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. Effective December 31, 1978, section 102 of Reorganization Plan No. 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. In this regard, section 11.3(b) of the Omnibus Agreement now provides that at the request of a majority of Pinnacle's independent directors, a fairness opinion will be obtained from an investment bank respecting certain Affiliate Transactions. The Proposed Exemption included specific conditions that ensure that the independent fiduciary is free from conflicts of interest. Federal Register. In addition, the Independent Fiduciary negotiated the right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. Thus, the fourth bullet point in the second column at 68 FR 2585 (describing certain voting rights) should be modified accordingly. Preview; Edit & Save; Related Documents; 50 of the Top 250 law firms use our Products every day. As a board, we recognize the valuable contributions our employees made to the company during the 1993-1996 wage reduction period and acknowledge the company's obligation to buy back the Series C Preferred Stock. Start Printed Page 49808. Northwest Airlines Corporation (NWA Corp.) will guarantee Northwest's obligations under the Omnibus Agreement, including the Put Option. The Omnibus Agreement further requires that Northwest provide regular notice of its liquidity to Fiduciary Counselors. Eclat furnished to the Independent Fiduciary its report and opinion as to the value of the contributed Pinnacle Stock at the time of the Initial Contribution on January 15, 2003 (January 15, 2003 Valuation). are not part of the published document itself. There will be no change in their personnel assigned to this engagement or in the manner in which the fees are split between the two organizations. Eclat is an aviation-consulting firm that specializes in detailed analysis of the economic and financial issues that surround the industry. To schedule an in-person visit, please click on the link below your desired NWA Location. The ASA also was revised to eliminate the unilateral right of Northwest to terminate the ASA in the event of the bankruptcy of Northwest. 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. Press "0" to be connected with the Employee Service Center. Glassdoor is your resource for information about the Pension Plan benefits at Northwest Airlines. 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. The IF Report notes that the Independent Fiduciary drew upon the resources of its affiliate, Aon Investment Counseling, Inc. (AIC), to assist it in its financial analysis and valuation of the Pinnacle Stock. 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. Northwest asserts that it couldn't make this representation if there were restrictions that limited its ability to honor the Put Option or other aspects of the Omnibus Agreement and this representation was the product of the negotiations between the Independent Fiduciary and Northwest (as noted above). Fiduciary Counselors states that the Omnibus Agreement provides: Fiduciary Counselors stated that, in conjunction with Northwest's contribution of Pinnacle stock to the Plans, Northwest has provided the Plans with a Put Option to protect them from a possible decline in Pinnacle's shares' value. Based on input from AIC, Eclat then applied a 15 percent liquidity discount and a 5 percent minority discount. 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. 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. See Omnibus Agreement at section 8.8. In addition, the Independent Fiduciary will monitor on an ongoing basis the prudence of the Plans' continued holding of Pinnacle Stock consistent with the fiduciary standards of ERISA. On August 1, 2003, Northwest issued a press release that announced its decision on the Series C Preferred Stock. documents in the last year, 675 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. Northwest explained that, as part of labor agreements reached in 1993, Northwest's parent company, NWA Corp., issued to trusts for the benefit of participating employees 9.1 million shares of a new class of Series C cumulative, voting, convertible, redeemable preferred stock, par value of $.01 per share (the Series C Preferred Stock), and 17.5 million shares of Common Stock and provided the union groups with three positions on the Board of Directors. Eclat provided additional information in support of its view that the discount rates, and other factors used in determining the fair market value of the Pinnacle Stock were reasonable and theoretically sound. Subject to the further conditions and restrictions set forth in the Omnibus Agreement, the Plans may transfer the Pinnacle Stock prior to July 1, 2006, (1) only in the event of an IPO or sale to a third party initiated by Northwest, (2) by exercise of the Put Option (as described below), or (3) because of an Early Termination Event (including a breach of the Omnibus Agreement by Northwest or Pinnacle which is not cured timely or Northwest's failure to honor the Put Option). Northwest noted that the Omnibus Agreement added certain valuation details that expand the discussion of the Right of First Refusal at 68 FR 2586. The Department wishes to clarify that any replacement Independent Fiduciary must be acceptable to the Department and must assume its responsibility prior to the effective date of the removal of the predecessor Independent Fiduciary. The President of the United States issues other types of documents, including but not limited to; memoranda, notices, determinations, letters, messages, and orders. 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. 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. Plan Name. We want to do so as soon as possible. Start Printed Page 49803Northwest stated [i]n the absence of an exemption, Northwest would have to consider the contribution of NWA Corp. stock or an IRS waiver. See Omnibus Agreement at section 9.1(d). The value of the transaction is enhanced due to the downside protection that this Put Option provides. on AIC valued the Put Option at $20,680,684 using a Black-Scholes American option-pricing model. 1. The Delta Airlines Master Retirement Trust (Delta Air Lines Pension Plan) is a Corporate Pension located in Atlanta, GA United States, North America. Despite the turmoil in the industry in recent years, Eclat felt that Northwest has emerged as, perhaps, the most stable airline in the industry. The restrictions of sections 406(a), 406(b)(1) and (b)(2), and 407(a) of the Act and the sanctions resulting from the application of section 4975(a) and (b) of the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall not apply to: (1) The transfer of the common shares of Pinnacle Airlines Corp. (Pinnacle Stock) to the Northwest Airlines Pension Plan for Salaried Employees, the Northwest Airlines Pension Plan for Pilot Employees, and the Northwest Airlines Pension Plan for Contract Employees (the Plans) through the in-kind contribution(s) of such shares by Northwest Airlines, Inc. (Northwest), a party in interest with respect to such Plans; (2) The holding of the Pinnacle Stock by the Plans; (3) The sale of the Pinnacle Stock by the Plans to Northwest; (4) The acquisition, holding, and exercise by the Plans of a put option (the Put Option) granted by Northwest which permits the Plans to sell the Pinnacle Stock to Northwest; and. The documents posted on this site are XML renditions of published Federal A total of 9.1 million shares of Series C Preferred Stock were contributed to the Employee Stock Plan. Browse deals and discounts on Northwest Airlines airfares, check flight status for departure and arrival times, and book available dates for low-cost tickets for your trip. If the Pinnacle Stock is not publicly traded, the Plans will receive the. Northwest will provide at least quarterly notice to the Independent Fiduciary of its cash liquidity. 