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Employee Benefits Security Administration

EBSA Federal Register Notice

Proposed Exemptions; Sorenson Broadcasting Employee Stock Ownership Plan and Trust (the Plan) [09/05/2003]

[PDF Version]

Volume 68, Number 172, Page 52791-52799


[[Page 52791]]

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. D-11067, et al.]

 
Proposed Exemptions; Sorenson Broadcasting Employee Stock 
Ownership Plan and Trust (the Plan)

AGENCY: Employee Benefits Security 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 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 requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5649, 
U.S. Department of Labor, 200 Constitution Avenue, NW, Washington, DC 
20210. Attention: Application No. ------, stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or Fax. Any such 
comments or requests should be sent either by e-mail to: 
``moffitt.betty@ 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 Employee Benefits Security 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.

Sorenson Broadcasting Employee Stock Ownership Plan and Trust (the 
Plan) Located in Sioux Falls, SD

[Application No. D-11067]

Proposed Exemption

    Based on the facts and representations set forth in the 
application, 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).\1\ If the 
exemption is granted, the restrictions of sections 406(a), 406(b)(1) 
and 406(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) the sale 
(the Sale) by the Plan to Sorenson Broadcasting Corporation (the 
Employer), a party in interest with respect to the Plan, of 930 shares 
of common stock (the Common Stock) of the Employer; and (2) the 
extension of credit by the Plan to the Employer under the terms of a 
subsequent adjustment to the Sale price (the True-up) in connection 
with the Sale.
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    \1\ For purposes of this proposed exemption, references to 
provisions of Title I of the Act, unless otherwise specified, refer 
also to corresponding provisions of the Code.
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    This proposed exemption is subject to the following conditions:
    (a) The Sale occurs in the following manner:
    (1) The Employer pays the Plan the fair market value of the Common 
Stock as of December 31, 2002, as determined by a qualified, 
independent appraiser, plus certain positive adjustments indicated in 
an addendum (the First Addendum) to a purchase agreement dated May 26, 
2000 (the Purchase Agreement);
    (2) The fair market value of the Common Stock as of the transaction 
date (the Closing Value) is determined no later than two months after 
the transaction date;
    (3) As additional consideration, the Plan receives the difference 
between the Closing Value and the amount paid for the Common Stock on 
the transaction date (i.e., the True-up), plus interest based on the 
New York prime market rate, effective on the transaction date until the 
date of the True Up; and
    (4) As collateral for the True-up, Mr. Dean Sorenson, the principal 
shareholder of the Employer, deposits $100,000 in cash in an escrow 
account for the benefit of the Plan to ensure that the Employer honors 
its obligation under the True-up.
    (b) The Plan does not pay any commissions or other expenses with 
respect to the Sale.
    (c) The transactions are approved by an independent fiduciary, who 
will monitor such transactions on behalf of the Plan.
    (d) The Plan's trustees (the Trustees) determine that the Sale and 
True-up are appropriate transactions for the Plan and in the best 
interests of the Plan and its participants and beneficiaries.

Summary of Facts and Representations

    1. The Employer is a South Dakota corporation maintaining its 
principal place of business in Sioux Falls, South Dakota. Prior to 
January 1, 2000, the Employer operated 17 radio stations which 
broadcasted on various frequencies to the Upper Midwestern States of 
the United States. As of January 1, 2000, the broadcasting stations 
have been operated by Waitt Radio Inc. (Waitt) of Dakota Dunes, South 
Dakota, an unrelated entity, under an interim programming agreement 
(the Interim Programming Agreement), the terms of which are

[[Page 52792]]

