[Federal Register Volume 59, Number 45 (Tuesday, March 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5249]


[[Page Unknown]]

[Federal Register: March 8, 1994]


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DEPARTMENT OF LABOR
[Application No. D-9295, et al.]

 

Proposed Exemptions; Lone Star Industries, Inc. Master Retirement 
Trust, et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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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.

Lone Star Industries, Inc. Master Retirement Trust (the Master Trust) 
Located in Chicago, IL

[Application No. D-9295]

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).
Section I--Transactions
    If the exemption is granted, effective September 10, 1990, the 
restrictions of sections 406(a), 406(b)(1), 406(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:
    (a) the lease (the Lease) by the Master Trust of a certain parcel 
of real property (the Property) located in Rancho Cordova, California, 
to RMC Lonestar (RMC), a party in interest with respect to plans 
participating in the Master Trust (the Plans);
    (b) the obligations and guarantees to the Master Trust by Lone Star 
Industries, Inc. (LSI), a party in interest with respect to the Plans, 
arising under the terms of the Lease on the Property, subsequent to the 
assignment by LSI of its leasehold interest in the Property to RMC; and
    (c) the payment in the amount of $6,000,000 by LSI to the Master 
Trust in exchange for a release of LSI's obligation to perform under 
the terms of a certain yield guarantee agreement (the Guarantee 
Agreement) signed December 18, 1992, by LSI and the Master Trust; 
provided that the conditions set forth in section II below are 
met.1
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    \1\For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
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Section II--Conditions
    This exemption is conditioned upon the adherence to the material 
facts and representations described herein and upon the satisfaction of 
the following requirements:
    (a) the Bankruptcy Court for the Southern District of New York (the 
Bankruptcy Court) enters an order confirming the modified amended 
consolidated plan of reorganization filed by LSI and its affiliates, 
pursuant to Chapter 11 of the Bankruptcy Code;
    (b) the obligations and guarantees of LSI to the Master Trust under 
the Lease are assumed by LSI and continue after the plan of 
reorganization is confirmed by the Bankruptcy Court;
    (c) LSI pays the $6,000,000 in a single lump-sum payment in cash to 
the Master Trust, not later than sixty (60) days following the later of 
(1) the date of the order of the Bankruptcy Court approving the 
payment, or (2) the date the grant of this exemption is published in 
the Federal Register;
    (d) Morrison, Karsten, Ramzy & Arthur, Inc. (MKRA), acting as 
independent qualified fiduciary on behalf of the Master Trust (the I/
F), has negotiated, reviewed, and approved the transactions, and has 
determined that the transactions were feasible, in the interest of, and 
protective of the participants and beneficiaries of the Plans invested 
in the Master Trust, as of the effective date of this exemption;
    (e) MKRA at the time of its appointment was unrelated to LSI, RMC, 
and any other parties involved in the Lease and will at all times 
remain independent of such parties;
    (f) the provisions of the amendment to the Lease, as described in 
paragraph 11 below, executed in December 1992 (the First Amendment) 
become effective on the date that the grant of this exemption is 
published in the Federal Register;
    (g) the terms of the Lease, as modified by the First Amendment, are 
at least as favorable to the Master Trust, the Plans, and their 
participants and beneficiaries, as those which could have been obtained 
by the Master Trust in an arm's length negotiations with an unrelated 
third party under similar circumstances;
    (h) from September 10, 1990, to June 1, 1993, the Northern Trust 
Company (the Trustee), an independent party with respect to LSI, RMC, 
and their affiliates, managed the Property on behalf of the Master 
Trust and monitored and enforced the terms of the Lease;
    (i) from June 1, 1993, MKRA managed the Property on behalf of the 
Master Trust and monitored and enforced the terms of the Lease, and 
MKRA or its successors, will act as I/F with respect to the Property 
and will monitor and enforce the provisions of the Lease as long as 
such Property is leased to a party in interest;
    (j) MKRA or its successors will monitor the fair market value of 
the Master Trust in order to insure that the fair market value of the 
Property will at no time exceed twenty percent (20%) of the total fair 
market value of the assets of the Master Trust;
    (k) LSI has either paid directly or reimbursed the Master Trust for 
any fees, other than trustee and investment management fees, incurred 
with respect to the ownership of the Property by the Master Trust, and 
in the future, the Master Trust will incur no fees in connection with 
the transactions, other than fees paid to the trustee and to the 
investment manager; and
    (l) LSI has filed Forms 5330 and paid the excise taxes with respect 
to the Lease of the Property for years 1987-1989 and will file Forms 
5330 and pay the excise taxes for the period after December 31, 1989, 
and before the effective date of this exemption.

