Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices 1913

1For purposes of this proposed exemption,

references to the provisions of Title I of the Act,

unless otherwise specified, refer also to

corresponding provisions of the Code.

I agree with the ARS that the stipend paid

to the human subjects for each day they

participate in the research ($35 per day) is an

amount so small that it does not have an

undue influence on the decision of the

individual to participate in the research.

2. Human subjects who voluntarily

participate in the ARS nutritional research

studies enter into a consent agreement under

which they agree to follow research protocols

established by the ARS during the duration

of the research study. A continuing

relationship between the ARS and the human

subjects is not established.

3. The human subjects do not produce a

product or provide a service to the ARS

during these research studies. Providing

samples of blood and normal bodily

functions is not an activity pursued as a

livelihood by the human subjects.

4. The human subjects control the means

and methods used to accomplish the task,

i.e., the provision of samples of bodily

functions. While the ARS controls the

research protocols to be followed, including

the schedule of sample collection, the human

subjects control their own bodily functions.

5. The ARS provides no tools, supplies, or

equipment to the human subjects. The ARS

does use instruments during the nutritional

research to collect and analyze bodily

samples provided by the human subjects,

however these instruments are not used by

the human subjects.

6. Human subjects are not entitled to sick

leave or annual leave and are not covered

under any Federal Employee Retirement

System.

The reasons stated above indicate that an

employment relationship does not exist and

support the conclusion stated in the first

paragraph of this ruling that, for UCFE

program purposes, human subjects who

participate in nutritional research studies

conducted by the USDA, ARS, do not

perform ‘‘Federal Service’’ within the

meaning of 5 U.S.C. 8501(1).

This coverage ruling is issued pursuant to

redelegation of authority from the Assistant

Secretary, in Employment and Training

Order No. 2–92, dated April 10, 1992,

(published at 57 Fed. Reg. 13760), which is

authorized by Section 6 of Secretary’s Order

No. 4–75 (40 Fed. Reg. 18515) (as amended

by Secretary’s Order No. 14–75).

Dated: November 26, 1996.

Mary Ann Wyrsch,

Director, Unemployment Insurance Service.

[FR Doc. 97–839 Filed 1–13–97; 8:45 am]

BILLING CODE 4510–30–M

Pension and Welfare Benefits

Administration

[Application No. D–10172, et al.]

Proposed Exemptions; The Chicago

Corporation

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

proposed exemptions from certain of the

prohibited transaction restriction of the

Employee Retirement Income Security

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

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or request for

a hearing on the pending exemptions,

unless otherwise stated in the Notice of

Proposed Exemption, within 45 days

from the date of publication of this

Federal Register Notice. Comments and

request for a hearing should state: (1)

the name, address, and telephone

number of the person making the

comment or request, and (2) the nature

of the person’s interest in the exemption

and the manner in which the person

would be adversely affected by the

exemption. A request for a hearing must

also state the issues to be addressed and

include a general description of the

evidence to be presented at the hearing.

A request for a hearing must also state

the issues to be addressed and include

a general description of the evidence to

be presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, NW.,

Washington, DC 20210. Attention:

Application No. stated in each Notice of

Proposed Exemption. The applications

for exemption and the comments

received will be available for public

inspection in the Public Documents

Room of Pension and Welfare Benefits

Administration, U.S. Department of

Labor, Room N–5507, 200 Constitution

Avenue, 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 (43 FR 47713, October 17, 1978)

transferred the authority of the Secretary

of the Treasury to issue exemptions of

the type requested to the Secretary of

Labor. Therefore, these notices of

proposed exemption are issued solely

by the Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

The Chicago Corporation (TCC) Located

in Chicago, IL

[Application No. D–10172]

Proposed Exemption

Based on the facts and representations

set forth in the application, 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

Section I. Covered Transactions

If the exemption is granted, the

restrictions of section 406(a) of the Act

and the sanctions resulting from the

application of section 4975 of the Code,

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

through (D) of the Code, shall not apply

to the proposed sale, for cash or other

consideration, by the Midwest Banc

Fund IV Group Trust (the BF IV Group

Trust) in which employee benefit plans

(the Plans) invest, of certain securities

(the Securities) that are held in the BF

IV Group Trust Portfolio, to a party in

interest with respect to a participating

Plan, where the party in interest

proposes to acquire or merge with a

bank company (the Bank Company) or

a financial services company (the

Financial Services Company) that

issued such securities.

In addition, the restrictions of section

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)(E) of the Code, shall

not apply to the payment of a

performance fee (the Performance Fee)

by Plans investing in the BF IV Group

Trust to TCC.
1914 Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices

This proposed exemption is subect to

the following conditions as set forth

below in Section II.

Section II. General Conditions

(a) Prior to a Plan’s investment in the

BF IV Group Trust, a Plan fiduciary

which is independent of TCC and its

affiliates (the Independent Fiduciary)

approves such investment on behalf of

the Plan.

(b) Each Plan investing in the BF IV

Group Trust has total assets that are in

excess of $50 million.

(c) No Plan invests more than 10

percent of its assets in beneficial

interests (the Beneficial Interests) in the

BF IV Group Trust and such Beneficial

Interests held by the Plan may not

exceed 25 percent of the Group Trust.

(d) No Plan may invest more than 25

percent of its assets in investment

vehicles (i.e., collective investment

funds or separate accounts) managed or

sponsored by TCC and/or its affiliates.

(e) Prior to investing in the BF IV

Group Trust,

(1) Each Independent Fiduciary

receives a Private Placement

Memorandum and its supplement

containing descriptions of all material

facts concerning the purpose, structure

and the operation of the BF IV Group

Trust.

(2) An Independent Fiduciary who

expresses further interest in the BF IV

Group Trust receives—

(A) A copy of the Group Trust

Agreement outlining the organizational

principles, investment objectives and

administration of the BF IV Group

Trust, the manner in which Beneficial

Interests may be redeemed, the duties of

the parties retained to administer the BF

IV Group Trust and the manner in

which BF IV Group Trust assets will be

valued;

(B) A copy of the Investment

Management Agreement describing the

duties and responsibilities of TCC, as

investment manager of the BF IV Group

Trust, the rate of compensation that it

will be paid and conditions under

which TCC may be terminated; and

(C) Copies of the proposed exemption

and grant notice covering the exemptive

relief provided herein.

(3) If accepted as an investor in the

Group Trust, the Independent Fiduciary

is—

(A) Furnished with the names and

addresses of all other participating

Plans;

(B) Required to acknowledge, in

writing, prior to purchasing a Beneficial

Interest in the BF IV Group Trust that

such Independent Fiduciary has

received copies of such documents; and

(C) Required to acknowledge, in

writing, to TCC that such fiduciary is

independent of TCC and its affiliates,

capable of making an independent

decision regarding the investment of

Plan assets, knowledgeable with respect

to the Plan in administrative matters

and funding matters related thereto, and

able to make an informed decision

concerning participation in the BF IV

Group Trust.

(f) Each Plan, including the trustee

(the Trustee) of the BF IV Group Trust,

receives the following written

disclosures from TCC with respect to its

ongoing participation in the BF IV

Group Trust:

(1) Within 120 days after the end of

each fiscal year of the BF IV Group

Trust as well as at the time of

termination, an annual financial report

containing a balance sheet for the BF IV

Group Trust as of the end of such fiscal

year and a statement of changes in the

financial position for the fiscal year, as

audited and reported upon by

independent, certified public

accountants. The annual report will also

disclose the fees paid or accrued to TCC.

(2) Within 60 days after the end of

each quarter (except in the last quarter)

of each fiscal year of the BF IV Group

Trust, an unaudited quarterly financial

report consisting of at least a balance

sheet for the BF IV Group Trust as of the

end of such quarter and a profit and loss

statement for such quarter. The

quarterly report will also specify the

fees that are actually paid to or accrued

to TCC.

(3) Such other information as may be

reasonably requested by the Plans or the

Trustee (e.g., certain trading activity and

portfolio status reports provided to the

Trustee as required by Prohibited

Transaction Exemption (PTE) 86–128

(51 FR 41686, November 16, 1986) in

order to comply with the reporting

requirements of the Act and the Code.

(g) At least annually, TCC holds a

meeting of the participating Plans at

which time the Independent Fiduciaries

of investing Plans are given the

opportunity to decide on whether the

BF IV Group Trust, the Trustee or TCC

should be terminated as well as to

discuss any aspect of the BF IV Group

Trust and the agreements promulgated

thereunder with TCC.

(h) During each year of the BF IV

Group Trust’s existence, TCC

representatives are available to confer

by telephone or in person with

Independent Fiduciaries on matters

concerning such Group Trust.

(i) The terms of all transactions that

are entered into on behalf of the BF IV

Group Trust by TCC remain at least as

favorable to an investing Plan as those

obtainable in arm’s length transactions

with unrelated parties. In this regard,

the valuation of assets in the BF IV

Group Trust that is done in connection

with the payment of Performance Fees

is based upon independent market

quotations or (where the same are

unavailable) determinations made by an

independent appraiser (the Independent

Appraiser).

(j) In the case of the sale by the BF IV

Group Trust of Securities to a party in

interest with respect to a participating

Plan, the party in interest is not TCC,

any employer of a participating Plan, or

any affiliated thereof, and the BF IV

Group Trust receives the same terms as

is offered to other shareholders of a

Bank Company or a Financial Services

Company.

(k) As to each Plan, the total fees paid

to TCC and its affiliates constitute no

more than ‘‘reasonable compensation’’

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

of the Act.

(l) TCC’s Performance Fee is based

upon a predetermined percentage of net

realized gains minus net unrealized

losses. In this regard,

(1) The Performance Fee is not to be

paid before December 31, 2001, which

represents the completion of the

projected acquisition phase (the

Acquisition Phase) of the BF IV Group

Trust, and not until all participating

Plans have received distributions equal

to 100 percent of their capital

contributions made to the BF IV Group

Trust.

