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Secretary of Labor Thomas E. Perez
Proposed Exemptions; The FINA, Inc. Capital Accumulation Plan (the Plan) [Notices] [01/05/2000]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; The FINA, Inc. Capital Accumulation Plan (the Plan) [01/05/2000]

[PDF Version]

Volume 65, Number 3, Page 526-532



[[Page 526]]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10763, et al.]

 
Proposed Exemptions; The FINA, Inc. Capital Accumulation 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 restrictions 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 requests 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.

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.

The FINA, Inc. Capital Accumulation Plan (the Plan) Located in 
Dallas, Texas

[Application No. D-10763]

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)(2), and 407(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, as of June 4, 1999, to the acquisition, holding, 
and exercise by the Plan of certain warrants that were issued by Total, 
S.A. (Total),<SUP>1</SUP> pursuant to a tender offer (the Exchange 
Offer) made on May 6, 1999 to all shareholders of PetroFina S.A. 
(PetroFina), including the Plan, provided that the following conditions 
were satisfied:
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    \1\ The applicant states that the warrants issued by Total do 
not constitute ``qualifying employer securities,'' as defined in 
section 407(d)(5) of the Act.
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    (a) The Plan's acquisition and holding of the warrants issued by 
Total (the Total Warrants) in connection with the Exchange Offer 
occurred as a result of an independent act of Total as a corporate 
entity;
    (b) All shareholders of PetroFina, including the Plan, were treated 
in a like manner with respect to all aspects of the Exchange Offer; and
    (c) An independent fiduciary made the determination whether, and to 
what extent, the Plan should participate in the Exchange Offer.

EFFECTIVE DATE: This exemption, if granted, will be effective as of 
June 4, 1999.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan sponsored by Fina, Inc. 
(Fina). Fina is a Delaware corporation with its principal headquarters 
in Dallas, Texas. Fina is a wholly owned, indirect subsidiary of 
PetroFina, a societe anonyme/naamloze vennootschap organized under the 
laws of the Kingdom of Belgium. Fina and its subsidiaries were 
organized in 1956 as American PetroFina, Incorporated and are part of 
an international group of companies that are affiliated with PetroFina. 
Fina, through its subsidiaries, is engaged in crude oil and natural gas 
exploration and production; petroleum products refining, supply and 
transportation and marketing; chemical manufacturing and marketing; and 
natural gas marketing. As of March 31, 1999, the Plan had total assets 
of approximately $246,215,000. As of March 31, 1999, the Plan had 2,534 
participants and beneficiaries.
    2. In connection with an earlier merger in which Fina became a 
subsidiary of PetroFina in August, 1998, PetroFina issued certain 
warrants (the PetroFina Warrants) to all shareholders of Fina, 
including the Plan.<SUP>2</SUP> One PetroFina Warrant entitled the 
holder to purchase nine-tenths (0.9) of one PetroFina American 
Depositary Share (a PetroFina ADS), each PetroFina ADS representing 
one-tenth (0.1) of one ordinary voting share of PetroFina (a

[[Page 527]]

