[Federal Register Volume 60, Number 200 (Tuesday, October 17, 1995)]
[Notices]
[Pages 53805-53810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25717]



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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-09973, et al.


Proposed Exemptions; Kay Alden, Inc.

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.

Kay Alden, Inc. Money Purchase Plan (the Plan), Located in Chicago, 
Illinois

[Application No. D-09973]

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 32847, August 10, 1990). If the exemption is 
granted, the restrictions of sections 406(a), 406(b)(1) and 406(b)(2) 
of the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1) (A) through (E) of 
the Code shall not apply to the purchase of real property (the 
Purchase) by the Plan from Mr. Vernon Nelson (Nelson), a party in 
interest with respect to the Plan provided that: (a) The Purchase is a 
one time transaction for cash; (b) the Plan will pay no more than fair 
market value for the Property, as determined by an independent 
qualified real estate appraiser at the time of the transaction; (c) the 
fair market value of the Property represents no more than 25% of the 
value of the Plan's assets; (d) the Plan's interests with respect to 
the Purchase are represented by two independent fiduciaries (e) the 
Plan will pay no fees or commissions associated with the Purchase; and 
(f) all terms and conditions of the Purchase are at least as favorable 
to the Plan as those obtainable in an arm's length transaction with an 
unrelated party.

Summary of Facts and Representations

    1. The Plan is a defined contribution plan having three 
participants and assets with a fair market value of $1,533,292 as of 
January 12, 1995. The trustees of the Plan are Nelson and Kay Alden 
Nelson. The Plan sponsor is in the business of script writing for day 
time soap operas.
    2. The Property consists of eighteen undeveloped building sites 
located in Spyglass Hills, a subdivision in Hutchinson, Kansas. The 
Spyglass subdivision is located to the North and East of Hutchinson, 
Kansas. The sewer, natural gas, underground electrical and telephone 
wires are accessible to all lots. Over the last twenty years, the 
development in Hutchinson has been in the general area of Spyglass 
Hills. Spyglass Hills currently is the only development with growth 
potential which has sewer and utilities in place. Spyglass Hills should 
be completely developed within the next five to ten years.
    In 1989, Nelson acquired twenty-five lots. During the past three 
years, Nelson has been preparing the subdivision for development. He 
has encouraged housing starts by working with developers and 
individuals willing to build homes. There is a fully occupied five unit 
luxury condominium in Spyglass Hills, and a townhouse complex is to be 
built within the next year.
    3. The Property was appraised on October 31, 1994 by Ralph E. 
Gingerich, an independent and qualified real estate appraiser. Mr. 
Gingerich calculated that the fair market value of the Property to be 
$324,000 using the comparable sales approach. In his appraisal, he 
states that market conditions and growth potential are favorable, and 
new housing starts have increased sharply in the past two years causing 
values and sales of sites to increase rapidly.
    4. The Plan is seeking a suitable replacement for an unrelated real 
estate holding it sold in August 1994 and therefore, proposes to 
purchase the Property. The Private Bank and Trust Company (the Bank) 
has been retained 

[[Page 53806]]
to serve as independent fiduciary on behalf of the Plan. The Bank has 
reviewed the proposed transaction and represented that the Property is 
an appropriate investment for the Plan for the following reasons. 
First, even though the Property is not income producing, the economic 
attraction of the Property to the Plan is not diminished. All three 
Plan participants are relatively young, and not facing retirement in 
the near future. Thus, any possible illiquid characteristic of the 
investment would not prejudice the Plan. Secondly, following the 
Purchase, only 25% of the Plan's assets will be invested in real 
estate. Lastly, the Property consists of multiple lots that will be 
marketed individually providing a continuing cash flow as each lot is 
sold.
    Central Bank and Trust Company (Central Bank) has also been 
retained to serve as independent fiduciary on behalf of the Plan. 
Central Bank represents that the appraisal is a fair representation of 
the current market. Further, Central Bank states that the new housing 
market in Hutchinson continues to be strong, and Spyglass Hills should 
benefit from this trend. Central Banks believes that the Property is an 
appropriate investment for the Plan. Lastly, Central Bank represents 
that at the time of the purchase of the Property, it will review the 
transaction and confirm that the Plan is paying no more than fair 
market value for the Property.
    5. In summary, the applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act 
because: (1) The terms of the purchase are as favorable as the Plan 
could obtain in an arm's length transaction with an unrelated party; 
(2) the fair market value of the Property has been established by an 
independent and qualified appraiser and represents no more than 25% of 
the value of the Plan's assets; (3) the Plan has retained an 
independent fiduciary who has reviewed the terms of the Purchase and 
has determined that the Purchase is in the Plan's interest; and (4) the 
Plan has retained a second independent fiduciary who will represent the 
interests of the Plan at the time of the Purchase to ensure that the 
Plan is not paying more than fair market value for the Property.
    For Further Information Contact: Allison Padams of the Department, 
at (202)219-8971. (This is not a toll-free number.)

