Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57389

Technical Support, Occupational Safety

and Health Administration, U.S.

Department of Labor, Room N–3653,

200 Constitution Avenue, N.W.,

Washington, DC 20210, telephone: (202)

693–2110. A copy of the Agency’s

Information-Collection Request (ICR)

supporting the need for the informationcollection requirements specified by

OSHA for becoming a nationallyrecognized testing laboratory (29 CFR

1910.7) is available for inspection and

copying in the Docket Office, or you

may request a mailed copy by

telephoning Bernard Pasquet at (202)

693–2110. For electronic copies of the

ICR, contact OSHA on the Internet at

http://www.osha.gov.

SUPPLEMENTARY INFORMATION:

I. Background

The Department of Labor, as part of its

continuing effort to reduce paperwork

and respondent burden, conducts a

preclearance consultation program to

provide the general public and Federal

agencies with an opportunity to

comment on proposed and continuing

information-collection requirements in

accordance with the Paperwork

Reduction Act of 1995 (PRA–95) (44

U.S.C. 3506(c)(2)(A)). This program

ensures that information is in the

desired format, reporting burden (time

and costs) is minimal, collection

instruments clearly understood, and

OSHA’s estimate of the information

burden is correct. The Occupational

Safety and Health Act of 1970 (the Act)

authorizes information collection by

employers as necesssary or appropriate

for enforcement of the Act or for

developing information regarding the

causes and prevention of occupational

injuries, illnesses, and accidents (29

U.S.C. 657).

A number of standards issued by the

Occupational Safety and Health

Administration (OSHA) contain

requirements for equipment, products,

or materials. These standards often

specify that employers use only

equipment, products, or material

‘‘tested’’ or ‘‘approved’’ by a ‘‘nationally

recognized testing laboratory’’ (NRTL);

this requirement ensures that employers

use safe and efficacious equipment,

products, or materials in complying

with the standards. Accordingly, OSHA

promulgated the regulation titled

‘‘Definitions and Requirements for a

Nationally Recognized Testing

Laboratory’’ (the ‘‘Regulation’’). The

Regulation specifies procedures that

organizations must follow to apply for,

and to maintain, OSHA’s recognition to

test and certify equipment, products, or

material for this purpose.

As part of the recognition process, the

Regulation requires that organizations

seeking recognition submit an initialrecognition application to OSHA. The

Agency reviews the information

provided in the initial-recognition

application to determine if an

organization meets the qualification

criteria specified in the Regulation.

These criteria address an organization’s

capability to test and examine

equipment, products, or material for

safety (for example, fire or electrical

safety). In this regard, the Agency

evaluates an organization’s facilities,

equipment, staff training, written testing

procedures, and calibration and qualitycontrol programs necessary to test and

examine equipment, products, and

material for safety. If OSHA approves

the initial-recognition application, it

will recognize the organization as an

NRTL for five years.

Once recognized, an NRTL may apply

to expand its current recognition to

cover additional categories of NRTL

testing. To do so, an NRTL must submit

an expansion-of-recognition application

that provides the Agency with

information demonstrating that it meets

the testing criteria specified by the

Regulation for these additional

categories. An NRTL may also revise its

testing procedures, such as testing

methods or pass-fail criteria, provided

the revisions are at least as effective as

the prior testing procedures; OSHA

reviews these revisions during the

annual site visit to the NRTL.

To renew recognition for another fiveyear period, an NRTL must submit a

renewal-of-recognition application to

the Agency several months before the

current recognition expires. OSHA may

in some cases dispense with this

renewal requirement provided the

organization certifies its continuing

compliance with the Regulation.

To ensure that NRTLs are meeting the

requirements of the Regulation, the

Agency attempts to conduct site visits

(i.e., audits) at each NRTL annually.

During these site visits, an NRTL

provides OSHA with written

information to evaluate its compliance

with the requirements for recognition.

These reviews also permit the Agency to

determine if revisions to testing

procedures made by NRTLs are at least

as effective as the prior testing

procedures. These site visits help to

ensure that equipment, products, or

material used by employers to comply

with OSHA’s standards are providing

employees with the highest level of

protection available.

II. Proposed Actions

OSHA proposes to extend OMB’s

approval of the collection-ofinformation (paperwork) requirements

contained in the requirements for

becoming a nationally-recognized

testing laboratory. OSHA will

summarize the comments submitted in

response to this notice, and will include

this summary in the request to OMB to

extend the approval of these

information-collection requirements.

Type of Review: Extension of

currently approved informationcollection requirements.

Title: Definition and Requirements for

a Nationally Recognized Testing

Laboratory (29 CFR 1910.7).

OMB Number: 1218–0147.

Affected Public: Business or other forprofit organizations; Not-for-Profit

institutions; State, Local or Tribal

governments.

Number of Respondents: 58.

Frequency: On occasion.

Total Responses: 58.

Average Time per Response: 53 hours.

Estimated Total Burden Hours: 1,345

hours.

Estimated Cost (Operation and

Maintenance): $0.

III. Authority and Signature

Charles N. Jeffress, Assistant Secretary

of Labor for Occupational Safety and

Health, directed the preparation of this

notice. The authority for this notice is

the Paperwork Reduction Act of 1995

(44 U.S.C. 3506) and Secretary of

Labor’s Order No. 3–2000 (65 FR

50017).

Signed at Washington, DC on September

12, 2000.

Charles N. Jeffress,

Assistant Secretary of Labor.

[FR Doc. 00–23900 Filed 9–21–00; 8:45 am]

BILLING CODE 4510–26–M

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10800, et al.]

Proposed Exemptions; The Masters,

Mates and Pilots Pension Plan (the

Pension Plan) and Individual

Retirement Account Plan (the IRAP;

Together, the Plans)

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Notice of proposed exemptions.

SUMMARY: This document contains

notices of pendency before the

Department of Labor (the Department) of

57390 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

1 In re Masters, Mates and Pilots Pension Plan

and IRAP Litigation, Lead File No. 85 Civ. 9545

(VLB) (S.D.N.Y.)

proposed exemptions from certain of the

prohibited transaction restrictions of the

Employee Retirement Income Security

Act of 1974 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or request for

a hearing on the pending exemptions,

unless otherwise stated in the Notice of

Proposed Exemption, within 45 days

from the date of publication of this

Federal Register Notice. Comments and

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

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, NW.,

Washington, DC 20210. Attention:

Application No. lll, 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 the Pension and

Welfare Benefits Administration, U.S.

Department of Labor, Room N–5638,

200 Constitution Avenue, NW.,

Washington, DC 20210.

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

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

accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

1978, 5 U.S.C. App. 1 (1996), transferred

the authority of the Secretary of the

Treasury to issue exemptions of the type

requested to the Secretary of Labor.

Therefore, these notices of proposed

exemption are issued solely by the

Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

The Masters, Mates and Pilots Pension

Plan (the Pension Plan) and Individual

Retirement Account Plan (the IRAP;

together, the Plans), Located in

Linthicum Heights, Maryland

[Application Nos. D–10800 and D–10801]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

and section 4975(c)(2) of the Code and

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

FR 32836, 32847, August 10, 1990). If

the exemption is granted, the

restrictions of sections 406(a), 406(b)(1)

and (b)(2) and 407(a) of the Act and the

sanctions resulting from the application

of section 4975 of the Code, by reason

of section 4975(c)(1)(A) through (E) of

the Code, shall not apply to: (1) The

transfer and sale by the Plans of their

shares of stock (the AHL Stock or the

Stock) in American Heavy Lift Shipping

Company (AHL) to AHL Holdings, Inc.

(AHL Holdings), in exchange for a note

(the Note) from AHL Holdings to the

Plans; (2) the holding of the Note by the

Plans; (3) the guarantee (the Guarantee)

of the Note to the Plans by AHL; (4) the

continued holding of the AHL Stock by

the Plans for the period from January 1,

1999 until the date of the sale of the

Stock by the Plans to AHL Holdings;

and (5) the holding by the Plans for a

period of two years of any collateral,

including the Stock, received by the

Plans as a result of the exercise of their

rights in the event of a default under the

Note or under the Guarantee, provided

that: (a) The Plans’ independent

fiduciary, Independent Fiduciary

Services, Inc. (IFS), has determined that

the transactions are appropriate for the

Plans and in the best interests of the

Plans’ participants and beneficiaries; (b)

the Plans’ independent investment

manager with respect to the Stock,

Hellmold Associates, Inc. (HAI),

negotiated the terms of the subject

transactions with AHL Holdings and has

made the decision for the Plans’ to enter

the subject transactions with AHL

Holdings; (c) HAI continues to monitor

the Plans’ holding of the Note,

determines at all times that such

transaction remains in the best interests

of the Plans and takes whatever actions

are necessary to enforce the Plans’ rights

under the Note; (d) HAI has determined

that the current fair market value of the

Note is not less than the current fair

market value of the Stock; and (e) HAI

has determined that the proposed

transactions have terms and conditions

which are at least as favorable to the

Plans as terms and conditions which

would exist in similar transactions with

unrelated parties.

EFFECTIVE DATE: With respect to the

Plans’ holding of the AHL Stock, this

proposed exemption, if granted, will be

effective from January 1, 1999 until the

date of the sale of the Stock by the Plans

to AHL Holdings; with respect to the

sale of the AHL Stock by the Plans to

AHL Holdings, this proposed

exemption, if granted, will be effective

the date of publication of the grant in

the Federal Register.

