Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17209

of the Fountain Square West Project.

Fifth Third wishes to emphasize that no

gross rents in excess of $3 million are

actually projected for any year during

the initial term of the Fountain Square

West Project. Fifth Third also points out

that the issue of gross rents in excess of

$3 million is relevant because such

rents would result in additional

payments being made to the City of

Cincinnati under the City Lease.

Thus, after giving full consideration to

the entire record, including the written

comment, the Department has made the

aforementioned changes to the proposed

exemption. In addition, the Department

has decided to grant the exemption

subject to the clarifications described

above. The comment letter has been

included as part of the public record of

the exemption application. The

complete application file, as well as all

supplemental submissions received by

the Department, is made available for

public inspection in the Public

Documents Room of the Pension and

Welfare Benefits Administration, Room

N–5638, U.S. Department of Labor, 200

Constitution Avenue, NW, Washington,

DC 20210.

FOR FURTHER INFORMATION CONTACT: Ms.

Jan D. Broady of the Department,

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

a toll-free number.)

Orders Distributing Co., Inc. Profit

Sharing Plan and 401(k) Retirement

Savings Plan (the Plan) Located in

Greenville, South Carolina

[Prohibited Transaction Exemption 97–21;

Exemption Application No. D–10341]

Exemption

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 the past sale

by the Plan of certain units of limited

partnership interests (the Units) to

Orders Distributing Co., Inc. (the

Employer), a party in interest with

respect to the Plan, provided that the

following conditions are satisfied: (1)

The terms of the sale were at least as

favorable to the Plan as those the Plan

could have obtained in a comparable

arm’s length transaction with an

unrelated party; (2) the sale was a onetime transaction for cash; (3) the Plan

paid no commissions nor other

expenses relating to the sale; (4) the

Plan received an amount no less than

the fair market value of the Units as of

the date of the sale, as determined by an

independent appraisal; and (5) within

30 days of publication in the Federal

Register of the notice of the grant of this

exemption, the Employer makes an

additional cash contribution to the Plan

to make up for opportunity costs

attributable to the Units.

EFFECTIVE DATE: The exemption is

effective as of January 1, 1995.

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

January 31, 1997 at 62 FR 4802.

FOR FURTHER INFORMATION CONTACT: Ms.

Karin Weng 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 or

disqualified person from certain other

provisions to which the exemptions

does not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are

supplemental to and not in derogation

of, any other provisions of the Act and/

or the Code, including statutory or

administrative exemptions and

transactional rules. Furthermore, the

fact that a transaction is subject to an

administrative or statutory exemption is

not dispositive of whether the

transaction is in fact a prohibited

transaction; and

(3) The availability of these

exemptions is subject to the express

condition that the material facts and

representations contained in each

application are true and complete and

accurately describe all material terms of

the transaction which is the subject of

the exemption. In the case of continuing

exemption transactions, if any of the

material facts or representations

described in the application change

after the exemption is granted, the

exemption will cease to apply as of the

date of such change. In the event of any

such change, application for a new

exemption may be made to the

Department.

Signed at Washington, D.C., this 3rd day of

April, 1997.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor

[FR Doc. 97–8972 Filed 4–8–97; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10345, et al.]

Proposed Exemptions; Washington

National Retirement Plan et al.

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

Unless otherwise stated in the Notice

of Proposed Exemption, all interested

persons are invited to submit written

comments, and with respect to

exemptions involving the fiduciary

prohibitions of section 406(b) of the Act,

requests for hearing within 45 days from

the date of publication of this Federal

Register Notice. Comments and request

for a hearing should state: (1) The name,

address, and telephone number of the

person making the comment or request,

and (2) number of the person making

the comment or request, and (3) 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
17210 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

1The interests in the Venture Capital Funds and

the Private Placement Bond Issue are collectively

referred to herein as the Interests.

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.

Washington National Retirement Plan

(the Plan), Located in Lincolnshire, IL

[Application No. D–10345]

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 the cash sale by the

Plan of five venture capital limited

partnership interests (the Venture

Capital Funds) and a private placement

bond issue (the Private Placement Bond

Issue) 1 to Washington National

Insurance Company (the Employer), a

party in interest with respect to the

Plan.