01/18/2023, 249 The January 15, 2003 Eclat valuation report (January 15, 2003 Valuation) was attached to the Independent Fiduciary's report submitted to the Department on April 25, 2003 (see below for a discussion of these documents). The selection of an independent qualified appraiser to determine the value of an in-kind contribution and the acceptance of the resulting valuation are fiduciary decisions governed by the provisions of Part 4 of Title I ERISA. See Omnibus Agreement at section 6.2. Without modifications to the pilot collective bargaining agreement, the Proposed Exemption contemplated that the other two Plans would receive a contribution of Pinnacle Stock in an amount equal to the maximum amount permitted under section 407(a)(2) of ERISA, while the Pilot Plan would receive no contributions of Pinnacle Stock. Alternatively, Northwest could consider filing for bankruptcy, which would suspend most pension contributions, and could result in termination of some or all of the Plans.. No products in the cart. northwest airlines pension plan phone number. At the conclusion of these deliberations, it was clear that the legal restrictions applicable to stock buy backs under Delaware Law did not permit Northwest to proceed at this time with the buy back of the Series C Preferred Stock. Additionally, ALPA requested that it be involved in the monitoring of the Independent Fiduciary. The notice set forth a summary of the facts and representations contained in Northwest's November 6, 2002 application for exemptive relief (Application) and referred interested persons to the Application for a complete statement of the facts and representations. 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. the material on FederalRegister.gov is accurately displayed, consistent with has no substantive legal effect. daily Federal Register on FederalRegister.gov will remain an unofficial The Investment Fund holds Pinnacle Stock on behalf of the Contract Plan and the Salaried Plan. This site displays a prototype of a Web 2.0 version of the daily 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. Section 1C of the Northwest Pilots Agreement, the Collective Bargaining Agreement between Northwest and the Air Line Pilots Association dated as of September 13, 1998, as amended, or any successor agreement. (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. NWA is the plan administrator and the employer plan sponsor of the Plan. 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. Seattle WA 98102-3305. Northwest Response: Northwest notes that it has never before sought a prohibited transaction exemption and has never missed a pension funding payment. (3) any corporation or partnership of which such person is an officer, director, partner, or employee. (This is not a toll-free number.). 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. Moreover, the Plans will receive all of any investment gains attributable to their shares of Pinnacle Stock at the time of an IPO. [8] The exemption affects participants and beneficiaries of, and fiduciaries with respect to, the Plans. 4. headings within the legal text of Federal Register documents. The Term Sheet formed the basis for the Omnibus Agreement, which was executed on January 15, 2003, after the Independent Fiduciary received confirmation from the Department that the Proposed Exemption had been issued. (5) The guaranty to the Plans by Northwest Airlines Corporation of Northwest's obligation to honor the Put Option. As long as the Common Stock is publicly traded, no dividends accrue on the Series C Preferred Stock. 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. As also mentioned in the March 3 Comment, the Independent Fiduciary notes that at the fifth paragraph of the Voting Provisions section in the Proposed Exemption at column 2 of 68 FR 2585, the description of the required affirmative vote of the director designated by the Plans should be expanded to include the approval of: amending the Note, amending Pinnacle's charter or by-laws in certain respects, implementing certain changes in Pinnacle's capital structure, or issuing capital stock prior to an IPO, as set forth in the Omnibus Agreement. Contact Info NWPS HQ: 4025 Delridge Way SW, Suite 250 Seattle, WA 98106 Ph: 206-933-1500 Fax: 206-938-5987 Email Address: info@nwpsbenefits.com Driving Directions From I-5 North or South Take the W SEATTLE BR exit EXIT 163A toward SPOKANE ST Merge onto WEST SEATTLE BRIDGE Exit onto Delridge Way SW Continue on Delridge Way SW Driving Directions. The Department notes that the appointment of an independent fiduciary to represent the interests of the Plans with respect to the transactions that are the subject of the exemption request was a material factor in its determination to propose exemptive relief. However, as noted in Northwest's Application, the final terms of the Put Option were subject to negotiation with Fiduciary Counselors. The Pilot Plan and its participants benefit from the voluntary contribution by providing an early contribution of an asset with significant Start Printed Page 49806value to more adequately fund the benefits promised under the Pilot Plan. 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 hearing on the Proposed Exemption was held on May 5 and 6, 2003 at the Department of Labor (the Hearing). On May 20 and June 10, 2003, Northwest responded to certain issues raised during the Hearing that were not responded to in the April 26 Comment. 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. The Independent Fiduciary reports that it negotiated the following additional requirements. In this regard, section 404(a)(1)(A) and (B) of ERISA requires that fiduciaries discharge their duties to a plan solely in the interests of the participants and beneficiaries, for the exclusive purpose of providing benefits to participants and beneficiaries and defraying reasonable administrative expenses, and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Fiduciary Counselors notes, as described in its report, in accepting the Pinnacle Stock contribution, Fiduciary Counselors determined that Pinnacle Stock fit within the Plans' investment guidelines and diversification needs. Will receive the Plan no any investment gains attributable to their shares of Pinnacle Stock the. 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