20278 Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices

* Since Ms. Belt is the sole owner of the Plan

sponsor and the only participant in the Plan, there

is no jurisdiction under Title I of the Act pursuant

to 29 CFR 2510.3–3(b). However, there is

jurisdiction under Title II of the Act pursuant to

section 4975 of the Code.

the Property; (d) the fair market value of

the Property has been determined by a

qualified, independent appraiser; and

(e) Ms. Belt is the only Plan participant

to be affected by the transaction, and

she desires that the transaction be

consummated.*

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

March 22, 1996 at 61 FR 11895.

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

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

a toll-free number.)

General Information

The attention of interested persons is

directed to the following:

(1) The fact that a transaction is the

subject of an exemption under section

408(a) of the Act and/or section

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

a fiduciary or other party in interest 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 accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, D.C., this 30th day

of April, 1996.

Ivan Strasfeld,

Director of Exemption Determination,

Pension and Welfare Benefits Administration,

Department of Labor.

[FR Doc. 96–11118 Filed 5–3–96; 8:45 am]

BILLING CODE 4510–29–P

[Application No. D–10039, et al.

Proposed Exemptions; San Diego

National Bank

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Notice of proposed exemptions.

SUMMARY: This document contains

notices of pendency before the

Department of Labor (the Department) of

proposed exemptions from certain of the

prohibited transaction restriction of the

Employee Retirement Income Security

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

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or request for

a hearing on the pending exemptions,

unless otherwise stated in the Notice of

Proposed Exemption, within 45 days

from the date of publication of this

Federal Register Notice. Comments and

request for a hearing should state: (1)

The name, address, and telephone

number of the person making the

comment or request, and (2) the nature

of the person’s interest in the exemption

and the manner in which the person

would be adversely affected by the

exemption. A request for a hearing must

also state the issues to be addressed and

include a general description of the

evidence to be presented at the hearing.

A request for a hearing must also state

the issues to be addressed and include

a general description of the evidence to

be presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, NW.,

Washington, DC 20210. Attention:

Application No. stated in each Notice of

Proposed Exemption. The applications

for exemption and the comments

received will be available for public

inspection in the Public Documents

Room of Pension and Welfare Benefits

Administration, U.S. Department of

Labor, Room N–5507, 200 Constitution

Avenue, NW., Washington, DC 20210.

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

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

accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR

32836, 32847, August 10, 1990).

Effective December 31, 1978, section

102 of Reorganization Plan No. 4 of

1978 (43 FR 47713, October 17, 1978)

transferred the authority of the Secretary

of the Treasury to issue exemptions of

the type requested to the Secretary of

Labor. Therefore, these notices of

proposed exemption are issued solely

by the Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

San Diego National Bank Deferred

Savings Plan (the Plan)

Located in San Diego, California

[Application No. D–10039]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

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

the exemption is granted the restrictions

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

and 407(a) of the Act and the sanctions

resulting from the application of section

4975 of the Code, by reason of section

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

shall not apply to (1) The past

acquisition by the Plan of certain stock

rights (the Rights) pursuant to a stock

rights offering (the Offering) by SDNB

Financial Corp., a California corporation

(the Parent), which wholly-owns and is

the parent company of the San Diego

National Bank (the Employer), the

sponsor of the Plan and a party in

interest with respect to the Plan; (2) the
Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices 20279

1The Trustee is expected to merge in April 1996

with the Bank of California, N.A., located in San

Francisco, California, and a subsidiary of

Mitsubishi Bank, a Japanese corporation.

past holding of the Rights during the

subscription period of the Offering; and

(3) the disposition or exercise of the

Rights by the Plan; provided the

following conditions are satisfied: (a)

The acquisition and holding of the

Rights by the Plan occurred in

connection with the Offering made

available to all shareholders of the

common stock of the Parent; (b) all

holders of the common stock of the

Parent were treated in a like manner,

with respect to the Offering, including

the Plan; and (c) all decisions regarding

the holding and disposition of the

Rights by the Plan were made in

accordance with Plan provisions for

individually-directed investment of

participant accounts by the individual

participant whose account in the Plan

received Rights in the Offering, and if

no instructions were received the Rights

were sold.

EFFECTIVE DATE: If the proposed

exemption is granted, the exemption

will be effective as of May 30, 1995.

Summary of Facts and Representations

1. The Parent is a registered bank

holding company, incorporated in the

State of California in 1982, with its

principal executive office located in San

Diego, California. The principal

subsidiary of the parent is the Employer,

a national banking association located

in San Diego, California and organized

in 1981, with deposits that are insured

up to the applicable limits by the

Federal Deposit Insurance Corporation.

Through the Employer the Parent

provides general banking services. As of

June 30, 1995, the Parent had

consolidated assets of approximately

$156 million, consolidated liabilities of

approximately $145 million (which

includes total deposits with the

Employer of approximately $125

million), and shareholders equity of

approximately $11 million.

As of May 30, 1995, the opening date

of the Offering by the parent, there were

issued and outstanding 2,048,485 shares

of the common stock of the Parent (the

Common Stock) held by approximately

800 shareholders, which included 61

participants of the Plan with account

balances invested in the Common Stock.

The Common Stock is publicly traded

on the National Association of

Securities Dealers Automated Quotation

National Market System (the NASDAQ).

The Rights were also traded on the

NASDAQ, with three New York City

trading firms making a market in the

Rights.

2. The Plan is a defined contribution

plan that’s intended to satisfy the

requirements of sections 401(a) and

401(k) of the Code. The Plan had

approximately 106 participants and

beneficiaries and total assets of

$1,291,916, as of December 31, 1994.

Sixty-one of the participants had their

individual account balances in the Plan

invested in 83,485 shares of the

Common Stock, valued at $231,331.79,

as of December 31, 1994, and

comprising approximately 18 percent of

the total assets in the Plan.

The Plan permits participants to

contribute up to 10 percent of their

respective annual compensation to the

Plan and the Employer may match on a

discretionary basis any percentage of

each contribution by a participant (the

Matching Contribution). The last

previous match made by the Employer

was for the plan year ended December

31, 1990. Also, the employer may make

annual-discretionary profit sharing

contributions, which have been made in

varying amounts for each Plan year

through December 31, 1990.

The Plan provides that funding

contributions received from Plan

participants are immediately vested;

and the Matching Contributions and

profit sharing contributions from the

Employer are vested according to a

schedule based on length of service with

the Employer by the respective

participants. The proceeds received

from the sale of the Rights or the

Common Stock received from exercising

the Rights vested according to the

vesting schedule of the Plan.

In connection with the Offering, the

Board of Directors of the Employer

adopted a resolution on April 26, 1995,

authorizing a one-time special match of

contributions by the Employer for

participants in the Plan who were in the

employment of the Employer on April

30, 1995. The amount of the special

match was equal to 50 percent of the

amount of employee contributions made

to the Plan for the period from January

1, 1995, through April 30, 1995. The

special match contributed by the

Employer totalled $20,657 and was paid

in cash and made available for the

exercise of the Rights; or, if not so used,

the remaining cash was to be invested

in the Common Stock.

The Plan permits its participants to

direct the investments of their

individual accounts among four

investment funds (the Funds), which

includes one fund primarily invested in

shares of the Common Stock (the Parent

Stock Fund), and three other funds

holding various types of other assets.

