95-25717. Proposed Exemptions; Kay Alden, Inc.

[Federal Register Volume 60, Number 200 (Tuesday, October 17, 1995)]
[Notices]
[Pages 53805-53810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25717]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-09973, et al.

Proposed Exemptions; Kay Alden, Inc.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

-----------------------------------------------------------------------

SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restriction of the Employee
Retirement Income Security Act of 1974 (the Act) and/or the Internal
Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

All interested persons are invited to submit written comments or
request for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of this Federal Register Notice. Comments and
request for a hearing should state: (1) The name, address, and
telephone number of the person making the comment or request, and (2)
the nature of the person's interest in the exemption and the manner in
which the person would be adversely affected by the exemption. A
request for a hearing must also state the issues to be addressed and
include a general description of the evidence to be presented at the
hearing. A request for a hearing must also state the issues to be
addressed and include a general description of the evidence to be
presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least
three copies) should be sent to the Pension and Welfare Benefits
Administration, Office of Exemption Determinations, Room N-5649, U.S.
Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210.
Attention: Application No. stated in each Notice of Proposed Exemption.
The applications for exemption and the comments received will be
available for public inspection in the Public Documents Room of Pension
and Welfare Benefits Administration, U.S. Department of Labor, Room N-
5507, 200 Constitution Avenue NW., Washington, DC 20210.

Notice to Interested Persons

Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code, and in accordance with procedures set forth in
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978 (43 FR 47713, October 17, 1978) transferred the authority of
the Secretary of the Treasury to issue exemptions of the type requested
to the Secretary of Labor. Therefore, these notices of proposed
exemption are issued solely by the Department.
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.

Kay Alden, Inc. Money Purchase Plan (the Plan), Located in Chicago,
Illinois

[Application No. D-09973]

Proposed Exemption

Summary of Facts and Representations

1. The Plan is a defined contribution plan having three
participants and assets with a fair market value of $1,533,292 as of
January 12, 1995. The trustees of the Plan are Nelson and Kay Alden
Nelson. The Plan sponsor is in the business of script writing for day
time soap operas.
2. The Property consists of eighteen undeveloped building sites
located in Spyglass Hills, a subdivision in Hutchinson, Kansas. The
Spyglass subdivision is located to the North and East of Hutchinson,
Kansas. The sewer, natural gas, underground electrical and telephone
wires are accessible to all lots. Over the last twenty years, the
development in Hutchinson has been in the general area of Spyglass
Hills. Spyglass Hills currently is the only development with growth
potential which has sewer and utilities in place. Spyglass Hills should
be completely developed within the next five to ten years.
In 1989, Nelson acquired twenty-five lots. During the past three
years, Nelson has been preparing the subdivision for development. He
has encouraged housing starts by working with developers and
individuals willing to build homes. There is a fully occupied five unit
luxury condominium in Spyglass Hills, and a townhouse complex is to be
built within the next year.
3. The Property was appraised on October 31, 1994 by Ralph E.
Gingerich, an independent and qualified real estate appraiser. Mr.
Gingerich calculated that the fair market value of the Property to be
$324,000 using the comparable sales approach. In his appraisal, he
states that market conditions and growth potential are favorable, and
new housing starts have increased sharply in the past two years causing
values and sales of sites to increase rapidly.
4. The Plan is seeking a suitable replacement for an unrelated real
estate holding it sold in August 1994 and therefore, proposes to
purchase the Property. The Private Bank and Trust Company (the Bank)
has been retained

