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Secretary of Labor Thomas E. Perez
Proposed Exemptions; Robert A. Benz & Co., P.A., Certified Public Accountants Employees Profit Sharing Plan (the Plan) [Notices] [06/04/1997]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; Robert A. Benz & Co., P.A., Certified Public Accountants Employees Profit Sharing Plan (the Plan) [06/04/1997]

[PDF Version]

Volume 62, Number 107, Page 30616-30623

[DOCID:fr04jn97-99]

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10398, et al.]

 
Proposed Exemptions; Robert A. Benz & Co., P.A., Certified Public 
Accountants Employees Profit Sharing Plan (the Plan)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction 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

    Unless otherwise stated in the Notice of Proposed Exemption, all 
interested persons are invited to submit written comments, and with 
respect to exemptions involving the fiduciary prohibitions of section 
406(b) of the Act, requests for hearing 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

[[Page 30617]]

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 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.

Robert A. Benz & Co., P. A., Certified Public Accountants Employees 
Profit Sharing Plan (The Plan) Located in Pensacola, Florida

[Application No. D-10398]

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, 12847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a) and 406(b)(1) and 
(b)(2) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1) (A) through 
(E) of the Code, shall not apply to both (1) the proposed cash sale 
(the Sale) of certain real property (the Property) to the Plan by 
Robert A. Benz & Co., P.A., Certified Public Accountants (the 
Employer), a party in interest with respect to the Plan, and (2) the 
proposed lease-back (the Lease) of the Property by the Plan to the 
Employer; provided:
    (A) The terms and conditions of the transactions are at least as 
favorable to the Plan as those obtainable from unrelated parties;
    (B) The Plan is represented at all times and for all purposes with 
respect to the Sale and the Lease by a qualified, independent 
fiduciary;
    (C) The Sale is a one-time transaction for a lump sum cash payment;
    (D) The purchase price is the fair market value of the Property as 
determined on the date of the Sale by a qualified, independent 
appraiser;
    (E) The monthly rents paid to the Plan will be adjusted every year 
after the first 12 months of the Lease by an amount to reflect the 
greater of either a 3 percent per year increase or the most recent 
percentage increase in the U. S. Department of Labor Consumer Price 
Index;
    (F) In addition, the rents initially paid under the Lease are no 
less than the fair market rental value of the Property as determined by 
a qualified, independent appraiser, and thereafter are adjusted every 
third year to be no less than the fair market rental value as then 
determined by the independent appraiser;
    (G) The Lease is a triple-net lease under which the Employer as the 
lessee is obligated for all expenses incurred by the Property, 
including all taxes and assessments, maintenance, insurance, utilities, 
and any other expense;
    (H) The qualified, independent fiduciary of the Plan monitors and 
enforces compliance with the terms and conditions of the Lease and the 
exemption herein proposed;
    (I) At all times the qualified, independent fiduciary for the Plan 
determines that the Lease is in the best interests of the Plan and its 
participants and beneficiaries, and at all times determines that there 
are adequate protections of the rights of the participants and 
beneficiaries of the Plan, and takes all the necessary steps to protect 
those rights;
    (J) In the event the Plan sells the Property and the proceeds 
received from the sale plus the net rentals received for the Property 
are less than the Plan's cost of acquiring, holding, and maintaining 
the Property plus a 5 per cent per annum compounded rate of return on 
the cost to the Plan in acquiring, holding, and maintaining the 
Property, the Employer, or its successors, shall pay in cash the 
difference to the Plan within 45 days of the sale;
    (K) No commissions, expenses, or costs shall be incurred by the 
Plan from the Sale or the Lease; and
    (L) At all times during the Sale and Lease, the fair market value 
of the Property represents less than 25 percent of the total assets of 
the Plan.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan that is a profit sharing 
plan as described in section 401(a) of the Code, and is exempt from 
taxation pursuant to section 501 of the Code. The Plan has seven 
participants and beneficiaries and total assets of $2,300,000, as of 
December 31, 1996. The fiduciary of the Plan is Mr. Robert A. Benz, who 
is a certified public accountant and also is the president and director 
as well as 90.79 percent stockholder of the Employer. The Employer is 
being purchased under a long-term contract from Mr. Benz by other 
Certified Public Accountants who are presently employed by the 
Employer. The Employer has been in existence over thirty years as a 
public accounting firm, and now is a registered professional 
association under the statutes of Florida.
    The independent fiduciary for the Plan in connection with the 
proposed transactions is Mr. J. Thomas Fife (the Independent 
Fiduciary), a resident of Pensacola, Florida, and a Vice President-
Investments, for Paine Webber, Incorporated in its Pensacola, Florida 
office. When accepting his appointment with a written agreement, the 
Independent Fiduciary was given discretionary authority by the Plan 
with respect to the acquisition and the leasing of the Property and the 
management, control, and disposition of