Summary of Facts and Representations

1. The Pension Plan is a defined

benefit plan that currently has

approximately 5,026 participants. As of

December 31, 1998, the Pension Plan

had approximately $797,144,611 in

assets. The IRAP is a defined

contribution plan that currently has

approximately 3,959 participants. As of

December 31, 1998, the IRAP had

approximately $163,618,557 in assets.

The Plans principally cover members of

the International Organization of

Masters, Mates and Pilots (the Union).

2. IFS is a registered investment

advisor which serves as the Named

Fiduciary for the Special Assets

Portfolio of the Plans. The Special

Assets Portfolio consists of various

venture capital and other non-liquid

investments which were made by a

former investment manager of the Plans,

Tower Asset Management, Inc. (Tower),

and which were the subject of

protracted litigation (the Litigation)

between the Department, Tower, the

Plans and certain of their trustees, and

certain plan participants.1 The

Litigation ultimately was settled

pursuant to Court Order entered by the

United States District Court for the

Southern District of New York (the

Court).

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57391

2 IFS was then known as ‘‘Bear Stearns Fiduciary

Services, Inc.’’

3. In the course of the Litigation, IFS 2

was appointed Named Fiduciary for the

Plans’ Special Assets Portfolio by Court

Order dated September 18, 1990 (the

Court Order). IFS assumed its

responsibilities on November 8, 1990.

The Court Order provided that the

Named Fiduciary, rather than the Plans’

trustees, has the ‘‘* * * sole, exclusive,

full and complete authority and

discretion concerning the control,

management and disposition of the

Special Assets Portfolio.’’

4. Since February, 1987, the Plans

have each owned 45 shares of the Stock,

which Stock represents all of the

outstanding shares of AHL. AHL is a

Delaware corporation, headquartered in

New Orleans, Louisiana, that is engaged

in the shipping industry. Its principal

assets consist of four double-hulled

tankers, built in the 1950’s as singlehulled ships and converted to doublehulled beginning in 1995 to comply

with Federal law, that are used

primarily for the transportation of

petroleum products in the Jones Act

trade (i.e., American-flagged tankers in

the domestic intra-coastal trade). The

Plans’ Stock can be traced back to

certain prior investments made by

Tower and is held in the Plans’ Special

Assets Portfolio, along with the Plans’

other remaining Tower-initiated

investments.

5. In connection with the doublehulling of the ships, AHL assumed

significant long-term debt. AHL issued

$125 million U.S. Government Ship

Financing Bonds on May 12, 1995. AHL

sold an additional $23.7 million U.S.

Government Ship Financing Bonds on

December 18, 1996. Proceeds from the

sales of bonds were deposited with the

U.S. Treasury and may be used for ship

construction pursuant to Title XI of the

Merchant Marine Act. AHL was

required to pay the following minimum

amounts through sinking fund deposits:

1998—$3,326,000

1999—$3,568,000

2000—$3,827,000

2001—$4,104,000

Thereafter—$132,302,000

In addition to this $148.7 million of

debt (the MARAD Loans), AHL also

borrowed $3.35 million from Avondale

Industries, Inc. (the Avondale Loan),

one of the nation’s leading shipbuilding

companies. This amount, together with

interest at approximately 7.5%, is due to

be repaid in 20 years or earlier under

certain circumstances if cash flow, as

defined, exceeds certain minimum

amounts. The payment of principal and

interest is secured by a second mortgage

on AHL’s ships. No payments are

anticipated to be due in the next five

years.

6. Since AHL is an employer of

employees covered under the Plans, the

AHL Stock constitutes employer

securities under section 407(d)(1) of the

Act. The applicants represent that the

Stock constituted qualifying employer

securities within the meaning of section

407(d)(5) of the Act at the time of its

acquisition, but as of January 1, 1993,

the AHL Stock may have ceased to be

a qualifying employer security because

the Stock is wholly-owned by the Plans

and thus may not meet the requirements

of section 407(f) of the Act. However,

the applicants state that the Plans’

continued holding of the Stock was

exempt from the prohibited transaction

restrictions of the Act pursuant to

Prohibited Transaction Class Exemption

No. 79–15 (44 FR 26979, May 8, 1979)

as a result of a court order, dated

November 2, 1992, entered in the

Litigation (the PTE 79–15 Order). Under

the terms of the PTE 79–15 Order, this

exemption was effective until the later

of: (a) December 31, 1993; or (b)

December 31, 1994, provided the Plans

made application to the Department for

an exemption to permit the continued

holding of the Stock. The Plans did file

a request for an exemption in timely

fashion, and thus the exemption

provided under the PTE 79–15 Order

was automatically extended to

December 31, 1994. On December 19,

1994, the Department granted

Prohibited Transaction Exemption 94–

85 (PTE 94–85; 59 FR 65403), which

continued the exemption for the holding

of the Stock by the Plans until the later

of: (a) December 31, 1995, or (b)

December 31, 1996, provided another

application for exemption was filed

with the Department prior to December

31, 1995. Another exemption

application was filed prior to December

31, 1995, so that PTE 94–85 remained

effective until December 31, 1996. On

October 2, 1996, the Department granted

Prohibited Transaction Exemption 96–

73 (61 FR 51463), which continued the

exemption for the holding of the Stock

by the Plans until the later of: (a)

December 31, 1997, or (b) December 31,

1998, provided another application for

exemption was filed with the

Department prior to December 31, 1997.

Another exemption application was

filed on October 15, 1997, so that PTE

96–73 remained in effect until

December 31, 1998. That application

was later withdrawn, and a revised

application was filed on August 13,

1999. The applicant has requested that

the exemption proposed herein be made

retroactive to January 1, 1999 with

respect to the holding of the Stock by

the Plans.

7. While IFS, in its capacity as Named

Fiduciary, has ultimate investment

management responsibility for the

Special Assets Portfolio, it does not

exercise investment management

discretion over the portfolio’s assets on

a day-to-day basis. Rather, as

contemplated by the Court Order,

responsibility for the day-to-day

management and supervision of the

portfolio’s assets has been delegated at

all times to independent investment

managers selected by IFS. With respect

to the Plans’ investment in the Stock,

such responsibility was first delegated

to Sunwestern Advisors, L.P.

(Sunwestern), which served as the

investment manager for this investment

until July 14, 1992. Effective that date,

Sunwestern’s responsibilities were

assumed by a new investment manager,

Potomac Asset Management, Inc.

(Potomac). On October 15, 1996, IFS

appointed HAI as the investment

manager for certain investments of the

Plans, including the AHL Stock. HAI

continues to serve in that capacity.

8. HAI is a private investment banking

firm offering financial advisory services

and investment management services.

HAI has specialized in working with

troubled companies or their creditors to

raise capital, divest businesses and

restructure liabilities, whether in or

outside bankruptcy. HAI is also the

general partner of a hedge fund that

invests primarily in the securities of

distressed companies. HAI is registered

with the Securities and Exchange

Commission as an investment advisor

and broker/dealer. HAI is located in

New York, New York. Since its

retention, HAI has devoted substantial

time and effort to developing a thorough

understanding of AHL’s business and

financial condition. As required by the

terms of its engagement, HAI has

provided IFS with quarterly reviews of

AHL’s financial results and operations,

including the status of ships under

construction, charter status, and the

status of collective bargaining

negotiations, including negotiations

involving the transaction which is the

subject of this proposed exemption.

9. The applicants have requested an

exemption that would permit the Plans

to sell their AHL Stock to AHL

Holdings. Subsequently, all of the

shares of AHL Holdings (Holdings

Stock) will be acquired by a newly

created ESOP to be established by AHL.

The ESOP is represented by the ESOP

Committee. The ESOP Committee is a

five-person ad hoc committee of AHL

employees represented by the Union.

57392 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

3 In this regard, the applicant states that the

acquisition of the Holdings Stock by the ESOP will

be covered by the statutory exemption available

under section 408(e) of the Act, because the

Holdings Stock is considered ‘‘qualifying employer

securities’’ pursuant to section 407(d)(5) of the Act.

The Department is providing no opinion in this

proposed exemption as to whether the acquisition

and holding by the ESOP of Holdings Stock would

be covered by section 408(e) of the Act and the

regulations thereunder. In addition, the Department

is not providing any relief herein for any

transactions by the ESOP involving the Holdings

Stock.

4The Department wishes to note that ERISA’s

general standards of fiduciary conduct would apply

to the proposed acquisition and holding of the Note

by the Plans and the proposed acquisition and

holding of the Stock by the ESOP, and that

satisfaction of the conditions of this proposal

should not be viewed as an endorsement of the

investments by the Department. Section 404(a) of

the Act requires, among other things, that a plan

fiduciary discharge his duties with respect to a plan

solely in the interest of the plan’s participants and

beneficiaries and in a prudent fashion. Accordingly,

the plan fiduciary must act prudently with respect

to the decision to enter into an investment

transaction. The Department further emphasizes

that it expects the plan fiduciary to fully

understand the benefits and risks associated with

engaging in a specific type of investment, following

disclosure to such fiduciary of all relevant

information. In addition, such plan fiduciary must

be capable, either directly or indirectly through the

use of hired professional experts, of monitoring the

investment, including any changes in the value of

the investment. Thus, in considering an investment,

a fiduciary should take into account its ability to

provide adequate oversight of the particular

investment.