(2) Prior to the termination of the BF

IV Group Trust, no more than 75

percent of the Performance Fee credited

to TCC is withdrawn from such Group

Trust.

(3) The Performance Fee account

established for TCC is credited with

realized gains and losses and charged

for net unrealized losses and fee

payments.

(4) No portion of the Performance Fee

is withdrawn if the Performance Fee

Account is in a deficit position.

(5) TCC repays all deficits in its

Performance Fee account and it

maintains a 25 percent cushion in such

account before receiving any further fee

payment.

(m) Either TCC or the Trustee, on

behalf of Plans participating in the BF

IV Group Trust, may terminate the

Investment Management Agreement at

any time pursuant to the provisions in

such agreement.

(n) TCC maintains, for a period of six

years, the records necessary to enable

the persons described in paragraph (o)

of this Section II to determine whether

the conditions of this exemption have

been met, except that—
Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices 1915

2TCC also organized the MBF I LP in 1986. This

limited partnership shared the same general

partners and types of investments as MBF II LP.

Continued

(1) A prohibited transaction will not

be considered to have occurred if, due

to circumstances beyond the control of

TCC and/or its affiliates, the records are

lost or destroyed prior to the end of the

six year period; and

(2) No party in interest other than

TCC shall be subject to the civil penalty

that may be assessed under section

502(i) of the Act, or to the taxes imposed

by section 4975 (a) and (b) of the Code,

if the records are not maintained, or are

not available for examination as

required by paragraph (o) below.

(o)(1) Except as provided in section

(o)(2) of this paragraph and

notwithstanding any provisions of

subsections (a)(2) and (b) of section 504

of the Act, the records referred to in

paragraph (n) of this Section II shall be

unconditionally available at their

customary location during normal

business hours by:

(A) Any duly authorized employee or

representative of the Department or the

Internal Revenue Service;

(B) Any Independent Fiduciary of a

participating Plan or any duly

authorized representative of such

Independent Fiduciary;

(C) Any contributing employer to any

participating Plan or any duly

authorized employee representative of

such employer; and

(D) Any participant or beneficiary of

any participating Plan, or any duly

authorized representative of such

participant or beneficiary.

(o)(2) None of the persons described

above in subparagraphs (B)–(D) of this

paragraph shall be authorized to

examine the trade secrets of TCC or

commercial or financial information

which is privileged or confidential.

Section III. Definitions

For purposes of this proposed

exemption,

(a) the term ‘‘TCC’’ means The

Chicago Corporation and any affiliate of

TCC as defined in paragraph (b) of

Section III.

(b) An ‘‘affiliate’’ of TCC includes—

(1) Any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control with TCC.

(2) Any officer, director or partner in

such person, and

(3) Any corporation or partnership of

which such person is an officer, director

or a 5 percent partner or owner.

(c) The term ‘‘control’’ means the

power to exercise a controlling

influence over the management or

policies of a person other than an

individual.

(d) An ‘‘Independent Fiduciary’’ is a

Plan fiduciary who is independent of

TCC and its affiliates and is either a

Plan administrator, trustee, named

fiduciary, as the recordholder of

Beneficial Interests in the BF IV Group

Trust or an investment manager.

Preamble

On September 22, 1993, the

Department granted PTE 93–63 (58 FR

49322), a temporary exemption which is

effective for a period of eight years from

the date of the grant. PTE 93–63 permits

a series of transactions relating to the (a)

sale by the Bank Fund III Group Trust

(the BF III Group Trust) in which Plans

invest, of certain Securities which have

been issued by Bank Companies and are

held in the BF III Group Trust’s

portfolio, to a party in interest with

respect to a Plan, where the party in

interest proposes to acquire or merge

with the Bank Company that issued

such securities. In addition, PTE 93–63

permits the BF III Group Trust to

purchase Bank Company Securities

from the Midwest Bank Fund I Limited

Partnership (MBF I LP) and the Midwest

Bank Fund II, Limited Partnership (MBF

II LP), two entities organized by TCC.

Further, PTE 93–63, allows Plans

investing in the BF III Group Trust to

pay a Performance Fee to TCC.

The pooled investment fund that is

described herein (i.e., the BF IV Group

Trust) is virtually identical to the

pooled investment fund that is

described in PTE 93–63 as well as other

funds organized by TCC. The

transactions described herein are

generally patterned after the exemptive

relief described in PTE 93–63. However,

no cross-trading transactions under this

exemption will be permitted. Also,

permanent exemptive relief is being

provided.

Summary of Facts and Representations

1. TCC is an investment services firm

founded in 1965 in Chicago, Illinois to

serve the needs of financial institutions,

corporations, governments, individual

investors, fiduciaries and securities and

commodities dealers. TCC is a registered

investment adviser under the

Investment Advisers Act of 1940, as

amended. It is also registered as a

broker-dealer under the Securities

Exchange Act of 1934 and is a member

in good standing with various national

and regional securities exchanges. By

virtue of its exchange memberships,

TCC is an exchange specialist for many

securities as well as an over-the-counter

market maker in other securities. As of

March 31, 1995, TCC had total assets of

$507 million.

TCC has four principal lines of

business. First TCC provides

institutional investors with investment

research and trade execution services

for listed and unlisted equity and fixed

income securities, options and futures.

Second, TCC’s investment banking

group provides corporations with

assistance in capital planning and in

facilitating and arranging for corporate

mergers and acquisitions as well as

underwriting. Third, TCC’s asset

management group provides investment

management services to a broad range of

clients, including Plans, through

separate accounts. In this regard, TCC

currently manages $3.545 billion in

client Plan assets in 259 separate

accounts. Fourth, TCC provides

securities firms, futures commission

merchants and professional investors

with exchange floor execution and

clearing services.

TCC’s relevant specialty is provided

by its banking group which, in addition

to the services described above,

provides management, investment and

capital formation services to collective

investment vehicles which invest in

commercial banks and other financial

institutions. The banking group

possesses detailed knowledge of the

banking industry and other financial

institutions such as consumer finance

companies and stock insurance

companies. It researches financial

institutions, underwrites the securities

of these institutions and acts as

consultants or organizers of merger and

acquisition projects.

During 1997, it is anticipated that

TCC’s parent will be acquired by ABN

AMRO North America, Inc., a subsidiary

of ABN AMRO Bank N.V., a global bank

headquartered in the Netherlands. The

acquisition will not involve the

purchase of the assets of TCC’s parent

and TCC will retain its separate

corporate identity.

2. In 1989, TCC organized the MBF II

LP as a limited partnership with the

investors acting as the limited partners.

The general partners of MBF II LP are

partnerships (MidBanc I and MidBanc

II), whose general partners are corporate

affiliates of TCC and whose limited

partners are the members of TCC staff

who are responsible for managing the

MBF II LP. Less than 25 percent of the

funds invested in the MBF II LP have

been provided by Plans. According to

the applicant, the portfolios of these

funds do not constitute ‘‘plan assets’’

within the meaning of 29 CFR 2510.3–

101 and TCC has not assumed the role

of a fiduciary with respect to these

investing Plans.2
1916 Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices

Moreover, less than 25 percent of its assets were

provided by Plans. On January 1, 1995, MBF I LP

reached the end of its term and final liquidations

were made.

3The BF III Group Trust and the BF III LP are

collectively referred to herein as BF III.

4The limited partners of the MidBanc III, L.P. are

the individuals who are responsible for the

management of BF III. Chicorp Management III, Inc.

is a wholly owned subsidiary of Chicorp, Inc.,

which is the holding company of TCC.

5 In the case of MBF II LP, these banks are located

in the Midwestern United States. In the case of BF

III and proposed BF IV Group Trust, there are no

geographic restrictions.

6TCC believes it is appropriate to organize the BF

IV Group Trust separate from the BF IV LP in order

that the assets of the Group Trust may be regarded

as ‘‘plan assets’’ and the requirements of the Act

may otherwise be complied with in a separate

entity.

7Although TCC and the Trustee will not be

affiliated with, or under the control of or controlling

any participating Plan, the applicant represents that

it is likely that certain participating Plans may have

a pre-existing relationship with TCC in the form of

investment in the MBF II LP or the BF III. The

applicant believes it is possible that a Plan

participating in the BF IV Group Trust may utilize

the services of the Trustee with respect to certain

of its other assets that are not invested in such

Group Trust. In this regard, the applicant is not

requesting, nor is the Department providing,

exemptive relief with respect therefor.

8The Department is not proposing, nor in the

applicant requesting herein, exemptive relief for the

purchase and sale of Beneficial Interests in the BF

IV Group Trust between the Trustee and the

investing Plans beyond that provided under section

408(b)(8) of the Act.

9 If an investing Plan cannot or does not meet a

capital call, the Trust Agreement provides that ten

days after the investor receives notice of default on

a capital call, TCC may (a) permit the investor’s

continued participation in the BF IV Group Trust

with a commensurate reduction in both the

investor’s proportionate interest in such Group

Trust and aggregate size of the Group Trust; (b)

declare the investor’s entire capital commitment

due and pursue collection of the same; or (c) expel,

at fair market value, the defaulting investor and

offer its interest in the BF IV Group Trust first to

the non-defaulting investors and then to noninvestors who are qualified to invest in such Group

Trust. In making the choice between these

alternatives, it is represented that TCC will be

guided by then-current investment strategies and

the best interest of the non-defaulting investors.

In 1993, TCC completed the

organization of the BF III Group Trust

and the Bank Fund III Limited

Partnership (the BF III LP) 3 whose

objectives were somewhat identical to

those formulated for the MBF II LP.

Taxable investors acquired an interest in

the BF III LP, the general partner of

which is MidBanc III, L.P., a limited

partnership of which Chicorp

Management III, Inc. is the general

partner.4

3. The MBF II LP and the BF III invest

in subregional banks that are located in

the United States.5 In this regard, these

entities acquire minority investments in

Bank Companies that may be potential

candidates for acquisition by other

entities or at public offerings. Interests

in Bank Companies can be acquired in

freely-traded public securities, on either

exchanges or in the over-the-counter

markets, or in private transactions.

