Proposed Exemptions; Wyndham International, Inc. Employee Savings
& Retirement Plan [Notices] [03/18/2002]
Proposed Exemptions; Wyndham International, Inc. Employee Savings
& Retirement Plan [03/18/2002]
Volume 67, Number 52, Page 12062-12065
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-10912, et al.]
Proposed Exemptions; Wyndham International, Inc. Employee Savings
& Retirement 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
All interested persons are invited to submit written comments or
requests for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of thisFederal 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 that
hearing.
ADDRESSES: All written comments and requests for a hearing (at least
three copies) should be sent to the Pension and Welfare Benefits
Administration (PWBA), Office of Exemption Determinations, Room N-5649,
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC
20210.
[[Page 12063]]
Attention: Application No. ____, stated in each Notice of Proposed
Exemption. Interested persons are also invited to submit comments and/
or hearing requests to PWBA via e-mail or FAX. Any such comments or
requests should be sent either by e-mail to: ``moffittb@pwba.dol.gov'',
or by FAX to (202) 219-0204 by the end of the scheduled comment period.
The applications for exemption and the comments received will be
available for public inspection in the Public Documents Room of the
Pension and Welfare Benefits Administration, U.S. Department of Labor,
Room N-1513, 200 Constitution Avenue, NW., Washington, DC 20210.
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code and in accordance with procedures set forth in
29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978, 5 U.S.C. App. 1 (1996), 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.
Wyndham International, Inc.; Employee Savings & Retirement Plan
(the Plan) Located in Dallas, Texas
[Application No. D-10912]
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 to the past acquisition, holding, exercise by the
Plan of certain stock purchase rights (the Rights),\1\ which were
issued by Wyndham International, Inc. (Wyndham) to all shareholders of
record, as of September 30, 1999, of certain Wyndham common stock (the
Common Stock) pursuant to a rights offering (the Rights Offering),
provided that the following conditions were satisfied.
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\1\ The applicant states that the Rights do not constitute
``qualifying employer securities'' within the meaning of section
407(d)(5) of the Act.
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(a) The Plan's acquisition and holding of the Rights in connection
with the Rights Offering occurred as a result of an independent act of
Wyndham as a corporate entity;
(b) All holders of the Common Stock, including the Plan, were
treated in a like manner with respect to all aspects of the Rights
Offering; and
(c) All decisions regarding the disposition or exercise of the
Rights were made by the individual Plan participants whose accounts in
the Plan received the Rights, in accordance with Plan provisions for
the individually directed investment of such accounts.
EFFECTIVE DATE: This exemption, if granted, will be effective for the
period from November 9, 1999 to December 8, 1999.
Summary of Facts and Representations
1. The Plan is a defined contribution, profit sharing plan with a
Code section 401(k) feature. Wyndham, the Plan sponsor, is in the
business of buying, selling, leasing, and managing hotels. Wyndham is a
Delaware corporation headquartered in Dallas, Texas. The Plan provides
for individually directed accounts. As of December 31, 1999, the fair
market value of the total assets of the Plan was approximately
$71,963,560. As of May 26, 2000, the Plan had approximately 3,344
participants. The trustee of the Plan is CG Trust Company (the
Trustee), located in Chicago, Illinois.
2. Among the assets of the Plan is Wyndham's Class A common Stock
(i.e., the Common Stock), which is publicly traded on the New York
Stock Exchange (NYSE). The applicant represents that, as of September
30, 1999 (the Record Date), there were issued and outstanding
168,132,832 shares of the Common Stock. As of that date, the Plan held
487,364 shares of the Common Stock, less than one-half of one percent
of all outstanding shares. These shares were held in individual
accounts and had been purchased pursuant to participant direction of
investment under the terms of the Plan. As of September 29, 1999, the
closing price of the Common Stock on the NYSE was $2.938 per share.
3. As background to the Rights Offering, Wyndham agreed to settle a
class action lawsuit filed against it relating to a $1 billion equity
investment in Wyndham's Series B Convertible Preferred Stock. On
September 17, 1999,. Wyndham entered into a stipulation of settlement
Agreement with the other parties to this litigation. On November 1,
1999, the Delaware Chancery Court issued an Order approving the
stipulation of Settlement Agreement.