[[Page 53806]]
to serve as independent fiduciary on behalf of the Plan. The Bank has
reviewed the proposed transaction and represented that the Property is
an appropriate investment for the Plan for the following reasons.
First, even though the Property is not income producing, the economic
attraction of the Property to the Plan is not diminished. All three
Plan participants are relatively young, and not facing retirement in
the near future. Thus, any possible illiquid characteristic of the
investment would not prejudice the Plan. Secondly, following the
Purchase, only 25% of the Plan's assets will be invested in real
estate. Lastly, the Property consists of multiple lots that will be
marketed individually providing a continuing cash flow as each lot is
sold.
Central Bank and Trust Company (Central Bank) has also been
retained to serve as independent fiduciary on behalf of the Plan.
Central Bank represents that the appraisal is a fair representation of
the current market. Further, Central Bank states that the new housing
market in Hutchinson continues to be strong, and Spyglass Hills should
benefit from this trend. Central Banks believes that the Property is an
appropriate investment for the Plan. Lastly, Central Bank represents
that at the time of the purchase of the Property, it will review the
transaction and confirm that the Plan is paying no more than fair
market value for the Property.
5. In summary, the applicant represents that the proposed
transaction satisfies the criteria of section 408(a) of the Act
because: (1) The terms of the purchase are as favorable as the Plan
could obtain in an arm's length transaction with an unrelated party;
(2) the fair market value of the Property has been established by an
independent and qualified appraiser and represents no more than 25% of
the value of the Plan's assets; (3) the Plan has retained an
independent fiduciary who has reviewed the terms of the Purchase and
has determined that the Purchase is in the Plan's interest; and (4) the
Plan has retained a second independent fiduciary who will represent the
interests of the Plan at the time of the Purchase to ensure that the
Plan is not paying more than fair market value for the Property.
For Further Information Contact: Allison Padams of the Department,
at (202)219-8971. (This is not a toll-free number.)

The Chase Manhattan Bank (National Association) Pooled Investment Trust
for Employee Benefit Plans (the Trust) Located in New York, New York

[Exemption Application No. D-09983]

Proposed Exemption

The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption
is granted, the restrictions of sections 406(a), 406(b)(1) and
406(b)(2) of the Act and the sanctions resulting from the application
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through
(E) of the Code, shall not apply to the past cash sale of certain
commercial paper notes (the Notes) for $25,129,748 by two collective
investment funds in the Trust known as VAN 1 and VAN 18 (the VANs) to
The Chase Manhattan Bank, N.A. (the Bank), a party in interest with
respect to the employee benefit plans invested in the VANs at the time
of the transaction; provided the following conditions were met:
(a) The sale of each of the Notes was a one-time cash transaction;
(b) The terms and conditions of the sale were at least as favorable
to the VANs as those obtainable in an arm's-length transaction with an
unrelated party;
(c) The VANs received an amount for the Notes that was equal to the
greater of: (i) In the case of a Note that had a scheduled maturity
after the date of the transaction, the original purchase price paid by
the particular VAN for the Note plus interest at the imputed yield to
maturity up to the date of sale, as calculated by the Bank; (ii) in the
case of a Note that had a scheduled maturity on or before the date of
the transaction, the value at maturity plus additional interest to the
date of sale at the daily rates earned by the related VAN (exclusive of
its holdings of the Notes) from the maturity date to the date of sale;
or (iii) the fair market value of each Note as of the time of sale as
determined by an independent, qualified appraiser;
(d) The VANs did not pay any commissions, costs or other expenses
in connection with the sale of the Notes;
(e) If the exercise of any of the Bank's rights, claims or causes
of action in connection with its ownership of the Notes results in the
Bank recovering from the issuer of the Notes, or any third party, an
aggregate amount that is more than the purchase price paid to the VANs
by the Bank for the Notes (i.e. $25,129,748), the Bank will pay such
excess amounts to the respective VANs within thirty (30) days of the
receipt of such recovery amounts; and
(f) Each employee benefit plan with interests in the VANs received
its proportionate share of the proceeds of the sale of the Notes to the
Bank and receives its proportionate share of any recovery amounts
obtained on the Notes in excess of the purchase price received by the
VANs, as described in condition (e) above.
Effective Date: If granted, this proposed exemption will be
effective as of December 19, 1994.

