[Federal Register Volume 62, Number 107 (Wednesday, June 4, 1997)]
[Notices]
[Pages 30616-30623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14559]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-10398, et al.]
Proposed Exemptions; Robert A. Benz & Co., P.A., Certified Public
Accountants Employees Profit Sharing Plan (the Plan)
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Notice of proposed exemptions.
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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
Unless otherwise stated in the Notice of Proposed Exemption, all
interested persons are invited to submit written comments, and with
respect to exemptions involving the fiduciary prohibitions of section
406(b) of the Act, requests for hearing 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
[[Page 30617]]
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, N.W., Washington, D.C.
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, N.W., Washington, D.C. 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.
Robert A. Benz & Co., P. A., Certified Public Accountants Employees
Profit Sharing Plan (The Plan) Located in Pensacola, Florida
[Application No. D-10398]
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, 12847, August 10, 1990). If the exemption
is granted, the restrictions of sections 406(a) and 406(b)(1) and
(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 both (1) the proposed cash sale
(the Sale) of certain real property (the Property) to the Plan by
Robert A. Benz & Co., P.A., Certified Public Accountants (the
Employer), a party in interest with respect to the Plan, and (2) the
proposed lease-back (the Lease) of the Property by the Plan to the
Employer; provided:
(A) The terms and conditions of the transactions are at least as
favorable to the Plan as those obtainable from unrelated parties;
(B) The Plan is represented at all times and for all purposes with
respect to the Sale and the Lease by a qualified, independent
fiduciary;
(C) The Sale is a one-time transaction for a lump sum cash payment;
(D) The purchase price is the fair market value of the Property as
determined on the date of the Sale by a qualified, independent
appraiser;
(E) The monthly rents paid to the Plan will be adjusted every year
after the first 12 months of the Lease by an amount to reflect the
greater of either a 3 percent per year increase or the most recent
percentage increase in the U. S. Department of Labor Consumer Price
Index;
(F) In addition, the rents initially paid under the Lease are no
less than the fair market rental value of the Property as determined by
a qualified, independent appraiser, and thereafter are adjusted every
third year to be no less than the fair market rental value as then
determined by the independent appraiser;
(G) The Lease is a triple-net lease under which the Employer as the
lessee is obligated for all expenses incurred by the Property,
including all taxes and assessments, maintenance, insurance, utilities,
and any other expense;
(H) The qualified, independent fiduciary of the Plan monitors and
enforces compliance with the terms and conditions of the Lease and the
exemption herein proposed;
(I) At all times the qualified, independent fiduciary for the Plan
determines that the Lease is in the best interests of the Plan and its
participants and beneficiaries, and at all times determines that there
are adequate protections of the rights of the participants and
beneficiaries of the Plan, and takes all the necessary steps to protect
those rights;
(J) In the event the Plan sells the Property and the proceeds
received from the sale plus the net rentals received for the Property
are less than the Plan's cost of acquiring, holding, and maintaining
the Property plus a 5 per cent per annum compounded rate of return on
the cost to the Plan in acquiring, holding, and maintaining the
Property, the Employer, or its successors, shall pay in cash the
difference to the Plan within 45 days of the sale;
(K) No commissions, expenses, or costs shall be incurred by the
Plan from the Sale or the Lease; and
(L) At all times during the Sale and Lease, the fair market value
of the Property represents less than 25 percent of the total assets of
the Plan.
Summary of Facts and Representations
1. The Plan is a defined contribution plan that is a profit sharing
plan as described in section 401(a) of the Code, and is exempt from
taxation pursuant to section 501 of the Code. The Plan has seven
participants and beneficiaries and total assets of $2,300,000, as of
December 31, 1996. The fiduciary of the Plan is Mr. Robert A. Benz, who
is a certified public accountant and also is the president and director
as well as 90.79 percent stockholder of the Employer. The Employer is
being purchased under a long-term contract from Mr. Benz by other
Certified Public Accountants who are presently employed by the
Employer. The Employer has been in existence over thirty years as a
public accounting firm, and now is a registered professional
association under the statutes of Florida.
The independent fiduciary for the Plan in connection with the
proposed transactions is Mr. J. Thomas Fife (the Independent
Fiduciary), a resident of Pensacola, Florida, and a Vice President-
Investments, for Paine Webber, Incorporated in its Pensacola, Florida
office. When accepting his appointment with a written agreement, the
Independent Fiduciary was given discretionary authority by the Plan
with respect to the acquisition and the leasing of the Property and the
management, control, and disposition of
[[Page 30618]]
the Property. The Independent Fiduciary represents that after a review
the terms of the Plan and its portfolio and the terms and conditions of
the proposed Sale and the Lease of the Property he is able to render a
favorable opinion with respect to the proposed transactions. In
addition, the Independent Fiduciary represents that his qualifications,
background, and experience qualify him to act as the independent
fiduciary for the Plan in connection with the proposed Sale and Lease.