This proposed exemption is subject to

the following conditions:

(a) All terms and conditions of the sale are

at least as favorable to the Plan as those

obtainable in an arm’s length transaction

with an unrelated party.

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

cash.

(c) The fair market value of the Interests is

determined by a qualified, independent

appraiser.

(d) The Plan does not pay any

commissions, costs or other expenses in

connection with the sale.

(e) With respect to each Venture Capital

Fund Interest, the Plan receives as

consideration an amount that is no less than

the greater of (1) its investment basis in such

Interest or (2) the fair market value of the

Interest on the date of the sale.

(f) With respect to the Private Placement

Bond Issue, the Plan receives as

consideration an amount that is no less than

the greater of (1) the remaining principal

balance of such Interest or (2) the fair market

value of the Interest on the date of the sale.

Summary of Facts and Representations

1. The Plan is a defined benefit plan

having total assets with an aggregate fair

market value of $22,925,300 as of June

30, 1996. As of September 11, 1996, the

Plan had 964 participants. The trustees

of the Plan (the Trustees) are Robert W.

Patin, Thomas C. Scott and Thomas

Pontarelli. The Trustees are charged

with overseeing the investments and

investment philosophy of the Plan. The

Employer, an insurance company,

maintains its principal place of business

in Lincolnshire, Illinois.

2. Included among the assets of the

Plan are Interests in five Venture Capital

Funds and one Private Placement Bond

Issue. The Interests, which represent

approximately 6.2 percent of the Plan’s

total assets, were all purchased on

behalf of the Plan by the then-existing

Trustees during the 1970’s and 1980’s.

In this regard, the Interests in the

Venture Capital Funds were acquired by

the Plan at the inception of the

respective limited partnerships whereas

the Interest in the Private Placement

Bond Issue was acquired by the Plan

directly from Merrill Lynch, Hubbard

Inc., as underwriter. With the exception

of the Employer (see Representation 4

below), it is represented that none of the

general partners, limited partners or

holders, in the case of the Private

Placement Bond Issue, is a party in

interest with respect to the Plan.

The Interests are further described as

follows:

(a) The Narragansett First Fund (NFF),

a Venture Capital Fund, is a Rhode

Island limited partnership that was

formed on December 17, 1982 primarily

for the purpose of making investments

in leveraged buyout transactions with

the objective of capital appreciation.

NFF has one general partner,

Narraganset Management Partners

(NMP), also a Rhode Island limited

partnership and 35 limited partners

consisting of corporations, partnerships

and trusts. The total funding

commitment for NFF was $75.2 million.

Of this amount, $66.7 million was

actually funded. Although NFF was

scheduled to terminate on December 17,

1995, NMP temporarily deferred the

liquidation of the assets of NFF. The

partnership is now fully invested and is

presently in a liquidation mode.

On December 15, 1982, the Plan

entered into a subscription agreement to

invest $500,000 in NFF. As of March 31,

1996, the Plan had funded $446,885 of

the capital commitment representing a

0.67 percent interest in NFF. Since the

inception of its investment in NFF, the

Plan has received cash disbursements

totaling $1,369,523 leaving an

investment basis of $0.

(b) TCW Special Placements Fund I

(TCW I), a Venture Capital Fund, is a

California limited partnership that was

formed on March 12, 1985 for the

purpose of allowing investors to pool

their assets in order to provide financing

to highly-leveraged companies for

expansions, acquisitions, management

buyouts and capital restructurings. TCW

Capital, a California partnership serves

as the general partner of TCW I. As

general partner, TCW Capital makes all

investment decisions and has exclusive

responsibility for the management of

TCW I. TCW I is fully invested and is

expected to terminate in 1997.