Also, the Plan allows the participants to

elect to establish an individually

earmarked account if the participant

pays all the fees and other expenses

necessary for the establishment and

maintenance of such account.

As to investing funding contributions

in the Plan, the participant may direct

his individual account with respect to

(a) the voluntary contributions made by

the participant and (b) those voluntary,

discretionary contributions made by the

Employer from its annual profits.

However, the participant may not direct

the Matching Contributions of the

Employer, other than the limited

direction of the one-time special match

of April 26, 1995, because the Matching

Contributions of the Employer must be

invested in the Common Stock.

Participants elect their investment

options on written forms that are

delivered to the Administrative

Committee, which is created by the

Board of Directors of the Employer to

administer the Plan until successors are

appointed. Four individuals from the

officers and staff of the Employer

currently make up the Administrative

Committee. Among their duties is

included the selecting of the trustee of

the Plan and other professional and

administrative aids.

The trustee of the Plan is the Union

Bank (the Trustee), a California

corporation, located in San Francisco,

California, and which is a subsidiary of

the Bank of Tokyo, a Japanese

corporation.1 The Trustee acts as

custodian of Plan assets, holding legal

title to the assets, and executing

investment directions received from the

Administrative Committee in

accordance with the participant’s

written instructions. The Administrative

Committee reviews the investment

option forms executed by the

participants for possible errors, such as

the failure of the participant to sign or

give clear instructions.

3. The applicant represents that the

Offering was conceived because of an

agreement entered into on January 31,

1995, by the Parent with two limited

partnerships of which WHR

Management Corp. is the general partner

(collectively, WHR). The agreement

provided that WHR was to purchase by

March 28, 1995, 24.9 percent of the

Parent’s issued and outstanding

Common Stock. The purchase was made

as agreed with WHR obtaining a total of

510,121 shares of Common Stock for

$4.34 per share or for a total sum of

$2,213,925.

Since the purchase by WHR at less

than the then current book value

afforded WHR an opportunity to

purchase stock at a price that was

unavailable to the existing shareholders
20280 Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices

2The Department notes that the Rights do not

constitute qualifying employer securities within the

meaning of section 407(d)(5) of the Act.

through the public market, the Parent

decided to make the Offering to all the

holders of the Common Stock, with the

exception of WHR, at the same price of

$4.34 per share that WHR had paid.

However, after the Offering was

completed WHR, in order to maintain

its parity of 24.9 percent ownership in

the Parent, was given the opportunity to

purchase from the Parent 255,193 shares

of additional Common Stock at $4.34

per share for an aggregate purchase

price of $1,107,538.

4. After filing a preliminary

Registration Statement (S–3) on March

31, 1995, the Parent commenced on May

30, 1995, the Offering by issuing

transferable subscription Rights to the

holders of the Common Stock, as of the

close of business on May 5, 1995, (the

Record Date).2 One Right was issued for

each two shares of Common Stock held

by the shareholders, and the number of

Rights so distributed was rounded up to

the nearest whole Right. Each Right

conferred upon its holder an entitlement

(the Basic Privilege) to purchase one

share of the Common Stock (an

Additional Share) at the exercise price

of $4.34 per share. Each Right also

conferred upon its holder (other than

the Plan) a second privilege (the

Oversubscription Privilege), allowing

the Right holder, who had exercised in

full the Basic Privilege, to subscribe for

Additional Shares not previously

subscribed for in the Basic Privilege. If

there were an insufficient number of

shares available to satisfy the demands

of the Oversubscription Privilege, the

available shares would be allocated on

a pro rata basis among those requesting

the Oversubscription Privilege.

When exercising the Oversubscription

Privilege all funds submitted by the

holder of the Rights were deposited in

an interest bearing, escrow account with

the Subscription Agent, the American

Transfer & Trust Company. All the

interest earned in the escrow account

was paid to the Parent. Therefore, the

Plan was excluded from participation in

the Oversubscription Privilege in order

to avoid the prohibited transactions

under the Act arising from the payment

to the Parent of the interest earned in

the escrow account.

In anticipation of the Offering, the

Board of Directors of the Employer

amended the Plan on May 24, 1995, to

permit each Plan participant who had a

Plan account invested in the Parent

Stock Fund on the Record Date to direct

the Trustee to either exercise or sell all

the Rights attributable to their involved

individual account in the Plan.

Before the amendment of May 24,

1995, the participants of the Plan that

were involved in the Offering had no

power or authority under the Plan to

select investments of the Matching

Contributions of the Employer, because

these contributions were required to be

allocated to the purchase of the

Common Stock. With the amendment

the Employer acted to permit the

involved participants to elect the

disposition of all Rights allocated to

their individual accounts in the Plan.

This decision to provide pass-through

elections to Plan participants was to

place the involved participants of the

Plan in a like position with other

shareholders of the Parent who were

receiving the Rights. If involved

participants failed to make an election

before the Election Close-Out Date, or

filed an invalid election, they were

deemed to have elected to sell their

Rights and the Committee instructed the

Trustee to sell those Rights in the open

market.

The amendment to the Plan on May

24, 1995, also established a procedure

for the participant to give instructions

with respect to the Offering, and also

provided for the one-time special match

of contributions to the Plan by the

Employer on behalf of participants

employed by the Employer on April 30,

1995.

In the initial stages of the Offering

which had an expiration date on July

21, 1995, a participant of the Plan could

elect to exercise or sell a Right by

instructing the Committee to instruct

the Trustee at any time until July 12,

1995, (the Election Close-Out Date). The

Election Close-Out Date was established

to permit sufficient time for the Trustee

to liquidate in an orderly manner the

assets in the Funds so that the necessary

cash would be available to exercise the

Rights before the expiration date of July

21, 1995.

Each Plan participant involved in the

Offering obtained his funds for the $4.34

exercise price needed to acquire the

Common Stock from the following order

of priority: (a) First from the one-time

special match of the Employer which

was based on salary deferrals from

January 1, 1995, through April 30, 1995;

(b) second from any salary deferrals to

the Plan by Plan participants; and (c)

third by redeeming investments in the

Funds, other than from the Parent Stock

Fund, as directed by the participant.

Amounts that were redeemed or

realized from the sale of assets in the

Funds prior to the expiration of the

Offering were invested by the Trustee in

a short-term investment account, which

retained its earnings, pending use for

the payment of the exercise price for

Additional Shares. Thus, Rights were

exercisable by Plan participants only to

the extent cash was available from their

account balances in the Funds. If cash

was not available from the account

balances to pay the exercise price for

Additional Shares, the Trustee was

instructed to sell the Rights not

exercised with the proceeds from such

sales credited to the account balances of

the respective involved participant.

6. All of the Rights were transferable,

including those Rights issued in the

Oversubscription Privilege; and,

although the Offering did not guarantee

that a market would develop or remain

available during the Offering, the Rights

as separate securities from the Common

Stock, could be traded on the NASDAQ

under their own symbol, SDNBR.

Meetings were held in April 1995 by

the Employer to explain to the Plan

participants the Offering and its

ramifications. The applicant represents

that questions from participants

generally were concerned with the

following: (a) Why the cash used to

exercise the Rights was to come only

from existing assets allocated to

involved participants individual

accounts in the Plan, (b) could the

Rights held by participants’ individual

accounts be transferred outside of the

Plan to the individual participant; and

(c) general questions about

contributions to the Plan.

