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. Northwest Response: Northwest explains that, while the Proposed Exemption and the Omnibus Agreement negotiated with Fiduciary Counselors do not require collateral, the Proposed Exemption and the Omnibus Agreement include provisions designed to limit the need for collateral. does steven weber have a brother; charlie bears lantern; My Cart. 5. 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. As a condition to any such contribution by Northwest, the Independent Fiduciary must determine on behalf of the Plans that the acceptance of the contributed shares is prudent and in the interests of the Plans' participants and beneficiaries and otherwise consistent with the fiduciary standards of ERISA. 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. Northwest strongly believes that Pinnacle Stock has significant value and that the value of Pinnacle Stock will increase when the IPO market improves for regional airlines. Northwest has entered into a 10-year ASA with Pinnacle through 2012 that provides substantial value. 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. 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. Federal Register. )J',^3rieAM7+%n[(PiZZ3'MC1*v 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. # A1430. The result was a net value of $339,178,820.00 for the purposes of determining the value of the stock contributed on January 15, 2003. Register, and does not replace the official print version or the official WebLarkin are participants in the Northwest Airlines Pension Plan for Contract Employees and also worked for the airline during the class period. 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. The Initial Contribution was comprised of 1,819,833 shares valued at $22.61 per share. documents in the last year, 295 Form Answers. The original Employee Stock Plan was established in 1993. 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. 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. 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. grassroots elite basketball ; why does ted lasso have a southern accent . ; (i) The Plans incur no fees, costs or other charges as a result of their participation in any of the transactions described herein. The Term Sheet did not provide for the Additional Initial Contribution. Based on input from AIC, Eclat then applied a 15 percent liquidity discount and a 5 percent minority discount. 2007) Annotate this Case U.S. Court of Appeals for the Ninth Circuit - 484 F.3d 1211 (9th Cir. These plans cover approximately 161,000 current and retired employees who could stand to lose billions in benefits if these plans were turned over to the Pension Benefit Guaranty Corporation (PBGC). Participants and beneficiaries of the Plans benefit from Northwest's improved liquidity and continued viability and competitiveness in the current economic environment. By letter dated April 26, 2003, Northwest responded to many of the comments the Department had received concerning the Proposed Exemption (April 26 Comment). In this event, a majority of the independent directors may require a fairness opinion from a nationally recognized investment banking firm. Northwest Airlines Pension Plan 3 employees reported this benefit 2.0 1 Rating Available to US-based employees Change location Employee Aon Consulting internally allocated 25% of the fee to Fiduciary Counselors, which comprised less than 5% of its annual gross revenue in 2002. The addition of the regional jets has more than doubled the size of the airline. documents in the last year, 1407 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. 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. 612-726-3774. Fiduciary Counselors notes that immediately prior to the transaction, NWA Inc. (NWAI), an affiliate of Northwest, owned 86,842 shares of common stock, par value $0.01 per share, of Pinnacle Airlines, Inc., a Georgia corporation, constituting all of the issued and outstanding capital stock of Pinnacle Airlines, Inc. Pursuant to the transaction, Pinnacle Airlines, Inc. declared and paid to NWAI a dividend consisting of a promissory note payable to the order of NWAI in the aggregate principal amount of $200 million. Create an Account and Draft a QDRO for This Plan. 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. First, the Plans must provide Northwest with an Offer Notice which shall contain an independent valuation of the consideration by a nationally recognized valuation expert acceptable to Fiduciary Counselors and Northwest. As reflected in the Proposed Exemption, another Aon affiliate does provide non-plan services to Northwest, albeit services representing less than 1% of Aon's total annual revenue. Fiduciary Counselors stated that Eclat's valuation took into account a variety of financial data. 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. rendition of the daily Federal Register on FederalRegister.gov does not Omnibus Agreement at section 7.2, Certain Approval Rights. Although the Plan's option is exercisable at anytime, unlike a normal option, Northwest does not have to immediately settle. Total cost is only $ The Additional Initial Contribution served to provide the Plans with added protection until Northwest obtained written assurances from the bank lenders that the Put Option does not violate the Credit Agreement. The Series C Preferred Stock ranks senior to Common Stock with respect to liquidation and certain dividend rights. The right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. The shares were then allocated to individual accounts established on behalf of each eligible employee. One of the strengths of the Northwest network is that the airline has the least exposure of any major carrier to low-cost carriers in the industry. As Successor to Northwest Airlines, Inc., and Northwest Airlines Pension Plan for Contract Employees, Defendants, 10 Civ. NWA is the plan administrator and the employer plan sponsor Fiduciary Counselors and its advisors negotiated with Northwest and Pinnacle concerning the ability of the Plans to transfer the Pinnacle Stock and the rights of the Plans to cause Northwest to register the shares of Pinnacle Stock under Federal and State securities laws for resale to third parties. by the Education Department Northwest will make a voluntary contribution to the Pilot Plan