On February 28, 1985, the Plan

entered into a subscription agreement to

fund $500,000 to TCW I. As of March

31, 1996, the Plan had funded $500,000

of this commitment. The total funding

commitment for TCW I was $105.6

million of which the full amount was

funded. Therefore, the Plan’s interest in

TCW I is 0.47 percent. Since its

investment in TCW I, the Plan has

received cash disbursements totaling

$414,870 leaving an investment basis of

$85,130.

(c) Narragansett Capital Partners—B

(NCP–B), a Venture Capital Fund, was

formed as a limited partnership in

Providence, Rhode Island on January 14,

1987 for the purpose of investing in
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17211

2 It is represented that K-Mart Corporation, an

affiliate of Kresge is the actual lessee of the

distribution center.

3 In this proposed exemption, the Department

expresses no opinion on whether the acquisition

and holding by the Plan and the Employer of their

respective Interests in the Venture Capital Funds

violated any provision of Part 4 of Title I of the Act.

equity and equity-related securities in

leveraged buyout transactions. The

general partner of NCP–B is Narraganset

Capital Associates, L.P. (NCA), a Rhode

Island limited partnership. The total

funding commitment for NCP–B was

$63.6 million of which $50.5 million

was actually funded. NCP–B is fully

invested and is currently in an

investment liquidation mode.

On December 16, 1986, the Plan

entered into a subscription agreement to

fund $500,000 of NCP–B. As of March

31, 1996 the Plan had funded $397,306

of this commitment. Therefore, the

Plan’s interest in NCP–B is 0.01 percent.

Since its investment in NCP–B, the Plan

has paid management fees totaling

$58,057 and has received cash

disbursements totaling $161,065.

Therefore, the Plan’s investment basis in

NCP–B is $294,298.

(d) TCW Special Placement Fund II

(TCW II), a Venture Capital Fund, is a

California limited partnership that was

formed on February 12, 1987 for the

purpose of allowing investors to pool

their assets in order to provide financing

to highly-leveraged companies. TCW

Capital serves as the general partner of

TCW II. The total funding commitment

for TCW II was $335.3 million of which

all such amount was actually funded.

TCW II is fully invested and is expected

to terminate in 1999.

On February 10, 1986, the Plan

entered into a subscription agreement to

fund $500,000 of TCW II. As of March

31, 1996 the Plan had funded $500,000

of this commitment. Therefore, the

Plan’s interest in TCW II is 0.15 percent.

Since its investment in TCW II, the Plan

has received disbursements totaling

$446,864 leaving an investment basis of

$53,136.

(e) The Shansby Group (Shansby), a

Venture Capital Fund, is a California

limited partnership that was formed on

November 3, 1987 for the purpose of

making equity investments in

established businesses in consumer

industries. The general partner of

Shansby is TSG Partners, a California

limited partnership which has sole

responsibility for the investment,

management and custody of Shansby’s

assets. Shansby has a stated life of ten

years and is currently in a liquidation

mode. The total funding commitment

for Shansby was $31.3 million of which

all $31.3 million was actually funded.

The partnership is fully funded and is

presently in an investment liquidation

mode.

On October 27, 1987, the Plan entered

into a subscription agreement to fund

$500,000 of Shansby. As of March 31,

1996, the Plan had funded $500,000 of

this commitment. Therefore, the Plan’s

interest in Shansby is 0.16 percent.

Since its investment in Shansby, the

Plan has received disbursements

totaling $476,643 leaving an investment

basis of $23,357.

(f) Pennsylvania Mart Properties

Secured Notes constitute the Private

Placement Bond Issue in which the Plan

has invested. The issuer, Pennsylvania

Mart Properties Corp. (PMP) is a special

purpose corporation. PMP was formed

in the mid-1970’s to finance up to 100

percent of the cost of acquiring and

constructing a distribution center near

Morrisville, Pennsylvania. It was

intended that the facility would be

leased to the S.S. Kresge Company

(Kresge) or a subsidiary for a 30 year

term.2

To obtain funds necessary to acquire

the property from Kresge and to

complete construction, PMP sold

secured notes to institutional investors.

