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Employee Benefits Security Administration

EBSA Federal Register Notice

Proposed Exemptions; BNP Paribas S.A., (BNP Paribas) and Its French Affiliates (the French Affiliates) [05/13/2005]

[PDF Version]

Volume 70, Number 92, Page 25601-25614

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. D-11249, et al.]

 
Proposed Exemptions; BNP Paribas S.A., (BNP Paribas) and Its 
French Affiliates (the Fren

[[Page 25602]]

ch Affiliates)

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.

BNP Paribas S.A., (BNP Paribas) and Its French Affiliates (the French 
Affiliates) Located in Paris, France

[Application No. D-11249]

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).\1\
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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 the corresponding provisions of the Code.
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Section I. Covered Transactions
    A. If the exemption is granted, the restrictions of section 
406(a)(1)(A) through (D) 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 any purchase 
or sale of a security between BNP Paribas, a bank established under the 
laws of France and any French Affiliate or branch of BNP Paribas which 
is a bank regulated by the Commission Bancaire (CB) or a broker-dealer 
holding a securities dealers license issued by the Comit[eacute] des 
Etablissements de Cr[eacute]dit et des Enterprises d'Investissement 
(CECEI) or registered with the Autorite des March[eacute]s Financiers 
(AMF) (each, a BNP Entity), and employee benefit plans (the Plans) with 
respect to which the BNP Entity is a party in interest, including 
options written by a Plan or the BNP Entity, provided that the 
following conditions and the General Conditions of Section II, are 
satisfied:
    (1) The BNP Entity customarily purchases and sells securities for 
its own account in the ordinary course of its business as a bank or 
broker-dealer, as the case may be;
    (2) The terms of any transaction are at least as favorable to the 
Plan as those which the Plan could obtain in a comparable arm's length 
transaction with an unrelated party; and
    (3) Neither the BNP Entity nor any of its affiliates has 
discretionary authority or control with respect to the investment of 
the Plan assets involved in the transaction, or renders investment 
advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to 
those assets, and the BNP Entity is a party in interest or disqualified 
person with respect to the Plan assets involved in the transaction 
solely by reason of section 3(14)(B) of the Act or section 
4975(e)(2)(B) of the Code, or by reason of a relationship to a person 
described in such sections. For purposes of this paragraph, the BNP 
Entity shall not be deemed to be a fiduciary with respect to Plan 
assets solely by reason of providing securities custodial services for 
a Plan.
    B. If the exemption is granted, the restrictions of sections 
406(a)(1)(A) through (D) 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 (D) of the Code, shall not apply to 
any extension of credit to a Plan by a BNP Entity to permit the 
settlement of securities transactions, regardless of whether they are 
effected on an agency or a principal basis, or in connection with the 
writing of options contracts, provided that the following conditions 
and the General Conditions of Section II, are satisfied:
    (1) The BNP Entity is not a fiduciary with respect to the Plan 
assets involved in the transaction, unless no interest or other 
consideration is received by the BNP Entity or any of its affiliates in 
connection with such extension of credit; and
    (2) Any extension of credit would be lawful under the Securities 
Exchange Act of 1934, as amended (the 1934 Act), and any rules or 
regulations thereunder, if the 1934 Act, rules or regulations were 
applicable and is lawful under applicable foreign law.
    C. If the exemption is granted, the restrictions of sections 
406(a)(1)(A) through (D) 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,

[[Page 25603]]

shall not apply to the lending of securities that are assets of a Plan 
to a BNP Entity, provided that the following conditions and the General 
Conditions of Section II are satisfied:
    (1) Neither the BNP Entity nor any of its affiliates has 
discretionary authority or control with respect to the investment of 
Plan assets involved in the transaction, or renders investment advice 
(within the meaning of 29 CFR 2510.3-21(c)) with respect to those 
assets;
    (2) The Plan receives from the BNP Entity, either by physical 
delivery or by book entry in a securities depository located in the 
U.S., by the close of business on the day on which the securities lent 
are delivered to the BNP Entity, collateral consisting of U.S. 
currency, securities issued or guaranteed by the U.S. Government or its 
agencies or instrumentalities, or irrevocable U.S. bank letters of 
credit issued by persons other than the BNP Entity (or any of its 
affiliates), or any combination thereof having, as of the close of 
business on the preceding business day, a market value (or, in the case 
of letters of credit, a stated amount) equal to not less than 100 
percent of the then market value of the securities lent. All collateral 
shall be held in U.S. dollars, or dollar denominated securities or bank 
letters of credit and shall be held in physical or book entry form in 
the United States.
    (3) The loan is made pursuant to a written loan agreement (the Loan 
Agreement), which may be in the form of a master agreement covering a 
series of securities lending transactions, and which contains terms at 
least as favorable to the Plan as those the Plan could obtain in an 
arm's length transaction with an unrelated party;
    (4) In return for lending securities, the Plan either (a) receives 
a reasonable fee which is related to the value of the borrowed 
securities and the duration of the loan, or (b) has the opportunity to 
derive compensation through the investment of cash collateral. In the 
latter case, the Plan may pay a loan rebate or similar fee to the BNP 
Entity, if such fee is not greater than the Plan would pay an unrelated 
party in a comparable arm's length transaction with an unrelated party;
    (5) The Plan receives at least the equivalent of all distributions 
made to holders of the borrowed securities during the term of the loan, 
including, but not limited to, cash dividends, interest payments, 
shares of stock as a result of stock splits and rights to purchase 
additional securities that the Plan would have received (net of tax 
withholdings) had it remained the record owner of such securities. 
Where dividends and other distributions on foreign securities payable 
to a lending Plan are subject to foreign tax withholdings, the BNP 
Entity will put the Plan back in at least as good a position as it 
would have been in had it not lent the securities;
    (6) If the market value of the collateral as of the close of 
trading on a business day falls below 100% of the market value of the 
borrowed securities as of the close of trading on that day, the BNP 
Entity delivers additional collateral, by the close of business on the 
following business day, to bring the level of the collateral back to at 
least 100% of the market value of all the borrowed securities as of 
such preceding day. Notwithstanding the foregoing, part of the 
collateral may be returned to the BNP Entity if the market value of the 
collateral exceeds 100% of the market value of the borrowed securities, 
as long as the market value of the remaining collateral equals at least 
100% of the market value of the borrowed securities;
    (7) Prior to entering into a Loan Agreement, the BNP Entity 
furnishes to the independent Plan fiduciary, who is making decisions on 
behalf of the Plan with respect to the lending of securities: (a) The 
most recent available audited and unaudited statements of its financial 
condition, (b) the most recent available unaudited statement of its 
financial condition (if more recent than the audited statement), and 
(c) a representation by the BNP Entity that, as of each time it borrows 
securities, there has been no material adverse change in its financial 
condition since the date of the most recently furnished financial 
statement that has not been disclosed to the Plan fiduciary. Such 
representation may be made by the BNP Entity's agreeing that each loan 
of securities shall constitute a representation that there has been no 
such material adverse change;
    (8) The Loan Agreement and/or any securities loan outstanding may 
be terminated by the Plan at any time, whereupon the BNP Entity 
delivers certificates for securities identical to the borrowed 
securities (or the equivalent thereof in the event of reorganization, 
recapitalization or merger of the issuer of the borrowed securities) to 
the Plan within (a) the customary delivery period for such securities, 
(b) five business days, or (c) the time negotiated for such delivery by 
the Plan and the BNP Entity, whichever is lesser, or, alternatively, 
such period as permitted by Prohibited Transaction Class Exemption 
(PTCE) 81-6 (46 FR 7527, January 23, 1981, as amended at 52 FR 18754, 
May 19, 1987), as it may be amended or superseded; \2\
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    \2\ PTCE 81-6 provides an exemption under certain conditions 
from section 406(a)(1)(A) through (D) of the Act and the 
corresponding provisions of section 4975(c) of the Code for the 
lending of securities that are assets of an employee benefit plan to 
a U.S. broker-dealer registered under the 1934 Act (or exempted from 
registration under the 1934 Act as a dealer in exempt Government 
securities, as defined therein).
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    (9) In the event that the loan is terminated and the BNP Entity 
fails to return the borrowed securities or the equivalent thereof 
within the time described in paragraph (8) above, then the Plan may 
purchase securities identical to the borrowed securities (or their 
equivalent as described above) and may apply the collateral to the 
payment of the purchase price, any other obligations of the BNP Entity 
under the Loan Agreement, and any expenses associated with the sale 
and/or purchase. The BNP Entity is obligated to pay to the Plan the 
amount of any remaining obligations and expenses not covered by the 
collateral (the value of which shall be determined as of the date the 
borrowed securities should have been returned to the Plan), plus 
interest at a reasonable rate, as determined in accordance with an 
independent market source. If replacement securities are not available, 
the BNP Entity will pay the Plan an amount equal to (a) the value of 
the securities as of the date such securities should have been returned 
to the Plan, plus (b) all the accrued financial benefits derived from 
the beneficial ownership of such borrowed securities as of such date, 
plus (c) interest at a reasonable rate determined in accordance with an 
independent market source from such date to the date of payment. The 
amounts paid shall be reduced by the amount or value of the collateral 
determined as of the date the borrowed securities should have been 
returned to the Plan. The BNP entity is obligated to pay, under the 
terms of the Loan Agreement, and does pay, to the Plan, the amount of 
any remaining obligations and expenses not covered by the collateral, 
plus interest at a reasonable rate. Notwithstanding the foregoing, the 
BNP Entity may, in the event it fails to return borrowed securities as 
described above, replace non-cash collateral with an amount of cash not 
less than the then current market value of the collateral, provided 
that such replacement is approved by the independent Plan fiduciary; 
and
    (10) The independent Plan fiduciary maintains the situs of the Loan 
Agreement in accordance with the indicia of ownership requirements 
under section 404(b) of the Act and the