4. The MBF II LP and BF III have predefined terms of existence and defined

activity periods within those terms. For

example, the MBF II LP has an eight

year term between organization and

liquidation. The first five years

represent the acquisition phase (the

Acquisition phase). Once those five

years elapse, no further acquisitions of

Bank Company Securities can be made

except under limited circumstances.

The last three years of the term of the

MFB II LP will be used to liquidate the

portfolio.

5. TCC proposes to organize Banc

Fund IV (BF IV) as two separate and

distinct entities sharing the same

investment philosophy and strategy,

similar (if not identical) portfolios and

operational methods as those

formulated for the MBF II LP and the BF

III. Taxable investors will acquire an

interest in the Banc Fund IV Limited

Partnership (the BF IV LP). The general

partner of the BF IV LP will be MidBanc

IV, L.P., a limited partnership of which

Chicorp Management IV, Inc., a wholly

owned subsidiary of TCC’s parent

corporation, is the general partner.

In addition to the BF IV LP,

approximately 5–10 Plans will acquire

Beneficial Interests in the BF IV Group

Trust which will be a tax-exempt entity

pursuant to Revenue Ruling 81–100,

1981–1 C.B. 326.6 The BF IV Group

Trust and the BF IV LP will not be

organized unless $50 million in capital

contribution commitments are

subscribed for by investors in both

entities. Unless extended, the BF IV

Group Trust and the BF IV LP will

terminate on December 31, 2003.

Investments by both the BF IV Group

Trust and the BF IV LP may be made in

the equities and debt instruments of

Bank Companies such as commercial

banks and other depository institutions.

BF IV may also acquire interests in

Financial Services Companies such as

consumer finance companies and

demutualizing insurance companies. All

of these entities will be located in the

United States.

6. It is anticipated that Citibank will

act as the trustee of the BF IV Group

Trust. In this capacity, the Trustee will

be responsible for retaining TCC or such

other investment manager for the BF IV

Group Trust. The Trustee will also be

responsible for monitoring TCC’s

compliance with the established

investment philosophy of the BF IV

Group Trust and for policing TCC’s

adherence to the provisions of the

Investment Management Agreement.

For services rendered, the Trustee is

entitled to receive the following

annualized fees that will be paid

quarterly and in arrears: (a) a base fee

of $1,500; (b) a proportionate fee based

upon the combined market value of the

BF IV Group Trust and the BF IV LP at

the beginning of the quarter

representing (i) 0.02 percent of the first

$100 million and (ii) 0.01 percent of any

amount over $100 million; and a

transaction fee of $12 per purchase or

sale and a disbursement fee of $8 per

payment of funds from the BF IV Group

Trust. In accordance with the provisions

of the Group Trust Agreement, the

Trustee may be removed by a vote of

Plans holding a majority of the

Beneficial Interests in the BF IV Group

Trust, provided such Plans give the

Trustee 30 days’ advance written notice

of their intent to terminate the Trustee.

Although TCC may have and may

have had business relationships with

the Trustee, there will be no control

relationship or ownership-based

affiliation between TCC and the Trustee.

Further, no Plan sponsored by TCC will

be permitted to invest in the BF IV

Group Trust.7

7. Interests in the BF IV Group Trust

are referred to as ‘‘Beneficial

Interests.’’ 8 All investors that are

beneficiaries of the BF IV Group Trust

must evidence the following

characteristics in order to acquire

Beneficial Interests: (a) Each must

commit to making at least $1 million in

initial capital contributions; (b) each

investor must be a Plan; (c) each Plan

mut have at least $50 million in assets;

(d) each Plan must agree to incorporate

the terms of the Group Trust Agreement

into its own trust agreement; (e) no Plan

may invest more than 10 percent of its

assets in Beneficial Interests in the BF

IV Group Trust and such Beneficial

Interests held by a Plan may not exceed

25 percent of such Group Trust; and (f)

no Plan may subscribe for Beneficial

Interests which, when aggregated with

all other Plan assets that are subject to

investment funds or separate accounts

managed by TCC and/or its affiliates, is

valued in excess of 25 percent of such

Plan’s net assets.

8. The Group Trust Agreement

provides that each Plan’s commitment

to contribute will be divided into 20

equal segments. TCC, as investment

manager, may call any amount of these

installments, upon 14 days’ advance

written notice, when cash is needed to

fund the acquisition of the Securities.9

However, there are two limitations upon

TCC’s power to call contributions. First,
Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices 1917

10The Department is not providing exemptive

relief herein for any prohibited transactions that

may arise as a result of proxy voting on the part of

TCC. The Department also notes that the general

standards of fiduciary conduct promulgated under

the Act would apply to such voting practices.

11The Department expresses no opinion on

whether the effecting of securities transactions by

TCC will comply with the terms and conditions of

PTE 86–128.

12A Justified Termination will occur if it is

caused by: (a) a material breach of the Investment

Management Agreement by the party that is not

seeking to terminate such Agreement; (b) a material

violation of the Act that has already occurred or

will occur absent termination of the Investment

Management Agreement; or (c) the disassociation of

key personnel (i.e., those upon whom the Plans

relied in making their investment) from TCC

without being replaced by individuals who are

approved by a majority of the Plans.

13The Department notes that the general

standards of fiduciary conduct promulgated under

the Act would apply to the participation in the BF

IV Group Trust by an Independent Fiduciary.

Section 404 of the Act requires that a fiduciary

discharge his duties respecting a plan solely in the

interest of the plan’s participants and beneficiaries

and in a prudent fashion. Accordingly, an

Independent Fiduciary must act prudently with

respect to the decision to invest in the BF IV Group

Trust. The Department expects that an Independent

Fiduciary, prior to investing in the BF IV Group

Trust, to fully understand all aspects of such

investment following disclosure by TCC of all

relevant information. (For a further discussion of

these disclosures, see Representation 12 above.)

14The Department is not expressing an opinion

on whether TCC or the Trustee would be deemed

to be fiduciaries under section 3(21)(A)(ii) of the

Act with respect to a Plan’s investment in the BF

IV Group Trust. The Department is also not

proposing relief for the rendering of investment

advice in connection with the acquisition of

Beneficial Interests in the BF IV Group Trust.

no more than 50 percent of the

contribution commitment may be called

in any twelve month period. Second,

TCC cannot call any contributions after

the sixth anniversary date of the

inception of the BF IV Group Trust (the

period running from the date on which

initial capital contributions are made to

such sixth anniversary being referred to

as ‘‘the Acquisition Period’’).

9. The terms of the BF IV Group Trust

prescribe the content of the Investment

Management Agreement. For example,

TCC, at its own expense, will provide

the BF IV Group Trust with personnel

who are able to perform the

administrative functions of the Group

Trust. In addition, TCC, at its own

expense, will provide the BF IV Group

Trust with office space, telephones,

copying machines, postage and all other

necessary items of office services.

Further, TCC will control proxy voting

on all portfolio securities.10

The Investment Management

Agreement permits TCC to provide

brokerage services in an agency

capacity. To the extent that TCC utilizes

its own services in connection with

brokerage services provided to the BF IV

Group Trust, it will comply fully with

state and federal securities laws as well

as with PTE 86–128.11

The Investment Management

Agreement may be terminated by either

the Trustee, on behalf of the Plans, or by

TCC at any time, subject to the

following provisions. If the termination

is a ‘‘Justified Termination,’’ 12 the

Investment Management Agreement can

be terminated by the Trustee

unilaterally. However, if the termination

is a ‘‘Non-Justified Termination,’’ it

cannot be terminated unilaterally by the

Trustee. In such case, the Trustee must

first obtain the approval of Plans

holding at least two-thirds of the

Beneficial Interests in the BF IV Group

Trust. Further, as a precondition to a

‘‘Non-Justified Termination,’’ the

terminating party must provide the

other party with 60 days’ advance

written notice of its intent to terminate.

10. In general, Beneficial Interests in

the BF IV Group Trust will not be

assignable, and no Plan may assign or

otherwise transfer, pledge or otherwise

encumber any or all of its interest in the

Group Trust except for the purpose of

redemption. Redemptions are limited to

situations where (a) a replacement Plan

is available from either current Plans

investing in BF IV or there are new,

qualified investors; (b) a Plan submits to

TCC and the Trustee, a written opinion

of counsel to the effect that the Plan’s

continued participation in the BF IV

Group Trust would violate the Act and

that relief from the violation cannot be

obtained; (c) the Plan loses its taxexempt status and that loss threatens the

tax-exempt status of the BF IV Group

Trust; and (d) the BF IV Group Trust

loses its tax-exempt status or fails to

obtain the exemptive relief proposed

herein for the necessary operation of

such Group Trust. This information will

be disclosed to investors.

11. The decision to participate in the

BF IV Group Trust will be made by a

plan fiduciary who is independent of

TCC and the Trustee. In each instance,

the Plan fiduciary who makes the

investment decision will agree not to

rely on either the advice of TCC or the

Trustee as the primary basis for a Plan’s

investment and the Independent

Fiduciary will be specifically required

to do so in every instance.13 TCC

represents that the decision of a Plan to

invest in the BF IV Group Trust will be

made by an unrelated Plan fiduciary

acting on the basis of his or her own

investigation into the advisability of

investing in the Group Trust.14

12. An Independent Fiduciary of each

Plan proposing to invest in the BF IV

Group Trust will be provided with a

copy of the Private Placement

Memorandum by TCC. The Private

Placement Memorandum will describe

all material facts concerning the

purpose, structure and operation of the

BF IV Group Trust. If the Independent

Fiduciary expresses further interest in

participating in the BF IV Group Trust,

such Independent Fiduciary will be

provided with copies of the Group Trust

Agreement outlining the organization

principles, investment objectives and

administration of the BF IV Group

Trust, the procedure for the redemption

of Beneficial Interests, the duties of the

parties retained to administer the BF IV

Group Trust and the manner in which

Group Trust assets will be valued. The

Independent Fiduciary will also be

provided with a copy of the Investment

Management Agreement which

describes the duties and responsibilities

of TCC, as investment manager of the BF

IV Group Trust, the fees that will be

paid to TCC, the conditions under

which TCC may be terminated and the

functions of the Independent Appraiser

which may be retained under certain

circumstances. Once the Independent

Fiduciary has made a decision to invest

in the BF IV Group Trust, TCC will

provide such Independent Fiduciary

with the names and addresses of all

other participating Plans. The

Independent Fiduciary will be required

to acknowledge, in writing, prior to

purchasing a Beneficial Interest in the

BF IV Group Trust that such fiduciary

has received copies of such documents.