PetroFina Share). The PetroFina Warrants are exercisable any time prior 
to August 5, 2003. PetroFina ADSs and PetroFina Warrants are listed for 
trading on the New York Stock Exchange, Inc. (the NYSE).
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    \2\ The applicant states that the PetroFina Warrants were 
``employer securities,'' as defined in section 407(d)(1) of the Act 
but were not ``qualifying employer securities,'' as defined in 
section 407(d)(5) of the Act. Section 407(a)(1)(A) of the Act 
prohibits a plan from acquiring or holding any employer security 
which is not a qualifying employer security. However, the Plan 
obtained authorization from the Department to acquire, hold, and 
exercise the PetroFina Warrants, pursuant to an authorization made 
under Prohibited Transaction Class Exemption 96-62 (61 FR 39988, 
July 31, 1996). Interested persons may review the information 
submitted to the Department by Fina in Submission E-00080, which is 
available for public inspection in the Public Documents Room of the 
Pension and Welfare Benefits Administration, U.S. Department of 
Labor, Room N-5638, 200 Constitution Avenue, N.W., Washington, D.C. 
20210.
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    3. The Plan allows participants to contribute up to 10% of their 
pre-tax income to their respective individual accounts in the Plan and 
6% of their after-tax earnings to another individual account, or a 
combination of pre-tax and after-tax contributions to each such 
account, not exceeding 10%. Each year, Fina contributes to a third 
account in the Plan, known as the Matching Contributions Account, an 
amount equal to 100% of the employee's contributions to the Plan, up to 
a total of 6% of the employee's gross annual income, for all employees 
who have completed at least one year of service.
    Plan assets may be invested in various mutual funds, i.e., a money 
market fund, U.S. debt index fund, balanced fund, equity index fund, 
equity growth fund, and a global equity fund. In addition, the Plan has 
two other investment funds (which are not mutual funds) that hold 
PetroFina ADSs and PetroFina Warrants, respectively. Prior to the date 
of the Exchange Offer, all assets in the Matching Contributions Account 
could be invested only in PetroFina ADSs or PetroFina Warrants. As of 
March 31, 1999, the Plan held 2,954,328 PetroFina ADSs with a fair 
market value of approximately $162,457,394, or approximately 66% of the 
Plan's total assets. As of the same date, the Plan held 720,461 
PetroFina Warrants with a fair market value of approximately 
$10,034,226, or approximately 4% of the Plan's total assets.
    4. Effective January 14, 1999, Total, a major international 
integrated oil and gas company based in France, acquired approximately 
41% of the outstanding PetroFina Shares. Consequently, as required by 
Belgian law, Total made an exchange offer in Belgium for all PetroFina 
Shares not held by persons in the United States. On May 6, 1999, 
concurrently with that offer, Total initiated the Exchange Offer in the 
United States to exchange: (1) Total American Depositary Shares (Total 
ADSs) for PetroFina ADSs; (2) Total Warrants for PetroFina Warrants; 
and (3) shares of common stock of Total (the Total Shares) for 
PetroFina Shares. Pursuant to the Exchange offer: (1) holders of 
PetroFina Shares could exchange two such shares for nine Total Shares; 
(2) holders of PetroFina ADSs could exchange 10 such ADSs for nine 
Total ADSs; and (3) holders of PetroFina Warrants could exchange 100 
such warrants for 81 Total Warrants. It is represented that the 
Exchange Offer was an independent act of Total as a corporate entity 
and that all shareholders of PetroFina, including the Plan, were 
treated in a like manner with respect to all aspects of the Exchange 
Offer.
    The Total Warrants will expire concurrently with the PetroFina 
Warrants and otherwise have terms and conditions similar to the 
PetroFina Warrants, after giving effect to the exchange ratio for the 
underlying shares. Each Total Warrant entitles the holder to acquire 
one Total ADS at a price of $46.94. The terms of the Exchange Offer 
were set forth in Total's Exchange Offer Prospectus, dated May 6, 1999, 
