Federal Register / Vol. 75, No. 151 / Friday, August 6, 2010 / Notices 47639 

authorized employee or representative of 

these entities; or 

(D) Any participant or beneficiary of a Plan 

that engages in the covered transaction, or 

duly authorized employee or representative 

of such participant or beneficiary; 

(2) None of the persons described, above, 

in paragraphs (h)(1)(B)–(D) shall be 

authorized to examine trade secrets of State 

Street or its affiliates, or commercial or 

financial information which is privileged or 

confidential; and 

(3) Should State Street refuse to disclose 

information on the basis that such 

information is exempt from disclosure, State 

Street shall, by the close of the thirtieth 

(30th) day following the request, provide a 

written notice advising that person of the 

reasons for the refusal and that the 

Department may request such information. 

Effective Date: This exemption is 

effective as of December 22, 2009. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant this 

exemption, refer to the notice of 

proposed exemption published on April 

30, 2010 at 75 FR 22860. 

FOR FURTHER INFORMATION CONTACT: 

Brian Shiker of the Department, 

telephone (202) 693–8552. (This is not 

a toll-free number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the subject 

of an exemption under section 408(a) of the 

Act and/or section 4975(c)(2) of the Code 

does not relieve a fiduciary or other party in 

interest or disqualified person from certain 

other provisions to which the exemption 

does not apply and the general fiduciary 

responsibility provisions of section 404 of the 

Act, which among other things require a 

fiduciary to discharge his duties respecting 

the plan solely in the interest of the 

participants and beneficiaries of the plan and 

in a prudent fashion in accordance with 

section 404(a)(1)(B) of the Act; nor does it 

affect the requirement of section 401(a) of the 

Code that the plan must operate for the 

exclusive benefit of the employees of the 

employer maintaining the plan and their 

beneficiaries; 

(2) This exemption is supplemental to and 

not in derogation of, any other provisions of 

the Act and/or the Code, including statutory 

or administrative exemptions and 

transactional rules. Furthermore, the fact that 

a transaction is subject to an administrative 

or statutory exemption is not dispositive of 

whether the transaction is in fact a prohibited 

transaction; and 

(3) The availability of this exemption is 

subject to the express condition that the 

material facts and representations contained 

in the application accurately describes all 

material terms of the transaction which is the 

subject of the exemption. 

Signed at Washington, DC, this 29th day of 

July, 2010. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2010–19367 Filed 8–5–10; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Application Nos. and Proposed 

Exemptions; D–11569, Sherburne Tele 

Systems, Inc.; and D–11597, John D. 

Simmons Individual Retirement 

Account; et al. 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Notice of proposed exemptions. 

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 (ERISA or 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–5700, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

Attention: Application No. lll, 

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. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

you do not want to be publiclydisclosed. All comments and hearing 

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

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. 

Sherburne Tele Systems, Inc., 2008 Amended 

and Restated Employee Stock Ownership 

Plan and Trust (the ‘‘ESOP’’), Located in 

Big Lake, Minnesota [Application No. D– 

11569] 


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1For purposes of this proposed exemption, 

references to provisions of Title I in the Act, unless 

otherwise specified, should be read to refer also to 

the corresponding provisions of the Code. 

2The non-ESOP shareholders besides Mr. Eddy 

and Ms. Shiota, some of whom are relatives to Mr. 

Eddy, are as follows: Rolland K. Eddy and Donna 

L. Eddy Trust (1,137,116 shares); Eric R. Morales 

(485,750 shares); and Fred I. Shiota, Sr. (4,044 

shares). 

3The Department expresses no opinion herein as 

to whether the ESOP paid ‘‘adequate consideration’’ 

for its initial purchase of the Company stock. 

4FBTS represents that it is not acting as an 

‘‘investment manager’’ within the meaning of 

section 3(38) of the Act because such section 

specifically excludes trustees. 

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 If the 

exemption is granted, the restrictions of 

sections 406(a)(1)(A) and (D) and 406(b)(1) 

and 406(b)(2) of the Act and the sanctions 

imposed under section 4975 of the Code, by 

reason of sections 4975(c)(1)(A), (D), and (E) 

of the Code, shall not apply to the sale by the 

ESOP of all its shares of common stock (the 

‘‘ESOP Shares’’) in Sherburne Tele Systems, 

Inc. (the ‘‘Company’’) to the Company, a party 

in interest with respect to the ESOP, 

provided that the following conditions are 

satisfied: 

(a) The sale is a one-time transaction for 

cash; 

(b) The terms and conditions of the sale are 

at least as favorable to the ESOP as those that 

the ESOP could obtain in an arm’s length 

transaction with an unrelated third party; 

(c) The sales price is the greater of (i) $5.01 

per share, or (ii) the fair market value of the 

ESOP Shares as of the date of the sale, as 

determined by a qualified, independent 

appraiser (the appraiser); 

(d) The sales proceeds received by the 

ESOP pursuant to the transaction are valued 

at a share price that is greater than the share 

price received by the non-ESOP 

shareholders; 

(e) The benefits received by the members 

of the board of directors and officers of the 

Company pursuant to the board of directors 

awards program, the Company’s phantom 

stock plan and retention plans, which were 

paid, coincident with the closing of the asset 

sale of the Company to Iowa 

Telecommunications Services, Inc. were 

reasonable; 

