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Secretary of Labor Thomas E. Perez
Proposed Exemptions; Smith Barney Shearson Prototype [Notices] [10/17/1996]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; Smith Barney Shearson Prototype [10/17/1996]

[PDF Version]

Volume 61, Number 202, Page 54224-54229

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10150, et al.]

 
Proposed Exemptions; Smith Barney Shearson Prototype

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restriction 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 
request 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 
request 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. 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 request for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 
20210. Attention: Application No. stated in each Notice of Proposed 
Exemption. The applications for exemption and the comments received 
will be available for public inspection in the Public Documents Room of 
Pension and Welfare Benefits Administration, U.S. Department of Labor, 
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 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 (43 FR 47713, October 17, 1978) transferred the authority of 
the Secretary of the Treasury to issue exemptions of the type requested 
to the Secretary of

[[Page 54225]]

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.

The Smith Barney Shearson Prototype, Defined Contribution Plan (the 
Plan), Located in Los Angeles, California

[Application No. D-10150]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a), 406(b)(2), and 407(a) 
of the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1) (A) through (E) of 
the Code, shall not apply to the past acquisition, holding, and 
exercise by the Plan of certain stock purchase rights (the 
Rights),<SUP>1 which were issued by the Highland Federal Bank (the 
Employer) to all shareholders of record, as of November 7, 1995, of 
common stock of the Employer (the Employer Stock) pursuant to a rights 
offering (the Rights Offering), provided that the following conditions 
were satisfied:
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    \ 1\  The Department notes that the Rights do not constitute 
``qualifying employer securities'' within the meaning of section 
407(d)(5) of the Act.
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    (a) The Plan's acquisition and holding of the Rights in connection 
with the Rights Offering occurred as a result of an independent act of 
the Employer as a corporate entity;
    (b) All holders of the Employer stock, including the Plan, were 
treated in a like manner with respect to all aspects of the Rights 
Offering; and
    (c) The acquisition, holding, and disposition of the Rights by the 
affected participant accounts in the Plan occurred in accordance with 
Plan provisions for the individually directed investment of such 
accounts.

EFFECTIVE DATE: This exemption, if granted, will be effective for the 
period from November 8, 1995 to December 15, 1995.