Summary of Facts and Representations

1. The Trust is a collective investment vehicle comprised of
several separate collective funds maintained by the Bank for investment
by employee benefit plans subject to the Act (the Plans) and
governmental employee benefit plans. The Bank is a national banking
association that serves as trustee to the Trust. The Trust includes VAN
1 and VAN 18 (i.e. the VANs), which are two separate collective
investment funds that hold assets of various Plans. The VANs are short-
term investment funds that are designed to be highly liquid. As of
December 31, 1994, VAN 1 and VAN 18 had total assets in the amounts of
$606,241,334 and $558,048,711, respectively.
2. The Bank, acting on behalf of the VANs as trustee of the Trust,
purchased the Notes from the VANs on December 19, 1994. The Notes were
short-term investments with maturities of five months or less that were
issued by Confederation Life Insurance Co. (Confederation) with a total
face amount of $25 million. The Bank states that the Notes, like most
short-term commercial paper, were purchased at a discount with the face
amount to be paid at maturity. No other interest payments were
contemplated during the term of the Notes.
The Notes held by the respective VANs, including the original
purchase price and date, value at maturity, and stated maturity date
are as follows:

----------------------------------------------------------------------------------------------------------------
Original Purchase Value at Maturity
VAN purchase price date maturity date
----------------------------------------------------------------------------------------------------------------
VAN 1............................................. $4,943,750.00 6/09/94 $5,000,000 9/07/94

[[Page 53807]]

VAN 1............................................. 4,959,441.67 7/29/94 5,000,000 9/29/94
VAN 1............................................. 4,871,163.20 8/02/94 5,000,000 1/30/95
VAN 18............................................ 4,959,441.67 7/29/94 5,000,000 9/29/94
VAN 18............................................ 4,871,163.20 8/02/94 5,000,000 1/30/95
----------------------------------------------------------------------------------------------------------------

3. On August 11, 1994, the Canadian insurance regulatory
authorities placed Confederation into a liquidation and winding-up
process, and on August 12, 1994, the insurance authorities of the State
of Michigan commenced legal action to place the U.S. operations of
Confederation into rehabilitation proceedings. The Bank states that, as
a result of these actions, the payments on the Notes were suspended.\1\
The Bank states further that it appeared highly unlikely that the
assets of Confederation would be sufficient to pay the Noteholders,
including the VANs, to any significant extent.

\1\The Department notes that the decisions made by the Bank on
behalf of the VANs to acquire and hold the Notes were subject to the
fiduciary responsibility provisions of Part 4 of Title I of the Act.
In this proposed exemption, the Department is not providing an
opinion as to whether any violations of Part 4 of Title I may have
arisen as a result of the acquisition and holding of the Notes by
the VANs.
---------------------------------------------------------------------------

4. The Bank represents that once it received notice of the seizure
of Confederation, it segregated the Notes in separate liquidating
accounts within the Trust. There were two liquidating accounts, one
with respect to each of the VANs (the Liquidating Accounts). The
proportional interest of each Plan in a Liquidating Account following
the segregation equalled its proportional interest in the affected VAN
immediately before the segregation. The estimated number of Plans
participating in each of the Liquidating Accounts established with
respect to VAN 1 and VAN 18 were 100 and 19, respectively. Among the
Plans invested in one or both of the VANs were the Retirement and
Family Benefit Plan of The Chase Manhattan Bank, N.A., and The Chase
Manhattan Bank, N.A. Thrift Investment Plan.
5. The Bank represents that because it desired to make the Plans
``whole'' for the losses that would have occurred in connection with
the Plans' investment in the Notes, the Bank purchased the Notes from
the Liquidating Accounts on December 19, 1994 for the value the Notes
would have had in the particular VAN at the time of the transactions
but for the placement of Confederation in liquidation. The Bank entered
into the transactions prior to the end of 1994 in response to the
demands of Plan fiduciaries that the Plans be made ``whole'' on these
investments and completely liquid for purposes of year-end valuations
of the assets held by the VANs. Accordingly, the Bank requests a
retroactive administrative exemption from the Department to permit the
past sale of the Notes under the terms and conditions described herein.
6. The Bank paid to the Liquidating Accounts a total of $25,129,748
for the Notes. The Bank states that the sale price received by the VANs
for the Notes was equal to: (i) In the case of a Note that had a
scheduled maturity after the date of the transaction, the original
purchase price paid by the particular VAN for the Note plus interest at
the imputed yield to maturity up to the date of sale, as calculated by
the Bank;\2\ and (ii) in the case of a Note that had a scheduled
maturity on or before the date of the transaction, the value at
maturity plus additional interest to the date of sale at the daily
rates earned by the related VAN (exclusive of its holdings of the
Notes) from the maturity date to the date of sale. The Bank represents
that the guiding principal in determining the price of the Notes for
the transactions was to place the VANs in exactly the position they
would have occupied on the date of the transactions if Confederation
had not defaulted.