[[Page 30618]]

the Property. The Independent Fiduciary represents that after a review 
the terms of the Plan and its portfolio and the terms and conditions of 
the proposed Sale and the Lease of the Property he is able to render a 
favorable opinion with respect to the proposed transactions. In 
addition, the Independent Fiduciary represents that his qualifications, 
background, and experience qualify him to act as the independent 
fiduciary for the Plan in connection with the proposed Sale and Lease. 
The Independent Fiduciary also represents that he has no interest in 
the Employer or the Plan, and no interest or relationship with any 
employee, shareholder, or director of the Employer. The Independent 
Fiduciary has also acknowledged that he has knowledge and experience 
with the responsibilities, duties, and liabilities of an independent 
fiduciary under the Act; and that he has a net-worth in excess of the 
appraised fair market value of the Property.
    2. The Property, which the Employer proposes to sell to the Plan 
and lease-back, is located at 1823 North 9th Avenue, Pensacola, 
Florida, and consists of a tract of land, zoned commercial, with 
improvements, totaling approximately 14,404 square feet in area. The 
improvements on the Property consists of a one-story concrete office 
building of approximately 4,463 square feet and adjoining asphalt 
parking facilities. It is encumbered by a real estate mortgage with 
current balance of $214,951.60, which is to be paid off at the closing 
of the Sale, so that the Plan is to acquire the title to the Property 
free and clear of the mortgage. The Property is used solely by the 
Employer in its business of providing accounting services to the 
public.
    Mr. Richard H. Sherrill of Sherrill Appraisal Company located in 
Pensacola, Florida, an independent MAI appraiser (the Independent 
Appraiser) determined, as of November 11, 1996, that the Property has 
fair market value of $395,000. As of January 27, 1997, the Independent 
Fiduciary determined the fair market rental value of the Property is 
$34,500 for the first year of the Lease, based upon a ten year lease 
providing for a triple net rental terms whereby the lessee pays all 
expenses. In addition, there is a provision for annual rent increases.
    3. The applicant represents that the Sale of the Property to the 
Plan by the Employer is for cash in an amount equal to the fair market 
value as determined by an independent appraiser, which amount is less 
than 17.5 percent of the total assets of the Plan.
    The applicant represents the Sale is contingent upon the 
simultaneous execution of the Lease by the Plan and the Employer. The 
Lease is a triple-net lease under which the Employer, as the lessee, 
will pay all expenses incurred by the Property during the term of the 
Lease including taxes, insurance, maintenance, repairs, utilities, and 
any other expense. The term of Lease is for a duration of ten years. If 
the lessee has performed all the covenants contained in the Lease, the 
lessee has an option to extend the Lease for an additional two years 
under the same terms and conditions as the original Lease. Beginning in 
the first year of the Lease, the annual rental is $34,500, and will be 
adjusted every year thereafter to be the greater of either an increase 
of 3 percent in the rent or an increase equal to the most recent 
percentage increase of the Consumer Price Index as determined by the 
U.S. Department of Labor. Also, the applicant represents that on every 
third year of the Lease, the rent will be adjusted so as to be no less 
than the fair market rental value of the Property as then determined by 
an independent appraiser selected by the Independent Fiduciary, and in 
no event will the amount of the rent be lowered.
    In addition, the applicant represents that it will indemnify and 
hold the Plan harmless from any liability arising from the Plan 
purchasing and holding the Property, including, but not limited to, 
hazardous material found on the Property, violation of zoning, land use 
regulations or restrictions, and violation of federal, state, or local 
environmental regulations or laws.
    The applicant also represents that if the Independent Fiduciary 
decides to sell the Property and the proceeds from the sale plus net 
rentals received for the Property are less than the Plan's cost of 
acquiring, holding, and maintaining the Property plus a 5 per cent per 
annum compounded rate of return, the Employer, or its successors, shall 
pay the difference in cash to the Plan within 45 days of the date of 
the sale.
    The applicant also represents that in order to ensure that the best 
interests of the Plan are served and to protect the rights of all the 
Plan participants and beneficiaries, the Independent Fiduciary has the 
ultimate authority to make distribution of the Property. At the time of 
distribution of benefits to Mr. Benz, the Independent Fiduciary will 
determine whether or not the interests of the Plan and its participants 
and beneficiaries are protected and better served by distributing the 
Property in kind to Mr. Benz as part of his vested benefits in the 
Plan, or whether or not the Plan will retain or dispose of the Property 
in some other manner.
    4. In summary, the applicant represents that the proposed 
transactions satisfies the criteria for an exemption under section 
408(a) of the Act because (a) the proposed transactions have been 
reviewed and approved by the Independent Fiduciary of the Plan; (b) the 
fair market value and the fair market rental value of the Property have 
been determined by an Independent Appraiser; (c) the Plan will pay no 
more than the fair market value for the Property and will receive the 
fair market rental value from the Lease; (d) in the event the Plan 
sells the Property and the proceeds received from the sale plus the net 
rentals received for the Property are less than the Plan's cost of 
acquiring, holding, and maintaining the Property plus a 5 per cent per 
annum compounded rate of return on the cost to the Plan of acquiring, 
holding, and maintaining the Property, the Employer, or its successors, 
shall pay in cash the difference to the Plan within 45 days of the 
sale; (e) the Independent Fiduciary will monitor and enforce the terms 
and conditions of the Sale and the Lease on behalf of the Plan; (f) the 
Independent Fiduciary will have exclusive authority with respect to the 
management, control, and disposition of the Property; and (g) the 
Independent Fiduciary has determined that the proposed Sale and Lease 
are in the best interests and protective of the rights of the Plan and 
its participants and beneficiaries.

FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver of the Department, 
telephone (202) 219-8881. (This not a toll-free number.)

Gart Brothers Sporting Goods Company 401(k) Plan (the Plan) Located in 
Denver, Colorado

[Application No. D-10403]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, the restrictions of sections 406(a) and 406 (b)(1) and 
(b)(2) of the Act and the sanctions resulting from the application of 
section 4975 of the Code, by reason of section 4975(c)(1) (A) through 
(E) of the Code, shall not apply to the proposed cash sale (the Sale) 
by the Plan of a 5 per cent interest (the Interest) in the Hampden 
Enterprises Limited Partnership (the Partnership) to the Gart Bros. 
Sporting Goods Company, the

[[Page 30619]]

sponsor of the Plan (the Employer) and a party in interest with respect 
to the Plan; provided (1) the terms and conditions of the transaction 
are at least as favorable to the Plan as those obtainable from 
unrelated parties, (2) the Sale is a one-time transaction for cash, (3) 
the Plan pays no commissions nor incurs any other expenses in 
connection with the proposed transaction, (4) the Plan receives as 
consideration from the Sale the greater of either (a) the total funds 
expended by the Plan in acquiring and holding the Interest, less any 
return of capital realized from its investment in the Interest, or (b) 
the fair market value of the Interest as determined on the date of the 
Sale by an independent appraiser, and (5) if the Employer ever receives 
more from the Interest than it pays the Plan when acquiring the 
Interest, the Employer will pay the Plan the excess.

Summary of Facts and Representations

    1. The Plan, effective April 1, 1995, and a successor by amendment 
to a profit sharing plan that had been established on November 1, 1970, 
is a defined contribution plan which features (a) employer-matching 
funding and salary deferral contributions by Plan participants, and (b) 
self-directed investments by Plan participants of their respective Plan 
accounts. The Plan is intended to be qualified pursuant to the 
requirements of sections 401(a) and 401(k) of the Code. The total 
assets of the Plan are $3,251,355, as of September 30, 1996, and the 
total participants in the Plan are approximately 747, as of January 17, 
1997. The fiduciary of the Plan is the Advisory Committee (the 
Fiduciary) appointed by the Employer to administer the Plan and to 
direct the trustee of the Plan with respect to the investments of Plan 
assets by the participants. Currently, the Fiduciary consists of three 
employees all of whom are minority shareholders and two are officers of 
the Employer. The trustee of the Plan is Wells Fargo Bank (Colorado), 
N.A. (The Trustee) whose principal offices are located in San Franciso, 
California.
    2. The Employer, a Colorado corporation, is a wholly owned 
subsidiary of Gart Sports Company, a Delaware corporation, which is 
privately held by 78 shareholders. The Employer was originally founded 
by the Gart family in 1928 as a family-operated, retail sporting goods 
store located in Denver, Colorado. From 1971 to the present, the 
Employer, through several changes in ownership, has expanded its retail 
stores in size and location throughout six states in the Rocky Mountain 
Region to include more than 60 stores and more than 1,700 employees.
    3. The applicant represents that on November 16, 1987, the Plan, 
with an investment of $206,000 acquired the Interest in the 
Partnership, which had been established on March 20, 1970, from an 
unrelated person, The Denver Sympathy Fountain, a Colorado non-profit 
corporation.\1\ As of March 17, 1997, this investment in the 
Partnership was determined to have a fair market value of $123,830 by 
Hale Companies, Inc., a real estate firm, located in Parker, Colorado. 
Hale Companies, Inc. represents that it is not related to the Plan, the 
Plan sponsor, or to the Fiduciary of the Plan.
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    \1\ The applicant represents that the individuals who were the 
members of the Advisory Committee and Plan Fiduciaries at the time 
the Plan acquired the Interest are no longer Fiduciaries of the Plan 
or employed by the Employer.
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    The applicant represents, that because the value of real estate 
plummeted in Denver, Colorado during the late 1980s and early 1990s, 
the Partnership, on November 30, 1994, sold an asset, which consisted 
of real property, and distributed $70,500 to the Plan. During March 
1995 the Partnership sold another parcel of real property to Mainstreet 
Quincy, LLC (Mainstreet LLC), a Colorado limited liability company, for 
a total sum of $5,010,000. At the closing of the sale of the second 
parcel of real property, Mainstreet LLC tendered as payment to the 
Partnership the sum of $760,000 in cash (of which $33,000 was 
distributed to the Plan on March 22, 1995) and two promissory notes. 
The first note is in the amount of $1,175,000, and promises to pay one-
half of the earned annual 6 percent interest on every March 15th and 
September 15th, plus annual payments of $293,000 every March 15th on 
the outstanding principal until the obligation becomes due and payable 
in full on March 15, 2000. The second note is in the amount of 
$3,075,000, and earns 6 per cent interest with no interest or principal 
payable until the note matures on March 15, 2000. The applicant 
represents that the two promissory notes and a reserve account of 
approximately $11,000 are the only assets currently possessed by the 
Partnership.
    4. On March 31, 1994, the Fiduciary communicated to the Partnership 
its desire to sell the Interest to other limited partners in the 
Partnership and received no response to its communication. During 1996 
the Fiduciary again attempted with no success to sell the Interest to 
the other limited partners of the Partnership; and also, to a secondary 
market-maker of limited partnership interests. Also during 1996, an 
attempt was made by the Plan without success to sell its interest in 
the Partnership to Mainstreet LLC.
    The applicant represents that on March 15, 1997, Mainstream LLC 
defaulted on the interest payment due on its first promissory note. On 
April 1, 1997, the applicant received confirmation from the U.S. 
Bankruptcy Court in Denver, Colorado that on December 30, 1996, 
Mainstream LLC, d/b/a Main Street Homes had filed for reorganization 
under Chapter 11 of the Bankruptcy Act and was assigned Case No. 96-
26283CEM.
    5. The applicant requests an administrative exemption from the 
prohibited transaction provisions of the Act to enable the Plan to sell 
the Interest it holds to the Employer, so that not only will the 
participants of the Plan be able to self-direct all the assets in their 
individual accounts, but they will be able to unburden the Plan of its 
investment in the Partnership. Also, the applicant represents that by 
selling the Interest to the Employer the Plan will avoid selling the 
Interest at a discounted price on the secondary market, and will avoid 
any commissions or other expenses in connection with the transaction.
    The applicant represents that the Employer will pay to the Plan as 
consideration for the Sale of the Interest to the Employer the greater 
of either (a) the total funds expended by the Plan in acquiring and 
holding the Interest, less any return of capital from its investment in 
the Interest, or (b) the fair market value of the Interest as 
determined on the date of the Sale by an independent appraiser. The 
Trustee represents in a letter dated April 4, 1997, that it will ensure 
that the Plan will receive the consideration from the Sale as required 
by the proposed exemption of the Department.
    6. In summary, the applicant represents that the proposed 
transaction will satisfy the criteria of section 408(a) of the Act 
because (a) the terms and conditions of the transaction are at least as 
favorable to the Plan as those obtainable from unrelated parties; (b) 
the Sale of the Interest involves a one-time transaction for cash; (c) 
the Plan will not incur the payment of any commissions nor any other 
expenses; (d) the transaction will enable the participants of the Plan 
to direct the investments of all the assets in their individual 
accounts in the Plan; (e) the Trustee will ensure that the 
consideration paid by the Employer is (i) the greater of either the 
funds expended by the Plan from acquiring