There were 4 Post-Effective

Amendments filed with the SEC before

the final filing was made effective on

September 8, 1995, extending the

Offering to September 21, 1995. The

second and third Post-Effective

Amendments provided, inter alia for

payment to registered, securities brokerdealers a commission of 5 percent of the

aggregate subscription price of the

Rights that were exercised through their

facilities. Post-Effective Amendment

number 4 provided, inter alia, for a bestefforts underwriting agreement between

the Parent and Torrey Pines Securities,

Inc., a California corporation (Torrey

Pines). Torrey Pines agreed to act on its

best-efforts to underwrite the Offering

by soliciting the exercise of the Rights

by 3rd parties, and by soliciting the

sales of any unsubscribed shares of

Common Stock involved in the Offering

at a sales price of $4.34.

With the extension of the Offering to

September 21, 1995, the involved

participants were notified that they had

a new Election Close-Out Date of

September 19, 1995.

The applicant represents that at the

beginning of the Offering the Plan held

a total of 42,322 Rights of which 1,634
Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices 20281

3These 1,634 unallocated Rights were then sold,

and the proceeds from their sale will be allocated

at the end of the Plan year as a forfeiture.

were unallocated because some

participants had terminated and were

not fully vested in accordance with the

vesting schedule set forth in the Plan.3

This left 40,688 Rights allocated to the

individual accounts of the involved

participants in the Offering. Four of the

involved participants were part of the

management of the Employer and 57

were from non-management. The

management participants were allocated

30,512 Rights of which they exercised

12,786 Rights at the exercise price of

$4.34 for the total sum of $55,491.24.

The non-management involved

participants were allocated 10,176

Rights of which 26 exercised 3,975

Rights at the exercise price of $4.34 for

the total sum of $17,251.50. All of the

involved participants exercised the total

of 16,761 Rights at the exercise price of

$4.34 for a total sum of $72,742.74.

The 4 involved participants from

management sold 17,726 Rights and 38

involved participants from nonmanagement sold 6,201 Rights at an

average of in excess of $0.01 and less

than $0.02 per Right.

The Offering resulted in all the Rights

being eventually exercised and the

Parent receiving approximately

$3,339,986, less underwriting discounts

and commissions, for the 769,582 Rights

issued in the Offering. In addition WHR

purchased an additional 255,193 shares

of common Stock for $1,107,538. Thus,

the Parent received, from the Offering

and the additional purchase by WHR,

the total sum of approximately

$4,447,524.

The Oversubscription Privilege was

exercised for 2,531 shares by two

shareholders who were unrelated to the

Plan.

7. The applicant represents that the

Offering and the resulting transactions

were in the best interests of and

beneficial to the Plan and its

participants and beneficiaries. Also, the

applicant represents that the rights of

the participants and beneficiaries of the

plan were protected in the Offering and

subsequent transactions. The applicant

demonstrates that all involved

participants were adequately notified in

advance of the Offering of the procedure

for instructing the Trustee of the

participant’s desires for execution under

the Offering, and all instructions given

by the involved participants to the

Trustee were properly executed.

Accordingly, the applicant represents

all actions by the Trustee with respect

to the Offering were made pursuant to

expressed instructions except when the

involved participant failed to act or

acted in violation of the published

procedures and the Rights were sold on

behalf of the involved participant. These

instructions as to the disposition of the

Rights upon the failure of the involved

participant to act or to give valid

instructions were fully disclosed in the

procedural instructions given to the

involved participants. The applicant

further represents that such instructions

were consistent with the nature of

participant-directed investments under

a Plan.

In addition, the applicant represents

that there was no expense incurred by

the Plan from the Offering, and there

was full disclosure of the Offering in the

public documents filed with the SEC.

8. In summary the applicants

represent that the transactions satisfied

the statutory criteria of section 408(a) of

the Act for the following reasons: (a)

The acquisition of the Rights by the Plan

resulted from an independent act by the

Parent as a corporate act and all holders

of the Common Stock were treated in a

like manner, including the Plan; (b) all

decisions with respect to the Rights

were controlled by involved

participants accounts pursuant to Plan

provisions for individually-directed

investments of such accounts; (c) the

Rights and the Common Stock were

both traded on NASDAQ from which

current price information was readily

ascertainable as were the terms and

conditions of the Offering from the

public documents distributed to the

holders of the Common Stock and filed

with the SEC; and (d) there were no

expenses incurred by the Plan or its

participants and beneficiaries from the

Offering and the resulting transactions;

and (e) if no instructions were received,

the Rights were sold.

FOR FURTHER INFORMATION CONTACT: Mr.

C.E. Beaver of the Department,

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

a toll-free number.)

Fieldcrest Cannon, Inc. Retirement

Savings Plan for Salaried Employees,

and Fieldcrest Cannon, Inc. Retirement

Savings Plan for Hourly Employees (the

Plans) Located in Eden, North Carolina

[Application Nos. D–10180 & D–10181]

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 C.F.R. Part 2570, Subpart B

(55 F.R. 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

guaranty (the Guaranty) by Fieldcrest

Cannon, Inc. (the Employer), the

sponsor of the Plans, of amounts due the

Plans with respect to three guaranteed

investment contracts (the GICs) issued

by Confederation Life Insurance

Company (Confederation); (2) the

potential extensions of credit (the

Advances) to the Plans by the Employer

pursuant to the Guaranty; (3) the Plans’

potential repayment of the Advances;

and (4) the potential purchase of the

GICs from the Plans by the Employer for

cash; provided the following conditions

are satisfied:

(A) All terms and conditions of such

transactions are no less favorable to the

Plans than those which the Plans could

obtain in arm’s-length transactions with

unrelated parties;

(B) No interest and/or expenses are

paid by the Plans in connection with the

transactions;

(C) The proceeds of the Advances are

used solely in lieu of payments due

from Confederation with respect to the

GICs;

(D) Repayment of the Advances will

be restricted to the GIC Proceeds,

defined as the cash proceeds obtained

by the Plans from or on behalf of

Confederation with respect to the GICs;

(E) Repayment of the Advances will

be waived to the extent that the

Advances exceed the GIC Proceeds; and

(F) In any sale of a GIC to the

Employer, the Plans will receive a

purchase price which is no less than the

fair market value of the GIC as of the

sale date, and no less than the GIC’s

‘‘Book Value’’ as defined below, plus

post-maturity interest, if applicable, at

the FIF Rate as defined below, less any

Advances made pursuant to this

exemption and any GIC Proceeds

received with respect to the GIC, as of

the sale date.

Summary of Facts and Representations

Introduction: The Plans’ assets

currently include three guaranteed

investment contracts (the GICs) issued

by Confederation Life Insurance

Company (Confederation).

Confederation has been placed in

receivership and, consequently,

payments and withdrawals with respect

to the GICs are prohibited. The Plans’

sponsor, Fieldcrest Cannon, Inc. (the

Employer), proposes to guarantee that in

the eventual resolution of the

receivership the Plans will recover fully

its investments in the GICs, including

interest guaranteed under the GICs

through their maturity dates and interest
20282 Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices

4 The Department notes that the decisions to

acquire and hold the GICs are governed by the

fiduciary responsibility requirements of Part 4,

Subtitle B, Title I of the Act. In this proposed

exemption, the Department is not proposing relief

for any violations of Part 4 which may have arisen

as a result of the acquisition and holding of the

GICs.