\2\The Bank represents that the imputed yield to maturity for
the Notes held by the VANs, as listed above in Paragraph 2, was
4.5%, 4.71%, 5.125%, 4.71% and 5.125%, respectively, when calculated
on an annualized basis. However, as noted above, the Notes bore no
coupon or other current yield. The imputed yield consisted of the
difference between the face amount due at maturity and the original
discounted purchase price. The Bank states that the method used for
calculating earnings on the non-matured Notes at the time of the
transaction was consistent with the cost basis accounting rules
permitted for short-term investment funds by the Office of the
Comptroller of the Currency (see OCC Rule 9.18).
In addition, the Bank states that by selling the non-matured
Notes to the Bank prior to their maturity dates (i.e. 1/30/95), the
VANs were able to reinvest the proceeds of the sales as of the date
of the transactions rather than as of the later maturity dates, a
period of almost six weeks later. The VANs' earnings rate during
that six-week period was higher than the imputed yield to maturity
of the Notes that had not already matured. Thus, the Bank maintains
that the sale of the non-matured Notes on December 19, 1994 was more
financially advantageous to the VANs than if the sale had not
occurred until January 30, 1995, the last maturity date of the Notes
held by the VANs.
---------------------------------------------------------------------------

These calculations by the Bank resulted in VAN 1 receiving the
following sale prices for the Notes on December 19, 1994, the date of
sale: $5,073,286 for the Note which matured on 9/7/94; $5,058,484 for
the Note which matured on 9/29/94; and $4,970,109 for the Note which
was due to mature on 1/30/95. In addition, on such date, VAN 18
received $5,057,760 for the Note which matured on 9/29/94 and
$4,970,109 for the Note which was due to mature on 1/30/95.
The VANs received such amounts in cash on the date of sale in
exchange for the transfer to the Bank of all right, title and interest
in the Notes, together with all causes of action, suits or other claims
that the VANs may have against any person with respect to the Notes.
The Bank states that each Plan with an interest in the respective VANs
received its proportionate share of the proceeds of the sale of the
Notes to the Bank.
7. The Bank engaged Deloitte & Touche (D&T), an independent,
qualified appraiser in New York City, to determine the fair market
value of the Notes. With respect to the independence of D&T, the Bank
represents that D&T at times performs services for the Bank and its
affiliates. However, the Bank states that payments made by the Bank and
its affiliates for such services constitute less than one (1) percent
of D&T's annual gross revenues.
On the basis of discussions with three independent brokers, D&T
estimated the fair market value of the Notes at approximately ten cents
for each one dollar of principal amount due on the Notes.\3\ Thus,
since each Note had a face value of $5 million, D&T concluded that each
Note would be worth approximately $500,000 at the time of the
transaction.

\3\D&T represents that its inquiry to establish the value of the
Notes was intended to be consistent with the procedure for
determining current market price under SEC Rule 17a-7(b) of the
Investment Company Act of 1940.
---------------------------------------------------------------------------

Based on the pricing information obtained from D&T, the Bank
represents that the fair market value of the Notes was significantly
below the purchase price paid by the respective VANs for the Notes (as
noted below).