The Private Placement Bond Issue was

issued in the aggregate principal amount

of $22 million and has a maturity date

of 30 years or January 17, 2007. The

Private Placement Bond Issue carries

interest at the rate of 10.25 percent per

annum and is secured by a first

mortgage on the property and by an

assignment of the lease.

The Plan initially purchased its

Interest in the Private Placement Bond

Issue for $500,000 on December 2, 1976

from Merrill Lynch. At the time of the

investment, the cost to complete the

warehouse facility securing the Issue

was $18,900,000 or 21.25 percent less

than the original cost estimate of $24

million. Because the indenture for the

Private Placement Bond Issue did not

permit outstanding debt to exceed the

final cost of the facility, PMP refunded

21.25 percent of the Issue, pro rata, to

each investor on January 17, 1977. A

total of $106,250 in principal was

returned to the Plan. On that same date,

a revised secured note, having a face

value of $393,750, was given to the

Plan. The applicant assumes that the

Plan also received an accrued interest

payment on January 17, 1977 in the

amount of $6,406. This accrued interest

would represent 45 days of interest on

the initial $500,000 investment from

December 2, 1976 to January 1, 1977.

Since the time of its original

investment, the Plan has received

interest income totaling $723,831. As of

January 17, 1997, the outstanding

principal balance of the Plan’s Interest

in the Private Placement Bond Issue was

$267,035. Thus, the Plan’s investment

basis in the Private Placement Bond

Issue is $0.

3. With the exception of NCP–B (as

noted in Representation 2), the Plan has

not been required to pay any

management fees in connection with its

ownership of the other Venture Capital

Fund Interests. In this regard, all

management fees paid by the Plan have

been derived from capital contributions

or have been withheld from

distributions. The Plan has not paid any

fees with respect to its Interest in the

Private Placement Bond Issue. Other

than management fees, the Plan has not

been required to pay any servicing fees

to any outside party to monitor or

administer the Interests.

4. The Employer has also invested in

four of the Venture Capital Funds. It is

represented that the Employer acquired

its Interests in these Funds

contemporaneously with the Plan. In

this regard, the Employer invested

$1,494,255 in NFF in return for a 0.02

percent interest, $2 million in TCW I in

return for a 0.02 percent interest, $2

million in TCW II for a 0.01 percent

interest and $3 million in Shansby for

a 0.10 percent interest. It is represented

that the Employer has never invested in

the Private Placement Bond Issue. In

addition, the Employer also has

invested $1,587,397 in Narragansett

Capital Partners—A, a parallel Fund of

NCP–B.3

5. Each of the Venture Capital Funds

is valued quarterly by an advisory

committee which is comprised of

representative limited partners from the

respective Funds. It is represented that

such committee members do not

include the Employer or its principals.

The Plan receives a quarterly statement

from each committee summarizing the

value of the Venture Capital Fund and

the value of the Plan’s Interest in a

Venture Capital Fund. In this regard, as

of March 31, 1996, the fair market

values of the Plan’s Interests in the

Venture Capital Funds were reported as

follows: $49,094 in NFF; $267,000 in

TCW I; $416,665 in NCP–B; $123,000 in

TCW II; and $272,653 in Shansby. By

letter dated January 27, 1997, Mr.

Gregory Barber, who undertakes the

specific duties of the general partner for

NFF and NCP–B, stated that the

quarterly valuations for these Venture

Capital Funds represent the best

estimate of the fair market value of the

portfolio companies. Mr. Barber also

noted that there were no sales or

transfers of Interests in the Venture
17212 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

Capital Funds resulting from arm’s

length transactions between unrelated

parties during 1995 or 1996.

By letter dated February 7, 1997, Mr.

Raymond Henze, Group Managing

Director of TCW Capital, the general

partner of TCW I and TCW II, outlined

the principals and methods of valuation

utilized by TCW Capital in valuing the

net assets of these Venture Capital

Funds. In this regard, Mr. Henze stated

that—

(a) Non-publicly traded securities are

initially valued at cost unless a change in the

financial condition or operating results of the

issuer or guarantor of such securities

indicates that there has been a permanent

impairment in the value of the investment.

