The third expert then determines which of the two assessed values should be assigned to such non-cash consideration. Northwest represents that, if the Independent Fiduciary determines that the Pinnacle Stock previously contributed to the Plans was worth less at the time of the contribution than the amount attributed to it at the time of the contribution, Northwest shall contribute additional Pinnacle Stock or cash in amounts sufficient to make up the shortfall. Preview; Edit & Save; Related Documents; 50 of the Top 250 law firms use our Products every day. No products in the cart. 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. 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. On June 27, 2003, ALPA and Northwest provided the Department with a Letter of Agreement between Northwest and the Northwest airline pilots represented by ALPA (the Letter Agreement) regarding the acquisition and holding of Pinnacle stock by the Northwest Pension Plan for Pilot Employees (the Pilot Plan). As with all domestic U.S. carriers, Northwest has been hit by the drop in revenue due to lower overall yields and depressed passenger levels. Retiree Pass Travel To access paycheck receipts (stubs), W-2's, and 1099's go to the DeltaNet for Alumni home page and click "Self Service" on the white menu bar, then click "My Money". Title: NORTHWEST AIRLINES EXCESS PENSION PLAN FOR SALARIED EMPLOYEES Date: 3/16/2007 Industry: Airline Sector: Transportation. Based on the Eclat and AIC valuations, the Independent Fiduciary determined that the contribution of 1,938,000 shares of Pinnacle Stock should be valued at $43,821,894 as of January 15, 2003, the date the contribution occurred. The concerns expressed generally related to the proposed contribution of Pinnacle Stock instead of a cash contribution to the Plans; the value and method of valuation of the Pinnacle Stock; the effects of the proposed transactions on the Plans; and the adequacy of the proposed safeguards that are intended to protect the Plans' interests. 612-726-3774. Document page views are updated periodically throughout the day and are cumulative counts for this document. Although the Plan's option is exercisable at anytime, unlike a normal option, Northwest does not have to immediately settle. While every effort has been made to ensure that Seattle WA 98102-3305. 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. Read Our Story Our Approach 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. Any decision not to use all Available Cash to effect such partial purchases must be approved by a majority of the directors elected by the holders of the Series C Preferred Stock. Many of the commenters expressed concern about the effect of the Proposed Exemption on the Plans. documents in the last year, 117 On February 14, 2003, Northwest obtained formal written confirmation from the bank lenders that none of the rights afforded to the Plans in the Omnibus Agreement nor the exercise of such rights would violate the Credit Agreement. If NWA Corp. decides not to repurchase the Series C Preferred Stock, quarterly dividends will accrue beginning August 1, 2003, at 12% per annum and the employee unions will receive three additional Board of Directors positions. Northwest noted that the second bullet point in the third column at 68 FR 2585 (respecting the obtainment of fairness opinions) has been revised. More information and documentation can be found in our The ASA was revised to provide that the acquisition or disposition of shares of Pinnacle Stock pursuant to the terms of the Omnibus Agreement does not constitute a Change of Control (as defined in the ASA). northwest airlines pension plan phone number. Northwest has from 30 to 180 days to settle the option. 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. Service Provider information is on Pages 25 to 32, compensation for those maintaining the fund, fees and commissions. Northwest and ALPA assert that the voluntary contribution gives Northwest the liquidity it needs, and thereby the ability to maintain all of its Plans, by eliminating the funding requirement for the Pilot Plan for the 2003 Plan Year, possibly reducing the funding requirements for future plan years, and by waiving the monthly contribution requirement under the pilot collective bargaining agreement for the 2004 and 2005 Plan Years. Signed at Washington, DC this 14th day of August 2003. Northwest provided the funded status of each Plan as of 1/1/03 as shown in the following table. This voluntary contribution will eliminate the funding requirements under the Code and ERISA for the 2003 Plan Year that would otherwise be payable with respect to the Pilot Plan. are not part of the published document itself. 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. New Documents The description of Northwest's right of first refusal with respect to Pinnacle Stock is accurate; however, if the Plans negotiate the sale of Pinnacle Stock to a third party for non-cash consideration, the Omnibus Agreement includes a specific valuation mechanism with respect to such consideration. 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). During the Hearing, employees of Northwest referenced an employee stock program that was established by the company in 1993. Wall Street analysts also look favorably on ExpressJet, the Continental Airlines regional airline partner. However, Northwest understands that some of United's airline services agreements have been renegotiated and that it has been reported that the airline services agreement between United and Atlantic Coast Airlines is the subject of current negotiations. documents in the last year, by the Food Safety and Inspection Service Driving Directions. 