Summary of Facts and Representations

    1. The Plan is a profit sharing plan with a 401(k) feature adopted 
by the Employer. The Employer is a Federal savings bank headquartered 
in Los Angeles, California. Effective January 1, 1995, the previous 
plan maintained by the Employer was amended and restated as the current 
Plan to provide for individually directed accounts. As of September 30, 
1995, the Plan had total assets of $2,416,827. As of December 31, 1994, 
the Plan had approximately 94 participants and beneficiaries. The 
trustee of the Plan is Smith Barney Corporate Trust Company (the 
Trustee).
    2. Among the assets of the Plan is the Employer Stock. The Employer 
Stock began to trade on the SmallCap Market of the National Association 
of Securities Dealers Automated Quotation Stock Market, Inc. (NASDAQ) 
as of October 16, 1995, under the symbol ``HBNK,'' and was approved for 
quotation in the NASDAQ National Market System as of December 29, 1995. 
The trustees of the previous plan made the decision to invest a portion 
of plan assets in the Employer Stock. The Employer Stock was carried 
over to the Plan and is now held under the individual accounts of those 
participants with an interest in the Employer Stock (the Invested 
Participants). As of December 31, 1994, the Plan had 92 Invested 
Participants. Participants are no longer permitted to invest in the 
Employer Stock. The only action that Invested Participants can take 
with respect to the Employer Stock is to sell such stock and to direct 
the Trustee as to the investment of the sale proceeds in one or more of 
the six funds that comprise the investment options currently available 
to participants. As of November 7, 1995 (the Record Date), there were 
issued an outstanding 1,105,000 shares of the Employer Stock. As of 
that date, the Plan held 21,436 shares of the Employer Stock at $13.25 
per share (a total of $284,027), or about two percent of all 
outstanding shares.
    3. The Employer, as a means of raising capital needed to promote 
its business plan and to support future growth, made a Rights Offering 
to its shareholders. The Rights Offering commenced on November 8, 1995 
with the issuance by the Employer to all its shareholders of record as 
of the close of business on the Record Date (the Record Date 
Shareholders) transferable subscription Rights in the ratio of one 
Right for every 1.105 shares of the Employer Stock held. The number of 
Rights actually issued to each Record Date Shareholder was rounded up 
to the nearest whole Right. It is represented that the Rights Offering 
was an independent act of the Employer as a corporate entity and that 
all holders of the Employer Stock, including the Plan, were treated in 
a like manner with respect to all aspects of the Rights Offering.
    Each Right conferred upon its holder an entitlement (the Basic 
Privilege) to purchase one additional share of the Employer Stock at a 
subscription price of $12 per share (the Subscription Price). Each 
Right also conferred upon its holder a second privilege (the 
Oversubscription Privilege) allowing each Rights holder exercising the 
Basic Privilege in full to subscribe for an unlimited number of 
additional shares of the Employer Stock (the Excess Shares), also at 
$12 per share, subject to availability after satisfaction of 
subscriptions made pursuant to the Basic Privilege. If the number of 
Excess Shares was insufficient to satisfy all exercises of the 
Oversubscription Privilege, the Excess Shares were to be allocated on a 
pro rata basis in accordance with the number of shares of the Employer 
Stock owned as of the Record Date by each Rights holder who exercised 
the Oversubscription Privilege. Any exercise of the Oversubscription 
Privilege had to occur at the same time that the Basic Privilege was 
exercised. Once the Basic Privilege or the Oversubscription Privilege 
was exercised, such exercise could not be revoked. The Rights Offering 
was announced to expire at 5 p.m., Pacific Time, on December 15, 1995 
(the Expiration Time), at which time no further exercises of Rights 
could occur.
    While the Basic Privilege under the Rights was generally 
transferable, the Oversubscription Privilege was not transferable. The 
Rights traded on the SmallCap Market of NASDAQ under the symbol 
``HBNKR'' until the close of trading on December 14, 1995, the date 
prior to the expiration date of the Rights Offering. The Employer had 
authorized the issuance of up to 1,700,500 additional shares of the 
Employer Stock, for a total of 2,805,500 outstanding shares if the 
maximum number of additional shares were sold. Payments of the 
Subscription Price for the purchase of the Employer Stock pursuant to 
the exercise of the Rights were held in an escrow account maintained by 
First Interstate Bank of California as the subscription agent (the 
Subscription Agent) pursuant to an Escrow Agreement with the Employer. 
The Rights Offering was conditioned upon the receipt of minimum 
proceeds of $12 million pursuant to the exercise of Rights and from 
standby purchasers <SUP>2

[[Page 54226]]

