30012 Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices

the miner’s Social Security Number. If

the claim is approved, the miner is

entitled to medical benefits directly

related to the treatment of the miner’s

black lung disease, which include

reimbursement of reasonable travel

costs for that treatment. The CM–957

form is specifically designed to record

all such costs and to serve as the miner

beneficiary’s formal request for

reimbursement.

Ira L. Mills,

Departmental Clearance Officer.

[FR Doc. 01–13904 Filed 6–1–01; 8:45 am]

BILLING CODE 4510–27–M

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Application No. D–10951, et al.]

Proposed Exemptions; Merganser

Capital Management LP (Merganser),

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 restrictions of the

Employee Retirement Income Security

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

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests: All interested persons are

invited to submit written comments or

request for a hearing on the pending

exemptions, unless otherwise stated in

the Notice of Proposed Exemption,

within 45 days from the date of

publication of this Federal Register

Notice. Comments and requests for a

hearing should state: (1) the name,

address, and telephone number of the

person making the comment or request,

and (2) the nature of the person’s

interest in the exemption and the

manner in which the person would be

adversely affected by the exemption. A

request for a hearing must also state the

issues to be addressed and include a

general description of the evidence to be

presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, NW.,

Washington, DC 20210. Attention:

Application No. __, stated in each

Notice of Proposed Exemption. The

applications for exemption and the

comments received will be available for

public inspection in the Public

Documents Room of the Pension and

Welfare Benefits Administration, U.S.

Department of Labor, Room N–5638,

200 Constitution Avenue, NW.,

Washington, DC 20210.

Notice to Interested Persons: Notice of

the proposed exemptions will be

provided to all interested persons in the

manner agreed upon by the applicant

and the Department within 15 days of

the date of publication in the Federal

Register. Such notice shall include a

copy of the notice of proposed

exemption as published in the Federal

Register and shall inform interested

persons of their right to comment and to

request a hearing (where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

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

accordance with procedures set forth in

29 CFR part 2570, Subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

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

the authority of the Secretary of the

Treasury to issue exemptions of the type

requested to the Secretary of Labor.

Therefore, these notices of proposed

exemption are issued solely by the

Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

Merganser Capital Management LP

(Merganser) Located in Cambridge,

Massachusetts

[Application No. D–10951]

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, August 10, 1990).

Section I. Transaction

If the exemption is granted, Merganser

shall not be precluded from functioning

as a ‘‘qualified professional asset

manager’’ pursuant to Prohibited

Transaction Exemption 84–14 (49 FR

9494, Mar. 13, 1984) (PTE 84–14) for the

period between April 6, 2000 and

December 31, 2006, solely because of its

failure to satisfy the shareholders’ or

partners’ equity requirement under

section V(a)(4) of PTE 84–14, provided

that the conditions set forth in section

II are met.

Section II. Conditions

(a) Merganser shall obtain an

irrevocable Letter of Credit, which shall

be reduced only by ERISA Claims paid

on behalf of ERISA Clients.

(b) The amount available under the

Letter of Credit shall be at least

$750,000 as of the first day of each fiscal

year during which the Letter of Credit

is maintained.

(c) Merganser shall cause the Letter of

Credit to be issued to an Agent to be

held for the benefit of all ERISA Clients.

(d) Merganser shall notify current and

future ERISA Clients in writing of: (i)

Their status as beneficiaries of the Letter

of Credit; (ii) their right to make a draw

against the Letter of Credit by presenting

the Agent with the documentation

described in (g) below; and (iii) the U.S.

address of the Agent at which an ERISA

Client may present such documentation.

Merganser shall promptly notify all

ERISA Clients of any changes in the

information as to how to contact the

Agent.

(e) Merganser shall provide current

and future ERISA Clients with a copy of

the proposed and final exemption, if

granted, as published in the Federal

Register.

(f) Merganser shall provide the Agent

with a complete list of all ERISA

Clients, which shall be updated each

time Merganser obtains a new ERISA

Client.

(g) The Letter of Credit shall be

payable on demand solely to any ERISA

Client (or its agent) if the ERISA Client

provides the Agent with:

(i)(A) a certified copy of the final

judgment against Merganser based on an

ERISA Claim of such client, entered by

a court of competent jurisdiction with

all rights of appeal having expired or

having been exhausted, or (B) a true

copy of a settlement agreement between

the ERISA Client and Merganser

providing for damages to the ERISA

Client with respect to an ERISA Claim;

(ii) in the case of a final court

judgment, a certified true copy of a

Sheriff’s or Marshall’s levy and

execution on the judgment, returned

unsatisfied, or such other

documentation, certified by an officer of

the court in which the judgment was

entered, stating that the judgment

remains unsatisfied following attempts

Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices 30013

to collect the judgment in accordance

with local court rules; and

(iii) a certificate of an authorized

representative of the ERISA Client

stating the amount of the judgment or

settlement which remains unsatisfied.

(h)(i) The Letter of Credit shall be

maintained until the earlier of December

31, 2006 or Merganser’s satisfaction of

the partners’ equity requirement under

section V(a)(4) of PTE 84–14.

(ii) Notwithstanding subparagraph (i),

in the event that one or more ERISA

Clients has a Pending ERISA Claim on

December 31, 2006, Merganser shall

either (A) cause the Letter of Credit to

be maintained until the earlier of

December 31, 2008 or a final judgment

or settlement disposing of all such

Pending ERISA Claims, or (B) cause a

bond to be purchased which fully

insures all such Pending ERISA Claims

in the total amount equal to the amount

of such Pending ERISA claims but not

to exceed $750,000.

Section III. Definitions

(a) ‘‘Agent’’ shall mean a commercial

bank, trust company or other financial

institution subject to federal or state

banking regulation that is independent

of Merganser.

(b) ‘‘Claim’’ shall mean a civil

proceeding for monetary relief which is

commenced by the filing or service of a

civil complaint or similar pleading, or a

request for monetary relief which could

have been the subject of such a

complaint or pleading but for a

settlement agreement.

(c) ‘‘ERISA Claim’’ shall mean a Claim

filed against Merganser or with respect

to which a settlement is reached with

Merganser prior to December 31, 2006,

by reason of Merganser’s alleged breach

or violation of a duty described in

sections 404 or 406 of the Act.

(d) ‘‘ERISA Client’’ shall mean any

employee benefit plan covered by Title

I of ERISA to which Merganser provides

or provided investment management

services on or before December 31,

2006.

(e) ‘‘Letter of Credit’’ shall mean a

standby letter of credit in the amount of

$750,000 issued by a commercial bank,

trust company or other financial

institution subject to federal or state

banking regulation that is independent

of Merganser.

(f) ‘‘Pending ERISA Claim’’ shall

mean an ERISA Claim that: (i) has been

filed in court and is not the subject of

a final judgment or settlement; or (ii)

has been the subject of a final judgment

or settlement which remains

unsatisfied.

(g) A person will be ‘‘independent’’ of

another person only if:

(i) for purposes of this exemption,

such person is not an affiliate of that

other person; and

(ii) the other person, or an affiliate

thereof, is not a fiduciary that has

investment management authority or

renders investment advice with respect

to assets of such person.