5 The FIF Rate is defined as a varying rate equal

to the rate earned by the money market component

of the FI Fund— specifically excluding the GICs—

managed by CoreStates Investment Advisers, Inc. or

a comparable rate as determined by the Trustee.

after the maturity dates at a rate

described below. The exemption

proposed herein would enable this

guaranty under the terms and

conditions described below.

1. The Plans are defined contribution

plans, the assets of which are held in

one master trust (the Trust), of which

the trustee is Harris Trust and Savings

Bank (the Trustee) located in Chicago,

Illinois. Both Plans provide for

individual participant accounts (the

Accounts) and participant-directed

investment of the Accounts. The Plans

are sponsored by Fieldcrest Cannon,

Inc. (the Employer), a Delaware public

corporation engaged in the design,

manufacture and marketing of a broad

range of household textile products,

with its principal executive offices in

Eden, North Carolina. The Accounts are

invested at the directions of individual

Plan participants among various

investment funds, one of which is the

Fixed Income Fund (the FI Fund),

which is invested primarily in

guaranteed investment contracts issued

by insurance companies.

2. Among the assets in the FI Fund are

three guaranteed investment contracts

(the GICs) issued by Confederation Life

Insurance Company (Confederation), a

Canadian corporation doing business in

the United States through branches in

Michigan and Georgia. The GICs are

further identified as follows: (a)

Contract No. 62388 was issued to the

Plans by Confederation effective January

18, 1991, upon an initial principal

deposit of $2 million, and it provides for

simple annual interest at the rate of 8.74

percent, with a maturity date of January

17, 1996; (b) Contract No. 62499 was

issued to the Plans by Confederation

effective June 6, 1991, upon an initial

principal deposit of $1 million and it

provides for simple annual interest at

the rate of 8.18 percent, with a maturity

date of June 5, 1995; and (c) Contract

No. 62710 was issued to the Plans by

Confederation effective October 15,

1992, upon an initial principal deposit

of $1 million and it provides for simple

annual interest at the rate of 6.21

percent, with a maturity date of October

14, 1997. The GICs are single-deposit

contracts which permit withdrawals

(the Withdrawals) prior to maturity

solely for purchasing annuities for

retiring Plan participants whose

Accounts are invested in the GICs. The

terms of the GICs provide that interest

at the rates guaranteed by each GIC (the

Contract Rates) will be credited to the

Plans daily, and will be paid annually

(the Interest Payments) on the

anniversary of a date specified by each

GIC for such Interest Payments. Upon

each GIC’s maturity date, Confederation

is obligated to make a final cash

payment to the Plans (the Maturity

Payment) in the amount of the GIC’s

principal plus interest at the Contract

Rate, less previous Withdrawals (the

Maturity Value). The Employer

represents that through July 1994, all

payments due under the GICs had been

paid.

3. The Employer represents that on

August 11, 1994, the Canadian

insurance regulatory authorities placed

Confederation into a liquidation and

winding-up process, and on August 12,

1994, the insurance authorities of the

State of Michigan commenced legal

action to place the U.S. operations of

Confederation into a rehabilitation

proceeding. As a result of these actions,

all payments and withdrawals with

respect to the GICs have been

suspended.4 The Employer represents

that it cannot be determined accurately

whether, to what extent, or at what time

the Withdrawals and Interest Payments

will be resumed. The Employer desires

to alleviate the Plans’ participants of the

risks associated with continued

investment in the GICs and to prevent

any losses of the FI Fund’s investments

in the GICs. Accordingly, the Employer

proposes to guarantee that the Plans will

recover all amounts due under the GICs,

plus post-maturity interest at a rate

described below, and in its discretion to

make advances to the Plans, and

potentially purchase the GICs, pursuant

to this guaranty. The Employer requests

an exemption for these transactions

under the terms and conditions

described herein.

4. The Guaranty: The Employer’s

proposed guaranty, including the

potential advances, repayments of the

advances, and potential purchase of the

GICs, will be embodied in a written

agreement between the Trustee and the

Employer (the Agreement). Under the

Agreement, the Employer undertakes a

guaranty (the Guaranty) that the Plans

will recover with respect to each GIC no

less than the ‘‘Book Value’’ of the GIC

through its Maturity Date plus postmaturity interest. The Agreement

defines the Book Value of each GIC as

(a) The principal amount invested in the

GIC, less Withdrawals, plus (b) interest

thereon through the Maturity Date at the

Contract Rate, plus (c) interest on any

unpaid interest due under the GIC

(Interest-Payment Interest), from the

date such interest payment is due

through the Maturity Date, at a rate

referred to and defined in the

Agreement as the Fixed Income Fund

Rate (FIF Rate 5). The total amount to

which the Employer becomes obligated

under the Agreement (the Guaranty

Amount) with respect to each GIC is the

Book Value plus post-maturity interest

on the Book Value at the FIF Rate from

the GIC’s Maturity Date until (a) The

entry of a final rehabilitation,

liquidation or other similar order by a

court of competent jurisdiction

regarding Confederation’s assets (the

Final Order), and (b) the Plans’ receipt

of the Guaranty Amount from

Confederation, state guaranty

association funds, or other third parties

paying recovery on the GICs (the GIC

Proceeds); but in no event later than

December 31, 2004.

Accordingly, as each Interest Payment

and each Maturity Payment become due

under each GIC, the Employer becomes

obligated to pay the Plans (not

necessarily on the Maturity Date, but in

no event later than December 31, 2004,

as explained below) the difference

between the amount of such payment

then due and the amount of GIC

Proceeds, if any, actually received by

the Plans with respect to such payment

due (the Payment Obligation). After an

Interest Payment or Maturity Payment is

due, the amount of Payment Obligation

then assumed by the Employer with

respect to such payment earns interest

at the FIF Rate set forth in the

Agreement. The Agreement requires the

Trustee to notify the Employer of the

amount of the Payment Obligation upon

the Plans’ failure to receive in full any

Interest Payment or Maturity Payment.

As described below in the discussion of

‘‘Advances’’, the Employer may from

time to time at its discretion make

payments of amounts due the Plans

under the Agreement, thereby reducing

the amount of the outstanding Payment

Obligation. However, the Agreement

requires that the Plans receive the total

Payment Obligation no later than final

resolution of the Receivership and in no

event later than December 31, 2004. If,

by that date, the Plans have not

recovered all of the GIC Proceeds which

are to be paid with respect to a GIC, the

Employer will discharge the Payment

Obligation with respect to that GIC by

purchasing the GIC from the Plans, as

described below in the discussion of

‘‘Potential Purchase’’.
Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices 20283

The Agreement provides that the

Employer’s Guaranty obligation with

respect to each GIC will continue until,

and terminate upon, the earlier of the

following events: (a) Payment to the

Plans of the Guaranty Amount with

respect to the GIC by Confederation or

other third parties; (b) the Employer’s

satisfaction of its Guaranty obligations

with respect to the GIC under the

Agreement; or (c) transfer of ownership

of the GIC to the Employer pursuant to

a purchase of the GIC from the Plans, as

described below.

5. Advances: The Agreement enables

(but does not obligate) the Employer at

any time to make cash advances to the

Plans (the Advances) and thereby

reduce the balance of amounts the

Employer owes the Plans under the

Guaranty. The Advances are treated

under the Agreement as interest-free

loans of amounts guaranteed by the

Employer under the Agreement. The

Employer represents that Advances are

anticipated only in the event the Plans

encounter unforeseen liquidity

problems.