The Independent Fiduciary also represents that he has no interest in
the Employer or the Plan, and no interest or relationship with any
employee, shareholder, or director of the Employer. The Independent
Fiduciary has also acknowledged that he has knowledge and experience
with the responsibilities, duties, and liabilities of an independent
fiduciary under the Act; and that he has a net-worth in excess of the
appraised fair market value of the Property.
2. The Property, which the Employer proposes to sell to the Plan
and lease-back, is located at 1823 North 9th Avenue, Pensacola,
Florida, and consists of a tract of land, zoned commercial, with
improvements, totaling approximately 14,404 square feet in area. The
improvements on the Property consists of a one-story concrete office
building of approximately 4,463 square feet and adjoining asphalt
parking facilities. It is encumbered by a real estate mortgage with
current balance of $214,951.60, which is to be paid off at the closing
of the Sale, so that the Plan is to acquire the title to the Property
free and clear of the mortgage. The Property is used solely by the
Employer in its business of providing accounting services to the
public.
Mr. Richard H. Sherrill of Sherrill Appraisal Company located in
Pensacola, Florida, an independent MAI appraiser (the Independent
Appraiser) determined, as of November 11, 1996, that the Property has
fair market value of $395,000. As of January 27, 1997, the Independent
Fiduciary determined the fair market rental value of the Property is
$34,500 for the first year of the Lease, based upon a ten year lease
providing for a triple net rental terms whereby the lessee pays all
expenses. In addition, there is a provision for annual rent increases.
3. The applicant represents that the Sale of the Property to the
Plan by the Employer is for cash in an amount equal to the fair market
value as determined by an independent appraiser, which amount is less
than 17.5 percent of the total assets of the Plan.
The applicant represents the Sale is contingent upon the
simultaneous execution of the Lease by the Plan and the Employer. The
Lease is a triple-net lease under which the Employer, as the lessee,
will pay all expenses incurred by the Property during the term of the
Lease including taxes, insurance, maintenance, repairs, utilities, and
any other expense. The term of Lease is for a duration of ten years. If
the lessee has performed all the covenants contained in the Lease, the
lessee has an option to extend the Lease for an additional two years
under the same terms and conditions as the original Lease. Beginning in
the first year of the Lease, the annual rental is $34,500, and will be
adjusted every year thereafter to be the greater of either an increase
of 3 percent in the rent or an increase equal to the most recent
percentage increase of the Consumer Price Index as determined by the
U.S. Department of Labor. Also, the applicant represents that on every
third year of the Lease, the rent will be adjusted so as to be no less
than the fair market rental value of the Property as then determined by
an independent appraiser selected by the Independent Fiduciary, and in
no event will the amount of the rent be lowered.
In addition, the applicant represents that it will indemnify and
hold the Plan harmless from any liability arising from the Plan
purchasing and holding the Property, including, but not limited to,
hazardous material found on the Property, violation of zoning, land use
regulations or restrictions, and violation of federal, state, or local
environmental regulations or laws.
The applicant also represents that if the Independent Fiduciary
decides to sell the Property and the proceeds from the sale plus net
rentals received for the Property are less than the Plan's cost of
acquiring, holding, and maintaining the Property plus a 5 per cent per
annum compounded rate of return, the Employer, or its successors, shall
pay the difference in cash to the Plan within 45 days of the date of
the sale.
The applicant also represents that in order to ensure that the best
interests of the Plan are served and to protect the rights of all the
Plan participants and beneficiaries, the Independent Fiduciary has the
ultimate authority to make distribution of the Property. At the time of
distribution of benefits to Mr. Benz, the Independent Fiduciary will
determine whether or not the interests of the Plan and its participants
and beneficiaries are protected and better served by distributing the
Property in kind to Mr. Benz as part of his vested benefits in the
Plan, or whether or not the Plan will retain or dispose of the Property
in some other manner.
4. In summary, the applicant represents that the proposed
transactions satisfies the criteria for an exemption under section
408(a) of the Act because (a) the proposed transactions have been
reviewed and approved by the Independent Fiduciary of the Plan; (b) the
fair market value and the fair market rental value of the Property have
been determined by an Independent Appraiser; (c) the Plan will pay no
more than the fair market value for the Property and will receive the
fair market rental value from the Lease; (d) in the event the Plan
sells the Property and the proceeds received from the sale plus the net
rentals received for the Property are less than the Plan's cost of
acquiring, holding, and maintaining the Property plus a 5 per cent per
annum compounded rate of return on the cost to the Plan of acquiring,
holding, and maintaining the Property, the Employer, or its successors,
shall pay in cash the difference to the Plan within 45 days of the
sale; (e) the Independent Fiduciary will monitor and enforce the terms
and conditions of the Sale and the Lease on behalf of the Plan; (f) the
Independent Fiduciary will have exclusive authority with respect to the
management, control, and disposition of the Property; and (g) the
Independent Fiduciary has determined that the proposed Sale and Lease
are in the best interests and protective of the rights of the Plan and
its participants and beneficiaries.
FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver of the Department,
telephone (202) 219-8881. (This not a toll-free number.)
Gart Brothers Sporting Goods Company 401(k) Plan (the Plan) Located in
Denver, Colorado
[Application No. D-10403]
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) and 406 (b)(1) and
(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 proposed cash sale (the Sale)
by the Plan of a 5 per cent interest (the Interest) in the Hampden
Enterprises Limited Partnership (the Partnership) to the Gart Bros.
Sporting Goods Company, the
[[Page 30619]]
sponsor of the Plan (the Employer) and a party in interest with respect
to the Plan; provided (1) the terms and conditions of the transaction
are at least as favorable to the Plan as those obtainable from
unrelated parties, (2) the Sale is a one-time transaction for cash, (3)
the Plan pays no commissions nor incurs any other expenses in
connection with the proposed transaction, (4) the Plan receives as
consideration from the Sale the greater of either (a) the total funds
expended by the Plan in acquiring and holding the Interest, less any
return of capital realized from its investment in the Interest, or (b)
the fair market value of the Interest as determined on the date of the
Sale by an independent appraiser, and (5) if the Employer ever receives
more from the Interest than it pays the Plan when acquiring the
Interest, the Employer will pay the Plan the excess.
Summary of Facts and Representations
1. The Plan, effective April 1, 1995, and a successor by amendment
to a profit sharing plan that had been established on November 1, 1970,
is a defined contribution plan which features (a) employer-matching
funding and salary deferral contributions by Plan participants, and (b)
self-directed investments by Plan participants of their respective Plan
accounts. The Plan is intended to be qualified pursuant to the
requirements of sections 401(a) and 401(k) of the Code. The total
assets of the Plan are $3,251,355, as of September 30, 1996, and the
total participants in the Plan are approximately 747, as of January 17,
1997. The fiduciary of the Plan is the Advisory Committee (the
Fiduciary) appointed by the Employer to administer the Plan and to
direct the trustee of the Plan with respect to the investments of Plan
assets by the participants. Currently, the Fiduciary consists of three
employees all of whom are minority shareholders and two are officers of
the Employer. The trustee of the Plan is Wells Fargo Bank (Colorado),
N.A. (The Trustee) whose principal offices are located in San Franciso,
California.
2. The Employer, a Colorado corporation, is a wholly owned
subsidiary of Gart Sports Company, a Delaware corporation, which is
privately held by 78 shareholders. The Employer was originally founded
by the Gart family in 1928 as a family-operated, retail sporting goods
store located in Denver, Colorado. From 1971 to the present, the
Employer, through several changes in ownership, has expanded its retail
stores in size and location throughout six states in the Rocky Mountain
Region to include more than 60 stores and more than 1,700 employees.
3. The applicant represents that on November 16, 1987, the Plan,
with an investment of $206,000 acquired the Interest in the
Partnership, which had been established on March 20, 1970, from an
unrelated person, The Denver Sympathy Fountain, a Colorado non-profit
corporation.\1\ As of March 17, 1997, this investment in the
Partnership was determined to have a fair market value of $123,830 by
Hale Companies, Inc., a real estate firm, located in Parker, Colorado.
Hale Companies, Inc. represents that it is not related to the Plan, the
Plan sponsor, or to the Fiduciary of the Plan.
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\1\ The applicant represents that the individuals who were the
members of the Advisory Committee and Plan Fiduciaries at the time
the Plan acquired the Interest are no longer Fiduciaries of the Plan
or employed by the Employer.
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The applicant represents, that because the value of real estate
plummeted in Denver, Colorado during the late 1980s and early 1990s,
the Partnership, on November 30, 1994, sold an asset, which consisted
of real property, and distributed $70,500 to the Plan. During March
1995 the Partnership sold another parcel of real property to Mainstreet
Quincy, LLC (Mainstreet LLC), a Colorado limited liability company, for
a total sum of $5,010,000. At the closing of the sale of the second
parcel of real property, Mainstreet LLC tendered as payment to the
Partnership the sum of $760,000 in cash (of which $33,000 was
distributed to the Plan on March 22, 1995) and two promissory notes.
The first note is in the amount of $1,175,000, and promises to pay one-
half of the earned annual 6 percent interest on every March 15th and
September 15th, plus annual payments of $293,000 every March 15th on
the outstanding principal until the obligation becomes due and payable
in full on March 15, 2000. The second note is in the amount of
$3,075,000, and earns 6 per cent interest with no interest or principal
payable until the note matures on March 15, 2000. The applicant
represents that the two promissory notes and a reserve account of
approximately $11,000 are the only assets currently possessed by the
Partnership.