that was part of the Total registration statement on file with the 
Securities and Exchange Commission. Total ADSs and Total Warrants are 
listed for trading on the NYSE.
    5. The PetroFina Board of Directors instructed Paribas, a European-
based investment advisor, to evaluate, from a financial perspective, 
the fairness of the consideration to be received by the shareholders of 
PetroFina in the Exchange Offer. On April 7, 1999, Paribas delivered 
its opinion to the PetroFina Board of Directors to the effect that, as 
of such date, the terms and conditions of the Exchange Offer proposed 
by Total to PetroFina shareholders were fair from a financial 
perspective. A similar fairness opinion was provided by the Morgan 
Guaranty Trust Company of New York (Morgan) on the same date. The 
PetroFina Board of Directors concluded that the terms and conditions of 
the Exchange Offer proposed by Total were fair and recommended that 
PetroFina shareholders accept the offer and tender their PetroFina 
Shares, ADSs, and Warrants, pursuant to the Exchange Offer.
    6. The Plan was amended to grant to the the Plan Committee, the 
named fiduciary of the Plan, broad discretionary authority to establish 
procedures to facilitate and/or implement the decision to participate 
in the Exchange Offer. The Plan was also amended to provide that U.S. 
Trust Company, N.A. (U.S. Trust) would be appointed as an independent 
fiduciary for the Plan to determine whether, and to what extent, the 
Plan should participate in the Exchange Offer. It is represented that, 
with assets under management totalling approximately $56 billion, U.S. 
Trust is an experienced and qualified fiduciary with extensive trust 
and management capabilities, including discretionary asset management, 
asset allocation and diversification, investment advice, securities 
trading, and independent fiduciary assignments under the Act.
    7. U.S. Trust determined that the Plan should participate fully in 
the Exchange Offer and instructed Boston Safe Deposit and Trust Company 
(Boston Safe), the Plan trustee, accordingly. U.S. Trust represents 
that its decision was based upon the following considerations. First, 
the Exchange Offer clearly represented a significant premium to 
PetroFina's trading price at the same time of the offer, as well as 
historically, and the markets had maintained that premium to date based 
upon the proposed exchange ratio. Second, the Exchange Offer translated 
into valuation multiples that were above PetroFina's historical 
valuation levels and above the median levels for its peer group. Third, 
on a pro forma basis, Total Shares were trading in a reasonable range 
of valuation multiples relative to comparable companies, and, 
therefore, represented a fairly valued investment into which to 
exchange. Finally, U.S. Trust determined that the fairness opinion 
provided to PetroFina by its financial advisers, Paribas and Morgan, 
indicated that the Exchange Offer was fair and reasonable, and a review 
of the accompanying analysis by such advisers supported that 
conclusion.
    8. The applicant represents that the following is a summary of the 
Exchange Offer. On June 4, 1999, the expiration date of the Exchange 
Offer, the Plan, pursuant to the determination by U.S. Trust, tendered 
2,977,144 PetroFina ADSs, each with a fair market value of $54.75, the 
closing price on the NYSE as of that date. The Plan received nine Total 
ADSs in exchange for each ten PetroFina ADSs tendered. Also on June 4, 
1999, the Plan tendered 614,212 PetroFina Warrants, each with a fair 
market value of $13.88, the closing price on the NYSE as of that date. 
The Plan received 81 Total Warrants for each 100 PetroFina Warrants 
tendered. Each participant in the Plan received his or her allocable 
share of Total ADSs and Total Warrants in exchange for the PetroFina 
ADSs and PetroFina Warrants held by his or her individual account, as 
of June 4, 1999. Following the exchange, participants exercise control 
over the Total Warrants and Total ADSs acquired in the exchange, 
through their individual accounts in the Plan, in the same manner as 
they did over the comparable PetroFina securities.<SUP>3</SUP> The