Such investments will not be valued in

excess of cost. No change in valuation of debt

securities is made for fluctuations in market

interest rates.

(b) Marketable securities listed on a

national securities exchange or marketable

securities traded in the over-the-counter

market for which there is a last sales price

available are valued at the last sales price on

the date of valuation. Other marketable

securities traded in the over-the-counter

market are valued at the closing bid price as

reported by the National Quotations Bureau,

Inc. or at a discount from the bid price if

marketability is limited by the size of the

holdings relative to trading volume.

Securities not marketable due to investment

letter restrictions but constituting part of the

class of publicly-traded securities are valued

at an appropriate discount from the public

market price.

(c) The carrying value of investments in

non-publicly traded securities and restricted

marketable securities is based upon the

written valuation by a nationally-recognized

independent appraiser or investment banker.

Historically, this has been Deloitte & Touche

LLP.

In addition, Mr. Henze stated that

during calendar year 1996, there were

no transfers in TCW I.

Finally, in a letter dated January 28,

1997, Mr. Charles Esserman, General

Partner of the Shansby Group stated that

the value of the assets of the Shansby

Group as shown in the quarterly

financial statement is, in the opinion of

the general partners a fair representation

of the fair market value of such assets

as of such dates. In addition, Mr.

Esserman stated that there have been no

sales of Interests in the Shansby Group

during the last two years.

6. The Employer proposes to

terminate the Plan and wishes to ensure

that all of the Plan’s assets can be

efficiently liquidated at their fair market

value. Because there is no ready market

for any the of Venture Capital Funds, it

is represented that the general partners

of each Fund are under no obligation to

assist in the sale or repurchase of the

Interests. Since each of the Venture

Capital Funds is in a liquidation mode,

it is represented that even if a purchaser

could be found, it is unlikely that the

purchaser would be willing to pay fair

market value for the Plan’s Venture

Capital Fund Interests.

7. Therefore, the Employer requests

an administrative exemption from the

Department in order to purchase the

Plan’s Interests in the Venture Capital

Funds for the greater of: (a) the funded

amount of the Plan’s Interest in the

Venture Capital Fund (i.e., the Plan’s

investment basis); or (b) the fair market

value of the Venture Capital Fund

Interests, on the quarterly statement for

the most current statement available at

the time of purchase. In each instance,

the value attributed to the Venture

Capital Interests will be reduced by any

distributions received prior to such

purchase. No fees or commissions will

be paid by the Plan in connection with

its sale of the Interests in the Venture

Capital Funds. Any costs associated

with determining the fair market value

for these investments will be borne by

the Employer.

8. In addition to acquiring the

Interests in the Venture Capital Funds,

the Employer requests administrative

exemptive relief in order to purchase

the Plan’s Interest in the Private

Placement Bond Issue. The proposed

sales price for the Interest will be the

greater of: (a) the independentlyappraised fair market value; or (b) the

remaining principal balance of such

Interest. No fees or commissions will be

paid by the Plan in connection with the

sale. Any cost associated with

determining the fair market value of the

Interest in the Private Placement Bond

Issue will be borne by the Employer.

9. Because the Private Placement

Bond Issue is not valued on a

continuing basis, the Employer has

retained the Allison-Williams Company

of Minneapolis, Minnesota (AllisonWilliams), an independent investment

banking firm, to value this investment.

Specifically, Mr. Michael A. Lingvall,

Vice President of Allison-Williams, has

determined the fair market value of the

investment. Mr. Lingvall represents that

he is completely unrelated to the

Employer and its principals. He also

states that he has three years experience

in effecting private placement sales,

valuation and trading and has over eight

years experience in finance.

In an appraisal report dated August

20, 1996 and an addendum dated

November 8, 1996, Mr. Lingvall has

placed the market position for the Plan’s

Interest in the Private Placement Bond

Issue at 92.06 (or $249,203 based upon

a principal balance of $267,035). He

indicates that this represents a spread of

approximately 600 points over

comparable Treasury bonds which he

believes is an appropriate benchmark

for pricing corporate private placements

similar to the Interest. In determining

the fair market value of the Interest, Mr.