In accordance with the above-described settlement, all holders of
the Common Stock, including the Plan, as well as the holders of certain
units in partnerships related to Wyndham, were issued, on November 9,
1999, Rights to purchase shares of Wyndham's Series A Convertible
Preferred Stock (the Preferred Stock) for a price of $100 per share.
The applicant represents that it filed Form S-3 with the Securities and
Exchange Commission, as well as the Prospectus, dated November 8, 1999,
for the Rights Offering.
The applicant further represents that the Plan had no control over
the terms of the settlement, including the decision to carry out the
Rights Offering, and that the Plan was not involved in any capacity in
the settlement negotiations. Thus, the Rights Offering was an
independent act of Wyndham as a corporate entity, and all holders of
the Common Stock, including the Plan, were treated in a like manner
with respect to all aspects of the Rights Offering.
4. Pursuant to the Rights Offering, each shareholder of the Common
Stock was issued one Right for each share of the Common Stock held as
of the Record Date. Each shareholder was entitled to purchase one share
of the Preferred Stock for every 57 Rights issued to such shareholder.
As previously noted, the Plan held 487,364 shares of the Common Stock
as of the Record Date. Consequently, the Plan was issued a total of
487,364 Rights. All Rights were to expire at 5:00 p.m, Eastern Standard
Time, on December 8, 1999 (the Expiration Date), 30 days after their
issuance, unless they were properly exercised, or sold, before that
date.
[[Page 12064]]
5. The applicant represents that, in anticipation of the Rights
Offering, the Plan was amended, as appropriate, to provide for the
handling of the Rights. The Plan was also amended to establish a new
Wyndham International, Inc. Series A Convertible Preferred Stock Fund
(Preferred Stock Fund), similar to the fund that already held the
Common Stock,, to hold all shares of Preferred Stock that were
purchased.
6. The applicant represents that each Plan participant was notified
of the terms of the Rights offering, as well as the number of rights
that were to be issued to the individual account of such participant.
Each participant received a packet of information that included: (i) A
memorandum, dated November 8, 1999, that was specifically designed to
instruct participants regarding the Rights Offering; (ii) a Preferred
Stock purchase form; and (iii) the Prospectus, dated November 8, 1999,
which was also distributed to all other shareholders entitled to
participate in the Rights Offering.
7. Each participant was allowed to direct the Trustee to sell or
exercise the Rights allocated to the participant's account. In order to
exercise the Rights, each shareholder was required to properly fill
out, execute, and deliver a subscription warrant, along with full
payment of the $100 per share purchase price, to ChaseMellon
Shareholder Services, LLC (ChaseMellon), the subscription agent, before
the Expiration Date.
At the time of the Rights Offering, contributions could be
invested, at the election of the participant, in one or more of the
following investments: (i) CIGNA Guaranteed Long-Term Account; (ii)
CIGNA Charter Large Company Stock Index Fund; (iii) Fidelity Puritan
Account; (iv) Franklin Small Cap Growth A Account; (v) Franklin Mutual
Qualified A Account; (vi) Wyndham International Common Stock Fund;
(vii) Fidelity Advisor Growth Opportunities Account; (viii) INVESCO
Dynamics Account; (ix) CIGNA Charter Small Company Stock Value I Fund;
and (x) CIGNA Charter Foreign Stock II Fund. As set forth in the
memorandum distributed to participants, a participant who elected to
exercise his or her Rights was to authorize CIGNA Retirement &
Investment Services (CIGNA), the Plan's third party administrator, to
raise the purchase price for the Preferred Stock from the first six
funds listed above. If insufficient, the participant was to authorize
CIGNA to raise the amount from the next available fund in which the
participant's account was invested.
The applicant represents that all decisions regarding the
disposition or exercise of the Rights were made by the individual Plan
participants whose accounts in the Plan received the Rights, in
accordance with Plan provisions for the individually directed
investment of such accounts. The Board of Directors made no
recommendation about whether an individual shareholder should exercise
any Rights. Moreover, no shareholder was required to exercise any
Rights or otherwise take any action in response to the Rights Offering.