(h) An ‘‘affiliate’’ of a person means:

(i) any person directly or indirectly

through one or more intermediaries,

controlling, controlled by, or under

common control with the person. (For

purposes of this paragraph, the term

‘‘control’’ means the power to exercise

a controlling influence over the

management or policies of a person

other than an individual);

(ii) any officer, director, employee or

relative (as defined in section 3(15) of

the Act) of any such other person or any

partner in any such person; and

(iii) any corporation or partnership of

which such person is an officer, director

or employee, or in which such person

is a partner.

Summary of Facts and Representations

1. Based in Cambridge,

Massachusetts, Merganser Capital

Management LP (the Partnership) is a

registered investment adviser with more

than $2.4 billion in assets under its

management, including $850 million in

ERISA plan assets. The Partnership’s

predecessor, Merganser Capital

Management Corporation (the

Corporation), was founded in 1984 as a

wholly-owned subsidiary of the

Polaroid Corporation. In 1987, Polaroid

sold the subsidiary to its founders,

Edward R. Bedrosian and Edward

Safran. They were equal partners, each

owning fifty percent of the stock of the

Corporation.

2. On April 6, 2000, Mr. Safran sold

his shares back to the Corporation for

$10 million. The Corporation’s purchase

of the stock was financed by a $2.5

million contribution from Mr.

Bedrosian, a $6 million unsecured loan

from a commercial bank, and a secured,

subordinated loan from Mr. Safran in

the amount of $1.5 million. Following

the buyout, Mr. Bedrosian owned 100%

of the Corporation. Five employees of

the Corporation participated in a

phantom stock ownership plan. The

Corporation then transferred

substantially all of its assets and

liabilities to the Partnership, a new

limited partnership formed to serve as

Merganser’s operating entity.

3. The general partner of the new

Partnership is the Corporation. The

Partnership has a single limited partner,

a limited liability company owned by

the same Merganser employees who had

participated in the Corporation’s

phantom stock ownership plan. The

general partner has an eighty percent

interest and the limited partner has a

twenty percent interest in the

Partnership.

4. The Applicant represents that as a

result of the buyout of Mr. Safran, as of

December 31, 2000 (the last day of its

fiscal year), the Partnership has

partners’ equity of negative $6.5 million,

determined in accordance with

‘‘generally accepted accounting

principles’’ (GAAP). Because the buyout

was an ‘‘internal’’ transaction, GAAP

requires that the assets of the

Corporation (and the Partnership) be

reflected at ‘‘book’’ rather than market

value. As a result, goodwill, a

significant asset to a firm such as this

one, cannot be recognized on the

Partnership’s balance sheet. Because

goodwill cannot be included as an asset,

the Partnership will have negative

equity until most of its current debt is

repaid.

The Applicant further represents that,

had the stock of the Corporation been

sold to outsiders in an external

transaction, the Corporation (and thus

the Partnership) could have recognized

the full market value of its assets.

Following an external transaction, the

Corporation (and the Partnership)

would have had equity sufficient to

meet the requirements of PTE 84–14,

even if it had financed the transaction.

Had Mr. Bedrosian personally borrowed

the funds to buyout Mr. Safran using the

Partnership to guarantee the loan, the

Partnership would have had sufficient

partners’ equity. Although the partners’

equity is affected by the structure of the

buyout, the Partnership’s earning

potential is not.

The Partnership’s current EBITDA

(i.e., earnings before interest, taxes,

depreciation, and amortization) is over

$2 million per year. It is expected that,

as a result of debt repayment and

earnings, the Partnership will satisfy the

$750,000 equity requirement on a GAAP

basis within four or five years.

5. To qualify as a qualified

professional asset manager (QPAM)

under PTE 84–14, an investment adviser

must have partners’ equity in excess of

$750,000. As a result of its

reorganization, as of April 6, 2000, the

Partnership will no longer qualify as a

QPAM under PTE 84–14 because it will

not have $750,000 in partners’ equity.

6. The Partnership seeks an

individual exemption permitting it to

substitute an irrevocable standby letter

of credit for the partners’ equity

requirement under PTE 84–14.

Specifically, the Partnership will cause

First Union National Bank (First Union)

to issue an irrevocable standby letter of

30014 Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices

credit for the benefit of employee

benefit plans to which Merganser

provides or provided investment

management services on or before

December 31, 2006 (ERISA Clients). The

Applicant represents that, if the

exemption is granted, it will serve as a

QPAM, as defined in PTE 84–14, for all

the ERISA Clients with respect to which

it provides investment management

services.

7. The letter of credit will initially be

issued in the amount of $750,000, the

amount of the partners’ equity

requirement under PTE 84–14. As a

condition of continuing relief, the

Partnership will ensure that the amount

available to ERISA Clients under the

letter of credit as of the first day of each

of the Partnership’s fiscal years for

which relief is needed is at least

$750,000. Thus, in the event that there

is a payment under the letter of credit

during one of the Partnership’s fiscal

years, thereby reducing the remaining

amount available under the letter of

credit, the Partnership will ensure that

the letter of credit is increased back to

$750,000 no later than the first day of

the following fiscal year.

8. The letter of credit shall be payable

on demand solely to any ERISA Client

(or its agent) if the ERISA Client

provides:

(1) (A) a certified copy of the final

judgment against Merganser based on an

ERISA Claim of such client, entered by

a court of competent jurisdiction with

all rights of appeal having expired or

having been exhausted, or

(B) a true copy of a settlement

agreement between the ERISA Client

and Merganser providing for damages to

the ERISA Client with respect to an

ERISA Claim;

(2) in the case of a final court

judgment, a certified true copy of a

Sheriff’s or Marshall’s levy and

execution on the judgment, returned

unsatisfied, or such other

documentation, certified by an officer of

the court in which the judgment was

entered, stating that the judgment

remains unsatisfied following attempts

to collect the judgment in accordance

with local court rules; and

(3) a certificate of an authorized

representative of the ERISA Client

stating the amount of the judgment or

settlement which remains unsatisfied.

9. The letter of credit will be

maintained by the Partnership for the

period of the exemption, unless the

Partnership satisfies the partners’ equity

requirement of PTE 84–14 at an earlier

date. Additionally, in the event that one

or more ERISA Clients has a pending

ERISA claim against Merganser

outstanding on December 31, 2006,

Merganser will either (i) cause the letter

of credit to be maintained until the

earlier of December 31, 2008 or a final

judgment or settlement disposing of all

such pending ERISA claims, or (ii)

cause a bond to be purchased which

fully insures all such pending ERISA

claims in the total amount equal to the

amount of such pending ERISA claims

but not to exceed $750,000.

If Merganser causes a bond to be

purchased under subparagraph (ii)

above, the bond would be payable under

terms consistent with the letter of credit.

Accordingly, the bond would cover the

pending ERISA claim(s) and would be

payable in the event of a final judgment

with rights to appeal expired or

exhausted, or in the event of a

settlement. The Applicant represents

that it has inquired and been told by a

bond company that obtaining a bond for

a claim that already has been filed is

commercially feasible, although it could

require substantial collateral.

10. During the life of the letter of

credit, Merganser’s ERISA Clients will

likely change; new clients will be added

and existing clients may end their

relationships with Merganser. Because

the letter of credit is intended to provide

protection to a changing group of ERISA

Clients, it will be necessary to issue the

letter to an ‘‘agent’’ who can hold it on

behalf of the multiple ERISA Clients.

The agent (Agent) will be a person or

entity affiliated with First Union and

independent of the Partnership. The

Agent will be required to demand

payment from First Union on behalf of

any ERISA Client under exactly the

same circumstances under which First

Union is obligated to pay under the

letter of credit (i.e., an unsatisfied claim

or judgment for ERISA Claims).