discussed below, between the Employer, as the Licensor, and Waitt, as 
the Programmer. Waitt is engaged in the radio broadcasting business in 
the Central and Upper Midwest. Waitt leases the buildings in which the 
Employer's radio stations are located from Mr. Dean Sorenson, the owner 
of the buildings.
    Mr. Sorenson is President of the Employer and he owns 70 percent of 
the shares of outstanding Common Stock of the Employer. The Plan owns 
the remaining 30 percent of the shares of outstanding Common Stock of 
the Employer. Since January 1, 2000, the Employer has been operating as 
a sub-chapter ``S'' corporation.
    2. The Plan is an employee stock ownership plan that is sponsored 
by the Employer. The Plan was established by the Employer on December 
31, 1995. As of May 30, 2003, the Plan had 157 participants. As of 
December 31, 2002, which is the most recent date financial information 
is available, the Plan had total assets of approximately $3,148,522. 
Also, as of the same date, the Plan held 930 shares of Common Stock, 
valued at $3,148,230, and representing approximately 99% of the fair 
market value of the assets of the Plan.
    Sharon Otten, Fred Smith, Scott Kooistra, Bruce Erlandson, Trent 
Schmotzer, Bill Grady, Holly Gill, and Tony Sieler, serve as the 
Trustees for the Plan, and have discretionary control over the Plan's 
assets involved in the transaction. These individuals were all 
employees of Sorenson at the time the Interim Programming Agreement 
went into effect, although since that time, some of the Sorenson 
employees have become Waitt employees.
    3. The Plan originally acquired 930 shares of non-treasury Common 
Stock from Mr. Sorenson in a single transaction on December 31, 
1996.\2\ The Common Stock was valued by Mr. Gerald C. Johnson, Jr., the 
President and sole owner of Johnson Communications Properties, Inc. of 
Minneapolis, Minnesota. Mr. Johnson is a qualified, independent broker 
and appraiser of broadcasting properties, with extensive experience in 
valuing radio stations in the upper Midwest. Although Mr. Johnson's 
original valuation (the Original Valuation) placed the total value of 
such Common Stock on the date of the purchase at $3,415,300, the actual 
purchase price paid by the Plan to Mr. Sorenson was negotiated down to 
$3,331,577.\3\
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    \2\ The applicant represents that the acquisition and holding, 
by the Plan, of common stock of the Employer is covered under 
section 408(e) of the Act. However, the Department expresses no 
opinion as to the applicability of the statutory exemption provided 
by section 408(e) of the Act to the original transaction. Further, 
the Department, herein, is offering no relief for transactions other 
than the transactions described in this exemption.
    \3\ The applicant represents that the difference between the 
negotiated price of the original 930 shares of Common Stock the Plan 
bought and the price listed in the Original Valuation does not 
constitute an excess contribution to the Plan in violation of 
sections 401(a)(4), 404 and 415 of the Code.
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    4. The Plan derived the funds to purchase the Common Stock from Mr. 
Sorenson and from First Dakota National Bank (the Bank), an unrelated 
entity with respect to the Plan. Mr. Sorenson made one loan (the 
Sorenson Loan) to the Plan in the amount of $2,898,718 and the Bank 
made another loan (the Bank Loan; together, the Loans) to the Plan in 
the amount of $432,859.
    The Sorenson Loan was evidenced by a promissory note (the Sorenson 
Promissory Note) dated December 31, 1996 between the Plan and Mr. 
Sorenson. The Sorenson Promissory Note was executed simultaneously with 
the Sorenson Loan and provided that the Plan repay the principal sum of 
the Sorenson Loan plus interest thereon at an annual interest rate of 
8.5 percent. Such note required the Plan to make annual payments of 
both principal and interest totaling $502,226.45, commencing on 
September 15, 1997. There were no prepayment penalties.
    The Sorenson Promissory Note was made subject to the provisions of 
a pledge agreement (the Sorenson Pledge Agreement), also dated December 
31, 1996, between the Plan and Mr. Sorenson. The Sorenson Pledge 
Agreement secured Mr. Sorenson's first lien interest in the 930 shares 
of Common Stock purchased by the Plan. An amortization schedule 
indicated that under normal amortization, the Sorenson Loan would be 
paid off by September 15, 2004.
    5. The Bank Loan was also evidenced by a promissory note (the Bank 
Promissory Note), dated December 31, 1996, that was executed between 
the Plan and the Bank. The Bank Promissory Note required the Plan to 
repay the principal sum of the Bank Loan plus interest thereon at an 
annual interest rate of 8.5 percent until September 15, 2000. The Bank 
Promissory Note also provided that the Plan make three regular annual 
payments of $75,316.98 and one irregular last payment, estimated at 
$321,370.83. There were no prepayment penalties. The Bank Promissory 
Note was secured by both the Employer's and Mr. Sorenson's personal 
guarantees of the entire $432,859 principal amount of the Bank Loan.\4\
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    \4\ The applicant represents that the Sorenson Loan and the Bank 
Loan comply with section 408(b)(3) of the Act and the regulations 
promulgated thereunder. In this regard, the Department is expressing 
no opinion on whether the Loans initially satisfied, or continue to 
satisfy, the requirements necessary for exemptive relief under 
section 408(b)(3) of the Act, nor is any relief provided for those 
Loans under this proposed exemption. The relief provided by this 
exemption is limited solely to the sale of the Common Stock to the 
Employer, a party in interest with respect to the Plan.
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    6. Also on December 31, 1996, Mr. Sorenson, in his capacity as 
President of the Employer, sent the Bank a letter agreement. The 
agreement stated, in pertinent part, that in consideration of the Bank 
Loan and all other financial accommodations provided by the Bank to the 
Plan, the Employer would not, without the Bank's prior written consent, 
amend any provision of the Plan requiring the Employer to make 
contributions necessary to enable the Plan to discharge its obligations 
under the Bank Loan and the Bank Promissory Note.
    7. Cash that the Plan received from the Loans was converted into 
Common Stock. The Common Stock is being maintained by the Plan in a 
``suspense'' account (the Suspense Account), separate from the 
participants' individual accounts. Initially, 317.752 shares of Common 
Stock were allocated to participants from the Suspense Account as 
payments were made by the Plan under the Loans. Because it was 
determined that there was insufficient compensation to permit 
deductible contributions, and that payments of the amounts due would 
violate the annual addition limits of section 415 of the Code, a freeze 
was placed on the Plan assets in 1999 in order to prevent any new 
participation in the Plan. Therefore, no further allocations of Common 
Stock were made to participants from the Suspense Account. At present, 
612.248 shares of such stock continue to be held in the Suspense 
Account.
    8. At the time of the freeze, there was $105,000 available in Plan 
assets to make payments on the Loans. Both Mr. Sorenson and the Bank 
agreed to receive interest only payments on the Sorenson Loan until a 
sale of the Common Stock held by the Plan could be made, at which point 
they would be paid the principal amount of their respective Loans. 
Interest only payments were made on the Loans throughout 2000 and 
briefly during 2001, until the money ran out. The last interest only 
payment was made by the Plan to Mr. Sorenson on October 16, 2000 and to 
the Bank on

[[Page 52793]]