The Chase Manhattan Bank (National Association) Pooled Investment Trust 
for Employee Benefit Plans (the Trust) Located in New York, New York

[Exemption Application No. D-09983]

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 
406(b)(2) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through 
(E) of the Code, shall not apply to the past cash sale of certain 
commercial paper notes (the Notes) for $25,129,748 by two collective 
investment funds in the Trust known as VAN 1 and VAN 18 (the VANs) to 
The Chase Manhattan Bank, N.A. (the Bank), a party in interest with 
respect to the employee benefit plans invested in the VANs at the time 
of the transaction; provided the following conditions were met:
    (a) The sale of each of the Notes was a one-time cash transaction;
    (b) The terms and conditions of the sale were at least as favorable 
to the VANs as those obtainable in an arm's-length transaction with an 
unrelated party;
    (c) The VANs received an amount for the Notes that was equal to the 
greater of: (i) In the case of a Note that had a scheduled maturity 
after the date of the transaction, the original purchase price paid by 
the particular VAN for the Note plus interest at the imputed yield to 
maturity up to the date of sale, as calculated by the Bank; (ii) in the 
case of a Note that had a scheduled maturity on or before the date of 
the transaction, the value at maturity plus additional interest to the 
date of sale at the daily rates earned by the related VAN (exclusive of 
its holdings of the Notes) from the maturity date to the date of sale; 
or (iii) the fair market value of each Note as of the time of sale as 
determined by an independent, qualified appraiser;
    (d) The VANs did not pay any commissions, costs or other expenses 
in connection with the sale of the Notes;
    (e) If the exercise of any of the Bank's rights, claims or causes 
of action in connection with its ownership of the Notes results in the 
Bank recovering from the issuer of the Notes, or any third party, an 
aggregate amount that is more than the purchase price paid to the VANs 
by the Bank for the Notes (i.e. $25,129,748), the Bank will pay such 
excess amounts to the respective VANs within thirty (30) days of the 
receipt of such recovery amounts; and
    (f) Each employee benefit plan with interests in the VANs received 
its proportionate share of the proceeds of the sale of the Notes to the 
Bank and receives its proportionate share of any recovery amounts 
obtained on the Notes in excess of the purchase price received by the 
VANs, as described in condition (e) above.
    Effective Date: If granted, this proposed exemption will be 
effective as of December 19, 1994.

Summary of Facts and Representations

    1. The Trust is a collective investment vehicle comprised of 
several separate collective funds maintained by the Bank for investment 
by employee benefit plans subject to the Act (the Plans) and 
governmental employee benefit plans. The Bank is a national banking 
association that serves as trustee to the Trust. The Trust includes VAN 
1 and VAN 18 (i.e. the VANs), which are two separate collective 
investment funds that hold assets of various Plans. The VANs are short-
term investment funds that are designed to be highly liquid. As of 
December 31, 1994, VAN 1 and VAN 18 had total assets in the amounts of 
$606,241,334 and $558,048,711, respectively.
    2. The Bank, acting on behalf of the VANs as trustee of the Trust, 
purchased the Notes from the VANs on December 19, 1994. The Notes were 
short-term investments with maturities of five months or less that were 
issued by Confederation Life Insurance Co. (Confederation) with a total 
face amount of $25 million. The Bank states that the Notes, like most 
short-term commercial paper, were purchased at a discount with the face 
amount to be paid at maturity. No other interest payments were 
contemplated during the term of the Notes.
    The Notes held by the respective VANs, including the original 
purchase price and date, value at maturity, and stated maturity date 
are as follows:

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                                                        Original        Purchase       Value at        Maturity 
                        VAN                          purchase price       date         maturity          date   
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VAN 1.............................................     $4,943,750.00      6/09/94        $5,000,000     9/07/94 

[[Page 53807]]
                                                                                                                
VAN 1.............................................      4,959,441.67      7/29/94         5,000,000      9/29/94
VAN 1.............................................      4,871,163.20      8/02/94         5,000,000      1/30/95
VAN 18............................................      4,959,441.67      7/29/94         5,000,000      9/29/94
VAN 18............................................      4,871,163.20      8/02/94         5,000,000      1/30/95
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    3. 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 rehabilitation proceedings. The Bank states that, as 
a result of these actions, the payments on the Notes were suspended.\1\ 
The Bank states further that it appeared highly unlikely that the 
assets of Confederation would be sufficient to pay the Noteholders, 
including the VANs, to any significant extent.

    \1\The Department notes that the decisions made by the Bank on 
behalf of the VANs to acquire and hold the Notes were subject to the 
fiduciary responsibility provisions of Part 4 of Title I of the Act. 
In this proposed exemption, the Department is not providing an 
opinion as to whether any violations of Part 4 of Title I may have 
arisen as a result of the acquisition and holding of the Notes by 
the VANs.
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    4. The Bank represents that once it received notice of the seizure 
of Confederation, it segregated the Notes in separate liquidating 
accounts within the Trust. There were two liquidating accounts, one 
with respect to each of the VANs (the Liquidating Accounts). The 
proportional interest of each Plan in a Liquidating Account following 
the segregation equalled its proportional interest in the affected VAN 
immediately before the segregation. The estimated number of Plans 
participating in each of the Liquidating Accounts established with 
respect to VAN 1 and VAN 18 were 100 and 19, respectively. Among the 
Plans invested in one or both of the VANs were the Retirement and 
Family Benefit Plan of The Chase Manhattan Bank, N.A., and The Chase 
Manhattan Bank, N.A. Thrift Investment Plan.
    5. The Bank represents that because it desired to make the Plans 
``whole'' for the losses that would have occurred in connection with 
the Plans' investment in the Notes, the Bank purchased the Notes from 
the Liquidating Accounts on December 19, 1994 for the value the Notes 
would have had in the particular VAN at the time of the transactions 
but for the placement of Confederation in liquidation. The Bank entered 
into the transactions prior to the end of 1994 in response to the 
demands of Plan fiduciaries that the Plans be made ``whole'' on these 
investments and completely liquid for purposes of year-end valuations 
of the assets held by the VANs. Accordingly, the Bank requests a 
retroactive administrative exemption from the Department to permit the 
past sale of the Notes under the terms and conditions described herein.
    6. The Bank paid to the Liquidating Accounts a total of $25,129,748 
for the Notes. The Bank states that the sale price received by the VANs 
for the Notes was equal to: (i) In the case of a Note that had a 
scheduled maturity after the date of the transaction, the original 
purchase price paid by the particular VAN for the Note plus interest at 
the imputed yield to maturity up to the date of sale, as calculated by 
the Bank;\2\ and (ii) in the case of a Note that had a scheduled 
maturity on or before the date of the transaction, the value at 
maturity plus additional interest to the date of sale at the daily 
rates earned by the related VAN (exclusive of its holdings of the 
Notes) from the maturity date to the date of sale. The Bank represents 
that the guiding principal in determining the price of the Notes for 
the transactions was to place the VANs in exactly the position they 
would have occupied on the date of the transactions if Confederation 
had not defaulted.