4. On March 31, 1994, the Fiduciary communicated to the Partnership
its desire to sell the Interest to other limited partners in the
Partnership and received no response to its communication. During 1996
the Fiduciary again attempted with no success to sell the Interest to
the other limited partners of the Partnership; and also, to a secondary
market-maker of limited partnership interests. Also during 1996, an
attempt was made by the Plan without success to sell its interest in
the Partnership to Mainstreet LLC.
The applicant represents that on March 15, 1997, Mainstream LLC
defaulted on the interest payment due on its first promissory note. On
April 1, 1997, the applicant received confirmation from the U.S.
Bankruptcy Court in Denver, Colorado that on December 30, 1996,
Mainstream LLC, d/b/a Main Street Homes had filed for reorganization
under Chapter 11 of the Bankruptcy Act and was assigned Case No. 96-
26283CEM.
5. The applicant requests an administrative exemption from the
prohibited transaction provisions of the Act to enable the Plan to sell
the Interest it holds to the Employer, so that not only will the
participants of the Plan be able to self-direct all the assets in their
individual accounts, but they will be able to unburden the Plan of its
investment in the Partnership. Also, the applicant represents that by
selling the Interest to the Employer the Plan will avoid selling the
Interest at a discounted price on the secondary market, and will avoid
any commissions or other expenses in connection with the transaction.
The applicant represents that the Employer will pay to the Plan as
consideration for the Sale of the Interest to the Employer the greater
of either (a) the total funds expended by the Plan in acquiring and
holding the Interest, less any return of capital from its investment in
the Interest, or (b) the fair market value of the Interest as
determined on the date of the Sale by an independent appraiser. The
Trustee represents in a letter dated April 4, 1997, that it will ensure
that the Plan will receive the consideration from the Sale as required
by the proposed exemption of the Department.
6. In summary, the applicant represents that the proposed
transaction will satisfy the criteria of section 408(a) of the Act
because (a) the terms and conditions of the transaction are at least as
favorable to the Plan as those obtainable from unrelated parties; (b)
the Sale of the Interest involves a one-time transaction for cash; (c)
the Plan will not incur the payment of any commissions nor any other
expenses; (d) the transaction will enable the participants of the Plan
to direct the investments of all the assets in their individual
accounts in the Plan; (e) the Trustee will ensure that the
consideration paid by the Employer is (i) the greater of either the
funds expended by the Plan from acquiring
[[Page 30620]]
and holding the Interest, less any return of capital from the Interest,
or (ii) the fair market value of the Interest as determined by an
independent, qualified appraiser; and (f) if the Employer ever receives
more from the Interest than it pays the Plan when acquiring the
Interest, the Employer will pay the Plan the excess.
FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
First Savings Bank, F.S.B. Profit Sharing and Employee Stock Ownership
Plan (the Plan) Located in Clovis, New Mexico
[Application No. D-10409]
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 C.F.R. Part
2570, Subpart B (55 F.R. 32836, 32847, August 10, 1990). If the
exemption is granted the restrictions of sections 406(a), 406 (b)(1)
and (b)(2), and 407 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, effective
December 26, 1996 to (1) the acquisition by the Plan of certain stock
rights (the Rights) pursuant to a stock rights offering (the Offering)
by Access Anytime Bancorp, Inc. (the Parent), which is the parent
corporation of First Savings Bank, F.S.B. (the Employer), the sponsor
of the Plan; (2) the holding of the Rights by the Plan during the
subscription period of the Offering; and (3) the exercise of certain of
the Rights by the Plan; provided that the following conditions are
satisfied:
(A) The Plan's acquisition and holding of the Rights occurred in
connection with the Offering made available to all shareholders of
common stock of the Parent;
(B) All holders of the common stock of the Employer were treated in
the same manner with respect to the Offering, including the Plan;
(C) All decisions regarding the holding and potential exercise of
the Rights by the Plan were made in accordance with Plan provisions for
individually-directed investment of participant accounts by the
individual Plan participant whose account in the Plan received Rights
in the Offering; and
(D) With respect to any participants' accounts in the Plan for
which no valid instructions were timely filed regarding the Rights
during the Offering, such Rights expired unexercised in the same manner
as unexercised Rights issued to all other holders of the common stock
of the Parent, since the Rights were not transferable and could not be
sold.
EFFECTIVE DATE: This exemption, if granted, will be effective as of
December 26, 1996.
Summary of Facts and Representations
1. The Employer is a federal savings bank that conducts full
service banking operations from its main office in Clovis, New Mexico,
two branch locations in Clovis and Portales, New Mexico and a loan
production office in Rio Rancho, New Mexico. Access Anytime Bancorp,
Inc. (the Parent) is a Delaware public corporation \2\ which was
organized to become a holding company for the Employer. Pursuant to a
merger agreement (the Merger) between the Employer and the Parent, and
upon approval of the holders of the common stock of the Employer (the
Employer Stock) on October 18, 1996, all outstanding shares of Employer
Stock were converted into and exchanged for an equal number of shares
of common stock of the Parent (Parent Stock). The Employer continues
its banking operations as a wholly-owned subsidiary of the Parent.