[[Page 30620]]

and holding the Interest, less any return of capital from the Interest, 
or (ii) the fair market value of the Interest as determined by an 
independent, qualified appraiser; and (f) if the Employer ever receives 
more from the Interest than it pays the Plan when acquiring the 
Interest, the Employer will pay the Plan the excess.

FOR FURTHER INFORMATION CONTACT: Mr. C.E. Beaver of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

First Savings Bank, F.S.B. Profit Sharing and Employee Stock Ownership 
Plan (the Plan) Located in Clovis, New Mexico

[Application No. D-10409]

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 C.F.R. Part 
2570, Subpart B (55 F.R. 32836, 32847, August 10, 1990). If the 
exemption is granted the restrictions of sections 406(a), 406 (b)(1) 
and (b)(2), and 407 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, effective 
December 26, 1996 to (1) the acquisition by the Plan of certain stock 
rights (the Rights) pursuant to a stock rights offering (the Offering) 
by Access Anytime Bancorp, Inc. (the Parent), which is the parent 
corporation of First Savings Bank, F.S.B. (the Employer), the sponsor 
of the Plan; (2) the holding of the Rights by the Plan during the 
subscription period of the Offering; and (3) the exercise of certain of 
the Rights by the Plan; provided that the following conditions are 
satisfied:
    (A) The Plan's acquisition and holding of the Rights occurred in 
connection with the Offering made available to all shareholders of 
common stock of the Parent;
    (B) All holders of the common stock of the Employer were treated in 
the same manner with respect to the Offering, including the Plan;
    (C) All decisions regarding the holding and potential exercise of 
the Rights by the Plan were made in accordance with Plan provisions for 
individually-directed investment of participant accounts by the 
individual Plan participant whose account in the Plan received Rights 
in the Offering; and
    (D) With respect to any participants' accounts in the Plan for 
which no valid instructions were timely filed regarding the Rights 
during the Offering, such Rights expired unexercised in the same manner 
as unexercised Rights issued to all other holders of the common stock 
of the Parent, since the Rights were not transferable and could not be 
sold.

EFFECTIVE DATE: This exemption, if granted, will be effective as of 
December 26, 1996.