June 29, 2001. To date, no further payments have been made by the Plan. 
At present, the outstanding principal balances of the Sorenson Loan and 
the Bank Loan are $1,979,095 and $295,808, respectively.
    9. Although the Plan defaulted on the Loans, the default provisions 
therein gave both Mr. Sorenson and the Bank the discretion to waive 
foreclosure on the Loans if the circumstances warranted. Therefore, 
both Mr. Sorenson and the Bank agreed that the enforcement of their 
rights to the collateral for the Loans was not in their best interests, 
as it would not be helpful to completing an eventual sale of the 
Employer to Waitt. On December 28, 2001, Mr. Sorenson and the Bank 
signed an agreement to extend the maturity date of the Loans from 
December 15, 2001 until June 15, 2002 in order that neither Loan could 
be foreclosed upon. Since then, in an agreement signed by both parties 
on December 27, 2002, the maturity date of the Loans was further 
extended until June 15, 2003. Such agreement has been re-extended 
pending the outcome of this exemption request.\5\
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    \5\ In regard to the deferral of payments, the Employer also 
agreed to waive its right to recoup interest payments made on behalf 
of the Plan under its guaranty agreement to the Bank with respect to 
the Bank Loan (see Representation 5) in order that the Plan could 
retain a greater amount of the final Sale proceeds. It is 
represented that the interest paid by the Employer through February 
28, 2003 is $52,670.96.
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    10. Mr. Sorenson wishes to retire from the day-to-day management of 
the individual stations. While he had hoped that a group of key 
employees would emerge to acquire a small ownership stake outside of 
the Plan and assume the role of group-wide management, this has not 
happened. Mr. Sorenson also believes that a decrease in the fair market 
value of the radio stations is likely to occur over the next several 
years. Therefore, he has researched the marketplace to determine a 
prospective sale price should there be a willing buyer. Based on his 
research, Mr. Sorenson and his advisors consider a multiple of cash 
flows (a key factor used in calculating the purchase or selling price 
of radio stations) within the range of 8.0 and 9.0 to be a realistic 
target.
    11. Mr. Sorenson has been approached by Waitt, a willing buyer, and 
the multiple of cash flows offered and agreed upon by Waitt and the 
Employer is 8.75. The Employer has also negotiated with Waitt an 
arrangement to transfer ownership of the broadcasting stations to 
Waitt. The preferred method is for the parties to enter into a long-
term programming agreement (the Programming Agreement) with a purchase 
option (the Option Agreement) at its conclusion.
    12. The Interim Programming Agreement with Waitt, dated January 1, 
2000, was signed by Mr. Sorenson in his capacity as President of the 
Employer, and was approved by the Trustees on behalf of the 
participants. As initially executed, the Interim Programming Agreement 
stipulates that, not later than September 1, 2000, the Employer and 
Waitt would enter into either: (a) The Programming Agreement 
concurrently with the Option Agreement or (b) a stock purchase 
agreement (the Stock Purchase Agreement). However, because the 
applicant did not obtain the requested exemption as of the September 1, 
2000 termination date, neither option was selected. Therefore, the 
Interim Programming Agreement still remains in effect and it has been 
extended by the Employer and Waitt every six months.
    13. As consideration, under the Interim Programming Agreement, 
Waitt is required to pay the Employer $114,516, which amount is to be 
increased (or decreased) each month by an amount equal to $13,500 for 
every one percent increase (or decrease) in the New York prime rate, as 
published in the Wall Street Journal, on the 15th day of the preceding 
month. In addition, Waitt is required to reimburse the Employer for 
expenses incurred in the operation of the station and to deposit 
$1,374,000 in an escrow account. Also, pursuant to the Interim 
Programming Agreement, the broadcasting stations are being operated by 
Waitt, who supplies the stations with programming, while the Employer 
maintains ultimate control over the stations' finances, personnel 
matters and programming content. Further, the Interim Programming 
Agreement requires the Employer to continue to employ 15 management 
employees of the stations. All other employees became Waitt employees 
effective April 1, 2000, at the start of the Interim Programming 
Agreement.
    14. The Interim Programming Agreement provides that upon its 
termination date, Waitt may exercise either of two options. First, 
Waitt can extend the Interim Programming Agreement into the ten year 
Programming Agreement that will end on December 31, 2009. At this time, 
Waitt may purchase the assets of the Employer for $12,967,023, under 
the terms of the Option Agreement, provided Waitt pays the Employer 
$3,200,000 as the option amount. Second, Waitt may immediately 
purchase, for $16,167,023 (subject to certain adjustments), all of the 
Employer's Common Stock held by the Employer and the Plan, pursuant to 
the provisions of the Stock Purchase Agreement. The Interim Programming 
Agreement will terminate on the earliest of (a) the effective date of 
the Programming Agreement and the execution of the Option Agreement, 
(b) the closing date of the Stock Purchase Agreement, or (c) a date 
mutually agreed to by the parties with at least thirty (30) days prior 
written notice.\6\
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    \6\ To date, neither the Programming Agreement nor the Stock 
Purchase Agreement have gone into effect. From correspondence in the 
exemption application file, it appears that the parties are inclined 
to enter into the Programming Agreement, which will be dated 
contemporaneously with the date of the Sale transaction described 
herein.
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    15. The Trustees have concluded that a sale of the Common Stock and 
the retirement of the Loans with the Sale proceeds would be in the best 
interests of the Plan participants. Moreover, the Trustees believe that 
allowing the debt to go into default would only disrupt this process 
and could damage the interests of the Plan participants. Therefore, as 
noted above, both Mr. Sorenson and the Bank offered, and the Trustees 
accepted, the waiver of default and deferral of payments pending the 
resolution of the proposed Sale and True-Up transactions described 
herein.\7\
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    \7\ Although the Trustees represent that such waiver should not 
cause the Loans to lose their status as exempt loans under section 
408(b)(3) of this Act, the Department again expresses no opinion in 
this proposed exemption on whether the provisions of section 
408(b)(3) of the Act have been violated while the Loans are 
outstanding.
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    16. To facilitate the termination of the Plan and allow the 
participants (most of whom are now Waitt employees) to diversify their 
portfolios into other investments with better future returns, the 
Trustees propose that the Common Stock held by the Plan be sold. The 
Employer is willing to purchase the Common Stock (and the Trustees are 
willing to sell such stock) under a deferred payment arrangement, in 
accordance with a ``True-up'' or adjustment to the purchase price. The 
Plan will not be required to pay any fees or expenses in connection 
with the Sale. Then, the Employer proposes to distribute the Sale 
proceeds to the participant accounts in the Plan.
    Because the Employer is a subchapter S corporation, section 
408(d)(2)(A) of the Act provides that the statutory relief under 
section 408(e) of the Act is unavailable with respect to the proposed 
Sale transaction since more than 50 percent of the Common Stock is 
owned by Mr. Sorenson, a shareholder-employee. Also, section 408(e) of 
the Act does not exempt extensions of credit in connection with 
adjustments to

[[Page 52794]]