[[Page 25604]]

regulations promulgated under 29 CFR 2550.404(b)-1. However, the BNP 
Entity shall not be subject to the civil penalty, which may be assessed 
under section 502(i) of the Act, or to the taxes imposed by section 
4975(a) and (b) of the Code, if the independent Plan fiduciary fails to 
comply with the requirements of 29 CFR 2550.404(b)-1.
    If the BNP Entity fails to comply with any condition of this 
exemption in the course of engaging in a securities lending 
transaction, the Plan fiduciary which caused the Plan to engage in such 
transaction shall not be deemed to have caused the Plan to engage in a 
transaction prohibited by section 406(a)(1)(A) through (D) of the Act 
solely by reason of the failure on the part of the BNP Entity to comply 
with the conditions of the exemption.
Section II. General Conditions
    A. The BNP Entity is a registered broker-dealer or bank subject to 
regulation by a governmental agency, as described in Section III.B, and 
is in compliance with all applicable rules and regulations thereof in 
connection with any transactions covered by this exemption.
    B. The BNP Entity, in connection with any transactions covered by 
this exemption, is in compliance with all requirements of Rule 15a-6 of 
the 1934 Act, and Securities and Exchange Commission (SEC) 
interpretations thereof, providing foreign affiliates a limited 
exemption from U.S. broker-dealers registration requirements (17 CFR 
240.15a-6).
    C. Prior to the transaction, the BNP Entity enters into a written 
agreement with the Plan in which the BNP Entity consents to the 
jurisdiction of the courts of the United States for any civil action or 
proceeding brought in respect of the subject transactions.
    D. Each BNP Entity located in the United States is fully 
responsible for any judgment rendered by a United States court against 
BNP Paribas, and the U.S. assets of BNP Paribas, including those of any 
BNP Entities located in the U.S., are subject to the enforcement of any 
such judgment.
    E. The BNP Entity maintains, or causes to be maintained, within the 
United States for a period of six years from the date of the covered 
transactions, such records as are necessary to enable the persons 
described in paragraph F. of this Section II to determine whether the 
conditions of this exemption have been met, except that:
    (1) If the records necessary to enable the persons described in 
paragraph F. to determine whether the conditions of the exemption have 
been met are lost or destroyed prior to the end of such year period, 
due to circumstances beyond the control of the BNP Entity, then no 
prohibited transaction will be considered to have occurred solely on 
the basis of the unavailability of those records; and
    (2) No party in interest, other than the BNP Entity and its 
affiliates, shall be subject to the civil penalty that may be assessed 
under section 502(i) of the Act or to the taxes imposed by section 
4975(a) and (b) of the Code if the records are not maintained or are 
not available for examination as required by paragraph F. of this 
Section II.
    F. Notwithstanding the provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the BNP Entity makes the records referred to 
above in paragraph E. of this Section II, unconditionally available for 
examination during normal business hours at their customary location to 
the following persons or an authorized representative thereof:
    (1) The Department, the Internal Revenue Service or the SEC;
    (2) Any fiduciary of a participating Plan;
    (3) Any contributing employer to a Plan;
    (4) Any employee organization any of whose members are covered by a 
Plan; and
    (5) Any participant or beneficiary of a Plan.
    However, none of the persons described above in paragraphs (2)-(5) 
of this paragraph F. shall be authorized to examine trade secrets of 
the BNP Entity, or any commercial or financial information which is 
privileged or confidential.
    G. Prior to any Plan's approval of any transaction with a BNP 
Entity, the Plan is provided with copies of the proposed and final 
exemption with respect to the exemptive relief granted herein.
Section III. Definitions
    For purposes of this proposed exemption,
    A. The term ``affiliate'' of another person shall include:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, or partner, employee or relative (as 
defined in section 3(15) of the Act) of such other person; and
    (3) Any corporation, partnership or other entity of which such 
other person is an officer, director or partner. (For purposes of this 
definition, the term ``control'' means the power to exercise a 
controlling influence over the management or policies of a person other 
than an individual.)
    B. The term ``BNP Entity'' shall mean BNP Paribas or any branch or 
affiliate thereof that is a broker-dealer or bank subject to regulation 
by the (1) CB or (2) AMF.
    C. The term ``security'' shall include equities, fixed income 
securities, options on equity and on fixed income securities, 
government obligations, and any other instrument that constitutes a 
security under U.S. securities laws. The term ``security'' does not 
include swap agreements or other notional principal contracts.

Summary of Facts and Representations

    1. BNP Paribas, which maintains its principal offices in Paris, 
France, is a publicly-held French bank that operates primarily in 
France. BNP Paribas has additional activities in major banking and 
securities markets worldwide. Through its branch offices and 
affiliates, BNP Paribas provides a full line of depository, lending and 
investment services to a broad base of clients and is engaged in a wide 
range of banking, financial and related activities. As of December 31, 
2004, BNP Paribas had consolidated assets of Euro 905.9 billion ($1.231 
trillion) and stockholders equity of Euro 30.2 billion ($41.02 
billion). As of close of business on March 29, 2005, BNP Paribas had a 
market capitalization of over Euro 49 billion (over $63 billion). The 
banking activities of BNP Paribas and its French Affiliates are 
regulated by CB. The securities activities of BNP Paribas are regulated 
by the AMF.
    As of December 31, 2004, BNP Paribas reported that its presence in 
the United States (excluding Banc West Corporation and its 
subsidiaries) was valued in excess of $185 billion. Because it is a 
single legal entity acting through various branches and other 
subsidiaries in various locations, including the United States, BNP 
Paribas states that each U.S.-based BNP Entity would be fully 
responsible for any judgment rendered by a U.S. court against BNP 
Paribas, and the U.S. assets of BNP Paribas, including those of any BNP 
Entities, located in the U.S., would likely be subject to the 
enforcement of any such judgment.\3\
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    \3\ Alternatively, BNP Paribas has advised that if a judgment by 
a U.S. court is rendered against a French Affiliate, the judgment 
would be enforceable in France if the suing party has obtained an 
exequatur (enforcement order) from a French court. Before it issues 
an exequatur, the French court must determine that the judgment of 
the U.S. court has satisfied the following requirements: (a) The 
court must have subject-matter and personal jurisdiction over the 
litigation; (b) the court proceedings must have been properly 
followed (i.e., the proceedings must have conformed to basic French 
legal notions of fundamental fairness and due process): (c) The 
court must have used the correct choice of law; (d) enforcement of 
the judgment must be consistent with French law; and (e) the 
substance of the judgment must not be directly contrary to French 
law. According to BNP Paribas, judgments from U.S. courts typically 
satisfy these five requirements and French courts rarely have 
refused to grant exequaturs to enforce U.S. judgments.

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[[Page 25605]]