[[Page 528]]

applicant represents that the Exchange Offer was successful, and Total 
subsequently changed its name to Total Fina, S.A.
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    \3\ In connection with the Plan's earlier acquisition of the 
PetroFina Warrants, pursuant to an authorization made by the 
Department under PTE 96-62 (see Footnote 2), Plan participants were 
provided by Fina with instructional material explaining the value of 
the warrants and how that value could be realized, i.e., either by 
selling or exercising the warrants prior to their expiration date. 
As noted in the second paragraph of Item 4, above, the Total 
Warrants will expire concurrently with the PetroFina Warrants and 
otherwise have terms and conditions similar to the PetroFina 
Warrants. The applicant represents that it will continue to provide 
Plan participants with pertinent information regarding the Total 
Warrants, including periodic reminders of the deadline to sell or 
exercise them.
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    9. In summary, the applicant represents that the subject 
transactions satisfied the criteria for an exemption under section 
408(a) of the Act because, among other things: (a) The Plan's 
acquisition and holding of the Total Warrants in connection with the 
Exchange Offer occurred as a result of an independent act of Total as a 
corporate entity; (b) all shareholders of PetroFina, including the 
Plan, were treated in a like manner with respect to all aspects of the 
Exchange Offer; (c) U.S. Trust, acting as an independent fiduciary for 
the Plan, made the determination whether, and to what extent, the Plan 
should participate in the Exchange Offer; and (d) Boston Safe, as the 
Plan trustee, ensured that each Plan participant received his or her 
allocable share of Total ADSs and Total Warrants in exchange for the 
PetroFina ADSs and PetroFina Warrants held by his or her individual 
account, as of June 4, 1999.

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

Bankers Trust Company (BTC), Located in New York, New York

[Application No. D-10837]