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\2\ The common stock of Access Anytime Bancorp, Inc. is publicly
traded on the National Association of Securities Dealers Automated
Quotation Small-Cap Market System under the symbol, ``AABC''.
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2. The Employer maintains the Plan as a defined contribution plan
combining a profit sharing component (the PSP) with an employee stock
ownership component (the ESOP) for the benefit of employees of the
Employer and each of the employers which are members of a controlled
group with the Employer. As of October 31, 1996, the Plan had
approximately 54 participants and total assets of $319,659. The trustee
of the Plan is Roddy Pearce (the Trustee), who is an officer of the
Employer. The Plan provides for individual participant accounts (the
Accounts) in both the ESOP and the PSP, and participant-directed
investment of the PSP Accounts. The Trustee acts as custodian of Plan
assets, holding legal title to the assets and executing investment
directions in accordance with the participants' directions. A committee
appointed by the Employer's board of directors (the Committee) reviews
all investment direction forms filed by Plan participants to check for
possible errors, such as the failure of a participant to enter a
signature or to specify clear instructions. The Plan assets in the ESOP
are invested primarily in Parent Stock under the direction of the
Trustee, and the assets in the PSP are invested pursuant to participant
directions among nine different investment options. As of October 31,
1996, the ESOP component of 35 Accounts in the Plan held a total of
9,798 shares of Parent Stock comprising approximately 18 percent of
total Plan assets.
3. Following the Merger and the conversion of Employer Stock to
Parent Stock, the Parent commenced on December 26, 1996 (the Opening
Date) an offering (the Offering) of new shares of Parent Stock to all
holders of record (the Shareholders) of Parent Stock as of December 20,
1996 (the Record Date) pursuant to nontransferable subscription rights
(the Rights) \3\ issued to all of the Shareholders, including the Plan.
One Right was issued for each share of Parent Stock held by the
Shareholders, and each Right conferred upon its holder an entitlement
to purchase one new share of Parent Stock at a stated subscription
price of $5.25 per share (the Subscription Price) during the Offering,
prior to close of business on the date of the Offering's expiration
(the Expiration Date). The original Expiration Date was January 31,
1997, but the directors of the Parent extended the Offering to April 8,
1997. Under the terms of the Offering, each Right was non-transferable
and was required to expire if not exercised prior to the close of the
Expiration Date. As of the Opening Date, 732,198 shares of Parent stock
were issued and outstanding, held by 450 Shareholders, including the
Plan Accounts' investments in 9,798 shares, which constituted about
1.33 percent of all issued and outstanding Parent Stock. The Employer
and the Parent are requesting an exemption for the Plan's acquisition
and holding of 9,798 Rights pursuant to the Offering and, to the extent
the Rights were exercised, for the exercise of the Rights, under the
terms and conditions described herein.
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\3\ The Department notes that the Rights do not constitute
``qualifying employer securities'' within the meaning of section
407(d)(5) of the Act.
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4. In anticipation of the Offering, the Plan and its related trust
agreement were amended with respect to all Plan participants with an
Account invested in the Parent Stock (Invested Participants). Prior to
this amendment and restatement of the Plan, participants had no
authority to direct any investments of the ESOP portion of their
Accounts. With the amendment, the Plan document enabled Invested
Participants to determine the disposition of all Rights allocated to
their Accounts. Pursuant to these
[[Page 30621]]
amended Plan provisions, each Invested Participant was permitted to
direct the Trustee to exercise any or all of the Rights attributable to
his or her Account. The Employer represents that the amendment and
restatement of the Plan to provide pass-through elections to Plan
participants was intended to place the Invested Participants in a like
position with other Shareholders for purposes of the Offering. Since
all shares of Parent Stock held by the Plan were allocated to
participant Accounts, all decisions with respect to the Rights acquired
by the Plan were made by individual Invested Participants. In order to
exercise the Rights, the Invested Participants were required to file
valid instructions with the Trustee no later than the close of the
Expiration Date and to liquidate a sufficient portion of the non-Parent
Stock assets in their Accounts to cover the Subscription Price. Those
Rights with respect to which the Invested Participant failed to file
with the Trustee valid exercise instructions before close of business
on the Expiration Date expired in the same manner as the Rights held by
non-Plan Shareholders. The Employer represents that 5,000 Rights were
exercised by Invested Participants, that the remaining 4,798 Rights
expired on the Expiration Date, and that no expenses were incurred by
the Invested Participants or the Plan in connection with the Offering.