11. Neither First Union nor the Agent

has any discretion in determining

whether, respectively, to pay under the

letter of credit or to demand payment

under the letter of credit. If an ERISA

Client meets the conditions described in

the letter of credit, the duty to pay or

demand payment is automatic. So long

as the letter of credit is in effect, the

Agent will demand and First Union will

pay any ERISA Client who obtains a

settlement or judgment of ERISA claims,

irrespective of when the alleged

violations occurred.

12. The Agent will maintain an up-todate list of all of Merganser’s ERISA

Clients, each of which shall be entitled

to instruct the Agent to demand

payment under the letter of credit

consistent with the conditions described

above. This list will be made an exhibit

to the agreement between the Agent and

the Partnership. Each current ERISA

Client will be provided with written

notice of its rights with respect to the

letter of credit at the same time as it is

provided with a copy of the proposed

exemption for purposes of its right to

comment pursuant to the Department’s

regulations at 29 CFR 2570.43. New

ERISA Clients will be provided with

written notice of their rights with

respect to the letter of credit at the same

time as they are provided with a copy

of the proposed and final exemption, if

granted, as published in the Federal

Register. ERISA Clients will be

provided with the U.S. address of the

Agent, and will be promptly notified of

any changes in that address. First

Union’s obligation to pay under the

letter of credit will be fully secured by

marketable collateral with value of at

least $750,000.

13. In summary, it is represented that

the proposed transactions satisfy the

statutory criteria for an exemption

under section 408(a) of the Act because:

(a) The requested exemption is

administratively feasible because the

Partnership’s compliance with the

proposed conditions can be readily

determined. In addition, the exemption

would not require continued monitoring

or other involvement on behalf of the

Department.

(b) The requested exemption is in the

interest of the Partnership’s ERISA

Clients and their participants and

beneficiaries because it permits the

Partnership to render continuing

services to the ERISA Clients and

permits those ERISA Clients to continue

to invest without regard to the ‘‘party in

interest’’ status of other parties to the

transactions, while providing security

for any ERISA Claims arising out of

these investments.

(c) The requested exemption is

protective of the rights of the

Partnership’s ERISA Clients and their

participants and beneficiaries because it

requires the maintenance of a letter of

credit exclusively for the Partnership’s

ERISA Clients.

For Further Information Contact:

Karen Lloyd of the Department,

telephone (202) 219–8194. (This is not

a toll-free number).

ATGI 401(k) Plan (the Plan) Located in

Houston, Texas

[Application No. D–10970]

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, August 10, 1990). If the

exemption is granted, the restrictions of

Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices 30015

sections 406(a), 406(b)(1) and (b)(2) and

407(a) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

4975(c)(1)(A) through (E) of the Code,

shall not apply effective November 30,

2000 to: (1) the acquisition of Stock

Rights (the Stock Rights) by the Plan in

connection with a Stock Rights offering

by Alpha Technologies Group, Inc.

(ATGI); (2) the holding of the Stock

Rights by the Plan during the

subscription period of the offering; and

(3) the disposition or exercise of the

Stock Rights by the Plan; provided that

the following conditions are met:

(a) The Stock Rights were acquired

pursuant to Plan provisions for

individually-directed investment of

such accounts;

(b) The Plan’s receipt of the Stock

Rights occurred in connection with a

Stock Rights offering made available to

all shareholders of common stock of

ATGI;

(c) All decisions regarding the holding

and disposition of the Stock Rights by

the Plan were made, in accordance with

the Plan provisions for individuallydirected investment of participant

accounts, by the individual Plan

participants whose accounts in the Plan

received Stock Rights in connection

with the offering;

(d) The Plan’s acquisition of the Stock

Rights resulted from an independent act

of ATGI as a corporate entity, and all

holders of the Stock Rights, including

the Plan, were treated in the same

manner with respect to the acquisition;

and

(e) The price received by the Plan for

the Stock Rights is no less than the fair

market value of the Stock Rights on the

date of the offering.

Effective Date: This exemption is

effective as of November 30, 2000.

Summary of Facts and Representations

1. ATGI, the sponsor of the Plan, is a

Delaware corporation engaged primarily

in the manufacturing of thermal

management products, principally heat

sinks. ATGI’s thermal management

business is conducted through several

wholly owned subsidiaries: Wakefield

Engineering, Inc., which includes the

Wakefield-Fall River and WakefieldTemecula Divisions; Specialty Extrusion

Corporation; Lockhart Industries, Inc;

and National Northeast Corporation

(NNE).

2. The Plan is a defined contribution

profit-sharing plan. The initial effective

date of the Plan was November 1, 1977.

The Plan is a qualified plan under Code

section 401(a). As of February 19, 2001,

the Plan has approximately 730

participants. According to CIGNA

Retirement & Investment Services

(CIGNA), the Plan’s recordkeeper,

approximately 200 of these participants

had shares of ATGI stock, a NASDAQ

publically traded stock, allocated to

their Plan accounts as of the Record

Date. In total, 188,983.82 shares of ATGI

stock were allocated to Plan

participants’ accounts on the Record

Date for a total ATGI stock balance of

$1,994,971.06. These holdings of

employer stock represented

approximately 19.95% of the Plan’s

total assets as of the Record Date.

3. Steve E. Chupik, ATGI’s VicePresident of Administration, serves as

Plan Trustee. The Plan provides for

participant-directed investment of

contributions made to the Plan.

Investment in employer stock is a

permitted investment option under the

terms of the Plan. The Plan Trustee has

authority to vote all shares of employer

stock owned by participants through the

Plan. In addition to ATGI stock, Plan

participants may choose among the

following investment options: (1) the

Guaranteed Long-Term Fund, (2) the

Guaranteed Short-Term Securities Fund,

(3) the Large Company Stock Index

Fund, (4) the Fidelity Advisor Growth

Opportunities Account, (5) the Janus

Account, (6) the PBHG Growth Account,

and (7) the American Century Vista

Account.

Each participant’s Plan account is also

subdivided into various source

accounts. Source accounts denote from

which sources monies held within a

participant’s Plan account were

received. There are six source account

designations: (1) Employee Post-Tax, (2)

Rollover, (3) Prior Company Matching,

(4) Company Discretionary, (5)

Company Matching, and (6) Employee

Pre-Tax.

4. ATGI’s decision to engage in the

Stock Rights offering was made in

ATGI’s capacity as issuer of its

securities, not in its capacity as a Plan

fiduciary. The decision was prompted

by a business need to raise capital for

the expansion of ATGI’s thermal

management business. The offering was

conducted as a mechanism for partially

financing the purchase of the stock of

NNE, a leading manufacturer of

aluminum extrusions and heat sinks.

ATGI first began exploring the

possibility of engaging in a Stock Rights

offering to assist in financing the

purchase of NNE in September 2000.

Based upon this initial consideration,

ATGI filed an S–2 Registration

Statement containing a preliminary

prospectus with the Securities and

Exchange Commission (the SEC) on

October 6, 2000. ATGI made the Stock

Rights offering contingent upon the

completion of the purchase of NNE. On

November 21, 2000, ATGI’s Board of

Directors (the Board) resolved to meet

the requirements of the lender through

a Stock Rights offering, and it settled

upon a subscription price for the

offering. A revised S–2A Registration

Statement including a final prospectus

were then filed with the SEC on

November 30, 2000.