The Department also wishes to note that it

reserves the right to investigate and take any other

action with respect to the transaction which is the

subject of the proposed exemption.

The ESOP Committee has functioned as

an advisory group to the Union and its

advisors in connection with the

collective bargaining negotiations that

resulted in the proposed transaction.3

10. In connection with the transaction

involving the transfer of the AHL Stock,

the Union and AHL have adopted a new

conditional eight-year collective

bargaining agreement (CBA), which took

effect in part on September 1, 1997, and

will take effect in full upon the closing

of the proposed transaction. The new

CBA provides for a 7.5% reduction in

base wages and vacation pay by Union

members, certain benefit concessions

and a reduction in crew size. On August

31, 2002, the wage rate reductions and

other benefit modifications (the CBA

Concessions) to the CBA adopted

pursuant to agreement between the

Union and AHL will be terminated and

certain wages and benefit provisions

will be restored to their 1996 levels. In

addition, AHL will continue to benefit

from certain productivity improvements

in the new agreement.

According to AHL and the Union, the

modifications to the CBA would reduce

AHL’s actual cash compensation costs

by more than $1,500 per day, per ship—

or more than seventeen percent of

AHL’s actual cash compensation costs

under the prior collective bargaining

agreement—for a period through August

31, 2002. The net present value of these

proposed contractual reductions in

wages, staffing and pension

contributions and benefits over five

years, as estimated by AHL and the

Union, exceeds $7.7 million.

11. AHL Holdings will issue the Note

to the Plans in exchange for the Stock.4

The Note will have a six-year term and

a stated principal value of $6.9 million.

The Note will have an interest rate of

nine percent for the initial three years

and ten percent for the remaining three

years. The interest will be payable semiannually (with a total of twelve interest

payments), but the first six semi-annual

interest payments will be ‘‘payable in

kind’’, i.e., accrued and added to the

principal amount of the Note. A single

$2.5 million payment will be due on the

fifth anniversary of the date of issuance

of the Note, and the remaining principal

balance will be due at the conclusion of

the six-year term.

Principal may be pre-paid at any time,

without penalty. In order to provide an

incentive for the repayment of principal,

in the event that at least $250,000 of

principal is prepaid in cash at one time,

the final principal payment will be

reduced by an amount calculated in

accordance with the following formula:

(1+R/2) to the Y power times the

Prepayment Amount

Where

Y=Number of semi-annual periods until

maturity.

R=Semi-Annually Compounded

Discount Rate.

If the Prepayment Amount is between

$250,000—$499,999, the Annual

Discount Rate is 8.00% and the SemiAnnually Compounded Discount Rate is

7.85%.

If the Prepayment Amount is between

$500,000—$749,999, then the Annual

Discount Rate is 12.00% and the SemiAnnually Compounded Discount Rate is

11.66%.

If the Prepayment Amount is between

$750,000—$999,999, the Annual

Discount Rate is 15.00% and the SemiAnnually Compounded Discount Rate is

14.48%.

If the Prepayment Amount is

$1,000,000 or more, the Annual

Discount Rate is 17.50% and the SemiAnnually Compounded Discount Rate is

16.79%.

If more than one prepayment is made,

subsequent prepayments are entitled to

be calculated at the larger discount rate

applicable to the cumulative amount of

prepayments made.

The applicant represents that the

prepayment formula results in a lesser

discount the closer the prepayment is to

the Note’s maturity. Additionally, aside

from the prepayment dollar amounts,

different discount rates have been

assigned to different size prepayments,

so that the greater the prepayment, the

greater the reduction in principal.

Therefore, a prepayment received

sooner rather than later will result in a

greater discount from principal, and a

larger prepayment will also obtain a

greater discount than a smaller one. As

an example, a $500,000 prepayment

made as soon as the Note is issued will

result in a reduction of $986,910 from

the final principal payment six years

later. In contrast, a $500,000

prepayment made in the third year of

the six-year Note will only result in a

reduction of $702,460 from the final

principal payment.

The Note given by AHL Holdings will

be secured by: (1) A pledge of all of the

AHL Stock, none of which will be

released until the Note is paid in full;

(2) the Guarantee of AHL, subordinated

to AHL’s obligations under the MARAD

and Avondale Loans; (3) a pledge of the

cash in an escrow account to be

established for all wage increases under

the collective bargaining agreement

beginning March 1, 2003, none of which

will be released until the Note is paid

in full; and (4) if practicable, a third

mortgage on AHL’s assets, subordinated

to the MARAD and Avondale Loans.

AHL will periodically provide the Plans

with certain confidential financial

information. Effective as of the date of

the closing of the transaction, AHL’s

Board of Directors (the AHL Board) will

consist of seven members, one of whom

will be designated by HAI (acting as

investment manager for the Plans), two

of whom will be selected by the ESOP

Committee and the Union (the

Employee Directors), and one of whom

will be designated by AHL (the

Management Director). There will be

three independent directors who will be

jointly selected by the Employee

Directors and the Management Director.

On the date the Plans receive their first

cash payment under the terms of the

Note (i.e., $893,000), HAI’s power to

designate a member of the AHL Board

will end. HAI will have the power to

designate (on behalf of the Plans) one

director of AHL Holdings until the Note

is fully repaid. The ESOP, as 100%

shareholder of AHL Holdings, will elect

the rest of AHL Holdings’ Board. The

applicant represents that by requiring at

least one director to be elected by the

Plans, and further precluding (1) the

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57393

5 If AHL Holdings defaults on its obligations on

the Note, AHL must meet its obligations under the

Guarantee. AHL Holdings may not incur any

additional debt (see rep. 11, above). If AHL defaults

on any of its obligations, then AHL Holding’s Note

will also be in default (by virtue of the cross-default

provision).

6 If the Plans were to foreclose on the pledged

Stock, the Plans’ subsequent holding of that Stock

could create the same prohibited transactions for

which PTEs 94–85 and 96–73 were granted. Thus,

the applicants have requested that should this

scenario arise, the exemption proposed herein

would permit the Plans to hold such Stock for a

period of two years after the foreclosure.

incurrence of any debt, (2) any

bankruptcy filing, or (3) any amendment

to its Articles without the unanimous

consent of the AHL Holdings Board (and

therefore of the Plans’ director), the

ESOP cannot abrogate AHL Holdings’

requirement to repay the Note to the

Plans in full, or return ownership of

100% of AHL to the Plans upon any

default under the Note.

Certain extraordinary actions cannot

be taken by AHL without the affirmative

vote of at least 6 of the 7 directors of

AHL, including: A merger,

consolidation or combination of AHL

with another person or entity; any

aggregate investment of $1 million in

another person or entity in the maritime

shipping business; a sale or issuance of

stock or other equity securities which

would give another person or entity

more than 35% of AHL’s common stock

on a fully diluted basis, except for

issuances necessary to permit AHL to

avoid bankruptcy or repossession of

AHL vessels; a sale, lease, transfer or

disposition of more than 32% of AHL’s

assets, subject to certain exceptions; the

appointment of a new CEO; or certain

other changes relating to the

composition, removal, replacement,

committee structure, or consensus

provisions of the AHL Board.

The AHL Holdings Articles of

Incorporation will provide that AHL

Holdings may not: (1) Incur any new

debt; (2) declare voluntary bankruptcy;

or (3) amend its Articles, without the

unanimous consent of the AHL

Holdings Board.

12. The applicants represent that AHL

Holdings and AHL will be motivated to

make payments on the Note in a full and

timely fashion. The Note will default if

AHL Holdings fails to make a required

cash interest payment for any single

payment period. In the event of default,

AHL Holdings will have 45 days to cure

the default. If AHL Holdings does not

cure the default within 45 days, the

holders of the Note will enjoy standard

public debt provisions with respect to

events of default. In addition, the Notes

will contain cross-default provisions

with respect to the covenants of AHL

contained in the Guarantee.5 These

public debt provisions include

approximately 25 affirmative and

negative covenants made by AHL

which, if violated, would trigger a

default on the Note. The affirmative

covenants include covenants to: Make

timely payments of principal and

interest on the Note; to maintain a

principal office in New Orleans; to keep

proper books and records in accordance

with GAAP (i.e., generally accepted

accounting principles); to properly pay

all taxes; to keep AHL’s properties and

assets in good condition, repair and

working order; to comply with all

applicable laws and government rules

and regulations; to maintain sufficient

insurance; to render periodic financial

statements; and to notify the Plans of

any material adverse changes in the

business, affairs or financial condition

of AHL. The negative covenants include

prohibitions on: The acquisition of

significant assets in the ordinary course

of business; the redemption of

outstanding stock; the incurrence of

indebtedness except for tax liabilities;

the incurrence of any liens except

permitted liens and obligations

included in the ordinary course of

business; the declaration of dividends in

cash or in stock; the guaranty of any

third party obligations; the dissolution,

sale, consolidation or merger of AHL;

transactions with affiliated persons on

terms less favorable than comparable

transactions with non-affiliates;

investments or loans to any other

company; and the sale and leaseback of

assets in excess of $250,000.