EFFECTIVE DATE: If the proposed exemption is granted, the exemption 
will be effective as of September 10, 1990.2
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    \2\The Department is not proposing exemptive relief for the 
prohibited transactions described herein prior to September 10, 
1990. In this regard, it is represented that LSI on July 31, 1990, 
filed an excise tax return on Forms 5330 for plan years 1987, 1988, 
and 1989 and paid the excise taxes with respect to the Property for 
years 1987-1989. It is also represented that LSI will file Forms 
5330 and pay the excise taxes for the period after December 31, 
1989, and before the effective date of this proposed exemption.
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    Summary of Facts and Representations
    1. The Plans are pension plans sponsored by LSI and its 
subsidiaries. LSI, a corporation whose stock is publicly traded on the 
New York Stock Exchange, engages in the mining, processing, and 
distributing of sand, gravel, and crushed stone. In addition, LSI is a 
major source of ready-mixed concrete and precast concrete products and 
is a leading importer of cement and clinker. During 1987, LSI had net 
sales of $760.8 million and a net profit of $57.2 million. Since 
December 31, 1987, LSI has been one of two general partners, each of 
whom own a fifty percent (50%) interest in RMC, a California general 
partnership. Prior to that time, LSI and a wholly owned subsidiary 
together owned a hundred percent (100%) interest in RMC. RMC, with 
principal offices in Pleasanton, California, also engages in mining 
operations.
    2. On January 1, 1979, the Master Trust was established, to provide 
for the commingled investment of the assets of Plans sponsored by LSI 
and its affiliates. As of June 30, 1992, there were nine (9) such Plans 
participating in a Master Trust, covering approximately 5,917 
individual participants. As of the same date, the total value of the 
assets held by the Master Trust was approximately $88,223,000 of which 
approximately $29 million was held in a segregated fund for the benefit 
of LSI's Salaried Employees Pension Plan. Of the remaining $59 million, 
approximately $55 million was held for the benefit of the pension plans 
for hourly employees of LSI, and an additional $4 million was held for 
the benefit of the pension plans for salaried employees of LSI. It is 
represented that, as of June 30, 1992, a value for the Property of 
approximately $8,340,000 was included in and constituted approximately 
14.1% of the $59 million dollar figure. Until June 1, 1993, when MKRA 
was appointed as Property manager, the Northern Trust Company, as the 
Trustee of the Master Trust, had discretionary authority over the 
management of the Property.
    3. The Property consists of approximately 800 acres in Rancho 
Cordova, California located twelve (12) miles east of downtown 
Sacramento, California, and adjacent to Mather Air Force Base. Most of 
the Property is unimproved land currently being mined by RMC for sand, 
gravel, stone, clay, or other materials, exclusive of gold or gold 
tailings (the Aggregates), pursuant to the Lease between the Master 
Trust and RMC. It is anticipated that approximately 100 acres of the 
Property containing the plant site will not be mined.
    4. The Master Trust acquired the Property from LSI on December 20, 
1983, for a purchase price of $5,706,016, and simultaneously leased the 
Property back to LSI. It is represented that the Property was part of a 
larger tract of real estate (the Tract) which under California law 
could not then be subdivided or separately conveyed to the Master 
Trust. Accordingly, the Master Trust acquired from LSI an undivided 
62.8% interest, while LSI, respectively, retained 37.2% interest in the 
Tract.3 Subsequently, during 1984, applicable provisions of 
California law necessary to subdivide the Tract were satisfied, and the 
Master Trust became the sole owner and lessor of the Property.
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    \3\The Department is expressing no opinion as to whether the 
acquisition and holding by the Master Trust of a partial interest in 
the Tract in which LSI owned the remaining interest violated section 
406 of the Act, nor is the Department offering relief for such 
transaction. Further, the Department is not proposing relief for any 
violation of section 404 of the Act which may have arisen as a 
result of any of the transactions described herein.
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    It is represented that the Property was ``qualifying employer real 
property,'' as defined in section 407(d)(4) of the Act, when acquired 
by the Master Trust in 1983, because the Master Trust held other 
parcels of real estate which were then leased to LSI or its affiliates 
and which qualified as ``employer real property,'' as defined in 
section 407(d)(2) of the Act.4 The applicant asserts that the sale 
and leaseback of the Property between the Master Trust and LSI until 
1986 were exempt from the prohibited transaction restrictions by reason 
of section 408(e) of the Act.5
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    \4\As set forth in relevant part below, section 407(d)(2) of the 
Act defines the term, ``employer real property,'' as real property 
(and related personal property) which is leased to an employer of 
employees covered by the plan, or to an affiliate of such employer. 
Section 407(d)(4) of the Act defines the term, ``qualifying employer 
real property,'' as parcels of ``employer real property''--(A) if a 
substantial number of the parcels are dispersed geographically; (B) 
if each parcel of real property and the improvements thereon are 
suitable (or adaptable without excessive cost) for more than one 
use; (C) even if all of such property is leased to one lessee (which 
may be an employer, or an affiliate of an employer); (D) if the 
acquisition and retention of such property comply with the 
provisions of this part (other than section 404(a)(1)(B) to the 
extent it requires diversification, and sections 404(a)(1)(C), 406, 
and subsection (a) of this section). The Department is expressing no 
opinion, herein, whether the Property at any time constituted 
``qualifying employer real property'' within the meaning of section 
407(d)(4) of the Act.
    \5\Section 408(e) of the Act provides, in pertinent part, that 
sections 406 and 407 shall not apply to the acquisition or lease by 
a plan of ``qualifying employer real property,'' as defined in 
section 407(d)(4) of the Act, if specified conditions are satisfied. 
Among these conditions are that such acquisition or lease is for 
adequate consideration, that no commission is charged with respect 
thereto, and, in the case of an acquisition or lease of ``qualifying 
employer real property'' by a plan which is not an ``eligible 
individual account plan,'' as defined in section 407(d)(3) of the 
Act, that the lease or acquisition is not prohibited by section 
407(a) of the Act. The Department is expressing no opinion herein as 
to whether the sale and leaseback of the Property satisfied the 
conditions, as set forth under section 408(e) of the Act.
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    5. By 1986, except for the Property, the Trustee had disposed of 