    2. BNP Paribas seeks prospective exemptive relief from the 
Department to permit certain principal transactions, extensions of 
credit, and securities borrowing transactions between employee benefit 
plans subject to the Act and BNP Paribas acting through its French 
Affiliates and French branches. The proposed exemption would solely 
cover transactions affected by BNP Paribas and its French Affiliates 
that are located in France and regulated by the CB or AMF. Aside from 
BNP Paribas, such French Affiliates currently include BNP Paribas 
Arbitrage of Paris, France which is regulated by the Autorit[eacute] de 
March[eacute]s Financiers of France.
    BNP Paribas requests an individual exemption on behalf of itself, 
its French Affiliates, and others, which may in the future, be subject 
to governmental regulation in France, to engage with Plans in the 
securities transactions described herein because such entities may be 
parties in interest with respect to the Plans under the Act, by virtue 
of being fiduciaries (for assets of the Plans other than those involved 
in the transactions) or service providers to such Plans, or by virtue 
of their relationships to such fiduciaries or service providers.
    3. BNP Paribas is subject to regulations established by the CB and 
the AMF governing minimum capitalization, reporting requirements, 
periodic examinations, client money and safe custody rules and books 
and records requirements with respect to client accounts. These 
regulations and the regulations established by the SEC share a common 
objective of protecting investors through regulation of the securities 
industry. The regulations of the CB and the AMF require BNP Paribas to 
maintain a positive tangible net worth and be able to meet its 
obligations as they may fall due. These rules establish comprehensive 
financial resource and reporting and disclosure requirements regarding 
capital adequacy. In addition, the regulations impose requirements with 
respect to risk management, internal controls and transaction reporting 
and record keeping and require such records to be produced at the 
request of the CB and the AMF. Finally, these regulations impose 
potential fines and penalties, which establish a comprehensive 
disciplinary framework.
    4. In addition to the requirements and protections imposed under 
the regulations of the CB and the AMF, BNP Paribas will comply with all 
applicable provisions of Rule 15a-6 of the 1934 Act, as amended. In 
lieu of registration with the SEC, Rule 15a-6 provides an exemption 
from SEC broker-dealer registration for a foreign broker-dealer that 
induces or attempts to induce the purchase or sale of any security 
(including over-the-counter equity and debt options) by a ``U.S. 
institutional investor'' or a ``major U.S. institutional investor,'' 
provided that the foreign broker-dealer, among other things, enters 
into these transactions through a U.S. registered broker or dealer 
intermediary.
    The term ``U.S. institutional investor'', as defined in Rule 15a-
6(b)(7), includes an employee benefit plan within the meaning of the 
Act if:
    (a) The investment decision is made by a plan fiduciary, as defined 
in section 3(21) of the Act, which is either a bank, savings and loan 
association, insurance company or registered investment adviser, or
    (b) The employee benefit plan has total assets in excess of $5 
million, or
    (c) The employee benefit plan is a self-directed plan with 
investment decisions made solely by persons that are ``accredited 
investors,'' as defined in Rule 501(a)(1) of Regulation D of the 
Securities Act of 1933, as amended.
    The term ``major U.S. institutional investor'' is defined in Rule 
15a-6(b)(4), as any entity that owns or controls (or, in the case of an 
investment adviser, has under management) in excess of $100 million 
aggregate financial assets.\4\ BNP Paribas represents that the 
intermediation of the U.S. registered broker or dealer imposes upon the 
foreign broker-dealer the requirement that the securities transaction 
be effected in accordance with a number of U.S. securities laws and 
regulations applicable to U.S. registered broker-dealers.
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    \4\ Note that a SEC No-Action Letter has expanded the categories 
of entities that qualify as ``major U.S. institutional investors.'' 
See SEC No-Action Letter issued to Cleary, Gottlieb, Steen & 
Hamilton on April 9, 1997 (the April 9, 1997 No-Action Letter).
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    5. BNP Paribas represents that under Rule 15a-6 of the 1934 Act, a 
foreign broker-dealer that induces or attempts to induce the purchase 
or sale of any security by a U.S. institutional or major institutional 
investor in accordance with Rule 15a-6 must, among other things:
    (a) Provide written consent to service of process for any civil 
action brought by, or proceeding before the SEC or self-regulatory 
organization;
    (b) Provide the SEC with any information or documents within its 
possession, custody or control, any testimony of any such foreign 
associated persons, and any assistance in taking the evidence of other 
persons, wherever located, that the SEC requests and that relates to 
transactions effected pursuant to the Rule;
    (c) Rely on the U.S. registered broker or dealer through which the 
principal transactions with the U.S. institutional and major 
institutional investors are effected to (among other things):
    (1) Effect the transactions, other than negotiating their terms;
    (2) Approve foreign associated personnel that contact U.S. 
investors to verify that such individuals are not subject to a 
``statutory disqualification'', as defined in Section 3(a)(39) of the 
1934 Act or the non-U.S. equivalent of such disqualification (e.g., 
expulsion or suspension by a securities regulator).
    (3) Issue all required confirmations and statements;
    (4) As between the foreign broker-dealer and the U.S. registered 
broker or dealer, extend or arrange for the extension of credit in 
connection with the transactions;
    (5) Maintain required books and records relating to the 
transactions, including those required by Rules 17a-3 (Records to be 
Made by Certain Exchange Members) and 17a-4 (Records to be Preserved by 
Certain Exchange Members, Brokers and Dealers) of the 1934 Act; \5\
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    \5\ BNP Paribas represents that all such requirements relating 
to recordkeeping of principal transactions would be applicable to 
any BNP Entity in a transaction that would be covered by this 
proposed exemption.
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    (6) Receive, deliver, and safeguard funds and securities in 
connection with the transactions on behalf of the U.S. institutional 
investor or major U.S. institutional investor in compliance with Rule 
15c3-3 (Customer Protection--Reserves and Custody of Securities) of the 
1934 Act; \6\ and
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    \6\ Under certain circumstances described in the April 9, 1997 
Letter, (e.g., clearance and settlement transactions), there may be 
direct transfers of funds and securities between a Plan and a BNP 
Entity. Please note that in such situations (as in other situations 
covered by Rule 15a-6), the U.S. broker-dealer will not be acting as 
a principal with respect to any duties it is required to undertake 
pursuant to Rule 15a-6.
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    (7) Participate in all oral communications (e.g., telephone calls), 
subject to certain exceptions, between the foreign associated person 
and the U.S. institutional investor (not the major

[[Page 25606]]

U.S. institutional investor), and accompany the foreign associated 
person on all visits with U.S. institutional investors. By virtue of 
this participation, the U.S. registered broker-dealer would become 
responsible for the content of all these communications.
Description of the Exemption Transactions
    6. The exemption will apply to transactions involving principal 
transactions, extensions of credit and securities borrowing 
transactions that would be exempt under Prohibited Transaction Class 
Exemption 75-1 (PTCE 75-1, 40 FR 50845, October 31, 1975) and 
Prohibited Transaction Class Exemption 81-6 (PTCE 81-6, 46 FR 7527, 
January 23, 1981, amended at 52 FR 18754, May 19, 1987) but for the 
fact that BNP Paribas and its French Affiliates are not supervised by 
the U.S. government or registered under the Securities Exchange Act in 
the manner required under PTCE 75-1 and PTCE 81-6.
    The exemption will be applicable only to transactions effected by 
BNP Paribas or any affiliated French broker-dealers holding a 
securities dealers license issued by the CECEI or subject to the rules 
and regulations of the CB and the AMF and compliant with Rule 15a-6.

Principal Transactions

    7. BNP Paribas represents that in the ordinary course of business, 
it customarily operates as a trader, dealer and market maker in 
securities markets wherein it purchases and sells securities for its 
own account and engages in purchases and sales of securities with its 
clients. Such trades are referred to as principal transactions. Part II 
of PTCE 75-1 provides exemptive relief from section 406(a) of the Act 
and section 4975(c)(1)(A) through (D) of the Code for principal 
transactions between plans and U.S. banks and broker-dealers which are 
registered under the 1934 Act and are parties in interest with respect 
to such plans, provided all requirements stated in part II are 
satisfied. In the absence of an exemption for principal transactions, 
such as PTCE 75-1, those responsible for trading activities on behalf 
of plan investors would be prevented from engaging in transactions with 
those broker-dealers and banks that provide the markets for the 
securities and are most capable of handling such transactions. Like the 
U.S. dealer markets, international equity and debt markets, including 
the options markets, are no less dependent on a willingness of dealers 
to trade as principals.
    Over the past decade, plans have increasingly invested in foreign 
equity and debt securities, including foreign government securities. 
Plans seeking to enter into such investments may wish to increase the 
number of trading partners available to them by trading with foreign 
banks, such as BNP Paribas and certain of its French Affiliates. 
However, where BNP Paribas or certain of its French Affiliates provide 
services to such Plans which are covered by the Act, principal 
transactions with BNP Paribas or certain of its French Affiliates would 
be prohibited by the Act. Thus, the exemptive relief afforded U.S. 
banks and U.S. broker-dealers by PTCE 75-1 would not be available with 
respect to BNP Paribas because that class exemption is limited to (a) 
banks supervised by the U.S. or a State thereof and (b) broker-dealers 
registered with the SEC under the 1934 Act.\7\ The business carried out 
by BNP Paribas and its French Affiliates is not so supervised or 
registered.
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    \7\ The Department notes that the proposed principal 
transactions are subject to the general fiduciary responsibility 
provisions of part 4 of Title I of the Act. Section 404(a) of the 
Act requires, among other things, that a fiduciary of a plan act 
prudently and solely in the interest of the participants and 
beneficiaries of a plan, when making investment decisions on behalf 
of the plan.
---------------------------------------------------------------------------

    Because of the conditions of PTCE 75-1 which require that a bank be 
supervised by the U.S. or a U.S. State and a broker-dealer be 
registered with the SEC, BNP Paribas is prevented from engaging in 
principal transactions with Plans with respect to which it is a party 
in interest. This is so even though BNP Paribas is subject to the 
stringent regulations of the CB and AMF, and it is able to satisfy the 
Rule 15a-6 requirements for an exemption from registration under the 
Securities Exchange Act. Accordingly, BNP Paribas is requesting an 
individual exemption to permit it and its French Affiliates 
(collectively referred to herein as the BNP Entities) to engage in 
principal transactions with Plans under the terms and conditions set 
forth herein, which are equivalent to those set forth in PTCE 75-1.
    The BNP Entities will comply with all conditions set forth in PTCE 
75-1 other than the condition to be a U.S. bank or registered broker-
dealer under the Securities Exchange Act. With respect to principal 
transactions, the BNP Paribas entities will engage in such transactions 
only where (a) BNP Paribas or the relevant French Affiliates are not a 
fiduciary with respect to the transaction (in other words, the BNP 
Entity will have no discretionary authority or control with respect to 
the investment of a Plan's assets involved in a principal transaction 
or render investment advice (within the meaning of 29 CFR 2510.3-21(c)) 
with respect to those assets.); (b) the BNP Entity will customarily 
purchase and sell securities for its own account in the ordinary course 
of business as a bank or broker-dealer; (c) the transaction will be at 
least as favorable to the Plan as an arm's length transaction with an 
unrelated party would be; and (d) the BNP Entity will be a party in 
interest or a disqualified person with respect to the Plan assets 
involved in a principal transaction solely by reason of section 
3(14)(B) of the Act or section 4975(e)(2)(B) of the Code (i.e., a 
service provider to the Plan), or by reason of a relationship to such a 
person as described in such sections.
Extensions of Credit
    8. BNP Paribas represents that a normal part of the execution of 
securities transactions by broker-dealer on behalf of clients, 
including Plans, is the extension of credit to clients so as to permit 
the settlement transactions in the customary settlement period. Such 
extensions of credit are also customary in connection with the writing 
of option contracts.
    BNP requests that the proposed exemption include relief for 
extensions of credit to the Plans by the BNP Entities in the ordinary 
course of their purchases or sales of securities, regardless of whether 
they are effected on an agency or a principal basis, or in connection 
with the writing of options contracts. In this regard, an exemption for 
such extensions of credit is provided under PTCE 75-1, Part V, only for 
transactions between Plans and U.S. registered broker or dealers.\8\
---------------------------------------------------------------------------