(f) A qualified, independent fiduciary (the 

‘‘Independent Fiduciary’’) for the ESOP was 

and is responsible for (i) reviewing the terms 

of the sale of the Company’s assets; (ii) 

engaging the appraiser to value the ESOP 

Shares; (iii) reviewing and, if appropriate, 

approving the methodology used by the 

appraiser, to ensure that such methodology is 

properly applied in determining the fair 

market value of the ESOP Shares, to be 

updated as of the date of the sale; (iv) 

negotiating the terms of the sale of the ESOP 

Shares to the Company to ensure that the 

ESOP participants receive at least the fair 

market value of the ESOP Shares; (v) 

determining, and documenting in writing, 

whether the terms of the sale are fair and 

reasonable to the ESOP and whether it is 

prudent to proceed with the proposed 

transaction; (vi) approving the proposed 

transaction; and (vii) determining whether 

the proposed transaction satisfies the criteria 

set forth in section 404 and section 408(a) of 

the Act; 

(g) The ESOP pays no fees, commissions, 

or other expenses in connection with the sale 

(including the fees paid to the appraiser and 

the Independent Fiduciary), other than a onetime $500.00 escrow fee (as described in 

Summary of Facts and Representations #10); 

and 

(h) The proceeds from the sale are 

promptly forwarded to the ESOP’s trust 

simultaneously with the transfer of the ESOP 

Shares to the Company. 

Summary of Facts and Representations 

1. The ESOP was established by Sherburne 

Tele Systems, Inc. (the ‘‘Company’’ or the 

applicant) on January 1, 1999. As of 

December 31, 2009, the ESOP had 102 

participants. The Company is the named 

fiduciary of the ESOP. The Company 

formerly operated as a sub-chapter ‘‘S’’ 

corporation in Big Lake, Minnesota, 

providing local and long distance telephone 

services to residential and business 

customers. The Company’s assets were 

acquired in 2009, as described in Item 7, 

below. 

According to the applicant, the ESOP had 

total assets of approximately $8,204,432.51, 

as of December 31, 2009; this amount 

includes $2,966,920.46 invested in money 

market funds and certificates of deposit, as 

well as 1,427,115 shares of the Company’s 

stock (the ‘‘ESOP Shares’’) with a current 

value of $5,237,512.05, based upon the 

annual valuation of the ESOP assets 

performed by a qualified, independent 

appraiser. 

2. The Company has only one class of 

stock. As of June 29, 2009, there were 

14,436,920 shares of the stock issued and 

outstanding. Robert Eddy is the President of 

the Company and a member of the board of 

directors. Mr. Eddy owned, directly and 

indirectly, approximately 87% of the 

outstanding shares of the stock; he owned 

6,262,772 shares directly. Mr. Eddy’s sister, 

Jane Eddy Shiota, was the only other 

shareholder who directly owned more than 

10% of the stock; she owned approximately 

35.46% (5,120,123 shares) of the outstanding 

shares of the stock.2 The 1,427,115 shares of 

stock owned by the ESOP represent a 

minority interest in the Company of 9.89%. 

3. The background to the ESOP’s 

acquisition of the Company stock is as 

follows. The applicant represents that, on 

September 15, 1999, the ESOP acquired 

285,423 shares of the stock at $9.81 per share, 

the fair market value of the stock as of that 

date, as determined by the ESOP’s trustees, 

based upon a report by a qualified, 

independent appraiser, Chartwell Business 

Valuation, LLC (doing business as Chartwell 

Capital Solutions) (‘‘Chartwell’’).3 The total 

price for the stock purchased on September 

15, 1999 was $2,799,999.63, which was 

financed in the form of an exempt loan (the 

‘‘Exempt Loan’’). 

The Company approved a five-to-one split 

of its stock, effective November 3, 2005, 

which increased the shares of stock held by 

the ESOP from 285,423 shares to 1,427,115 

shares. In 2007, the ESOP repaid the Exempt 

Loan in full, in advance of the amortized 

payment schedule under the loan agreement, 

and allocated the remaining ESOP Shares 

held in the ESOP’s suspense account to the 

ESOP participant accounts. 

The ESOP received income distributions 

from the Company with respect to the ESOP 

Shares in the following amounts: $19,647.92 

(1999); $176,447.15 (2000); $66,638.00 

(2001); $14,139.00 (2002); $11,479.00 (2003); 

$33,917.00 (2004); $54,852.00 (2005); 

$373,238.00 (2006); $5,651,375.40 (2007); 

and $841,997.85 (2008). There were no 

expenses charged to participant accounts in 

connection with holding the ESOP Shares. 

4. The applicant represents that, after 

reviewing the strategic alternatives, the 

Company’s board of directors decided that a 

sale of the Company was in the best interests 

of its shareholders. In October 2007, the 

Company retained the services of Green 

Holcomb & Fischer, LLC, an investment 

banking firm, to find a buyer. 

Due to a potential sale of the Company, 

Barnes & Thornburg LLP, counsel to the 

Company (specifically, with regard to its 

ESOP matters), advised the Company to 

engage First Bankers Trust Services, Inc. 