6. Repayments: Under the Agreement

the Trustee takes on an obligation to

make repayment of the Advances (the

Repayments) only in the event the Plans

receive GIC Proceeds plus Advances in

excess of the Guaranty Amount. The

Repayments will be made only from the

funds received by the Plans as GIC

Proceeds, and the Repayments will be

limited to the principal amount of any

Advances made by the Employer.

However, the Trustee will have no

obligation to make Repayments of

Advances with respect to any GICs

which the Employer purchases, as

described below. In such case, any

Advances made with respect to the

purchased GIC will be credited toward

the purchase price.

The Trustee’s obligation to make

Repayments shall not apply until the

entry of the Final Order and the Plans’

receipt of all GIC Proceeds which are to

be paid. Within sixty days thereafter,

the total Repayments shall be made to

the Employer by the Trustee in a lump

sum or as agreed at that time by the

parties. Under the Agreement, in the

event the amount of GIC Proceeds with

respect to a GIC exceeds the Guaranty

Amount, any excess amount shall be

retained as earnings of the Plans and

allocated to each Plan based on its

proportionate interest in the GIC. Under

the Agreement the Employer waives

Repayments with respect to a GIC to the

extent the the total GIC Proceeds is less

than the Repayments due under the

Agreement. The Employer agrees that

the GIC Proceeds shall be the sole

source of the Repayments and that it

will have no recourse against the

Trustee, the Plans or their participants

or beneficiaries for the Repayments.

7. Potential Purchase: The Agreement

provides that at any time prior to the

Plans’ recovery of GIC Proceeds totalling

an amount equal to the Guaranty

Amount, but in no event later than

December 31, 2004, the Employer may

elect to purchase one or more of the

GICs from the Plans. The Agreement

further provides that if the Plans have

not received full and final recovery of

all GIC Proceeds which are to be paid

with respect to a GIC by December 31,

2004, the Employer shall be required to

purchase that GIC from the Plans. The

purchase price of a GIC in either event

will be calculated as of the purchase

date and will equal the GIC’s Book

Value plus any Post Maturity Interest at

the FIF Rate through the purchase date,

less GIC Proceeds and any Advances

made with respect to that GIC. The

Employer may exercise its purchase

option with respect to each GIC

separately. To the extent necessary

under the terms of the GIC, the

Employer must obtain written approval

of the transfer from Confederation or its

successor.

5. In summary, the Employer

represents that the proposed

transactions satisfy the criteria of

section 408(a) of the Act for the

following reasons: (1) The transactions

will enable the Plans to recover all

amounts due under the terms of the

GICs, plus post-maturity interest; (2)

Repayment of the Advances will be

restricted to the GIC Proceeds and will

be limited to the principal amount of

the Advances; (3) The Repayments will

be waived to the extent the Advances

exceed the GIC Proceeds; and (4) No

interest and/or expenses will be

incurred by the Plans with respect to

any of the transactions.

FOR FURTHER INFORMATION CONTACT: Ron

Willett of the Department, telephone

(202) 219–8881. (This is not a toll-free

number.)

AmSouth Bancorporation Thrift Plan

(the Plan) Located in Birmingham,

Alabama

[Application No. D–10185]

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) and 406 (b)(1) and

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

resulting from the application of section

4975 of the Code, by reason of sections

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

shall not apply to the proposed cash

sale (the Sale) of Guaranteed Investment

Contract No. 62531 and Guaranteed

Investment Contract No. 62651

(collectively, the GICs), both issued by

Confederation Life Insurance of Atlanta,

Georgia (Confederation), by the Plan to

AmSouth Bancorporation (AmSouth), a

Delaware corporation, the sponsor of the

plan and a party in interest with respect

to the Plan; provided that (1) the Sale is

a one-time transaction for cash; (2) the

Plan experiences no losses nor incurs

any expenses from the Sale; and (3) the

Plan receives as consideration from the

Sale an amount, as expressed below in

paragraph No. 4, that is equal to the

total amount expended by the Plan

when acquiring the GICs plus all

interest earnings occurring under the

terms of the GICs until the date of the

Sale.

Summary of Facts and Representations

1. AmSouth, a Delaware corporation

incorporated in 1972, is a bank holding

company headquartered in Birmingham,

Alabama and is the sponsor of the Plan.

The issued and outstanding common

stock of AmSouth is listed and traded

on the New York Exchange. It holds five

state banks, of which two are

incorporated and located in Alabama,

and the remaining three are located and

incorporated in Georgia, Florida, and

Tennessee, respectively. Through its

five wholly-owned subsidiaries,

AmSouth offers to the public full

commercial banking services in the four

respective States.

2. The Plan is a defined contribution

profit sharing plan with individual

accounts for the respective participants

that utilizes a thrift formula and

contains a cash or deferred arrangement

that is intended to satisfy the

qualification requirements of sections

401(a) and 401(k) of the Code. As of

September 30, 1995, there were the

5,748 participants in the Plan, and the

approximate fair market value of the

assets in the Plan was $95,940,526. The

GICs had a book value of $2,687,290, as

of September 30, 1995, which was

approximately 2.8 percent of the total

Plan assets.

The Plan offers the participants a

choice of four different investment

funds (collectively, the Funds) in which

they can direct the investment of the

assets held in their respective

individual accounts. The Funds consist

of (a) the Fixed Fund that invests in

AmSouth Bank of Alabama’s managed

collective investment trust, GICs, notes,

bills, mortgages or other non-equity
20284 Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices

6The Department notes that decisions to acquire

and hold the GICs are governed by fiduciary

responsibility provisions of Part 4 of Title I of the

Act. In this regard, the Department is not proposing

relief for any violations of Part 4 which may have

arisen as a result of the acquisition and holding of

the GICs.

7The applicant represents that there have not

been any withdrawals from the GICs.

securities, and money-market or other

debt obligations; (b) the Equity Fund

that invests in common stock and other

equity based investments; (c) the

Balanced Fund that invests in shares of

mutual funds holding a combination of

stocks and bonds; and (d) the AmSouth

Stock Fund that invests in the common

stock of the Employer.

No assets of the plan are invested in

loans to the Employer or property leased

to the Employer. However, as of

December 31, 1994, approximately

$13,444,564 or 16.4 percent of the assets

of the Plan was invested in common

stock of the Employer.

The trustee of the plan is the Trust

Division of AmSouth of Alabama (the

Trustee), one of the wholly-owned

subsidiaries of the Employer, whose

officers have investment discretion over

selecting for the Plan the Funds in

which the participants direct the assets

of their respective individual accounts

to be invested.

3. The Fixed Fund of the Plan holds

the two GICs, which were issued by

Confederation on July 15, 1991, and

May 20, 1992, respectively, and which

are the subjects of the proposed

exemption.6 With respect to the GICs,

Contract No. 62531, which matures on

July 31, 1996, has a guaranteed annual

interest rate of 8.59 percent, and a book

value, as of September 30, 1995, of

approximately $1,414,166. Contract No.

62651, which matures on May 19, 1997,

has a guaranteed interest rate of 7.41

percent, and a book value, as of

September 30, 1995, of approximately

$1,272,124.

The book value represents the total

amount deposited under the terms of

the GICs plus accrued interest as

provided by the GICs. The aggregated

book value of two GICs represents, as of

September 30, 1995, approximately 7.3

percent of the total assets in the Fixed

Fund. At maturity the total aggregate

value of the two GICs would be

$2,945,277.