5. The Employer represents that upon commencement of the Offering,
all Invested Participants were notified of the Offering and the
procedure for filing instructions with the Trustee with respect to the
Rights. The Employer states that all instructions timely filed by the
Invested Participants were properly executed. The Employer represents
that the Plan was necessarily involved in the Offering because the
Parent accorded equal treatment to all Shareholders with respect to
issuance of the Rights, and that the Plan was entitled to all rights
and benefits available to other Shareholders. The Employer maintains
that all actions by the Trustee with respect to the Offering were taken
pursuant to express instructions of Invested Participants except when
an Invested Participant failed to file timely, valid instructions, in
which case the Rights were allowed to expire unexercised, since the
Rights were non-transferable and could not be sold. The Employer
represents that the Plan procedures requiring Invested Participants to
file written instructions with the Trustee in order to exercise the
Rights, and the expiration of the Rights upon the failure to do so,
were fully disclosed in the advance notice to Invested Participants.
6. In summary, the applicant represents that the transactions
satisfied the criteria of section 408(a) of the Act for the following
reasons: (A) The Plan's acquisition of the Rights resulted from an
independent act of the Parent; (B) With respect to all aspect of the
Offering, all Shareholders were treated in the same manner, including
the Plan; (C) All decisions with respect to the Plan's acquisition,
holding and control of the Rights were made by the individual Invested
Participants whose Accounts held Parent Stock, except for those
Invested Participants who failed to file timely and valid instructions,
in which case the Rights expired unexercised; and (D) The acquisition
and holding of Rights affected 35 of the Plan's 54 participants whose
accounts held only about 1.33 percent of the Parent Stock issued and
outstanding as of the Record Date of the Offering.
FOR FURTHER INFORMATION CONTACT: Ronald Willett of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
BP America Inc. Retirement Trust (the BP Trust), Located in Cleveland,
Ohio; IBM Retirement Plan Trust (the IBM Trust), Located in Armonk, New
York; United States Steel Corporation Plan (the US Steel Plan), Located
in Pittsburgh, Pennsylvania; and Retirement Plan of Marathon Oil
Company (the Marathon Plan), Located in Findlay, Ohio; (collectively,
the Plans)
[Application Nos. D-10441 through D-10444]
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 section 406(a) 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 (D) of the Code, shall not
apply to (1) the proposed granting to The Industrial Bank of Japan,
Limited, New York Branch (IBJ), as the representative of lenders (the
Lenders) participating in a credit facility (the Facility), of security
interests in limited partnership interests in The Westbrook Real Estate
Fund II, L.P. (the Partnership) owned by the Plans with respect to
which some of the Lenders are parties in interest; and (2) the proposed
agreements by the Plans to honor capital calls made by IBJ in lieu of
the Partnership's general partner; provided that (a) the proposed
grants and agreements are on terms no less favorable to the Plans than
those which the Plans could obtain in arm's-length transactions with
unrelated parties; (b) the decisions on behalf of each Plan to invest
in the Partnership and to execute such grants and agreements in favor
of IBJ are made by a fiduciary which is not included among, and is
independent of, the Lenders and IBJ; and (c) with respect to plans that
may invest in the Partnership in the future, such plans will have
assets of not less than $100 million and not more than 5% of the assets
of such plans will be invested in the Partnership.
Summary of Facts and Representations
1. The Partnership is a Delaware limited partnership the general
partner of which is Westbrook Real Estate Partners Management II,
L.L.C. (the General Partner), a Delaware limited liability company. The
Partnership has an eight-year term from the initial closing date,
expiring on February 24, 2005, and will be self-liquidating. The
Partnership has been organized to make investments, including leveraged
equity investments, in undervalued or inappropriately capitalized real
estate assets and portfolios, and corporate real estate. Proceeds from
the sale or refinancing of properties generally will not be reinvested,
but will be distributed to the limited partners, so that the
Partnership will be self-liquidating.
2. After execution of the Partnership Agreement (the Agreement),
the General Partner sought capital commitments through private
placement and has obtained, as a result, irrevocable, unconditional
capital commitments in excess of at least $410,000,000 from
approximately 17 current and prospective purchasers of limited
partnership units (the Limited Partners). The Agreement requires
Limited Partners to make capital contributions upon receipt of notice
from the General Partner. Under the Agreement, the General Partner may
make a call for cash contributions, also known as a ``drawdown'', up to
the total amount of the Limited Partner's capital commitment upon 15
business days' notice, with some limitations. The Partners' capital
commitments are structured as irrevocable, unconditional and binding
commitments to contribute equity when capital calls are made by the
General Partner. The obligation of each Limited Partner to contribute
the full amount of its capital commitment is secured by a security
interest granted to
[[Page 30622]]
the Partnership in the Limited Partner's partnership interest.