In the event of default, the Plans will

be in a position to foreclose on the

pledged AHL Stock 6 and to demand

payment from AHL under its Guarantee.

Events of default include the falsity of

any representation or warranty in any

material respect given; a payment

default; failure to observe or perform

any affirmative or negative covenant

which continues unremedied for more

than 30 days after written notice thereof;

a default under the MARAD Loan (see

rep. 5, above) documents (i.e., crossdefault with MARAD) unless such

default is waived by MARAD; the

suspension or discontinuance of

business by AHL or the commencement

of any bankruptcy or similar proceeding

by or against AHL; the entry of an order,

judgment or decree of dissolution of

AHL; the entry of a money judgment

against AHL in excess of $500,000 that

has not been stayed pending appeal; if

any of the operative documents should

be declared unenforceable; and finally,

if the Internal Revenue Service

determines that the ESOP does not

qualify under section 4975(e)(7) of the

Code. If AHL was forced into

bankruptcy for nonperformance, the

Plans’ unsecured claim (as a creditor)

against the estate would be superior to

the claims of all other equity holders.

AHL will provide the Plans with the

Guarantee, which will contain

covenants and events of default

identical in form to the covenants and

events of default contained in

subordinated public debt, because the

Note will be subordinated to all of

AHL’s funded indebtedness.

13. HAI has reviewed the proposed

transactions and made a determination

that they are appropriate for the Plans

and in the best interests of their

participants and beneficiaries. HAI

represents that, under the CBA in effect

prior to September 1, 1997, the labor

costs of AHL were too high for AHL to

be profitable or even survive. As a part

of the collective bargaining process, the

Union recognized that cost concessions

were necessary and agreed to put them

into effect in return for the proposed

ESOP transaction. In connection with

the CBA signed on September 1, 1997

(see rep. 10, above), certain of the new

labor contract cost savings were

implemented as of that date, resulting in

escrowed cash savings of $2,148,400 as

of October 31, 1999. If the subject

proposed transaction were not to take

effect, AHL would be required to return

these amounts, which it would not be

financially capable of doing. Therefore,

failure to approve the proposed ESOP

transaction could render AHL insolvent.

HAI further represents that because of

its belief that AHL could not be

profitable and service its debt when due

without these CBA Concessions, and

because the Union refused to make such

cost concessions to any third party, it

was not possible to attempt to sell AHL

as a going concern to anyone other than

the ESOP.

14. HAI completed a financial

evaluation of AHL as of December 31,

1997, and represents that, as of

December 31, 1999, there has been no

material change in the financial

condition of AHL. HAI represents that

AHL could be liquidated, but given the

extremely large debt load incurred to

convert AHL’s four ships to double-hull

(i.e., the MARAD Loan and the

Avondale Loan; see Rep. 5, above), and

because of the provision in the CBA that

obligates AHL to make a payment to the

Union of $2.5 million if it sells its four

ships and Union members are not

employed thereon, it is extremely

unlikely that, if AHL were liquidated,

there would be any net value remaining

to the AHL Stock owned by the Plans.

HAI has calculated that a one-year

57394 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

bankruptcy and liquidation process,

including shut-down, marketing and

legal expenses estimated at $3 million,

would likely produce a negative $3.1

million equity value for the Plans if the

MARAD Loan were to be paid off at

face, with no accrued interest. If the

MARAD Loan had to be repurchased at

the 106% premium called for in its

indenture, the equity value for the Plans

would be a negative $12 million. HAI’s

analysis assumed that a third party

would pay as much for the AHL ships,

with their old engine rooms, as for a

completely new ship. HAI represents

that the likelihood is that the actual

recoveries would be substantially lower

than those described above, and would

certainly leave no value for the AHL

Stock. Thus, HAI believes there would

be no value remaining to the Plans’

ownership of the Stock in the event of

a liquidation of AHL. HAI has

concluded, accordingly, that if the

subject transaction does not take place,

the likely value of the AHL Stock is

zero. If the transaction were to take

place, HAI has concluded that the net

present value of the AHL Stock is equal

to the net present value of the Note to

be received. Using 10% to 15% as the

appropriate discount rates, HAI has

estimated the present value of the Note

to be in the range of $5.2 to $6.1 million.

15. IFS represents that, based upon its

own analysis of the situation and

continuing close evaluation of HAI’s

activities as investment manager, it

believes that the Plans’ equity

investment in AHL is in dire

circumstances. Although IFS recognizes

that the proposed sale of the Stock is not

ideal (largely because of the seller

financing), IFS strongly believes that it

is preferable to the only other

alternative, which is bankruptcy. IFS

represents that absent completion of the

proposed transaction, the Plans’ equity

interest is likely to be worth little or

nothing. By contrast, with the

transaction, (a) AHL’s cost structure

(and thus, its only chance for survival)

will improve dramatically, and (b) the

Plans will exchange an equity security

for a fixed income instrument, thus

gaining a priority position in the event

of AHL’s bankruptcy. In short, IFS

represents that without the transaction,

the Plans’ equity investment in AHL is

in severe jeopardy, but with the

improved protections including the

Guarantee and the escrow, the Plans

will be in a superior position as a

debtholder in a more viable company.

16. Arthur Anderson LLP (AA), an

independent accounting firm, has

reviewed the balance sheets and income

statements of AHL as of June 30, 1999.

AA, in a report dated September 2,

1999, has opined that ‘‘if the cost

savings and the resulting funds [from

the ESOP transaction] are not realized in

the full amount and on the schedule

contemplated, [AHL] may not be able to

meet its obligations timely’’, and that

‘‘[t]he uncertainties related to these

matters raise substantial doubt about

[AHL]’s ability to continue as a going

concern.’’

17. The ESOP Committee also

represents that it believes the subject

transactions are necessary to prevent the

insolvency of AHL. The ESOP

Committee reached this conclusion after

extremely extensive negotiations with

the Plans, in which it exerted every

effort to achieve the best deal it could.

In acquiring AHL Holdings, the ESOP is

in essence acquiring the possibility that

AHL will become profitable again.

There is risk in this transaction,

particularly given AHL’s recent

financial performance. However, there

is also the possibility that the

investment in AHL Stock by AHL

Holdings will be profitable, which in

turn will make the value of Holdings

Stock pay off for the ESOP participants.

18. In summary, the applicant

represents that the proposed

transactions satisfy the criteria

contained in section 408(a) of the Act

because: (a) The Plans’ independent

investment manager, HAI, has

determined that the transactions are

appropriate for the Plans and in the best

interests of the Plans’ participants and

beneficiaries; (b) HAI has made this

determination based upon its finding

that if AHL were to be liquidated, it is

unlikely that there would be any value

remaining to the Plans’ ownership of the

Stock; (c) AA, the independent

accountant for AHL, concurs in the

opinion that if the proposed

transactions are not consummated, there

is substantial doubt about AHL’s ability

to meet its obligations and to continue

as a going concern; (d) IFS, the Plans’

independent fiduciary, has also

determined that the transactions are

appropriate for the Plans and in the best

interests of the Plans’ participants and

beneficiaries; (e) HAI, the Plans’

independent investment manager, will

continue to monitor the Plans’ holding

of the Note, determine at all times that

such transaction remains in the best

interests of the Plans and take whatever

actions are necessary to enforce the

Plans’ rights under the Note; and (f) the

ESOP Committee has determined that

the transaction is in the best interests of

the AHL employees who will become

ESOP participants.

Notice To Interested Persons

The applicant represents that the

notice to interested persons required by

29 CFR 2570.43 will be effected by

publication of a copy of this notice of

proposed exemption and the required

supplemental statement in The Master,

Mate and Pilot. This publication is a

newspaper published by the Union and

is received by participants and

beneficiaries of the Plans, including

retirees. The notice will be published

within 30 days of the publication of this

notice of proposed exemption in the

Federal Register. Comments and

requests for a public hearing are due

within 60 days of the publication of this

notice of proposed exemption in the

Federal Register.

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

John L. Rust Co. Profit Sharing Plan

(the Plan), Located in Albuquerque,

New Mexico

[Application No. D–10877]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

and section 4975(c)(2) of the Code and

in accordance with the procedures set

forth in 29 CFR part 2570, subpart B (55

FR 32836, 32847, August 10, 1990). If

the exemption is granted, the

restrictions of sections 406(a), 406(b)(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 (1) the proposed

purchases by the Plan of certain leases

of equipment (the Leases) from John L.

Rust Co. (Rust), the Plan sponsor and a

party in interest with respect to the

Plan, and (2) the agreement by Rust to

indemnify the Plan against any loss

relating to the Leases and also to

repurchase any Leases that are in

default in accordance with paragraph

(E) below, provided that the following

conditions are met:

A. Any sale of Leases to the Plan is

on terms at least as favorable to the Plan

as an arm’s length transaction with an

unrelated third party.

B. Subsequent to the date of

publication of the proposed exemption,

the acquisition of a Lease from Rust

shall not cause the Plan to hold

immediately following the acquisition

(1) more than 25% of the current value

(as that term is defined in section 3(26)

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57395

7According to section 3(26) of the Act, the term

‘‘current Value’’ means fair market value where

available and otherwise the fair market value as

determined in good faith by a trustee or a named

fiduciary pursuant to the terms of the plan and in

accordance with regulations of the Secretary [of

Labor], assuming an orderly liquidation at the time

of such determination.

