Proposed Exemptions from Certain Prohibited Transaction Restrictions

Federal RegisterJul 27, 2015

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

Proposed Exemptions from Certain Prohibited Transaction Restrictions

AGENCY:

Employee Benefits Security Administration, Labor.

ACTION:

Notice of proposed exemptions.

SUMMARY:

This document contains notices of pendency before the Department of Labor (the Department) of proposed exemptions from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). This notice includes the following proposed exemptions: D-11788, D-11789, D-11790, D-11791, and D-11792, The Les Schwab Tire Center of Washington, Inc., the Les Schwab Tire Centers of Idaho, Inc., and the Les Schwab Tire Centers of Portland, Inc.; L-11795, New England Carpenters Training Fund; D-11818, Virginia Bankers Association Defined Contribution Plan for First Capital Bank; D-11823, Idaho Veneer Company/Ceda-Pine Veneer, Inc. Employees' Retirement Plan; D-11835, United States Steel and Carnegie Pension Fund; D-11836, Roberts Supply, Inc. Profit Sharing Plan and Trust; D-11763, D-11764 and D-11765, Red Wing Shoe Company Pension Plan for Hourly Employees, The Red Wing Shoe Company Retirement Plan and the S.B. Foot Tanning Company Employees' Pension Plan; and D-11781, Frank Russell Company and Affiliates.

DATES:

All interested persons are invited to submit written comments or requests 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.

ADDRESSES:

Comments and requests for a hearing should state: (1) The name, address, and telephone number of the person making the comment or request, and (2) the nature of the person's interest in the exemption and the manner in which the person would be adversely affected by the exemption. A request for a hearing must also state the issues to be addressed and include a general description of the evidence to be presented at the hearing.

All written comments and requests for a hearing (at least three copies) should be sent to the Employee Benefits Security Administration (EBSA), Office of Exemption Determinations, Room N-5700, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210. Attention: Application No. ___, stated in each Notice of Proposed Exemption. Interested persons are also invited to submit comments and/or hearing requests to EBSA via email or FAX. Any such comments or requests should be sent either by email to:

moffitt.betty@dol.gov

, or by FAX to (202) 219-0204 by the end of the scheduled comment period. The applications for exemption and the comments received will be available for public inspection in the Public Documents Room of the Employee Benefits Security Administration, U.S. Department of Labor, Room N-1515, 200 Constitution Avenue NW., Washington, DC 20210.

Warning:

All comments will be made available to the public. Do not include any personally identifiable information (such as Social Security number, name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments may be posted on the Internet and can be retrieved by most Internet search engines.

SUPPLEMENTARY INFORMATION:

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).

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 (76 FR 66637, 66644, October 27, 2011).

Effective December 31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the Secretary of the Treasury to issue exemptions of the type requested to the Secretary of Labor. Therefore, these notices of proposed exemption are issued solely by the Department.

The Department has considered exemption applications received prior to December 27, 2011 under the exemption procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).

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.

The Les Schwab Tire Centers of Washington, Inc. (Les Schwab Washington), the Les Schwab Tire Centers of Idaho, Inc. (Les Schwab Idaho), and the Les Schwab Tire Centers of Portland, Inc. (Les Schwab Portland), (Collectively, With Their Affiliates, Les Schwab or the Applicant), Located in Bothell, Washington; Lacey, Washington; Renton, Washington; Twin Falls, Idaho; and Sandy, Oregon

[Application Nos. D-11699, D-11700, D-11701, D-11702, and D-11703]

Proposed Exemption

The Department is considering granting an exemption under the authority of section 408(a) of the Act (or ERISA), and section 4975(c)(2) of the Code, and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).

For purposes of this proposed exemption, references to the provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code.

Section I. Transactions

If the proposed exemption is granted, the restrictions of sections 406(a)(1)(A), 406(a)(1)(D), 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 sections 4975(c)(1)(A), 4975(c)(1)(D) and 4975(c)(1)(E) of the Code, shall not apply to the sales (the Sales) by the Les Schwab Profit Sharing Retirement Plan (the Plan) of the following parcels of real property (each, a “Parcel” and together, “the Parcels”) to the Applicant:

(a) The Parcel located at 19401 Bothell Everett Highway in Bothell, Washington (the Bothell Parcel);

(b) The Parcel located at 150 Marvin Road, SE Lacey, Washington (the Lacey Parcel);

(d) The Parcel located at 21 Blue Lakes Boulevard North Twin Falls, Idaho (the Twin Falls Parcel); and

(e) The Parcel located at 37895 Highway 26, Sandy, Oregon (the Sandy Parcel);

where the Applicant is a party in interest with respect to the Plan, provided that the conditions set forth in

Section II of this proposed exemption are met.

Section II. Conditions

(a) The price paid by Les Schwab to the Plan (the Purchase Price) for each Parcel no less than the fair market value of each Parcel (exclusive of the buildings or other improvements paid for by Les Schwab, to which Les Schwab retains title), as determined by qualified independent appraisers (the Appraisers), working for CBRE, Inc., in separate appraisal reports (the Appraisals) that are updated on the date of the Sale.

(b) Each Sale is a one-time transaction for cash.

(c) The Plan does not pay any costs, including brokerage commissions, fees, appraisal costs, or any other expenses associated with each Sale.

