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Secretary of Labor Thomas E. Perez
Proposed Exemptions; Wyndham International, Inc. Employee Savings & Retirement Plan [Notices] [03/18/2002]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; Wyndham International, Inc. Employee Savings & Retirement Plan [03/18/2002]

[PDF Version]

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