all other parcels of real estate in the Master Trust which were leased 
to LSI or its affiliates. Accordingly, the Property became the only 
parcel of ``employer real property,'' as defined by section 407(d)(2) 
of the Act, which remained in the Master Trust. As the sole remaining 
parcel of ``employer real property'' held in the Master Trust, the 
applicant represents that the Property may have, at that time, no 
longer constituted ``qualifying employer real property,'' because the 
``substantial number'' requirement, as set forth in section 
407(d)(4)(A) of the Act, may no longer have been satisfied. As a 
result, the exemption for the Lease provided by section 408(e) may no 
longer have been available.
    6. As stated in paragraph 4 above, LSI entered into the Lease of 
the Property with the Master Trust on December 20, 1983. On January 1, 
1987, the Trustee of the Master Trust approved the assignment by LSI of 
the Lease of the Property to RMC, and the Master Trust began to Lease 
the Property to RMC rather than LSI. Notwithstanding the assignment of 
the leasehold interest of LSI to RMC, it is represented that LSI was 
not released from its obligations under the Lease, nor were the terms 
of the Lease between LSI and the Master Trust altered by the assignment 
of the Lease.
    The Lease provides that its term shall end on December 31, 2003, 
unless sooner terminated. The Trustee has the right to terminate the 
Lease on certain portions of the Property prior to December 31, 2003, 
effective on specified dates, provided RMC is given at least six months 
prior written notice of such effective termination date. Under certain 
circumstances, the Lease also gives the Trustee the right to terminate 
such Lease with respect to any portion of the Property which is not 
continuously mined or quarried during specified periods.
    It is represented the Trustee recognized the need to maintain a 
fair market rental throughout the duration of the Lease. Accordingly, 
the rental rate under the terms of the Lease are based on royalties to 
be paid to the Master Trust to compensate primarily for the removal of 
the Aggregates from the Property and the subsequent sale of such 
Aggregates. In this regard, under the terms of the Lease, the royalty 
on the Aggregates was set in 1983 at thirty cents ($.30) per ton; 
provided that in any lease year the lessee pays no less than seven 
percent (7%) of the net realized income from the sale of such 
Aggregates. For each year during the term of the Lease, commencing in 
the second year, the Lease also provides that the royalty on Aggregates 
is subject to a four percent (4%) yearly increase, compounded annually. 
For example, in the second year of the Lease, the royalty on the 
Aggregates increased from the initial 30 cents per ton to 31.2 cents 
per ton of Aggregates. In addition, the Lease provides that for each 
ton of gold or gold tailings extracted from the Property the lessee 
shall pay a royalty equal to 33\1/3\% of the net realized income from 
the sale of such gold or gold tailings. It is represented that all the 
terms of the Lease are triple net and provide for the lessee to pay for 
all taxes, maintenance, and insurance.
    Notwithstanding the level of production or sale of Aggregates or 
gold by the lessee, the Lease also provides for certain minimum 
guaranteed annual payments of royalties by the lessee starting in the 
sixth year (1989) and ending in the fifteenth year (1998) of the Lease. 
In this regard, the Lease provides that these minimum guaranteed 
royalties increase by $25,000 annually through 1998. For example, the 
terms of the Lease established the minimum guaranteed royalty amount at 
$375,000 for 1989 and at $600,000 in 1998, the fifteenth year of the 
Lease. It is represented that the royalty payments actually made by RMC 
have exceeded the minimum guaranteed royalty amounts for the years 1989 
through 1992. As indicated in paragraph 6 above, despite the assignment 
of the leasehold on the Property to RMC, LSI at all times remains 
primarily liable to the Master Trust for the continuing obligations and 
guarantees, including the minimum guaranteed royalties specified under 
the Lease.
    As originally contemplated by LSI and the Master Trust, although 
the Lease term extended until 2003, the guarantee of minimum annual 
royalty payments by LSI was not to extend beyond 1998. Such amounts are 
not guaranteed by LSI, because it was originally anticipated that the 
reserves of the Aggregates on the Property would be exhausted by 1998. 
Nevertheless, it is represented that provision was made to continue the 
Lease beyond 1998 in the event there was sufficient production or sale 
of the Aggregates from the Property during the five-year period from 
1999 to 2003.
    7. In an attempt to obtain a prohibited transaction exemption from 
the Department for the ongoing Lease, MKRA, a registered investment 
advisor under the Investment Advisors Act of 1940, was appointed by LSI 
in June 1990 to serve as the I/F to the Master Trust with respect to 
the Lease. MKRA was appointed to determine whether the continued 
holding of the Property by the Master Trust and the leasing of the 
Property to RMC was in the best interests of the Plans. In doing so, 
MKRA was to evaluate the Lease and to determine whether the terms of 
the Lease provided a fair market rental return to the Master Trust. In 
this regard, MKRA was authorized to engage an independent appraiser, as 
needed. It is represented that, if MKRA were to conclude that the 
continuation of the Lease was not in the best interests of the 
participants of the Plans, MKRA was to notify and consult with LSI with 
respect to such findings and to negotiate independently any changes to 
the terms and conditions of the Lease, as would be necessary for MKRA 
to determine that such continued holding of the Property and leasing of 
such Property to RMC would be in the best interests of the participants 
of the Plans.
    On June 1, 1993, MKRA assumed further responsibilities in addition 
to its duties as I/F. In this regard, LSI appointed MKRA to serve as 
investment manager for the Property on behalf of the Master Trust. 
MKRA's duties in this regard include monitoring and enforcing the terms 
of the Lease. These duties had previously been performed by the 
Trustee. MKRA maintains offices located in Santa Rosa, California and 
specializes in the management and disposition of distressed and under 
performing real estate assets for tax-exempt and non-exempt 
institutional clients. MKRA is independent in that it is unrelated to 
any of the parties involved in the Lease.
    MKRA's qualifications include managing, as of 1990, approximately 
$40 million in assets involving a variety of property types located 
throughout the West and the Southwest. Further, it is represented that 
MKRA is familiar with land value trends in the Sacramento area and has 
an excellent network of contacts there for appraisal, geological, and 
real estate transaction information. In this regard, with respect to 
the highly specialized operations on the Property, MKRA interviewed and 
consulted with independent third parties active in the sand and gravel 
industry in the Sacramento or San Francisco Bay areas.
    8. In a report dated September 10, 1990, MKRA stated that the Lease 