On August 12, 1994, the Ingham

County Circuit Court, Lansing, Michigan

placed Confederation in conservatorship

and rehabilitation, causing

Confederation to suspend all payments

on its contracts, including the GICs. The

applicant represents that it is not known

whether, when, or under what

circumstances Confederation will

resume payments on its contracts,

including payment of the interest and

the principal on the GICs. Based upon

estimates received with regard to the

final settlement, the applicant estimates

that a settlement of both GICs might pay

the Plan between $2,042,977 and

$2,338,347. If these estimates are

correct, the applicant represents that the

participants invested in the Fixed Fund

would lose between $606,930 and

$902,300; and, additional losses would

be experienced because of missed

investment opportunities if settlement

of the GICs was delayed past their

respective maturity dates.

4. In order to eliminate the risk

associated with the continued

investment in the GICs by the Plan and

to allow the Plan to distribute or

otherwise invest assets currently

invested in the GICs, the Employer

proposes to purchase the GICs from the

Plan for cash in an amount equal to

their book value on the date of the Sale

(i.e., the original investment plus the

accrued interest provided for by the

GICs at the time of Sale).7 The applicant

represents that the elimination of the

risks inherent in the continued

investment in the GICs by the Plan

would be in the best interests of the

Plan and its participants and would

serve to protect their rights under the

Plan. The Plan will incur no expenses

or losses from the proposed transaction.

5. In summary, the applicant

represents that the proposed transaction

will satisfy the criteria for an exemption

under section 408(a) of the Act because

(a) the Plan will receive from the

Employer in a one-time transaction cash

equal to the total amount expended by

the Plan in acquiring the GICs plus all

interest accruing under the terms of the

GICs until the date of the Sale; (b) the

proposed transaction will enable the

Plan and its participants to avoid any

risk associated with the continued

holding of the GICs; (c) the Plan will not

incur any losses or expenses from the

proposed transaction; and (d) the

Trustee of the Plan has determined that

the proposed transaction is in the best

interests of the Plan and its participants

and would serve to protect their rights

under the Plan.

FOR FURTHER INFORMATION CONTACT: Mr.

C. E. Beaver of the Department,

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

a toll-free number.)

The Masters, Mates and Pilots Pension

Plan (the Pension Plan) and Individual

Retirement Account Plan (the IRAP;

together, the Plans) Located in

Linthicum Heights, Maryland

[Application Nos. D–10198 and D–10199]

Proposed Exemption

The Department is considering

granting an exemption under the

authority of section 408(a) of the Act

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

in accordance with the procedures set

forth in 29 CFR Part 2570, Subpart B (55

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

the exemption is granted, the

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

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

sanctions resulting from the application

of section 4975 of the Code, by reason

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

the Code, shall not apply to the

continued holding by the Plans of their

shares of stock (the Stock) in American

Heavy Lift Shipping Company (AHL),

provided that (a) the Plans’ independent

fiduciary has determined that the Plans’

holding of the Stock is appropriate for

the Plans and in the best interests of the

Plans’ participants and beneficiaries;

and (b) the Plans’ independent fiduciary

continues to monitor the Plans’ holding

of the Stock and determines at all times

that such transaction remains in the best

interests of the Plans.

TEMPORARY NATURE OF EXEMPTION: If the

proposed exemption is granted, the

exemption will be effective until the

later of: (1) December 31, 1997, or (2)

December 31, 1998 provided another

application for exemption is filed with

the Department prior to December 31,

1997.

Summary of Facts and Representations

1. The Pension Plan is a defined

benefit plan that currently has

approximately 5,800 participants. As of

December 31, 1994, the Pension Plan

had approximately $597 million in

assets. The IRAP is a defined

contribution plan that currently has

approximately 4,700 participants. As of

December 31, 1994, the IRAP had

approximately $86 million in assets.

The Plans principally cover members of

the International Organization of

Masters, Mates and Pilots (the Union).

2. Bear Stearns Fiduciary Services,

Inc. (BSFS) is a registered investment

advisor which serves as the Named

Fiduciary for the Special Assets

Portfolio of the Plans. The Special

Assets Portfolio consists of various

venture capital and other non-liquid

investments which were made by a

former investment manager of the Plans,

Tower Asset Management, Inc. (Tower),
Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices 20285

8 In re Masters, Mates and Pilots Pension Plan and

IRAP Litigation, Lead File No. 85 Civ. 9545 (VLB)

(S.D.N.Y.)

9OPA 90 provides that petroleum products will

eventually be transported in United States intracoastal trade only in double-hulled tankers.

Beginning in 1995 and each year thereafter, some

single-hulled vessels will be phased out of the

domestic petroleum trade, including two AHL

vessels in 1996. Thus, OPA 90 has effectively

legislated AHL out of the petroleum business by

January 1, 1997, unless AHL builds entirely new

ships or rebuilds its existing fleet to conform to the

new specifications.

and which were the subject of

protracted litigation (the Litigation)

between the Department, Tower, the

Plans and certain of their trustees, and

certain plan participants.8 The

Litigation ultimately was settled

pursuant to Court Order entered by the

United States District Court for the

Southern District of New York (the

Court).

3. In the course of the Litigation,

BSFS was appointed Named Fiduciary

for the Plans’ Special Assets Portfolio by

Court Order dated September 18, 1990

(the Court Order). BSFS assumed its

responsibilities on November 8, 1990.

The Court Order provided that the

Named Fiduciary, rather than the Plans’

trustees, has the ‘‘sole, exclusive, full

and complete authority and discretion

concerning the control, management

and disposition of the Special Assets

Portfolio’’.

4. Since February 1987, the Plans

have each owned 45 shares of the Stock,

which Stock represents all of the

outstanding shares of AHL. AHL is a

Delaware corporation, headquartered in

Houston, Texas, that is engaged in the

shipping industry. Its principal assets

consist of four single-hulled tankers,

built in the 1950’s, that are used

primarily for the transportation of

petroleum products in the Jones Act

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

the domestic intra-coastal trade). The

Plans’ Stock can be traced back to

certain prior investments made by

Tower and is held in the Plans’ Special

Assets Portfolio, along with the Plans’

other remaining Tower- initiated

investments.

5. Since AHL is an employer of

employees covered under the Plans, the

Stock constitutes employer securities

under section 407(d)(1) of the Act. The

applicants represent that the Stock

constituted qualifying employer

securities within the meaning of section

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

acquisition, but as of January 1, 1993,

the Stock ceased to be a qualifying

employer security because the Stock is

wholly-owned by the Plans and thus

cannot meet the requirements of section

407(f) of the Act. However, the Plans’

continued holding of the Stock was

exempt from the prohibited transaction

restrictions of the Act pursuant to

Prohibited Transaction Class Exemption

No. 79–15 as a result of a court order,

dated November 2, 1992, entered in the

Litigation (the PTE 79–15 Order). Under

the terms of the PTE 79- 15 Order, this

exemption was effective until the later

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

December 31, 1994, provided the Plans

made application to the Department for

an exemption to permit the continued

holding of the Stock. The Plans did file

a request for an exemption in timely

fashion, and thus the exemption

provided under the PTE 79–15 Order

was automatically extended to

December 31, 1994. On December 19,

1994, the Department granted

Prohibited Transaction Exemption 94–

85 (PTE 94–85; 59 FR 65403), which

continued the exemption for the holding

of the Stock by the Plans until the later

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

December 31, 1996, provided another

application for exemption was filed

with the Department prior to December

31, 1995. By filing the request which is

the subject of the exemption proposed

herein, the exemption provided under

PTE 94–85 has been automatically

extended to December 31, 1996.