    \8\ PTCE 75-1, part V, provides an exemption, under certain 
conditions, from section 406 of the Act and section 4975(c)(1) of 
the Code, for extensions of credit, in connection with the purchase 
or sale of securities, between employee benefit plans and U.S. 
registered broker-dealers that are parties in interest with respect 
to such plans.
---------------------------------------------------------------------------

    Under the conditions of this proposed exemption, as in PTCE 75-1, 
part V, BNP Paribas and its French Affiliates may not be fiduciaries 
with respect to the Plan assets involved in the transaction. However, 
an exception to such condition would be provided herein, as in PTCE 75-
1, if no interest or other consideration is received by the BNP Entity 
or an affiliate thereof, in connection with any such extension of 
credit. In addition, the extension of credit must be lawful under the 
1934 Act and any rules or regulations thereunder, if the 1934 Act rules 
or regulations were applicable, and such

[[Page 25607]]

extension of credit must not be a prohibited transaction under section 
503(b) of the Code. If the 1934 Act would not be applicable, the 
extension of credit must still be lawful under applicable French law, 
where BNP Paribas and its French Affiliates are domiciled.

Securities Lending

    9. BNP Paribas or its French Affiliates, acting as principals, 
actively engage in the borrowing and lending of securities, typically 
foreign securities, from various institutional investors, including 
employee benefit plans.
    Accordingly, BNP Paribas requests an exemption for securities 
lending transactions between the BNP Entities and the Plans under terms 
and conditions equivalent to those required in PTCE 81-6 (46 FR 7527, 
January 23, 1981, as amended at 52 FR 18754, May 19, 1987). Because 
PTCE 81-6 provides an exemption only for U.S. registered broker-dealers 
and U.S. banks, the securities lending transactions at issue would fall 
outside the scope of relief provided by PTCE 81-6.
    10. BNP Paribas or its French Affiliates utilize borrowed 
securities either to satisfy their own trading requirements or to re-
lend to other broker-dealers and entities which need a particular 
security for a certain period of time. As described in the Federal 
Reserve Board's Regulation T, borrowed securities are often used to 
meet delivery obligations in the case of short sales or the failure to 
receive securities that a broker-dealer is required to deliver. BNP 
Paribas represents that foreign broker-dealers are those broker-dealers 
most likely to seek to borrow foreign securities. Thus, the requested 
exemption will increase the lending demand for such securities, 
providing the Plans with increased securities lending opportunities, 
which will earn such Plans additional rates of return on the borrowed 
securities (as discussed below).
    11. An institutional investor, such as a pension fund, lends 
securities in its portfolio to a broker-dealer or bank in order to earn 
a fee while continuing to enjoy the benefits of owning the securities, 
(e.g., from the receipt of any interest, dividends, or other 
distributions due on those securities and from an appreciation in the 
value of the securities). The lender generally requires that the 
securities loan be fully collateralized, and the collateral usually is 
in the form of cash, irrevocable bank letters of credit, or high 
quality liquid securities, such as U.S. Government or Federal Agency 
obligations.
    12. With respect to the subject securities lending transactions, 
BNP Paribas or its French Affiliates will have no discretionary 
authority or control with respect the investment of the Plan assets 
involved in the transaction, or render investment advice (within the 
meaning of 29 CFR 2510.3-21(c)) with respect to those assets.
    13. By the close of business on the day the loaned securities are 
delivered, the Plan will receive from the BNP Entity (by physical 
delivery book entry in a securities depository, wire transfer, or 
similar means) collateral consisting of cash, securities issued or 
guaranteed by the U.S. Government or its agencies or instrumentalities, 
irrevocable U.S. bank letters of credit issued by person other than the 
BNP Entity or an affiliate of thereof, or any combination thereof. All 
collateral will be in U.S. dollars, or dollar-denominated securities or 
bank letters of credit, and will be held in the United Sates. The 
collateral will have, as of the close of business on the business day 
preceding the day it is posted by the BNP Entity, a market value equal 
to at least 100% of the then market value of the loaned securities (or, 
in the case of letter of credit, a stated amount equal to same).
    14. The loan will be made pursuant to a written Loan Agreement, 
which may in the form of a master agreement covering a series of 
securities lending transactions between the Plan and the BNP Entity. 
The terms of the Loan Agreement will be at least as favorable to the 
Plan as those the Plan could obtain in a comparable arm's length 
transaction with an unrelated party. The Loan Agreement will also 
contain a requirement that the BNP Entity pay all transfer fees and 
transfer taxes relating to the securities loans.
    15. In return for lending securities, the Plan will either (a) 
receive a reasonable fee, which is related to the value of the borrowed 
securities and the duration of the loan, or (b) have the opportunity to 
derive compensation through the investment of cash collateral. Where 
the Plan has that opportunity, the Plan may pay a loan rebate of 
similar fee to the BNP Entity, if such fee is not greater than what the 
Plan would pay in comparable arm's length transaction with an unrelated 
party. Earnings generated by non-cash collateral will be returned to 
the BNP Entity. The Plan will be entitled to at least the equivalent of 
all distributions on the borrowed securities made during the term of 
the loan. Such distributions will include cash dividends, interest 
payments, shares of stock as a result of stock splits, and rights to 
purchase additional securities, that the Plan would have received (net 
of any applicable tax withholdings) had it remained the record owner of 
such securities.
    16. If the market value of the collateral as of the close of 
trading on a business day falls below 100 percent of the market value 
of the borrowed securities as of the close of trading on that day, the 
BNP Entity will deliver additional collateral, by the close of business 
on the following business day, to bring the level of collateral back to 
at least 100 percent. However, if the market value of the collateral 
exceeds 100 percent of the market value of the borrowed securities, the 
BNP Entity may require the Plan to return part of the collateral to 
reduce the level of the collateral to 100 percent.
    17. Before entering into a Loan Agreement, the BNP Entity will 
furnish to the independent Plan fiduciary (a) the most recent available 
audited statement of the BNP Entity's financial condition, (b) the most 
recent available unaudited statement of its financial condition (if 
more recent than the audited statement), and (c) a representation that, 
at the time the loan is negotiated, there has been no material adverse 
change in its financial condition that has not been disclosed since the 
date of the most recent financial statement furnished to the 
independent Plan fiduciary. Such representation may be made by the BNP 
Entity agreeing that each loan of securities shall constitute a 
representation that there has been no such material adverse change.
    18. The Loan Agreement and/or any securities loan outstanding may 
be terminated by the Plan at any time, whereupon the BNP Entity will 
deliver certificates for securities identical to the borrowed 
securities (or the equivalent thereof in the event of reorganization, 
recapitalization, or merger of the issuer of the borrowed securities) 
to the Plan within (a) the customary delivery period for such 
securities, (b) five business days, or (c) the time negotiated for such 
delivery by the Plan and the BNP Entity, whichever is least, or, 
alternatively, such period as permitted by PTE 81-6, as it may be 
amended or superseded. In the event the loan is terminated and the BNP 
Entity fails to return the borrowed securities or the equivalent 
thereof with the designated time, the Plan will have certain rights 
under the Loan Agreement to realize upon the collateral. The Plan may 
purchase securities identical to the borrowed securities, or the 
equivalent thereof, and may apply the collateral to the payment of the 
purchase price, any other obligations of the BNP Entity under the Loan 
Agreement, and any

[[Page 25608]]

expenses associated with replacing the borrowed securities.
    The BNP Entity is obligated to pay to the Plan the amount of any 
remaining obligations and expenses not covered by the collateral (the 
value of which shall be determined as of the date the borrowed 
securities should have been returned to the Plan), plus interest at a 
reasonable rate as determined in accordance with an independent market 
source. If replacement securities are not available, the BNP Entity 
will pay the Plan an amount equal to (a) the value of the securities as 
of the date such securities should have been returned to the Plan, plus 
(b) all the accrued financial benefits derived from the beneficial 
ownership of such borrowed securities as of such date, plus (c) 
interest at a reasonable rate determined in accordance with an 
independent market source from such date to the date of payment. The 
amounts paid shall be reduced by the amount or value of the collateral 
determined as of the date the borrowed securities should have been 
returned to the Plan. Notwithstanding the foregoing, the BNP Entity 
may, in the event it fails to return borrowed securities as described 
above, replace non-cash collateral with an amount of cash not less than 
the then current market value of the collateral, provided that such 
replacement is approved by the lending independent Plan fiduciary.
    19. The independent Plan fiduciary will maintain the situs of the 
Loan Agreement in accordance with the indicia of ownership requirement 
under section 404(b) of the Act and the regulations promulgated under 
29 CFR 2550.404(b)-1.\9\
---------------------------------------------------------------------------