needed to be modified in several respects. MKRA determined, among other 
modifications, that the Master Trust should receive a ``put option'' 
(the Put Option) which would require LSI to purchase the Property from 
the Master Trust at the end of the Lease at a cash price that, when 
considered with all royalties and earlier disposition proceeds, if any, 
received by the Master Trust over the life of the investment, would 
generate a twelve percent (12%) internal rate of return on the Property 
for the Master Trust. Provided this modification and others were made, 
MKRA concluded that the continued holding of the Property by the Master 
Trust and the leasing to RMC would be in the best interests of the 
Plans.
    9. MKRA's conclusion was based, in part, on its review, among other 
materials, of the annual reports and related financial information of 
LSI and RMC and the presumption that LSI and RMC were and would remain 
sufficiently creditworthy to honor the recommended Put Option and 
thereby assure the Master Trust a 12% market yield for the Property as 
leased. However, on December 10, 1990, while the application for 
exemption was under consideration by the Department, LSI filed a 
petition to reorganize under Chapter 11 of the United States Bankruptcy 
Code.
    As a result of LSI's petition in Bankruptcy Court, MKRA raised 
concerns as to: (1) LSI's ability to perform under the Put Option; and 
(2) the viability of such Put Option, without modification, to serve as 
a reliable yield guarantee device. In response, LSI requested that MKRA 
further determine whether the continuation of the Lease to RMC would 
remain in the best interests of participants and beneficiaries of the 
Plans, given the fact that LSI had filed a petition for reorganization 
in Bankruptcy Court.
    10. In order to make this analysis, MKRA engaged in an extensive 
review and analysis of the Property, including obtaining an additional 
evaluation of the soil conditions on the Property. In this regard, MKRA 
hired Jo Crosby and Associates (Crosby), a geotechnical consultant 
located in Mountain View, California. Crosby's report, issued in 
December 1992, updated the observations and conclusions of its two 
prior reports, dated February 22, 1991, and September 18, 1991, which 
had addressed the ability of the Property to support future commercial 
development upon completion of the mining operations. In addition, 
Crosby reviewed the status of the mining operation, and RMC's proposed 
plans for completion of the quarrying, and assessed the validity and 
costs of previously recommended soil remediation measures.
    In its December 1992 report, Crosby stated that remediation of 525 
acres of quarry floor would cost $7,000 per acre, plus up to $1,500 per 
acre for geotechnical engineering, and supervision for a total cost of 
from $3,150,000 to $4,462,500. With respect to approximately 180 acres 
of the Property to be quarried in the future, Crosby estimated 
remediation would cost $5,200 per acre, plus $1,000 per acre for 
engineering and supervision, if certain recommendations were followed.
    While remediation of the Property to enable commercial development 
at the termination of the Lease would have a high cost, paying this 
price would be optional to the then Property owner. There are no 
regulatory requirements to engage in so extensive a remediation. In 
fact, with regard to soil remediation of the Property upon completion 
of the mining, it is represented that the State of California does not 
have any requirements. However, the County of Sacramento requires upon 
completion of mining: (1) The rough grading of slopes--no greater than 
two feet horizontal to one foot vertical, (2) the seeding of such 
slopes within one year of the completion of mining, (3) the 
encouragement of natural growth in reclaimed areas, and (4) the 
maintenance of reclaimed areas free of derelict machinery and 
materials. In this regard, the Lease requires the lessee to reclaim 
portions of the Property that it has mined in accordance with the 
requirements of the law, and those of the Property Use Permit dated May 
9, 1975, as revised on August 8, 1983. The lessee is also obliged to 
remove all improvements, fixtures, and equipment from the Property at 
the end of the Lease term. It is represented that RMC has complied with 
these reclamation requirements in all areas where mining has been 
completed.
    11. After reviewing the information described in the paragraph 
above, MKRA concluded that continuing the Lease would be in the best 
interests of the participants of the Plans provided the Lease was 
amended, and LSI agreed to certain modifications in the guaranteed rate 
of return. Accordingly, LSI, the Trustee, and MKRA signed, in December 
1991, a letter of understanding, and subsequently, on December 18, 
1992, signed the final Guarantee Agreement, first mentioned in 
paragraph (b) of section I above. Though the Guarantee Agreement was 
executed by LSI, MKRA, and the Trustee, the agreement would only become 
effective upon approval by the Bankruptcy Court and was also 
conditioned on the Department granting LSI's application for exemption 
from the prohibited transaction provisions of the Act.
    The Guarantee Agreement provided for a guarantee by LSI to the 
Master Trust of a fourteen percent (14%) annual internal rate6 of 
return on $5,706,000, the purchase price paid by the Master Trust for 
the Property in 1983. It is represented that MKRA increased the 
internal rate of return to fourteen percent (14%) from the twelve 
percent (12%) it had previously recommended, due to changes in market 
conditions for institutional investment in real estate. The guaranteed 
return was to be provided either through a ``put'' of the Property to 
LSI or through the payment by LSI of a yield guarantee amount, subject 
to a $10,000,000 limit on LSI's liability. In order to secure the 
guaranteed return, LSI, under the terms of the Guarantee Agreement, was 
required to: (1) Post an irrevocable letter of credit in a form 
satisfactory to the Master Trust, or (2) deposit in an escrow account 
either cash (initially in the amount of approximately $6,700,000 but 
subject to annual adjustments) or liquid securities meeting pre-
specified requirements in terms of investment grade and quality.
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    \6\It is represented that internal rate of return is defined as 
the rate of return at which the discounted future cash flows, 
including the reversion, equal the initial cash outlay (in this 
instance the initial purchase price of $5,706,016). The internal 
rate of return is also defined as the discount rate at which the net 
present value of a series of cash flows, including the initial 
investment outflow (investment amount) and the reversion, is zero.
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    Further, the Guarantee Agreement required LSI to contribute, 
beginning in 1995, or if earlier, upon completion of payments to 
creditors pursuant to a confirmed plan of reorganization, up to 
$200,000 per year, subject to certain limiting conditions, which would 
be used to prepare and implement a program of soil remediation on the 
Property. Under the terms of the Guarantee Agreement, LSI had the right 
to purchase the Property at the higher of its fair market value or an 