    \2\The Bank represents that the imputed yield to maturity for 
the Notes held by the VANs, as listed above in Paragraph 2, was 
4.5%, 4.71%, 5.125%, 4.71% and 5.125%, respectively, when calculated 
on an annualized basis. However, as noted above, the Notes bore no 
coupon or other current yield. The imputed yield consisted of the 
difference between the face amount due at maturity and the original 
discounted purchase price. The Bank states that the method used for 
calculating earnings on the non-matured Notes at the time of the 
transaction was consistent with the cost basis accounting rules 
permitted for short-term investment funds by the Office of the 
Comptroller of the Currency (see OCC Rule 9.18).
    In addition, the Bank states that by selling the non-matured 
Notes to the Bank prior to their maturity dates (i.e. 1/30/95), the 
VANs were able to reinvest the proceeds of the sales as of the date 
of the transactions rather than as of the later maturity dates, a 
period of almost six weeks later. The VANs' earnings rate during 
that six-week period was higher than the imputed yield to maturity 
of the Notes that had not already matured. Thus, the Bank maintains 
that the sale of the non-matured Notes on December 19, 1994 was more 
financially advantageous to the VANs than if the sale had not 
occurred until January 30, 1995, the last maturity date of the Notes 
held by the VANs.
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    These calculations by the Bank resulted in VAN 1 receiving the 
following sale prices for the Notes on December 19, 1994, the date of 
sale: $5,073,286 for the Note which matured on 9/7/94; $5,058,484 for 
the Note which matured on 9/29/94; and $4,970,109 for the Note which 
was due to mature on 1/30/95. In addition, on such date, VAN 18 
received $5,057,760 for the Note which matured on 9/29/94 and 
$4,970,109 for the Note which was due to mature on 1/30/95.
    The VANs received such amounts in cash on the date of sale in 
exchange for the transfer to the Bank of all right, title and interest 
in the Notes, together with all causes of action, suits or other claims 
that the VANs may have against any person with respect to the Notes. 
The Bank states that each Plan with an interest in the respective VANs 
received its proportionate share of the proceeds of the sale of the 
Notes to the Bank.
    7. The Bank engaged Deloitte & Touche (D&T), an independent, 
qualified appraiser in New York City, to determine the fair market 
value of the Notes. With respect to the independence of D&T, the Bank 
represents that D&T at times performs services for the Bank and its 
affiliates. However, the Bank states that payments made by the Bank and 
its affiliates for such services constitute less than one (1) percent 
of D&T's annual gross revenues.
    On the basis of discussions with three independent brokers, D&T 
estimated the fair market value of the Notes at approximately ten cents 
for each one dollar of principal amount due on the Notes.\3\ Thus, 
since each Note had a face value of $5 million, D&T concluded that each 
Note would be worth approximately $500,000 at the time of the 
transaction.

    \3\D&T represents that its inquiry to establish the value of the 
Notes was intended to be consistent with the procedure for 
determining current market price under SEC Rule 17a-7(b) of the 
Investment Company Act of 1940.
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    Based on the pricing information obtained from D&T, the Bank 
represents that the fair market value of the Notes was significantly 
below the purchase price paid by the respective VANs for the Notes (as 
noted below).

                                                                                                                

[[Page 53808]]
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                                                                                           Fair                 
                     Fund                        Purchase     Principal     Purchase      market    Price red.'d
                                                   date        amount         price        value                
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VAN 1........................................      6/09/94    $5,000,000    $4,943,750    $500,000    $5,073,286
VAN 1........................................      7/29/94     5,000,000     4,959,442     500,000     5,058,484
VAN 1........................................      8/02/94     5,000,000     4,871,163     500,000     4,970,109
VAN 18.......................................      7/29/94     5,000,000     4,959,442     500,000     5,057,760
VAN 18.......................................      8/02/94     5,000,000     4,871,163     500,000     4,970,109
----------------------------------------------------------------------------------------------------------------