on or before September 15, 2003 so that the funded current liability percentage for the Plan is at least 80% for the 2003 Plan Year. Wendy M. McColough of the Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor, telephone (202) 693-8540. In response to the commenters' concerns about the role of the independent fiduciary, the Department believes that it would be helpful to provide its views on the responsibilities of an independent fiduciary in connection with the in-kind contribution of property to an employee benefit plan. Northwest and ALPA seek a declaration that the MP3 complies with the Employment Retirement Income Security Act (ERISA), 29 U.S.C. None of the named plaintiffs is a participant in the Northwest Airlines Pension Plan for Salaried Employees, although they bring this action on behalf of participants in that plan as well. Reported by. The IF Report states that on January 15, 2003, Fiduciary Counselors determined that the Master Trust could accept a contribution by Northwest of 1,938,000 shares of Pinnacle Stock, valued at $43,821,894.00, on behalf of the Contract Plan on terms and conditions set forth in the Omnibus Agreement. See Omnibus Agreement at section 6.3. 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). No. NORTHWEST AIRLINES PENSION PLAN FOR CONTRACT EMPLOYEES, Defendant-Appellee. See Omnibus Agreement at section 7.3. This model is designed to value firms, like Pinnacle, that are expected to go through three phases of growthan initial phase of high growth, a transitional period where the growth rate declines, and a steady-state period where growth is stable. 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. electronic version on GPOs govinfo.gov. On January 11, 2003, the Independent Fiduciary and its advisors conducted a telephone interview with Pinnacle's chief executive officer and chief financial officer as part of its due diligence. Because many of the comments raise common concerns, Northwest organized its responses to address these common concerns. Legal News. The labor situation is Start Printed Page 49797stable. The OFR/GPO partnership is committed to presenting accurate and reliable 3. Number of retired or separated participants receiving benefits. 3. Northwest represents that it will make any such contributions in cash. travel symbol copy and paste On December 11, 2007, Northwest and ALPA implemented the Money Purchase Plan for Pilot Employees (MP3), which replaced the Northwest Airlines Pension Plan for Pilot Employees. These tools are designed to help you understand the official document ). Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. 1, 1995) transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. 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). If the Pinnacle Stock is not publicly traded, the Plans will receive the. Northwest asserts that its beliefs in this regard have been independently verified. 3. 1 0 obj<> endobj 3 0 obj<>stream (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. 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. Until the ACFR grants it official status, the XML Fiduciary Counselors, AIC and Eclat represent that the ASA between Northwest and Pinnacle provided the framework for the final valuation. Regional airlines play an indispensable role in providing major airlines with important access to passengers, largely from markets too small to be serviced by a major airline. 4. The Independent Fiduciary considered, and determined, that the Plans' holding of Pinnacle Stock was consistent with the Plans' investment guidelines and would not impair the Plans' diversification. The President of the United States issues other types of documents, including but not limited to; memoranda, notices, determinations, letters, messages, and orders. Northwest noted that the second bullet point in the third column at 68 FR 2585 (respecting the obtainment of fairness opinions) has been revised. 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. 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. Northwest believes this is the best outcome for all Plan participants and beneficiaries. 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. As a result of its engagement by the Independent Fiduciary, Eclat was given access to non-public information including the ASA, Pinnacle's full 2002 revenue figures and information concerning the delivery schedule for delivery of regional jets to Pinnacle. 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. Several commenters requested that Northwest provide for enhanced communication with the Plan participants concerning the Exemption Transactions. dog off leash ticket california; Income Tax. The Put Option is exercisable at any time by the Plan. Northwest airlines founded 90 years ago DA.C from www.diecastaircraftforum.com. Indeed, the January 15, 2003 Valuation indicates that the Plans could receive a 20 percent IPO premium in connection with the Pinnacle Stock investment. of the issuing agency. This feature is not available for this document. In valuing the Pinnacle shares, it was necessary to assign a value, not only to Pinnacle, but also to the Put Option. Eclat was provided with Pinnacle's audited financial statements for the years 2000 and 2001. Contributions of Pinnacle Stock to the Salaried Plan and the Contract Plan will likewise be held in a separate segregated subaccount of the Master Trust and held for the exclusive benefit of each respective plan. However, audited 2002 financial statements were not available at the time of Eclat's valuation for the January 15, 2003 contribution. For purposes of this exemption, a fiduciary will not be deemed to be independent of and unrelated to Northwest if: (1) Such fiduciary directly or indirectly controls, is controlled by or is under common control with Northwest, (2) such fiduciary directly or indirectly receives any compensation or other consideration in connection with any transaction described in this exemption; except that an independent fiduciary may receive compensation for acting as an independent fiduciary from Northwest in connection with the transactions contemplated herein if the amount or payment of such compensation is not contingent upon or in any way affected by the independent fiduciary's ultimate decision, and (3) the annual gross revenue received by such fiduciary, during any year of its engagement, from Northwest and its affiliates exceeds 5 percent (5%) of the independent fiduciary's annual gross revenue from all sources for its prior tax year. 