(FBTS), a discretionary trustee, to serve as an 

independent fiduciary (the ‘‘Independent 

Fiduciary’’) for the ESOP in order to avoid 

any conflict of interest or appearance of 

impropriety.4 As set forth in the July 22, 2008 

retainer agreement, FBTS, as the sole 

discretionary trustee of the ESOP, agreed to 

‘‘exercise all duties, responsibilities, and 

powers of a fiduciary under ERISA in its 

capacity as a discretionary trustee. * * *’’ As 

such, FBTS’ responsibilities, in addition to 

other traditional trustee responsibilities, were 

(i) to exercise its exclusive discretion as 

trustee and make its independent decision 

concerning any transaction that may arise or 

occur under the ESOP, and (ii) to control the 

management and disposition of the assets 

held by the ESOP trust. FBTS represents that, 

pursuant to its retainer agreement, FBTS’ 

responsibilities included: (i) Negotiating a 

fair transaction in which the ESOP 

participants would receive no less than fair 

market value for their Company stock as of 

the closing date of the transaction; (ii) 

reviewing an appraisal of the Company stock, 

which was prepared by an independent, 

qualified appraiser, and updated as of the 

closing date of the transaction; (iii) 

evaluating the sufficiency of the methodology 

of such appraisal; and (iv) determining the 

reasonableness of the conclusions reached in 

such appraisal. 

5. It is represented that FBTS is a state 

chartered trust company that has been 

specializing in employee benefits as an 

independent trustee for over twenty years 

and that, at all times, FBTS has been and 

continues to be represented by its own 

counsel, Krieg Devault. Prior to its 

engagement as the discretionary trustee for 


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5Counsel for FBTS explained that as a technical 

matter the ESOP has not yet ‘‘terminated.’’ Rather, 

according to the counsel, a ‘‘partial termination’’ of 

the ESOP occurred, for purposes of the Internal 

Revenue Code, because the employees of the 

Company were terminated from employment and, 

generally were re-hired by ITSI. Because of the 

‘‘partial termination,’’ counsel for FBTS represented 

that participants are 100% vested in their account 

balances. 

6The Department notes that, as the ESOP 

Transaction has not yet been consummated, the 

ESOP Shares are ‘‘plan assets’’ subject to the 

requirements of, among other things, Part 4 of Title 

I in the Act. 

7 In general, the applicant notes that section 

408(e) of the Act provides a statutory exemption for 

the sale of qualifying employer securities (QES) by 

an individual account plan to a party in interest. 

Section 408(d) of the Act, however, excludes from 

this exemption transactions involving an individual 

account plan and (i) any person who is an owneremployee with respect to the plan, (ii) a family 

member of such owner-employee, or (iii) any 

corporation of which such owner-employee owns 

50 percent or more of the combined voting stock of 

the corporation. Thus, section 408(d) excludes any 

transaction between the ESOP and the Company 

because Mr. Eddy, an owner-employee of the 

Company, owns 50% or more of the combined 

voting stock of the Company. The Taxpayer Relief 

Act of 1997 granted some relief to subchapter ‘‘S’’ 

corporations that maintain ESOPs. Specifically, 

section 408(d)(2)(B) of the Act provides an 

exemption for sales of QES to an ESOP by an 

owner-employee, a family member of such owneremployee, or related Subchapter ‘‘S’’ corporation. It 

does not, however, exempt a sale by an ESOP to 

such parties. 

8The Department is not expressing an opinion 

whether the cash equivalent of the value of the 

ESOP Shares held in the escrow account are ‘‘plan 

assets’’ subject to the requirements of Part 4 of Title 

I in the Act. 

the ESOP, FBTS had no relationship with the 

Company. Moreover, FBTS and its whollyowned subsidiaries derived less than 1% of 

its consolidated gross income from the 

Company and its affiliates for the years 

ending December 31, 2008 and through May 

4, 2010. In addition, FBTS represents that it 

has no relationship with Green Holcomb & 

Fischer, LLC. 

6. In regard to its qualifications, FBTS 

states that the firm has four offices 

nationwide and 30 full-time employees 

devoted to providing trust services for over 

600 account relationships. FBTS maintains 

that its professional staff has in-depth 

knowledge of Internal Revenue Service and 

Labor Department regulations and 

compliance requirements for all types of 

retirement plans. 

Kimberly Serbin, a senior trust officer with 

FBTS since 2001, is one of FBTS’ employees 

responsible for providing trust services to the 

ESOP; she has an insurance license, and her 

past work experience includes 

manufacturing, investment/financial 

services, insurance services, and banking. In 

a letter dated June 18, 2009, Ms. Serbin 

asserts that FBTS is well qualified to review 

appraisals in connection with the sale of the 

ESOP Shares. She states: ‘‘In the last three 

years, FBTS has served as an independent 

transactional trustee for approximately 15–20 

transactions in which the sale of stock by an 

employee benefit plan has occurred. The 

circumstances have usually been in 

connection with the sale of the plan sponsor 

(either a stock sale or an asset sale) or in 

connection with the termination of an 

employee benefit plan by the plan sponsor.’’ 

7. On or about November 21, 2008, the 

Company and its subsidiaries and all nonESOP shareholders executed an Asset 

Purchase Agreement (the ‘‘Purchase 

Agreement’’), which provided for the sale of 

substantially all of the assets of the Company 

and its subsidiaries to Iowa 

Telecommunications Services, Inc. (‘‘ITSI’’). 

The asset sale closed on June 30, 2009, and 

the final purchase price paid was 

approximately $82 million due to certain 

terms and conditions that allowed for 

adjustment to the purchase price based on 

changes in the Company’s operations. The 

Purchase Agreement required that the 

Company ‘‘terminate’’ the ESOP immediately 

prior to the closing of the asset sale, which 

occurred on June 30, 2009.5 Although the 

ESOP was ‘‘frozen’’ as of the same date, it 

continues to hold the ESOP Shares in trust.6

It is represented that ITSI is not affiliated 

with any party in interest to the proposed 

exemption transaction, (i.e., the sale of the 

ESOP Shares to the Company (the ‘‘ESOP 

Transaction’’)). 