6. 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 The Independent Fiduciary must ensure that each appraisal, at a minimum, includes the following elements: (a) A summary of the appraiser's qualifications to evaluate Pinnacle Stock. Despite the turmoil in the industry in recent years, Eclat felt that Northwest has emerged as, perhaps, the most stable airline in the industry. 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.. After that date, the Omnibus Agreement provides Fiduciary Counselors with the right to cause an IPO of Pinnacle Stock. In particular, the risk and the liquidity of the Pinnacle Stock were taken into account and are explained in the reports issued by Fiduciary Counselors and Eclat. In determining the fair market value of the Pinnacle Stock, the Independent Fiduciary obtains an appraisal from an independent qualified appraiser selected by the Independent Fiduciary, and ensures that the appraisal and the Independent Fiduciary's analysis of the appraisal are consistent with sound principles of valuation and with the elements described by the Department in the Preamble to this final exemption in the section entitled Duties of the Independent Fiduciary; (g) The terms of (1) the Put Option granted by Northwest; (2) any exercise of the Put Option by the Plans; and (3) any sale of the Pinnacle Stock by the Plans to Northwest other than through the exercise of the Put Option will be in accordance with the terms set forth in the Term Sheet and the Omnibus Agreement; (h) Immediately after each contribution, employer securities and employer real property, including the Pinnacle Stock, will represent no more than 10 percent (10%) of the value of each Plan's assets. The Proposed Exemption is part of Northwest's strategy to achieve that goal. At the present time, the Board was unable to make this finding. In addition, in the paragraph immediately following subparagraph (iii) in the second column of 68 FR 2580, the reference to the price of Pinnacle Stock being determined as of the exercise date should be expanded to reflect these concepts. According to Northwest, the Omnibus Agreement provides the Plans substantial investment risk protection, protection that would not be available to the Plans when investing in securities with similar risk and return characteristics. Pinnacle itself had revenues of approximately $345.2 million for 2002. documents in the last year, 480 rendition of the daily Federal Register on FederalRegister.gov does not 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? In valuing the Pinnacle shares, it was necessary to assign a value, not only to Pinnacle, but also to the Put Option. documents in the last year, 1401 If accepting an in-kind contribution is not prudent, not solely in the interest of the participants and beneficiaries of the plan, or would result in an improper lack of diversification of plan assets, the responsible fiduciaries of the plan Start Printed Page 49800would be liable for any losses resulting from such a breach of fiduciary responsibility, even if a contribution in kind does not constitute a prohibited transaction under section 406 of ERISA. The Employee Stock Plan covers in general terms Northwest's employees employed from August 1, 1993 through 1996, including employees represented by Air Line Pilots Association (ALPA), International Association of Machinists and Aerospace Workers (IAM), International Brotherhood of Teamsters (IBT), Airline Technical Support Association (ATSA), Northwest Airlines Meteorologists Association (NAMA), Transport Workers Union of America (TWUA) and management employees. 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 Northwest ended the 3rd quarter with over $2.5 billion in cash and short-term receivables. In addition, Northwest shall provide it with copies of any amendments to the credit agreement. 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. Such techniques were employed by Fiduciary Counselors and Eclat in this circumstance. Pursuant to the terms of the Omnibus Agreement, Northwest contributed Pinnacle Stock to the Contract Plan. In negotiating the terms of the Contributions and determining whether to accept the Initial Contribution, the Independent Fiduciary, with its financial advisors and legal counsel, reviewed those documents that it deemed relevant, participated in meetings and telephone conferences with officers and other representatives of Northwest, and considered aspects of the Contribution that it deemed pertinent to its engagement, including without limitation Northwest's current and future ability to honor the Put Option. The IF Report represents that, in the January 15, 2003 Valuation, Eclat determined that the net equity value (before discounts) of Pinnacle was $412,923,928.00. Northwest guarantees the principal attributable to the investment in Pinnacle Stock. 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. 1. Northwest Airlines, Inc. Northwest observed that the comments submitted to the Department raised several concerns regarding the contribution of Pinnacle Stock to the Plans, as contemplated by the Proposed Exemption. In connection with the Exemption Transactions, Northwest does not determine the value of Pinnacle Stock. 01/18/2023, 159 4. 