prior to the Expiration Time, which minimum condition was 
achieved.<SUP>3
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    \2\ The Employer had standby purchase agreements with certain 
outside investors, who severally agreed to commit to purchasing a 
specified number of shares of the Employer Stock at the Subscription 
Price, subject to availability after satisfaction of exercises by 
Rights holders of the Basic Privilege and the Oversubscription 
Privilege. The standby purchase agreements have no bearing on this 
proposed exemption.
    \3\ The Employer was not required to issue shares of the 
Employer Stock pursuant to the Rights Offering to any Rights holder 
or standby purchaser who, in the Employer's sole judgment and 
discretion, was required to obtain prior clearance, approval, or non 
disapproval from any Federal bank regulatory authority to own or 
control such shares, unless prior to the expiration time, evidence 
of such clearance, approval, or nondisapproval had been provided to 
the Employer. This regulatory limitation had no bearing on this 
proposed exemption because it was not possible for the relatively 
small number of shares of the Employer Stock available for purchase 
by the Invested Participants to trigger the regulatory limitation on 
purchases described in the Rights Offering Circular.
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    4. It is represented that the acquisition, holding, and disposition 
of the Rights by the affected participant accounts in the Plan occurred 
in accordance with Plan provisions for the individually directed 
investment of such accounts. In anticipation of the Rights Offering, 
the trust agreement (the Trust Agreement) of the Plan was amended in 
order to permit Invested Participants as of the Record Date to direct 
the Trustee either to exercise or sell the Rights attributable to their 
accounts, and such amendments also established the procedures for 
making such directions. Due to the amendments to the Trust Agreement 
and, consequently, the conversion of the Plan from a prototype plan 
into an individually designed plan, the Employer has submitted the Plan 
to the Internal Revenue Service for its determination on the 
qualification of the Plan as an individually designed plan.
    5. It is further represented that on November 8, 1995 all Invested 
Participants received by hand delivery a packet of information 
pertaining to the Rights Offering, which included: (i) a copy of the 
Rights Offering Circular published by the Employer; (ii) a notice from 
the Trustee describing the procedures for participant directions with 
respect to the Rights Offering; (iii) a direction form (the Direction 
Form); and (iv) a Statement of Benefits for the quarter ending 
September 30, 1995, containing information regarding the number of 
shares of the Employer Stock allocated to each Invested Participant 
under his or her individual account, as well as the number of Rights 
issued to each in proportion to the number of shares of the Employer 
Stock held. As of November 8, 1995, the Employer had also furnished all 
other Record Date Shareholders with information regarding the Rights 
Offering by mail.
    6. The Direction Form provided to Invested Participants enabled 
them to direct the Trustee either (i) to exercise the Rights allocated 
to their respective accounts, or (ii) to sell the Rights on the open 
market. In order to allow the Trustee sufficient time to carry out the 
administrative procedures required to review the Direction Forms of the 
Invested Participants and to implement such directions, Invested 
Participants had to return a properly completed form to the Trustee by 
5:00 p.m., Pacific Time, on December 1, 1995 (i.e., 10 business days 
before the expiration date of the Rights Offering). Invested 
Participants who failed to return a timely and properly completed 
Direction Form to the Trustee were deemed to have directed the Trustee 
to sell their respective Rights on the open market.
    Invested Participants who directed the Trustee to exercise their 
Rights had to specify the order in which to liquidate their other Plan 
investments, if necessary, to obtain the funds for the payment of the 
Subscription Price. If an Invested Participant failed so to specify, 
the Trustee would automatically liquidate such investments in the 
following order: (i) Stable Value Fund; (ii) Balanced Fund; (iii) Large 
Value Equity Fund; (iv) Large Growth Fund; (v) Small Growth Fund; and 
(vi) International Equity Fund. Invested Participants also had to 
specify the order in which to liquidate within each investment fund the 
following types of contributions: profit-sharing contributions, 
elective deferrals, employer matching contributions, qualified matching 
contributions, or rollover contributions. If an Invested Participant 
failed so to specify, the Trustee would automatically liquidate each 
investment fund from the following order of contributions: (i) Rollover 
contributions; (ii) profit sharing contributions; (iii) employer 
matching contributions; (iv) qualified matching contributions; and (v) 
elective deferrals. The Trustee would exercise Rights only to the 
extent of the funds available in the Invested Participant's account. 
Thus, if an Invested Participant had insufficient funds to pay the 
Subscription Price for all of the shares of the Employer Stock 
subscribed for, the Trustee would attempt to sell any Rights not 
exercised on the open market.
    7. Once the Trustee obtained the funds necessary for the payment of 
the Subscription Price, the Trustee would transfer such funds to the 
Reserve Deposit Account in the Plan, pending a transfer to the 
Subscription Agent. Once the Subscription Agent purchased the Employer 
Stock pursuant to an exercise of Rights by an Invested Participant, the 
Trustee would allocate the newly acquired shares of the Employer Stock 
to the account of the Invested Participant from which the funds had 
been obtained.
    In the event that the market price for the Employer Stock, 
including the effect of any applicable brokerage commissions and other 
expenses, was less than the Subscription Price at the time the Trustee 
was to exercise the Rights pursuant to such election by an Invested 
Participant, the Trustee was not to exercise such Rights. It is 
represented that on December 15, 1995, the expiration date of the 
Rights Offering and the date on which the Trustee exercised Rights on 
behalf of the Invested Participants so directing the exercise of their 
Rights, the Subscription Price was less than the market price for a 
share of the Employer Stock on NASDAQ,<SUP>4 after giving effect to any 
applicable brokerage commissions and other expenses.
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    \4\ As of December 15, 1995, the closing price of the Employer 
Stock, as quoted on NASDAQ, was $12.25 per share.
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    All sales of Rights by Invested Participants were to be executed by 
Sandler O'Neal & Partners, L.P., the Employer's financial advisor for 
the Rights Offering (the Financial Advisor), at the market price per 
Right. Neither the Trustee nor the Financial Advisor were to charge any 
commissions or other fees in connection with the sale of Rights. The 
proceeds from the sale of any Rights were to be deposited in the 
accounts of the Invested Participants in proportion to the number of 
Rights they elected to sell, to be invested in accordance with their 
then current investment selections.
    However, the Trustee inadvertently did not follow the Invested 
Participants' directions with respect to the sale or exercise of their 
Rights within the time frame established by the Rights Offering 
Circular. When the Trustee discovered that the Rights Offering had 
expired, it took immediate steps to make the Plan whole. Accordingly, 
on January 22, 1996, the Trustee paid $2,111.31 to the Plan.
    8. The Employer represents that the following is a summary of the 
Rights Offering. As of the Record Date, the total number of shares of 
Employer Stock outstanding prior to the Rights Offering was 1,105,000, 
of which approximately 21,436 shares, or approximately two percent were 
held by the Plan. The Rights issued to the Plan pursuant to the Rights 
Offering were allocated to the account of each Invested Participant for 
his or her direction on the exercise or sale of such Rights. The 
Rights, as listed on NASDAQ, were initially valued at \1/8\