8. Because the ESOP was a minority 

shareholder of the Company, it did not have 

the authority to delay the asset sale that 

occurred on June 30, 2009. Prior to the sale, 

however, the Independent Fiduciary 

negotiated a Stock Redemption Agreement 

(the ‘‘Redemption Agreement’’) on May 26, 

2009 with the Company and Robert Eddy, in 

his individual capacity and in his capacity as 

majority shareholder representative, 

providing for a sale of all of the ESOP Shares 

to the Company. Under the terms of the 

Redemption Agreement, the consummation 

of the ESOP Transaction is contingent upon 

first obtaining a prohibited transaction 

exemption from the Department.7

9. Prior to the anticipated sale of the 

Company’s assets, the Company applied for 

authorization by the Department, pursuant to 

class Prohibited Transaction Exemption 

(PTE) 96–62, for the one-time cash sale by the 

ESOP of 100% of the ESOP Shares to the 

Company, a party in interest to the ESOP. 

Because the Company was notified by the 

Department in June 2009 that it would not 

qualify for authorization pursuant to PTE 96– 

62, it has requested an individual prohibited 

transaction exemption. 

10. As a result, the cash value of the ESOP 

Shares, attributable to the sale of the 

Company’s assets, is currently held in an 

escrow account, subject to the final closing 

of the Redemption Agreement, which is 

pending until the grant of the requested 

exemptive relief.8 Wells Fargo Bank, National 

Association is the escrow agent. It is 

represented that the funds in the escrow 

account are invested in a money market 

account. There was a one-time escrow fee of 

$500.00 paid from the earnings on the 

escrowed funds and no other fees. 

11. The applicant represents that the terms 

and conditions of the proposed ESOP 

Transaction are at least as favorable to the 

ESOP as those that the ESOP could obtain in 

an arm’s length transaction with an unrelated 

third party. A fairness opinion, the ESOP 

Closing Valuation and Opinion, was 

prepared and issued on July 2, 2009 by 

Chartwell for the Independent Fiduciary, 

concerning the proposed sale of the ESOP 

Shares to the Company for adequate 

consideration. FBTS engaged Chartwell to 

perform this appraisal of the ESOP Shares 

pursuant to their January 26, 2009 retainer 

agreement. The Company has confirmed that 

the financial projections shared with 

Chartwell are identical with those shared 

with FBTS, other lenders and ITSI. As 

previously noted in Item 3, above, Chartwell 

is represented to be a qualified, independent 

appraiser and has performed the ESOP’s 

annual stock valuations to date. It is 

represented that Chartwell derived less than 

1% of its annual gross income from the 

Company and its affiliates for the years 

ending December 31, 2007 and December 31, 

2008. It is further represented that Chartwell 

derived less than 3% of its annual gross 

income from the Company and its affiliates 

for the year ending December 31, 2009 and 

will derive no income from the Company and 

its affiliates for the year ending December 31, 

2010. 

12. The applicant represents that Chartwell 

is a nationally recognized financial services 

firm located in Minneapolis, Minnesota, 

serving privately held companies and their 

shareholders. The firm focuses on business 

valuation and transaction consulting and has 

provided opinions and advisory services to 

hundreds of organizations in a variety of 

industries, including over 150 ESOPs 

throughout the United States. The 

individuals involved in the July 2, 2009 

appraisal of the ESOP Shares were Paul J. 

Halverson, Managing Director, and Matthew 

R. Schubring. Mr. Halverson is an Accredited 

Senior Appraiser, a Certified Business 

Appraiser, and a member of the American 

Society of Appraisers and the Institute of 

Business Appraisers, who has provided 

financial advisory services to privately-held 

companies since 1987; a substantial portion 

of his work relates to ESOPs and providing 

independent financial advisory services to 

ESOP trustees and other corporate 

fiduciaries. Mr. Schubring is an Accredited 

Senior Appraiser who has provided valuation 

services since 1999 and also has extensive 

valuation experience with ESOPs, buy/sell 

agreements, and other corporate matters. 

13. It is represented that the methodologies 

used by Chartwell to evaluate the fairness of 

the proposed sales price are uniformly 

accepted and approved for valuing 

companies of the size and within the 

industry of the Company and took into 

consideration all known and relevant facts 

and circumstances attendant to the proposed 

ESOP Transaction. Chartwell represents that 

it valued the ESOP Shares using the merger 

and acquisition method of the market 

approach. Chartwell states, ‘‘In the merger 

and acquisition method, the sales of entire 

companies or large blocks of companies are 

analyzed to determine appropriate valuation 

multiples for the subject company. In this 

case, the sale of the subject company 

presented the best indication of fair market 

value under this method. Based upon our 

knowledge of the diligence of the transaction 

process undertaken by the Company and the 


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9Of the $4.64 per share value received by nonESOP shareholders, $3.65 per share was paid upon 

closing, $0.75 per share was placed in a separate 

escrow account to be released 18 months following 

the closing, and the remaining proceeds (i.e., 

approximately $0.23 per share) are expected to be 

distributed after finalizing all transaction costs. The 

administrative file refers to the $4.64 per share 

amount even though the sum of the three amounts 

equals $4.63. The Department assumes that the 

discrepancy is attributable to it being an estimated 

amount. 