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. Fiduciary Counselors sent additional information to the Department on July 11, 2003. The complete Application file, including all supplemental submissions received by the Department, is available for public inspection in the Public Disclosure Room of the Employee Benefits Security Administration, U.S. Department of Labor, Room N-1513, 200 Constitution Avenue, NW., Washington, DC 20210. 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 requirement that the director nominated by the Plans approve any changes in the ASA will ensure that any modification of those terms is done only if the changes, taken as a whole, are favorable to Pinnacle and its shareholders, including the Plans. 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. Maintaining liquidity is key to Northwest's strategy for avoiding bankruptcy. Register documents. 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). Archived News Release Caution: Information may be out of date. The Department asked the Independent Fiduciary if the January 15, 2003 Valuation was based on audited financial statements. The value was then increased to reflect the value of the put. 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). (j) A description of all of the factors taken into account in making the valuation, including any restrictions, understandings, agreements or obligations limiting the Plans' ability to dispose of the stock. Both the Minnesota law and the Delaware law relate to the repurchase of the stock issued by Northwest Airlines, Inc. and NWA Corp., respectively, and would not apply to the repurchase of stock of Pinnacle (the Pinnacle Stock). The Investment Fund holds Pinnacle Stock on behalf of the Contract Plan and the Salaried Plan. 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. With PBGC's consent, Eclat was subsequently retained by the Independent Fiduciary to value the Pinnacle Common Stock. 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. the official SGML-based PDF version on govinfo.gov, those relying on it for Participants and beneficiaries of the Plans stand to benefit from an IPO of the Pinnacle Stock. 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. documents in the last year, 19 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. 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. [8] include documents scheduled for later issues, at the request 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. 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 Proposed Exemption is part of Northwest's strategy to achieve that goal. (j) That the fair market value of the stock has been determined by way of a prudent investigation. In addition, under the Agreements, the trustee of each plan was given a one time Special Conversion Option that, if elected, resulted in the relevant trusts receiving Common Stock at the rate of 1.9096 shares of Common Stock for each share of the Series C Preferred Stock that they would have otherwise received. 4 of 1978 (5 U.S.C. We devoted substantial time and effort to this issue. Northwest appointed Fiduciary Counselors investment manager of the Investment Fund and Fiduciary Counselors has accepted this appointment. 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. (5) The guaranty to the Plans by Northwest Airlines Corporation of Northwest's obligation to honor the Put Option. As a result of instructions given to State Street, after the contribution was made to the Investment Fund, the Contract Plan owns 83.5% of the Investment Fund, while the Salaried Plan owns 16.5% of the Investment Fund. Reliance solely on the valuation provided by the appraiser would not be sufficient to meet this prudence requirement. It is not an official legal edition of the Federal Northwest's pension fund consists of three individual plans, for about 8,000 pilots, 9,000 salaried employees and 52,000 unionized workers, including mechanics and agents. developer tools pages. 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. Northwest provided the funded status of each Plan as of 1/1/03 as shown in the following table. 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. are not part of the published document itself. For the reasons set forth below, the Independent Fiduciary has concluded that it is prudent for the Plans to accept the Contribution and that the Contribution is in the interest of the Plans and their participants and beneficiaries: Transfer restrictions on Pinnacle Stock held by the Plans are reasonable in light of the Put Option. These can be useful The director designated by the Plans will have the right to serve on Pinnacle's audit committee to the extent permitted under applicable SEC and stock exchange rules. Northwest expects that the Start Printed Page 49807board, like any board fulfilling its fiduciary duties, will seek to maximize the value of the enterprise. Thus, Northwest notes that the holding of Pinnacle Stock by the Plans can fit within the overall investment strategy adopted for the Plans. 4. NWAI then transferred the Pinnacle Shares and the Series A Preferred Share to Northwest as a contribution to the capital of Northwest. Thus, the fourth bullet point in the second column at 68 FR 2585 (describing certain voting rights) should be modified accordingly. 68 FR 49792 - Northwest Airlines Pension Plan for Salaried Employees (Salaried Plan), the Northwest Airlines Pension Plan for Pilot Employees (Pilot Plan), and the Northwest Airlines Pension Plan for Contract Employees (Contract Plan) (Collectively, the Plans), Located in Eagan, MN - Content Details - 03-21162 Download Start Printed Page 49801. Fiduciary Counselors notes that there will be no change in its providing objective and independent investment management. 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 Proposed Exemption further required that the independent fiduciary obtain expert valuation advice from an independent valuation firm. As a result, Northwest has a strong interest in ensuring that maximum value is obtained in connection with an IPO and Northwest believes that it is appropriate for it to determine the timing of an IPO.
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