amount necessary to provide the Master Trust with its 14% internal rate 
of return. If the purchase were to occur prior to December 31, 1998, 
LSI was required to pay an ``early purchase premium'' of up to $1 
million to exercise this right. However, the Master Trust could offer 
the Property for sale to LSI without the ``early purchase premium'' at 
the higher of the fair market value of the Property or an amount 
necessary to provide the Master Trust with the 14% internal rate of 
return.
    In connection with the Guarantee Agreement, LSI also agreed to the 
First Amendment to the Lease on the Property. As indicated in paragraph 
(f) of section II above, the First Amendment to the Lease will become 
effective on the date the grant of this proposed exemption is published 
in the Federal Register. The First Amendment will provide: (1) For 
notice to the Master Trust at least twelve months in advance of the 
monthly due date for non-guaranteed minimum annual royalties of RMC's 
intent not to pay such royalties to the Master Trust,7 (2) for a 
limitation on the increase in the number of acres on the Property used 
as settlement ponds, and (3) for access to the Property by the Master 
Trust for soil remediation activities. In addition, the First Amendment 
deleted section 25 of the Lease which had provided LSI with a ``right 
of first opportunity'' to purchase the Property should the Master Trust 
determine to sell to third parties and corrected a typographical error 
in the language under section 23 of the Lease, with respect to the 
remedies available to the Master Trust in the event RMC, as lessee, 
attempted to occupy the Property or any part of the Property after 
termination of either the Lease or the lessee's right to possession of 
the Property.
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    \7\In the event such minimum non-guaranteed annual royalties are 
not paid, the Master Trust, as lessor, may at its election, upon not 
less than ten days written notice to RMC, the lessee, terminate the 
Lease and all of RMC's rights thereunder.
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    12. Subsequently, LSI determined that, in lieu of its performance 
under the Guarantee Agreement, it would prefer to make a cash payment 
to the Master Trust. LSI believes such payment will increase the level 
of funding for the Plans and will assist in negotiations occurring in 
bankruptcy with the Pension Benefit Guaranty Corporation (the PBGC), 
respecting, among other things, potential underfunding of the Plans, 
and PBGC's contingent claims should the Plans be terminated with 
insufficient assets to satisfy benefit liabilities.
    Accordingly, after discussions with MKRA and the Trustee of the 
Master Trust, in a letter dated July 9, 1993, LSI offered to pay the 
Master Trust $6,000,000 (the Proposed Offer), if the Master Trust would 
give up certain rights, as set forth in the Guarantee Agreement. In 
this regard, acceptance of the Proposed Offer is contingent upon: (a) 
the $6,000,000 payment being approved by the Bankruptcy Court; (b) the 
Department issuing a final administrative exemption; (c) the Trustee 
withdrawing all claims currently pending before the Bankruptcy Court 
filed on behalf of the Master Trust relating to or arising from the 
ownership of the Property by the Master Trust and the leasing of the 
Property;8 (d) the Master Trust providing LSI, RMC, their 
affiliates, officers, directors, and employees, and all fiduciaries of 
the Master Trust with a complete release of any claims against such 
parties based on the Lease of the Property to LSI or to RMC which may 
have been deemed to be a prohibited transaction under section 406 of 
the Act or section 4975 of the Code or which may involve a breach of 
fiduciary duty under section 404 of the Act;9 and (e) the Master 
Trust releasing LSI from all obligations under the terms of the 
Guarantee Agreement. Notwithstanding the release of LSI from its 
obligations under the Guarantee Agreement, it is represented that the 
First Amendment to the Lease, which provides for the notice to the 
Master Trust of non-payment of certain royalties, the limitation on 
settlement ponds, access by the Master Trust for remediation activities 
on the Property, the deletion of the ``right of first opportunity'' for 
LSI to purchase the Property, and correction of certain typographical 
errors in the Lease, as described in paragraph 11 above, will become 
effective on the date this proposed exemption is granted.
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    \8\It is represented that on October 15, 1991, the Trustee, on 
behalf of the Master Trust, filed a proof of claim in the Bankruptcy 
Court against LSI. The proof of claim alleges contingent liability 
of LSI to the Master Trust as a result of the continuation of the 
Lease and as a result of possible violations of the prohibited 
transaction restrictions of the Code and the Act. In addition, it is 
represented that the Trustee and the PBGC each filed contingent 
claims to cover the possibility of funding deficiencies or unfunded 
pension liabilities in the pension plans sponsored by LSI. In this 
regard, on October 15, 1991, the PBGC filed three separate proofs of 
claim against LSI. The PBGC's claims consist of: (1) a claim for 
$196,129 based on the alleged failure of the debtors to pay annual 
premiums; (2) a claim for $2,318,288 based upon the alleged failure 
of the debtors to meet minimum funding requirements in the event of 
the termination of certain plans; and (3) a contingent claim for 
$61,066,255 based on the potential liability should such plans be 
terminated with insufficient assets to satisfy all benefit 
liabilities.
    \9\The Department notes that the decisions affecting the Master 
Trust made by the fiduciaries, including the Trustee and MKRA, are 
governed by the fiduciary responsibility requirements of part 4, 
subtitle B, title I of the Act. Section 404 of the Act requires that 
a fiduciary of a plan must act prudently, solely in the interest of 
the participants and beneficiaries of such plan, and for the 
exclusive purpose of providing benefits to such participants and 
beneficiaries. In this regard, the Department notes that in order to 
act prudently in determining to release the above-described claims 
and to accept the Proposed Offer on behalf of the Master Trust, the 
fiduciaries must consider, among other factors, the consequences of 
that decision in relation to those of alternative courses of action.
    The Department is expressing no opinion, herein, whether any 
provision of part 4, subtitle B, title I of the Act will be violated 
by the decision of the Master Trust to provide a complete release of 
all claims against LSI, RMC, their affiliates, officers, directors, 
and employees, and any other fiduciaries of the Master Trust. In 
this regard, the Department notes that no relief from sections 406 
and 407 of the Act is provided, herein, for transactions other than 
those specifically described in section I(a)-(c) of this proposed 
exemption. The Department further notes that the Plans' release of 
claims in connection with the Lease transaction does not affect the 
Department's ability to take any action that it deems appropriate.