6. While BSFS, in its capacity as

Named Fiduciary, has ultimate

investment management responsibility

for the Special Assets Portfolio, it does

not exercise investment management

discretion over the portfolio’s assets on

a day-to-day basis. Rather, as

contemplated by the Court Order,

responsibility for the day-to-day

management and supervision of the

portfolio’s assets has been delegated at

all times to independent investment

managers selected by BSFS. With

respect to the Plans’ investment in the

Stock, such responsibility was first

delegated to Sunwestern Advisors, L.P.

(Sunwestern), which served as the

investment manager for this investment

until July 14, 1992. Effective that date,

Sunwestern’s responsibilities were

assumed by a new investment manager,

Potomac Asset Management, Inc.

(Potomac), which continues to serve in

that capacity.

7. Potomac, a registered investment

adviser founded in 1978, is owned by

three principals, all of whom are

analysts as well as portfolio managers.

In addition to the principals, Potomac

has an experienced fixed-income

manager, equity manager, and corporate

finance consultant. In addition to its

traditional investment management of

$165 million in bond and stock

portfolios, Potomac maintains a

corporate finance business consisting of

private placement consulting and

monitoring for pension funds, fair

market value analysis for various

clients, restructuring and financing of

private companies and related activities.

Potomac has had experience in

managing investments by multiemployer plans in privately-held

companies, similar to the situation

involving the Plans’ investment in the

Stock.

8. Potomac represents that aggressive

efforts were made by Sunwestern to sell

the Plans’ Stock in 1991 and 1992.

However, by the spring of 1992, the

purchase price under discussion with

interested parties had fallen to levels

near the scrap value of AHL’s ships.

This was the result of a number of

adverse circumstances, including a

marked deterioration in the market for

AHL’s services, the inability of AHL’s

then-current management to obtain

more lucrative term (rather than spot)

charters, and the impact of the Oil

Pollution Act of 1990 (OPA 1990) on

AHL’s operations, given the age and

single-hull construction of AHL’s

ships.9 By the time these sales efforts

were discontinued in mid-1992, no bona

fide offers for any price above

essentially scrap value had materialized.

When it became apparent that AHL

could not be sold in the short term

without essentially forfeiting its goingconcern value, Sunwestern and AHL’s

Board concluded in June, 1992 that they

should discontinue the immediate sales

effort and, instead, focus their attention

on improving profitability and better

positioning the company for a future

disposition.

9. Shortly thereafter, Sunwestern was

replaced as investment manager by

Potomac. After conducting its own

review of AHL’s assets and operations,

Potomac also concluded that a focus in

the short term on addressing operational

problems offered a better opportunity

for realizing a reasonable return on the

Plans’ investment. Since 1992, Potomac

has pursued this focus on improving the

profitability of AHL’s operations (while

continuing to explore the possibility of

disposition). These efforts resulted in

AHL’s return to profitability at the end

of 1994. As of the end of 1994, Potomac

was of the opinion that a sale of AHL

on terms favorable to the Plans could

not be achieved at that time. No buyers

for AHL had appeared, and Potomac

believed that a significant reason for the

lack of buyer interest was the age of

AHL’s ships and the impact of OPA 90.

Accordingly, Potomac advised BSFS

that, in its view, any sale or attempted

sale of the Plans’ AHL investment at
20286 Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices

10Nonetheless, Potomac continues to discuss

disposition of the Plans’ holdings in AHL with

prospective buyers, including venture capital funds.

that time was not in the Plans’ financial

interests.

10. However, Potomac and the AHL

management were also concerned about

the impending obsolescence of the AHL

single-hulled tankers (see footnote 2,

above). Preliminary analysis suggested

that the cost of building a new doublehulled vessel to comply with OPA 90

requirements was approximately $65–70

million and it was unclear that

projected charter rates could justify

such a capital expenditure. Based on a

proposal by Avondale Shipyard

Division of Avondale Industries, Inc. of

New Orleans, Louisiana (Avondale), one

of the nation’s leading shipbuilding

companies, AHL’s Board concluded that

it would be more cost effective to

rebuild the single-hulled tankers by

attaching a new, double-hulled cargo

body to the existing vessels. According

to Avondale, this would cost

approximately 50% less than

constructing new ships. Based on its

review of the decision of AHL’s Board

and its own independent analysis,

Potomac believed that this potential cost

saving (in the range of $30–40 million

per ship) represented important

potential value for AHL’s existing

vessels that far exceeded their scrap

value and would be attractive to

prospective buyers as a possible

competitive advantage.

11. Following careful consideration of

(i) the technical and financial feasibility

of the rebuilding process, (ii) the

possibility of federally guaranteed

funding by the Federal Maritime

Administration (MARAD) under Title XI

of the Merchant Marine Act of 1936, and

(iii) the absence of alternatives other

than the sale of the vessels for their

scrap value, Potomac concluded that the

rebuilding project was in the financial

interest of the Plans. MARAD responded

favorably to AHL’s initial application

and indicated that AHL should act

promptly for the guarantee to proceed.

Potomac considered MARAD’s terms to

be extremely favorable to AHL, far more

so than commercially available

guarantees, and believed MARAD’s

guarantee would enhance both the

projected cashflow and marketability of

AHL. MARAD subsequently issued a

commitment to AHL to provide a federal

MARAD guarantee on an amount up to

$139,364,000 of financing (out of a total

cost of $159,273,686) to be obtained by

AHL to rebuild the four ships. The

closing of the MARAD guarantee and

the issuance of the federally guaranteed

debt occurred in May 1995. Based on

the closing of the financing agreements

and with the concurrence of Potomac,

AHL directed Avondale to proceed with

the rebuilding project and entered into

a construction contract on May 12,

1995. Design for construction on the

new forebody hulls commenced at

Avondale shortly thereafter and

fabrication of the first hull began in late

June, 1995.

12. The applicant represents that the

Plans remain committed to selling their

interest in AHL. Potomac believes that

the contractual commitment that AHL

has made to rebuild the ships will

enhance the long-term value of the AHL

stock. However, even though the

financial position of AHL has been

enhanced by significant operational

reorganization and the potentially

valuable financing and construction

contracts, Potomac has concluded that a

sale of AHL at the present time is

unlikely to garner the potential financial

benefits resulting from these events.

Potomac is of the view that a sale within

the forthcoming year is unlikely to yield

a price significantly in excess of the

scrap value of the vessels, perhaps

including a small premium to reflect the

valuable contract rights. Accordingly, it

has concluded that it is in the Plans’

best interests to continue to hold the

AHL stock until the rebuilding process

is further along.10

13. Potomac has based this conclusion

on several factors. First, Potomac is of

the opinion that the rebuilding process

is at a significantly sensitive juncture,

and its ultimate success subject to

enough uncertainty, that AHL could not

be disposed of in the most advantageous

way for the Plans at this time. The

rebuilding process has recently begun

and is not expected to be finished before

late 1997, at the earliest. Potomac

believes that it will be significantly

easier both to identify potential buyers

for the Plans’ AHL stock and to obtain

attractive offers for that stock once it

becomes clear to buyers how profitable

AHL will be with the rebuilt vessels.