Summary of Facts and Representations

    1. The Employer is a federal savings bank that conducts full 
service banking operations from its main office in Clovis, New Mexico, 
two branch locations in Clovis and Portales, New Mexico and a loan 
production office in Rio Rancho, New Mexico. Access Anytime Bancorp, 
Inc. (the Parent) is a Delaware public corporation \2\ which was 
organized to become a holding company for the Employer. Pursuant to a 
merger agreement (the Merger) between the Employer and the Parent, and 
upon approval of the holders of the common stock of the Employer (the 
Employer Stock) on October 18, 1996, all outstanding shares of Employer 
Stock were converted into and exchanged for an equal number of shares 
of common stock of the Parent (Parent Stock). The Employer continues 
its banking operations as a wholly-owned subsidiary of the Parent.
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    \2\ The common stock of Access Anytime Bancorp, Inc. is publicly 
traded on the National Association of Securities Dealers Automated 
Quotation Small-Cap Market System under the symbol, ``AABC''.
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    2. The Employer maintains the Plan as a defined contribution plan 
combining a profit sharing component (the PSP) with an employee stock 
ownership component (the ESOP) for the benefit of employees of the 
Employer and each of the employers which are members of a controlled 
group with the Employer. As of October 31, 1996, the Plan had 
approximately 54 participants and total assets of $319,659. The trustee 
of the Plan is Roddy Pearce (the Trustee), who is an officer of the 
Employer. The Plan provides for individual participant accounts (the 
Accounts) in both the ESOP and the PSP, and participant-directed 
investment of the PSP Accounts. The Trustee acts as custodian of Plan 
assets, holding legal title to the assets and executing investment 
directions in accordance with the participants' directions. A committee 
appointed by the Employer's board of directors (the Committee) reviews 
all investment direction forms filed by Plan participants to check for 
possible errors, such as the failure of a participant to enter a 
signature or to specify clear instructions. The Plan assets in the ESOP 
are invested primarily in Parent Stock under the direction of the 
Trustee, and the assets in the PSP are invested pursuant to participant 
directions among nine different investment options. As of October 31, 
1996, the ESOP component of 35 Accounts in the Plan held a total of 
9,798 shares of Parent Stock comprising approximately 18 percent of 
total Plan assets.
    3. Following the Merger and the conversion of Employer Stock to 
Parent Stock, the Parent commenced on December 26, 1996 (the Opening 
Date) an offering (the Offering) of new shares of Parent Stock to all 
holders of record (the Shareholders) of Parent Stock as of December 20, 
1996 (the Record Date) pursuant to nontransferable subscription rights 
(the Rights) \3\ issued to all of the Shareholders, including the Plan. 
One Right was issued for each share of Parent Stock held by the 
Shareholders, and each Right conferred upon its holder an entitlement 
to purchase one new share of Parent Stock at a stated subscription 
price of $5.25 per share (the Subscription Price) during the Offering, 
prior to close of business on the date of the Offering's expiration 
(the Expiration Date). The original Expiration Date was January 31, 
1997, but the directors of the Parent extended the Offering to April 8, 
1997. Under the terms of the Offering, each Right was non-transferable 
and was required to expire if not exercised prior to the close of the 
Expiration Date. As of the Opening Date, 732,198 shares of Parent stock 
were issued and outstanding, held by 450 Shareholders, including the 
Plan Accounts' investments in 9,798 shares, which constituted about 
1.33 percent of all issued and outstanding Parent Stock. The Employer 
and the Parent are requesting an exemption for the Plan's acquisition 
and holding of 9,798 Rights pursuant to the Offering and, to the extent 
the Rights were exercised, for the exercise of the Rights, under the 
terms and conditions described herein.
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    \3\ 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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    4. In anticipation of the Offering, the Plan and its related trust 
agreement were amended with respect to all Plan participants with an 
Account invested in the Parent Stock (Invested Participants). Prior to 
this amendment and restatement of the Plan, participants had no 
authority to direct any investments of the ESOP portion of their 
Accounts. With the amendment, the Plan document enabled Invested 
Participants to determine the disposition of all Rights allocated to 
their Accounts. Pursuant to these

[[Page 30621]]