the Sale price, such as those contemplated under the True-up. 
Accordingly, an administrative exemption is requested from the 
Department.
    17. On May 26, 2000, the Plan and the Employer entered into a 
purchase agreement (the Purchase Agreement) to acquire the Common Stock 
held by the Plan. The purchase price was to be based on the amount 
which would have been due the Plan from Waitt for shares of Common 
Stock under the Stock Purchase Agreement. According to the Stock 
Purchase Agreement, Waitt promised to pay the Employer and the Plan a 
total of $16,167,023 for such Common Stock. The purchase price was, 
however, subject to various adjustments. For example, not later than 
five days prior to the transaction closing date, the sellers would be 
required to submit a pro forma balance sheet to Waitt that had been 
prepared in accordance with generally-accepted accounting principles, 
along with a schedule setting forth the value of the Employer's Common 
Stock (the Computation of Stock Value, as calculated by Mr. Johnson, 
the independent appraiser who prepared the Original Valuation of the 
Common Stock). The purchase price would then be adjusted to an amount 
equal to the total value of the Employer's Common Stock, as set forth 
on such schedule. In addition, the parties agreed that the purchase 
price would be further adjusted to reflect the loss of the depreciation 
on the underlying broadcast assets. However, for purposes of the 
Purchase Agreement, it was determined that the Plan's price per share 
for the Common Stock would be valued without the loss of the 
depreciation adjustment.
    18. On January 8, 2002, an addendum (the First Addendum) was made 
to the Purchase Agreement. In this regard, the Plan's price per share 
to be paid by the Employer for the Common Stock would be calculated to 
include additional value due to state and Federal taxes, amounts due to 
certain employees under an Individual Employment and Incentive 
Compensation Agreement, and accrued sales commissions.
    19. According to a second addendum to the Purchase Agreement (the 
Second Addendum), effective November 13, 2002, the Purchase Agreement 
was again amended. In this regard, the Programming Agreement and 
proposed Sale by the Plan of its Common Stock to the Employer will 
occur on the first month following the publication, in the Federal 
Register, of the notice granting the final exemption (the Closing 
Date). The Employer will pay the Plan the fair market value of the 
Common Stock as of December 31, 2002, as determined by an independent 
appraisal, plus the adjustments indicated in the First Addendum (e.g., 
Federal and state taxes, sales commissions, etc.). The fair market 
value of the Common Stock as of the Closing Date (the Closing Value) 
will be determined no later than two months after the Closing Date by 
an independent appraisal.
    The Second Addendum also provides that the True-up, which is the 
difference between the Closing Value and the amount which has already 
been deposited on the Closing Date, will be paid to the Plan, plus 
interest based on the New York prime market rate, effective on the 
Closing Date until the date of the True-up. As collateral for the True-
up, Mr. Sorenson has agreed to deposit $100,000 cash in an escrow 
account for the benefit of the Plan.
    20. In an independent appraisal report dated February 27, 2003, Mr. 
Johnson again valued the Common Stock held by the Plan and Mr. 
Sorenson, as of December 31, 2002 (the 2002 Appraisal). Mr. Johnson 
noted that the established value of all of the radio stations owned by 
the Employer was $16,167,023 as opposed to the value of the Common 
Stock. He explained that the valuation of the Employer's assets was 
based upon a multiple of 8.75 times the adjusted cash flow of the 
Employer's radio affiliates for the year ending December 31, 1998, 
including a provision for the costs incurred in constructing a radio 
station located in South Dakota, which was not completed until mid-
1999. Mr. Johnson further noted that the $16,167,023 aggregate value of 
the Employer's assets had been reduced by $3,500,000 to compensate 
Waitt for the fact that it would be acquiring Employer Common Stock as 
opposed to the Employer's underlying assets. He indicated that he 
believed the 8.75 multiple for the Employer's radio stations was 
entirely appropriate and that the $16,167,023 selling price was 
realistic for such stations. Although Mr. Johnson did not express an 
opinion regarding the $3,500,000 downward adjustment to the selling 
price, he acknowledged that such a price reduction was common in the 
industry.
    As stated above, it was Mr. Johnson's opinion that $16,167,023 
represented the total fair market value of the various broadcast 
properties that were owned by the Employer as of December 31, 2002 
rather than the value of the Common Stock. For the year ending December 
31, 2002, he noted that the Computation of Stock Value equaled 
$10,494,101. Because the Plan holds a 30 percent interest in all of the 
Employer's assets, Mr. Johnson placed the fair market value of the 
Common Stock held by the Plan at $3,148,230 ($10,494,101 x 30%) as of 
December 31, 2002.
    21. Thus, on the basis of the 2002 Appraisal, the Plan will receive 
30% of $15,794,416 from the Employer prior to time of the True-up. This 
gross amount reflects the $10,494,101 value attributed to the Common 
Stock, plus the following positive adjustments: (a) State and Federal 
income taxes totaling $3,500,000, (b) a $1,692,315 aggregate amount due 
to certain employees under an ``Individual Employment and Incentive 
Agreement,'' and (c) accrued sales commissions of $108,000 that the 
Employer would be obligated to pay. Therefore, the net amount owed by 
the Employer to the Plan will be $4,738,325, without the inclusion of 
the True-Up.
    22. Upon conclusion of the Sale, proceeds from the Sale will 
effectively be split into two pools: (a) The proceeds related to the 
allocated shares (the Allocated Share Proceeds) and (b) the proceeds 
related to the unallocated shares (the Unallocated Share Proceeds). The 
Allocated Share Proceeds will be allocated to each Plan participant 
based on the shares held in their account. The Unallocated Share 
Proceeds will be used to pay off the Loans to the Bank and Mr. 
Sorenson. It is anticipated that the share proceeds will exceed the 
Loans by approximately $290,000 and that such gain will be allocated to 
the participants.
    23. Mr. John F. Archer, an attorney with the law firm of Hagen 
Wilka & Archer, P.C., of Sioux Falls, South Dakota, was designated by 
the Trustees to serve on behalf of the Plan as the independent 
fiduciary. In such capacity, Mr. Archer is representing the interests 
of the Plan and the Plan participants in connection with the Sale and 
the True-up. Mr. Archer asserts that he is qualified to act as an 
independent fiduciary for the Plan because of his background as it 
relates to reviewing business valuations. Such experience includes his 
position as the South Dakota Division of Securities Director from 1978 
until 1983, in which he was chairman of the North American Securities 
Administrators Association Franchise Committee, and his private 
practice, which covers securities law, mergers and acquisitions, real 
estate law, franchise law, corporate law and title insurance law. In 
addition, Mr. Archer represents that he has been a speaker discussing 
securities and franchise law at various Continuing Legal Education 
seminars and has served on the South Dakota State Bar Committee on 
Corporations. Mr. Archer represents that he has had a professional

[[Page 52795]]