Lingvall represents that he considered

such factors as the current Treasury

bond yield environment, yield spread

premiums on similar-term bond issues,

current credit ratings, security, the size

of the Plan’s Interest and economic

factors. In addition, Mr. Lingvall will

update his appraisal of the Interest prior

to the proposed sale.

10. Thus, based upon the appraisals,

the Plan will sell the Interests in the

Venture Capital Funds for their fair

market values because, as the following

table shows, these amounts exceed the

Plan’s investment basis for each Fund.

VC Fund Cost Distrib. Adjusted basis FMV

NFF ................................................................................................................... $500,000 $1,369,523 $0 $49,094

TCW I ............................................................................................................... 500,000 414,870 85,130 267,000

NCP–B .............................................................................................................. *455,363 161,065 294,298 416,665

TCW II .............................................................................................................. 500,000 446,864 53,136 123,000

Shansby ............................................................................................................ 500,000 476,643 23,357 272,653

Totals ..................................................................................................... $2,455,363 $2,868,965 $455,921 $1,128,412

*Includes management fees totaling $58,057.

Accordingly, the total sales price for

the Interests in the Venture Capital

Funds will be $1,128,412.

With respect to the Private Placement

Bond Issue, the Plan will sell its interest

to the Employer for $267,035. As noted

in Representation 9, this amount

denotes the outstanding principal

balance of such Interest and it exceeds
Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices 17213

4This figure reflects the fair market value of the

Plan’s assets, valuing the Notes (plus accrued

interest) at zero.

5The Department expresses no opinion herein as

to whether the acquisition and holding of the Notes

by the Plan violated any of the provisions of Part

4 of Title I in the Act.

the Interest’s fair market value of

$249,203.

Therefore, the aggregate sales price for

the Venture Capital Fund Interests and

the Interest in the Private Placement

Bond Issue will be $1,395,447

($1,128,412 + $267,035).

11. In summary, it is represented that

the proposed transaction will satisfy the

statutory criteria for an exemption

under section 408(a) of the Act because:

(a) All terms and conditions of the sale

will be at least as favorable to the Plan

as those obtainable in an arm’s length

transaction with an unrelated party; (b)

the sale will be a one-time transaction

for cash; (c) the fair market value of the

Interests has been determined by

qualified, independent appraisers; (d)

the Plan will not pay any commissions,

costs or other expenses in connection

with the sale; (e) with respect to each

Venture Capital Fund Interest, the Plan

will receive as consideration an amount

that is no less than the greater of (1) its

investment basis in such Interest or (2)

the fair market value of the Interest on

the date of the sale; and (f) with respect

to the Private Placement Bond Issue, the

Plan will receive as consideration an

amount that is no less than the greater

of (1) the remaining principal balance of

such Interest or (2) the fair market value

of the Interest on the date of the sale.

Notice to Interested Persons

Notice of the proposed exemption

will be provided to interested persons

within 10 days as of the date of

publication of the notice of pendency in

the Federal Register. Such notice will

be provided to interested persons by

first class or interoffice mail. The 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 hearing

requests with respect to the proposed

exemption are due 40 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.)

The Kenzer Corporation Thrift Savings

Plan and Trust (the Plan), Located in

New York, New York

[Application No. D–10391]

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

‘‘restoration payment’’ (the Restoration

Payment) to the Plan by The Kenzer

Corporation (the Employer), in respect

of certain defaulted notes (the Notes),

and (2) the potential future receipt by

the Employer of ‘‘recapture payments’’

(the Recapture Payments) from the Plan.

This proposed exemption is subject to

the following conditions:

(1) The Restoration Payment covers

the face amount of the Notes and

accrued interest as of the date of default,

plus lost opportunity costs attributable

to the Notes since the date of default;

(2) Any Recapture Payments are

restricted solely to the amounts, if any,

recovered by the Plan with respect to

the Notes in litigation or otherwise; and

(3) The Employer receives a favorable

ruling from the Internal Revenue

Service that the Restoration Payment

does not constitute a ‘‘contribution’’ or

other payment that will disqualify the

Plan.