    8. The VANs did not pay any commissions, costs or other expenses in 
connection with the sale. In addition, the Bank is willing to bear all 
costs and expenses associated with the transactions, including any 
expenses incurred in pursuing other claims with respect to the Notes. 
The Bank states that it will indemnify the VANs for any amounts 
recovered from Confederation, or any third party, in connection with 
the enforcement of the Bank's rights and remedies as owner of the 
Notes. In this regard, the Bank notes that it is unlikely that the 
proceeds from any such recoveries on the Notes will exceed the payments 
that the Bank made to the VANs. However, the Bank represents that if 
such recoveries ultimately exceed the purchase price paid by the Bank 
to the VANs for the Notes, the Bank will return any excess amounts to 
the respective VANs within thirty (30) days of the receipt of the 
recovery amounts. In addition, each employee benefit plan with 
interests in the VANs will receive its proportionate share of any 
recovery amounts obtained on the Notes in excess of the purchase price 
received by the VANs.
    9. In summary, the applicant represents that the transaction 
satisfied the statutory criteria of section 408(a) of the Act because: 
(a) The terms and conditions of the transaction were at least as 
favorable to the VANs as those which the VANs could have obtained in an 
arm's-length transaction with an unrelated party; (b) the sale of the 
Notes was a one-time cash transaction; (c) the VANs were not required 
to pay any commissions, costs or other expenses in connection with the 
sale; (d) the VANs received an amount for the Notes that was equal to 
the greater of: (i) in the case of a Note that had a scheduled maturity 
after the date of the transaction, the original purchase price paid by 
the particular VAN for the Note plus interest at the imputed yield to 
maturity up to the date of sale, as calculated by the Bank; (ii) in the 
case of a Note that had a scheduled maturity on or before the date of 
the transaction, the value at maturity plus additional interest to the 
date of sale at the daily rates earned by the related VAN (exclusive of 
its holdings of the Notes) from the maturity date to the date of sale; 
or (iii) the fair market value of each Note as determined by an 
independent, qualified appraiser at the time of the transaction; (e) if 
the exercise of any of the Bank's rights, claims or causes of action in 
connection with its ownership of the Notes results in the Bank 
recovering from the issuer of the Notes, or any third party, an 
aggregate amount that is more than the purchase price paid to the VANs 
by the Bank for the Notes (i.e. $25,129,748), the Bank will pay such 
excess amounts to the respective VANs within thirty (30) days of the 
receipt of such recovery amounts; and (f) each Plan with an interest in 
the VANs received its proportionate share of the proceeds of the sale 
of the Notes to the Bank and will receive its proportionate share of 
any recovery amounts obtained on the Notes in excess of the purchase 
price received by the VANs.

Notice to Interested Persons

    The applicant states that notice of the proposed exemption shall be 
made by first class mail to the appropriate plan fiduciaries for each 
employee benefit plan that had an interest in the Liquidating Accounts 
at the time of the transaction. Notice to the plan fiduciaries shall be 
made within fifteen (15) days following the publication of the proposed 
exemption in the Federal Register. This notice shall include a copy of 
the notice of proposed exemption as published in the Federal Register 
and a supplemental statement (see 29 CFR 2570.43(b)(2)) which informs 
interested persons of their right to comment on and/or request a 
hearing with respect to the proposed exemption. Comments and requests 
for a public hearing are due within forty-five (45) days following the 
publication of the proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)

WLI Industries, Inc. Employees' Stock Ownership Plan (the Plan) Located 
in Villa Park, IL

[Application No. D-09987]

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 2570, 
Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption is 
granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) of 
the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A) through (E) shall 
not apply to the proposed cash sale by the Plan of its interest (the 
Interest) in a limited partnership (the Partnership) to James Van 
DeVelde and Robert Van DeVelde, the general partners of the Partnership 
and parties in interest with respect to the Plan, provided (1) all 
terms and conditions of the sale are at least as favorable to the Plan 
as those obtainable in an arm's length transaction with an unrelated 
party; (2) the sale is a one-time transaction for cash; (3) the Plan is 
not required to pay any commissions, costs or other expenses in 
connection with the sale; (4) the Plan receives a price for the 
Interest which is not less than the greater of: (i) $2,500 or (ii) the 
fair market value of the Interest as determined by a qualified, 
independent appraiser and; (5) within 30 days of the publication, in 
the Federal Register, of the notice granting this proposed exemption, 
WLI files a Form 5330 with the Internal Revenue Service (the Service) 
and pays all applicable excise taxes by reason of such prior or 
continuing prohibited transactions.