8 ‘‘Payout value’’ of a Lease is defined as the price

that the lessee would pay at any point in time to

obtain title to the leased property.

9 In this proposed exemption, the Department

expresses no opinion with respect to the

applicability of PTE 85–68 to the Plan’s acquisition

and holding of such Notes.

of the Act) 7 of Plan assets in customer

notes (Notes) and Leases sold by Rust or

(2) more than 10% of Plan assets in the

aggregate of Leases with and Notes of

any one entity.

C. Prior to the purchase of each Lease,

an independent, qualified fiduciary

determines that the purchase is

appropriate and suitable for the Plan

and that any Lease purchase is a fair

market value transaction.

D. The independent fiduciary, on

behalf of the Plan, monitors the terms of

the Leases and the exemption and take

whatever action is necessary to enforce

the rights of the Plan.

E. Upon default by the lessee on any

payment due under a Lease, Rust

repurchases the Lease from the Plan at

the payout value 8 as of the date of the

default, without discount, and

indemnifies the Plan for any loss

suffered. The occurrence of any of the

following events shall be considered

events of default for purposes of this

section: (1) The lessee’s failure to pay

any amounts due hereunder within five

days after receipt of written notice from

the Plan’s independent fiduciary, or the

lessee’s failure to pay any amounts due

hereunder within 30 days after payment

becomes past due, if earlier; (2) the

lessee’s failure to perform any other

obligation under this agreement within

ten days of receipt of written notice

from the Plan’s independent fiduciary;

(3) abandonment of the equipment by

the lessee; (4) the lessee’s cessation of

business; (5) the commencement of any

proceeding in bankruptcy, receivership

or insolvency or assignment for the

benefit of creditors by the lessee; (6)

false representation by the lessee as to

its credit or financial standing; (7)

attachment or execution levied on

lessee’s property; or (8) use of the

equipment by third parties without

lessor’s prior written consent.

F. The Plan receives adequate security

for the Lease. For purposes of this

exemption, the term adequate security

means that the Lease is secured by a

perfected security interest in the leased

property which will name the Plan as

the secured party.

G. Insurance against loss or damage to

the leased property from fire or other

hazards is procured and maintained by

the lessee and the proceeds from such

insurance is assigned to the Plan.

H. The Plan maintains for the

duration of any Lease which is sold to

the Plan pursuant to this exemption,

records necessary to determine whether

the conditions of this exemption have

been met. The Plan continues to

maintain the records for a period of six

years following the expiration of the

Lease or the disposition by the Plan of

the Lease. The records referred to above

must be unconditionally available at

their customary location for

examination, for purposes reasonably

related to protecting rights under the

Plan, during normal business hours by

the Internal Revenue Service, the

Department, Plan participants, any

employee organization any of whose

members are covered by the Plan, or any

duly authorized employee or

representative of the above described

persons.

Temporary Nature of Exemption

Effective Dates: The proposed

exemption, if granted, will be temporary

and will be effective from September 21,

2000 through September 21, 2005 with

respect to the Plan’s future purchases of

Leases. The Plan may hold the Leases

acquired pursuant to the terms of the

exemption subsequent to the end of the

five year period.

Summary of Facts And Representations

1. The Plan is a profit sharing plan

which currently has 502 participants

and assets with an approximate

aggregate fair market value of

$34,303,504. Rust, which does business

as ‘‘Rust Tractor Co.’’ in Albuquerque,

New Mexico, is in the business of

selling heavy construction equipment.

The Plan’s trustee is Wells Fargo Bank

New Mexico, N.A. (the Bank).

2. On April 3, 1985, the Department

published Prohibited Transaction Class

Exemption 85–68 (PTE 85–68, 50 FR

13293) which permits, under certain

conditions, a plan to purchase and hold

customer notes from an employer of

employees covered by the plan. The

applicant represents that the Plan has

acquired and held many such customer

notes (i.e., the Notes) from Rust since

1985 in compliance with the terms and

conditions of PTE 85–68.9

3. In addition to the Notes, the Plan

also acquired from Rust, from December

30, 1985 through September 21, 1995,

approximately 76 Leases. These Leases

are secured leases which were accepted

by Rust in the normal course of its

primary business activity as the seller of

heavy construction equipment. The

Leases involve equipment which is

leased to third parties. The applicant

represents that the Plan acquired the

Leases from Rust in the belief that such

transactions were also covered by PTE

85–68. When the applicant realized that

the Leases might not be exempt under

PTE 85–68, it requested retroactive

relief from the Department with respect

to the Plan’s past acquisition of such

Leases, and also requested an exemption

to permit the Plan to purchase

additional Leases from Rust over a five

year period. The Department granted the

requested relief in PTE 95–87 (60 FR

49010, September 21, 1995).

4. The applicant represents that, since

the issuance of PTE 95–87, the Plan has

acquired from Rust approximately 50

Leases. The applicant now requests

prospective relief for an additional five

(5) years, upon the expiration of PTE

95–87 on September 21, 2000.

5. The applicant represents that each

of the transactions involving the Plan’s

acquisition of the Leases would have

satisfied the conditions of PTE 85–68

(i.e., the class exemption for customer

notes), but for the fact that these were

Leases and not Notes. The applicant

further represents that the conditions of

PTE 95–87 (i.e., the current individual

exemption for Leases) have been

satisfied and will continue to be

satisfied with respect to future

purchases by the Plan of Leases. The

applicant specifies that the conditions

of PTE 95–87 have been satisfied in the

following manner:

(a) Prior to the purchase of any Lease,

the transaction has been reviewed by

Mr. Charles R. Seward, C.P.A., an

independent certified public accountant

who is the Plan’s independent fiduciary

with respect to this series of

transactions. Mr. Seward performs no

other services for either Rust or the

Plan. On-going review of the

performance of the customer-obligor is

performed by the Bank, the Plan’s

independent trustee. In the event that a

default in payment occurs, Rust is

notified by the Bank and an immediate

repurchase is effected for cash;

(b) The transactions have been on

terms at least as favorable to the Plan as

an arm’s-length transaction with an

unrelated party. The Plan’s independent

fiduciary, Mr. Seward, has represented

that each transaction that he has

approved for the Plan involving a Note

or Lease has been in the best interests

of the Plan and its participants. Mr.

Seward further represents that each

such transaction has been for a price

and on terms and conditions no less

favorable to the Plan, and in many

57396 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

10Because Mr. Lobenherz is the sole owner of the

Plan sponsor and the only participant in the Plan,

there is no jurisdiction under Title I of the

Employee Retirement Income Security Act of 1974

(the Act) pursuant to 29 CFR 2510.3–3(b). However,

there is jurisdiction under Title II of the Act

pursuant to section 4975 of the Code.

respects more favorable, than such

transactions have in the past been

engaged in between Rust and third party

financial institutions. Mr. Seward

represents that due to the high rate of

return on these Notes/Leases, they are

excellent investments which bear no

risk of loss since Rust has guaranteed

the repurchase of any Note/Lease which

might default;

(c) At no time has the value of the

Notes/Leases held by the Plan

approached 50% of the Plan’s assets. In

accordance with PTE 95–87, less than

25% of the Plan assets has been and will

be involved in these transactions. As of

December 31, 1999, the Notes/Leases

comprised only 4.1% of the Plan’s

assets. At no time have the Notes/Leases

of any one customer exceeded 10% of

the Plan’s assets. With respect to Notes

and Leases acquired by the Plan

subsequent to the publication of this

proposed exemption, the applicant

represents that the value of such Notes

and Leases in the aggregate will

constitute no more than 25% of the total

value of Plan assets. At no time will the

Notes/Leases of any one customer

exceed 10% of the Plan’s assets.

(d) Rust will continue to guarantee

immediate repayment of any defaulted

obligation. The applicant represents that

there have been zero defaults of the

Leases since the issuance of PTE 95–87;

(e) The Plan will continue to receive

a perfected security interest in the

tangible personal property purchased

from Rust in return for the Note/Lease;

(f) The obligor is required to insure

the collateral against fire and other

hazards; and

(g) None of the terms of the Notes/

Leases will extend beyond the 60 month

period applicable to Notes secured by

heavy equipment.

6. The applicant represents that the

Leases create essentially the same risk

and obligations on the parties as a sale

transaction, and thus pose no greater

risk of loss to the Plan than in the case

of the acquisition of a Note which is

subject to PTE 85–68. To date, the Plan

has suffered no loss on any of the

subject Lease transactions. Before

entering into either a Note or Lease,

Rust performs the same type of due

diligence and requests the same type of

financial information from the

prospective purchaser/lessee. The

agreements governing the transactions

are very similar in that:

(a) Both transactions provide for

monthly installments to pay for the use

and possession of the equipment;

(b) Financing statements are filed by

Rust in connection with both

transactions;

(c) Upon default, Rust may accelerate

the lessee/purchaser’s obligations and

immediately regain possession of the

subject equipment;

(d) In the event of default under either

transaction, Rust is entitled to its

enforcement costs, including reasonable

attorneys’ fees;

(e) Both types of transactions contain

warranty disclaimers and sell/lease the

subject equipment ‘‘AS IS WHERE IS’’

with no express or implied warranties

except the pass-through of the

manufacturer’s warranties;

(f) When either a Note or a Lease is

sold to the Plan, an identical form of

guarantee is executed by Rust in favor

of the Plan as required by PTE 85–68.