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    13. MKRA has determined that the acceptance by the Master Trust of 
the Proposed Offer is feasible, in the interest of and protective of 
the participants and beneficiaries of the Plans, provided the 
Bankruptcy Court approves the $6 million dollar payment and provided 
that the obligations of LSI, as set forth under the Lease, will 
continue unaffected and will become obligations of LSI upon 
confirmation of a plan of reorganization. In this regard, MKRA has 
opined that the $6,000,000 cash payment, if received by April 30, 1994, 
will produce in combination with the Lease an overall transaction which 
is (i) superior to that produced by the Guarantee Agreement, (ii) is 
feasible, in the best interest of, and protective of the beneficiaries 
of the Master Trust, and (iii) is equal or superior to transactions 
which could be negotiated with unrelated third parties.
    MKRA offers the following reasons for this opinion regarding the 
Proposed Offer:
    (a) MKRA asserts that the Proposed Offer completely eliminates the 
risk of capital recovery and achievement of a current fair market 
yield. MKRA calculates that the Proposed Offer will generate an 
internal rate of return of 11.02%, assuming the $6,000,000 cash payment 
is received on or before April 30, 1994. MKRA explains that this means 
that from commencement of the Lease through 1993, the Master Trust will 
have received total consideration in an amount equal to its original 
investment of $5,706,000 plus an annual yield on that investment of 
11.02% for each year during the term of the Lease through April 30, 
1994--even if the Master Trust does not receive royalty payments or any 
reversionary amount for the Property subsequent to receipt of the $6 
million dollar payment. MKRA concludes that, as the Proposed Offer 
eliminates the risk of recovery of capital, an internal rate of return 
of 11.02% represents a yield equal or superior to the current market 
yield required by pension funds. In the opinion of MKRA, such current 
market yield ranges from nine to ten percent (9% to 10%) on 
investments, such as single tenant properties leased for periods of ten 
(10) or more years on an absolute net basis to AAA-rated tenants.
    (b) MKRA asserts that with the Proposed Offer there is greater 
opportunity for enhanced yield in excess of the fourteen percent (14%) 
rate of return provided for under the Guarantee Agreement. In analyzing 
the Guarantee Agreement, MKRA calculated that in order to generate an 
annual fourteen percent (14%) rate of return, the Property would have 
to have a reversionary value of $14,656,000 (only $10 million of which 
under the Guarantee Agreement would have been guaranteed by LSI) upon 
the expiration of the Lease in 1998. In analyzing the Proposed Offer, 
MKRA asserts that if the $6,000,000 cash payment were to be made by 
April 30, 1994, the reversionary value of Property in 1998 would only 
need to be $3,475,000 to generate a fourteen percent (14%) internal 
rate of return for the Master Trust. MKRA states in a letter dated 
January 27, 1994, that as of December 31, 1993, the estimated fair 
market value of the fee simple estate interest in the Property is 
$5,750,000. Because the current fair market value of the Property, as 
determined by MKRA, exceeds the $3,475,000 value which MKRA calculates 
would be needed in 1998 to generate a fourteen percent (14%) internal 
rate of return, MKRA concludes that the Proposed Offer produces an 
enhanced opportunity for the investment in the Property by the Master 
Trust to produce an internal rate of return in excess of fourteen 
percent (14%).
    (c) MKRA asserts that under the terms of the Proposed Offer, a 
yield in excess of 11.02% is assured to the Master Trust. In this 
regard, MKRA explains that every dollar of reversionary value, and 
future royalties paid for the Property in excess of zero will produce a 
yield in excess of the 11.02% rate of return generated by royalties 
received to date by the Master Trust, plus the $6,000,000 cash payment. 
Notwithstanding the soils remediation issues that exist for the 
Property, MKRA expresses certainty that the Property will have some 
value upon expiration of the Lease. In this regard, MKRA explains that 
the acreage representing the plant site will not be mined, and 
accordingly, the value of that portion will not be affected. According 
to MKRA, the 100 acres on the Property representing the plant site have 
a current fair market value of approximately $1,200,000, as of January 
27, 1994. Thus, MKRA states that, even if all of the areas which are 
mined and require remediation prior to future development prove to be 
valueless, the Property would still have a value of approximately 
$1,200,000, subject to future market conditions, when the Lease 
terminates. Assuming a $1,200,000 reversionary value for the Property 
and receipt of the $6,000,000 cash payment by April 30, 1994, MKRA 
calculates that upon expiration of the Lease the Property will have 
generated a 12.18% internal rate of return. In the opinion of MKRA, 
such a rate of return is well in excess of market yield requirements 
for comparable investments.
    14. In summary, the applicant represents that the subject 
transactions satisfy the criteria for exemption, as set forth in 
section 408(a) of the Act because:
    (a) LSI will pay $6,000,000 in a single lump-sum payment in cash to 
the Master Trust, not later than sixty (60) days following the later of 
(1) the date of the order of the Bankruptcy Court approving the 
payment, or (2) the date the grant of this exemption is published in 
the Federal Register;
    (b) MKRA, acting as I/F on behalf of the Master Trust, has 
negotiated, reviewed, and approved the transactions, and has determined 
that the transactions were feasible, in the interest of, and protective 
of the participants and beneficiaries of the Plan invested in the 
Master Trust, as of the effective date of this exemption;
    (c) the terms of the Lease, as modified by the First Amendment, are 
represented to be at least as favorable to the Master Trust, the Plans, 
and their participants and beneficiaries, as those which could have 
been obtained by the Master Trust in an arm's length negotiation with 
an unrelated third party under similar circumstances;
    (d) MKRA, as I/F on behalf of the Master Trust, has managed the 
Property, and MKRA or its successors, will act as independent 
investment manager of the Property and will enforce the provisions of 
the Lease; for as long as such Property is leased to a party in 
interest;
    (f) MKRA or its successors will monitor the fair market value of 
the Master Trust in order to insure that the fair market value of the 
Property will at no time exceed twenty percent (20%) of the total fair 
market value of the assets of the Master Trust; and
    (g) LSI has either paid directly or reimbursed the Master Trust for 
any fees, other than trustee and investment management fees, incurred 
with respect to the ownership of the Property by the Master Trust, and 
in the future, the Master Trust will incur no fees in connection with 
the transactions, other than fees paid to the trustee and to the 
investment manager.
    For Further Information Contact: Angelena C. Le Blanc, of the 
Department, telephone (202) 219-8883. (This is not a toll-free number.)