relationship with Mr. Sorenson at various times between 1989 and 1994 
and has assisted Mr. Sorenson in the purchase of his personal residence 
as well as the sale or purchase of Mr. Sorenson's commercial 
enterprises. However, Mr. Archer does not believe that these matters 
carry any conflict of interest with respect to the proposed 
transactions.
    Mr. Archer states that he has no current ongoing relationship with 
Mr. Sorenson or the Employer, and he confirms that his firm will derive 
less than one percent of its gross annual income from the Employer. Mr. 
Archer has agreed to represent the interests of the Plan and its 
participants and he has executed a representation agreement (the 
Representation Agreement) with the Trustees containing the duties and 
capacities that such representation includes.
    24. As independent fiduciary, Mr. Archer certifies that he has 
reviewed and analyzed the proposed transactions and related documents, 
as well as their potential effects, both direct and collateral, to the 
Plan participants. In addition, Mr. Archer states that he has evaluated 
the overall fairness of the subject transactions, specifically as to 
the other parties involved, and the validity of the proposed valuation. 
Based on such review and evaluation, Mr. Archer states that he is of 
the opinion that the 2002 Appraisal reflects a fair valuation of the 
Employer. He also explains that the sale of the shares owned by the 
Plan to the Employer based on the price set forth in the Purchase 
Agreement, treats the Plan participants fairly and justly in comparison 
to the other parties involved in such transaction. Further, after 
reviewing the 2002 Appraisal, Mr. Archer states that he concurs with 
the appraisal amount and he is of the opinion that the Sale is in the 
best interests of the Plan.
    In addition, Mr. Archer states that the subject transactions are in 
the best interests of the Plan and its participants because the price 
being paid to the Plan is based on the sale of the Employer's Common 
Stock to a third party and it was determined on an arm's length basis 
between the Employer and Waitt. In reviewing other similar sales, Mr. 
Archer states that the Sale price in this case is consistent with other 
transactions dealing with radio stations and that the Plan's price per 
share will be higher than that paid to Mr. Sorenson because the Plan's 
interest in the Employer's Common Stock will be valued to include 
certain special adjustments (i.e., Federal and state income taxes, 
amounts due to employees under Individual Employment and Incentive 
Compensation Agreements and accrued sales commissions). Mr. Archer 
states that his role as representative and adviser to the Plan will 
continue until such time as the transactions are completed or 
abandoned. Mr. Archer explains that the transactions will be deemed 
complete for purposes of his representation upon receipt of the final 
valuation to be used in the distribution of funds to Plan participants 
or will be deemed abandoned upon receipt of notice from the trustee of 
the Plan, the Employer, or Mr. Sorenson that the transactions will not 
be completed.
    25. Mr. Archer notes that while the Employer is receiving a 
programming fee of $13,500 per month under the Interim Programming 
Agreement from Waitt, it would appear that this fee is normal and 
customary in today's marketplace and that it is not uncommon that when 
a transaction of this sort is made that this type of fee is paid to a 
licensor such as the Employer. Mr. Archer states that he has reviewed 
this matter with other owners of radio stations and has found this 
practice to be consistent. Consequently, he believes that the payment 
of this programming fee by Waitt to the Employer does not make the Sale 
unfair to the Plan participants. Mr. Archer also notes that Mr. 
Sorenson is receiving lease payments from Waitt for the rental of the 
buildings that are owned by Mr. Sorenson in which the Employer's radio 
stations are located. Assuming that the lease payments are fair market 
value, Mr. Archer does not believe these rental payments would make the 
proposed Sale transaction unfair to the Plan participants.
    Further, Mr. Archer opines that the subject transactions are 
protective of the Plan, participants and beneficiaries because they 
comply with the organization and governing documents of the Plan and 
the Trustees have been given all information necessary to determine 
their fairness.
    Finally, Mr. Archer confirms that his duties with respect to the 
transactions are to ensure that there is a final valuation of the 
Common Stock as of the Sale date, to supervise the payment of the True-
up and disbursement of the funds to Plan participants, and the filing 
of tax notices and final Form 5500, among other things. Mr. Archer also 
confirms that he will take all actions that are necessary and proper to 
enforce and protect the rights of the Plan participants and 
beneficiaries.
    26. In summary, it is represented that the transactions will 
satisfy the statutory criteria for an exemption under section 408(a) of 
the Act because:
    (a) The Sale will occur in the following manner:
    (1) The Employer will pay the Plan the fair market value of the 
Common Stock as of December 31, 2002, as determined by a qualified, 
independent appraiser, plus certain adjustments indicated in the Second 
Addendum to the Purchase Agreement;
    (2) The Closing Value of the Common Stock will be determined no 
later than two months after the transaction date;
    (3) As additional consideration, the Plan will receive the 
difference between the Closing Value and the amount paid for the Common 
Stock on the transaction date (i.e., the True-up), plus interest based 
on the New York prime market rate, effective on the transaction date 
until the date of the True-up; and
    (4) As collateral for the True-up, Mr. Dean Sorenson will deposit 
$100,000 in cash in an escrow account for the benefit of the Plan to 
ensure that the Employer honors its obligation under the True-up.
    (b) The Plan will not pay any commissions or other expenses with 
respect to the Sale.
    (c) The transactions have been approved by an independent fiduciary 
who will monitor such transactions on behalf of the Plan.
    (d) The Trustees have determined that the Sale and True-up will be 
appropriate transactions for the Plan and in the best interests of the 
Plan and its participants and beneficiaries.
    For Further Information Contact: Ms. Anna M.N. Mpras of the 
Department, telephone (202) 693-8565. (This is not a toll-free number.)

Hayden O. Grona IRA (the IRA) Located in San Antonio, Texas

[Application No. D-11192]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of 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 sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) through (E) of the Code, shall not apply to 
the proposed sale of certain unimproved land (the Property) by the IRA 
to Mr. Grona's children (the Children), disqualified persons with

[[Page 52796]]

respect to the IRA; \8\ provided that the following conditions are met:
---------------------------------------------------------------------------

    \8\ Pursuant to CFR 2510.3-2(d), there is no jurisdiction with 
respect to the IRA under Title I of the Act. However, there is 
jurisdiction under Title II of the Act, pursuant to section 4975 of 
the Code.
---------------------------------------------------------------------------

    (a) The sale is a one-time cash transaction;
    (b) The IRA receives the current fair market value for the 
Property, as established at the time of the sale by an independent, 
qualified appraiser; and
    (c) the IRA pays no commissions or other expenses associated with 
the sale.

Summary of Facts and Representations

    1. The IRA is an individual retirement account, as described in 
section 408(a) of the Code, which was established by Hayden O. Grona 
(Mr. Grona) in 1989. As of March 19, 2003, the IRA had approximately 
$6,701,128 in total assets. The Trust Company, N.A., located at 711 
Navarro, Suite 750, in San Antonio, Texas, is the custodian of the IRA 
(the Custodian). Mr. Grona is the trustee for the IRA (the Trustee). 
The Children are identified as Mr. Nelson Grona, Ms. Suzanne Grona 
White, and Mr. James Grona.
    2. On February 8, 2001, the IRA purchased the Property from Leigh 
Stelmach, an unrelated third party, for $1,791,403. The IRA paid the 
entire amount of the purchase price in cash at closing. At the time of 
purchase, the Property represented approximately 21% of the IRA's total 
assets. The applicant represents that the Property is not adjacent to 
any other property owned individually, or jointly, by Mr. Grona and/or 
the Children. It is represented that Mr. Grona, as the Trustee, made 
the decision to purchase the Property for the IRA as a investment, to 
be developed by the IRA into an income-producing asset. However, it is 
represented, that shortly after acquisition, Mr. Grona realized that 
the Property was not a suitable investment for the IRA. The IRA has 
paid approximately $5,484 in real estate taxes due to its ownership of 
the Property. There have been no additional expenses incurred by the 
IRA as a result of its ownership of the Property.
    3. The Property is an approximately 1,515 acre tract of unimproved 
land, located in Medina and Bandera Counties, Texas. The applicant 
represents that since the acquisition of the Property by the IRA, the 
Property has not been leased to or used by any disqualified persons, as 
defined under section 4975(e)(2) of the Code. In addition, the Property 
has not generated any income for the IRA since its acquisition.
    4. The Property was appraised on February 27, 2003 (the Appraisal). 
The Appraisal was prepared by Grady Hoermann, MSA (Mr. H), who is an 
independent, Texas state certified, general real estate appraiser. Mr. 
H is with Grady Hoermann Appraisal Service, which is located in San 
Antonio, Texas. Mr. H relied primarily on the sales comparison 
approach, with an analysis of recent sales of similar properties in the 
local geographic area. After examining available sales data, Mr. H 
determined that the Property's fair market value would be approximately 
$900 per acre.
    Accordingly, Mr. H represents that the Property had a fair market 
value of approximately $ 1,363,000, as of February 27, 2003.
    5. The applicant proposes that the Children purchase the Property 
from the IRA in a one-time cash transaction. The applicant represents 
that the proposed transaction would be in the best interest and 
protective of the IRA. The IRA will be able to dispose of the Property, 
which has depreciated in value since it was originally acquired, at its 
fair market value and will not pay any commissions or expenses 
associated with the sale. The Appraisal will be updated at the time the 
transaction is consummated. It is represented that Mr. Grona is 
currently age 68. He will be required to begin receiving distributions 
from the IRA when he attains age 70\1/2\. The applicant states that the 
sale of the Property will increase the IRA's liquidity, therefore 
putting the IRA into a better position to make distributions to Mr. 
Grona once he reaches the age of 70\1/2\. In this regard, the Children 
will pay the IRA an amount in cash equal to the current fair market 
value of the Property at the time of the transaction, based on an 
update of the Appraisal. Thus, the applicant maintains that the sale of 
the Property by the IRA to the Children will: (i) Increase the 
liquidity of the IRA's portfolio; (ii) enable the Trustee to diversify 
the assets of the IRA; (iii) enable the IRA to sell an illiquid non-
income producing asset; and (iv) facilitate future distributions of 
assets to Mr. Grona.
    6. In summary, the applicant represents that the proposed 
transaction satisfies the statutory criteria of section 4975(c)(2) of 
the Code because:
    (a) The sale will be a one-time cash transaction;
    (b) The IRA will receive the current fair market value for the 
Property, as established at the time of the sale by an independent, 
qualified appraiser;
    (c) The IRA will pay no commissions or other expenses associated 
with the sale; and
    (d) The sale will:
    (i) Provide the IRA with more liquidity and facilitate future 
distributions to Mr. Grona;
    (ii) Enable the IRA to diversify its assets;
    (iii) Allow the IRA to divest itself of a non-income producing 
asset that has depreciated in value; and
    (iv) Allow the IRA to reinvest the proceeds of the sale in other 
investments that potentially could yield greater returns.