In the few transactions involving Notes

sold to the Plan which have gone into

default (prior to the issuance by the

Department of PTE 95–87), Rust has

performed under its guarantees and the

Plan has suffered no loss;

(g) Under New Mexico law, there is

no practical difference in the rights and

obligations of Rust between the subject

Lease transactions and sales

transactions involving Notes. The

essential terms and conditions of the

two types of transactions are identical.

7. In summary, the applicant

represents that the proposed sales of the

Leases by the Employer to the Plan will

meet the requirements of section 408(a)

of the Act, because: (a) The sales will be

limited to a five year period and will be

limited to 25% of Plan assets, with the

additional condition that no more than

10% of Plan assets can be invested in

the Leases or Notes of any one customer;

(b) the decision to purchase a Lease will

be made by Mr. Seward acting as

independent fiduciary for the Plan, and

the customer/obligor’s performance

under the Lease will be monitored by

Mr. Seward and the Bank on behalf of

the Plan; (c) perfected security interests

will be filed on the equipment related

to each Lease; and (d) Rust will agree to

indemnify the Plan against any loss

related to the Leases and to repurchase

any Leases that are in default.

FOR FURTHER INFORMATION CONTACT: Mr.

Gary Lefkowitz of the Department,

telephone (202) 219–8881. (This is not

a toll-free number.)

Richard E. Lobenherz Profit Sharing

Plan (the Plan), Located in Charlevoix,

Michigan

[Application No. D–10895]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 4975(c)(2) of the

Code and in accordance with the

procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847,

August 10, 1990.) If the exemption is

granted, the sanctions resulting from the

application of section 4975 of the Code,

by reason of section 4975(c)(1)(A)

through (E) of the Code, shall not apply

to the proposed sale of certain

unimproved real property (the Land) by

the Plan to Richard E. Lobenherz (Mr.

Lobenherz), a disqualified person with

respect to the Plan,10 provided that the

following conditions are satisfied:

(a) The proposed sale will be a onetime transaction for cash;

(b) The Plan will receive the current

fair market value for the Land

established at the time of the sale by a

qualified, independent appraiser;

(c) The Plan will pay no real estate

expenses or commissions associated

with the sale; and

(d) The sale will provide the Plan

with greater liquidity and further

diversification of the Plan’s assets.

Summary of Facts and Representations

1. The Plan, which was originally

known as the ‘‘Richard E. Lobenherz

Keogh Plan’’ (the Keogh Plan), was

established on April 5, 1986 by Mr.

Lobenherz, who was the sole sponsor,

trustee and participant. In 1991, the

Keogh Plan was converted and restated

as the current Plan. At the time of

conversion, Mr. Lobenherz flied an

application with the Internal Revenue

Service (the Service) and subsequently

obtained a Favorable Determination

Letter from the Service with respect to

the qualifications of the current Plan.

2. As of December 31, 1999, the Plan

had $786,209 in net assets available for

benefits. Mr. Lobenherz is the sponsor,

trustee, and the only participant in the

Plan. He is also a sole proprietor, who

is an independent contractor and real

estate broker licensed in the State of

Michigan. Recently, Mr. Lobenherz

retained an independent party, Citizens

Bank and Trust (CBT) of Saginaw,

Michigan, to serve as the Plan’s

custodian, trustee and investment

manager.

3. In May of 1998, the Plan purchased

the Land from the Bruce K. Shanahan

Trust, an unrelated third party, for

$60,000 in cash. The Land was acquired

by the Plan for capital appreciation

purposes and it was considered by Mr.

Lobenherz to be a good long-term

investment. The Land consists of

approximately 80 acres of vacant

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57397

11 It is represented that the Club has nine other

shareholders aside from Mr. Lobenherz. These

shareholders are not related to Mr. Lobenherz or the

Plan.

agricultural land that is located in Hayes

Township, Charlevoix County,

Michigan. The Land is legally described

as:

‘‘That portion of the west 1⁄2 of the

northwest 1⁄4 of Section 17, Town 34 North,

Range 7 West, lying North of U.S.-31, and

also; that part of the Northwest 1⁄4 of the

Southwest 1⁄4 of Section 17, Town 34 North,

Range 7 West, lying north of Highway U.S.-

31.’’

The Land is adjacent to Big Rock

Nuclear Power Plant, which is presently

in the second year of a five year

decommissions program, and the

Charlevoix Country Club (the Club), of

which Mr. Lobenherz is a 15%

shareholder.11 At the time of purchase,

the Land represented approximately

15% of the Plan’s total assets. As of

December 31, 1999, the Land

represented approximately 8.9% of the

total value of the Plan’s assets.

4. The applicant represents that the

Land has not produced any income

since it was acquired by the Plan. In

addition, the applicant states that the

Land has not been used by or leased to

anyone, including disqualified persons.

Furthermore, the Plan has paid

aggregate real estate taxes for the Land

in the total amount of $3,112.45. The

Plan also paid $300 for one appraisal,

which was dated February 8, 2000 (the

Appraisal), as discussed below.

Therefore, the Plan’s total acquisition

and holding costs in connection with its

ownership of the Land is $63,412.45. 5. The Land was appraised as of

February 8, 2000 (i.e., the Appraisal), by

A. Kenneth Smith (Mr. Smith), GRI,

who is an independent state certified

real estate appraiser in the State of

Michigan. Mr. Smith is employed with

Mid-Michigan Engineering & Survey

Co., a real estate appraisal and

consultation business located in Big

Rapids, Michigan. In determining the fair market value

of the Land, Mr. Smith relied primarily

on the Sales Comparison Approach. On

the basis of the Appraisal, Mr. Smith

placed the fair market value of the Land

at $70,000, as of February 8, 2000. The

applicant represents that Mr. Smith

maintains that the Land’s adjacency to

the Club does not merit a premium

above fair market value. In this regard,

Mr. Smith considered, among other

things, that the Club passed on the

opportunity to acquire the Land at an

earlier time, and also the Club is not in

the financial position to expand. Thus,

even though Mr. Lobenherz is a 15%

shareholder of the Club, no premium

above the fair market value of the Land

is merited for purposes of a sale of the

Land to Mr. Lobenherz.

By letter dated June 28, 2000, Mr.

Smith stated that he was aware that the

Appraisal was being submitted by the

applicant to the Department as part of

the exemption request described herein.

In that letter, Mr. Smith also indicated

that the value of the Land had not

changed since his original valuation. 6. CBT, as the Plan’s newly appointed

custodian, trustee and investment

manager, has requested that the Plan

divest itself of the Land because it is

non-income producing. Therefore, the

applicant requests an administrative

exemption from the Department which

will allow Mr. Lobenherz to purchase

the Land from the Plan in a one-time

cash transaction. The applicant

represents that the proposed transaction

will be in the best interest and

protective of the Plan because the Plan

will pay no real estate commissions or

expenses (including transfer taxes)

associated with the sale. In addition,

Mr. Lobenherz will pay the Plan the

current fair market value of the Land, as

determined by Mr. Smith in an updated

appraisal at the time of the sale. Further,

the sale of the Land will increase the

liquidity of the Plan’s portfolio, provide

the Plan with the opportunity to

reinvest the proceeds of the sale in

investments that will yield greater

returns, and permit greater

diversification of the Plan’s assets.

7. In summary, the applicant

represents that the proposed transaction

will satisfy the statutory criteria for an

administrative exemption under section

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

(a) The proposed sale will be a onetime transaction for cash;

(b) The Plan will receive the current

fair market value for the Land

established at the time of the sale by a

qualified, independent appraiser; (c) The Plan will pay no real estate

expenses or commissions associated

with the sale; and

(d) The sale will provide the Plan

with greater liquidity, an opportunity to

achieve greater investment returns, and

will permit further diversification of the

Plan’s assets.

Notice to Interested Persons

Because Mr. Lobenherz is the sole

participant in the Plan, it has been

determined that there is no need to

distribute the notice of proposed

exemption to interested persons.

Comments and requests for a hearing are

due thirty (30) days from the date of

publication of the notice of proposed

exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Ekaterina A. Uzlyan of the Department

at (202) 219–8883. (This is not a toll-free

number.)