The Independent Fiduciary will also

be required to acknowledge, in writing,

to TCC that such fiduciary is

independent of TCC and its affiliates,

capable of making an independent

decision regarding the investment of

Plan assets, knowledgeable with respect

to the Plan in administrative matters

and funding matters related thereto, and

able to make an informed decision

concerning participation in the BF IV

Group Trust.

13. TCC will prepare, or cause to be

prepared on behalf of the BF IV Group

Trust, the following reports with respect

to the ongoing operations of the Group

Trust: (a) Trading Activity and Portfolio

Status Reports, for the Trustees, as

required by PTE 86–128; (b) annual

audited financial statements for the

Trustee and the Plans; and (c) quarterly

unaudited financial statements for the

Trustee and Plan investors. The annual

financial statements will contain a

balance sheet for the BF IV Group Trust

as of the end of the applicable fiscal

year and a statement describing changes

in the financial position for the fiscal

year, as audited and reported upon by

independent, certified public

accountants. The annual financial report
1918 Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices

15According to the applicant, cash dividends that

are received by the BF IV Group Trust from

investments in Securities will be distributed to

investors on an annual basis. Stock dividends will

be retained by the BF IV Group Trust until the

original portfolio investment is sold.

16The applicant explains that these exceptions to

the general distribution rules are disclosed to

investors in the Group Trust Agreement. With

respect to the commitment exception, the applicant

states that it is meant to cover situations where the

BF IV Group Trust enters into an installment-type

purchase agreement or some other contingency

contract prior to the seventh year of its existence.

In this connection, the applicant explains that TCC

may have determined that the BF IV Group Trust

should own a certain percentage of the Securities

of a Bank Company or a Financial Services

Company, but the requisite number of shares might

not be available at that time. Under these

circumstances, the applicant states that the BF IV

Group Trust might enter into an agreement to

purchase such Securities as they become available,

even if the availability does not occur until after the

sixth year.

17The Department expresses no opinion herein

on whether TCC’s receipt of the Management Fee

will satisfy the terms and conditions of section

408(b)(2) of the Act.

18By aggregating capital contributions that are

made by the BF IV Group Trust with those made

to the BF IV LP and by allocating the dollar amount

between both entities in proportion to their

respective size, TCC represents that all investors

will be charged a lower Management Fee. TCC

believes that by computing the Management Fee in

this manner more appropriately reflects the unified

investment management of the BF IV Group Trust

and the BF IV LP. The Department, however,

expresses no opinion as to whether this

arrangement for computing the Management Fee

satisfies the ‘‘reasonable compensation’’

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

applicable regulations.

19All distributions, with the exception of interest

income and cash dividends, count as returns of

capital.

will also specify the fees that are

payable or accruable to TCC. TCC will

make the annual financial report

available to the Trustee and each Plan

within 120 days after the end of each

fiscal year of the BF IV Group Trust.

Within 60 days after the end of each

quarter (except in the last quarter) of

each fiscal year of the BF IV Group

Trust, TCC will prepare and distribute

an unaudited quarterly financial report

to the Trustee and each Plan investor.

The report will consist of at least a

balance sheet for the BF IV Group Trust

as of the end of fiscal year quarter and

a profit and loss statement for such

quarter. The quarterly financial report

will also disclose the fees that are

payable or accruable to TCC.

In addition to the foregoing reports,

TCC will prepare and distribute to the

BF IV Group Trust and each Plan such

other information as may be reasonably

requested by the Plans, including such

information as a Plan may request in

order to comply with the reporting

requirements of the Act or Code.

14. A meeting of the participating

Plans and TCC will be held at least

annually. The meeting will afford

Independent Fiduciaries an opportunity

to decide on whether the BF IV Group

Trust should be terminated, whether the

Trustee should be removed or whether

the Investment Management Agreement

should be terminated, if the situation

warrants. However, before any

termination can take place, the advance

notification requirements for

termination discussed above must be

complied with. Also at the annual

meeting, TCC representatives will be

available to discuss any aspect of the BF

IV Group Trust and the agreements

promulgated thereunder with

Independent Fiduciaries. Such meetings

will be conducted in either TCC’s

offices or in the offices of the

Independent Fiduciaries.

15. During the Acquisition Phase for

the BF IV Group Trust, any net gains

realized on portfolio sales will be

distributed to Plan investors but the

original cost of the Security that is sold

will be reinvested.15 From the seventh

year of the Group Trust through its

termination, the net proceeds from sales

of portfolio Securities will be

distributed unless the proceeds are

needed to honor pre-seventh year

investment commitments or to protect

pre-seventh year investments.16

16. Under the Investment

Management Agreement, two types of

fees will be payable to TCC by the BF

IV Group Trust. These fees are the

Management Fee and the Performance

Fee, the components of which are

described below. TCC’s Management

Fee, which is independent of the

Performance Fee, is intended to cover

the day-to-day operating expenses of the

BF IV Group Trust. TCC represents that

the Management Fee is covered by the

statutory exemptive relief available

under section 408(b)(2) of the Act.17

With respect to the Performance Fee,

TCC is requesting administrative

exemptive relief from the Department.

(a) The annualized Management Fee

will be payable to TCC monthly in

arrears during each fiscal year the BF IV

Group Trust is in existence. The

Management Fee will be based upon a

percentage of the aggregate capital

contributions committed to both the BF

IV Group Trust and the BF IV LP (the

Management Fee Base). It will be equal

to (1) the sum of 5 percent of the first

$35 million of the Management Fee Base

plus (2) 0.84 percent of the Management

Fee Base in excess of $35 million,

multiplied by (3) a fraction (the Trust

Share), the numerator of which is the

amount of capital contributions

committed to the BF IV Group Trust and

the denominator of which is the

aggregate of the capital contributions

made to the BF IV Group Trust and the

BF IV LP.18 The Management Fee will

not exceed 2 percent of committed

capital when all capital is contributed,

even if BF IV is capitalized at less than

$125 million.

After the end of the Acquisition

Phase, the Management Fee will be

subject to certain adjustments,

particularly as distributions are made to

Plan investors.19 If, as a result of

distributions to Plan investors, capital

contributions made by Plans are

reduced to 50 percent or less of the

original aggregate capital contributions

to the BF IV Group Trust, the Trust

Share of the Management Fee will be

reduced to 70 percent of the amount

otherwise payable, effective for fiscal

years subsequent to the year in which

said payment was completed, and upon

the payment to the Plans of an amount

sufficient to reduce to 25 percent or less

of their total capital contributions to the

BF IV Group Trust, the Trust Share of

the Management Fee will be reduced to

50 percent of the amount otherwise

payable, effective for fiscal years

subsequent to the year in which said

payment was completed.

(b) The Performance Fee that will be

accruable to TCC for each fiscal year of

the Group Trust, will be equal to 20

percent of ((1) the excess, if any of (a)

the cumulative total of realized capital

gains from the inception of the BF IV

Group Trust through the end of such

fiscal year over (b) the cumulative total

of realized capital losses during the

term, less (2) any unrealized losses in

the BF IV Group Trust portfolio at the

end of such period in excess of

unrealized appreciation in the Portfolio)

and, the amount of such fee previously

accrued. The amount of the annual

Performance Fee that is accruable to

TCC will be determined after the annual

audit of the BF IV Group Trust as

described in Representation 13. The

calculation of the Performance Fee will

be made within 60 days of the BF IV

Group Trust’s fiscal year end.

Specifically, Securities will be valued as

of the close of business on the last day

of the Group Trust’s fiscal year.

The Performance Fee will be further

subject to the following terms and

conditions:

(1) Fee Base. As stated above, the

amount credited to TCC as the

Performance Fee will be equal to a

percentage of realized gains minus

realized and net unrealized losses. Such
Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices 1919

20For purposes of calculating the Performance

Fee, cash dividends and interest are not included

in the computation of the return of capital to Plan

investors. As such, cash dividends do not affect the

calculation of the amount of the Performance Fee

or the time such fee can be first paid, even if the

return of capital occurs before December 31, 2001.

21The assumption is, for purposes of this

example, that all Plans investing in the BF IV Group

Trust have received a 100 percent return of their

capital contributions.

22The assumption is again, for purposes of this

example, that all Plans investing in the BF IV Group

Trust have received a 100 percent return of their

capital contributions.

amount will be credited to TCC

annually.

(2) Limited Deferral/Return of Capital.

The Performance Fee will be paid after

December 31, 2001 which is the

completion of the Acquisition Phase for

the BF IV Group Trust and it cannot be

paid until all participating Plans have

received distributions equal to 100

percent of their capital contributions

made to the BF IV Group Trust.20

(3) Reduced Availability. Prior to the

termination of the Group Trust, only 75

percent of what is credited to TCC as the

Performance Fee may be withdrawn

from the BF IV Group Trust after the

Acquisition Phase.

(4) Charges. The Performance Fee

account will be charged for realized

losses, net unrealized losses and fee

payments. Thus, the fee cannot be

drawn when the Performance Fee

account is in a deficit position.