    \9\ Section 404(b) of the Act states that no fiduciary may 
maintain the indicia of ownership of any assets of a plan outside 
the jurisdiction of the district courts of the United States, except 
as authorized by regulation by the Secretary of Labor.
---------------------------------------------------------------------------

    20. In summary, BNP Paribas represents that the subject 
transactions will satisfy the statutory criteria for an exemption under 
section 408(a) of the Act for the following reasons:
    (a) With respect to principal transactions effected by the BNP 
Entities, the proposed exemption will enable the Plans to realize the 
same benefits of efficiency and convenience which derive such Plans 
could derive from principal transactions executed by U.S. registered 
broker-dealers or U.S. Banks, pursuant to PTCE 75-1, part II;
    (b) With respect to extensions of credit by the BNP Entities in 
connection with purchases or sales of securities, the proposed 
exemption will enable the BNP Entities and the Plans to extend credit 
in the ordinary course of business to effect agency or principal 
transactions within the customary three-day settlement period, or in 
connection with the writing of options contracts for transactions 
between Plans and U.S. registered broker-dealers, pursuant to PTCE 75-
1, part V;
    (c) With respect to securities lending transactions effected by the 
BNP Entities, the proposed exemption will enable the Plans to realize a 
low-risk return on securities that otherwise would remain idle, as in 
securities lending transactions between plans and U.S. registered 
broker-dealers or U.S. Banks, pursuant to PTCE 81-6; and
    (d) The proposed exemption will provide the Plans with virtually 
the same terms and conditions upon the transactions executed by the BNP 
Entities as those imposed on U.S. banks and U.S. registered, pursuant 
to PTCE 75-1 and PTCE 81-6.

Notice to Interested Persons

    Notice of proposed exemption will be provided to all interested 
persons by first class mail within 4 days of publication of the notice 
of pendency in the Federal Register. Such notice shall include a copy 
of the notice of pendency of the exemption as published in the Federal 
Register and a supplemental statement, as required pursuant to 29 CFR 
2570.43(b)(2), which will inform interested persons of their right to 
comment on the proposed exemption and/or to request a hearing. Comments 
and hearing requests are due within 34 days of the date of publication 
of the proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Silvia Quezada of the Department, 
telephone (202) 693-8553. (This is not a toll-free number.)

Best Business Products Inc. Employee Stock Ownership Plan (the ESOP) 
Located in Sioux Falls, SD

[Exemption Application No. D-11305]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act (the Act) and section 4975(c)(2) of the Internal Revenue Code of 
1986 (the Code), and in accordance with the procedures set forth in 29 
CFR Part 2570, Subpart B, 55 FR 32836, 32847 (August 10, 1990).\10\ If 
the exemption is granted, the restrictions of sections 406(a)(1)(A) 
through (D), 406(b)(1), and 406(b)(2) of the Act and the sanctions 
resulting from the application of section 4975, by reason of section 
4975(c)(1)(A) through (E) of the Code, shall not apply, effective July 
7, 2004, to: (1) The purchase from the ESOP by Best Business Products, 
Inc. (BBP), a party in interest with respect to the ESOP, of shares of 
the voting common stock of BBP (the Stock) which were allocated to the 
accounts of the participants in the ESOP; and (2) the transfer to BBP 
of shares of the Stock which were held by the ESOP in a suspense 
account in exchange for the assumption by BBP of the ESOP's obligation 
to pay the balance of a note (the Note) to Betty B. Best (Ms. Best), a 
party in interest with respect to the ESOP; provided that prior to 
entering into the subject transactions: (a) An independent fiduciary 
(the Independent Fiduciary) was responsible for each of the 
transactions, and in accordance with the fiduciary provisions of the 
Act, reviewed, analyzed, and determined that the ESOP should enter into 
each of the transactions; (b) the Independent Fiduciary reviewed, 
negotiated, and approved the terms of each of the transactions, and 
determined on behalf of the ESOP and solely in the interest of the 
ESOP, its participants, and beneficiaries that the terms of each of the 
transactions were fair and reasonable; (c) the Independent Fiduciary 
monitored compliance with the terms of each of the transactions by the 
parties; (d) an independent qualified appraiser determined the fair 
market value of the Stock as of the date each of the transactions were 
entered; and (e) the ESOP incurred no fees, commissions, or other 
charges or expenses as a result of its participation in each of the 
transactions.

    \10\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

Effective Date: If the proposed exemption is granted, the exemption 
will be effective July 7, 2004.

Summary of Facts and Representations

    1. BBP, a South Dakota Corporation, located in Sioux Falls, SD, 
sells, installs, and services electronic office equipment and sells 
related supplies to customers throughout the state of South Dakota and 
in southwestern Minnesota. It is represented that BBP has, at all 
relevant times, been taxed pursuant to subchapter ``S'' tax provisions 
of the Code. As of December 31, 2003, BBP had $5.7 million in assets, 
$1.9 million in liabilities, and $3.8 million in shareholder equity.
    Ms. Best is the major shareholder of BBP, the President of BBP, and 
the sole director of BBP. As such, Ms. Best is a party in interest with 
respect to the

[[Page 25609]]

ESOP, pursuant to section 3(14)(E) and 3(14)(H) of the Act.
    2. For the benefit of its eligible employees and their 
beneficiaries, BBP adopted the ESOP, effective January 1, 1997, as an 
employee stock ownership plan, as amended and restated from time to 
time, to meet the requirements of the Act and the Code. As an employer 
any of whose employees are covered by the ESOP, BBP is a party in 
interest with respect to the ESOP, pursuant to section 3(14)(C) of the 
Act.
    On December 31, 1997, BBP entered into a trust agreement with the 
First National Bank in Sioux Falls (the Bank), a South Dakota Banking 
Corporation, in which the Bank agreed to serve as the trustee of the 
assets of the ESOP. As a trustee, the Bank is a fiduciary and party in 
interest with respect to the ESOP, pursuant to section 3(14)(A) of the 
Act. It is represented that the Bank served in this capacity as trustee 
until replaced by Ms. Best on December 19, 2001. Since that time, Ms. 
Best has been the sole trustee of the assets of the ESOP held in the 
trust. As a trustee, Ms. Best is a fiduciary and party in interest with 
respect to the ESOP, pursuant to section 3(14)(A) of the Act.
    As of July 7, 2004, the date the subject transactions were entered, 
there were 71 participants and beneficiaries in the ESOP. As of 
December 31, 2003, the aggregate fair market value of the total assets 
available to pay benefits to participants in the ESOP was $822,889. As 
of the same date, the value of the ESOP's assets, after subtracting 
liabilities was $338,681.
    3. On June 12, 1998, it is represented that an Amendment to the 
Articles of Incorporation of BBP was adopted which combined two classes 
of shares (voting and non-voting) into a single class of shares of 
voting common stock and which authorized a stock dividend converting 
each single share of common stock then outstanding into 100 shares. It 
is represented that in July 1998, there were 181,100 shares of Stock 
issued and outstanding of which Ms. Best was the sole shareholder.
    It is represented that the Stock that is the subject of this 
exemption (i.e. the voting common stock of BBP) is the only class of 
stock authorized or issued by BBP. The Stock is not publicly traded.
    4. On July 17, 1998, the ESOP purchased a block of Stock from Ms. 
Best for a purchase price of $2.6 million dollars.\11\ As a result of 
this transaction, of the 181,100 shares of Stock issued and 
outstanding, Ms. Best retained ownership to 126,770 shares, and the 
ESOP acquired 54,330 shares of the Stock, representing approximately 70 
percent (70%) and approximately 30 percent (30%), respectively of the 
equity of BBP. It is represented that the acquisition of the block of 
Stock by the ESOP provided equity ownership to employees so that such 
employees had a direct stake in the success of BBP.
---------------------------------------------------------------------------

    \11\ The applicant maintains that the statutory exemption, 
pursuant to section 408(e) of the Act, provided relief for the 1998 
purchase by the ESOP of the block of Stock from Ms. Best, where the 
shares of the Stock are qualifying employer securities, as defined 
in section 407(d)(5) of the Act, the purchase of the shares of Stock 
was made for adequate consideration, and no commission was charged 
to the ESOP with respect thereto. The Department is offering no 
view, herein, as to the applicant's reliance on section 408(e) of 
the Act with respect to the purchase of the block of Stock by the 
ESOP in 1998, nor has the Department made a determination that the 
applicant satisfied all of the requirements of section 408(e) of the 
Act. Further, the Department is not providing any relief, herein, 
with respect to such purpose.
---------------------------------------------------------------------------

    On July 17, 1998, the ESOP acquired title to the block of Stock 
(54,330 shares) in exchange for a loan (the Loan) \12\ in the amount of 
$2.6 million dollars, representing the entire purchase price for such 
block of Stock. The Loan was evidenced by a non-recourse Note payable 
to Ms. Best. The Note was payable in annual installments of principal 
and interest over a period of ten (10) years, beginning September 1, 
1998. The interest rate applied to the outstanding balance on the Note 
was the prime interest rate in effect from time to time as published by 
the ``Wall Street Journal.'' Payment of the Loan was secured by a 
pledge to Ms. Best of a security interest in the block of Stock 
purchased by the ESOP. In addition, BBP guaranteed payment of the Note.
---------------------------------------------------------------------------