3. In the ordinary course of its business operations, it is
contemplated that the Partnership will incur indebtedness in connection
with many of its investments. This on-going need for credit will be
provided by the Facility, a two-year, eleven month arrangement for
revolving credit with restricted availability levels, which will enable
the Partnership to consummate investments quickly without the delay of
separate arrangements for interim or permanent financing for each
investment. The Facility is funded by the Lenders, represented by IBJ
and NationsBank, N.A. (NationsBank) which will also be participating
lenders. IBJ and NationsBank will serve as administrative agents for
the Facility. The Facility will be a non-recourse obligation of the
Partnership which matures in the year 2000 and which is secured by a
security interest in the Limited Partners' capital commitments, the
General Partner's right to make drawdowns and the Partnership's lien
and security interest in each Limited Partner's partnership interest.
As additional security, the Facility will require each Limited Partner
to execute an agreement (the Security Agreement) granting to IBJ, for
the benefit of each Lender, a security interest and lien in the Limited
Partner's partnership interest, and covenanting with IBJ, for the
benefit of the Lenders, that such Limited Partner will unconditionally
honor any drawdown made by IBJ in accordance with the Agreement in lieu
of the General Partner to the full extent of the Limited Partner's
unfunded capital commitment.
4. The trusts which hold assets of the Plans (the Trusts) own
limited partnership interests as Limited Partners in the Partnership.
Some of the Lenders may be parties in interest with respect to some of
the Plans in the Trusts by virtue of such Lenders' (or their
affiliates') provisions of fiduciary services to such Plans with
respect to Trust assets other than the Partnership interests. IBJ is
requesting an exemption to permit the Trusts to enter into the Security
Agreements under the terms and conditions described herein. The Plans
and the other Limited Partners with the largest interests in the
Partnership and the extent of their respective capital commitments to
the Partnership are described as follows:
(a) The BP Trust holds the assets of the following Plans: BP
America Master Hourly Plan for Represented Employees, a defined benefit
plan with 16,165 participants as of December 31, 1995, and BP America
Retirement Accumulation Plan, a defined benefit plan with 25,636
participants as of that date. The BP Trust also holds assets from some
smaller Plans (together with two above-described Plans, the BP Plans).
The approximate fair market value of the total assets of the BP Plans
held in the BP Trust is $1.6 billion. The fiduciary of the BP Plans
generally responsible for investment decisions is S.W. Percy, Chief
Executive Officer, BP America, Inc. Mr. Percy is also the fiduciary
responsible for reviewing and authorizing the investment in the
Partnership to which the exemption proposed herein relates. The BP
Trust has undertaken a total capital commitment of $10,000,000 in the
Partnership.
(b) The IBM Trust holds the assets of the IBM Retirement Plan (the
IBM Plan), a defined benefit pension plan with 289,934 participants as
of December 31, 1995, and assets with a total value of approximately 31
billion dollars as of that date. The fiduciary of the IBM Plan
generally responsible for investment decisions is the IBM Investment
Committee, which is the fiduciary responsible for reviewing and
authorizing the IBM Plan's investment in the Partnership. The IBM Trust
has undertaken a total capital commitment of $75,000,000 in the
Partnership.
(c) The USS Special Investments Group Trust holds assets of the US
Steel Plan, a defined benefit pension plan with 139,082 participants as
of December 31, 1995, and with assets of approximately 8.5 billion
dollars as of that date. The fiduciary responsible for reviewing and
authorizing the investment in the Partnership by the US Steel Plan is
United States Steel and Carnegie Pension Fund, Trustee, which is the
fiduciary of the US Steel Plan generally responsible for investment
decisions. This Trust has undertaken a total capital commitment of
$20,000,000 in the Partnership.
(d) The MRO Special Investments Group Trust holds assets of the
Marathon Plan and the Petroleum Marketing Retirement Plan (the PMR
Plan). The Marathon Plan is a defined benefit plan with 10,519
participants and approximately $881 million in total assets as of
December 31, 1995. The PMR Plan is a defined benefit plan with 6,608
participants and approximately $15.9 million in total assets as of
December 31, 1995. The fiduciary of the Marathon Plan and the PMR Plan
generally responsible for investment decisions is United States Steel
and Carnegie Pension Fund, Trustee, which is also the fiduciary
responsible for reviewing and authorizing the investment in the
Partnership to which the exemption proposed herein relates. This Trust
has undertaken a total capital commitment of $5,000,000 in the
Partnership.
(e) The applicant represents that it is possible that one or more
other Plans may become Limited Partners at some time in the future, and
requests relief for any such Plan under the exemption proposed herein,
provided the Plan meets the standards and conditions set forth herein.
The applicant further represents that any such Plan will have assets of
at least $100 million, and that no more than 5% of the assets of such
Plan will be invested in the Partnership.
(f) Limited Partners which are not ERISA-covered plans include:
(i) Arkansas Teacher Retirement System, which has undertaken a
total capital commitment of $50,000,000.
(ii) Allstate Insurance Company, which has undertaken a total
capital commitment of $20,000,000.