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 BTC (a) by Aslan Realty 
Partners, L.P. (the LP), and by Aslan GP, LLC (the General Partner) of 
security interests in the capital commitments of certain employee 
benefit plans (the Plans) investing in the LP, (b) by the LP of a 
borrower account funded by the Plans' capital contributions (Borrower 
Collateral Account), and (c) by the LP and the General Partner of the 
right to make capital calls (Capital Calls), and provide notice thereof 
(Capital Call Notices) under the agreement under which the LP is 
organized and operated (the Agreement), where BTC is the representative 
of certain lenders (the Lenders) that will fund a so-called ``credit 
facility'' providing loans to the LP and where the Lenders are parties 
in interest with respect to the Plans; and (2) the execution of an 
agreement and estoppel (the Estoppel) under which the Plans agree to 
honor Capital Calls made to the Plans by BTC, provided that (i) 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; (ii) the decisions on behalf of 
each Plan to invest in the LP, and to execute such grants and 
agreements in favor of BTC, are made by a fiduciary which is not 
included among, and is independent of and unaffiliated with, the 
Lenders and BTC; (iii) with respect to Plans that have invested or may 
invest in the LP in the future, such Plans have or will have assets of 
not less than $100 million and not more than 5% of the assets of any 
such Plan are or will be invested in the LP. For purposes of this 
condition (iii), in the case of multiple plans maintained by a single 
employer or single controlled group of employers, the assets of which 
are invested on a commingled basis, (e.g., through a master trust), 
this $100 million threshold will be applied to the aggregate assets of 
all such plans; and (iv) the general partner of the LP must be 
independent of BTC, the Lenders and the Plans.

Summary of Facts and Representations

    1. The LP is an Illinois limited partnership, the sole general 
partner of which is the General Partner, which is a Delaware limited 
liability company. The General Partner is a separate affiliate of 
Transwestern Investment Company, L.L.C. (TWIC), a Delaware limited 
liability company. The General Partner is an entity unrelated to BTC, 
the Lenders and the Plans. The LP will dissolve no later than 
September, 2007, and will be self-liquidating. The LP was formed by the 
General Partner (as sole General Partner), with the intent of seeking 
capital commitments from a limited number of prospective investors who 
would become limited partners (the Partners) of the LP. There are 19 
current and prospective Partners having, in the aggregate, irrevocable, 
unconditional capital commitments of at least $236,000,000.
    2. The LP has been organized to establish an integrated, self-
administered and self-managed real estate operating company (see 
paragraph 11, below). The LP will make investments in real estate 
including, but not limited to: (i) The acquisition or development of 
office, retail, industrial, multi-family, parking garage, corporate 
real estate assets and other types of real estate assets, (ii) the 
acquisition of an interest in real estate or the acquisition of 
interests in public or private real estate investment trusts and 
corporations, limited partnerships and limited liability companies 
whose primary assets are commercial real estate, and (iii) the 
acquisition of publicly-traded or privately-traded debt or equity 
securities of issuers whose primary assets are real estate. The LP 
believes that significant opportunities exist to achieve superior risk-
adjusted returns on its investments in excess of 20% per annum over a 
three- to five-year period. Proceeds from the sale or refinancing of 
properties generally will not be reinvested by the LP. Such proceeds 
generally will be distributed to the Partners on a quarterly basis or 
after a sale or financing, so that the LP will be self-liquidated.
    3. It is contemplated that the LP will incur short-term 
indebtedness for the acquisition of particular investments and for 
working capital purposes (with the expectation that such acquisition 
indebtedness will be repaid from the Partners' capital commitments and/
or from mortgage debt). This indebtedness will take the form of a 
revolving credit agreement (described in paragraph 5, below) secured 
by, among other things, a first, exclusive, and prior security interest 
and lien in and to (1) the Partners' capital commitments, (2) the 
Borrower Collateral Account, and (3) the Capital Calls, i.e., the 
rights to call capital under the Agreement. The Borrower Collateral 
Account is an account established by the General Partner with BTC to 
hold the Partners' capital contributions.
    4. The Agreement requires each Partner to execute a subscription 
agreement that obligates the Partner to make contributions of capital 
up to a specified maximum. The Agreement requires Partners to make 
capital contributions to fulfill this obligation upon receipt of notice 
from the General Partner. Under the Agreement, the General Partner may 
make Capital Calls up to the total amount of a Partner's capital 
commitment upon 15 business days' notice, subject to certain

[[Page 529]]

limitations. The Partners' capital commitments are structured as 
unconditional, binding commitments to contribute capital when Capital 
Calls are made by the General Partner. All such monies to be paid by 
the Partners pursuant to Capital Calls are to be deposited to the 
Borrower Collateral Account. In the event of a default by a Partner, 
the LP may exercise any of a number of specific remedies.
    The Partners constituting over 90% of the equity interests and 
their investments in the LP are:

------------------------------------------------------------------------
                  Name of partner                    Capital commitment
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Bell South Master Pension Trust...................           $72,956,877
Ameritech Pension Trust...........................            25,000,000
Burgundy, Inc.....................................            10,000,000
Allstate Insurance Company........................            25,000,000
The Bell South Corporation Representable Employees             9,119,610
 Health Care Trust--Retirees......................
The Bell South Corporation RFA VEBA Trust.........             9,119,610
Joshua Arnow and Elyse Arnow Bril.................               225,000
JWA Investment Company............................               700,000
New York Life Insurance Company...................            20,000,000
Pew Memorial Trust................................             9,990,000
J.H. Pew Freedom Trust............................             2,100,000
J.N. Pew, Jr. Trust...............................             1,050,000
Mabel Pew Myrin Trust.............................             1,350,000
Northwestern Memorial Hospital....................             3,000,000
Massachusetts Bay Transportation Authority                    15,000,000
 Retirement Fund Employees' Pension Plan Trust....
The Medical Trust.................................               600,000
Northwestern University...........................            15,000,000
Private Syndicate Pty Ltd. As Trustee of                      10,000,000
 Alternative Investment Private Syndicate.........
RHA Investment Company............................               700,000
------------------------------------------------------------------------

    5. The applicant states that the LP will incur indebtedness in 
connection with many of its investments. In addition to mortgage 
indebtedness, the LP will incur short-term indebtedness for the 
acquisition of particular investments. This indebtedness will take the 
form of a credit facility (the Credit Facility), described in 
representation 6, below, secured by, among other things, a pledge and 
assignment of each Partner's capital commitment. This type of facility 
will allow the LP to consummate investments quickly without having to 
finalize the debt/equity structure for an investment or having to 
arrange for interim or permanent financing prior to making an 
investment, and will have additional advantages to the Partners and the 
LP. Under the Agreement, the General Partner may encumber Partners' 
capital commitments, including the right to call for capital 
contributions, to one or more financial institutions as security for 
the Credit Facility. Each of the Partners has appointed the General 
Partner as its attorney-in-fact to execute all documents and 
instruments of transfer necessary to implement the provisions of the 
Agreement. In connection with this Credit Facility, each of the 
Partners is required to execute documents customarily required in 
secured financings, including an agreement to honor Capital Calls 
unconditionally.
    6. BTC will become agent for a group of Lenders providing a $175 
million revolving Credit Facility to the LP. BTC will also be a 
participating Lender. Some of the Lenders may be parties in interest 
with respect to some of the Plans that invest in the LP by virtue of 
such Lenders' (or their affiliates') provision of fiduciary or other 
services to such Plans with respect to assets other than the Plans' 
interests in the LP. BTC is requesting an exemption to permit the Plans 
to enter into security agreements with BTC, as the representative of 
the Lenders, whereby such Plans' capital commitments to the LP will be 
used as collateral for loans made under the Credit Facility to the LP, 
when such loans are funded by Lenders who are parties in interest to 
one or more of the Plans. However, BTC represents that neither it nor 
any Lender will act in any fiduciary capacity for the decision made by 
any of the Plans to invest in the LP (as discussed in Paragraph 13, 
below).
    The Credit Facility will be used to provide immediate funds for 
real estate acquisitions made by the LP, as well as for the payment of 
LP expenses. Repayments will be secured generally by the LP from the 
Partners' capital contributions, the Borrower Collateral Account and 
Capital Calls on the Partners' capital commitments. The Credit Facility 
is intended to be available until February 3, 2002. The LP can use its 
credit under the Credit Facility either by direct or indirect 
borrowings, by Lender guaranties, or by requesting that letters of 
credit be issued. All Lenders will participate on a pro rata basis with 
respect to all cash loans, guaranties or letters of credit up to the 
maximum of the Lenders' respective commitments. All such loans, 
guaranties and letters of credit will be issued to the LP or an entity 
in which the LP owns a direct or indirect interest (a Qualified 
Borrower), and not to any individual Partner. All payments of principal 
and interest made by the LP or a Qualified Borrower will be allocated 
pro rata among all Lenders.
    7. The Credit Facility will be a recourse obligation of the LP, the 
repayment of which is secured primarily by the grant of a security 
interest to BTC, as agent under the Credit Facility for the benefit of 
the Lenders, from the LP, in both: (a) The Partners' capital 
commitments and (b) the Borrower Collateral Account. In addition, the 
LP and the General Partner will grant BTC, as agent under the Credit 
Facility for the benefit of the Lenders, a security interest in the 
Capital Calls and Capital Call Notices. The Borrower Collateral Account 
will be assigned to BTC to secure repayment of the indebtedness 
incurred under the Credit Facility. BTC has the right to apply any or 
all funds in the Borrower Collateral Account toward payment of the 
indebtedness in any manner it may elect. The capital commitments are 
fully recourse to all the Partners and to the General Partner. In the 
event of default under the Credit Facility, the agent (i.e., BTC) has 
the right to make Capital Calls unilaterally on the Partners to pay 
their unfunded capital commitments, and will apply cash received from 
such Capital Calls to any outstanding debt.
    8. Under the Credit Facility, each Partner that is a Plan will 
execute an