Wally L. Morgan IRA (the IRA) Located in Dallas, TX

[Application No. D-9581]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 4975(c)(2) of the Code and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
32847, August 10, 1990.) If the exemption is granted, the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1) (A) through (E) of the Code, shall not apply to 
the proposed cash sale of three 50% undivided interests (the Interests) 
in each of three parcels of unimproved land (the Parcels) by the IRA to 
Wally L. Morgan (Mr. Morgan), a disqualified person with respect to the 
IRA; provided that the following conditions are satisfied:10
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    \1\0Pursuant to 29 CFR 2510.3-2(d), there is no jurisdiction 
with respect to the IRA under Title I of the Act. However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.
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    (a) The proposed sale will be a one-time cash transaction;
    (b) The IRA in this transaction will receive the aggregate current 
fair market value of the three 50% Interests as established at the time 
of the sale by an independent qualified appraiser;
    (c) The IRA will pay no expenses associated with the sale; and (d) 
Mr. Morgan as the sponsor of the IRA will be the only individual 
affected by the transaction.

Summary of Facts and Representations

    1. The IRA is an individual retirement account which was 
established on October 12, 1987. Mr. Morgan is the sponsor of the IRA. 
As of March 31, 1993, the IRA had net assets valued at $627,414. The 
principal assets of the IRA consisted of those obtained as a result of 
rollover distributions from the Information Retrieval Method Inc. 
Employees Profit Sharing Plan (the Plan), which was terminated in 
October, 1987. It is represented that no additional contributions have 
been made to the IRA.
    2. Part of the distributions from the Plan rolled over into the IRA 
consisted of the three 50% undivided Interests in the three Parcels of 
unimproved land. Parcel I contains 1.2436 acres and is located at the 
southeast corner of Denton Drive and Carlisle Street in Denton County, 
Texas. Parcel II contains .959 acres and is located at 483 Bennett 
Lane, and Parcel III contains .923 acres and is located at 500 Bennett 
Lane, Denton County, Texas. Parcel II is located on the north side of 
Bennett Lane and Parcel III is located on the south side of Bennett 
Lane. The remaining 50% undivided interests in the Parcels are held as 
an asset in Jack Brandenburger's IRA. Mr. Brandenburger has no 
relationship to Mr. Morgan or to Mr. Morgan's IRA.
    3. The Parcels were originally acquired from unrelated parties by 
the Plan in three separate cash transactions. Specifically, Parcel I 
was acquired on August 15, 1984, for $95,059.83. Parcel II was acquired 
on January 20, 1984, for $54,450. Parcel III was acquired on December 
16, 1983, for $69,397.14. It is represented that the Parcels were 
acquired as vacant land and remain undeveloped. Upon the termination of 
the Plan in October 1987, the aggregate fair market value of the 
Parcels was determined by three independent real estate brokers at 
$284,550, and, therefore, the three 50% Interests had a value of 
$142,275.
    4. The Parcels were appraised on September 28, 1993 (the 
Appraisal), by Ted Brooks, MAI, an independent and qualified appraiser 
with Noyd & O'Connell, Incorporated (Mr. Brooks). In establishing the 
fair market value of the Parcels, Mr. Brooks relied on the direct sales 
comparison approach to value, and determined that the fair market value 
of Parcel I was $22,000, for Parcel II the fair market value was 
$21,000, and for Parcel III the fair market value was $20,000. 
Therefore, the aggregate fair market value for the Parcels as of 
September 28, 1993, was $63,000, and, as such, the three 50% Interests 
had an aggregate fair market value of $31,500. Mr. Morgan represents 
that the Parcels are not encumbered by any debt, and that no other 
disqualified person or related party owns or has owned land adjacent to 
the Parcels. Mr. Morgan further maintains that the Parcels were never 
used by any disqualified person.
    5. It is represented that the proposed transaction is in the best 
interest and protective of the IRA because the transaction will enable 
the IRA to divest itself of a non-income producing asset that has 
depreciated in value since original acquisition and will provide the 
IRA with liquidity. The transaction is protective of the IRA because as 
a result of the sale the IRA will receive the current fair market value 
of the three 50% Interests established at the time of the sale by an 
independent qualified appraiser.
    6. In summary, the applicant represents that the transaction 
satisfies the statutory criteria of section 4975(c)(2) of the Code 
because:
    (a) the proposed sale will be a one-time cash transaction;
    (b) the IRA in this transaction will receive the current fair 
market value of the three 50% Interests established at the time of the 
sale by an independent qualified appraiser;
    (c) the IRA will pay no expenses associated with the sale;
    (d) the sale will provide the IRA with liquidity; and
    (e) Mr. Morgan as the sponsor of the IRA will be the only 
individual affected by the transaction.

Notice to Interested Persons

    Because Mr. Morgan is the sole participant of the IRA, it has been 
determined that there is no need to distribute the notice of proposed 
exemption to interested persons. Comments and requests for a hearing 
are due 30 days from the date of publication of this notice in the 
Federal Register.
    For Further Information Contact: Ekaterina A. Uzlyan of the 
Department at (202) 219-8883. (This is not a toll-free number.)