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. Northwest represents that the amount of shares necessary to satisfy the required contribution was based upon a final valuation of Pinnacle by Fiduciary Counselors, relying on a valuation report prepared by Eclat Consulting. See Omnibus Agreement at section 9.1(d). documents in the last year, 973 5. However, because of its liquidity needs, a cash contribution is not a viable alternative. On January 17, 2003, the Department published a notice in the Federal Register (68 FR 2578) of a proposed individual exemption (the Proposed Exemption). We devoted substantial time and effort to this issue. 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. The Proposed Exemption further required that the independent fiduciary obtain expert valuation advice from an independent valuation firm. 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 Department has determined that it would be appropriate to modify the definition of independent fiduciary as follows: (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.. (e) A statement of the relevance or significance accorded to the valuation methodologies taken into account. NWAI then transferred the Pinnacle Shares and the Series A Preferred Share to Northwest as a contribution to the capital of Northwest. Northwest responded that no similar legal restriction would apply to the repurchase of Pinnacle Stock pursuant to the exercise of the Put Option. The Independent Fiduciary recognizes that all aspects of its engagement involved fiduciary actions, and, for that reason, representatives of the Independent Fiduciary and its financial and legal advisors actively participated in the negotiations relating to the Omnibus Agreement and in the evaluation of the decision of whether to accept the Contribution. The amount of the Initial Contribution is equal to the amount that was required to meet the quarterly funding requirements under ERISA section 302 and Code section 412(l) for the Contract Plan due on January 15, 2003. Future contributions of Pinnacle Stock will continue to be subject to independent review and valuation. 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. provide legal notice to the public or judicial notice to the courts. Northwest will no longer guarantee a minimum operating margin in 2008. 3. Northwest Response: Northwest represents that it did not value Pinnacle Airlines for purposes of the Exemption Transactions. 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. documents in the last year. 1, 1995) transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. 01/18/2023, 202 has no substantive legal effect. informational resource until the Administrative Committee of the Federal Northwest notes that specifically, if the Pinnacle Stock is not publicly traded, the Plans will receive the greatest of (i) the initial contribution value (the Floor Price), (ii) the fair market value as determined by the Independent Fiduciary at the time of the exercise of the Put Option, or, if greater, at the closing date of the Put Option, and, (iii) if a third party sale is elected by the Plans and Northwest does not exercise its right of first refusal, the proceeds from the sale of Pinnacle Stock held by the Plans to such third party. The Independent Fiduciary negotiated the terms of the Put Option which provide downside protection by permitting the Plans to sell the Pinnacle Stock back to Northwest for the greater of the original value at which it was credited to the funding standard account or its fair market value at the time it is sold back to Northwest. 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). The Pension Investment Committee informed the Independent Fiduciary that the holding of Pinnacle Stock constituting the Initial Contribution to the Plans would not and was not expected in the foreseeable future to impair the liquidity of the Plans and that the Plans would be able to pay benefits and expenses when due. The Independent Fiduciary and its advisors also met with the senior officers of Pinnacle. Participants and beneficiaries of the Plans stand to benefit from an IPO of the Pinnacle Stock. On July 11, 2003, Fiduciary Counselors informed the Department that Fiduciary Counselors Inc. (formerly Aon Fiduciary Counselors, Inc.) (Fiduciary Counselors) is no longer a subsidiary of Aon Corporation. 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. 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. 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. (c) A statement that the appraisal is being conducted to determine the fair market value of Pinnacle Stock, which is defined as the price at which the stock would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well informed about the stock and the market for the stock. 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. Comments: Commenters expressed a concern that the contribution of Pinnacle Stock involves a conflict of interest on the part of Northwest. include documents scheduled for later issues, at the request The Independent Fiduciary must investigate the facts and assumptions underlying the appraisals to ensure that stock contributions are not valued at more than fair market 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. Press "1" to indicate that the employee number is all numeric. See Omnibus Agreement at section 8.8. ALPA and Northwest informed the Department that the Letter Agreement will be executed by the parties in connection with a proposed voluntary contribution of Pinnacle Stock (described below). 