[[Page 53808]]
----------------------------------------------------------------------------------------------------------------
Fair
Fund Purchase Principal Purchase market Price red.'d
date amount price value
----------------------------------------------------------------------------------------------------------------
VAN 1........................................ 6/09/94 $5,000,000 $4,943,750 $500,000 $5,073,286
VAN 1........................................ 7/29/94 5,000,000 4,959,442 500,000 5,058,484
VAN 1........................................ 8/02/94 5,000,000 4,871,163 500,000 4,970,109
VAN 18....................................... 7/29/94 5,000,000 4,959,442 500,000 5,057,760
VAN 18....................................... 8/02/94 5,000,000 4,871,163 500,000 4,970,109
----------------------------------------------------------------------------------------------------------------

8. The VANs did not pay any commissions, costs or other expenses in
connection with the sale. In addition, the Bank is willing to bear all
costs and expenses associated with the transactions, including any
expenses incurred in pursuing other claims with respect to the Notes.
The Bank states that it will indemnify the VANs for any amounts
recovered from Confederation, or any third party, in connection with
the enforcement of the Bank's rights and remedies as owner of the
Notes. In this regard, the Bank notes that it is unlikely that the
proceeds from any such recoveries on the Notes will exceed the payments
that the Bank made to the VANs. However, the Bank represents that if
such recoveries ultimately exceed the purchase price paid by the Bank
to the VANs for the Notes, the Bank will return any excess amounts to
the respective VANs within thirty (30) days of the receipt of the
recovery amounts. In addition, each employee benefit plan with
interests in the VANs will receive its proportionate share of any
recovery amounts obtained on the Notes in excess of the purchase price
received by the VANs.
9. In summary, the applicant represents that the transaction
satisfied the statutory criteria of section 408(a) of the Act because:
(a) The terms and conditions of the transaction were at least as
favorable to the VANs as those which the VANs could have obtained in an
arm's-length transaction with an unrelated party; (b) the sale of the
Notes was a one-time cash transaction; (c) the VANs were not required
to pay any commissions, costs or other expenses in connection with the
sale; (d) the VANs received an amount for the Notes that was equal to
the greater of: (i) in the case of a Note that had a scheduled maturity
after the date of the transaction, the original purchase price paid by
the particular VAN for the Note plus interest at the imputed yield to
maturity up to the date of sale, as calculated by the Bank; (ii) in the
case of a Note that had a scheduled maturity on or before the date of
the transaction, the value at maturity plus additional interest to the
date of sale at the daily rates earned by the related VAN (exclusive of
its holdings of the Notes) from the maturity date to the date of sale;
or (iii) the fair market value of each Note as determined by an
independent, qualified appraiser at the time of the transaction; (e) if
the exercise of any of the Bank's rights, claims or causes of action in
connection with its ownership of the Notes results in the Bank
recovering from the issuer of the Notes, or any third party, an
aggregate amount that is more than the purchase price paid to the VANs
by the Bank for the Notes (i.e. $25,129,748), the Bank will pay such
excess amounts to the respective VANs within thirty (30) days of the
receipt of such recovery amounts; and (f) each Plan with an interest in
the VANs received its proportionate share of the proceeds of the sale
of the Notes to the Bank and will receive its proportionate share of
any recovery amounts obtained on the Notes in excess of the purchase
price received by the VANs.

Notice to Interested Persons

The applicant states that notice of the proposed exemption shall be
made by first class mail to the appropriate plan fiduciaries for each
employee benefit plan that had an interest in the Liquidating Accounts
at the time of the transaction. Notice to the plan fiduciaries shall be
made within fifteen (15) days following the publication of the proposed
exemption in the Federal Register. This notice shall include a copy of
the notice of proposed exemption as published in the Federal Register
and a supplemental statement (see 29 CFR 2570.43(b)(2)) which informs
interested persons of their right to comment on and/or request a
hearing with respect to the proposed exemption. Comments and requests
for a public hearing are due within forty-five (45) days following the
publication of the proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department,
telephone (202) 219-8194. (This is not a toll-free number.)

WLI Industries, Inc. Employees' Stock Ownership Plan (the Plan) Located
in Villa Park, IL

[Application No. D-09987]

Proposed Exemption

Summary of Facts and Representations

1. The Plan is an employee stock ownership plan with 116
participants and net assets available for benefits of $1,210,898 as of
February 28, 1994. The trustees of the Plan and the decisionmakers with
respect to the Plan's investments are James Van DeVelde, Robert Van
DeVelde and Joseph S. Ott, Jr. These individuals also participate in
the Plan.