    \12\ The applicant maintains that the statutory exemption, 
pursuant to section 408(b)(3) of the Act, provided relief for the 
1998 Loan between the ESOP and Ms. Best, because the Loan: (a) was 
primarily for the benefit of the participants and beneficiaries of 
the ESOP; (b) contained an interest rate that was not in excess of a 
reasonable rate; (c) was used to purchase employer stock; and (d) 
satisfied the other requirements, as set forth in the Department's 
regulations at 29 CFR 2550.408b-3. The Department is offering no 
view, herein, as to the applicant's reliance on section 408(b)(3) of 
the Act with respect to the 1998 Loan, nor has the Department made a 
determination that the applicant satisfied all of the requirements 
of section 408(b)(3) of the Act. Further, the Department is not 
providing any relief, herein, with respect to such Loan transaction.
---------------------------------------------------------------------------

    5. In a letter dated, July 17, 1998, James L. Werness, JD (Mr. 
Werness), a principal of the Hawthorne Company (Hawthorne), determined 
that the purchase of the block of Stock by the ESOP for consideration 
of $2.6 million dollars was fair and equitable and that the purchase 
price paid was not more than the ``fair market value'' of such block of 
Stock. In support of this opinion, Hawthorne prepared an appraisal 
report, dated June 20, 1998, to establish the fair market value of the 
block of Stock purchased by the ESOP.
    It is represented that the professional staff of Hawthorne is 
qualified to provide the 1998 valuation of the Stock. In addition, 
Hawthorne has made similar statements regarding its qualifications with 
respect to annual valuations of the Stock which Hawthorne prepared 
during the period 1998 through 2004, as discussed more fully in 
paragraph 8, below. In this regard, Mr. Werness is a member of the 
Institute of Business Appraisers and a candidate member of the American 
Society of Appraisers. Other principals of Hawthorne have earned the 
following designations: (a) Accredited Senior Appraiser from the 
American Society of Appraisers, (b) Certified Business Appraiser 
through the Institute of Business Appraisers, and (c) Chartered 
Financial Analyst.
    Hawthorne certified that its research, analysis, and conclusions on 
the value of the Stock were conducted on an independent basis. In this 
regard, it is represented that neither Hawthorne, nor any employee of 
Hawthorne owns any present or prospective future interest in BBP or its 
affiliates. Further, Hawthorne represented that it does not know of any 
other relationship that would prevent it from, in fact, acting 
independently in connection with this valuation. Hawthorne made similar 
statements regarding its independence with respect to annual valuations 
of the Stock prepared by Hawthorne during the period from 1998 through 
2004, as discussed more fully in paragraph 8, below.
    It is represented that because the block of Stock purchased by the 
ESOP in 1998 represented a small percentage of all the voting rights in 
BBP, Hawthorne would normally have defined the fair market value of 
such block of Stock as a ``minority interest value.'' However, as the 
block of Stock was subject to a buy/sell agreement, discussed more 
fully in paragraph 6, below, that entitled the holder to ``put'' the 
shares of Stock back to BBP and required BBP to pay a price for such 
shares equal to the pro-rata enterprise value, Hawthorne conducted its 
analysis on the basis of an ``enterprise'' level of value. Accordingly, 
in the opinion of Hawthorne, the fair market value of the ESOP's block 
of Stock (54,330 shares), as of June 30, 1998, was $48.00 per share for 
a total value of $2,607,840.\13\
---------------------------------------------------------------------------

    \13\ The Department, herein, is offering no view as to whether 
the value per share of the block of Stock purchased by the ESOP in 
1998, based on the methodology used by Hawthorne in appraising such 
block of Stock constituted ``adequate consideration'' for purposes 
of section 408(e) of the Act.

---------------------------------------------------------------------------

[[Page 25610]]

    6. On July 17, 1998, contemporaneously with the purchase of the 
block of Stock by the ESOP, Ms. Best and BBP entered into a buy-sell 
Agreement, referred to in paragraph 5, above. It is represented that 
this agreement was entered in order to protect the election by BBP of 
subchapter ``S'' corporation status and to ensure that possible future 
transfers of ownership of Stock occur in a business-like manner. 
Accordingly, Ms. Best and BBP contractually agreed to restrictions on 
the transferability of the Stock and provided for the purchase of Stock 
in certain events.
    It is represented that the ESOP was not a party to such buy-sell 
agreement. Notwithstanding the fact that the ESOP was not a party, it 
is represented that the shares of Stock owned by the ESOP, its 
assignees or distributees possesses all the benefits and advantages 
contemplated in the buy-sell agreement, including but not limited to a 
``put'' provision contained in such agreement.
    7. It is represented that BBP from 1998 through 2003 made dividend 
payments totaling approximately $489,278 to the ESOP as an owner of the 
Stock. In addition, during the same period, BBP made periodic 
contributions to the ESOP totaling approximately $1,851,037 that 
enabled the ESOP to make installment payments on the Loan under the 
terms of the Note held by Ms. Best. It is represented that as the ESOP 
made installment payments, shares of Stock held in a suspense account 
in the ESOP were allocated to the accounts of participants. In this 
regard, 28,532.896 shares of Stock had been allocated, as of July 7, 
2004, to the accounts of the participants in the ESOP (the Allocated 
Shares), and as of the same date, 25,797.104 shares of Stock were in a 
suspense account (the Unallocated Shares) held by the ESOP.
    8. It is represented that, in 1998, BBP experienced a loss of 
several key employees, some of whom were subsequently employed by 
competitors. It is further represented that the electronic business 
machine industry has become more competitive, and that the earnings of 
BBP have suffered. In this regard, over the course of six (6) years 
from 1998 through 2004, the value of the Stock declined.
    The applicants submitted to the Department annual valuation reports 
prepared by Hawthorne during the period from 1998 through 2003, and 
working papers for the fiscal year ending December 31, 2004. According 
to Hawthorne, the aggregate ``enterprise value'' (EV) \14\ or the 
aggregate ``controlling interest value'' (CIV),\15\ and the per share 
value of the Stock during the period from 1998 through 2004 was as 
follows:
---------------------------------------------------------------------------

    \14\ Hawthorne defines ``enterprise value'' or ``EV'' in its 
1998 appraisal report as the value attributable to the ownership of 
100 percent of the common stock of a corporation.
    \15\ Hawthorne defines ``controlling interest value'' or ``CIV'' 
in its 1998 appraisal report as the value attributable to the 
ownership of a block of stock which maintains greater than 50 
percent ownership, yet less than 100 percent ownership.

------------------------------------------------------------------------
                                                             Per share
                                       Total value of      value of the
               Date                   181,100 shares of     stock  (per
                                            stock             share)
------------------------------------------------------------------------
June 20, 1998.....................  $8,700,000 EV.......          $48.00
December 31, 1999.................  $6,450,606 EV.......           35.62
December 31, 2000.................  $5,833,910 CIV......           32.21
December 31, 2001.................  $5,816,940 CIV......           32.12
December 31, 2002.................  $5,475,453 CIV......           30.14
December 31, 2003.................  $5,222,109 CIV......           28.84
Working papers 2004...............  $5,118,699 CIV......           28.26
------------------------------------------------------------------------

    9. It is represented that given the loss of several key employees, 
losses in earnings as a result of a more competitive industry, and the 
costs of maintaining the ESOP, effective July 7, 2004, BBP decided to 
terminate the ESOP. On September 24, 2004, BBP submitted to the 
Internal Revenue Service (IRS) FORM 5310, Application for determination 
for Terminating Plan, with respect to the ESOP. In connection with the 
termination of the ESOP, it is represented that all participants became 
100 percent (100%) vested, as of June 30, 2004. On January 14, 2005, 
the IRS issued a favorable determination letter on the termination of 
the ESOP.
    10. In connection with the termination of the ESOP, BBP determined 
to make lump sum distributions to each of the participants of the ESOP 
in order to increase employee morale and to allow BBP to invest its 
remaining resources in creating a more viable company. Accordingly, 
under the terms of a Stock Purchase and Sale Agreement, dated July 7, 
2004, BBP purchased the Allocated Shares (28,532.896 shares of Stock) 
from the ESOP for an aggregate purchase price in cash of approximately 
$900,000 at a price per share of $31.54.
    It is further represented that since the ESOP was being terminated 
and would receive no more contributions from BBP, it was expected that 
the ESOP would default on the payments on the Note held by Ms. Best. In 
order to avoid such default, on July 7, 2004, the Independent Fiduciary 
(described more fully in paragraph 14, below) transferred the 
Unallocated Shares (25,797.104 shares of the Stock) in the suspense 
account held by the ESOP to BBP in exchange for an assumption by BBP of 
the ESOP's responsibility to pay to Ms. Best the balance due under the 
Note as of that date in the amount $1,234,538.
    It is represented that as a result of the transactions which are 
the subject of this proposed exemption, the ESOP's ownership interest 
in BBP decreased from 30 percent (30%) to zero. It is further 
represented that notwithstanding the transfer of title to the 
Unallocated Shares to BBP, such shares continued to be subject to the 
pledge securing the Note in favor of Ms. Best. Accordingly, it is 
represented that after the subject transactions were completed, the 
Unallocated Shares were still considered to be issued and outstanding.
    11. The applicant has requested a retroactive administrative 
exemption, effective July 7, 2004, the date when the subject 
transactions were entered. In this regard, it is represented that 
before entering into such transactions, the applicant was advised by 
legal counsel. In this regard, legal counsel for the applicant has 
certified in writing that he was aware that such transactions were 
prohibited under section 406 of the Act, but that he believed the 
statutory exemption, set forth in section 408(e) of the Act, applied to 
the subject transactions and that an administrative