Summary of Facts and Representations

    1. The Plan is an employee stock ownership plan with 116 
participants and net assets available for benefits of $1,210,898 as of 
February 28, 1994. The trustees of the Plan and the decisionmakers with 
respect to the Plan's investments are James Van DeVelde, Robert Van 
DeVelde and Joseph S. Ott, Jr. These individuals also participate in 
the Plan. 

[[Page 53809]]

    2. WLI Industries, Inc. (WLI), the Plan sponsor, is engaged in the 
sale and/or rental of warning lights, signage, barricades and other 
materials utilized in connection with the construction and resurfacing 
of roads and highways. WLI maintains its principal place of business at 
880 North Addison Road, Villa Park, Illinois (the North Addison Road 
Property). James Van DeVelde is the President of WLI. Robert Van 
DeVelde is the Executive Vice President and Secretary of WLI. Joseph S. 
Ott, Jr. is an employee of WLI.
    3. Among the assets of the Plan is a 33 percent limited partnership 
interest in the J&R Limited Partnership. The Partnership holds 100 
percent of the beneficial interest in an Illinois Land Trust which, in 
turn, holds fee simple title to a 10.38 acre parcel of real property. 
The property is located at the North Addison Road address and serves as 
the headquarters of WLI. The general partners of the Partnership are 
James Van DeVelde and Robert Van DeVelde. The Van DeVeldes each hold a 
33.5 percent interest in the Partnership. It is represented that the 
subject property is not located near any other property that is owned 
by WLI.
    4. As the general partners of the Partnership, the Van DeVeldes 
wished to obtain financing from the Small Business Administration (the 
SBA) in order to construct a building. However, as a precondition to 
obtaining such financing, the SBA required that all shareholders of WLI 
hold a percentage of the Partnership. Because the Plan owned 
approximately 41 percent of the outstanding stock of WLI, it was 
obliged to purchase a 33 percent limited partnership interest in the 
Partnership from the Van DeVeldes. Thus, on October 23, 1992, the Plan 
paid $1.00 to the Van DeVeldes in order to acquire the Interest. In 
December 1992, the SBA executed the construction loan with the 
Partnership. With the exception of the Plan, the Van DeVeldes were 
required to guarantee the SBA indebtedness. Currently, the Plan owns an 
equity interest in the Partnership which it holds without any liability 
to either the SBA or other parties.
    5. On December 1, 1993, the Partnership commenced leasing an 84,943 
square foot office building that it had constructed on the North 
Addison Road Property to WLI under the terms of a triple net lease. The 
lease has an initial term of 10 years and it requires WLI to pay the 
Partnership a rental of $35,259.57 per month.4 Also during the 
term of the lease, WLI is required to pay the Partnership all taxes, 
utility expenses and casualty and liability insurance premiums.