Summary of Facts and Representations

1. The Plan is a 401(k) plan sponsored

by the Employer. The Employer, a New

York corporation, provides executive

search services to client businesses

seeking to fill executive or management

level positions and is headquartered in

New York City. As of June 30, 1996, the

Plan had total assets of approximately

$851,472.4 As of December 3, 1996, the

Plan had approximately 50 participants

and beneficiaries. The trustees of the

Plan (the Trustees) are Robert Kenzer,

Chairman of the Employer, and Eric

Segal, President of the Employer.

2. Among the assets of the Plan are

the Notes, which are promissory notes

issued by Bennett Funding, Inc. or an

affiliate thereof (collectively, Bennett).

The Plan acquired the Notes beginning

in approximately 1991. The Notes

consist of four separately issued notes in

the amounts of $100,000, $100,000,

$245,000, and $200,000, respectively,

for an aggregate face amount of

$645,000.

The applicant represents that the

Trustees believed the Notes to be secure,

safe investments. Documentation issued

to the Plan indicated that each Note was

secured by (a) equipment owned by

Bennett which Bennett was leasing to

unrelated third parties; (b) an

assignment of the income stream

generated by such leases; and (c) a

master insurance policy issued by one

of two insurance companies, which

guaranteed the income stream from the

leases.

In view of the relatively high interest

rates being offered on investments

which the Trustees considered to be

low-risk, the Notes, when due, would

generally be ‘‘rolled over,’’ with both the

principal and accrued interest being

reinvested in new Notes. As represented

by Bennett, interest paid on each Note

was deposited in a so-called ‘‘Insured

Prime Conversion Account’’ (IPCA)

until the maturity date, at which time

the interest was added to the principal

amount of the Note and reinvested in a

new Note.

3. In February, 1996, Bennett

announced that it was deferring interest

payments then coming due on the

Notes, which was in fact an act of

default on the Notes. On April 2, 1996,

Bennett filed a petition in the United

States Bankruptcy Court for the

Northern District of New York (Cases

Nos. 96–61376 et seq), seeking

reorganization under Chapter 11 of the

Federal Bankruptcy Code.5 Richard M.

Breeden, formerly Chairman of the

Securities and Exchange Commission

(S.E.C.), was appointed as bankruptcy

trustee. Contemporaneously, the S.E.C.

filed a suit against Bennett in the United

States District Court for the Southern

District of New York, charging

numerous acts of fraud and violations of

the Securities Act of 1933 and the

Securities and Exchange Act of 1934.

It appears, among other things, that

Bennett had begun, at one point, to

‘‘secure’’ the Notes with bogus leases of

non-existent equipment on a wholesale

basis. In other cases, Bennett pledged

actual equipment as security for loans

from institutional lenders and thereafter

pledged the same equipment lease as

further security both to the lenders and

to public purchasers of the Notes. The

money being raised with the newly

issued Bennett Notes was apparently

being used to pay off the interest due on

older Bennett Notes, or being siphoned

off into unrelated business ventures

owned by members of the Bennett

management. In addition, it was

revealed that the Notes were not in any

manner insured and that the IPCA
17214 Federal Register / Vol. 62, No. 68 / Wednesday, April 9, 1997 / Notices

6The Department notes the applicant’s

representation that the Plan’s lost opportunity costs

with respect to the $771,715 will be calculated

based upon an assumed rate of return equal to the

interest rate paid on the Plan’s money market

investments for the period from February 29, 1996

to December 31, 1996, and thereafter, the interest

rate paid on money market funds offered by the

Plan to participants. (Effective as of January 1, 1997,

the Plan permitted participants to direct the

investment of their respective individual accounts).

appears to have been a commingled

account whose assets were used by

Bennett in an, as yet, unascertained

fashion.