amended Plan provisions, each Invested Participant was permitted to 
direct the Trustee to exercise any or all of the Rights attributable to 
his or her Account. The Employer represents that the amendment and 
restatement of the Plan to provide pass-through elections to Plan 
participants was intended to place the Invested Participants in a like 
position with other Shareholders for purposes of the Offering. Since 
all shares of Parent Stock held by the Plan were allocated to 
participant Accounts, all decisions with respect to the Rights acquired 
by the Plan were made by individual Invested Participants. In order to 
exercise the Rights, the Invested Participants were required to file 
valid instructions with the Trustee no later than the close of the 
Expiration Date and to liquidate a sufficient portion of the non-Parent 
Stock assets in their Accounts to cover the Subscription Price. Those 
Rights with respect to which the Invested Participant failed to file 
with the Trustee valid exercise instructions before close of business 
on the Expiration Date expired in the same manner as the Rights held by 
non-Plan Shareholders. The Employer represents that 5,000 Rights were 
exercised by Invested Participants, that the remaining 4,798 Rights 
expired on the Expiration Date, and that no expenses were incurred by 
the Invested Participants or the Plan in connection with the Offering.
    5. The Employer represents that upon commencement of the Offering, 
all Invested Participants were notified of the Offering and the 
procedure for filing instructions with the Trustee with respect to the 
Rights. The Employer states that all instructions timely filed by the 
Invested Participants were properly executed. The Employer represents 
that the Plan was necessarily involved in the Offering because the 
Parent accorded equal treatment to all Shareholders with respect to 
issuance of the Rights, and that the Plan was entitled to all rights 
and benefits available to other Shareholders. The Employer maintains 
that all actions by the Trustee with respect to the Offering were taken 
pursuant to express instructions of Invested Participants except when 
an Invested Participant failed to file timely, valid instructions, in 
which case the Rights were allowed to expire unexercised, since the 
Rights were non-transferable and could not be sold. The Employer 
represents that the Plan procedures requiring Invested Participants to 
file written instructions with the Trustee in order to exercise the 
Rights, and the expiration of the Rights upon the failure to do so, 
were fully disclosed in the advance notice to Invested Participants.
    6. In summary, the applicant represents that the transactions 
satisfied the criteria of section 408(a) of the Act for the following 
reasons: (A) The Plan's acquisition of the Rights resulted from an 
independent act of the Parent; (B) With respect to all aspect of the 
Offering, all Shareholders were treated in the same manner, including 
the Plan; (C) All decisions with respect to the Plan's acquisition, 
holding and control of the Rights were made by the individual Invested 
Participants whose Accounts held Parent Stock, except for those 
Invested Participants who failed to file timely and valid instructions, 
in which case the Rights expired unexercised; and (D) The acquisition 
and holding of Rights affected 35 of the Plan's 54 participants whose 
accounts held only about 1.33 percent of the Parent Stock issued and 
outstanding as of the Record Date of the Offering.

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

BP America Inc. Retirement Trust (the BP Trust), Located in Cleveland, 
Ohio; IBM Retirement Plan Trust (the IBM Trust), Located in Armonk, New 
York; United States Steel Corporation Plan (the US Steel Plan), Located 
in Pittsburgh, Pennsylvania; and Retirement Plan of Marathon Oil 
Company (the Marathon Plan), Located in Findlay, Ohio; (collectively, 
the Plans)

[Application Nos. D-10441 through D-10444]

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 section 406(a) of the Act and the 
sanctions resulting from the application of section 4975 of the Code, 
by reason of section 4975(c)(1)(A) through (D) of the Code, shall not 
apply to (1) the proposed granting to The Industrial Bank of Japan, 
Limited, New York Branch (IBJ), as the representative of lenders (the 
Lenders) participating in a credit facility (the Facility), of security 
interests in limited partnership interests in The Westbrook Real Estate 
Fund II, L.P. (the Partnership) owned by the Plans with respect to 
which some of the Lenders are parties in interest; and (2) the proposed 
agreements by the Plans to honor capital calls made by IBJ in lieu of 
the Partnership's general partner; provided that (a) the proposed 
grants and agreements are on terms no less favorable to the Plans than 
those which the Plans could obtain in arm's-length transactions with 
unrelated parties; (b) the decisions on behalf of each Plan to invest 
in the Partnership and to execute such grants and agreements in favor 
of IBJ are made by a fiduciary which is not included among, and is 
independent of, the Lenders and IBJ; and (c) with respect to plans that 
may invest in the Partnership in the future, such plans will have 
assets of not less than $100 million and not more than 5% of the assets 
of such plans will be invested in the Partnership.

Summary of Facts and Representations

    1. The Partnership is a Delaware limited partnership the general 
partner of which is Westbrook Real Estate Partners Management II, 
L.L.C. (the General Partner), a Delaware limited liability company. The 
Partnership has an eight-year term from the initial closing date, 
expiring on February 24, 2005, and will be self-liquidating. The 
Partnership has been organized to make investments, including leveraged 
equity investments, in undervalued or inappropriately capitalized real 
estate assets and portfolios, and corporate real estate. Proceeds from 
the sale or refinancing of properties generally will not be reinvested, 
but will be distributed to the limited partners, so that the 
Partnership will be self-liquidating.
    2. After execution of the Partnership Agreement (the Agreement), 
the General Partner sought capital commitments through private 
placement and has obtained, as a result, irrevocable, unconditional 
capital commitments in excess of at least $410,000,000 from 
approximately 17 current and prospective purchasers of limited 
partnership units (the Limited Partners). The Agreement requires 
Limited Partners to make capital contributions upon receipt of notice 
from the General Partner. Under the Agreement, the General Partner may 
make a call for cash contributions, also known as a ``drawdown'', up to 
the total amount of the Limited Partner's capital commitment upon 15 
business days' notice, with some limitations. The Partners' capital 
commitments are structured as irrevocable, unconditional and binding 
commitments to contribute equity when capital calls are made by the 
General Partner. The obligation of each Limited Partner to contribute 
the full amount of its capital commitment is secured by a security 
interest granted to