[[Page 25611]]

exemption, pursuant to section 408(a) of the Act was not necessary. 
Further, legal counsel for the applicant has certified in writing that 
because the applicant relied in good faith on the advice of counsel, 
the applicant carried out the subject transactions with only the 
precautions required by section 408(e) of the Act in place at the time 
the transactions were entered. In this regard, it is represented that 
the ESOP received not less than adequate consideration, as determined 
by an independent appraiser, and no commission was charged with respect 
to such transactions.
    Legal counsel for the applicant has represented that upon further 
review, he subsequently advised the applicant that the subject 
transactions may have resulted in violations of sections 406(a)(1)(A) 
and (D), 406(b)(1) and (b)(2) of the Act. In this regard, although 
section 408(e) of the Act contains a statutory exemption for the sale 
of ``qualifying employer securities'' (QES), as defined in section 
407(d)(5) of the Act, by an ``eligible individual account plan,'' as 
defined in section 407(d)(3)(A) of the Act, to a ``party in interest,'' 
as defined in section 3(14) of the Act, other sections of the Act 
provide that this statutory exemption may not be available under 
certain circumstances. Specifically, section 408(d) of the Act excludes 
owner-employees (including shareholder-employees, such as Ms. Best), 
and any corporation that is 50 percent (50%) or more owned by such 
persons (such as BBP) from using the statutory exemption provided under 
section 408(e) of the Act for purchases or sales of QES.
    The applicant notes that, in the Taxpayer Relief Act of 1997, 
Congress provided some relief from the exclusion, set forth in section 
408(d) of the Act, (for taxable years beginning after December 31, 
1997) with regard to subchapter ``S'' corporations that maintain ESOPS. 
Specifically, section 408(d)(2)(B) of the Act provides an exception to 
the exclusion under 408(d) of the Act for sales of QES to an employee 
stock ownership plan by a shareholder-employee or related subchapter 
``S'' corporation. The applicant maintains that the failure of Congress 
to provide an exception for the purchase of QES by a subchapter ``S'' 
corporation from its employee stock ownership plan was a drafting 
oversight. In the opinion of the applicant, there would seem to be more 
need for protection of an employee stock ownership plan when purchasing 
stock of a closely held corporation and taking on debt than when 
selling such shares for cash.
    Notwithstanding the argument presented in the paragraph above, the 
applicant has acknowledged that BBP, even though it is a subchapter 
``S'' corporation, is excluded from relying on the statutory exemption, 
under section 408(e) of the Act, and that the purchase of the Allocated 
Shares by BBP from the ESOP does not fall within the exception to the 
exclusion found in section 408(d)(2)(B) of the Act. Accordingly, the 
applicant has requested a retroactive administrative exemption for the 
purchase of the Allocated Shares by BBP from the ESOP, pursuant to 
408(a) of the Act.
    It is the position of the applicant that the transfer of the 
Unallocated Shares to BBP in exchange for the assumption by BBP of the 
ESOP's obligation under the Note is not a new sale transaction, but 
should be considered part of the original acquisition by the ESOP of 
the block of Stock. In this regard, as part of the original 
acquisition, the applicant points out that the block of Stock purchased 
by the ESOP was pledged to Ms. Best, and that BBP guaranteed the debt 
owed by the ESOP under the Note. It is the position of the applicant 
that in order to avoid default on the Note once the ESOP was 
terminated: (a) BBP, pursuant to its guaranty of the Note, assumed, 
with the consent of Ms. Best, the ESOP's debt under the Note; and (b) 
the ESOP transferred its interest in the Unallocated Stock to BBP, 
subject to the pledge of the Stock to Ms. Best.
    The applicant has requested that if the Department disagrees with 
this analysis, relief should be provided for the transfer of the 
Unallocated Stock to BBP and the assumption by BBP of the ESOP's 
obligation under the Note. Accordingly, retroactive administrative 
relief, pursuant to section 408(a) of the Act, has been proposed for 
both: (a) The purchase of the Allocated Shares by BBP from the ESOP, 
and (b) the transfer of the Unallocated Shares to BBP in exchange for 
the assumption of the ESOP's obligation to pay Ms. Best under terms of 
the Note.
    12. BBP maintains that the subject transactions were in the 
interest of the ESOP, because the ESOP received a price for the 
Allocated Shares in excess of the fair market value of such shares. As 
discussed more fully in the paragraphs below, the final negotiated 
price paid by BBP for the Allocated Shares, was $31.54 per share.
    13. The application file contains a letter dated April 15, 2004, to 
the trustee of the ESOP prepared by Mr. Werness, one of the principals 
of Hawthorne, the independent, qualified appraiser. The letter is 
incorporated into an appraisal report, dated May 4, 2004, prepared by 
Hawthorne that provided an annual update of the value of the Stock for 
the year ended December 31, 2003. In this regard, it is represented 
that Hawthorne established that the fair market value of the Stock 
owned by the ESOP was $28.84 per share, as of December 31, 2003.
    The file also contains a letter from Mr. Werness, dated July 7, 
2004. In this letter, Mr. Werness offers an opinion regarding 
``adequate consideration'' with respect to the subject transactions 
that closed on July 7, 2004. In connection with this opinion, it is 
represented that Hawthorne, among other things: (a) Reviewed the annual 
financial statements of BBP prepared by Henry Scholten & Company, CPA 
and reviewed the April 2004, interim financial statement of BBP; (b) 
reviewed various documents involved with the subject transactions, 
including the Stock Purchase and Sale Agreement, Consent Minutes of the 
Board of Directors of BBP, Amendments to the Trust Agreement for the 
ESOP, and Amendment to the ESOP; (c) held discussions with certain 
members of the management of BBP and representatives of BBP regarding 
the operations, financial condition, future prospects, and projected 
performance of BBP; (d) reviewed Hawthorne's history of valuations 
conducted on behalf of the trustee of the ESOP; and (e) conducted other 
studies, analyses, and inquiries deemed appropriate. Based on the 
business, economic, market, and other conditions as such existed on 
July 7, 2004, the date of the letter and the date the subject 
transactions closed, it is the opinion of Hawthorne that the aggregate 
purchase price paid by BBP for the Stock was not less than the fair 
market value of such Stock and that the ESOP received no less than 
``adequate consideration.''
    In addition to Hawthorne's opinion regarding ``adequate 
consideration,'' on the date the subject transactions closed, as 
discussed in the paragraph above, the application file also contains a 
letter to counsel for BBP, dated November 11, 2004, from Mr. Werness, 
which encloses working papers relating to the projected performance 
schedule of BBP for the fiscal year ending December 31, 2004. In this 
letter, Mr. Werness states that the working papers were provided to the 
special trustee, as discussed in the paragraph below, prior to the date 
when the subject transactions were entered. These working papers 
indicate a per share value for the Stock of $28.26. Accordingly, it is 
represented that the $31.54 per share price paid by BBP to the ESOP for 
the Allocated Shares included an 11.6% premium over the

[[Page 25612]]