[[Page 54227]]

per Right on November 21, 1995 and at \1/64\ per Right on December 14, 
1995, the date prior to the expiration date of the Rights Offering. 
Ninety of the Invested Participants elected to sell their Rights, a 
total of 19,117 Rights. The market price of such Rights on December 4, 
1995, the date on which such Rights should have been sold, was \1/16\ 
per Right. Two of the Invested Participants elected to exercise their 
Rights pursuant to the Basic Privilege, a total of 282 Rights. No 
Invested Participants elected to exercise the Oversubscription 
Privilege.
    The total number of shares of the Employer Stock outstanding after 
the Rights Offering was 2,295,983, an increase of 1,190,983 shares. Of 
these additional 1,190,983 shares, approximately 190,983 were sold to 
shareholders upon exercise of their Rights, or to investors who 
purchased the Rights on the open market, and the other 1,000,000 shares 
were sold to outside investors pursuant to certain standby purchase 
agreements.
    9. In summary, the applicant represents that the transactions 
satisfied the criteria for an exemption under section 408(a) of the Act 
for the following reasons: (1) The Plan's acquisition and holding of 
the Rights in connection with the Rights Offering occurred as a result 
of an independent act of the Employer as a corporate entity; (2) all 
holders of the Employer Stock, including the Plan, were treated in a 
like manner with respect to all aspects of the Rights Offering; (3) the 
acquisition, holding, and disposition of the Rights by the affected 
participant accounts occurred in accordance with Plan provisions for 
the individually directed investment of such accounts; and (4) the 
Invested Participants' accounts held only approximately two percent of 
the Employer Stock outstanding as of the Record Date.

Notice to Interested Persons

    Notice of the proposed exemption shall be given to all interested 
persons, and all employee organizations in which they are members, by 
personal delivery, by first-class mail, or by posting in the Employer's 
offices within 15 days of the date of publication of the notice of 
pendency 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/or to 
request a hearing with respect to the proposed exemption. Comments and 
requests for a hearing are due within 45 days of the date of 
publication of this notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

John A. Colglazier Self Employment Retirement Plan (the Plan), Located 
in San Antonio, TX

[Application No. D-10291]