(5) Fee Repayment/25 Percent

Cushion. TCC must repay any deficit in

the Performance Fee account and it

must also maintain a 25 percent cushion

in such account.

The following examples illustrate the

calculation of TCC’s Performance Fee.

Although the Performance Fee is paid

annually and there are only two years of

the BF IV Group Trust’s expected term

during which this fee can be drawn

upon (i.e., 2002 and 2003), for purposes

of illustration, four draw years have

been assumed.

EXAMPLE #1

Year Cumulative

net position

Performance

fee account

Maximum

draw

Draw or

refund

1 ................................................................................................................................ $800 $160 $120 $120

2 ................................................................................................................................ 200 40 30 (90)

3 ................................................................................................................................ 1,000 200 150 120

4 ................................................................................................................................ 700 140 105 (45)

Year 1 Assume that when the

Performance Fee first becomes payable

in 2002, the BF IV Group Trust’s

Cumulative Net Position is $800. TCC’s

Performance Fee is 20% of $200 or

$160. TCC may draw 75% of the $160

or $120.21

Year 2 The BF IV Group Trust’s

Cumulative Net Position at the end of

the Year 2 is $200. The Performance Fee

is 20% of $200 or $40. TCC is entitled

to draw $30, but since it has previously

drawn $120, it must refund $90.

Year 3 The BF IV Group Trust now

has a Cumulative Net Position of $1,000.

The Performance Fee is $200 with a

permitted draw of $150. Because TCC

has previously draw a net amount of

$30 at the end of Year 2 (i.e., $120–$90),

it may now draw an additional $120.

Year 4 The BF IV Group Trust’s

Cumulative Net Position falls to $700

and the Performance Fee falls to $140.

The 75% draw equals $105, but TCC has

previously drawn a total of $150 (i.e.,

$120–$90+$120). Therefore, TCC must

make a refund to the BF IV Group Trust

of $45.

EXAMPLE #2

Year Cumulative

net position

Performance

fee account

Maximum

draw

Draw or

refund

1 ................................................................................................................................ $2,000 $400 $300 $300

2 ................................................................................................................................ 1,000 200 150 (150)

3 ................................................................................................................................ 500 100 75 (75)

4 ................................................................................................................................ 900 180 135 60

Year 1 Assume that when the

Performance Fee first becomes payable

in 2002, the Cumulative Net Position for

the BF IV Group Trust is $2,000. TCC’s

Performance Fee is 20% of $2,000 or

$400. TCC may draw 75% of the $400

fee or $300. $100 or 25% of the draw

amount must be left in the BF IV Group

Trust as a cushion.22

Year 2 The Cumulative Net Position

for the BF IV Group Trust at the end of

Year 2 has fallen to $1,000. The

Performance Fee is 20% of $1,000 or

$200. TCC is entitled to draw $150, but

since it has previously drawn $300, it

must refund $150.

Year 3 The Cumulative Net Position

for the BF IV Group Trust has fallen to

$500. The Performance Fee now falls to

$100 (i.e., 20% of $500) with a

permitted draw of $75 and a cushion of

$25. Because TCC has previously drawn

$150 ($300–$150), it must make a

refund to the BF IV Group Trust of $75.

Year 4 The Cumulative Net Position

for the BF IV Group Trust is $900 at the

end of Year 4. TCC’s Performance Fee is

20% of $900 of $180. The 75% draw on

the Performance Fee equals $135.

However, since TCC has previously

drawn a total of $75 ($300–$150–$75),

it may now draw a Performance Fee of

$60.

17. In the event of a premature

termination of the Investment

Management Agreement, special fee

arrangements will be effective as

follows:

(a) If the termination occurs prior to

the third full fiscal year of the

Investment Management Agreement’s

existence (i.e., before January 1, 1999)

and it is either a Justified Termination

by TCC or a non-Justified Termination

by the Trustee, TCC will be entitled to

receive a fee equal to the sum of (1) 20

percent of net realized gains to the date

the agreement was terminated plus (2)

20 percent of the aggregate of unrealized

gains net of unrealized losses
1920 Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices

23 If an early termination of the Investment

Management Agreement occurs, the applicant states

that the Trustee, on behalf of the BF IV Group Trust,

and TCC will initially attempt to agree on whether

the termination is Justified or Non-Justified. If the

parties are unable to agree, judicial proceedings will

be instituted as a final means of resolution.

24The applicant explains that the phrase

‘‘principally traded’’ means that if a Security is

traded on more than one exchange and if the trade

prices differ between exchanges, the value will be

taken from the exchange on which the largest

volume of that security has traded.

25The applicant explains that the most recent

trade price is not used to value a Security in this

instance because it may be too dated to provide an

accurate estimate of value. Instead, the applicant

considers the bid price to be indicative of the

current value at which someone would be willing

to acquire a Security on the valuation date. The

applicant further notes that the use of the bid price

rather than the previous trading or closing price in

valuing a Security provides a conservative

valuation approach which will result, in most

instances, in a lower Performance Fee payable to

TCC.

The Department assumes that the bid price

described herein represents active bids and is a true

indicator of market prices.

determined on the date the agreement

was terminated. (For purposes of

determining net unrealized gains or net

unrealized losses, TCC will utilize an

independent appraiser to value

Securities for which there are no

independent market quotations.)

Payment of this fee will be deferred

until the termination of the BF IV Group

Trust. In addition, TCC will not be

required to make payments to the BF IV

Group Trust in the event a loss to such

Group Trust occurs.

(b) If the termination of the

Investment Management Agreement

occurs after the third full fiscal year of

the BF IV Group Trust and is either a

Non-Justified Termination by the

Trustee or a Justified Termination by

TCC, TCC will be entitled to its regular

Performance Fee. However, payment

will be deferred to the termination of

the Group Trust.

(c) If TCC declares a Non-Justified

Termination at any time, it has no

enforceable right to receive a

Performance Fee under the terms of the

Investment Management Agreement.

(d) If the Trustee, on behalf of the BF

IV Group Trust, declares a Justified

Termination at any time, TCC has no

enforceable right to receive a

Performance Fee under the terms of the

Investment Management Agreement.

However, if the Justified Termination

involves a violation of the Act and such

violation has not been caused by TCC’s

gross misconduct (e.g., the law changes

in a manner that would prohibit

prospectively an important part of

TCC’s management of the BF IV Group

Trust), TCC will be entitled to the

Performance Fee it would have earned

through the date of the termination of

the Investment Management Agreement.

Payment will again be deferred until the

termination of the BF IV Group Trust.23

18. The BF IV Group Trust will

terminate upon the earliest to occur of

(a) the complete distribution of its

assets, (b) a vote in favor of termination

by two-thirds of the Plans holding

Beneficial Interests or (c) December 31,

2003. The Group Trust may be extended

by a two-thirds affirmative vote of those

Plans holding Beneficial Interests

therein. (For termination of the Trustee

under the Group Trust Agreement and

the termination of TCC under the

Investment Management Agreement, see

Representations 6, 9 and 17 of this

proposed exemption.)

Upon termination of the BF IV Group

Trust, all portfolio positions will be

liquidated, Group Trust expenses

(including TCC’s Performance Fee) will

be paid and distributions will be made.

If all assets cannot be converted into

cash or if it would be disadvantageous

to liquidate every asset, remaining

assets may be distributed in-kind. TCC

will then receive a fractional portion of

its fee in-kind.

TCC has exclusive authority over the

sale of portfolio securities so it will

make liquidation decisions. The Trustee

will pay all expenses of the BF IV Group

Trust at the direction of TCC. Although

TCC will be responsible for directing the

Trustee to make distributions, TCC’s

discretion will not be unlimited. Rather,

as amounts are available for

distribution, TCC will be required to

make distributions in accordance with

the provisions of the Group Trust

Agreement.

The following example illustrates the

manner in which in-kind distributions

will be made by TCC:

Assume that all Plans investing in the

BF IV Group Trust have received a

100% return of capital. Assume also

that there are only two Plans investing

in the BF IV Group Trust. Plan A has a

Beneficial Interest worth $60 and Plan

B has a Beneficial Interest worth $40.

The BF IV Group Trust holds 100

shares of Securities in Bank X which it

acquired for $5 per share. Upon

termination of the Group Trust, Bank X

Securities is worth $7 per share.

The total unrealized gain attributable

to Bank X Securities is

($7¥$5)×100=$200.

TCC’s Performance Fee is equal to

$200×20%=$40. TCC receives

$40÷$7=5.7 shares of Bank X Securities.

Plan A receives 60%×94.3=56.6

shares of Bank X Securities.

Plan B receives 40%×94.3=37.7 shares

of Bank X Securities.

19. Valuations of (and for) the BF IV

Group Trust will be needed for

redemptions, acquisitions by the BF IV

Group Trust, in connection with in-kind

distributions and to pay TCC’s

Performance Fee. The valuations will be

made by TCC for Securities for which

independent market quotations are

readily available. In situations where no

independent market quotations are

readily available, an Independent

Appraiser will be appointed as

described below.

(a) National Exchange—Regular

Trades. Any Security which is listed on

a national securities exchange will be

valued based on its last sales price on

the national securities exchange on

which the security is principally traded

on the valuation date.24 If the valuation

date is not a date on which the exchange

was open for trading, the value will be

determined in the same manner as if the

valuation date was the last prior date on

which the exchange was open for

trading.

(b) National Exchange—No Trades. If

no sale of a Security listed on a national

securities exchange occurred on either

of the dates described in clause (a)

above, the security will be valued based

on the last bid price on the exchange on

which the security was publiclytraded.25

(c) No Independent Market or No

Listing—Use of the Independent

Appraiser. In the event that there is no

independent market for a Security or the

Security is not listed on a national

securities exchange (e.g., a small bank

with 5 shareholders), the Independent

Appraiser will be required to value such

securities. TCC will utilize the

Independent Appraiser to value

Securities in connection with the inkind distributions by the BF IV Group

Trust, the redemption of Beneficial

Interests in the BF IV Group Trust or to

determine TCC’s Performance Fee.