Notice to Interested Persons

    Because Mr. Grona is the sole participant of the IRA, it has been 
determined that there is no need to distribute the notice of proposed 
exemption to interested persons (other than the Custodian). Comments 
and requests for a hearing are due thirty (30) days from the date of 
publication of this notice in the Federal Register.
    For Further Information Contact: Ekaterina A. Uzlyan of the 
Department at (202) 693-8540. (This is not a toll-free number.)

Newspaper Agency Corporation Pension Trust (the Plan) Located in Salt 
Lake City, Utah

[Application No. D-11194]

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).\9\
---------------------------------------------------------------------------

    \9\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
to the corresponding provisions of the Code.
---------------------------------------------------------------------------

I. Transactions
    If the exemption is granted, the restrictions of sections 
406(a)(1)(A)-(D), 406(b)(1), and 406(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) The leasing of certain improved real property (the Property) by the 
Plan to the Newspaper Agency Corporation (the Employer), a party in 
interest with respect to the Plan, pursuant to the terms of a lease 
(the New Lease), effective August 1, 2003; and (2) the guarantee by 
MediaNews Group, Inc. (MediaNews) and Deseret News Publishing 
Corporation (Deseret) (collectively, the Owners of the Employer) of the 
obligations of the Employer under the terms of the New Lease.

[[Page 52797]]

II. Conditions
    This exemption is conditioned upon the adherence to the material 
facts and representations described herein and upon the satisfaction of 
the following requirements:
    (a) An independent, qualified fiduciary (the I/F), acting on behalf 
of the Plan, determines that each of the proposed transactions is 
feasible, in the interest of, and protective of the Plan and the 
participants and beneficiaries of such Plan;
    (b) The I/F manages the Property on an on-going basis and is 
empowered to take whatever action it deems appropriate to serve the 
best interest of the Plan and its participants and beneficiaries, 
including but not limited to the retention, leasing, or sale of the 
Property;
    (c) The fair market value of the Property does not now and will at 
no time exceed twenty-five percent (25%) of the fair market value of 
the total assets of the Plan;
    (d) The I/F negotiates, reviews, and approves the terms of the 
subject transactions;
    (e) The terms and conditions of the subject transactions are, and 
will at all times be, no less favorable to the Plan than terms 
obtainable by the Plan under similar circumstances when negotiated at 
arm's length with an unrelated third party;
    (f) An independent, qualified appraiser determines the fair market 
value of the rental of the Property, as of August 1, 2003, and annually 
thereafter;
    (g) The I/F monitors compliance with the terms of the New Lease 
throughout the duration of such lease and is responsible for legally 
enforcing the payment of the rent and the proper performance by the 
Employer and/or the Owners of the Employer of all other obligations of 
the Employer under the terms of such lease;
    (h) The Plan incurs no fees, costs, commissions, or other charges 
or expenses as a result of its participation in the transactions which 
are the subject of this exemption, other than the fee payable to the I/
F for services rendered to the Plan and the fee payable to the 
independent, qualified appraiser for the annual appraisal of the fair 
market value of the Property;
    (i) The I/F ensures that the terms and conditions described herein 
are at all time satisfied;
    (j) The I/F will place the Property on the market for sale or lease 
to unrelated third parties, within fifteen (15) calendar days of the 
date of the publication of the grant of this proposed exemption in the 
Federal Register, and subject to the termination of the New Lease, as 
provided in section II(k), below, of this exemption, will proceed to 
sell or lease such Property to any such unrelated third party who 
presents a bona fide sale or lease offer which the I/F determines to be 
prudent and in the best interest of the Plan and its participants and 
beneficiaries; and
    (k) Notwithstanding anything to the contrary in the New Lease, the 
Plan may at any time upon six (6) month prior written notice to the 
Employer terminate the New Lease and the Employer's occupancy of the 
Property, effective as of the date specified in such notice, which date 
shall be at least six (6) months after the date such written notice is 
given to the Employer (but in no event extending the New Lease beyond 
the then current lease term.
    Effective Date: If the proposed exemption is granted, the exemption 
will be effective August 1, 2003.

Summary of Facts and Representations

    1. The Plan is a tax-qualified defined benefit pension plan 
covering 860 participants and beneficiaries, as of June 20, 2003. The 
total fair market value of the Plan's assets, as reflected in the FORM 
5500 annual report for 2001 was $37,143,730.
    2. The current trustee of the Plan is Wells Fargo Bank, N.A. (Wells 
Fargo), which is solely responsible for the investment of Plan assets. 
In addition, Wells Fargo has acknowledged and represented that it has 
accepted the appointment to serve as the I/F, acting on behalf of the 
Plan for purposes of the subject exemption. It is represented that the 
Plan is responsible for the payment of Wells Fargo's fees.
    It is represented that on April 1, 1996, Wells Fargo acquired First 
Interstate Bank, the former trustee of the Plan and the I/F under terms 
of a prior exemption,\10\ and concurrently assumed the responsibilities 
and obligations of First Interstate Bank. In this regard, it is 
represented that there was no period of time when the Plan did not have 
a bank, acting as trustee and an I/F on its behalf.
---------------------------------------------------------------------------

    \10\ Prohibited Transaction Exemption 85-37 (PTE 85-37) was 
published at 50 FR 7008 (February 19, 1985). The proposed exemption 
(D-5540) was published at 49 FR 47452 (December 4, 1984).
---------------------------------------------------------------------------