I.B.E.W. LU 567 Electrical Joint

Apprenticeship and Training Trust

Fund (the Training Plan) and Money

Purchase Retirement Plan of Local 567,

I.B.E.W (the M/P Plan) (collectively, the

Plans), Located in Falmouth, MA

[Application Nos. L–10906 and D–

10907, respectively.]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act (or

ERISA) and section 4975(c)(2) of the

Code and in accordance with the

procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847,

August 10, 1990.) If the exemption is

granted, the restrictions of sections

406(a), 406(b)(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,

effective August 31, 2000, to the leases

(the Leases) of certain office space and

supplemental facilities (the Leased

Space) to the Plans by Local 567

I.B.E.W. Building Corporation (the

Building Corporation), an entity which

is wholly owned by Local 567 of the

International Brotherhood of Electrical

Workers (the Union), a party in interest

with respect to the Plans, provided that

the following conditions are satisfied:

(1) The terms of the Leases are at least

as favorable to the Plans as those

obtainable in an arm’s length

transaction with an unrelated party;

(2) A qualified, independent appraiser

determines annually the fair market

rental value of the Leased Space;

(3) The Lease payments are adjusted

annually by an independent fiduciary to

assure that such Lease payments are not

greater than the fair market rental of the

Leased Space. The Lease payments are

reduced, if the fair market rental value,

as determined by the independent

fiduciary, decreases;

(4) An independent fiduciary

determines that the transactions are

appropriate for the Plans and in the best

interest of the Plans’ participants and

beneficiaries;

(5) The independent fiduciary

monitors the terms of the transactions

and conditions of this exemption, if

granted, at all times, and takes whatever

actions are necessary and proper to

enforce the Plans’ rights under the

Leases and protect the participants and

beneficiaries of the Plans. (Such

independent fiduciary duties also

include, but are not limited to,

negotiating any required amendments to

57398 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

12The Department expresses no opinion herein

on whether the Training Plan’s leasing or use of

space in Building II has complied with the

conditions required under PTCE 78–6 or provisions

of section 408(b)(2) of the Act. The Department

notes that the appropriate Training Plan fiduciaries

must make such determinations.

the Leases on behalf of the Plans to

make certain the terms of the Leases are

commercially reasonable.); and

(6) The annual fair market rental

amount for the Leased Space will not

exceed 5% of each of the Plan’s total

assets.

EFFECTIVE DATE: If granted, this proposed

exemption will be effective as of August

31, 2000.

Summary of Facts and Representations

1. The Training Plan, which operates

under a formal Trust Agreement dated

January 1, 1994, is a collectivelybargained multi-employer joint

apprenticeship training plan. The

Training Plan is sponsored by the

members of the Electrical Contractors

Association of Greater Boston Inc.—

Portland, Maine Division of the Boston

Chapter, N.E.C.A. (the Employers),

which have negotiated the collective

employment contract with the Union.

The Training Plan provides training and

educational benefits to electrical

apprentices and journeymen. Such

benefits are funded by contributions

made by the Employers to the Training

Plan, pursuant to certain collective

bargaining agreements between the

Union and the Employers. As of August

31, 1999, the Training Plan had 87

participants and $178,149 in net assets

available for benefits.

2. The M/P Plan, which was

established on June 1, 1981, is a defined

contribution, participant-directed plan

that is sponsored by the Employers. The

M/P Plan provides retirement benefits

that are funded by contributions made

by the Employers pursuant to certain

collective bargaining agreements

between the Union and the Employers.

As of August 31, 1999, the M/P Plan had

564 participants, all of whom are

members of the Union. As of March 31,

1999, the M/P Plan had $14,570,601 in

net assets available for benefits.

3. The Training Plan is administered

by six trustees (the Trustees), three of

whom are appointed by the Union

(Union Trustees) and three of whom are

appointed by the Employers (the

Employer Trustees). The Union Trustees

with respect to the Training Plan are

Milton McBreairty (Mr. McBreairty),

John Stevens and Kevin Murphy. The

Employer Trustees for the Training Plan

are Thomas Driscoll (Mr. Driscoll),

Mario Gowell and Steve Stewart. The

Employer Trustees are not affiliated

with either the Union or the Building

Corporation.

The M/P Plan is also administered by

three Union Trustees and three

Employer Trustees. The Union Trustees

for the M/P Plan are Mr. McBreairty,

Donald Berry and Gene Ellis. The

Employer Trustees for the M/P Plan are

Mr. Driscoll, David Bradbury and John

Penney. The Employer Trustees are not

affiliated either with the Union or the

Building Corporation.

4. The applicants represent that the

Training Plan required space for its

administrative offices and training

facilities. Similarly, the M/P Plan also

required office space for its

administrative personnel. Therefore, on

August 31, 2000, the Building

Corporation acquired a 10 year old twounit warehouse building (Building I)

from Atlantis Development Building

Corporation (Atlantis), an unrelated

party, for $425,000. Building I is located

at 238 Goddard Road, Lewiston, Maine.

It was purchased by the Building

Corporation as a replacement for

another building located at 240 Gray

Road, Falmouth, Maine (Building II),

which the Building Corporation intends

to sell to an unrelated party by

September 30, 2000.

5. The applicants state that both Plans

currently occupy space in Building II,

which also houses administrative offices

of the Union and serves as the Union

meeting hall. The applicants note that

the M/P Plan’s use of Building II is the

subject of a prior administrative

exemption granted by the Department

which is known as Prohibited

Transaction Exemption (PTE) 94–16, (59

FR 8027, February 17, 1994). PTE 94–16

permits, in relevant part, the leasing of

360 square feet of office space in

Building II by the Building Corporation

to the M/P Plan. The applicants state

that although the Lease would

constitute the payment by the M/P Plan

for office space to a party in interest

within the meaning of section 408(b)(2)

of the Act and the lease would

otherwise meet the requirements of 29

CFR 2550.408b–2, and be statutorily

exempt from section 406(a) of the Act,

further exemptive relief was required

because the Union Trustees of the M/P

Plan participated in the decision to have

the M/P Plan engage in the Lease in

violation of section 406(b)(2) of the Act.

The applicants represent that the M/P

Plan has complied with all of the terms

and conditions of PTE 94–16 since the

exemption was granted.

6. In addition, the applicants explain

that the Training Plan leased office

space in Building II from the Building

Corporation and state that the Training

Plan used certain other space for

training-related purposes. The

applicants represent that the Training

Plan’s leasing of office space in Building

II satisfies the requirements for statutory

exemptive relief under section 408(b)(2)

of the Act and the regulations that have

been promulgated thereunder (see 29

CFR 2550.408b–2).

Moreover, the applicants believe that

the other space in Building II, which has

been used by the Training Plan for

training-related purposes, is covered by

Prohibited Transaction Class Exemption

(PTCE) 78–6 (43 FR 23024, May 30,

1978). PTCE 78–6 permits certain lease

transactions involving collectively

bargained multiple employer

apprenticeship and training plans,

provided the conditions therein are

met.12

7. The applicants state that the

Training Plan wished to relocate and

consolidate its office space and training

facilities in one location. Previously,

training and educational classes were

held in rented facilities over the entire

State of Maine, and such programs were

constrained by the time and space

limitations of such facilities. Therefore,

the applicants believed that Building I,

rather than Building II, would provide

a central geographic location for the

Training Plan’s administrative offices

and training facilities.

Similarly, the applicants note that the

M/P Plan required additional

administrative office space. Thus,

Building I’s central geographic location

and proximity to other Union facilities

and services used by participants in the

M/P Plan were thought by the

applicants to make it an ideal location

for office space for such Plan.

Therefore, the applicants request an

administrative exemption from the

Department to permit, effective August

31, 2000, the Leases, by the Building

Corporation to the Plans, of certain

office space and supplemental facilities

space (i.e., the Leased Space) in

Building I. The applicants represent that

the participation by the Union Trustees

for both plans in the decision to have

the respective Plans engage in the

Leases does not permit that portion of

the Leased Space between the Plans and

the Building Corporation pertaining to

office space from otherwise meeting the

requirements of section 408(b)(2) of the

Act and the Department’s regulations

relating thereto. The applicants explain

that the Trust documents for the Plans

require that a majority of the Plans’

Trustees, which includes at least one

Union Trustee from each Plan, vote to

cause the Plans to enter into any

transaction, such as the subject Leases.

However, if the Union Trustees for both

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57399

13The applicants state that RF, a manufacturing

business that currently occupies approximately

one-half of Building I, is not a party in interest with

respect to either Plan, and is otherwise unrelated to

the Plans, the Employers and the Union.

Plans exercise their fiduciary authority

to cause the Plans to enter into the

Leases, the applicants state that the

transactions may violate section

406(b)(2) of the Act because of the

adverse interests of the Plans and the

Building Corporation.

Again, the Department expresses no

opinion herein on whether each Lease

constitutes the payment by a plan for

office space to a party in interest under

circumstances which would be

statutorily exempt from the prohibitions

of section 406(a) of the Act by reason of

section 408(b)(2) of the Act.

8. The Training Plan is initially

leasing 1,949 square feet of space in

Building I from the Building

Corporation. However, it is anticipated

that upon the termination of an

unrelated third party’s lease in Building

I on June 30, 2001, the Training Plan

will expand and reconfigure part of

Building I so that the Training Plan will

have 8,600 square feet for office space

and training facilities.

The M/P Plan is initially leasing 400

square feet of space in Building I for its

administrative offices. It is also

anticipated that this Plan will lease an

additional 800 square feet in Building I

for its administrative offices once

certain unrelated third parties terminate

their respective leases in Building I.

9. Both the Training Plan Trustees

and the M/P Plan Trustees negotiated

with the Building Corporation the

respective leasing agreements for their

Plans. In this regard, each Lease is a

triple-net lease having an initial term of

a five years which commenced on

August 31, 2000, and two consecutive

five year renewal terms. Rent is being

paid monthly in advance under the

Leases, and will equal the fair market

rental value of the Leased Space as

determined by a qualified, independent

appraiser. Currently, the Leases specify

that the Training Plan will pay $730.09

per month ($8,761 per year) in rent and

the M/P Plan will pay $150 per month

($1,800 per year) in rent. These monthly

rentals reflect the values prior to the

reconfiguration. The rental amounts will

be increased following the

reconfiguration.

