Plan beneficiaries may also contact FSCO staff by telephone at (416) 226-7776 or toll-free at 1-800-668-0128, if they require assistance in finding this information. 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. Northwest Airlines, Inc. documents in the last year, by the Engineers Corps and the Environmental Protection Agency These modifications and the major comments are discussed below. 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. Northwest noted that the Omnibus Agreement added certain valuation details that expand the discussion of the Right of First Refusal at 68 FR 2586. Any change to the ASA, including any early termination of the ASA by Pinnacle, must be approved by a majority of Pinnacle's independent directors, which majority must include the director designated by the Plans. See Omnibus Agreement at section 8.2. (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. 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. 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. documents in the last year, 675 Thus, the ALPA agreement will be formally entered into and effective on the date of the voluntary contribution. If Pinnacle in fact achieves the maximum operating margin provided under the ASA, Eclat estimated that the value of Pinnacle would be approximately 20 percent greater than the value used for purposes of the contribution. Eclat states in the January 15, 2003 Valuation that the valuation includes competitive, operational and financial elements essential to validating Pinnacle's current market viability as a Northwest regional partner and as a stand-alone airline and that the valuation describes the state of the regional airline industry, delves into some of the more important issues surrounding Pinnacle specifically, provides a brief financial review of the carrier, explains the valuation methodology, compares Pinnacle to Continental Express, and comments on the stability of Northwest. The shares were then allocated to individual accounts established on behalf of each eligible employee. Section 7.2(b) of the Omnibus Agreement requires only that the appointment of a new CEO be approved by a majority of Pinnacle's board (excluding the Northwest Director), and does not make reference to the compensation of Pinnacle's CEO. Fiduciary Counselors' duties also include the discretionary authority to manage the Pinnacle Stock as investment manager. Northwest ended the 3rd quarter with over $2.5 billion in cash and short-term receivables. Similarly, subparagraph (iii) at 68 FR 2580 should reflect that, after an IPO, the Plans will be entitled to the greatest of the value of the stock at the time of the contribution, or the average of the closing price for the Pinnacle Stock on the public market for the 10 trading days (or such other number if fewer than 10) preceding the exercise date, or as of the last trading day before the closing date of the Put Option. 3. documents in the last year, 117 Schedule Health & Welfare Appointment. The value of Pinnacle Stock is determined by an independent fiduciary, Fiduciary Counselors, based on the valuation provided by their independent valuation firm, Eclat. Several commenters requested that Northwest provide for enhanced communication with the Plan participants concerning the Exemption Transactions. Official Publications from the U.S. Government Publishing Office. By letter dated March 3, 2003, Northwest described the Northwest contribution of Pinnacle Stock made to the Contract Plan on January 15, 2003 (the March 3 Comment). Fiduciary Counselors asserts that the sale of Fiduciary Counselors will, if anything, increases their independence. regulatory information on FederalRegister.gov with the objective of documents in the last year, 37 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. App. Fiduciary Counselors notes that there will be no change in its providing objective and independent investment management. Aon Consulting internally allocated 25% of the fee to Fiduciary Counselors, which comprised less than 5% of its annual gross revenue in 2002. The IAM National 401 (k) Fund has 30,905 participant accounts and $743 million in assets under management. In addition, as reflected in the Omnibus Agreement, the Independent Fiduciary has negotiated a lapse of all transfer restrictions on the Pinnacle Stock held by the Plans on July 1, 2006, and upon an Early Termination Event (including a breach of the Omnibus Agreement by Northwest or Pinnacle or Northwest's failure to honor its Put Option obligations, but excluding violations of the scope clause limitations in certain of Northwest's collective bargaining agreements[5] The valuation prepared by Eclat took into consideration current industry conditions. (5) The guaranty to the Plans by Northwest Airlines Corporation of Northwest's obligation to honor the Put Option. Accordingly, the reference in the first column at 68 FR 2585 to quarterly valuations is no longer correct. In addition, U.S. Airways has recently signed an agreement with Mesa for more regional aircraft. Until the Series C stock is repurchased, each share will accrue a 12% per year dividend on the $46.96 per share buy back price. 01/18/2023, 823 The Independent Fiduciary must prudently determine the fair market value of the Pinnacle Stock as of the date it is contributed to the Plans. 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. 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. 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. Service Provider information is on Pages 25 to 32, compensation for those maintaining the fund, fees and commissions. The stock has long term upside potential because of the planned IPO. provide legal notice to the public or judicial notice to the courts. the Federal Register. The attention of interested person is directed to the following: (1) The fact that a transaction is the subject of an exemption under section 408(a) of the Act and section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of the Act and the Code, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of the Act, which require, among other things, a fiduciary to discharge his or her duties respecting the plan solely in the interest of the participants and beneficiaries of the plan and in a prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it affect the requirements of section 401(a) of the Code that the plan operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries; (2) The exemption will not extend to transactions prohibited under section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code; (3) 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 administratively feasible, in the interests of the plans and their participants and beneficiaries and protective of the rights of the participants and beneficiaries of the plans; (4) This exemption is supplemental to, and not in derogation of, any other provisions of the Act and/or the Code, including statutory or administrative exemptions and transitional rules. 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. Wendy M. McColough of the Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor, telephone (202) 693-8540. 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. In negotiating the rights and restrictions set forth in the transfer and registration rights provisions of the Omnibus Agreement, Fiduciary Counselors balanced the need of the Plans to achieve greater diversification in light of the anticipated holdings of shares of Pinnacle Stock with the need to maximize the value of the investment in such stock. Publi . 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. The exemption affects participants and beneficiaries of, and fiduciaries with respect to, the Plans. 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 Investment Fund holds Pinnacle Stock on behalf of the Contract Plan and the Salaried Plan. Comment: A number of comments noted that the airline industry is experiencing significant financial troubles and that some other airlines are in bankruptcy. Page 49 of 61. In view of the comments requesting a hearing, on March 11, 2003, the Department published in the Federal Register (68 FR 11589) a notice of hearing on the Proposed Exemption. 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. Once these growth assumptions are made, the present value of expected free cash flow is calculated. Northwest stated that it would not. 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. Once all of the Pinnacle Stock in such an account has been liquidated, that subaccount may be dissolved. To schedule an in-person visit, please click on the link below your desired NWA Location. Be no change in its providing objective and independent investment management Stock in such an account has liquidated... 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