    It is represented that Wells Fargo is independent in that there are 
no common officers or directors with the Employer or the Owners of the 
Employer. Substantially less than one percent (1%) of Wells Fargo's 
total deposits and substantially less than 1% of its outstanding loans 
(both in dollar amounts) are attributable, respectively, to deposits 
and loans of the Employer and its affiliates.
    It is represented that Wells Fargo is qualified to serve as the I/F 
on behalf of the Plan in that Wells Fargo is knowledgeable as to its 
duties and responsibilities as a fiduciary under the Act and is 
knowledgeable as to the subject transactions. In addition, Wells Fargo 
represents that it has many years experience managing assets and is 
currently responsible for managing approximately $183,000,000,000 in 
assets of its customers.
    3. The Property consists of a parcel of real estate (1.208 acres) 
improved by a one-story masonry warehouse building, constructed in 
1968, and estimated to contain 52,635 square feet of space. The 
Property is located south of the downtown central business district of 
Salt Lake City, Utah. This neighborhood is primarily a general business 
area with some commercial and light industrial uses.
    The Property is situated on a railroad spur. However, it is 
represented that the Salt Lake City Mayor's office has verbally 
expressed possible plans which may lead to the elimination of such 
railroad spur.
    The Plan owns the Property, unencumbered by any outstanding 
mortgage or any other indebtedness. As of December 31, 2001, the fair 
market value of the Property constituted 4.361% of the total assets of 
the Plan.
    The Plan purchased the Property in July of 1971, from Wycoff 
Warehouse, Inc., an unrelated third party, for a purchase price of 
$259,000. The Plan began leasing the Property to the Employer, pursuant 
to the terms of a lease (the Original Lease) entered into on July 21, 
1971. The applicant represents that the Original Lease satisfied the 
conditions provided by section 414(c) of the Act, because: (1) The 
Original Lease was entered into before July 1, 1974, when such a lease 
was not a prohibited transaction within the meaning of section 503(b) 
of the Code; and (2) the terms of the Original Lease were as favorable 
to the Plan as those of an arm's length transaction with an unrelated 
party.\11\
---------------------------------------------------------------------------

    \11\ Section 414(c)(2) of the Act provided a statutory exemption 
for a transitional period ending June 30, 1984, for certain leases 
meeting specified conditions. The Department expresses no opinion, 
herein, as to the applicability of section 414(c)(2) of the Act to 
the past leasing of the Property by the Plan to the Employer under 
the terms of the Original Lease.
---------------------------------------------------------------------------

    On August 1, 1983, the Plan and the Employer entered into another 
lease (the Old Lease) which superseded the Original Lease. With regard 
to the Old Lease between the Plan and the Employer, the Department 
issued, in 1985, a retroactive prohibited

[[Page 52798]]

transaction exemption, PTE 85-37, effective, as of July 1, 1984. The 
Old Lease provided for an initial ten (10) year rental term with two 
(2) additions renewal period of ten (10) years each, exercisable at the 
discretion of the Employer. In July 1993, the Employer opted to renew 
the Old Lease. On July 31, 2003, rather than extend the Old Lease for 
an addition term of ten (10) years, the Employer elected to terminate 
the Old Lease. On August 1, 2003, the Employer and the Plan entered 
into the New Lease.
    4. The New Lease provides for an initial term of three (3) years 
with up to (4) four additional one (1) year extension options 
exercisable by the Employer, subject to the approval of the I/F. 
Notwithstanding anything to the contrary in the New Lease, the Plan may 
at any time upon six (6) month prior written notice to the Employer 
terminate the New Lease and the Employer's occupancy of the Property, 
effective as of the date specified in such notice. Such date shall be 
at least six (6) months after the date such written notice is given to 
the Employer, but in no event extending the New Lease beyond the then 
current lease term.
    The initial rental amount under the provisions of the New Lease 
will be $16,448.42 a month ($197,381 annually). In this regard, for the 
purpose of portfolio management and lease negotiation, Mr. Howard J. 
Layton (Mr. Layton), MAI, CCIM, CRE, (dba The Appraisal Source, L.L.C.) 
prepared an appraisal report estimating the ``as is'' market value of 
the Property, as of November 26, 2002, the date the Property was 
inspected. In the opinion of Mr. Layton, as of November 26, 2002, the 
fee simple ``as is'' market value of the Property was $1,700,000. Based 
on the terms of the Old Lease, Mr. Layton further concluded that, as of 
November 26, 2002, the annual rental rate for the Property would be 
$197,381 ($3.75/SF x 52,635 SF in the Property) rounded to 
approximately $16,448 a month. After examining a copy of the New Lease, 
Mr. Layton, represented in a letter dated July 28, 2003, that there is 
no value impact to the subject Property, as a result of the terms of 
the New Lease.
    Mr. Layton is qualified to serve as an appraiser of real property 
in that he is a designated MAI member of the Appraisal Institute, a 
CCIM member of the Commercial Investment Real Estate Institute, a CRE 
member of the Counselors of Real Estate, and a certified general 
appraiser for the state of Utah. In addition, Mr. Layton has been 
engaged as a real estate appraiser since 1983.
    Mr. Layton represents that he is independent in that he is not 
related to the Employer, the Owners of the Employer, or their 
principals. Further, Mr. Layton has no present or prospective interest 
in the Property and has no personal interest or bias with respect to 
the parties involved. Mr. Layton's compensation was not contingent on 
reporting a predetermined value or a requested minimum valuation.
    The New Lease also provides for a periodic adjustment annually to 
the rental amount, so that the rent will be no less than the fair 
market rental value of the Property at the time of each adjustment. 
Such adjustments will be made by retaining a qualified, independent 
appraiser, selected by Wells Fargo. The cost of each such appraisal 
will be paid for by the Plan. It is represented that in no event shall 
the rental amount paid by the Employer be reduced below $16,448 a month 
during the term of the New Lease.
    The New Lease is a triple-net lease, such that the Employer is 
obligated to pay all taxes levied against the Property, all utility 
charges, the cost of installing any fixtures and equipment, all 
maintenance and repair costs, and premiums for both liability and 
casualty insurance for the benefit of the Plan as an additional named 
insured. All trade fixtures and equipment installed by the Employer 
remain the property of the Employer and may be removed by the Employer, 
who must repair any damage caused by such removal. In addition, the 
Employer has agreed to indemnify the Plan from all liabilities for 
personal injury or property damage occurring on the Property and not 
caused by the negligence of the Plan.
    5. The Employer and sponsor of the Plan is engaged in the business 
of producing two (2) daily newspapers seven (7) days a week. It is 
represented that the Employer uses the Property to receive (via the 
railroad spur on the Property and by truck) newsprint and other supply 
items for printing newspapers and related functions and to store such 
supplies. It is represented that the Employer has consistently complied 
with the terms of both the Original Lease and the Old Lease in a timely 
manner.
    6. The Owners of the Employer are each engaged in the newspaper 
publishing business. MediaNews owns 100 percent (100%) of Kearns-
Tribune, LLC (Kearns-Tribune), which owns 50 percent (50%) of the stock 
of the Employer. MediaNews purchased its ownership in Kearns-Tribune 
MediaNews from AT&T Corporation. The remaining 50 percent (50%) of the 
stock of the Employer is owned by Deseret. The Owners of the Employer 
have guaranteed performance of all conditions of the New Lease, 
including the payment of rent, by the Employer and have agreed to 
perform such conditions themselves, if the Employer is unable to do so. 
Wells Fargo has reviewed various information and financial data on 
MediaNews and Deseret and believes that each is creditworthy.
    7. The Employer is a party in interest with respect to the Plan, 
pursuant to section 3(14)(C) of the Act. The Owners of the Employer are 
parties in interest with respect to the Plan, pursuant to section 
3(14)(E) of the Act. The Plan and the Employer entered into the New 
Lease, effective August 1, 2003, on the condition that the proposed 
exemption is granted. In addition the Owners of the Employer have 
guaranteed the obligations of the Employer under such New Lease. 
Accordingly, the applicant has requested relief from section 
406(a)(1)(A) through (D), 406(b)(1) and 406(b)(2) of the Act and 4975 
of the Code by reason of 4975(c)(A)(A) through (E) for both 
transactions, the leasing of the Property by the Employer and the 
guarantee by the Owners of the Employer.
    8. It is represented that the proposed transactions are 
administratively feasible in that the Property has been previously 
leased by the Employer from the Plan for an extended period of time, 
pursuant to PTE 85-37. Further, no modification of the Property would 
be required to accommodate the Employer who is the current tenant. In 
addition, the appraisal of the Property, the drafting of the New Lease, 
and the other administrative requirements necessary to continue the 
leasing of the Property to the Employer by the Plan have already been 
accomplished.
    9. It is represented that there are sufficient safeguards in the 
proposed exemption for the protection of the Plan and its participants 
and beneficiaries. Wells Fargo has reviewed the terms of the New Lease 
and compared such terms with similar leases between unrelated parties. 
Further, Wells Fargo has agreed to monitor the New Lease and the 
conditions of the exemption on behalf of the Plan throughout the term 
of the New Lease and has authority to take all appropriate actions to 
safeguard the interests of the Plan.
    It is represented that Wells Fargo has examined the Plan's overall 
investment portfolio, considered the Plan's liquidity and 
diversification requirements in light of the proposed leasing, and has 
determined that the proposed leasing complies with the Plan's 
investment