Secondly AHL is currently in the midst

of labor negotiations, which could

impact future labor costs. The removal

of uncertainties over these costs and

other expense items likewise should

place AHL in a better sale posture.

Finally, uncertainties surrounding such

variables as charter rates and

operational expenses should be

substantially reduced as the rebuilding

process moves further along, and as the

date approaches on which the ships can

return to operational status.

14. In view of these factors, Potomac

does not believe it would be in the best

interests of the Plans to liquidate their

AHL holdings precipitously. Rather,

based on the foregoing considerations,

Potomac is of the opinion that a

disposition should not be commenced

until labor costs and other expense

items have been resolved. This will

enable prospective buyers to determine

how profitable AHL will be and,

therefore, how much they will be paying

for the Plans’ stock. While it is

conceivable that this could occur during

1996, Potomac believes that there is a

much greater likelihood that this may

not occur until late 1997 or even 1998,

i.e., the time at which the rebuilding

project is expected to have been

completed.

15. BSFS represents that its

obligations under the Court Order to

monitor and report on the activities of

the investment managers for the Special

Assets Portfolio sharply restrict

Potomac’s opportunity to perpetuate

unduly the Plans’ continued ownership

of AHL. Pursuant to the investment

management agreement with Potomac

that BSFS negotiated on behalf of the

Plans, Potomac is obligated to supply

detailed quarterly reports on each of the

Special Assets it manages and to comply

with written investment guidelines.

Those guidelines state that Potomac

‘‘shall seek, among other prudent

objectives, to: (A) Maximize the Plans’

net, long-term investment return [and]

(B) Liquidate each such investment

when and insofar as prudent * * * ’’

Furthermore, the guidelines require

Potomac to prepare and update on a

quarterly basis an ‘‘action plan’’ for each

asset, including AHL. The action plan

requires the investment manager to state

the timetable for achieving a sale (if sale

is intended) or for achieving any other

stated objective. In short, BSFS

represents that significant mechanisms

are in place to prevent Potomac from

improperly seeking to continue

indefinitely to manage the Plans’ Stock

in AHL. BSFS represents that in its

capacity as Named Fiduciary, it has

reviewed in depth Potomac’s analysis of

the various options available and has

accepted Potomac’s conclusion that the

continued ownership of the Stock is in

the best interests of the Plans. BSFS

further represents that the applicant has

fulfilled, or continues to fulfill all

conditions of PTE 94–85. Furthermore

BSFS confirms that the Plans have not

provided any further investment in

AHL, nor guarantees of any financial

obligations of AHL. Finally, the

applicant represents that the Plans will

not provide any such investment or

guarantees during the term of the

exemption proposed herein, or any

future exemption.

16. In summary, the applicant

represents that the proposed transaction
Federal Register / Vol. 61, No. 88 / Monday, May 6, 1996 / Notices 20287

satisfies the criteria contained in section

408(a) of the Act because: (a) The

proposed exemption would continue for

a limited period of time a transaction

originally permitted by the PTE 79–15

Order and currently by PTE 94–85; (b)

the Plans’ independent investment

manager, Potomac, has reviewed the

Plans’ holding of the Stock and has

determined that it is in the best interest

of both Plans to continue holding the

Stock; (c) Potomac will continue to

monitor the transaction to determine

whether it remains in the Plans’ best

interests to retain the Stock; (d) BSFS,

which has the overall responsibility as

Named Fiduciary over the Plans’

investment in the Stock, has reviewed

Potomac’s findings and agrees with

Potomac’s determination that the Plans’

continued holding of the Stock is in the

best interests of both Plans; and (e) the

Plans will make no additional

investment in AHL, nor will they

guarantee any financing to AHL, for the

purpose of double-hulling of the ships.

NOTICE TO INTERESTED PERSONS: The

applicant represents that the notice to

interested persons required by 29 CFR

2570.43 will be effected by publication

of a copy of this notice of proposed

exemption and the required

supplemental statement in The Master,

Mate and Pilot. This publication is a

newspaper published by the Union and

is received by participants and

beneficiaries of the Plans, including

retirees. The notice will be published

within 30 days of the publication of this

notice of proposed exemption in the

Federal Register. Comments and

requests for a public hearing are due

within 60 days of the publication of this

notice of proposed exemption in the

Federal Register.

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

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

a toll-free number.)

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

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

April, 1996.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 96–11119 Filed 5–03–96; 8:45 am]

BILLING CODE 4510–29–P

NATIONAL ARCHIVES AND RECORDS

ADMINISTRATION

Information Security Oversight Office

National Industrial Security Program

Policy Advisory Committee: Notice of

Meeting

In accordance with the Federal

Advisory Committee Act (5 U.S.C. App.

2) and implementing regulation 41 CFR

101–6, announcement is made of the

following committee meeting:

Name of Committee: National Industrial

Security Program Policy Advisory committee

(NISPPAC).

Date of Meeting: May 20, 1996.

Time of Meeting: 2:00 p.m. to 4:00 p.m.

Place of Meeting: Davis-Monthan Air Force

Base, Building No. 2050 5555 E. Ironwood

Street, Tucson, Arizona 85707.

Purpose: To discuss National Industrial

Security Program policy matters. The agenda

will include a discussion on the current

status of the program; discussion and

amendment to the NISPPAC bylaws; a report

on the implementation of the Executive

Order 12958 and 12968, including the status

of the financial disclosure form; an update on

reporting on security costs; and an update on

the most recent draft safeguarding directive.

This meeting will be open to the public.

However, due to space limitations and access

procedures, the names and telephone

numbers of individuals planning to attend

must be submitted to the information

Security Oversight Office (ISOO) no later

than May 15, 1996. Written statements from

the public will be accepted in lieu of an

opportunity for comment.

FOR FURTHER INFORMATION CONTACT:

Steven Garfinkel, Director, ISOO,

National Archives Building, 700

Pennsylvania Avenue, NW., Room 100,

Washington, DC 200408, telephone

(202) 219–5250.

Dated: May 2, 1996.

John W. Carlin,

Archivist of the United States.

[FR Doc. 96–11308 Filed 5–3–96; 8:45 am]

BILLING CODE 7515–01–M

Advisory Committee on Presidential

Libraries; Meeting

Notice is hereby given that the

Advisory Committee on Presidential

Libraries will meet on Wednesday, May

15, 1996, from 1 p.m. to 4 p.m. at the

National Archives and Records

Administration, 7th Street and

Pennsylvania Avenue, NW, Room 105,

Washington, DC.

The agenda for the meeting will be

foundation activities.

The meeting will be open to the

public. For further information, call

Lewis J. Bellardo on (301) 713–6410.

This notice is published less than 15

calendar days before the meeting

because of scheduling difficulties.

Dated: May 2, 1996.

John W. Carlin,

Archivist of the United States.

[FR Doc. 96–11309 Filed 5–3–96; 8:45 am]

BILLING CODE 7515–01–M

NATIONAL INSTITUTE FOR LITERACY

Advisory Board; Meeting

AGENCY: National Institute for Literacy

Advisory Board, National Institute for

Literacy.

ACTION: Notice of meeting.

SUMMARY: This Notice sets forth the

schedule and proposed agenda of a

forthcoming meeting of the National