[[Page 30622]]

the Partnership in the Limited Partner's partnership interest.
    3. In the ordinary course of its business operations, it is 
contemplated that the Partnership will incur indebtedness in connection 
with many of its investments. This on-going need for credit will be 
provided by the Facility, a two-year, eleven month arrangement for 
revolving credit with restricted availability levels, which will enable 
the Partnership to consummate investments quickly without the delay of 
separate arrangements for interim or permanent financing for each 
investment. The Facility is funded by the Lenders, represented by IBJ 
and NationsBank, N.A. (NationsBank) which will also be participating 
lenders. IBJ and NationsBank will serve as administrative agents for 
the Facility. The Facility will be a non-recourse obligation of the 
Partnership which matures in the year 2000 and which is secured by a 
security interest in the Limited Partners' capital commitments, the 
General Partner's right to make drawdowns and the Partnership's lien 
and security interest in each Limited Partner's partnership interest. 
As additional security, the Facility will require each Limited Partner 
to execute an agreement (the Security Agreement) granting to IBJ, for 
the benefit of each Lender, a security interest and lien in the Limited 
Partner's partnership interest, and covenanting with IBJ, for the 
benefit of the Lenders, that such Limited Partner will unconditionally 
honor any drawdown made by IBJ in accordance with the Agreement in lieu 
of the General Partner to the full extent of the Limited Partner's 
unfunded capital commitment.
    4. The trusts which hold assets of the Plans (the Trusts) own 
limited partnership interests as Limited Partners in the Partnership. 
Some of the Lenders may be parties in interest with respect to some of 
the Plans in the Trusts by virtue of such Lenders' (or their 
affiliates') provisions of fiduciary services to such Plans with 
respect to Trust assets other than the Partnership interests. IBJ is 
requesting an exemption to permit the Trusts to enter into the Security 
Agreements under the terms and conditions described herein. The Plans 
and the other Limited Partners with the largest interests in the 
Partnership and the extent of their respective capital commitments to 
the Partnership are described as follows:
    (a) The BP Trust holds the assets of the following Plans: BP 
America Master Hourly Plan for Represented Employees, a defined benefit 
plan with 16,165 participants as of December 31, 1995, and BP America 
Retirement Accumulation Plan, a defined benefit plan with 25,636 
participants as of that date. The BP Trust also holds assets from some 
smaller Plans (together with two above-described Plans, the BP Plans). 
The approximate fair market value of the total assets of the BP Plans 
held in the BP Trust is $1.6 billion. The fiduciary of the BP Plans 
generally responsible for investment decisions is S.W. Percy, Chief 
Executive Officer, BP America, Inc. Mr. Percy is also the fiduciary 
responsible for reviewing and authorizing the investment in the 
Partnership to which the exemption proposed herein relates. The BP 
Trust has undertaken a total capital commitment of $10,000,000 in the 
Partnership.
    (b) The IBM Trust holds the assets of the IBM Retirement Plan (the 
IBM Plan), a defined benefit pension plan with 289,934 participants as 
of December 31, 1995, and assets with a total value of approximately 31 
billion dollars as of that date. The fiduciary of the IBM Plan 
generally responsible for investment decisions is the IBM Investment 
Committee, which is the fiduciary responsible for reviewing and 
authorizing the IBM Plan's investment in the Partnership. The IBM Trust 
has undertaken a total capital commitment of $75,000,000 in the 
Partnership.
    (c) The USS Special Investments Group Trust holds assets of the US 
Steel Plan, a defined benefit pension plan with 139,082 participants as 
of December 31, 1995, and with assets of approximately 8.5 billion 
dollars as of that date. The fiduciary responsible for reviewing and 
authorizing the investment in the Partnership by the US Steel Plan is 
United States Steel and Carnegie Pension Fund, Trustee, which is the 
fiduciary of the US Steel Plan generally responsible for investment 
decisions. This Trust has undertaken a total capital commitment of 
$20,000,000 in the Partnership.
    (d) The MRO Special Investments Group Trust holds assets of the 
Marathon Plan and the Petroleum Marketing Retirement Plan (the PMR 
Plan). The Marathon Plan is a defined benefit plan with 10,519 
participants and approximately $881 million in total assets as of 
December 31, 1995. The PMR Plan is a defined benefit plan with 6,608 
participants and approximately $15.9 million in total assets as of 
December 31, 1995. The fiduciary of the Marathon Plan and the PMR Plan 
generally responsible for investment decisions is United States Steel 
and Carnegie Pension Fund, Trustee, which is also the fiduciary 
responsible for reviewing and authorizing the investment in the 
Partnership to which the exemption proposed herein relates. This Trust 
has undertaken a total capital commitment of $5,000,000 in the 
Partnership.
    (e) The applicant represents that it is possible that one or more 
other Plans may become Limited Partners at some time in the future, and 
requests relief for any such Plan under the exemption proposed herein, 
provided the Plan meets the standards and conditions set forth herein. 
The applicant further represents that any such Plan will have assets of 
at least $100 million, and that no more than 5% of the assets of such 
Plan will be invested in the Partnership.
    (f) Limited Partners which are not ERISA-covered plans include:
    (i) Arkansas Teacher Retirement System, which has undertaken a 
total capital commitment of $50,000,000.
    (ii) Allstate Insurance Company, which has undertaken a total 
capital commitment of $20,000,000.
    (iii) Atlantic Equity Corporation, which has undertaken a total 
capital commitment of $20,000,000.
    (iv) The Trustees of Columbia University, which has undertaken a 
total capital commitment of $20,000,000.
    (v) The Trustees of Dartmouth College, which has undertaken a total 
capital commitment of $10,000,000.
    (vi) New York State Common Retirement Fund, which has undertaken a 
total capital commitment of $25,000,000.
    (vii) Commonwealth of Pennsylvania State Employees' Retirement 
System, which has undertaken a total capital commitment of $56,000,000.
    (viii) J.H. Pew Freedom Trust, which has undertaken a total capital 
commitment of $4,200,000.
    (ix) J.N. Pew, Jr. Trust, which has undertaken a capital commitment 
of $2,100,000.
    (x) Mabel Pew Myrin Trust, which has undertaken a total capital 
commitment of $2,700,000.
    (xi) Pew Memorial Trust, which has undertaken a total capital 
commitment of $21,000,000.
    (xii) State of Wisconsin Investment Board, which has undertaken a 
total capital commitment of $75,000,000.
    (xiii) The General Partner, which has undertaken a total capital 
commitment of $4,151,515.
    5. IBJ represents that the Partnership will obtain an opinion of 
counsel that the Partnership will constitute an ``operating company'' 
under the Department's plan asset regulations [29 CFR 2510.3-101(c)] if 
the Partnership is operated in accordance with the Agreement and the 
offering memorandum (the Offering) distributed