Although TCC will nominate the

Independent Appraiser, Plans will be

given the option of either approving or

disapproving of the nominee. The

Independent Appraiser will not be

appointed absent the affirmative written

approval of a majority of the Plans

investing in the BF IV Group Trust.

However, the Plans will have no veto

power over TCC’s decision that an

Independent Appraiser is required.

Each member of the Independent

Appraiser (currently, the same advisory

committee serving in this capacity for

the MBF II LP and the BF III) must be

experienced in the valuation of

subregional banks as well as in the

business of performing valuations. In

addition, each member of the

Independent Appraiser must not be
Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices 1921

controlled by (or control) TCC and must

not receive more than 5 percent of their

lowest annual income from TCC or the

Trustee, either during the term of BF IV

or in the three years preceding its

creation. Individual members of the

Independent Appraiser or the entire

committee may be removed by Plans

holding 50 percent or more of the

Beneficial Interests in the Group Trust.

A majority of the Plans and TCC must

approve a replacement Independent

Appraiser. If the Plans and TCC cannot

agree, upon such replacement, the firm

of Peat Marwick Main & Co. will be

appointed.

The Independent Appraiser will use

the principles set forth in Revenue

Ruling 59–60 and the Department’s

proposed ‘‘Adequate Consideration’’

regulations (53 FR 17632, May 17, 1988)

to determine fair market value. The

valuations made by the Independent

Appraiser will be binding upon TCC. In

addition, the Independent Appraiser

will issue reports to TCC, the Trustee

and the Plans participating in the BF IV

Group Trust which set forth the

Independent Appraiser’s pricing

methodology and rationale for

Securities it has been asked to value.

Such reports will be issued after each

required valuation and they will comply

with the aforementioned regulations.

20. With respect to transactions which

may arise during the existence of the BF

IV Group Trust and which involve

parties in interest to participating Plans,

TCC requests exemptive relief from the

Department from the provisions of

section 406(a) of the Act. Specifically,

TCC requests exemptive relief where the

BF IV Group Trust sells Securities held

in its portfolio for cash or other

securities to a party in interest with

respect to a participating Plan in the

context of an acquisition or a merger by

the party in interest, provided the party

in interest is not an affiliate of TCC. TCC

represents that the BF IV Group Trust

will receive the same offer that other

shareholders of the Bank Company or

Financial Services Company will

receive. Because the BF IV Group Trust

will always be a minority shareholder in

such situation, TCC states that the BF IV

Group Trust will be in the position of

a beneficiary of the acquisition offer and

it will not be in the position of an active

player in the merger or acquisition

transactions.

21. In summary, it is represented that

the proposed transactions meet the

statutory criteria for an exemption

under section 408(a) of the Act because:

(a) The participation of Plans in the

BF IV Group Trust will be approved by

an Independent Fiduciary.

(b) Each Plan investing in the BF IV

Group Trust will have assets that are in

excess of $50 million.

(c) No Plan will invest more than 10

percent of its assets in Beneficial

Interests in the BF IV Group Trust and

such Beneficial Interests held by the

Plan will not exceed 25 percent of such

Group Trust.

(d) No Plan will invest more than 25

percent of its assets in investment

vehicles (i.e., collective investment

funds and separate accounts) managed

or sponsored by TCC and/or its

affiliates.

(e) Prior to making an investment in

the BF IV Group Trust, each

Independent Fiduciary contemplating

investing therein will receive offering

materials which disclose all material

facts concerning the purpose, structure

and operation of the Group Trust and

the fees paid to TCC.

(f) Each Plan investing in the BF IV

Group Trust will be required to

acknowledge, in writing, prior to

purchasing Beneficial Interests that such

fiduciary has received copies of such

documents and to acknowledge, in

writing, to TCC that such fiduciary is (1)

independent of TCC and its affiliates, (2)

capable of making an independent

decision regarding the investment of

Plan assets and (3) knowledgeable with

respect to the Plan in administrative

matters and funding matters related

thereto, and able to make an informed

decision concerning participation in the

BF IV Group Trust.

(g) TCC will make quarterly and

annual written disclosures to

participating Plans with respect to the

financial condition of the BF IV Group

Trust and the total fees that it will

receive for services rendered to the BF

IV Group Trust.

(h) TCC will hold annual meetings

and conduct periodic discussions with

Independent Fiduciaries of Plans

participating in the BF IV Group Trust

to address any matters pertaining to

such Group Trust.

(i) The terms of all transactions that

are entered into on behalf of the BF IV

Group Trust by TCC shall remain at

least as favorable to an investing Plan as

those obtainable in arm’s length

transactions with unrelated parties. In

this regard, the valuation of assets of the

BF IV Group Trust will be based upon

independent market quotations or

determinations made by an Independent

Appraiser.

(j) Either TCC or the Trustee, on

behalf of the Plans participating in the

BF IV Group Trust, may terminate the

Investment Management Agreement at

any time.

(k) As to each Plan, the total fees paid

to TCC and its affiliates will constitute

no more than reasonable compensation.

(l) TCC’s Performance Fee will be

based upon a percentage of net realized

gains minus net unrealized losses. In

this regard,

(1) The Performance Fee will be paid

after December 31, 2001, which is the

completion of the Acquisition Phase for

the BF IV Group Trust, and it cannot be

paid until all participating Plans have

received distributions equal to 100

percent of their capital contributions to

the BF IV Group Trust.

(2) Prior to the termination of the BF

IV Group Trust, only 75 percent of what

is credited to TCC as the Performance

Fee may be withdrawn by such Group

Trust.

(3) TCC will repay all deficits in its

Performance Fee account.

Notice to Interested Persons

Notice of the proposed exemption

will be given to Plans participating in

the BF IV Group Trust within 5 days as

of the date of publication of the notice

of pendency in the Federal Register.

Such notice will include a copy of the

notice of proposed exemption, as

published in the Federal Register, as

well as 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 to request a hearing.

Comments and hearings requests with

respect to the proposed exemption are

due 35 days after the date of publication

of the proposed exemption in the

Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms.

Jan D. Broady of the Department,

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

a toll-free number.)

Hughes Non-Bargaining Retirement

Plan, Hughes Bargaining Retirement

Plan, Hughes Subsidiary Retirement

Plan (Collectively, the Plans)

[Applications No. D–10295, D–10296 and D–

10297] Located in New York, N.Y.

Proposed Exemption

The Department of Labor (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 32847, August 10, 1990).

Effective October 6, 1995, 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)
1922 Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices

26SRA represents that it is a QPAM as that term

is defined in PTE 84–14.

through (E) of the Code shall not apply

to the leasing by the Plans of 10,106

square feet of office space (Suite 300) in

a commercial office building which is

owned by the Plans (the Building) to

Sarofim Realty Advisors (SRA), a party

in interest with respect to the Plans, for

a period ending February 28, 2000

pursuant to the terms of a lease

amendment (the Lease) provided the

following conditions are satisfied: (1)

An independent third party determines

that the terms of the Lease represent not

less than fair rental value as of the date

of the Lease; (2) the terms of the Lease

are reviewed and approved by a

qualified independent fiduciary of the

Plans who determines that the terms of

the transaction are at least as favorable

as the terms generally available to the

Plans in arm’s length transactions

between unrelated parties and that

SRA’s improvements to Suite 300 are

acceptable; (3) the qualified

independent fiduciary concludes that

the transaction is in the best interests of

the Plans and the Plans’ participants

and beneficiaries; (4) on behalf of the

Plans, the qualified independent

fiduciary continues to monitor SRA’s

performance under the Lease; and (5)

within sixty (60) days of the publication

in the Federal Register of a notice

granting this proposed exemption, SRA

will file Form 5330 with the Internal

Revenue Service and pay the excise

taxes applicable under section 4975(a)

of the Code that are due by reason of the

prohibited Lease transaction during the

period beginning March 1, 1995 and

ending on the effective date of this

exemption.

EFFECTIVE DATE: The effective date of

this exemption is October 6, 1995.

Summary of Facts and Representations

1. The Plans involved in the

transaction, the Hughes Non-Bargaining

Retirement Plan, the Hughes Bargaining

Retirement Plan and the Hughes

Subsidiary Retirement Plan, are covered

by the Hughes Master Retirement Trust

(the Trust). The Plans are defined

benefit plans. The Plans’ sponsor is

Hughes Electronic Corporation

(Hughes). Prior to March 29, 1995, the

Plans’ sponsor was Hughes Aircraft

Company. As of November 30, 1995, the

Plans had a total of 91,006 participants

and beneficiaries. As of November 30,

1995, the approximate aggregate fair

market value of the total assets of the

Plans was $6.376 billion. The Building

is a commercial office building known

as Preston Sherry Plaza with 147,008

square feet of rentable space and located

in Dallas, Texas. As of November 30,

1995, the value of the Building was .34

percent of the fair market value of the

total assets of the Plans.

2. SRA states that it is a fiduciary,

within the meaning of section 3(21) of

the Act, to the Plans and a party in

interest under section 3(14)(A) of the

Act with respect to the Plans by virtue

of its appointment by the Plans as an

investment manager for certain of the

Plans’ real estate investments. SRA is

headquartered in Dallas, Texas. As of

December 31, 1995, SRA employed 18

full-time employees and had

approximately $772 million in aggregate

market value of employee benefit plan

assets under management. SRA oversees

the acquisition, development, leasing,

management, financing and sale of

select property types in select regions

and major cities throughout the country

for the Plans and eight other pension

plans and endowment funds. SRA

provides recommendation to the Plans

as to the types of properties to be

purchased, the number and location of

the properties, the structure of the

transactions and the amount of thirdparty financing, if any, that is

appropriate. In addition, SRA is

responsible for ensuring that the Plans’

properties are managed in accordance

with the Plans’ investment objectives.