Potter Law Firm Retirement Plan (the Plan) Located in Tyler, TX

[Application No. D-9617]

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 section 4975(c)(1)(A) through (E) of the 
Code shall not apply to the proposed cash sale (the Sale) of a certain 
one-half undivided interest in real property (the Property) by the Plan 
to Potter, Minton, Roberts, Davis & Jones, P.C., (the Employer) a party 
in interest with respect to the Plan; provided that (1) the Sale is a 
one-time transaction for cash; (2) the Plan does not suffer any loss 
nor incur any expenses in the proposed transaction; (3) the Plan 
receives as consideration the greater of either the fair market value 
of the property as determined by an independent appraiser on the date 
of the Sale, or receives all the funds expended by the Plan in 
acquiring and maintaining the Property; and (4) the trustee of the Plan 
has determined that the proposed Sale is appropriate for the Plan and 
is in the best interests of the Plan and its participants and 
beneficiaries.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan, designated as a profit 
sharing plan, with 29 participants and beneficiaries and total assets 
of approximately $3,169,000, as of September 30, 1993. The Employer and 
NationsBank of Texas, N.A., located in Dallas, Texas, as trustee (the 
Trustee), are co-fiduciaries of the Plan.
    The Employer, which sponsors the Plan, is a Texas professional 
corporation engaged in the practice of law and is located in Tyler, 
Texas.
    2. The Property consists of an undivided one-half interest in 
86.751 acres of unimproved land, subject to no zoning restrictions, 
located in the E. Stephensen Survey, A-940, Smith County, Texas. It is 
described as 40 percent wooded with the remainder open with a 
scattering of large trees. There is 512 feet of frontage on County Road 
383. A year-round creek borders on the back of the Property. Utilities 
are available in the area of the location of the Property.
    The Property was acquired by the Plan for the consideration of 
$67,232.02 on February 6, 1985, from a Mr. and Mrs. Jack N. Zorn, who 
are unrelated persons with respect to the Plan and the Employer. The 
Trustee represents that the Plan incurred expenses totalling $9,185.56 
in maintaining the Property from the date of purchase in 1985 through 
1993, consisting of property taxes, appraisal fees, mowing charges, and 
other expenditures. No income has been received by the Plan from its 
ownership of the Property.11
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    \1\1The Department notes that the decisions to acquire and hold 
the Property are governed by fiduciary responsibility requirements 
of part 4, subtitle B, title I of the Act. In this regard the 
Department herein is not proposing relief for any violations of part 
4 of the Act which may have arisen as a result of the acquisition 
and holding of the Property.
---------------------------------------------------------------------------

    The Trustee has had the Property appraised each year. The last 
appraisal was on January 25, 1994, by James E. Justice, MAI of Real 
Estate Appraisal Services, Inc., Tyler, Texas, who determined that the 
fair market value of the entire Property was $100,000. One year 
earlier, Mr. Justice, in an appraisal of the Property on January 15, 
1993, determined that the fair market value of the entire Property was 
$110,000.
    3. The applicant represents that at the time the Plan purchased its 
interest in the Property in 1985 real estate prices had been 
increasing, and the fiduciaries of the Plan expected that after a few 
years the property could be sold for a profit. However, the applicant 
represents that the real estate market declined in activity and values 
during the years following the acquisition of the Property by the Plan, 
resulting in the Plan also incurring expenses with no correlating 
income.
    The owner of the other one-half undivided interest in the Property, 
Mr. Herbert Buie, as trustee of an unrelated trust, has stated that 
there is no objection by him to the Plan selling its interest in the 
Property to the Employer. Furthermore, Mr. Buie states that he has no 
interest in purchasing the Plan's interest in the Property and knows of 
no one that desires to purchase the Plan's interest.
    Three local realtors, PreJean Real Estate, Burns & Noble, and 
Simmons, all of Tyler, Texas, stated in separate documents that there 
is no market for the one-half undivided interest in the Property owned 
by the Plan, and further, that there is difficulty in obtaining 
financing for the purchase of a fractional interest in unimproved land.
    4. The Employer, as the applicant, proposes to purchase the 
Property from the Plan for either the higher of the fair market value 
of the Property, or for the sum of all the expenditures the Plan 
incurred in acquiring and maintaining the Property. The applicant and 
the Trustee represent that the Property is an illiquid investment for 
the Plan, which is depreciating in value and incurring expenses while 
producing no income for the Plan. Further, the applicant and the 
Trustee find that the investment prevents the Plan from utilizing a 
computerized daily accounting system which would allow each participant 
to select an individual asset mix.12
---------------------------------------------------------------------------

    \1\2In this proposed exemption the Department expresses no 
opinion as to whether the Plan will satisfy the requirements of 
section 404(c) of the Act.
---------------------------------------------------------------------------

    The applicant represents that numerous inquiries have been made 
with the co-owner and the local realtors regarding the marketability of 
the Property. The applicant has concluded that there is no purchaser in 
the forseeable future of the Plan's one-half interest in the Property. 
In addition, the Trustee represents that the transaction is appropriate 
and in the best interest of the Plan and its participants and 
beneficiaries.
    The applicant represents that the Plan will not incur any expenses 
from the proposed Sale of the Property or from obtaining an exemption 
from the prohibited transaction provisions of the Act.
    5. In summary, the applicant represents that the proposed 
transaction will satisfy the criteria of section 408(a) of the Act 
because (a) the Sale of the Property involves a one-time transaction 
for cash; (b) the Plan will not incur any expenses incidental to the 
Sale; (c) the Plan will receive as consideration for the Sale the 
greater of either the fair market value of the Property as determined 
on the date of the Sale by a qualified, independent appraiser, or will 
receive all of the funds expended by the Plan in obtaining and 
maintaining the Property; (d) the Sale will permit the Plan to reinvest 
illiquid assets into income producing, liquid assets; and (e) the Plan 
will avoid the expenses and risks involved in retaining and developing 
the Property.
    For Further Information Contact: Mr. C. E. Beaver of the 
Department, telephone (202) 219-8881. (This is not a toll-free number.)

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest of disqualified 
person from certain other provisions of the Act and/or the Code, 
including any prohibited transaction provisions to which the exemption 
does not apply and the general fiduciary responsibility provisions of 
section 404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(b) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete and accurately describe all 
material terms of the transaction which is the subject of the 
exemption. In the case of continuing exemption transactions, if any of 
the material facts or representations described in the application 
change after the exemption is granted, the exemption will cease to 
apply as of the date of such change. In the event of any such change, 
application for a new exemption may be made to the Department.

    Signed at Washington, DC, this 3rd day of March, 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 94-5249 Filed 3-7-94; 8:45 am]
BILLING CODE 4510-29-P