10For example, FBTS determined that it was not 

appropriate, in an asset acquisition, for the ESOP 

to bear the allocable cost of S-corporation 

insurance, which apparently ITSI required the 

Company to pay in the event the Internal Revenue 

Service made a determination that the Company’s 

S-corporation’s tax status election was improper 

and resulted in the assessment of additional taxes. 

11Pursuant to 29 CFR 2510.3–2(d), the IRA is not 

within the jurisdiction of 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. 

results of these efforts we believe that the 

value received by the non-ESOP shareholders 

represents the best indication of fair market 

value of the Company. Because this 

represented the actual fair market value and 

not theoretical values indicated by the 

income, guideline public company or asset 

approaches we chose to rely on the merger 

and acquisition method.’’ As a condition of 

the proposed exemption, Chartwell will 

update the appraisal of the ESOP Shares as 

of the date of the ESOP Transaction. 

14. The Independent Fiduciary not only 

evaluated the Chartwell appraisal of the 

ESOP Shares, it also negotiated the 

Redemption Agreement with the Company 

for the sale of ESOP Shares. It is represented 

that, over the course of several months, FBTS 

negotiated vigorously on behalf of the ESOP 

to receive the sales price of $5.01 per share 

rather than participating in the liquidating 

distribution from the available net asset 

proceeds, alongside the non-ESOP 

shareholders. In other words, according to 

FBTS’ counsel, the Redemption Agreement 

allows the ESOP to avoid being subject to, 

among other things, potential 

indemnification liabilities and certain other 

expenses that FBTS determined should not 

be borne by the ESOP. Thus, the negotiation 

resulted in the ESOP receiving a sales price 

of $5.01 per share rather than the estimated 

$4.64 per share that would be received by the 

non-ESOP shareholders of the Company 

under the terms of the Purchase Agreement 

with ITSI.9 The $5.01 per share price will be 

paid in cash upon closing of the ESOP 

redemption. 

By way of further explanation, the total per 

share proceeds from the asset sale of the 

Company to ITSI came to $5.68 per share, but 

this amount was reduced to the putative 

$4.64 per share after taking into account 

various payments that the Company intended 

to make. The Independent Fiduciary believed 

that the ESOP participants’ benefits should 

not be reduced by certain post-sale payments 

that the Company was making, which the 

ESOP had no control over, including: Certain 

awards to members of the Company’s board 

of directors and officers (some of whom are 

also shareholders) for completing the sale of 

the Company’s assets; S-corporation 

insurance; and amounts due under the 

Company’s phantom stock plan and retention 

agreements.10

Based on the sales price of $5.01 per share, 

the ESOP will realize in the aggregate 

approximately $7,149,846.15 on the sale of 

the 1,427,115 ESOP Shares, which constitute 

approximately 71% of the total assets of the 

ESOP. It is represented that the Independent 

Fiduciary reviewed the Purchase Agreement, 

the Redemption Agreement, and the ESOP 

Closing Valuation and Opinion and 

determined that the ESOP Transaction would 

be in the best interests of the ESOP 

participants. The Independent Fiduciary, on 

behalf of the ESOP, reviewed and approved 

the valuation methodology used by 

Chartwell, ensured that such methodology 

was properly applied in determining the fair 

market value of the ESOP Shares, and 

determined that the terms of the sale are fair 

and reasonable to the ESOP. The 

Independent Fiduciary also will determine 

whether it is prudent to go forward with the 

ESOP Transaction. 

15. The applicant represents that the sale 

of the ESOP Shares for cash pursuant to the 

terms of the Redemption Agreement is in the 

best interests of the ESOP and its participants 

because, in addition to the reasons given by 

the Independent Fiduciary, above, it will 

allow participants to diversify their 

investments. Except for the one-time $500.00 

escrow fee, as described in Item 10, above, 

which was paid from earnings on the ESOP’s 

share of cash proceeds derived from the asset 

sale of the Company to ITSI and held 

pursuant to an Escrow Agreement between 

Wells Fargo Bank and FBTS, the ESOP will 

not be responsible for any fees, commissions, 

or other expenses that may be associated 

with the sale of the ESOP Shares—including 

the cost of filing the exemption application, 

notifying interested persons, and engaging 

Chartwell and FBTS. The sale proceeds will 

be credited to the ESOP’s trust 

simultaneously with the transfer of title of 

the ESOP Shares to the Company, and each 

participant’s individual account will receive 

its pro rata share of the sale proceeds. 

16. In summary, the applicant represents 

that the ESOP Transaction meets the 

statutory criteria of section 408(a) of the Act 

because, among other things: (a) The ESOP 

Transaction will be a one-time transaction for 

cash; (b) the sales price for the ESOP Shares 

will be the greater of (i) $5.01 per share, or 

(ii) the fair market value of the ESOP Shares 

as of the date of the sale, as determined by 

Chartwell; (c) FBTS was and is responsible 

for (i) reviewing the terms of the sale of the 

Company’s assets; (ii) engaging Chartwell to 

value the ESOP Shares; (iii) reviewing and 

approving the methodology used by 

Chartwell to ensure that such methodology is 

properly applied in determining the fair 

market value of the ESOP Shares, to be 

updated as of the date of the sale; (iv) 

negotiating the terms of the ESOP 

Transaction to ensure that the ESOP 

participants receive at least the fair market 

value of the ESOP Shares; and (v) 

determining whether the terms of the sale are 

fair and reasonable to the ESOP and whether 

it is prudent to go forward with the ESOP 

Transaction; and (e) the ESOP will pay no 

fees, commissions, or other expenses in 

connection with the sale (including the fees 

paid to the independent appraiser and the 

Independent Fiduciary), other than a onetime $500.00 escrow fee. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Karin Weng of the Department, 

telephone (202) 693–8557. (This is not 

a toll-free number.) 