3. From October 1, 1991 to February

28, 1995, SRA leased 6,018 square feet

of space on the fourth floor of the

Building from the Plans. SRA represents

that its lease of the fourth floor space

complied with the requirements of Part

III of PTE 84–14 which permits a

qualified professional asset manager

(QPAM) to lease not in excess of the

greater of 7500 square feet or 1 percent

of the rentable space of the office

building in which the investment fund

managed by the QPAM has the

investment.26 In order to accommodate

another Building tenant and to facilitate

a cost effective reconfiguration of space

within the Building to the benefit of the

Plans, SRA relocated to the third floor

of the Building on March 1, 1995. SRA

occupied this space pursuant to the

terms of the Lease entered into on

March 1, 1995.

4. The Lease relates to 10,106 square

feet of office space and is for a term of

five years ending February 28, 2000, at

a base rent of $16,000 per square foot.

The annual base rent adjusts at a rate of

$.25 per square foot per year to $17.00

per square foot in the year 2000. The

Lease also provides for a one-time-only

tenant improvement or construction

allowance of $18.25 per square foot. The

allowance enabled SRA to build

additional walls, replace the carpet and

repaint the walls of the third floor.

Under the terms of the Lease, SRA is

responsible for its proportionate share of

common area maintenance, insurance

and property taxes over the 1994 base

year amount. The applicant states that

the Lease terms are comparable to the

terms of the leases of other similar

tenants in the Building, as well as the

terms of leases in similar buildings in

the area.

5. The applicant states that the Lease

between SRA and the Plans is not

eligible for relief from the prohibited

transaction provisions of the Act

pursuant to PTE 84-14 because the

Lease is for an amount of space in

excess of the greater of 7,500 square feet

or one percent of the rentable space in

the Building.

6. The applicant represents that on or

about March 8, 1995, SRA contacted

Price Waterhouse LLP (Price) and

requested that Price serve as the

independent fiduciary with respect to

the Lease. The applicant states that

Price agreed to the engagement and SRA

asked Price to begin work immediately

to determine whether the terms and

conditions of the Lease represented an

arm’s length lease of office space

between unrelated parties and to

prepare a report summarizing Price’s

conclusions (Price Report). During the

period March 14 to March 31, 1995,

Price performed a market review of the

Lease. Price reviewed the Lease and the

leases of five comparable tenants. Price

inspected and evaluated the Building

and interviewed the Building’s

management. Price performed a present

value analysis on the comparable leases

in order to evaluate the economic terms

of the leases. Based on Price’s research

and analysis, the March 31, 1995 Price

Report determined that the Lease was

under terms which are not less than fair

market value.

7. According to the Amendment, the

applicant states that SRA circulated

several drafts of an independent

fiduciary agreement to Price and to the

Plans. On March 30, 1995, the Plans

requested that SRA revise the

independent fiduciary agreement to

substitute ‘‘independent advisor’’ for

‘‘independent fiduciary.’’ SRA objected

to the change and advised the Plans that

the agreement should refer to Price as an

‘‘indendent fiduciary.’’ On April 4,

1995, the Plans advised SRA that Price

could not serve as an independent

fiduciary to the Plans because Price was

not a registered investment adviser

under the Investment Advisers Act of

1940 and the Plans documents required

all fiduciaries appointed by the Plans to

be registered investment advisers.
Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices 1923

Subsequently, SRA and the Plans

discussed several alternatives with

respect to the appointment of an

independent fiduciary. On October 6,

1995, the Plans and RREEF America

L.L.C. (RREEF) entered into an

agreement for RREEF to act on behalf of

the Plans as an independent fiduciary to

review the Price Report, review and

approve the Lease terms and monitor

SRA’s performance under the Lease (the

Agreement). This Agreement was

essentially an extension of RREEF’s

duties as a qualified professional asset

manager to the Plans pursuant to the

agreement dated March 3, 1992 between

the Plans and RREEF America Partners

L.P., now known as RREEF (the

Investment Management Agreement).

8. The applicant states that RREEF is

a qualified independent fiduciary who

actively manages commercial real estate

in Dallas, Texas. Further, neither RREEF

nor its affiliates has any ownership

interest in SRA or its affiliates and

neither SRA nor its affiliates has any

ownership interest in RREEF or its

affiliates. The Applicant represents that

the Plans will pay RREEF’s fee for

serving as an independent fiduciary. In

view of RREEF’s other unrelated

business relationships with the Plans,

RREEF has agreed to perform these

additional services for the Plans for the

sum of $1.00 per annum in lieu of any

additional fee which otherwise would

be due under the Investment

Management Agreement.

9. According to the Statement of

Independent Fiduciary dated September

12, 1996, RREEF states that it is an

investment adviser registered under the

Investment Advisers Act of 1940 and

oversees the acquisition, development,

leasing, management, financing and sale

of commercial real estate throughout the

country including real estate located in

Dallas, Texas. RREEF serves as an

investment advisor and fiduciary for

approximately 150 employee benefit

plans including the Plans. RREEF

represents that it understands its ERISA

duties and responsibilities in acting as

a fiduciary with respect to the Plans.

RREEF states that as of December 31,

1995, it had approximately $6 billion in

aggregate market value of employee

benefit plan assets under management

and that, as of December 31, 1995,

RREEF and its affiliates received less

than 1 percent of their annual income

from SRA or its affiliates.

10. The applicant represents that

under the Investment Management

Agreement, RREEF may be removed

with or without cause at any time by the

Plans (acting through fiduciaries of the

Plans that are unrelated to SRA or

RREEF) upon written notice of such

termination. Further, RREEF’s

appointment is subject to annual

confirmation by the fiduciaries of the

Plans. The applicant states that RREEF

may not be removed by SRA and the

appointment of RREEF as independent

fiduciary shall remain in effect until 60

days after receipt by the Plans of a

notice of resignation from RREEF, or 60

days after RREEF receives a notice of

removal from the Plans.

11. The applicant states that upon the

termination of RREEF’s appointment, a

successor independent fiduciary

(Successor) will be designated by the

Plans. The Successor will be subject to

annual confirmation by fiduciaries of

the Plans. In addition, any Successor

must be an individual, group of

individuals, or a business entity which

has substantial experience and expertise

in the commercial real estate field.

Neither the Successor nor any affiliate

of the Successor may have any

ownership interest in SRA or any of its

affiliates, nor may SRA or any of its

affiliates have any ownership interest in

the Successor or its affiliates. Moreover,

neither the Successor itself, nor the

Successor and its affiliates in the

aggregate, may receive more than 1

percent of their total annual gross

revenues, determined as of the end of

their last fiscal year, from business

transactions with SRA or its affiliates.

Furthermore, any Successor would be

removable with or without cause at any

time by the Plans acting through a

fiduciary or fiduciaries unrelated to

SRA or the Successor. Any Successor

would not be removable by SRA for any

reason.

12. RREEF states that on the Plan’s

behalf, RREEF has reviewed and

approved the terms of the Lease. RREEF

states that is has reviewed: the Lease;

SRA’s proposed improvements to the

property; the Price Report concerning

the proposed transaction, including all

accompanying data and analyses;

physically inspected the property; and

compared the Lease with other leases

for space in the Building and leases for

space at comparable properties. RREEF

also interviewed four local brokers

active in the Building’s submarket to

identify comparable market rent terms.

Based on RREEF’s review and analysis,

RREEF concluded that the terms of the

Lease are in the best interest of the Plans

and the Plans’ participants and

beneficiaries, the terms of the Lease are

at least as favorable as the terms

generally available to the Plans in arm’s

length transactions between unrelated

parties, and that SRA’s proposed

improvements to the office space are

acceptable and will not cause the

premises to be untenantable.

13. Under the Agreement, RREEF is

also obligated to monitor SRA’s

performance under the Lease. RREEF

agreed to review any matter which

requires the approval of the landlord

under the terms of the Lease and

determine on behalf of the Plans

whether or not to grant approval and

take any other action with regard to the

Lease which the landlord would have

the authority and/or obligation to take,

on behalf of the Plans.

14. The applicant represents that the

Lease allows the Plans to accommodate

existing tenants, to retain SRA as a

stable and reliable tenant, and to realize

income that might not otherwise be

received. The Plans derive a benefit by

virtue of SRA’s occupancy of space in

the Building and its ability to better

evaluate the day-to-day performance of

the other tenants, the property manager

and the physical upkeep of the asset. If

the Lease is not granted an exemption,

the applicant represents that the Plans

would be subjected to the risks of

downtime and additional refit costs for

the current SRA space.

15. The applicant represents that

within sixty (60) days of the publication

in the Federal Register of a notice

granting this proposed exemption, SRA

will file Form 5330 with the Internal

Revenue Service and pay the excise

taxes applicable under section 4975(a)

of the Code that are due by reason of the

prohibited Lease transaction during the

period beginning the date the Lease was

entered into, March 1, 1995, and ending

on October 6, 1995, the effective date of

this exemption, the date of the

appointment of an independent

fiduciary with respect to the Lease.

16. In summary, the applicant

represents that the proposed exemption

meets the criteria of section 408(a) of the

Act because: (1) Price, an independent

third party, has determined that the

terms of the Lease represent not less

than fair rental value as of the date of

the Lease; (2) the terms of the Lease

were reviewed and approved by RREEF,

a qualified independent fiduciary who

determined that the terms of the

transaction were at least as favorable as

the terms generally available to the

Plans in arm’s length transactions

between unrelated parties and that

SRA’s improvement to Suite 300 were

acceptable; (3) RREEF, a qualified

independent fiduciary, concluded that

the Lease is in the best interests of the

Plans and the Plans’ participants and

beneficiaries; (4) RREEF, on behalf of

the Plans, continues to monitor SRA’s

performance under the Lease; and (5)

within sixty (60) days of the publication

in the Federal Register of a notice

granting this proposed exemption, SRA
1924 Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices

will file Form 5330 with the Internal

Revenue Service and pay the excise

taxes applicable under section 4975(a)

of the Code that are due by reason of the

prohibited Lease transaction during the

period beginning March 1, 1995 and

ending on the effective date of this

exemption.