The acquisition of NNE was

completed on January 9, 2001, and the

proceeds of the Stock Rights offering

were contributed to the approximately

$50 million purchase price of NNE.

5. The Basic Subscription Privilege:

ATGI offered all of its shareholders as

of the Record Date the opportunity to

purchase additional shares of ATGI’s

common stock at a fixed price and in

proportion to the shareholders’ existing

interests on the Record Date. Through

the Stock Rights offering, shareholders

received one stock right for each 25

shares of stock they owned on the

Record Date. Shareholders became

entitled to receive their Stock Rights on

or about November 30, 2000 upon the

effectiveness of ATGI’s S–2A

Registration Statement. No fractional

Stock Rights were distributed. Rather,

the number of Stock Rights received by

a shareholder was rounded up to the

nearest whole number if the fraction

was greater than 1⁄2 and rounded down

to the nearest whole number if the

fraction was less than 1⁄2.

Each stock right allowed the

shareholder to purchase one share of

ATGI common stock at the fixed

subscription price of $7.25 per share.

The Board set this subscription price

after considering several factors,

including the historical and current

market price of the common stock,

ATGI’s current business prospects,

recent and anticipated operating results,

ATGI’s need for capital, the alternatives

available for raising capital, the amount

of proceeds desired, the pricing of

similar transactions, the liquidity of the

common stock, and the need to offer

shares at a price that would be attractive

to investors relative to the current

trading price of ATGI’s common stock.

Shareholders choosing to use the

Stock Rights granted to them to

purchase additional shares of ATGI

stock were required to exercise their

rights by 5 p.m., EST, on the Expiration

Date. A shareholder elected to exercise

his or her Stock Rights by properly

completing the rights exercise

agreement provided to the shareholder

along with the prospectus and

delivering this rights exercise agreement

to the subscription agent, the American

Stock Transfer and Trust Company (the

Subscription Agent), by 5 p.m., EST, on

30016 Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices

the Expiration Date. A shareholder

choosing to exercise rights also had to

deliver the purchase price of the stock

purchased pursuant to the exercise of

rights to the Subscription Agent by 5

p.m., EST, on the Expiration Date.

Shareholders were allowed to exercise

as few or as many of their basic Stock

Rights as they wished. The Stock Rights

were nontransferable, and an exercise of

Stock Rights was irrevocable. All

unexercised rights expired at 5 p.m.,

EST, on the Expiration Date and were

forfeited.

6. ATGI limited the shares of common

stock it issued under the Stock Rights

offering to 270,946 shares. However,

ATGI expected that not all of these

shares would be purchased by

shareholders pursuant to the exercise of

their basic subscription rights. Rather,

ATGI expected that some shareholders

would not exercise any or all of the

Stock Rights granted to them under the

basic subscription privilege. To

compensate for these under-subscribing

shareholders, ATGI provided

shareholders who elected to exercise all

of their Stock Rights pursuant to the

basic subscription privilege with the

opportunity to purchase those shares

that were not purchased by the undersubscribing shareholders (the OverSubscription Privilege). Shareholders

were required to exercise their oversubscription rights at the same time and

in the same manner as they elected to

exercise their basic subscription rights.

ATGI also expected that the number

of over-subscription requests might

exceed the number of shares available.

In this event, ATGI decided to allocate

the available shares to over-subscribing

shareholders in proportion to the

number of shares purchased by these

shareholders through the basic

subscription privilege.

6. The Expiration Date of the Stock

Rights Offering: the expiration date and

time of the Stock Rights offering were

initially set for 5 p.m., EST, January 5,

2001. However, ATGI reserved the right

to extend the offering up to 10 days. On

January 5, 2001, ATGI announced that

it was exercising this right to extend the

offering. The new expiration date and

time were extended to 5 p.m., EST,

January 8, 2001.

7. Pursuant to applicable securities

laws, ATGI could not exclude the Plan

from the Stock Rights offering. Thus, as

the holder of record of the 188,983.82

shares of ATGI stock allocated to Plan

participants’ accounts by CIGNA as of

the Record Date, the Plan Trustee

received 7,556 Stock Rights through the

Stock Rights offering. The Plan was

treated in the same manner as all other

holders of this class of securities.

To avoid engaging in a prohibited

transaction, the Plan Trustee considered

refusing to accept the Stock Rights

offered from ATGI. However, since

participation in the Stock Rights

offering was expected to allow Plan

participants whose Plan accounts held a

minimum level of ATGI stock on the

Record Date (Invested Plan Participants)

to purchase shares of ATGI’s common

stock at a discount from market price,

the Plan Trustee concluded that refusing

to accept the Stock Rights might

constitute a breach of his fiduciary duty

to Plan participants. A refusal of the

Stock Rights would have denied

Invested Plan Participants the

opportunity to purchase additional

shares of ATGI stock at the discounted

price offered to all other ATGI

shareholders.

8. The Plan provides for individuallydirected investment of the assets in each

participant’s account. Therefore, the

Stock Rights received by the Plan

Trustee were allocated to individual

Invested Plan Participants’ accounts

based upon the participants’ respective

holdings of ATGI stock on the Record

Date. All decisions regarding the

exercise of the Stock Rights were made

by the Invested Plan Participants. The

Plan Trustee undertook measures to

ensure that Invested Plan Participants

were provided with adequate

information regarding the Stock Rights

offering so that these participants could

make informed decisions regarding the

exercise of their Stock Rights.

9. Following the Board’s resolution on

November 21, 2000 setting the

subscription price of the Stock Rights

offering, a finalized prospectus was filed

with the SEC on November 30, 2000 as

part of ATGI’s S–2A Registration

Statement. On December 4, 2000, the

Plan received copies of this completed

prospectus from the printer for

distribution to Invested Plan

Participants. Completed prospectuses

and the accompanying materials

described below were sent via Federal

Express on December 6, 2000 to the

human resource departments at ATGI’s

locations. On December 7, 2000, the

prospectuses were distributed to the

approximately 125 Invested Plan

Participants employed at these

locations. Approximately 70 Invested

Plan Participants worked at remote

locations or were not current employees

of ATGI. These participants were mailed

prospectuses and accompanying

materials via first-class mail on

December 6, 2000. In comparison,

copies of the prospectus were not

mailed to other ATGI shareholders until

December 8, 2000.

10. A memorandum from the Plan

Trustee accompanied the prospectus.

The memorandum introduced the Stock

Rights offering and informed Invested

Plan Participants of the additional

information they would be receiving at

a later date.

11. The Plan Trustee provided

Invested Plan Participants with a letter

containing an explanation of the Stock

Rights offering and outlining the

procedure they should follow to

exercise their Stock Rights. The letter

also reminded Invested Plan

Participants of the risks involved in

investing in ATGI stock. Invested Plan

Participants who were current

employees of ATGI received the letter

and the accompanying materials

described below via interoffice mail on

December 8, 2000. Invested Plan

Participants who worked at remote

locations or who were not current

employees of ATGI were mailed the

letter and accompanying materials via

U.S. priority mail on December 7, 2000.

12. A Direction Form accompanied

the above letter provided to Invested

Plan Participants on December 7 and

December 8, 2000. The Direction Form

served as the mechanism through which

Invested Plan Participants directed the

Plan Trustee to exercise or to forfeit the

Stock Rights allocated to them. The

Direction Form also required Invested

Plan Participants electing to exercise

some or all of their rights to designate

which of their Plan investments were to

be liquidated to fund the exercise of the

rights. A self-addressed envelope was

included with the Direction Form to

assist Invested Plan Participants in

returning the Direction Form to the Plan

Trustee.