The result of these alleged fraudulent

activities, finally, was a build-up of cash

obligations which Bennett could no

longer pay through the sale of new

Notes. Bennett’s liabilities exceed a

billion dollars, and amounts due to

unsecured creditors, among which Note

holders are currently included, exceed

$800 million. The Employer has filed

claims with the insurers whose

certificates of insurance were issued to

investors in the Notes. However, these

insurers have taken the position that

such certificates were bogus and that no

insurance existed. The bankruptcy

trustee has sued the insurers, alleging,

among other things, complicity in

Bennett’s fraudulent scheme.

4. Whatever amount, if any, that the

Plan is able to recover with respect to

the Notes in litigation or otherwise, it is

likely to suffer enormous losses. The

Employer proposes, therefore, to make

the Plan whole with a Restoration

Payment covering the face amount of

the Notes and accrued interest as of

February 29, 1996, the end of the last

month for which interest was credited

in respect of the Notes ($771,715), plus

an amount for lost opportunity costs

attributable to the Notes (approximately

$21,473, as of September 30, 1996) for

the period from February 29, 1996 to the

date immediately prior to the date that

the Restoration Payment is deposited in

the Plan.6 The Plan will refund the

Restoration Payment to the Employer

only to the extent of any amount that

the Plan is able to recover from Bennett.

The Employer is bearing all expenses of

prosecuting the Plan’s claims in respect

of the Notes, including those relating to

Bennett’s bankruptcy proceedings, as

well as the costs of this exemption

application.

Effective as of January 1, 1997, the

Plan was converted to a self-directed,

individual account plan, administered

by The Chase Manhattan Bank.

Therefore, the Restoration Payment will

be allocated to each participant account

in proportion to its allocated share of

the net asset value of the entire Plan

portfolio. The Employer has requested a

ruling from the Internal Revenue

Service that the Restoration Payment

does not constitute a ‘‘contribution’’ or

other payment that will disqualify the

Plan.

5. In summary, the applicant

represents that the proposed

transactions satisfy the statutory criteria

for an exemption under section 408(a) of

the Act for the following reasons:

(1) The Restoration Payment will

enable the Plan to immediately recover

the face amount of the Notes and

accrued interest as of the date of default,

plus lost opportunity costs attributable

to the Notes since that date; (2) any

Recapture Payments will be restricted

solely to the amounts, if any, recovered

by the Plan with respect to the Notes in

litigation or otherwise; and (3) the

Employer must receive a favorable

ruling from the Internal Revenue

Service that the Restoration Payment

does not constitute a ‘‘contribution’’ or

other payment that will disqualify the

Plan.

Notice to Interested Persons

Notice of the proposed exemption

shall be given to all interested persons

by personal delivery or by first-class

mail within 15 days of the date of

publication of this notice of pendency

in the Federal Register. Such notice

shall include a copy of this notice of

pendency as published in the Federal

Register and shall inform interested

persons of their right to comment and/

or request a hearing with respect to the

proposed exemption. Comments and

requests for a hearing are due within 45

days of the date of publication of this

notice in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms.

Karin Weng of the Department,

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

a toll-free number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest of

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which among other things

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

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

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete and

accurately describe all material terms of

the transaction which is the subject of

the exemption. In the case of continuing

exemption transactions, if any of the

material facts or representations

described in the application change

after the exemption is granted, the

exemption will cease to apply as of the

date of such change. In the event of any

such change, application for a new

exemption may be made to the

Department.

Signed at Washington, DC, this 3rd day of

April, 1997.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 97–8973 Filed 4–8–97; 8:45 am]

BILLING CODE 4510–29–P

FEDERAL MINE SAFETY AND HEALTH

REVIEW COMMISSION

Sunshine Act Meeting

April 3, 1997.

PREVIOUSLY ANNOUNCED TIME AND DATE:

10:00 a.m., Thursday, March 20, 1997.

PLACE: Room 6005, 6th Floor, 1730 K

Street, N.W., Washington, D.C.

STATUS: Open.

CHANGES IN THE MEETING: The

Commission postponed until April 23,

1997, oral argument on the following:

1. Secretary of Labor v. Amax Coal

Co., Docket No. LAKE 94–74.