$28.26 per share fair market value for such shares of Stock.
    14. The applicant maintains that safeguards were in place at the 
time each of the transactions were entered which were designed to 
protect the interests of the ESOP and its participants and 
beneficiaries. It is represented that as early as May 2004, Stanton 
Trust Company, N.A. (Stanton) and counsel for BBP had conversations 
regarding the subject transactions. Subsequently, in an engagement 
letter, dated June 3, 2004, BBP appointed Stanton to act as special 
trustee on behalf of the ESOP.
    According to its letter of engagement, Stanton agreed to act as the 
Independent Fiduciary and to review, analyze, and determine whether or 
not to accept the subject transactions on behalf of the ESOP in 
accordance with fiduciary provisions of the Act. To assist in this 
regard, Stanton retained the services of Lindquist & Vennum P.L.L.P. 
(L&V) to act as its legal counsel and retained Hawthorne to act as a 
financial advisor.
    Based on Stanton's review of the opinion prepared by Hawthorne and 
related documents and schedules, its review of documents and 
information provided by BBP, and other documents deemed necessary and 
appropriate, Stanton issued a letter, dated July 7, 2004, the date the 
transactions were entered. In this letter, Stanton states that its role 
as special trustee is limited to an evaluation of the proposed 
transactions on behalf of, and solely in the interest of the 
participants and beneficiaries of the ESOP and determining that the 
transactions are fair and reasonable to the ESOP and its participants. 
Further, Stanton stated in the July 7 letter that: (1) The sale of 
28,532.896 shares of the Allocated Shares by the ESOP at a price of 
$31.54 per share for a total purchase price of approximately $900,000, 
and (2) the exchange by the ESOP of its outstanding debt in the amount 
of $1,234,538 for transfer to BBP of the 25,797.104 Unallocated Shares 
held in suspense is fair and reasonable to the ESOP and its 
participants and beneficiaries.
    The application file also contains letters, dated March 2, and 
March 24, 2005, from Robert J. Hartman, JD (Mr. Hartman) of L&V, acting 
as legal counsel to Stanton. In this regard, in a declaration under 
penalty of perjury, dated April 1, 2005, the current President of 
Stanton, confirms that Mr. Hartman and the law firm of L&V have 
represented Stanton from the inception and throughout the engagement of 
Stanton as special trustee to the ESOP and that representations made in 
Mr. Hartman's March 2, and March 24, 2005, letters to the Department 
are true and correct.
    Mr. Hartman represents that the purpose of his letter of March 2, 
2004, is to identify the actions taken by Stanton to complete the 
transactions and confirm that such actions were taken in full 
compliance with Stanton's obligations as a fiduciary to the ESOP and in 
the best interest of the ESOP participants. Further, Mr. Hartman 
represents that prior to Stanton issuing its July 7, 2004, opinion that 
the transactions were fair and reasonable, Stanton, Hawthorne, and L&V 
reviewed documents, including but not limited to those concerning the 
establishment of the ESOP and the trust, those relevant to the subject 
transactions, valuation reports prepared by Hawthorne for 2001, 2002, 
and 2003, financial statements of BBP, and minutes of the Board of 
Directors of BBP. It is further represented that interviews were 
conducted with Mr. Werness of Hawthorne, the trust officer of the Bank, 
the record keeper for the ESOP, and the counsel for BBP.
    Based on the review of the foregoing documents and interviews with 
the parties closely associated with BBP, Mr. Hartman represents that 
Stanton concluded: (a) That financial records and appraisals confirmed 
that BBP sales had declined for each of the three preceding years, and 
the office products market had become increasingly competitive; (b) 
that the value of BBP had declined and was likely to continue to 
decline; (c) that Ms. Best had rejected an offer to sell BBP to an 
unrelated third party and planned to turn over operations of BBP to her 
grandson who had little or no experience in the company; and (d) that 
BBP retained the ability to terminate the ESOP, distribute the Stock, 
and allow the participants to put the shares back to BBP at $28.26 per 
share.
    Based on the conclusions in the paragraph above, Mr. Hartman 
represents that Stanton determined that the best interest of the 
participants were served by selling the Allocated Shares to BBP. To 
this end, Mr. Hartman states that Stanton negotiated favorable terms in 
connection with the sale for the exclusive purpose of protecting the 
interest of the ESOP participants and enhancing the benefits to 
participants. In this regard, it is represented that Stanton: (a) 
Negotiated a sale price for the Allocated Shares that included a 
premium over the interim valuation performed by Hawthorne; (b) 
negotiated specific ``tag along'' rights for the ESOP in the event of a 
subsequent sale of BBP at a higher price following the transactions; 
and (c) obtained a representation from BBP that it would consider 
regular profit sharing contributions following the termination of the 
ESOP, subject to the financial circumstances of BBP. In light of the 
foregoing, it is the opinion of Mr. Hartman that Stanton fully 
discharged its fiduciary obligation to the ESOP in connection with the 
subject transactions.
    In his letter of March 2, 2005, Mr. Hartman also addresses the 
issue of independence of both L&V and Stanton. In this regard, Mr. 
Hartman represents that prior to the subject transactions neither L&V 
nor Stanton had had any dealings with BBP. It is further represented by 
Mr. Hartman that under the terms of Stanton's engagement letter with 
BBP, Stanton was not required to complete the transactions, and 
Stanton's fee was not conditioned upon such completion. Further, Mr. 
Hartman represents that had Stanton concluded that the transactions 
were not in the best interest of participants, Stanton would have 
withdrawn from the engagement.
    Mr. Hartman also enclosed with his letter of March 2, 2005, 
information regarding his qualifications and those of Stanton. With 
regard to his qualifications, Mr. Hartman represents that he practices 
in the employee benefits area, with an emphasis on qualified and non-
qualified deferred compensation and on counseling clients on fiduciary 
matters. Further, Mr. Hartman represents that he has extensive 
experience with the creation and operation of employee stock ownership 
plans and has served as a special counsel to trustees of such plans 
with respect to fiduciary issues.
    With regard to Stanton's qualifications, Mr. Hartman encloses 
documents which state that Stanton has been providing trust, custody, 
and other fiduciary services to institutions and individuals since 1919 
and is dedicated to the professional management of its clients' assets. 
In addition, it is represented that Stanton has extensive employee 
stock ownership plan experience as an independent fiduciary for 
leveraged and non-leveraged transactions.
    In addition to his letter of March 2, 2005, Mr. Hartman submitted 
another letter, dated March 24, 2005, to the Department in which he 
clarified that Stanton was fully aware that the subject transactions 
included both the sale of the Allocated Shares to BBP and the transfer 
of the Unallocated Shares to BBP in exchange for assumption by BBP of 
the ESOP's debt under the Note. Further, Mr. Hartman stated that the 
actions taken by Stanton outlined in his letter of March 2, 2005, apply 
with

[[Page 25613]]

equal effect to both of the subject transactions.
    In addition in his March 24, 2005 letter, Mr. Hartman informed the 
Department that, although no longer employed by Stanton, Richard Joseph 
(Mr. Joseph), formerly the President of Stanton, was the individual who 
analyzed and completed the subject transactions on behalf of Stanton. 
However, both Stanton and Mr. Joseph agreed to the accuracy of the 
discussion in Mr. Hartman's March 24 letter and confirmed the same by 
signing such letter.
    15. The applicant maintains that the requested exemption is 
administratively feasible in that the application contains all of the 
facts and law necessary for the Department to issue an exemption.
    The applicant further maintains that the exemption is feasible in 
that it involves a one-time transaction for cash in the case of the 
purchase by BBP of the Allocated Shares and a one-time exchange of the 
Unallocated Shares for the assumption by BBP of the ESOP's liability 
under the Note.
    Further, it is represented that the cash received by the ESOP in 
the sale of the Allocated Shares was immediately credited to the 
accounts of the each of the Participants in proportion to the shares of 
Stock that were sold from each participant's account. It is represented 
that each of the participants in the ESOP will be given the option to 
elect a lump sum distribution in cash or to rollover the distribution 
into a 401(k) plan sponsored by BBP or into such participant's 
individual retirement account.
    16. It is represented that were the sale to BBP of the Allocated 
Shares rescinded, the Allocated Shares distributed to participants upon 
termination of the ESOP, and the Allocated Shares purchased by BBP 
directly from the participants at the then fair market value, the 
participants might receive substantially less on such shares, than if 
the exemption were to be granted.
    17. In summary, the applicant represents that the subject 
transactions met the statutory criteria of section 408(a) of the Act 
and 4975(c)(2) of the Code because: (a) Stanton was responsible for 
each of the transactions, and in accordance with the fiduciary 
provisions of the Act, reviewed, analyzed, and determined that the ESOP 
should enter into each of the transactions; (b) Stanton reviewed, 
negotiated, and approved the terms of each of the transactions, and 
determined on behalf of the ESOP and solely in the interest of the 
ESOP, its participants, and beneficiaries that the terms of each of the 
transactions were fair and reasonable; (c) Stanton monitored compliance 
with the terms of each of the transactions by the parties; (d) 
Hawthorne, acting as the independent qualified appraiser, determined 
the fair market value of the Stock as of the date each of the 
transactions were entered; (e) the ESOP incurred no fees, commissions, 
or other charges or expenses as a result of its participation in each 
of the transactions; (f) the subject transactions were one-time 
transactions; (g) the purchase price which the ESOP received from sale 
of the Allocated Shares to BBP included a premium over the fair market 
value of such shares; (h) each of the participants in the ESOP will be 
given the option to elect a lump sum distribution in cash or to 
rollover the distribution into a 401(k) plan sponsored by BBP or into 
such participant's individual retirement account; (i) the cash received 
by the ESOP in the sale of the Allocated Shares was credited to the 
accounts of the each of the Participants in proportion to the Allocated 
Shares that were sold from each participant's account; (j) the proceeds 
from the sale of the Allocated Shares provide participants with 
additional investment liquidity and diversification.
Notice to Interested Persons
    Those persons who may be interested in the pendency of the 
requested exemption include participants and beneficiaries of the ESOP, 
alternative payees, participants who are current employees but who are 
absent from the work site, the employer, officers and employees of the 
employer, fiduciaries of the ESOP, Stanton, and all other interested 
persons or parties involved in the subject transactions. It is 
represented that these various classes of interested persons will be 
notified as follows.
    All participants and beneficiaries and all other interested persons 
will be provided with a copy of the notice of this proposed exemption 
(the Notice), plus a copy of the supplemental statement (the 
Supplemental Statement), as required, pursuant to 29 CFR 2570.43(b)(2), 
which will advise such interested persons of their right to comment and 
to request a hearing. The Notice and the Supplemental statement will be 
provided to all interested persons within fifteen (15) days of the 
publication of the Notice in the Federal Register.
    The Notice and the Supplemental Statement will be personally 
delivered to all participants who are current employees of BBP and who 
are present at the work site on the date the Notice and Supplemental 
Statement are provided. The Notice and the Supplemental Statement will 
be sent by first class mail to all other participants and beneficiaries 
or other interested persons. It is represented that for the purpose of 
sending the Notice and Supplemental Statement by mail, the last known 
addresses of such participants, beneficiaries, or other interested 
persons maintained by the ESOP will be used.
    The Department must receive written comments and requests for a 
hearing no later than forty-five (45) days from the date of the 
publication of the Notice in the Federal Register.

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

[[Page 25614]]

    (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 10th day of May, 2005.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 05-9577 Filed 5-12-05; 8:45 am]

BILLING CODE 4510-29-P