[[Page 30623]]

in connection with the private placement of the limited partnership 
interests.<SUP>4</SUP>
---------------------------------------------------------------------------

    \4\ The Department expresses no opinion herein as to whether the 
Partnership will constitute an operating company under the 
regulations at 29 CFR 2510.3-101.
---------------------------------------------------------------------------

    6. IBJ represents that the Security Agreement constitutes a form of 
credit security which is customary among financing arrangements for 
real estate limited partnerships, wherein the financing institutions do 
not obtain security interests in the real property assets of the 
partnership. IBJ also represents that the obligatory execution of the 
Security Agreement by the Limited Partners for the benefit of the 
Lenders was fully disclosed in the Offering as a requisite condition of 
investment in the Partnership during the private placement of the 
limited partnership interests. IBJ represents that with respect to the 
Partnership and its activities, the only direct relationship between 
any of the Limited Partners and any of the Lenders is the execution of 
the Security Agreements. All other aspects of the transaction, 
including the negotiation of all terms of the Credit Facility, are 
exclusively between the Lenders and the Partnership. IBJ represents 
that the proposed executions of the Security Agreements will not affect 
the abilities of the Trusts to withdraw from investment and 
participation in the Partnership. The only Plan assets to be affected 
by the proposed transaction are each Plan's limited partnership 
interests in the Partnership and the related Plan obligations as 
Limited Partners to respond to drawdowns up to the total amount of each 
Plan's capital commitment to the Partnership.
    7. IBJ represents that neither it nor any Lender acts or has acted 
in any fiduciary capacity with respect to any Trust's investment in the 
Partnership and that IBJ is independent of and unrelated to those 
fiduciaries (the Trust Fiduciaries) responsible for authorizing and 
overseeing the Trusts' investments in the Partnership. Each Trust 
Fiduciary represents independently that its authorization of Trust 
investment in the Partnership was free of any influence, authority or 
control by the Lenders. The Trust Fiduciaries represent that the 
Trust's investments in and capital commitments to the Partnership were 
made with the knowledge that each Limited Partner would be required 
subsequently to grant a security interest in the Partnership to the 
Lenders and to honor drawdowns made on behalf of the Lenders without 
recourse to any defenses against the General Partner. Each Trust 
Fiduciary individually represents that it is independent of and 
unrelated to IBJ and the Lenders and that the investment by the Trust 
for which that Trust Fiduciary is responsible continues to constitute a 
favorable investment for the Plans participating in that Trust and that 
the execution of the Security Agreement is in the best interests and 
protective of the participants and beneficiaries of such Plans.
    8. In summary, the applicants represent that the proposed 
transactions satisfy the criteria of section 408(a) of the Act for the 
following reasons: (1) The Plans' investments in the Partnership were 
authorized and are overseen by the Trust Fiduciaries, which are 
independent of the Lenders; (2) None of the Lenders have any influence, 
authority or control with respect to the Plans' investments in the 
Partnership or the Plans' executions of the Security Agreements; and 
(3) The Trust Fiduciaries invested in the Partnership on behalf of the 
Plans with the knowledge that the Security Agreements are required of 
all Limited Partners investing in the Partnership.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz 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 accurately describe all 
material terms of the transaction which is the subject of the 
exemption. In the case of continuing exemption transactions, if any of 
the material facts or representations described in the application 
change after the exemption is granted, the exemption will cease to 
apply as of the date of such change. In the event of any such change, 
application for a new exemption may be made to the Department.

    Signed at Washington, DC, this 30th day of May, 1997.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 97-14559 Filed 6-3-97; 8:45 am]
BILLING CODE 4510-29-P