Notice to Interested Persons

Notice of the proposed exemption

will be provided to all interested

persons by either mail or hand delivery

within 30 days of the date of publication

of the notice of pendency in the Federal

Register. Such notice shall include a

copy of the notice of pendency of the

exemption as published in the Federal

Register and shall inform interested

persons of their right to comment on

and/or to request a hearing with respect

to the proposed exemption. Comments

are due within 60 days of the date of

publication of the proposed exemption

in the Federal Register.

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or requests for

a hearing on the proposed replacement

exemption to the address above, within

the time period set forth above. All

comments will be made a part of the

record. Comments and requests for a

hearing should state the reasons for the

writer’s interest in the proposed

exemption. Comments received will be

available for public inspection with the

referenced applications at the address

set forth above.

FOR FURTHER INFORMATION CONTACT:

Wendy McColough of the Department,

telephone (202) 219–8971. (This is not

a toll-free number.)

APA, Inc. 401(k) Profit Sharing Plan

(the Plan) Located in Pleasant Hill,

California

[Application No. D–10375]

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

loan (the Loan) of $30,000 to Mr. Gary

Petsuch (Mr. Petsuch), a party in

interest with respect to the Plan, from

Mr. Petsuch’s segregated account (the

Account) in the Plan, and (2) the

personal guarantee of the Loan by Mr.

Petsuch, provided the following

conditions are satisfied: (a) The terms of

the Loan are at least as favorable to the

Plan as those obtainable in an arm’slength transaction with an unrelated

party; (b) the Loan does not exceed 25%

of the assets of the Account; (c) the Loan

is secured by a pledge of Mr. Petsuch’s

interest in an investment account which

has been currently valued by an

independent party as having a fair

market value approximately 280% of

the principal amount of the Loan; (d)

the account collateralizing the Loan will

be maintained at a collateral-to-Loan

ratio of not less than 200% throughout

the duration of the Loan; (e) Mr. Petsuch

has also personally guaranteed the Loan;

and (f) Mr. Petsuch is the only Plan

participant to be affected by the Loan.

Summary of Facts and Representations

1. Action Personnel Agency, Inc.

d.b.a. United Staffing Services (APA), a

California Subchapter S Corporation, is

the sponsor of the Plan. Mr. Petsuch is

the 100% owner of APA and, as such,

is a party in interest with respect to the

Plan.

2. Mr. Petsuch, as the owner of a

Subchapter S Corporation, is unable to

participate in the Plan’s participant loan

program. Mr. Petsuch has a segregated

rollover Account in the Plan which had

a value of $124,875 as of August 23,

1996. This Account is composed of

publicly traded stock.

3. Mr. Petsuch has requested an

exemption that would permit him to

borrow $30,000 from his Account in the

Plan. Since the Loan is to come from his

Account, Mr. Petsuch is the only Plan

participant who will be affected by this

proposed transaction. The Loan amount

would represent less than 25% of the

value of the Account. The term of the

Loan will be for a period of five years

at an interest rate of Prime plus two,

based on the published Prime Rate in

the Western Edition of the Wall Street

Journal, which currently would be

10.75%. The interest rate will be

adjusted during the term of the Loan

whenever there is a change in the Prime

Rate of Interest. The new interest rate

will be effective immediately and will

remain in effect until the next time the

Prime Rate changes. The Loan will be

repaid in equal monthly installments of

principal and interest. Ms. Jeanne Marx,

Vice President of The Bank of San

Ramon Valley (the Bank) in San Ramon,

California, has represented that the

Bank would require identical terms to

make a five year loan to Mr. Petsuch.

4. In addition to giving his personal

guarantee for the Loan, Mr. Petsuch will

pledge as security for the Loan his

interest in a Charles Schwab & Co., Inc.

(Schwab) investment account. The

account consists of publicly traded

securities, which according to Schwab

had a fair market value of $84,855 as of

August 26, 1996. Thus, the pledged

security has a fair market value

approximately 2.8 times greater than the

principal amount of the proposed Loan.

The applicant represents that the

collateral-to-Loan ratio will always

remain at least 200%. If the collateralto-Loan ratio ever falls below this level,

Mr. Petsuch represents that he will add

additional collateral to the Schwab

account.

5. In summary, the applicant

represents that the proposed transaction

satisfies the criteria of section 408(a) of

the Code because: (a) The Loan

represents less than 25% of the assets of

the Account; (b) the terms of the Loan

will be identical to those required by a

third party lender, the Bank, if it were

to make a similar loan; (c) the Loan will

be secured by Mr. Petsuch’s personal

guarantee and his interest in an

investment account which has been

currently valued by an independent

party as having a fair market value

approximately 280% of the principal

amount of the Loan; (d) the collateralto-Loan ration will remain not less than

200% throughout the duration of the

Loan; and (e) Mr. Petsuch is the only

Plan participant to be affected by the

Loan, and he desires that the transaction

be consummated.

NOTICE TO INTERESTED PERSONS: Since

Mr. Petsuch is the only Plan participant

to be affected by the proposed

transaction, the Department has

determined that there is no need to

distribute the notice of proposed

exemption to interested persons.

Comments and requests for a hearing are

due within 30 days from the date of

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.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest of

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction
Federal Register / Vol. 62, No. 9 / Tuesday, January 14, 1997 / Notices 1925

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 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 9th day of

January, 1997.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 97–865 Filed 1–13–97; 8:45 am]

BILLING CODE 4510–29–M

[Prohibited Transaction Exemption 97–01;

Exemption Application No. D–10143, et al.]

Grant of Individual Exemptions; Univar

Corporation UniSaver Tax

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Grant of individual exemptions.

SUMMARY: This document contains

exemptions issued by the Department of

Labor (the Department) 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).

Notices were published in the Federal

Register of the pendency before the

Department of proposals to grant such

exemptions. The notices set forth a

summary of facts and representations

contained in each application for

exemption and referred interested

persons to the respective applications

for a complete statement of the facts and

representations. The applications have

been available for public inspection at

the Department in Washington, D.C. The

notices also invited interested persons

to submit comments on the requested

exemptions to the Department. In

addition the notices stated that any

interested person might submit a

written request that a public hearing be

held (where appropriate). The

applicants have represented that they

have complied with the requirements of

the notification to interested persons.

No public comments and no requests for

a hearing, unless otherwise stated, were

received by the Department.

The notices of proposed exemption

were issued and the exemptions are

being granted solely by the Department

because, effective December 31, 1978,

section 102 of Reorganization Plan No.

4 of 1978 (43 FR 47713, October 17,

1978) transferred the authority of the

Secretary of the Treasury to issue

exemptions of the type proposed to the

Secretary of Labor.

Statutory Findings

In accordance with section 408(a) of

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

Code and the procedures set forth in 29

CFR Part 2570, Subpart B (55 FR 32836,

32847, August 10, 1990) and based upon

the entire record, the Department makes

the following findings:

(a) The exemptions are

administratively feasible;

(b) They are in the interests of the

plans and their participants and

beneficiaries; and

(c) They are protective of the rights of

the participants and beneficiaries of the

plans.

Univar Corporation UniSaver Tax

Savings Investment Plan (the Plan)

Located In Kirkland, Washington

[Prohibited Transaction Exemption 97–01;

Exemption Application No. D–10143]

Exemption

The restrictions of sections 406(a) and

406 (b)(1) and (b)(2) of the Act and the

sanctions resulting from the application

of section 4975 of the Code, by reason

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

the Code, shall not apply to the

extension of credit in the form of

guarantees and loans of funds (the

Loans), not to exceed $1,466,785.38, to

the Plan by Univar Corporation (the

Employer), the sponsor of the Plan, or

it successors, with respect to

Guaranteed Investment Contract No.

62127 (the GIC) issued by Confederation

Life Insurance Company of Canada

(Confederation), and the repayment of

the Loans by the Plan to the Employer,

or its successors, provided the following

conditions are satisfied: (a) All terms

and conditions of the transactions are

no less favorable to the Plan than those

the Plan could receive in arm’s length

transactions with unrelated parties; (b)

No interest payments or other expenses

will be incurred by the Plan with

respect to the transactions; (c)

Repayment of the Loans will be made

from proceeds realized from the GIC

(the GIC Proceeds) as paid to the Plan

by Confederation, its successors, or any

other third party, and made only if the

repayments do not interfere with the

liquidity needs of the Plan for payment

of benefits, transfers of investments,

hardship withdrawals, or loans as

determined by BZW Barclays Global

Investors, N.A., the Plan trustee; (d)

Repayment of the Loans will be waived

by the Employer and its successors to

the extent the Loans exceed the GIC

Proceeds; and (e) All unpaid principal

and interest that was due under the GIC

on August 12, 1994, minus any Loans

from the Employer and its successors,

and/or payments received under the GIC

after August 12, 1994, will be

completely paid by January 1, 2000, by

a Loan to the Plan from the Employer

or its successors.

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

November 6, 1996, at 61 FR 57467.

FOR FURTHER INFORMATION CONTACT: Mr.

C.E. Beaver of the Department,

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

a toll-free number.)

Wayne Obstetrical Group, P.A. Money

Purchase Retirement Plan (the Wayne

Plan); Pediatric Professional Associates,

P.A. Profit Sharing Plan (the Pediatric

Plan); Physicians for Women, P.A.

Profit-Sharing Plan and Trust (the

Physicians Plan; collectively, the Plans)

Located in Wayne, New Jersey

[Prohibited Transaction Exemption 97–02;

Exemption Application Nos. D–10262, D–

10263, and D–10264]

Exemption

The restrictions of sections 406(a),

406(b)(1) and (b)(2) of the Act and the