Proposed Exemption and Replacement of Exemption

    The Department is proposing to grant a new exemption that will 
replace Prohibited Transaction Exemption (PTE) 86-95 (51 FR 26077, July 
18, 1986). Authority to grant the proposed exemption and to replace PTE 
86-95 is given to the Department under section 4975(c)(2) of the Code 
and in accordance with the procedures set forth in 29 CFR Part 2570, 
Subpart B (55 FR 32836, 32847, August 10, 1990).
    If the proposed exemption is granted, the sanctions resulting from 
the application of section 4975 of the Code, by reason of section 
4975(c)(1) (A) through (E) of the Code, will not apply to the cash sale 
by the Plan, for $74,250, of a parcel of unimproved real property (the 
Property) to John A. Colglazier, a sole proprietor and a disqualified 
person with respect to the Plan.<SUP>5
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    \5\ Because Mr. Colglazier is a sole proprietor and the only 
participant in the Plan, there is no jurisdiction under Title I of 
the Employee Retirement Income Security Act of 1974 (the Act). 
However, there is jurisdiction under Title II of the Act pursuant to 
section 4975 of the Code.
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    This proposed exemption is subject to the following conditions:
    (a) The sale is a one-time transaction for cash that is entered 
into within 90 days following the publication, in the Federal Register, 
of the notice granting the proposed exemption.
    (b) The Plan does not pay any real estate fees or commissions in 
connection with the sale.
    (c) The Property is appraised by a qualified, independent 
appraiser.
    (d) The Plan receives, as consideration, an amount that is equal to 
the greater of $74,250 or the fair market value of the Property as of 
the date of the sale, including any special value attributed to the 
Property by reason of its proximity to other real property (the 
Adjoining Properties) owned by Mr. Colglazier.
    (e) All terms and conditions of the sale remain at least as 
favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party at the time of the sale.

Temporary Nature of Exemption/Effective Date

    This proposed exemption, if granted, will be effective for a period 
of 90 days subsequent to the date the grant notice is published in the 
Federal Register.

Preamble

    This proposed exemption is requested in an application filed with 
the Department by Mr. Colglazier. The application updates the facts and 
representations contained in PTE 86-95 which would have permitted the 
Plan to sell the Property to Mr. Colglazier. The transaction was never 
consummated due to declining real estate values which resulted in Mr. 
Colglazier's inability to obtain financing. In view of the passage of 
time and certain factual changes, the Department believes that it is 
necessary to replace PTE 86-95 by reproposing the requested exemption 
in a form which accurately reflects the current facts and 
circumstances.

Summary of Facts and Representations

    1. The Plan is a defined contribution, profit sharing plan and the 
successor to another plan that was originally established in 1983. The 
Plan, including its predecessor, has always had one participant, John 
A. Colglazier. Mr. Colglazier, a sole proprietor engaged in the 
commercial and investment real estate business in San Antonio, Texas, 
serves as the Plan trustee and the decisionmaker with respect to the 
Plan's investments. As of March 31, 1996, the Plan had total assets of 
$98,487.
    2. Among the assets of the Plan <SUP>6 is a parcel of real property 
consisting of 1.0307 acres of unimproved land located in the northeast 
corner of the intersection of Mesquite and Duval Streets in San 
Antonio, Bexar County, Texas. The Property is in close proximity to the 
Adjoining Properties that are owned by Mr. Colglazier.
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    \6\ Unless otherwise noted, references to the Plan include its 
predecessor.
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    3. The Plan purchased the Property on October 1, 1985 from William 
Cole Butler, an unrelated party, for a purchase price of $2.80 per 
square foot plus $101 in charges, or a total acquisition price of 
$126,093.94. At no time has the Property ever been encumbered by a 
mortgage or a deed of trust.
    4. Since it has owned the Property, the Plan has incurred total 
costs and real estate taxes of approximately $24,059. The Plan has also 
leased the Property to Conex Construction, Inc., an unrelated party, 
but never to a disqualified person. The subject lease, which commenced 
on November 1, 1989 and expired on October 15, 1990, required the 
lessee to pay a monthly rental of $200.
    5. At the time the Property was purchased by the Plan, it is 
represented

[[Page 54228]]