[[Page 530]]

acknowledgment (the Estoppel) pursuant to which it acknowledges that 
the LP and the General Partner have pledged and assigned to BTC, for 
the benefit of each Lender which may be a party in interest (as defined 
in Act section 3(14)) of such Partner, all of their rights under the 
Agreement relating to capital commitments and Capital Call Notices. The 
Estoppel will include an acknowledgment and covenant by the Plan that, 
if an event of default exists, such Plan will unconditionally honor any 
Capital Call made by BTC in accordance with the Agreement up to the 
unfunded capital commitment of such Plan to the LP.
    9. The applicant represents that at the present time the following 
Plans are partners in the LP:
    (a) The Ameritech Pension Trust (the Ameritech Trust) holds the 
assets of three defined benefit plans (the Ameritech Plans) which own 
interests in the LP. The Ameritech Trust has made a capital commitment 
of $25 million to the LP. The applicant states that some of the Lenders 
may be parties in interest with respect to some of the Ameritech Plans 
in the Ameritech Trust by virtue of such Lenders' (or their 
affiliates') provisions of fiduciary services to such Ameritech Plans 
with respect to Ameritech Trust assets other than their limited 
partnership interests in the LP. The total number of participants in 
the three Ameritech Plans is approximately 118,000, and the approximate 
fair market value of the total assets of the Ameritech Plans held in 
the Ameritech Trust as of December 31, 1997 is $13.7 billion.
    The applicant represents that the fiduciary of the Ameritech Plans 
generally responsible for investment decisions in the real estate area 
for internally managed assets is the Ameritech Corporation Asset 
Management Committee, the Chief Investment Officer of Ameritech 
Corporation, and/or the Ameritech Corporation Investment Management 
Department's Real Estate Committee (comprised of the staff real estate 
professionals and another Investment Management Department Director), 
depending on the size and type of investment. The fiduciary responsible 
for reviewing and authorizing the Ameritech Pension Trust's investment 
in the LP under this proposed exemption was collectively the Chief 
Investment Officer of Ameritech Corporation, along with the members of 
the Ameritech Corporation Investment Management Department's Real 
Estate Committee.
    (b) The BellSouth Master Pension Trust (the BellSouth Pension 
Trust), holds the assets of two defined benefit plans (the BellSouth 
Pension Plans), which own interests in the LP. The BellSouth Pension 
Trust has made a capital commitment of approximately $73 million to the 
LP. The applicant states that some of the Lenders may be parties in 
interest with respect to some of the BellSouth Pension Plans in the 
BellSouth Pension Trust by virtue of such Lenders' (or their 
affiliates') provisions of fiduciary services to such BellSouth Pension 
Trust assets other than their membership interests in the LP. The total 
number of participants in the two BellSouth Pension Plans is 
approximately 137,703, and the approximate fair market value of the 
total assets of the BellSouth Pension Plans held in the BellSouth 
Pension Trust as of December 31, 1997 is $17.3 billion.
    The applicant represents that the fiduciary generally responsible 
for investment decisions in real estate matters on behalf of both 
BellSouth Pension Plans is the BellSouth Corporation Treasurer, who was 
the fiduciary responsible for reviewing and authorizing the investment 
in the LP.
    (c) The BellSouth Corporation Representable Employees Health Care 
Trust--Retirees (BellSouth Health Care Trust) holds the assets of two 
welfare benefit plans (the BellSouth Health Care Plans) which own 
interests in the LP. The BellSouth Health Care Trust has made a capital 
commitment of approximately $9 million to the LP. The applicant states 
that some of the Lenders may be parties in interest with respect to 
some of the BellSouth Health Care Plans in the BellSouth Health Care 
Trust by virtue of such Lenders' (or their affiliates') provisions of 
fiduciary services to such BellSouth Health Care Trust assets other 
than their membership interests in the LP. The total number of 
participants in the two BellSouth Health Care Plans is approximately 
30,000, and the approximate fair market value of the total assets of 
the BellSouth Health Care Plans held in the BellSouth Health Care Trust 
as of December 31, 1997 is $1 billion. The applicant represents that 
the fiduciary generally responsible for investment decisions in real 
estate matters on behalf of both BellSouth Health Care Plans is the 
BellSouth Corporation Treasurer, who was responsible for reviewing and 
authorizing the investment in the LP.
    (d) The BellSouth Corporation RFA VEBA Trust (BellSouth VEBA Trust) 
holds the assets of one welfare benefit plan, the BellSouth Group Life 
Plan which owns interests in the LP. The BellSouth VEBA Trust has made 
a capital commitment of approximately $9 million to the LP. The 
applicant states that some of the Lenders may be parties in interest 
with respect to the BellSouth Group Life Plan in the BellSouth VEBA 
Trust by virtue of such Lenders' (or their affiliates') provisions of 
fiduciary services to such BellSouth VEBA Trust assets other than its 
membership interests in the LP. The total number of participants in the 
BellSouth Group Life Plan is approximately 133,560, and the approximate 
fair market value of the total assets of the BellSouth Group Life Plan 
held in the BellSouth VEBA Trust as of December 31, 1997 is $937 
million. The applicant represents that the fiduciary generally 
responsible for investment decisions in real estate matters on behalf 
of the BellSouth Group Life Plan is the BellSouth Corporation 
Treasurer, who was responsible for reviewing and authorizing the 
investment in the LP.
    10. The applicant represents that the Plans listed in paragraph 9 
are currently the only employee benefit plans subject to the Act that 
are Partners of the LP. However, the applicant states that it is 
possible that one or more other Plans will become Partners of the LP in 
the future. Thus, the applicant requests relief for any such Plan under 
this proposed exemption, provided the Plan meets the standards and 
conditions set forth herein. In this regard, such Plan must be 
represented by a fiduciary independent of the General Partner, the 
Lenders and BTC. Furthermore, the General Partner, who also must be 
independent of the Lenders and BTC, must receive from the Plan one of 
the following:
    (1) A representation letter from the applicable fiduciary with 
respect to such Plan substantially identical to the representation 
letter submitted by the fiduciaries of the other Plans, in which case 
this proposed exemption, if granted, will apply to the investments made 
by such Plan if the conditions required herein are met; or
    (2) Evidence that such Plan is eligible for a class exemption 
<SUP>4</SUP> or has obtained an individual exemption from the 
Department covering the potential prohibited transactions which are the 
subject of this proposed exemption.
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    \4\ For example, PTE 84-14 (49 FR 9497, March 13, 1984) permits, 
under certain conditions, parties in interest to engage in various 
transactions with plans whose assets are managed by a ``qualified 
professional asset manager'' (QPAM) who is independent of the 
parties in interest (with certain limited exceptions) and meets 
specified financial standards.
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    11. BTC represents that the LP has obtained an opinion of counsel 
that the