    \4\According to the application file, the fair market rental 
value of the building was determined on March 15, 1993 by Michael R. 
Kay, Associate Appraiser, and Douglas X. Adams, MAI, qualified, 
independent appraisers who are affiliated with Adams Valuation 
Corporation of Elmhurst, Illinois. The appraisers determined that 
the fair market rental value of the building was $372,422 annually 
or $31,035 monthly.
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    6. The Partnership is using WLI's rental payments under the lease 
to amortize a loan made by Harriet Van DeVelde, the mother of James and 
Robert Van DeVelde, to the Partnership. The loan, which is evidenced by 
a promissory note dated August 30, 1991, is in the original principal 
amount of $900,000. The note was executed between Mrs. Van DeVelde and 
the Partnership to enable the Partnership to purchase the North Addison 
Road Property. The note carries interest at the rate of prime plus one 
percent over a five year period. The note requires both principal and 
interest payments on a quarterly basis. At the end of the loan term, a 
balloon payment of $600,000 will become due and payable. Then, it is 
anticipated that the loan will be refinanced through unrelated lenders. 
As of September 19, 1995, the applicants represent that the note had an 
outstanding principal balance of $824,687. The applicants also 
represent that the Partnership has made payments under the note in a 
timely manner.
    7. James and Robert Van DeVelde request an administrative exemption 
from the Department in order that they may purchase the Interest from 
the Plan. The Van DeVeldes are aware that the purchase of the Interest 
by the Plan, the loan by Mrs. Van DeVelde to the Partnership and the 
leasing of the property by the Partnership to WLI have resulted in 
prohibited transactions in violation of the Act. Therefore, within 30 
days of the publication, in the Federal Register, of the notice 
granting this proposed exemption, WLI will file a Form 5330 with the 
Service and pay all applicable excise taxes by reason of such 
prohibited transactions.
    8. The Van DeVeldes propose to purchase the Interest from the Plan 
for cash at price that is not less than the greater of $2,500 or the 
fair market value of the Interest. In an independent appraisal report 
of the Partnership that is dated February 28, 1995, Ira D. Berk, CPA of 
Premiere Financial Consultants, Inc. of Northbrook, Illinois, a 
qualified, independent appraiser, determined that the Interest held by 
the Plan had no value as of February 28, 1995. In valuing the 
Partnership, Mr. Berk reviewed and relied upon an appraisal of the 
property that was performed by Kristy A. DeCleene, Staff Appraiser and 
Douglas X. Adams, of Adams Valuation Corporation. (This was the same 
independent appraisal firm that had valued the property prior to the 
inception of the lease.) In that appraisal, the appraisers placed the 
fair market value of a leased fee interest in the Property at 
$4,212,000 as of February 21, 1995. In addition, Mr. Berk indicated 
that he had reduced the appraised value of the property by estimated 
real estate commissions of $126,360 and by the Partnership's 
liabilities which totaled $4,225,554 as of December 31, 1994.5

    \5\As of December 31, 1994, it is represented that the 
Partnership's liabilities consisted of the following: (a) the 
$854,686 outstanding principal balance of the loan from Mrs. Van 
DeVelde; (b) the $726,896 outstanding principal balance of the loan 
from the SBA; and (c) the $2,455,905 outstanding principal balance 
of a loan from Merchants Bank; and (d) $188,067 owed to WLI.
---------------------------------------------------------------------------

    These calculations resulted in equity positions of $0 for the 
Partnership, the general partners and the Plan. Accordingly, the Plan 
will sell its Interest to the Van DeVelde's for $2,500.
    9. In summary, it is represented that the proposed transaction will 
satisfy the statutory criteria for an exemption under section 408(a) of 
the Act because: (a) All terms and conditions of the sale will be at 
least as favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party; (b) the sale will be a one-time 
transaction for cash; (c) the Plan will not be required to pay any 
commissions, costs or other expenses in connection with the sale; (d) 
the Plan will receive a price for the Interest which is not less than 
the greater of: (i) $2,500 or (ii) the fair market value of the 
Interest as determined by a qualified, independent appraiser; and (e) 
within 30 days of the publication, in the Federal Register, of the 
notice granting this proposed exemption, WLI will file a Form 5330 with 
the Service and pay all applicable excise taxes by reason of such prior 
or continuing prohibited transactions.

Notice to Interested Persons

    Notice of the proposed exemption will be given to all interested 
persons by first-class mail within 30 days of the date of publication 
of the notice of pendency in the Federal Register. Such notice will 
include a copy of the notice of proposed exemption as published in the 
Federal Register and shall inform interested persons of their right to 
comment on and/or to request a hearing. Comments with respect to the 
notice of proposed exemption are due within 60 days after the date of 
publication of this 

[[Page 53810]]
proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

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 12th day of October, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 95-25717 Filed 10-16-95; 8:45 am]
BILLING CODE 4510-29-P