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. Fiduciary Counselors adds that AIC, which remains a subsidiary of Aon, will continue to act as advisor in connection with this engagement. Employee Benefits Security Administration, Department of Labor. Payment will be made to Fiduciary Counselors, which will remit 75% to AIC. Through reduced employment levels and other cost-cutting measures, Northwest has been able to minimize the ongoing impact of reduced revenue levels, which the Independent Fiduciary believes are likely a permanent change in the industry. Northwest notes that the Omnibus Agreement, while consistent with the Term Sheet, provides specific terms for: the contribution transactions; transferability of Pinnacle Stock; corporate governance; voting rights; the Put Option; representations and warranties; and a number of other matters. on The Proposed Exemption contemplates both voluntary and required contributions to the Northwest Plans, as did the Application filed by Northwest on November 6, 2002 and the Omnibus Agreement. 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. This, together with the reporting planned by Fiduciary Counselors, will permit ALPA to monitor the Independent Fiduciary. Moreover, the Plans will receive all of any investment gains attributable to their shares of Pinnacle Stock at the time of an IPO. In no circumstance, however, may the parties treat Pinnacle Stock previously contributed to the Plans as if it had a higher value than was attributed to it at the time of the original contribution. A total of 9.1 million shares of Series C Preferred Stock were contributed to the Employee Stock Plan. Enter the 'pass eligibility date' as six digits (in most cases this is the same as the original hire date) and press #. The IF Report provides that the Independent Fiduciary and its advisors participated in numerous telephone conferences with representatives of Northwest and Pinnacle through November, December and early January concerning the Independent Fiduciary's engagement, the proposed Contribution, the status of Northwest's minimum funding waiver applications to the Internal Revenue Service and the Proposed Exemption. The initial fee was remitted directly to Aon Consulting, Inc., then a parent company of both Fiduciary Counselors and AIC. 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. legal research should verify their results against an official edition of Additionally, Northwest notes that the Letter Agreement between Northwest and ALPA relating to a voluntary contribution of Pinnacle Stock would provide ALPA with a role in reviewing and approving the termination, and any replacement, of the independent fiduciary. The right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. Representatives are available to assist you Eclat was provided with Pinnacle's audited financial statements for the years 2000 and 2001. 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. of the issuing agency. Once all of the Pinnacle Stock in such an account has been liquidated, that subaccount may be dissolved. Prior to valuing the put option, Eclat's estimate of the value of Pinnacle was $333,436,072, after application of an illiquidity discount of 15% and a minority discount of 5%. Once the Plans hold more than 50 percent of the Pinnacle Stock, the affirmative vote of the director designated by the Plans shall be required to approve the appointment of any new CEO of Pinnacle and compensation of any CEO, any amendments to the $200 million Note of Pinnacle Airlines, Inc. held by Northwest, the amendment of Pinnacle's charter or by-laws in certain respects, or the implementation of certain changes in Pinnacle's capital structure or the issuance of capital stock prior to an IPO. documents in the last year, 12 01/18/2023, 41 However, as noted in Northwest's Application, the final terms of the Put Option were subject to negotiation with Fiduciary Counselors. Northwest asserts that, if its current cash needs were not so great, Northwest would make its pension contributions in cash as it has in the past. On August 1, 2003, Northwest issued a press release that announced its decision on the Series C Preferred Stock. To schedule an in-person visit, please click on the link below your desired NWA Location. Northwest believes that the final terms for the Put Option, which are more favorable to the Plans, are more completely and accurately stated in the description of the Put Option contained in the description of the Term Sheet as set forth at 68 FR 2587. If such appropriate Plan fiduciary determines the liquidity of the Plans is impaired, such fiduciary shall direct the Independent Fiduciary to dispose of all or a portion of the Pinnacle Stock consistent with the terms of the Omnibus Agreement to the extent commercially reasonable. documents in the last year, 1487 QDRO Preparation for NORTHWEST AIRLINES PENSION PLAN FOR . 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. Eagan, MN 55121-1534. The President of the United States manages the operations of the Executive branch of Government through Executive orders. 702 King Farm Boulevard, Suite 400, Rockville, MD 20850 / +1 212-944-4455 / issgovernance.comAMR Under Pressure to Preserve Pensions . (Pinnacle Stock) to the Plans 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 to the Plans by Northwest; and (5) the guaranty to the Plans by Northwest Airlines Corporation (NWA Corp.) of Northwest's obligation to honor the Put Option (the Exemption Transactions).
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