In addition to the Direction Form,

Invested Plan Participants received a

Source Designation Form enabling them

to designate from which Plan accounts,

such as the employee pre-tax account or

the company matching account, they

wished the purchase price of any stock

purchased pursuant to the exercise of

rights to be withdrawn. Invested Plan

Participants who had already indicated

through a return of their Direction

Forms that they would not be

participating in the Stock Rights offering

were not sent a Source Designation

Form. Approximately 110 of the

Invested Plan Participants who were

current employees of ATGI received the

Source Designation Form via facsimile

on December 20, 2000. These Invested

Plan Participants were asked to return

this form to the Plan Trustee by

December 22, 2000 by either a return

facsimile or an email. Approximately 48

of the Invested Plan Participants who

were employed at remote locations or

Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices 30017

who no longer worked at ATGI were

sent a Source Designation Form by U.S.

priority mail on December 20, 2000.

These Invested Plan Participants were

asked to respond via email, facsimile, or

telephone by December 26, 2000.

ATGI’s Human Resources Manager (the

Human Resources Manager), personally

contacted by telephone the Invested

Plan Participants who could not be

reached by facsimile. The Human

Resources Manager also contacted the

Invested Plan Participants who

indicated through a return of their

Direction Forms that they wished to

participate in the Stock Rights offering

but whose Source Designation Forms

were not received by the deadline.

Through these efforts, source

designations were obtained from all but

two of the Invested Plan Participants

exercising rights. The Human Resources

Manager also attempted to contact these

two Invested Plan Participants by

telephone; however, there was no

response from either.

13. In addition to the Direction Form

and the Source Designation Forms, a

table depicting ATGI’s daily stock

activity, including stock closing prices,

for the period from November 1, 2000 to

December 6, 2000 accompanied the

letter from the Plan Trustee provided to

Invested Plan Participants on December

7 and December 8, 2000.

14. On December 7, 2000, the Plan

Trustee provided each Invested Plan

Participant with an individualized

statement of his or her Plan accounts

reflecting that participant’s investment

fund allocations and the value of that

participant’s various Plan accounts as of

the Record Date.

15. Representatives of ATGI and the

Plan made themselves available to

answer participants’ questions regarding

the Stock Rights offering. The Human

Resources Manager conducted

telephone conferences with

approximately 30 to 35 Plan

participants and several ATGI human

resource representatives. The Plan

Trustee visited several of ATGI’s larger

locations where he answered questions

presented to him during his visits with

employees on the shop floor. The Plan

Trustee also occupied a vacant office at

these locations, allowing employees to

stop in with questions without an

appointment.

16. An Invested Plan Participant

exercised the Stock Rights by properly

completing and submitting the Direction

Form to the Plan Trustee. An Invested

Plan Participant was required to include

the following information on the

Direction Form; (i) how many Stock

Rights, if any, the participant wished to

exercise; (ii) assuming the participant

elected to exercise all of the Stock

Rights allocated to him or her pursuant

to the basic subscription privilege,

whether and how many additional

shares of stock the participant wished to

purchase pursuant to the OverSubscription Privilege; and (iii) which

Plan investments the participant wished

to liquidate to cover the purchase price

of any shares of stock purchased

pursuant to the exercise of rights.

If an Invested Plan Participant elected

to exercise rights but failed to indicate

from which investments the purchase

price should be withdrawn, he or she

was deemed to have elected that the

purchase price be withdrawn pro rata

from all of his or her investments, i.e.,

a failure to specify constituted a pro rata

election.

The deadline for receipt of properly

completed Direction Forms by the Plan

Trustee was Friday, December 22, 2000.

The rights of Invested Plan Participants

whose Direction Forms were not

received by this date were forfeited. The

December 22 deadline was selected

upon consultation with CIGNA and

Merrill Lynch, the Plan’s broker for

ATGI stock transactions. The December

22 deadline for receipt of the Direction

Forms by the Plan Trustee from Invested

Plan Participants was selected as the

latest date allowing the Plan Trustee to

review and compile the Direction Forms

for submission of the data to CIGNA by

December 27, 2000.

In addition to completing and

returning the Direction Form, Invested

Plan Participants choosing to exercise

rights were also required to complete

and return a Source Designation Form.

On the Source Designation Form,

Invested Plan Participants designated

from which Plan accounts they wished

the purchase price of the shares of stock

purchased under the Stock Rights

offering to be withdrawn. Invested Plan

Participants were warned that if they

failed to make this designation, funds

would be withdrawn from Plan

accounts in the following order; (i)

Employee Post-tax; (ii) Rollover; (iii)

Prior Company Matching; (iv) Company

Discretionary; (v) Company Matching;

and (vi) Employee Pre-Tax.

Invested Plan Participants who lacked

sufficient funds in their Plan accounts

to cover the purchase price of the

requested shares of stock could exercise

their rights pursuant to the basic or the

Over-Subscription Privileges only to the

extent of the funds available in their

Plan accounts.

17. ATGI completed the Stock Rights

offering at 5 p.m., EST, on Monday,

January 8, 2001. The Stock Rights

offering raised almost $2 million

towards the acquisition of NNE. All

270,946 shares of ATGI common stock

offered under the Stock Rights offering

were purchased. Invested Plan

Participants purchased 2,427 shares

pursuant to the basic subscription

privilege and 5,405 shares pursuant to

the Over-Subscription Privilege. Since

the Stock Rights offering was oversubscribed, the shares available for

purchase under the over-subscription

privilege were allocated to oversubscribing shareholders in proportion

to the number of shares purchased by

these shareholders pursuant to their

basic subscription rights.

ATGI’s closing stock price on the

Expiration Date was listed on NASDAQ

as $7.813.

18. The applicant states that the

proposed transaction is in the best

interests of the Plan and its participants

and beneficiaries because the

acquisition of the Stock Rights from

ATGI benefitted the Plan and its

participants by providing Invested Plan

Participants with a mechanism through

which they could increase the net worth

of their Plan accounts. Through the

exercise of the Stock Rights, the

Invested Plan Participants acquired

stock worth $7.813 per share as of the

close of business on the Expiration Date

while only paying $7.25 per share, a net

gain of $.56 per share.

19. In summary, the applicant

represents that the proposed transaction

meets the statutory criteria of section

408(a) of the Act because:

(a) The Stock Rights were acquired

pursuant to Plan provisions for

individually-directed investment of

such accounts;

(b) The Plan’s receipt of the Stock

Rights occurred in connection with a

Stock Rights offering conducted by

ATGI;

(c) All decisions regarding the holding

and disposition of the Stock Rights by

the Plan were made, in accordance with

the Plan provisions for individuallydirected investment of participant

accounts, by the individual Plan

participants whose accounts in the Plan

received Stock Rights in connection

with the offering;

(d) All holders of the Stock Rights,

including the Plan, were treated in the

same manner with respect to the

acquisition of the Stock Rights; and

(e) Through the exercise of the Stock

Rights, the Invested Plan Participants

acquired stock worth $7.813 per share

as of the close of business on the

Expiration Date while only paying $7.25

per share, a net gain of $.56 per share.

Notice to Interested Persons: Notice of

the proposed exemption shall be given

to all interested persons in the manner

agreed upon by the applicant and

30018 Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices

Department within 15 days of the date

of publication in the Federal Register.