John D. Simmons Individual Retirement 

Account (the IRA), Located in West 

Chester, PA, [Application No. D–11597] 

Proposed Exemption 

The Department is considering granting an 

exemption under the authority of section 

4975(c)(2) of the Code and in accordance 

with the procedures set forth in 29 CFR Part 

2570, Subpart B (55 FR 32836, 32847, August 

10, 1990). If the exemption is granted, the 

sanctions resulting from the application of 

section 4975(c)(1)(A)–(E) of the Code, shall 

not apply to the proposed sale (the Sale) by 

the IRA to John D. Simmons, (the Applicant) 

a disqualified person with respect to the 

IRA,11 of a 50 percent interest (the Interest) 

in a condominium (the Condo); provided that 

the following conditions are satisfied: 

(a) The terms and conditions of the Sale are 

at least as favorable to the IRA as those 

obtainable in an arm’s length transaction 

with an unrelated party; 

(b) The Sale is a one-time transaction for 

cash; 

(c) As consideration, the IRA receives the 

lesser of $192,500 or the fair market value of 

the Interest as determined by a qualified, 

independent appraiser in an updated 

appraisal on the date of Sale; and 

(d) The IRA pays no commissions, costs, 

fees, or other expenses with respect to the 

Sale. 

Summary of Facts and Representations 

1. The Applicant is an attorney residing in 

West Chester, Pennsylvania. In August 2008, 

the Applicant established the IRA because it 

permitted self-directed purchases of real 

property and other non-stock investments. 

The Applicant then transferred 

approximately $195,000 from various mutual 

funds held by his rollover individual 

retirement account with Vanguard to the IRA. 

As of January 4, 2010, the IRA had total 

assets of $195,189.74. Entrust MidAtlantic, 

LLC, the directed trustee of the IRA, is based 

in Frederick, Maryland. 

2. Rose Marie Simmons (Mrs. Simmons) is 

the mother of the Applicant and a 

disqualified person with respect to the IRA. 

Mrs. Simmons resides in Millsboro, 

Delaware. Mrs. Simmons formerly owned 

investment real property in Drexel Hill, 

Pennsylvania (the Drexel Property) which 

was about 125 miles from her home in 

Southern Delaware. Mrs. Simmons had 

difficulty with her Drexel Property tenants 

and required the Applicant’s assistance in 

subsequent eviction proceedings against such 

tenants. In August 2008, Mrs. Simmons sold 

the Drexel Property to one of her neighbors. 

3. During 2008, the Applicant sought to 

diversify his IRA’s holdings into non-equity 

investments in light of the waning economy. 

So, he decided to invest one-half of his taxVerDate Mar<15>2010 16:35 Aug 05, 2010 Jkt 220001 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 E:\FR\FM\06AUN1.SGM 06AUN1

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favored retirement holdings in alternative 

investments, such as real property. As 

discussed above, Entrust MidAtlantic, LLC 

allows IRA owners to invest in real property. 

The Applicant also represents that he and 

Mrs. Simmons desired to purchase a long 

term investment property together for well 

below its value, and wait for it to increase in 

value as market conditions improved. 

Moreover, Mrs. Simmons wished to reside 

closer to her investment property so that she 

could inspect it more frequently than she 

could the Drexel Property. 

Thus, on October 6, 2008, the IRA and Mrs. 

Simmons incorporated Beach Rent, LLC in 

Delaware, described in detail below, to act as 

an investment property manager. In the same 

month, the Applicant found the Condo, 

located at 1609 Coastal Highway, Dewey 

Beach, Delaware. The Condo, which is Unit 

S204, was listed for $399,900 in the Opal 

Condominiums Complex (the Opal). The 

Applicant represents that in comparison, 

similar two-bedroom units in the Opal, had 

sold for approximately $500,000 to $550,000 

in 2006. Additionally, the Condo is located 

approximately 30 miles from Mrs. Simmons’ 

residence. 

4. On October 17, 2008, the IRA and Mrs. 

Simmons purchased the Condo for $384,500. 

The IRA’s Interest and Mrs. Simmons’ 50 

percent interest in the Condo each equaled 

$192,250.00. Both the IRA and Mrs. Simmons 

paid cash for their respective interests in the 

Condo from the Opal Dewey Beach, LLC, an 

unrelated party. Mrs. Simmons used the 

proceeds from the sale of the Drexel Property 

to purchase her 50 percent interest in the 

Condo pursuant to a tax-favored exchange 

under section 1031 of the Code. Currently, 

the IRA’s Interest in the Condo accounts for 

98 percent of the IRA’s total value. 

5. The IRA and Mrs. Simmons are named 

as the managing members of Beach Rent, 

LLC. The Applicant acts as its 

uncompensated manager. Beach Rent, LLC, 

which was created to simplify the 

bookkeeping of the rents and bills, is a flowthrough tax entity intended to pass profits 

(i.e., rental income) received by the Beach 

Rent, LLC to the IRA and Mrs. Simmons 

based on their respective ownership interests 

in the Condo. Both Mrs. Simmons and IRA 

each own 50 percent of the shares of Beach 

Rent, LLC. For the years 2008 and 2009, the 

Condo’s total rental income was $13,400 and 

total expenses have been $12,128. In these 

years, the IRA’s share of total income was 

$6,700 and total expenses were $6,064. Thus, 

the IRA’s net acquisition cost for the Interest 

is $191,864 [$192,500 (purchase price) + 

$6,064 (expenses)—$6,700 (income)]. 