that Mr. Colglazier, as Plan trustee, intended to develop the Property 
with a warehouse that would be constructed thereon and used for 
commercial rental. Soon after closing the sale, Mr. Colglazier realized 
that the Plan did not have sufficient assets to construct the warehouse 
and considered obtaining third party financing to realize this 
objective. However, after exploring various options, Mr. Colglazier 
decided that it would be more appropriate to purchase the Property from 
the Plan. Therefore, on advice of counsel, Mr. Colglazier applied to 
the Department for an administrative exemption.
    6. On July 18, 1986, the Department granted PTE 86-95 which would 
have permitted the Plan to sell the Property to Mr. Colglazier for 
cash, for the higher of the fair market value of the Property or 
$146,000. Although Mr. Colglazier was ready to complete the sale 
following the granting of PTE 86-95, he was unable to obtain the 
necessary financing because the real estate market had collapsed in 
Texas. Therefore, Mr. Colglazier never utilized PTE 86-95.
    7. On February 7, 1996, Mr. Colglazier purchased the Adjoining 
Properties from Flo-Line Filters, Inc., an unrelated party for a total 
purchase price of $37,500. The Adjoining Properties consist of two 
parcels of vacant land. One of the parcels is located on Austin Street 
and Duval Street and contains 0.7059 acres. The other parcel is located 
on Mesquite Street and Brooks Street and contains 0.2473 acres.
    It is represented that Mr. Colglazier decided to purchase the 
Adjoining Properties because it would allow him to construct a larger 
warehouse, when combined with the Property. Also, it is represented 
that one of the Adjoining Properties has frontage on a freeway and Mr. 
Colglazier believes that this factor will enhance his ability to sell 
all of the Properties as one tract if he decides not to construct the 
warehouse. However, at this time, Mr. Colglazier intends to construct 
the warehouse to provide income for his retirement.
    8. The Property has been appraised by Richard L. Dugger, MAI, CRE, 
a qualified, independent appraiser. In an appraisal report dated May 
14, 1996, Mr. Dugger has placed the fair market value of the Property 
at $67,500 as of April 19, 1996. In valuing the Property, Mr. Dugger 
has considered comparable sales of other properties.
    In an addendum to the appraisal dated July 17, 1996, Mr. Dugger has 
determined that the Property has nominal, incremental value by reason 
of Mr. Colglazier's ownership of the Adjoining Properties. According to 
Mr. Dugger, the incremental value is nominal since there has been very 
limited development activity in the San Antonio area for many years. 
Mr. Dugger concludes that the intrinsic value of the Property to Mr. 
Colglazier is approximately 10 percent above the market value of 
$67,500 or $74,250.
    9. Accordingly, Mr. Colglazier requests an administrative exemption 
from the Department in order to purchase the Property from the Plan. 
The new exemption is being requested in view of changed circumstances 
that would render PTE 86-95 invalid. As discussed above, these factual 
changes are (a) Mr. Colglazier's acquisition of the Adjoining 
Properties and (b) the special value attributed to the Property by Mr. 
Dugger as a result of such Adjoining Property acquisition. If granted, 
the new exemption will replace PTE 86-95.
    10. Mr. Colglazier proposes to purchase the Property from the Plan 
for cash for a price that is equal to the greater of $74,250 or the 
fair market value of the Property on the date of the sale, including 
any special value attributed to the Property by reason of its proximity 
to the Adjoining Properties. The Plan will not incur any fees, 
commissions, expenses or other costs in connection with the sale. In 
addition, the transaction must be entered into within 90 days following 
the publication, in the Federal Register, of the notice granting the 
proposed exemption.
    11. In summary, it is represented that the proposed transaction 
will satisfy the terms and conditions of section 4975(c)(2) of the Code 
because: (a) The sale will be a one-time transaction for cash that must 
be entered into within 90 days following the publication, in the 
Federal Register, of the notice granting the proposed exemption; (b) 
the Plan will not pay any real estate fees or commissions in connection 
with the sale; (c) the Property has been appraised by a qualified, 
independent appraiser; (d) the Plan will receive as consideration an 
amount that is equal to the greater of $74,250 or the fair market value 
of the Property as of the date of the sale, including any special value 
attributed to the Property by reason of its proximity to the Adjoining 
Properties; and (e) all terms and conditions of the sale will remain at 
least as favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party at the time of the sale.

Notice to Interested Persons

    Because Mr. Colglazier is the only person in the Plan who will be 
affected by the proposed transaction, it has been determined that there 
is no need to distribute the notice of pendency to interested persons. 
Therefore, comments and requests for a hearing are due 30 days from the 
publication of this notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (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 of disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(b) of the act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.


[[Page 54229]]


    Signed at Washington, DC, this 11th day of October, 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 96-26602 Filed 10-16-96; 8:45 am]
BILLING CODE 4510-29-P