[[Page 53809]]

2. WLI Industries, Inc. (WLI), the Plan sponsor, is engaged in the
sale and/or rental of warning lights, signage, barricades and other
materials utilized in connection with the construction and resurfacing
of roads and highways. WLI maintains its principal place of business at
880 North Addison Road, Villa Park, Illinois (the North Addison Road
Property). James Van DeVelde is the President of WLI. Robert Van
DeVelde is the Executive Vice President and Secretary of WLI. Joseph S.
Ott, Jr. is an employee of WLI.
3. Among the assets of the Plan is a 33 percent limited partnership
interest in the J&R Limited Partnership. The Partnership holds 100
percent of the beneficial interest in an Illinois Land Trust which, in
turn, holds fee simple title to a 10.38 acre parcel of real property.
The property is located at the North Addison Road address and serves as
the headquarters of WLI. The general partners of the Partnership are
James Van DeVelde and Robert Van DeVelde. The Van DeVeldes each hold a
33.5 percent interest in the Partnership. It is represented that the
subject property is not located near any other property that is owned
by WLI.
4. As the general partners of the Partnership, the Van DeVeldes
wished to obtain financing from the Small Business Administration (the
SBA) in order to construct a building. However, as a precondition to
obtaining such financing, the SBA required that all shareholders of WLI
hold a percentage of the Partnership. Because the Plan owned
approximately 41 percent of the outstanding stock of WLI, it was
obliged to purchase a 33 percent limited partnership interest in the
Partnership from the Van DeVeldes. Thus, on October 23, 1992, the Plan
paid $1.00 to the Van DeVeldes in order to acquire the Interest. In
December 1992, the SBA executed the construction loan with the
Partnership. With the exception of the Plan, the Van DeVeldes were
required to guarantee the SBA indebtedness. Currently, the Plan owns an
equity interest in the Partnership which it holds without any liability
to either the SBA or other parties.
5. On December 1, 1993, the Partnership commenced leasing an 84,943
square foot office building that it had constructed on the North
Addison Road Property to WLI under the terms of a triple net lease. The
lease has an initial term of 10 years and it requires WLI to pay the
Partnership a rental of $35,259.57 per month.^{4 Also during the
term of the lease, WLI is required to pay the Partnership all taxes,
utility expenses and casualty and liability insurance premiums.

\4\According to the application file, the fair market rental
value of the building was determined on March 15, 1993 by Michael R.
Kay, Associate Appraiser, and Douglas X. Adams, MAI, qualified,
independent appraisers who are affiliated with Adams Valuation
Corporation of Elmhurst, Illinois. The appraisers determined that
the fair market rental value of the building was $372,422 annually
or $31,035 monthly.
---------------------------------------------------------------------------