6. Beach Rent, LLC is responsible for 

renting and maintaining the Condo. Beach 

Rent, LLC deducts expenses, such as 

insurance, taxes, Opal condominium fees, 

cleaning service fees, cable and utilities, 

against the income generated from the 

seasonal rentals. During the off-season, Beach 

Rent, LLC pays for the maintenance of the 

Condo. 

Since 2008, neither the Applicant nor Mrs. 

Simmons nor any other disqualified person 

has stayed at the Condo. Since its acquisition 

by the IRA and Mrs. Simmons, the Applicant 

and Mrs. Simmons periodically visit the 

Condo for inspections and repairs, including 

installing furniture and window treatments. 

Neither the Applicant nor Mrs. Simmons 

have been compensated by the IRA for the 

services rendered to the Condo. As far as the 

Condo’s furnishings and electronics are 

concerned, Mrs. Simmons has either 

purchased or contributed them to the Condo. 

7. Beach Rent, LLC advertises for Condo 

renters on the Internet. At one time, Mrs. 

Simmons and the Applicant used Ocean 

Sothesby Realtors, which is not a related 

party, to locate renters. However, the 

Applicant represents that using Beach Rent, 

LLC to find renters has been more cost 

effective. On or about Memorial Day, Beach 

Rent, LLC typically begins renting the Condo 

for the beach season. Stays vary in price from 

a three-day stay at $600 up to a weekly rate 

for $1,500 plus a refundable $350 security 

deposit. A deposit of half the rent plus the 

security deposit is due a month prior to the 

rental and the other half is due at signing. 

Beach Rent, LLC refunds the security deposit 

14 days after a rental if its cleaning service 

confirms the Condo is in good condition. For 

the 2008 and 2009 rental seasons, the Condo 

has been rented a total of 11 times to 

unrelated parties. 

8. The Applicant represents that he and 

Mrs. Simmons thought the Condo would be 

a good investment because they believed the 

housing market would rebound more quickly 

than it has to date and there would be a 

substantial increase in the IRA’s equity 

holding in the Interest. Since 2008, the 

Applicant explains that the Opal Dewey 

Beach, LLC has been unable to sell the 

remaining 7 condominium units out of the 

original 36 in the Opal. The unsold units are 

currently being rented for less than fair 

market value. Additionally, the Applicant 

states that a bank-owned two-bedroom unit 

in the Opal failed to sell for its short sale 

price of $290,300 in May 2010 at a sheriff’s 

auction. This property had originally sold for 

$547,000 in October 2006. Thus, the 

Applicant believes there is the possibility 

that the IRA could face future equity losses 

in the Condo and that any equity 

improvement may not occur for a long time. 

Further, the Applicant states that, the IRA’s 

current rate of return is low. In this regard, 

the Applicant projects the Condo’s total 2010 

rentals will be $15,000 and total expenses 

will be $9,500, with a profit of $5,500. 

Accordingly, the IRA’s rate of return for its 

$192,500 Interest will be approximately 1.4 

percent per annum (($5,500 *.5)/$192,500). 

Because of these events, the Applicant 

proposes to purchase the Interest from the 

IRA in order that his IRA’s assets can be 

placed in investments yielding higher rates of 

return. Due to the joint ownership of the 

Condo, the Applicant explains that a Sale of 

the Interest to an unrelated party would be 

unduly burdensome and unreasonable, such 

Sale and would likely force the IRA to offer 

a discount for the Interest. In the alternative, 

the Sale avoids forcing Mrs. Simmons to sell 

her 50 percent interest in the Condo during 

down market conditions because her interest 

would be sold during a down market at a 

discounted price. Although the Applicant 

believes that there will be an equity 

improvement in 10–15 years, he states that 

the short-term returns are too low for a taxdeferred investment and the IRA needs to 

divest itself of the Interest as soon as 

possible. Accordingly, the Applicant requests 

an administrative exemption from the 

Department. 

9. The Sale will be a one-time cash 

transaction. The terms will be at least as 

favorable to the IRA as those obtainable in an 

arm’s length transaction with an unrelated 

party. The IRA will receive no less than the 

fair market value for the Interest, as 

determined by a qualified, independent 

appraisal on the date of the Sale. Further, the 

IRA will pay no commissions, costs, or other 

expenses in connection with the Sale. 

Following the Sale, Beach Rent, LLC will be 

dissolved and its assets will be distributed to 

the IRA and Mrs. Simmons. 

10. The Applicant retained R. Stephen 

White of First State Appraisal, Inc. of 

Rehoboth Beach, Delaware to appraise the 

Condo. Mr. White is licensed in the State of 

Delaware as a certified residential real 

property appraiser. During 2009, he received 

less than one percent of his income from 

services provided to the Applicant and 

related parties, including Mrs. Simmons. 

In an appraisal report dated September 17, 

2009 (the Appraisal), Mr. White compared 

the Condo in an ‘‘as is’’ condition with six 

other two-bedroom condominium sales in 

Dewey Beach and Rehoboth Beach, Delaware 

using the Sales Comparison Approach to 

valuation. Also as of September 17, 2009, Mr. 

White valued the Condo at $385,000. Mr. 

White will update the Appraisal on the date 

of Sale. Accordingly, the Applicant 

represents that the Interest is valued at 

$192,500.00 ($385,000 × 50 percent). 