The applicants represent that the

annual fair market rental amount under

the Leases will involve approximately

one percent (1%) of the M/P Plan’s total

assets and less than five percent (5%) of

the Training Plan’s total assets.

However, in no event will the annual

fair market rental amount for the Leased

Space exceed five percent (5%) of each

Plan’s total assets.

Other terms of the Leases will be at

least as favorable to the Plans as the

terms obtainable in an arm’s length

transaction with an unrelated party.

Further, the Leases may be terminated

by the Plans without penalty, on sixty

days prior written notice to the Building

Corporation, should any provision of

such Leases become disadvantageous to

the Plans.

In addition, the Leases contain

specific provisions designed to be

beneficial to the Plans, such as the

tenant’s right to a ten-day written notice

of payment default, and the tenant’s

right to take action on behalf of the

defaulting landlord and set off such

costs against the rent. The applicants

note that these conditions cannot be

obtained in the open market without

having to pay a higher rental to reflect

the increased costs and risks to the

landlord.

10. On October 12, 1999, Brian D.

Diskin (Mr. Diskin), a Certified General

Appraiser, who is employed by

Maineland Appraisal Consultants of

Portland, Maine (Maineland) as an

independent commercial real estate

appraiser, completed a competitive

rental market study of Building I (the

Study). As stated above, Building I was

constructed at its present location (i.e.,

238 Goddard Road, Lewiston, Maine) in

1990, and it consists of a manufacturing

warehouse containing two units.

Mr. Diskin relied on the Market

Comparison Approach to determine the

fair market rental value of Building I.

Mr. Diskin considered rental amounts

being charged for other warehouse/

industrial properties in the same

geographic area as Building I, and he

determined that the market rents for

such properties there ranged from $4 to

$6 per square foot, depending upon

such factors as location, size and utility

of the particular facility.

In the Study, Mr. Diskin noted that

there were two tenants in Building I: RF

Technologies (RF) 13 and the Building

Corporation, both of which leased space

from Atlantis, the former owner, until

the August 31, 2000 sale of Building I

to the Building Corporation. Mr. Diskin

explained that RF’s original lease,

which commenced on April 4, 1994,

was in its fourth renewal period, which

is set to expire on June 30, 2001. Mr.

Diskin indicated that RF’s lease

provides for a rental payment of $4.25

per square foot. In addition, he

explained that this lease is triple net

and requires RF to pay its pro rata share

of common area expenses.

Mr. Diskin also noted that the

Building Corporation had entered into a

lease with Atlantis on September 1,

1999 for a five year term. This lease,

which was terminated when the

Building Corporation purchased

Building I from Atlantis on August 31,

2000, required the Building Corporation

to pay Atlantis $4.50 per square foot in

rent and it contained a 3% escalator

provision for increasing the rental

amount each year. The Building

Corporation was also responsible for

paying its pro rata share of the common

area expenses.

In the Study, Mr. Diskin concluded

that as of October 6, 1999, the current

fair market rent for space in Building I

under a triple net lease would range

between $4.25 and $4.50 per square

foot.

11. The Trustees of each Plan have

also retained Maineland to serve as the

independent fiduciary for the Plans in

connection with the subject Leases. On

October 25, 1999, the Plans’ Trustees

signed a Fiduciary Engagement

Agreement (the Agreement) with

Maineland whereby Maineland agreed

to: (a) Evaluate the fair market rental

value of Building I; (b) review, on behalf

of the Plans, the provisions of each

Lease (and any proposed amendments

thereto), and make a determination and

recommendation to the Trustees

whether such Leases would be in the

best interest and protective of the Plans;

and (c) monitor the Lease transactions at

least annually (or more frequently, upon

written request by a Trustee) to ensure

that the rental amounts for the Leased

Space remain at fair market rental for

Building I, and the Leases continue to

be protective and in the best interest of

the Plans.

In the Agreement, Maineland states

that it has been advised by legal counsel

regarding its fiduciary obligations under

ERISA, and it understands and accepts

its duties as an ERISA fiduciary on

behalf of the Plans with respect to the

Leases.

12. In a letter dated December 16,

1999, Frank R. Montello, the president

of Maineland (Mr. Montello), has made

specific representations regarding

Maineland’s functions as the Plans’

independent fiduciary for the Leases.

Mr. Montello states that Maineland is

completely independent of the Plans,

the Union, the Employers and other

entities affiliated with the Plans. Mr.

Montello also states that the fees

received by Maineland will not exceed

one percent (1%) of Maineland’s annual

gross income (including all appraisal

fees) for each fiscal year that Maineland

acts as the Plans’ independent fiduciary

for the Leases.

Based on the Study completed by Mr.

Diskin (described in paragraph 10

57400 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

above), Mr. Montello has deemed the

Leases to be administratively feasible,

protective of the Plans and in the best

interest of the Plans. In this regard,

under the terms of the Leases, the Plans

have the right to terminate the Leases

upon sixty (60) days advance written

notice to the Building Corporation. Such

termination will be without penalty.

Mr. Montello states that the

Agreement requires Maineland to

reevaluate the terms of the Leases upon

a written request from the Plans’

Trustees. After reconfiguration of the

spaces in Building I, Maineland will

evaluate the fairness of the rental

amounts and the commercial

reasonableness of the Leases to ensure

that the Plans’ interests continue to be

protected under the terms of the Leases.

The applicants maintain that the

reconfiguration cost for the space is

anticipated to be nominal (i.e., no more

than a few thousand dollars).

13. The Agreement requires

Maineland to reevaluate any proposed

amendment to a Lease. In a second letter

to the Department dated June 13, 2000,

Mr. Montello has confirmed that the

Agreement gives Maineland, as the

independent fiduciary, authority to take

any actions which may be necessary to

protect the interest of the Plans and the

Plans’ participants and beneficiaries

with respect to the Lease transactions.

This authority includes directing the

amendment or termination of either

Lease, if Maineland, as the independent

fiduciary, determines that the terms of

such Leases cease being commercially

reasonable for the Plans. Mr. Montello

states that these provisions in the

Agreement will protect each Plan’s

interests in the event that the Building

Corporation wishes to amend the Lease

or adjust the amount of rent charged

after the necessary space in Building I

is reconfigured.

However, the applicants represent,

and Maineland will ensure, that the

rents paid by the Plans for the Leased

Space will remain at an amount equal

to the fair market value of the Leased

Space. In addition, the annual fair

market rental amount paid by the Plans

for the Leased Space will, at no time,

exceed 5% of each Plan’s total assets,

and will not adversely affect either

Plan’s ability to make necessary

payments for benefits or expenses

required under the terms of the Plans.

Maineland represents that it will

direct the Trustees whether the Plans

should either terminate or renew the

Leases for each five year extension

period. In this regard, the applicants

make a request regarding a successor

independent fiduciary (the Successor).

Specifically, if it becomes necessary in

the future to appoint the Successor to

replace Maineland, the applicants will

notify the Department sixty (60) days in

advance of the appointment of the

Successor. Any Successor will have the

responsibilities, experience and

independence similar to those of

Maineland.

14. In summary, the applicants

represent that the transactions satisfy

the statutory criteria for an exemption

under section 408(a) of the Act because:

(a) The terms of the Leases are at least

as favorable to the Plans as those

obtainable in an arm’s-length

transaction with an unrelated party;

(b) Maineland, as the Plans’

independent fiduciary, has determined

and will make subsequent

determinations, whenever appropriate,

that the terms and conditions of the

Leases are in the best interest and

protective of the Plans;

(c) The fair market rental amount of

Building I and the Leased Space has

been determined and will be

determined by a qualified, independent

appraiser;

(d) The annual fair market rental

amount for the Leased Space does not

exceed and will not exceed 5% of each

of the Plan’s total assets; and

(e) Maineland, as the independent

fiduciary, has monitored and will

continue to monitor the terms and

conditions of the Leases, at all times,

and will take whatever actions are

necessary and proper to enforce the

Plans’ rights thereunder.

Notice To Interested Persons

The applicants represent that they

will distribute, by first class mail, a

copy of the notice of pendency of this

proposed exemption (the Notice) within

seven (7) days of the date such Notice

is published in the Federal Register.

Such Notice will be given to all

interested persons, including all

participants in the Plans, all employees

in the Plans, and all Union members.

The distribution to interested persons

shall include a copy of the Notice, as

published in the Federal Register, and

a supplemental statement, as required

pursuant to 29 CFR 2570.43(b)(2), which

shall inform interested persons of their

right to comment on and/or request a

hearing with respect to the proposed

exemption.

Comments and requests for a public

hearing with respect to the proposed

exemption are due within thirty-seven

(37) days following the publication of

the Notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Ekaterina A. Uzlyan of the Department,

telephone (202) 219–8883. (This is not

a toll-free number).

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which, among other things,

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

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

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries, and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete, and

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 18th day of

September, 2000.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 00–24387 Filed 9–21–00; 8:45 am]

BILLING CODE 4510–29–P