8. Beginning on November 16, 1999, the Trustee attempted to sell,
in the over-the-counter (OTC) market, any unexercised Rights that were
allocated to the account of a participant. Prior to expiration, the
Rights were to be transferred or sold through a stockbroker or
ChaseMellon. However, no market developed for the Rights.
Wyndham did not charge any fee or sales commission to issue the
Rights or to issue the Preferred Stock to a shareholder who exercised
the Rights. Shareholders who exercised Rights through a broker or other
holder of their shares were responsible for paying any fees that person
may have charged. The shareholder was also to be responsible for any
fees or sales commissions that were applicable to a sale of any of the
Rights.
9. The applicant represents that the following is a summary of the
Rights Offering. A total of 31 participants, who each had at least 57
Rights issued to his or her account, elected to exercise their Rights
to purchase a total of 174 shares of Preferred Stock for the Plan.\2\
The rest of the Rights expired without value, since no market developed
for the Rights.
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\2\ The applicant states that the Preferred Stock is a
``qualifying employer security'' within the meaning of section
407(d)(5) of the Act. However, the Department expresses no opinion
herein as to whether the Preferred Stock is a ``qualifying employer
security'' under section 407(d)(5).
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The applicant also stated that no market has ever developed for the
Preferred Stock.\3\ Upon completion of the Rights Offering, the
beneficial ownership of individual shareholders of the Common Stock who
did not exercise their Rights declined when compared to other holders
of the Common Stock or limited partnership units who did exercise their
Rights. This result occurred because the Preferred Stock was
convertible into Common Stock and, therefore, represented dilution of
the ownership of Common Stock shareholders.
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\3\ The applicant represents that subsequent sales of the
Preferred Stock will be done in accordance with the conditions of
section 408(e) of the Act and the regulations thereunder [see 29 CFR
2550.408(e)]. However, the Department expresses no opinion herein as
to whether any sales of the Preferred Stock comply with section
408(e) and the regulations thereunder.
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10. In summary, the applicant represents that the subject
transactions satisfied the criteria for an exemption under section
408(a) of the Act for the following reasons: (1) The Plan's acquisition
and holding of the Rights in connection with the Rights Offering
occurred as a result of an independent act of Wyndham as a corporate
entity; (2) all holders of the Common Stock, including the Plan, were
treated in a like manner with respect to all aspects of the Rights
Offering; (3) all decisions regarding the disposition or exercise of
the Rights were made by the individual Plan participants whose accounts
in the Plan received the Rights, in accordance with Plan provisions for
the individually directed investment of such accounts; and (4) the Plan
held less than one-half of one percent of all the Common Stock
outstanding as of the Record Date.
For Further Information Contact:
Ms. Karin Weng of the Department, telephone (202) 693-8540. (This
is not a toll-free number.)
Holt, Fleck & Free P.A. Profit Sharing Plan (the Plan) Located in
Noblesville, Indiana
[Application No. D-11000]
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 sale (the Sale) by the Plan to a Plan
fiduciary (the Applicant) of two parcels of improved real property (the
Parcels). This exemption is conditioned upon the adherence to the
material facts and representations described herein and upon the
satisfaction of the following requirements:
(a) All terms and conditions of the Sale are at least as favorable
to the Plan as those that the Plan could obtain in an arm's-length
transaction with an unrelated party;
(b) The Sales price is the greater of $165,000 or the fair market
value of the Parcels as of the date of the Sale;
(c) The fair market value of the Parcels has been determined by an
independent, qualified appraiser;
[[Page 12065]]
(d) The Sale is a one-time transaction for cash; and
(e) The Plan does not pay any commissions, costs or other expenses
in connection with the Sale.
Summary of Facts and Representations
1. Holt, Fleck & Romine, the sponsor of the Plan, is a law firm
located in Noblesville, Indiana. The Plan is a profit sharing pension
plan, which, as of May 30, 2001, had 15 participants. The Applicant,
Steven Holt, the sponsor of the Plan, proposes to purchase the Parcels
from the Plan. The Plan's assets have an aggregate fair market value of
$921,549.