Comments and requests for a hearing are

due forty-five (45) days after publication

of the notice in the Federal Register.

For Further Information Contact:

Khalif Ford of the Department,

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

a toll-free number).

The Joliet Medical Group, Ltd.

Employees Retirement Plan & Trust (the

Plan) Located in Joliet, Illinois

[Application D–10990]

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,

will not apply effective November 1,

1999 to the past and continued leasing

of a medical clinic (the Property)

located at 2100 Glenwood Ave., Joliet,

Illinois, from the Plan to Joliet Medical

Group, Ltd. (the Employer), provided

that the following conditions have been

and will be met:

(a) The independent fiduciary has

determined that the transaction is

feasible, in the interest of, and

protective of the Plan;

(b) The fair market value of the

Property has not exceeded and will not

exceed twenty percent (20%) of the

value of the total assets of the Plan;

(c) The independent fiduciary has

negotiated, reviewed, and approved the

terms of the lease of the Property with

the Employer;

(d) The terms and conditions of the

lease of the Property with the Employer

have been and will continue to be no

less favorable to the Plan than those

obtainable by the Plan under similar

circumstances when negotiated at arm’s

length with unrelated third parties;

(e) An independent qualified

appraiser has determined the fair market

rental value of the Property;

(f) The independent fiduciary has

monitored and will continue to monitor

compliance with the terms of the lease

of the Property to the Employer

throughout the duration of such lease

and is responsible for legally enforcing

the payment of the rent and the proper

performance of all other obligations of

the Employer under the terms of the

lease on the Property; and

(g) The Plan has not incurred and will

not incur any fees, costs, commissions,

or other charges or expenses as a result

of its participation in the proposed

transaction, other than the fee payable

to the independent fiduciary.

Effective Date: This exemption is

effective as of November 1, 1999.

Preamble

On February 15, 2001 (66 FR 10526),

the Department published a notice of

proposed exemption (the Prior Notice)

from the prohibited transaction

restrictions of the Employee Retirement

Income Security Act of 1974 and from

certain taxes imposed by the Internal

Revenue Code of 1986. The Prior Notice

for which retroactive relief had been

requested, would have provided

conditional relief for the past and

continued leasing of the Property, from

the Plan to the Employer.

On April 3, 2001 (66 FR 17737), the

Department published a withdrawal of

the Prior Notice. The notice of proposed

exemption herein provides the most

recent information submitted by the

applicant and the independent

fiduciary.

Summary of Facts and Representations

1. The Plan is a profit sharing plan

which was created effective January 1,

1975. As of August 29, 2000, the Plan

had net assets valued at approximately

$20,075,282 and 165 participants.

2. The Employer is a medical

corporation licensed to practice

medicine in the State of Illinois, whose

principal place of business is Joliet,

Illinois. The Employer’s principal place

of business is the Property. The

Employer is engaged in the general

practice of medicine.

3. The Property consists of a two story

medical building located at 2100

Glenwood Avenue, Joliet Illinois. The

Property contains approximately 10,583

square feet on each floor for a total

square footage (above ground) of

approximately 21,166 square feet. In

addition, there is a full basement which

is finished and contains an additional

approximately 10,583 square feet. The

fair market value of the Property

represents 15.94% of the total assets in

the Plan.

The Plan initially leased the Property

to the Employer for an initial term of 18

years, which ended November 1, 1999.

In response to an exemption application

filed by the Employer, the Department

granted an exemption covering the

initial lease (the Initial Lease):

Prohibited Transaction Exemption 81–

96 (PTE 81–96), 46 FR 53816 (October

30, 1981). It is represented that since the

inception of the Initial Lease, the

Employer has always paid its rent on

time and otherwise complied with all of

the terms and conditions of the Initial

Lease and PTE 81–96. Furthermore, the

independent fiduciary has continued to

monitor and oversee compliance with

the conditions of the exemption after

the expiration of the lease because the

parties determined to continue the

arrangement after November 1, 1999.

4. Joseph E. Batis, (Mr. Batis), an

accredited appraiser with Edward J.

Batis & Associates, Inc., located in Joliet,

Illinois, appraised the Property on

October 24, 2000. Mr. Batis states that

he is a full time qualified, independent

appraiser, as demonstrated by his status

as a State Certified General Real Estate

Appraiser licensed by the State of

Illinois. In addition, Mr. Batis represents

that both he and his firm are

independent of the Employer.

In his appraisal, Mr. Batis relied

primarily on the ‘‘Appraisal Process’’.

Included within the steps of this process

are three approaches to a value estimate:

the Cost Approach, the Direct Sales

Comparison Approach and the Income

Approach. According to Mr. Batis, these

methods best represent the actions of

buyers and sellers in the market place.

After Mr. Batis independently applies

each approach to value, the three

resultant value estimates are reconciled

into an overall estimate of value. In the

reconciliation process, the appraiser

analyzes each approach with respect to

its applicability to the property being

appraised. Also considered in the

reconciliation process is the strength

and weakness of each approach with

regards to supporting market data. After

inspecting the Property and analyzing

all relevant data, Mr. Batis determined

that a fee simple interest in the Property

had a fair market value of approximately

$3,200,000. On February 27, 2001, Mr.

Batis updated the appraisal and

determined the fair market monthly

rental value of the Property to be

$32,000 and the annual fair market

rental value to be $384,000.

5. An independent party, the First

Midwest Trust Company (the Bank) has

served and continues to serve as the

independent fiduciary. The Bank

represents that since the inception of

the Initial Lease, the Employer has

complied with all of the terms and

conditions of the Initial Lease and PTE

81–96. The Bank certifies that the

transaction is appropriate and in the

best interests of the Plan and that the

terms and conditions of the proposed

transactions are at least equal to what

the Plan would receive from an

unrelated party in similar transaction. In

addition, the Bank will monitor the

transaction and will have the

Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices 30019

responsibility for exercising the Plan’s

rights in the proposed transaction. On

March 28, 2001 the Bank represented

that the annual fair market rental value

of the Property should reflect 12% of

the fair market value of the Property

(3,200,000 × .12 = $384,000).

6. The Employer will enter into a five

year, ‘‘triple net’’ lease with the Plan

leasing the Property to the Employer for

a ‘‘floating’’ monthly rental of 1% of the

current appraised value of the subject

realty ($3,200,000 × 1%= $32,000). A

new appraisal by an independent,

qualified appraiser would be performed

every other year to update the rent. The

minimum guaranteed monthly rental

value (regardless of any possible

decrease in the appraisal) is $32,000.

The terms of the lease provide for a

primary term of five years with an

option to renew and extend for two

additional successive terms of five years

each subject to the approval of the

independent fiduciary. In the event of a

default, the Employer is required to

reimburse the Plan on demand for all

costs reasonably incurred by the Plan in

connection therewith, including

attorney’s fees, court costs and related

costs plus a reasonable rate of return on

the amount of accrued but unpaid rent

due the Plan, as determined by an

appropriate third party source.

7. Since the Initial Lease, the

Employer has continued to pay rent to

the Plan in a timely manner without

default or rental delinquencies.

However, the Employer is aware of the

fact that a prohibited transaction

occurred in violation of the Act

subsequent to the expiration of the lease

under PTE 81–96 (November 1, 1999).