11. The Applicant represents that the 

proposed transaction will satisfy the 

statutory criteria for an exemption under 

section 4975(c)(2) of the Code because: 

(a) The terms and conditions of the Sale 

will be at least as favorable to the IRA as 

those obtainable in an arm’s length 

transaction with an unrelated party; 

(b) As consideration, the IRA will receive 

the lesser of $192,500 or the fair market value 

of the Property as determined by a qualified, 

independent appraiser in an updated 

appraisal on the date of Sale; and 

(d) The IRA will pay no commissions, 

costs, fees, or other expenses with respect to 

the Sale. 

Notice to Interested Persons 

Because the Applicant is the sole 

participant of the IRA, it has been 

determined that there is no need to distribute 

the notice of proposed exemption (the 

Notice) to interested persons. Therefore, 

comments and requests for a hearing are due 

thirty (30) days after publication of the 

Notice in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Anh-Viet Ly of the Department at (202) 

693–8648. (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 


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408(a) of the Act and/or section 

4975(c)(2) of the Code does not relieve 

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

section 404(a)(1)(b) of the Act; nor does 

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

and/or section 4975(c)(2) of the Code, 

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 29th day of 

July 2010. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2010–19368 Filed 8–5–10; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

[TA–W–71,174] 

General Electric Company, 

Transportation Division, Including OnSite Leased Workers From Adecco 

Technical, Erie, PA; Notice of Revised 

Determination on Remand 

On April 15, 2010, the U.S. Court of 

International Trade (USCIT) granted the 

U.S. Department of Labor’s 

(Department’s) motion for voluntary 

remand for further investigation in 

Former Employees of General Electric 

Company, Transportation Division, Erie, 

Pennsylvania v. United States, Case No. 

10–00076. Further, on June 3, 2010, the 

USCIT remanded United Electrical, 

Radio and Machine Workers of 

America, Local 506 v. United States, 

Case No. 10–00108, to the Department 

for further review. The two cases were 

consolidated on the same date under 

Case No. 10–00076. 

On June 10, 2009, former workers of 

General Electric Company, 

Transportation Division (hereafter 

referred to as the subject firm) filed a 

petition for Trade Adjustment 

Assistance (TAA) on behalf of workers 

of General Electric Company, 

Transportation Division, Erie, 

Pennsylvania (hereafter referred to as 

the subject facility). On July 1, 2009, 

United Electrical, Radio and Machine 

Workers of America, Local 506 (UE 

506), also filed a petition for TAA on 

behalf of workers at the subject facility. 

The UE 506 petition was consolidated 

with the petition filed on June 10, 2009, 

as it covered the same worker group. 

The initial investigation revealed that, 

during the period under investigation, 

workers at the subject facility, including 

on-site leased workers from Adecco 

Technical (hereafter referred to as the 

subject worker group) were engaged in 

the production of locomotives, 

locomotive kits, and propulsion and 

specialty parts. The findings of that 

investigation revealed that there had 

been a significant number or proportion 

of workers at the subject facility that 

was totally or partially separated from 

employment. 

It was determined, however, that 

imports of articles like or directly 

competitive with those produced by the 

subject firm did not contribute 

importantly to worker separations at the 

subject facility and that the subject firm 

did not shift production to a foreign 

country. A survey of the subject firm’s 

major declining domestic customers 

revealed decreasing imports of articles 

like or directly competitive with those 

produced by the subject worker group, 

both in absolute terms and relative to 

the production at the subject facility. 

Consequently, the Department 

determined that the subject worker 

group could not be considered import 

impacted, and a negative determination 

regarding the subject worker group’s 

eligibility to apply for TAA was issued 

on October 8, 2009. The Department’s 

Notice of Determination was published 

in the Federal Register on December 11, 

2009 (74 FR 65800). 

By application dated October 28, 

2009, the petitioning workers requested 

administrative reconsideration of the 

Department’s negative determination. In 

the request, the petitioners alleged that 

production had shifted out of the 

subject facility to facilities located 

outside of the United States that were 

operated by the subject firm. The 

petitioners also alleged that the subject 

firm imports articles like or directly 

competitive with those produced at the 

subject facility. 

To investigate the petitioners’ claims, 

the Department issued a Notice of 

Affirmative Determination Regarding 

Application for Reconsideration, on 

November 16, 2009. The Department’s 

Notice of Determination was published 

in the Federal Register on December 8, 

2009 (74 FR 64712). 

During the reconsideration 

investigation, the Department obtained 

new and additional information from 

the subject firm regarding the 

petitioners’ claims. Based on the 

findings of the reconsideration 

investigation, the Department 

concluded that worker separations at 

the subject facility were not caused by 

either a shift in production abroad or 

increased imports of articles like or 

directly competitive with those 

produced by the subject worker group. 

As such, the Department issued a Notice 

of Negative Determination on 

Reconsideration on January 22, 2010. 

The Department’s Notice of 

determination was published in the 

Federal Register, on February 1, 2010 

(75 FR 5151). 

In the complaint filed with the 

USCIT, dated March 1, 2010, the 

Plaintiffs allege that workers at the 

subject facility were impacted by import 

competition and by a shift in production 

to overseas facilities by the subject firm. 

In the complaint filed with the USCIT 

on March 29, 2010, the UE 506 alleged 

that workers at the subject facility were 

impacted by import competition, shifts 

abroad of multiple production lines by 

the subject firm, and foreign 

acquisitions by the subject firm of 

articles like or directly competitive with 


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