Prohibited Transaction Exemption 2002-37; et al.; Grant of
Individual Exemptions; Adams Wood Products, Inc. Profit Sharing Plan
(the Plan) [08/22/2002]
Volume 67, Number 163, Page 54482-54484
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Exemption Application No. D-10959]
Prohibited Transaction Exemption 2002-37; et al.; Grant of
Individual Exemptions; Adams Wood Products, Inc. Profit Sharing Plan
(the Plan)
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemption.
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SUMMARY: This document contains exemptions issued by the Department of
Labor (the Department) 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).
A notice was published in the Federal Register of the pendency
before the Department of a proposal to grant such exemption. The notice
set forth a summary of facts and representations contained in the
application for exemption and referred interested persons to the
application for a complete statement of the facts and representations.
The application has been available for public inspection at the
Department in Washington, DC. The notice also invited interested
persons to submit comments on the requested exemption to the
Department. In addition the notice stated that any interested person
might submit a written request that a public hearing be held (where
appropriate). The applicant has represented that it has complied with
the requirements of the notification to interested persons. No requests
for a hearing were received by the Department. Public comments were
received by the Department as described in the granted exemption.
The notice of proposed exemption was issued and the exemption is
being granted solely by the Department because, 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 proposed to the Secretary of Labor.
Statutory Findings
In accordance with section 408(a) of the Act and/or section
4975(c)(2) of the Code and the procedures set forth in 29 CFR part
2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon
the entire record, the Department makes the following findings:
(a) The exemption is administratively feasible;
(b) The exemption is in the interests of the plan and its
participants and beneficiaries; and
(c) The exemption is protective of the rights of the participants
and beneficiaries of the plan.
Adams Wood Products, Inc. Profit Sharing Plan (the Plan), Located
in Morristown, Tennessee
[Prohibited Transaction Exemption 2002-37; Exemption Application No. D-
10959]
Exemption
The restrictions of sections 406(a), 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: (1) a non-interest bearing loan (the Loan) by Adams
Wood Products, Inc. (AWP), the Plan sponsor, to the Plan to reimburse
the Plan for losses incurred concerning past investments by the Plan in
certain promissory notes (the Notes); and (2) the potential repayment
by the Plan to AWP of certain moneys if the Plan recovers any of the
investments in the Notes. This exemption is subject to the following
conditions:
(a) The Plan pays no interest nor incurs any other expense relating
to the Loan;
(b) The amount of the Loan includes the following:
(1) $340,187.38, which represents the amount due on the
consolidated note (the Consolidated Note) on June 30, 2000;
(2) opportunity costs as follows: (a) the amount due on the
Consolidated Note from June 30, 2000, the last date when the Plan
received interest on the Consolidated Note to January 26, 2001, the
date when AWP placed funds in Certificates of Deposit (CDs); and (b) an
additional amount yet to be determined to provide the Plan with an
identical rate of return as AWP received as a result of AWP's
investment in the CDs for the period between January 26, 2001
[[Page 54483]]
and the date the Plan receives the Loan amount; and
(3) $4,630.84 to reimburse the Plan for all interest on the 1st
note and 2nd note, due respectively, on April 20, 2001 and April 15,
2002; and
(c) Any repayment by the Plan is restricted solely to the amount,
if any, recovered by the Plan with respect to the Loan.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the Notice of Proposed Exemption published on June 6, 2002 at 67 FR
39051.
FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department,
telephone (202) 693-8540 (this is not a toll-free number).
Unifi, Inc. Retirement Savings Plan (the Plan), Located in
Greensboro, North Carolina
[Prohibited Transaction Exemption 2002-38; Exemption Application No. D-
11094]
Exemption
The restrictions of sections 406(a), 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 prospective cash sale of a certain parcel of
improved real property (the Property) by the Plan to Unifi, Inc.
(Unifi), the Plan's sponsor and, as such, a party in interest with
respect to the Plan; provided that the following conditions are
satisfied:
(a) the sale is a one-time cash transaction;
(b) the Plan receives the greater of: (i) $7,500,000; or (ii) fair
market value for the Property, as established by an independent
qualified appraiser at the time of the sale;
(c) the Plan pays no commissions or other expenses associated with
the sale; and
(d) the applicant files Form 5330 with the Internal Revenue Service
and pays all of the appropriate excise taxes with regard to the past
and continuing lease of the Property (the Lease) by the Plan to Unifi
\1\ within 60 days of the date that this exemption is published in the
Federal Register.
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\1\ See Prohibited Transaction Exemption 87-28 (PTE 87-29, 52 FR
8380, Mach 17, 1987) with regard to the Lease.
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For a more complete statement of the facts and representations
supporting the Department of Labor's (the Department) decision to grant
this exemption, refer to the notice of proposed exemption (the Notice)
published in the Federal Register on June 6, 2002 at 67 FR 39062.
Written Comments
The Department received one written comment (the Comment) with
respect to the Notice and no requests for a hearing. The Comment was
filed by legal counsel for Wachovia Bank, N.A. (Wachovia). The Comment
responds to certain statements concerning Wachovia's conduct as the
independent fiduciary for the Lease under PTE 87-28. These statements
were made in the exemption application filed by Unifi (the Application)
and in the Notice. PTE 87-28 permitted the Lease, pursuant to the terms
and conditions contained therein, until its expiration. The Lease
expired, by its terms, on March 12, 2002. Wachovia was the designated
independent fiduciary for the Plan in the transaction.
The Comment was subsequently sent by the Department to Unifi for
their response. Set forth below are the points made by Wachovia
together with responses to those points made by Unifi.