Therefore, the Employer has requested

exemptive relief with respect to the past

and continued leasing of the Property by

the Plan to the Employer. If granted, the

proposed exemption will be retroactive

to November 1, 1999.

8. In summary, the applicant

represents that the proposed transaction

meets the statutory criteria of section

408(a) of the Act because:

(a) The independent fiduciary has

determined that the transaction is

feasible, in the interest of, and

protective of the Plan;

(b) The fair market value of the

Property has not exceeded and will not

exceed twenty percent (20%) of the

value of the total assets of the Plan;

(c) The independent fiduciary has

negotiated, reviewed, and approved the

terms of the lease with the Employer on

the Property;

(d) The terms and conditions of the

lease with the Employer on the Property

have been and will continue to be no

less favorable to the Plan than those

obtainable by the Plan under similar

circumstances when negotiated at arm’s

length with unrelated third parties;

(e) An independent qualified

appraiser has determined the fair market

rental value of the Property;

(f) The independent fiduciary has

monitored and will continue to monitor

compliance with the terms of the lease

of the Property to the Employer

throughout the duration of such lease

and is responsible for legally enforcing

the payment of the rent and the proper

performance of all other obligations of

the Employer under the terms of the

lease; and

(g) The Plan has not incurred and will

not incur any fees, costs, commissions,

or other charges or expenses as a result

of its participation in the proposed

transactions, other than the fee payable

to the independent fiduciary.

Notice to Interested Persons: Notice of

the proposed exemption shall be given

to all interested persons in the manner

agreed upon by the applicant and

Department within 15 days of the date

of publication in the Federal Register.

Comments and requests for a hearing are

due forty-five (45) days after publication

of the notice in the Federal Register.

For Further Information Contact:

Khalif Ford of the Department,

telephone (202) 219–8883 (this is not a

toll-free number).

ACE Business Travel Accident Plan (the

Plan) Located in Philadelphia,

Pennsylvania

[Application No. L–10955]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

and in accordance with the procedures

set forth in 29 CFR part 2570, subpart

B (55 FR 32836, 32847, August 10,

1990). If the exemption is granted, the

restrictions of sections 406(a) and (b) of

the Act shall not apply to the

reinsurance of risks and the receipt of

premiums therefrom by ACE American

Insurance Company (ACE USA) from

the insurance contracts sold by Life

Insurance Company of North America

(CIGNA) or any successor company to

CIGNA which is unrelated to ACE INA

Holdings, Inc. (ACE INA), to provide

accidental death and dismemberment

benefits to participants in the Plan,

provided the following conditions are

met:

(a) ACE USA—

(1) Is a party in interest with respect

to the Plan by reason of a stock or

partnership affiliation with ACE INA

that is described in section 3(14)(E) or

(G) of the Act,

(2) Is licensed to sell insurance or

conduct reinsurance operations in at

least one State as defined in section

3(10) of the Act,

(3) Has obtained a Certificate of

Authority from the Insurance

Commissioner of its domiciliary state

which has neither been revoked nor

suspended, and

(4)(A) Has undergone an examination

by an independent certified public

accountant for its last completed taxable

year immediately prior to the taxable

year of the reinsurance transaction; or

(B) Has undergone a financial

examination (within the meaning of the

law of its domiciliary State,

Pennsylvania) by the Insurance

Commissioner of the Commonwealth of

Pennsylvania within 5 years prior to the

end of the year preceding the year in

which the reinsurance transaction

occurred.

(b) The Plan pays no more than

adequate consideration for the

insurance contracts;

(c) No commissions are paid with

respect to the direct sale of such

contracts or the reinsurance thereof;

(d) The Plan only contracts with

insurers with a rating of A or better from

A. M. Best Company (Best’s). The

reinsurance arrangement between the

insurers and ACE USA will be

indemnity insurance only, i.e., the

insurer will not be relieved of liability

to the Plan should ACE USA be unable

or unwilling to cover any liability

arising from the reinsurance

arrangement; and

(e) For each taxable year of ACE USA,

the gross premiums and annuity

considerations received in that taxable

year by ACE USA for life and health

insurance or annuity contracts for all

employee benefit plans (and their

employers) with respect to which ACE

USA is a party in interest by reason of

a relationship to such employer

described in section 3(14)(E) or (G) of

the Act does not exceed 50% of the

gross premiums and annuity

considerations received for all lines of

insurance (whether direct insurance or

reinsurance) in that taxable year by ACE

USA. For purposes of this condition (e):

(1) the term ‘‘gross premiums and

annuity considerations received’’ means

as to the numerator the total of

premiums and annuity considerations

received, both for the subject

reinsurance transactions as well as for

any direct sale or other reinsurance of

life insurance, health insurance or

annuity contracts to such plans (and

their employers) by ACE USA. This total

is to be reduced (in both the numerator

and the denominator of the fraction) by

30020 Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices

1The applicant represents that any successor to

CIGNA would be a legal reserve life insurance

company with assets and reserves similar to

CIGNA, and thus be of such a size as to afford

similar protection and responsibility.

experience refunds paid or credited in

that taxable year by ACE USA; and

(2) all premium and annuity

considerations written by ACE USA for

plans which it alone maintains are to be

excluded from both the numerator and

the denominator of the fraction.

Preamble

On August 7, 1979, the Department

published a class exemption [Prohibited

Transaction Exemption 79–41 (PTE 79–

41), 44 FR 46365] which permits

insurance companies that have

substantial stock or partnership

affiliations with employers establishing

or maintaining employee benefit plans

to make direct sales of life insurance,

health insurance or annuity contracts

which fund such plans if certain

conditions are satisfied.

In PTE 79–41, the Department stated

its views that if a plan purchases an

insurance contract from a company that

is unrelated to the employer pursuant to

an arrangement or understanding,

written or oral, under which it is

expected that the unrelated company

will subsequently reinsure all or part of

the risk related to such insurance with

an insurance company which is a party

in interest with respect to the plan, the

purchase of the insurance contract

would be a prohibited transaction.

The Department further stated that as

of the date of publication of PTE 79–41,

it had received several applications for

exemption under which a plan or its

employer would contract with an

unrelated company for insurance, and

the unrelated company would, pursuant

to an arrangement or understanding,

reinsure part or all of the risk with (and

cede part or all of the premiums to) an

insurance company affiliated with the

employer maintaining the plan. The

Department felt that it would not be

appropriate to cover the various types of

reinsurance transactions for which it

had received applications within the

scope of the class exemption, but would

instead consider such applications on

the merits of each individual case.

Summary of Facts and Representations

1. ACE INA is a publicly traded

insurance holding company

incorporated under the laws of the

Commonwealth of Pennsylvania. ACE

INA provides a full range of insurance

related services through its subsidiaries,

including ACE USA.

2. ACE USA is a corporation

organized under the laws of the

Commonwealth of Pennsylvania, with

its principal administrative offices in

Philadelphia, Pennsylvania. ACE USA

is a wholly-owned subsidiary of ACE

INA, and is currently licensed to do

business in all states and the District of

Columbia. ACE USA is principally

engaged in the business of underwriting

insurance including property and

casualty, accident and health,

commercial automobile, aviation, crime,

credit, crop/hail, fidelity, general

liability, inland marine, ocean marine,

surety and worker’s compensation

insurance. The applicant represents that

$416 million in premiums was

underwritten by ACE USA in 1999.