2. In September 1992, the Applicant purchased the Parcels from
Hamilton General Corporation, an unrelated third party, for $145,000.
At the time of the acquisition, the Parcels represented 53% of Plan
assets. The Parcels have an estimated fair market value of $165,000 and
constitute approximately 18% of the total value of Plan assets.
3. The Applicant represent that the Sale is in the interests of the
Plan, and its participants and beneficiaries. The Applicant is seeking
to purchase the Parcels from the Plan for cash, thus allowing the Plan
to be in a more liquid financial status. There will be no commissions,
costs or other expenses incurred by the Plan in connection with the
Sale.
4. The Parcels consist of:
A 5,412 square foot parcel of improved real property located at 107
South 8th Street, Noblesville, Indiana (107 South); and
A 4,356 square foot parcel of improved real property located at 123
South 8th Street, Noblesville, Indiana (123 South). The Parcels have
generated a minimal rate of return during the Plan's holding of the
Parcels.\4\
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\4\ The Department expresses no opinion herein as to whether the
acquisition and the holding of the Parcels by the Plan violated
section 404(a) of the Act. Section 404(a) of the Act requires, among
other things, that a fiduciary of a plan act prudently, solely in
the interest of the plan's participants and beneficiaries, and for
the exclusive purpose of providing benefits to participants and
beneficiaries when making investment decisions on behalf of the
plan.
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5. The Parcels were appraised on July 16, 2001, by Therese
Lattanzio and Stephen L. Cobb (the Appraisers) for Real Property
Evaluations, Inc. located in Indianapolis, Indiana. Both Appraisers are
Indiana state Certified General Appraisers. The Appraisers are
independent of the Applicant.
The Appraisers determined that the best use and highest value of
the Parcels was associated with valuing the Parcels in accordance with
the so-called direct sales comparison method. In this method, sales of
similar use land in the market area are compared to the subject to
arrive at an indication of value. In arriving at final value
conclusions, factors such as rights conveyed, financing terms, sale
conditions, market conditions, location, and physical characteristics
are taken into consideration. Therefore, based on the valuation
procedure, the fair market value of the Parcels was determined as
follows: (i) 107 South = $110,000; and (ii) 123 South = $55,000.
Accordingly, the total fair market value of the Parcels is $165,000 as
of July 16, 2001 ($110,000 + $65,000 = $165,000). The Plan will receive
an amount equal to the greater of: (i) $165,000: or (ii) The fair
market value of the Parcels at the time of the Sale.
6. In summary, the Applicant represent that the subject transaction
satisfies the statutory criteria contained in section 408(a) of the Act
and section 4975(c)(2) of the Code for the following reasons:
(a) The Sale will be a one-time transaction for cash;
(b) The Plan will not pay any commissions, costs or other expenses
in connection with the Sale; and
(c) The Plan will receive an amount equal to the greater of:
(i) $165,000; or (ii) The fair market value of the Parcels at the
time of the Sale.
Notice to Interested Persons: Notice of the proposed exemption
shall be given to all interested persons in the manner agreed upon by
the Applicant and Department within 15 days of the date of publication
in the Federal Register. Comments and requests for a hearing are due
forty-five (45) days after publication of the notice in the Federal
Register
For Further Information Contact: Khalif Ford of the Department,
telephone (202) 693-8540 (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 or disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which, among other things, require a fiduciary
to discharge his duties respecting the plan solely in the interest of
the participants and beneficiaries of the plan and in a prudent fashion
in accordance with section 404(a)(1)(b) of the Act; nor does it affect
the requirement of section 401(a) of the Code that the plan must
operate for the exclusive benefit of the employees of the employer
maintaining the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries, and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other provisions of the Act and/or the
Code, including statutory or administrative exemptions and transitional
rules. Furthermore, the fact that a transaction is subject to an
administrative or statutory exemption is not dispositive of whether the
transaction is in fact a prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete, and that each application
accurately describes all material terms of the transaction which is the
subject of the exemption.
Signed at Washington, DC, this 13th day of March, 2002.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 02-6431 Filed 3-15-02; 8:45 am]
BILLING CODE 4510-29-M
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