[[Page 531]]

LP will constitute an ``operating company'' under the Department's plan 
asset regulations [see 29 CFR 2510.3-101(c)] if the LP is operated in 
accordance with the Agreement and the private placement memorandum 
distributed in connection with the private placement of the LP 
Partnership interests.<SUP>5</SUP>
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    \5\ The Department notes that the term ``operating company'' as 
used in the Department's plan asset regulation cited above includes 
an entity that is considered a ``real estate operating company'' as 
described therein (see 29 CFR 2510.3-101(e)). However, the 
Department expresses no opinion in this proposed exemption regarding 
whether the LP would be considered either an operating company or a 
real estate operating company under such regulations. In this 
regard, the Department notes that it is providing no relief for 
either internal transactions involving the operation of the LP or 
for transactions involving third parties other than the specific 
relief proposed herein. In addition, the Department encourages 
potential Plan investors and their independent fiduciaries to 
carefully examine all aspects of the LP's proposed real estate 
investment program in order to determine whether the requirements of 
the Department's regulations will be met.
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    12. BTC represents that the Estoppel constitutes a form of credit 
security which is customary among financing arrangements for real 
estate limited partnerships or limited liability companies, wherein the 
financing institutions do not obtain security interests in the real 
property assets of the partnership or limited liability companies. BTC 
also represents that the obligatory execution of the Estoppel by the 
Partners for the benefit of the Lenders was fully disclosed in the 
Private Placement Memorandum as a requisite condition of investment in 
the LP during the private placement of the Partnership interests. BTC 
represents that the only direct relationship with respect to the LP 
between any of the Partners and any of the Lenders is the execution of 
the Estoppel. All other aspects of the transaction, including the 
negotiation of all terms of the Credit Facility, are exclusively 
between the Lenders and the LP. BTC represents that the proposed 
execution of the Estoppel will not affect the ability of a Plan to 
withdraw from investment and participation in the LP.<SUP>6</SUP> The 
only Plan assets to be affected by the proposed transactions are any 
funds which must be contributed to the LP in accordance with 
requirements under the Agreement to make Capital Calls to honor a 
Partner's capital commitments.
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    \6\ In this regard, the Department cautions Plan fiduciaries to 
fully understand all aspects of the Agreement, including the terms 
of the Estoppel, prior to making any capital commitments to the LP. 
The Department notes that section 404(a) of the Act requires, among 
other things, that a fiduciary of a plan act prudently when making 
investment decisions for the plan.
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    13. BTC represents that neither it nor any Lender acts or has acted 
in any fiduciary capacity with respect to any of the Plans' investments 
in the LP and that BTC is independent of and unrelated to those 
fiduciaries (the Fiduciaries) responsible for authorizing and 
overseeing the Plans' investments in the LP. Each of the Fiduciaries 
represents independently that its authorization of Plan investments in 
the LP was free of any influence, authority or control by the Lenders, 
including BTC. Each of the Fiduciaries represents that the Plan's 
investments in and capital commitments to the LP were made with the 
knowledge that each Partner would be required subsequently to grant a 
security interest in Capital Calls and capital commitments to the 
Lenders and to honor requests for cash contributions, also known as 
``drawdowns'', made on behalf of the Lenders without recourse to any 
defenses against the General Partner. Each of the Fiduciaries 
individually represents that it is independent of and unrelated to BTC 
and the Lenders and that the investment by the Plan for which that 
Fiduciary is responsible continues to constitute a favorable investment 
for the Plan and that the execution of the Estoppel is in the best 
interests and protective of the participants and beneficiaries of such 
Plan. In the event another Plan proposes to become a Partner, the 
applicant represents that it will require similar representations to be 
made by such Plan's independent fiduciary. Any Plan proposing to become 
a Partner in the future and needing to avail itself of the exemption 
proposed herein will have assets of not less than $100 
million,<SUP>7</SUP> and not more than 5% of the assets of such Plan 
will be invested in the LP. As noted in paragraph 9 above, the Plans 
currently investing in the LP all have total assets which exceed $100 
million and have committed amounts to the LP which are less than 5% of 
their total assets.
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    \7\ In the case of multiple plans maintained by a single 
employer or single controlled group of employers, the assets of 
which are invested on a commingled basis (e.g., through a master 
trust), this $100 million threshold will be applied to the aggregate 
assets of all such plans.
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    14. In summary, the applicant represents that the proposed 
transactions satisfy the criteria of section 408(a) of the Act for the 
following reasons: (1) The Plans' investments in the LP were authorized 
and are overseen by the Fiduciaries, which are independent of the 
Lenders and BTC, and other Plan investments in the LP from other 
employee benefit plans subject to the Act will be authorized and 
monitored by independent Plan fiduciaries; (2) None of the Lenders 
(including BTC) has any influence, authority or control with respect to 
any of the Plans' investment in the LP or the Plans' execution of the 
Estoppel; (3) Each Fiduciary invested in the LP on behalf of a Plan 
with the knowledge that the Estoppel is required of all Partners 
investing in the LP, and all other Plan fiduciaries that invest their 
Plan's assets in the LP will be treated the same as other Partners are 
currently treated with regard to the Estoppel; (4) Any Plan which has 
invested or may invest in the LP in the future, which needs to avail 
itself of the exemption proposed herein, has or will have assets of not 
less than $100 million,<SUP>8</SUP> and not more than 5% of the assets 
of any such Plan are or will be invested in the LP; and (5) the General 
Partner of the LP is independent of BTC, the Lenders and the Plans.

    \8\ See footnote 4, ibid.
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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

[[Page 532]]

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 December, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 00-221 Filed 1-4-00; 8:45 am]
BILLING CODE 4510-29-P