(iii) Atlantic Equity Corporation, which has undertaken a total
capital commitment of $20,000,000.
(iv) The Trustees of Columbia University, which has undertaken a
total capital commitment of $20,000,000.
(v) The Trustees of Dartmouth College, which has undertaken a total
capital commitment of $10,000,000.
(vi) New York State Common Retirement Fund, which has undertaken a
total capital commitment of $25,000,000.
(vii) Commonwealth of Pennsylvania State Employees' Retirement
System, which has undertaken a total capital commitment of $56,000,000.
(viii) J.H. Pew Freedom Trust, which has undertaken a total capital
commitment of $4,200,000.
(ix) J.N. Pew, Jr. Trust, which has undertaken a capital commitment
of $2,100,000.
(x) Mabel Pew Myrin Trust, which has undertaken a total capital
commitment of $2,700,000.
(xi) Pew Memorial Trust, which has undertaken a total capital
commitment of $21,000,000.
(xii) State of Wisconsin Investment Board, which has undertaken a
total capital commitment of $75,000,000.
(xiii) The General Partner, which has undertaken a total capital
commitment of $4,151,515.
5. IBJ represents that the Partnership will obtain an opinion of
counsel that the Partnership will constitute an ``operating company''
under the Department's plan asset regulations [29 CFR 2510.3-101(c)] if
the Partnership is operated in accordance with the Agreement and the
offering memorandum (the Offering) distributed
[[Page 30623]]
in connection with the private placement of the limited partnership
interests.4
---------------------------------------------------------------------------
\4\ The Department expresses no opinion herein as to whether the
Partnership will constitute an operating company under the
regulations at 29 CFR 2510.3-101.
---------------------------------------------------------------------------
6. IBJ represents that the Security Agreement constitutes a form of
credit security which is customary among financing arrangements for
real estate limited partnerships, wherein the financing institutions do
not obtain security interests in the real property assets of the
partnership. IBJ also represents that the obligatory execution of the
Security Agreement by the Limited Partners for the benefit of the
Lenders was fully disclosed in the Offering as a requisite condition of
investment in the Partnership during the private placement of the
limited partnership interests. IBJ represents that with respect to the
Partnership and its activities, the only direct relationship between
any of the Limited Partners and any of the Lenders is the execution of
the Security Agreements. All other aspects of the transaction,
including the negotiation of all terms of the Credit Facility, are
exclusively between the Lenders and the Partnership. IBJ represents
that the proposed executions of the Security Agreements will not affect
the abilities of the Trusts to withdraw from investment and
participation in the Partnership. The only Plan assets to be affected
by the proposed transaction are each Plan's limited partnership
interests in the Partnership and the related Plan obligations as
Limited Partners to respond to drawdowns up to the total amount of each
Plan's capital commitment to the Partnership.
7. IBJ represents that neither it nor any Lender acts or has acted
in any fiduciary capacity with respect to any Trust's investment in the
Partnership and that IBJ is independent of and unrelated to those
fiduciaries (the Trust Fiduciaries) responsible for authorizing and
overseeing the Trusts' investments in the Partnership. Each Trust
Fiduciary represents independently that its authorization of Trust
investment in the Partnership was free of any influence, authority or
control by the Lenders. The Trust Fiduciaries represent that the
Trust's investments in and capital commitments to the Partnership were
made with the knowledge that each Limited Partner would be required
subsequently to grant a security interest in the Partnership to the
Lenders and to honor drawdowns made on behalf of the Lenders without
recourse to any defenses against the General Partner. Each Trust
Fiduciary individually represents that it is independent of and
unrelated to IBJ and the Lenders and that the investment by the Trust
for which that Trust Fiduciary is responsible continues to constitute a
favorable investment for the Plans participating in that Trust and that
the execution of the Security Agreement is in the best interests and
protective of the participants and beneficiaries of such Plans.
8. In summary, the applicants represent that the proposed
transactions satisfy the criteria of section 408(a) of the Act for the
following reasons: (1) The Plans' investments in the Partnership were
authorized and are overseen by the Trust Fiduciaries, which are
independent of the Lenders; (2) None of the Lenders have any influence,
authority or control with respect to the Plans' investments in the
Partnership or the Plans' executions of the Security Agreements; and
(3) The Trust Fiduciaries invested in the Partnership on behalf of the
Plans with the knowledge that the Security Agreements are required of
all Limited Partners investing in the Partnership.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz 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 accurately describe all
material terms of the transaction which is the subject of the
exemption. In the case of continuing exemption transactions, if any of
the material facts or representations described in the application
change after the exemption is granted, the exemption will cease to
apply as of the date of such change. In the event of any such change,
application for a new exemption may be made to the Department.
Signed at Washington, DC, this 30th day of May, 1997.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 97-14559 Filed 6-3-97; 8:45 am]
BILLING CODE 4510-29-P
