pinnacle Stock. Definitions at (a) of the Proposed Exemption in column 1 of 68 FR 2590, the reference to 5 percent (5%) of such fiduciary's gross income, for Federal income tax purposes, in its prior tax year, will be paid by Northwest should read 5 percent (5%) of such fiduciary's annual gross revenue in the year of its engagement, will be paid by Northwest.. documents in the last year, by the Engineers Corps and the Environmental Protection Agency Preview; Edit & Save; Related Documents; 50 of the Top 250 law firms use our Products every day. Such techniques were employed by Fiduciary Counselors and Eclat in this circumstance. Minnesota law would not restrict the repurchase of Pinnacle stock by Northwest, a Minnesota corporation, which issued the Put Option. ALPA represents that it recognizes the need for Northwest to preserve liquidity so ALPA has agreed to modify the collective bargaining agreement and the Pilot Plan to permit the Pilot Plan to acquire and hold employer securities through a voluntary contribution to the Pilot Plan. Title: NORTHWEST AIRLINES EXCESS PENSION PLAN FOR SALARIED EMPLOYEES Date: 3/16/2007 Industry: Airline Sector: Transportation. By the end of 2021, the IAM National Pension Fund pays benefits to over 116,000 retirees and reaches $15 billion in assets under management. The Put Option is exercisable at any time by the Plan. This, together with the reporting planned by Fiduciary Counselors, will permit ALPA to monitor the Independent Fiduciary. See Omnibus Agreement at section 11.2. Eclat is an aviation-consulting firm that specializes in detailed analysis of the economic and financial issues that surround the industry. The value of the transaction was also adjusted for the period between the exercise of the put and the Plan's receipt of the funds. As a result of its review, certain changes were incorporated in the new Airline Services Agreement entered into on January 14, 2003 (ASA). In the March 3 Comment, Northwest observed that there are three references to NWA Inc. in the second column at 68 FR 2584 that should reference Northwest (Northwest Airlines, Inc.), the wholly-owned subsidiary corporation of NWA Inc. 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. 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. As described in the Fiduciary Counselors letter to the Department on January 6, 2003, Northwest has agreed to pay Fiduciary Counselors an annual fee that covers both the independent fiduciary and investment management services provided by Fiduciary Counselors and the investment advisory services provided by AIC. (c) Protective of the rights of the participants and beneficiaries of the plans. The Independent Fiduciary negotiated a comprehensive set of governance rights accorded to the Plans as a condition of acceptance of Pinnacle Stock. As soon as possible after receipt of the Benefit Enrollment Worksheet Northwest explained that the Omnibus Agreement granted the Plans Industry: Airline Sector: Transportation should be to! Provided with unaudited interim and full year financial information for 2002 ) Protective of Pinnacle... Is key to Northwest 's strategy for avoiding bankruptcy Northwest 's strategy avoiding! Present time, the Board was unable to make this finding and.... 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