[[Page 52799]]

objectives and policies. In this regard, of the total assets of the 
Plan an estimated 4.361 percent (4.361%) will be involved in the 
leasing of the Property between the Plan and the Employer. By 
diversifying a small percentage of the total Plan assets into real 
estate, Wells Fargo asserts that it is taking steps to protect the Plan 
and its participants and beneficiaries from fluctuations in the stock 
and bond markets.
    10. The exemption contains additional protections for the Plan and 
its participants and beneficiaries. In this regard, the exemption 
contains a condition that the Plan may at any time upon six (6) months 
prior written notice to the Employer terminate the New Lease and the 
Employer's occupancy of the Property. Further, the exemption contains a 
requirement that Wells Fargo, acting as the I/F on behalf of the Plan, 
place the Property on the market for sale or lease to an unrelated 
third party, within fifteen (15) calendar days of the date of the 
publication of the grant of this proposed exemption in the Federal 
Register, and proceed to sell or lease such Property to any such 
unrelated third party who presents a bona fide sale or lease offer 
which Wells Fargo determines to be prudent and in the best interest of 
the Plan and its participants and beneficiaries. It is represented that 
the Employer may build a new facility within the next two (2) years, 
and at the conclusion of the initial term of the New Lease, may not 
exercise an option to renew the lease on the Property. Accordingly, the 
conditions and requirements of the exemption assure that the Plan will 
have sufficient time to search for a replacement tenant or a purchaser, 
and will have the ability to terminate the New Lease within a 
reasonable period.
    11. Wells Fargo has stated that it believes the proposed leasing is 
in the best interest of the Plan and its participants and 
beneficiaries. In this regard, according to Wells Fargo, the estimated 
average annual total rate of return to the Plan from the Property over 
the past seven (7) years, based on both unrealized gain and income has 
been 13.31 percent (13.31%). Wells Fargo believes that rental payments 
to the Plan will be maximized by continuing to lease the Property to 
the Employer at a fair market rental amount (adjusted annually). In 
this regard, Wells Fargo estimates an annual rate of return for the 
Property in the coming year of approximately 11.61 percent (11.61%), 
even assuming that there is no increase in the fair market value of the 
Property. Accordingly, Wells Fargo has concluded that by leasing the 
Property to the Employer, the Plan will gain uninterrupted occupancy of 
the Property for an extended period of time and continued maintenance 
of the Property by a responsible and financially viable tenant. 
Further, the Plan will avoid additional expenses for modifications to 
the Property, and will avoid lost profits.
    12. In summary, the applicant represents that the proposed 
transactions satisfy the criteria for exemption, as set forth in 
section 408(a) of the Act, because: (a) The Employer will pay the fair 
market rental rate, as determined by a independent, qualified 
appraiser; (b) the rental rate under the terms of the New Lease will be 
adjusted every year to reflect the fair rental value of the Property at 
the beginning of each such period, as determined by an independent, 
qualified appraiser, but will never be less than $16,448 a month; (c) 
the New Lease does not require the Plan to pay any costs relating to 
the Property and requires the Employer to indemnify the Plan for 
certain liabilities relating to the Property; (d) the Employer will 
maintain both liability and casualty insurance, naming the Plan as an 
additional insured, with respect to the Property; (e) Wells Fargo, 
acting as the trustee and I/F with respect to the Plan, represents that 
the proposed transactions are in the best interests of the Plan and its 
participants and beneficiaries; (f) Wells Fargo will monitor the New 
Lease throughout its duration on behalf of the Plan, taking any 
appropriate actions to safeguard the interests of the Plan; (g) Wells 
Fargo will place the Property on the market for sale or lease to 
unrelated third parties, within fifteen (15) calendar days of the date 
of the publication of the grant of this proposed exemption in the 
Federal Register, and, subject to six (6) months prior written notice 
to the Employer, will proceed to sell or lease such Property to any 
such unrelated third party who presents a bona fide sale or lease offer 
which Wells Fargo determines to be prudent and in the best interest of 
the Plan and its participants and beneficiaries; and (h) the Plan may 
at any time upon six (6) months prior written notice to the Employer 
terminate the New Lease and the Employer's occupancy of the Property.

For Further Information Contact: Angelena C. Le Blanc, 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 2nd day of September, 2003.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, Department of Labor.
[FR Doc. 03-22622 Filed 9-4-04; 8:45 am]

BILLING CODE 4510-29-P