I. Discussion of Wachovia's Comment
Paragraph 2 of the Summary of the Facts and Representations (the
Summary) contained in the Notice states, in relevant part, that the
applicant maintains that all terms and conditions of PTE 87-28 have
been met. The applicant, however, makes no representation as to whether
Wachovia fulfilled all of its obligations as the independent fiduciary
under PTE 87-28.
In the Comment, Wachovia states that in a letter dated May 7, 2002
to counsel for Unifi, a copy of which was provided to the Department,
they discussed certain business relationships between Unifi and
Wachovia's banking department and certain Wachovia affiliates. For the
reasons set forth in that letter, Wachovia states again for the record
that it has at all times performed all its obligations as independent
fiduciary with respect to the Lease under PTE 87-28.
Paragraph 2 of the Summary also states that the applicant
represents that Wachovia, as the independent fiduciary for the Lease
under PTE 87-28, unilaterally elected to cease functioning as the
independent fiduciary for the Plan effective on or before March 13,
2002. Therefore, as of that date, Unifi states that it was engaging in
a prohibited transaction under the Act by continuing the Lease,
pursuant to a holdover provision contained therein.
In the Comment, Wachovia responds that it was Unifi's continuation
of the Lease that caused Unifi to engage in a prohibited transaction
with the Plan. Wachovia informed Unifi that the Department likely would
require, as a condition to any exemption providing retroactive relief
for continuation of the Lease after the original termination date, that
an independent fiduciary represent the Plan at all times after the
expiration of the Lease. Wachovia identified potential successor
independent fiduciaries with whom Unifi engaged in discussions.
However, Wachovia states that Unifi failed to reach an agreement with
any of them.
Additionally, the Comment contains Wachovia's clarifications on
certain statements contained in the Application. In a letter dated May
20, 2002, counsel to Unifi stated to the Department that Unifi is
contemplating legal action against Wachovia, in which Unifi would
allege that Wachovia failed to locate a suitable tenant for the
Property upon termination of the Lease as required by paragraph 2(b)(v)
of the independent fiduciary agreement (the I/F Agreement), therefore
causing monetary damages to Unifi.
In the Comment, Wachovia clarifies that Wachovia worked with Unifi
to find a purchaser for the Property, and identified two potential
buyers. Unifi indicated in these sales negotiations that it intended to
lease the Property after it was sold. These sales negotiations were
terminated when Unifi rejected the terms of a proposed future lease.
Unifi has acknowledged that these negotiations were consistent with
Wachovia's duties as the independent fiduciary. After negotiations with
potential buyers terminated, Wachovia assisted Unifi in applying for an
extension of Unifi's existing exemption (i.e., PTE 87-28).
In the Application, Unifi represented to the Department that
Wachovia is refusing to perform its services under the I/F Agreement
dated September 3, 1996, between Wachovia and Unifi.
In the Comment, Wachovia states that as indicated in Wachovia's
letter to Unifi dated March 11, 2002, Unifi was aware that Wachovia was
not prepared to continue to serve as the independent fiduciary, and
Unifi's representatives apparently concurred with that decision. Again,
Wachovia represents that it assisted Unifi in finding potential
successor independent fiduciaries, but Unifi failed to reach agreement
with any of them.
In summary, Wachovia states that it met all its obligations as the
independent fiduciary for the Plan with respect to the Lease. Wachovia
maintains that all terms and conditions of PTE 87-28 relating to its
duties and responsibilities as the independent fiduciary for the Plan
were satisfied.
[[Page 54484]]
II. Discussion of Unifi's Response to the Comment
In its response to the Comment (the Response), Unifi states that
the Comment made by Wachovia does not discuss the substance of the
proposed sale of the Property by the Plan to Unifi, which is the
subject transaction in the Notice.
The Response further states that the reason Unifi mentioned
Wachovia in the Application was to clarify to the Department why Unifi,
and not Wachovia, was submitting the Application to the Department.
Unifi states that apart from Wachovia's status as the independent
fiduciary for the Lease under PTE 87-28, Wachovia is not an interested
party to the proposed sale.
In conclusion, Unifi states that Wachovia has no real interest in
the proposed sale of the Property by the Plan to Unifi. There are no
statements in the Comment that are in support or against the terms of
the proposed sale. Therefore, Unifi respectfully requests that the
Department grant the exemption as proposed.
The Department notes that it is offering no views at this time with
regard to either Wachovia's conduct as the independent fiduciary for
the Plan for purposes of the Lease, pursuant to PTE 87-28, or Unifi's
concerns relating thereto. In this regard, the Department notes that
the Comment does not object to the proposed sale of the Property by the
Plan to Unifi.
Copies of the letters mentioned above, as well as other relevant
correspondence, are available for public inspection and may be obtained
by interested persons from the Public Documents Room, Pension and
Welfare Benefits Administration, U.S. Department of Labor, Room N-1513,
200 Constitution Avenue, NW., Washington, DC 20210. Interested persons
should request File No. D-11094 (with respect to the proposed sale of
the Property by the Plan to Unifi) and File No. D-11080 (with respect
to Unifi's initial exemption request for a continuation of the Lease).
Upon consideration of the entire record, the Department has
determined to grant the exemption as proposed.
FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (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 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) This exemption is supplemental to and not in derogation of, any
other provisions of the Act and/or the Code, including statutory or
administrative exemptions and transactional 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
(3) The availability of this exemption is subject to the express
condition that the material facts and representations contained in the
application accurately describes all material terms of the transaction
which is the subject of the exemption.
Signed at Washington, DC, this 19th day of August, 2002.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 02-21431 Filed 8-21-02; 8:45 am]
BILLING CODE 4510-29-P
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