6. The Partnership is using WLI's rental payments under the lease
to amortize a loan made by Harriet Van DeVelde, the mother of James and
Robert Van DeVelde, to the Partnership. The loan, which is evidenced by
a promissory note dated August 30, 1991, is in the original principal
amount of $900,000. The note was executed between Mrs. Van DeVelde and
the Partnership to enable the Partnership to purchase the North Addison
Road Property. The note carries interest at the rate of prime plus one
percent over a five year period. The note requires both principal and
interest payments on a quarterly basis. At the end of the loan term, a
balloon payment of $600,000 will become due and payable. Then, it is
anticipated that the loan will be refinanced through unrelated lenders.
As of September 19, 1995, the applicants represent that the note had an
outstanding principal balance of $824,687. The applicants also
represent that the Partnership has made payments under the note in a
timely manner.
7. James and Robert Van DeVelde request an administrative exemption
from the Department in order that they may purchase the Interest from
the Plan. The Van DeVeldes are aware that the purchase of the Interest
by the Plan, the loan by Mrs. Van DeVelde to the Partnership and the
leasing of the property by the Partnership to WLI have resulted in
prohibited transactions in violation of the Act. Therefore, within 30
days of the publication, in the Federal Register, of the notice
granting this proposed exemption, WLI will file a Form 5330 with the
Service and pay all applicable excise taxes by reason of such
prohibited transactions.
8. The Van DeVeldes propose to purchase the Interest from the Plan
for cash at price that is not less than the greater of $2,500 or the
fair market value of the Interest. In an independent appraisal report
of the Partnership that is dated February 28, 1995, Ira D. Berk, CPA of
Premiere Financial Consultants, Inc. of Northbrook, Illinois, a
qualified, independent appraiser, determined that the Interest held by
the Plan had no value as of February 28, 1995. In valuing the
Partnership, Mr. Berk reviewed and relied upon an appraisal of the
property that was performed by Kristy A. DeCleene, Staff Appraiser and
Douglas X. Adams, of Adams Valuation Corporation. (This was the same
independent appraisal firm that had valued the property prior to the
inception of the lease.) In that appraisal, the appraisers placed the
fair market value of a leased fee interest in the Property at
$4,212,000 as of February 21, 1995. In addition, Mr. Berk indicated
that he had reduced the appraised value of the property by estimated
real estate commissions of $126,360 and by the Partnership's
liabilities which totaled $4,225,554 as of December 31, 1994.^{5

\5\As of December 31, 1994, it is represented that the
Partnership's liabilities consisted of the following: (a) the
$854,686 outstanding principal balance of the loan from Mrs. Van
DeVelde; (b) the $726,896 outstanding principal balance of the loan
from the SBA; and (c) the $2,455,905 outstanding principal balance
of a loan from Merchants Bank; and (d) $188,067 owed to WLI.
---------------------------------------------------------------------------

These calculations resulted in equity positions of $0 for the
Partnership, the general partners and the Plan. Accordingly, the Plan
will sell its Interest to the Van DeVelde's for $2,500.
9. In summary, it is represented that the proposed transaction will
satisfy the statutory criteria for an exemption under section 408(a) of
the Act because: (a) All terms and conditions of the sale will be at
least as favorable to the Plan as those obtainable in an arm's length
transaction with an unrelated party; (b) the sale will be a one-time
transaction for cash; (c) the Plan will not be required to pay any
commissions, costs or other expenses in connection with the sale; (d)
the Plan will receive a price for the Interest which is not less than
the greater of: (i) $2,500 or (ii) the fair market value of the
Interest as determined by a qualified, independent appraiser; and (e)
within 30 days of the publication, in the Federal Register, of the
notice granting this proposed exemption, WLI will file a Form 5330 with
the Service and pay all applicable excise taxes by reason of such prior
or continuing prohibited transactions.

Notice to Interested Persons

Notice of the proposed exemption will be given to all interested
persons by first-class mail within 30 days of the date of publication
of the notice of pendency in the Federal Register. Such notice will
include a copy of the notice of proposed exemption as published in the
Federal Register and shall inform interested persons of their right to
comment on and/or to request a hearing. Comments with respect to the
notice of proposed exemption are due within 60 days after the date of
publication of this

[[Page 53810]]
proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)

General Information

The attention of interested persons 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/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest of disqualified
person from certain other provisions of the Act and/or 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 among other things require a fiduciary to
discharge his 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
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be 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. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete, and that each application
accurately describes all material terms of the transaction which is the
subject of the exemption.

Signed at Washington, DC, this 12th day of October, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 95-25717 Filed 10-16-95; 8:45 am]
BILLING CODE 4510-29-P}}

Visit the Official Version

Document Information

Effective Date:: 12/19/1994
Published:: 10/17/1995
Department:: Pension and Welfare Benefits Administration
Entry Type:: Notice
Action:: Notice of proposed exemptions.
Document Number:: 95-25717
Dates:: If granted, this proposed exemption will be effective as of December 19, 1994.
Pages:: 53805-53810 (6 pages)
PDF File:: 95-25717.pdf