3. ACE INA and most of its

subsidiaries provide their eligible

employees with certain welfare benefits

through the Plan. The Plan is a fully

insured ‘‘employee welfare benefit

plan’’ within the meaning of section 3(1)

of the Act that provides accidental death

and dismemberment benefits to

approximately 4,800 eligible employees

and beneficiaries. Eligible employees

include all full time and part time

salaried employees working at least 24

hours per week. Eligible employees and

beneficiaries receive accidental death or

dismemberment coverage in the event

that the employee dies or is severely

injured as a result of an accident while

traveling on company business.

Coverage under the Plan equals five

times salary, rounded to the highest

$1,000, up to a maximum of $2,500,000.

All premiums are paid by ACE INA and/

or its subsidiaries.

4. The benefits provided under the

Plan are currently underwritten by

CIGNA, an unaffiliated insurance

carrier. ACE INA, as a fiduciary of the

Plan, has entered into a policy with

CIGNA for 100% of this coverage. ACE

INA proposes to use its subsidiary, ACE

USA, to reinsure 50% of the risk

through a reinsurance contract between

ACE USA and CIGNA in which CIGNA

would pay 50% of the premiums to ACE

USA. From the participants’

perspective, the participants have a

binding contract with CIGNA, which is

legally responsible for the risk

associated under the Plan. CIGNA is

liable to provide the promised coverage

regardless of the proposed reinsurance

arrangement. The applicant has also

requested that the proposed exemption

apply to any successor company to

CIGNA that is also unrelated to ACE

INA should ACE INA, as a fiduciary of

the Plan, decide to insure this coverage

with another carrier under the same

kind of arrangement.

5. The applicant represents that the

proposed transaction will not in any

way affect the cost to the insureds of the

accidental death and dismemberment

insurance benefits, and the Plan will

pay no more than adequate

consideration for the insurance. Also,

Plan participants are afforded insurance

protection from CIGNA at competitive

rates arrived at through arm’s-length

negotiations. CIGNA is rated ‘‘A+’’ by

Best’s, whose insurance ratings are

widely used in financial and regulatory

circles. CIGNA has assets in excess of

$3.8 billion and reserves set aside for

group accident and health policies of

approximately $2.2 billion. CIGNA will

continue to have the ultimate

responsibility in the event of loss to pay

insurance benefits to the employee or

the employee’s beneficiary.1 The

applicant represents that ACE USA is a

sound, viable company which does a

substantial amount of business outside

of its affiliated group of companies. ACE

USA is substantially dependent upon

insurance customers that are unrelated

to itself and its affiliates for premium

revenue.

6. The applicant represents that the

proposed reinsurance transaction will

meet all of the conditions of PTE 79–41

covering direct insurance transactions:

(a) ACE USA is a party in interest

with respect to the Plan (within the

meaning of section 3(14)(G) of the Act)

by reason of stock affiliation with ACE

INA, which maintains the Plan.

(b) ACE USA is licensed to do

business in all states and the District of

Columbia.

(c) ACE USA has undergone an

examination by an independent

certified public accountant for the last

completed taxable year immediately

prior to the taxable year of the proposed

reinsurance transaction.

(d) ACE USA has received a

Certificate of Authority from its

domiciliary state, Pennsylvania, which

has neither been revoked nor

suspended.

(e) The Plan will pay no more than

adequate consideration for the

insurance. The proposed transaction

will not in any way affect the cost to the

insureds of the accidental death and

dismemberment benefits.

(f) No commissions have been paid or

will be paid with respect to the

acquisition of direct insurance or the

reinsurance agreements between CIGNA

(or any successor) and ACE INA and

ACE USA.

(g) For each taxable year of ACE USA,

the ‘‘gross premiums and annuity

considerations received’’ in that taxable

year for group life and health insurance

(both direct insurance and reinsurance)

for all employee benefit plans (and their

employers) with respect to which ACE

USA is a party in interest by reason of

Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices 30021

a relationship to such employer

described in section 3(14)(E) or (G) of

the Act will not exceed 50% of the

‘‘gross premiums and annuity

considerations received’’ by ACE USA

from all lines of insurance in that

taxable year. ACE USA has received no

premiums for the Plan insurance in the

past. ACE USA wrote $416 million in

premiums in 1999. At least 80% of ACE

USA’s premiums for 1999 were derived

from insurance (or reinsurance thereon)

sold to entities other than ACE INA and

its affiliated group. In addition, ACE

USA is substantially dependent upon

insurance customers that are unrelated

to CIGNA and its affiliates for premium

income.

7. In summary, the applicant

represents that the proposed transaction

will meet the criteria of section 408(a)

of the Act because: (a) Plan participants

and beneficiaries are afforded insurance

protection by CIGNA, an ‘‘A+’’ rated

group insurer, at competitive market

rates arrived at through arm’s-length

negotiations; (b) ACE USA is a sound,

viable insurance company which does a

substantial amount of public business

outside its affiliated group of

companies; and (c) each of the

protections provided to the Plan and its

participants and beneficiaries by PTE

79–41 will be met under the proposed

reinsurance transaction.

For Further Information Contact: Gary

H. Lefkowitz of the Department,

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

a toll-free number.)

General Informaiton

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest or

disqualified person from certain other

provisions of the Act and/or the Code,

including any prohibited transaction

provisions to which the exemption does

not apply and the general fiduciary

responsibility provisions of section 404

of the Act, which, among other things,

require a fiduciary to discharge his

duties respecting the plan solely in the

interest of the participants and

beneficiaries of the plan and in a

prudent fashion in accordance with

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

it affect the requirement of section

401(a) of the Code that the plan must

operate for the exclusive benefit of the

employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be

granted under section 408(a) of the Act

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

the Department must find that the

exemption is administratively feasible,

in the interests of the plan and of its

participants and beneficiaries, and

protective of the rights of participants

and beneficiaries of the plan;

(3) The proposed exemptions, if

granted, will be supplemental to, and

not in derogation of, any other

provisions of the Act and/or the Code,

including statutory or administrative

exemptions and transitional rules.

Furthermore, the fact that a transaction

is subject to an administrative or

statutory exemption is not dispositive of

whether the transaction is in fact a

prohibited transaction; and

(4) The proposed exemptions, if

granted, will be subject to the express

condition that the material facts and

representations contained in each

application are true and complete, and

that each application accurately

describes all material terms of the

transaction which is the subject of the

exemption.

Signed at Washington, DC, this 30th day of

May, 2001.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 01–13905 Filed 6–1–01; 8:45 am]

BILLING CODE 4510–29–P

DEPARTMENT OF LABOR

Pension and Welfare Benefits

Administration

[Exemption Application No. D–10918, et al.]

Prohibited Transaction Exemption

2001–19; Grant of Individual

Exemptions; Texas Instruments

Employees Pension Plan (the Plan) et

al.

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, DC. 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, 5 U.S.C. App. 1 (1996),

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.

Texas Instruments Employees Pension

Plan (the Plan) Located in Dallas, Texas

[Prohibited Transaction Exemption No.

2001–19; Application No. D–10918]

Exemption

The restrictions of sections 406(a),

406(b)(1), 406(b)(2), and 406(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 Sale (the Sale) by the Plan to

Texas Instruments, Inc. (the Employer)

of a parcel of improved real property

(the Property) located in Dallas, Texas.

This exemption is conditioned upon the

adherence to the material facts and

representations described herein and

upon the satisfaction of the following

requirements:

(a) All terms and conditions of the

Sale are at least as favorable to the Plan

as those which the Plan could obtain in