(d) A qualified independent fiduciary (the Independent Fiduciary) represents the interests of the Plan with respect to each Sale, and in doing so:

(1) Determines that it is prudent to go forward with each Sale;

(2) Approves the terms and conditions of each Sale;

(3) Reviews and approves the methodologies used by the Appraisers and ensures that such methodologies are properly applied in determining the fair market values of the Parcels on the date of the Sales;

(4) Reviews and approves the determination of the Purchase Price; and

(5) Monitors each Sale throughout its duration on behalf of the Plan for compliance with the terms of the transaction and with the conditions of this exemption, if granted, and takes any appropriate actions to safeguard the interests of the Plan and its participants and beneficiaries.

(e) The Appraisers determine the fair market value of their assigned Parcel, on the date of the Sale, using commercially accepted methods of valuation for unrelated third-party transactions, taking into account the following considerations:

(1) The fact that a lease between Les Schwab and the Plan is a ground lease and not a standard commercial lease;

(2) The assemblage value of the Parcel, where applicable;

(3) Any special or unique value the Parcel holds for Les Schwab; and

(4) Any instructions from the Independent Fiduciary regarding the terms of the Sale, including the extent to which the Appraiser should consider the effect that Les Schwab's option to purchase a Parcel would have on the fair market value of the Parcel.

(f) The terms and conditions of each Sale 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

The Summary of Facts and Representations is based solely on the representations of the Applicant and does not reflect the views of the Department, unless indicated otherwise.

Background

1. According to the Applicant, Les Schwab Tire Centers (together with its affiliates, Les Schwab) was founded by its namesake in 1952 in Prineville, Oregon, in order to sell tires, batteries and other automotive equipment, and provide vehicle maintenance services. There are now approximately 430 Les Schwab tire and automotive service centers located primarily in the Northwest and with over $1 billion dollars in annual sales. Their facilities are located in Alaska, Washington, Oregon, Montana, Nevada, Utah and California.

2. Les Schwab, which has elected to be treated as a sub-chapter “S” corporation under the Code, is made up of eleven distinct entities, each with an overlapping ownership structure and part of a single controlled group. The eleven entities include Les Schwab Washington, Les Schwab Idaho, Les Schwab Portland, and the Les Schwab Warehouse Center, Inc. (the Warehouse Center). Furthermore, the Applicant represents that all of the officers and directors of the participating employers are also officers and directors of the Warehouse Center.

3. According to the Applicant, all entities within the Les Schwab controlled group are owned by Alan Schwab, Diana Tomseth, Julie Waibel, and Leslie Tuftin (or by trusts for the benefit of such individuals and/or their children). Mr. Schwab and Ms. Tomseth are siblings and Ms. Waibel and Ms. Tuftin are siblings. These four individuals are the grandchildren of Les Schwab and they are also currently employees of the Warehouse Center and board members of Les Schwab. The Applicant states that each of these four individuals is a Plan participant, as well as an owner-employee because they each own more than 5 percent of the stock of Les Schwab.

The term “owner-employee” is defined under section 408(d) of the Act to include persons as defined in section 401(c)(3) of the Code, such as an employee who owns the entire interest in an unincorporated trade or business, or in the case of a partnership, a partner who owns more than 10 percent of either the capital interest or profits interest of such partnership. The term “owner-employee” also includes, in relevant part, (a) a shareholder-employee, which is an employee or officer of an S corporation who owns more than 5 percent of the outstanding stock of such corporation; (b) a member of the family of such owner-employee; or (c) a corporation in which such shareholder-employee owns, directly or indirectly, 50% or more of the total combined voting power of all classes of voting stock of a corporation or 50% or more of the total value of all classes of stock of such corporation.

4. The Plan is a qualified multiple-employer, defined contribution profit-sharing plan located in Bend, Oregon. The Plan is sponsored by the Warehouse Center. Thirteen employers, including Les Schwab Washington, Les Schwab Idaho, and Les Schwab Portland participate in the Plan. As of December 31, 2013, the Plan had 6,976 participants and beneficiaries. Also, as of December 31, 2013, the Plan had total assets of $653,315,345.00. The Applicant states that the Plan is the sole retirement plan available for Les Schwab employees.

5. The Administrative and Investment Committee of the Plan (the Committee) has the sole discretionary investment authority over the Plan and is a named fiduciary. The Committee has the exclusive right and discretionary authority to control, manage and operate the Plan. This includes the authority to direct the investment of the Plan's assets and to appoint and remove the Plan's Trustees and investment managers.

The Committee consists of seven trustees (the Trustees), who include executives and officers of Les Schwab. The Trustees are appointed by the Chief Executive Officer of the Warehouse Center. All of the Trustees are employees of the Warehouse Center, and some are officers of the Warehouse Center and Les Schwab Washington, Les Schwab Idaho and Les Schwab Portland.

Parcel Purchases

6. Over time, the Plan purchased twenty-six parcels of real property. As described below, following the purchases, the Plan entered into ground leases with various Les Schwab entities.

These Parcels of real property were then improved by buildings paid for by the Les Schwab entities. Under the terms of the leases, the Les Schwab entities retained title to these buildings.

The Applicant represents that these leases are exempt under section 408(e) of the Act. Section 408(e) of the Act provides, in pertinent part, that the restrictions of sections 406 and 407 of the Act shall not apply to the acquisition, sale or lease by a plan of qualifying employer real property if—(a) such acquisition, sale, or lease is for adequate consideration; (b) no commission is charged with respect thereto; and (c) the plan is an eligible individual account plan.

The Applicant asserts that the Plan was initially motivated to purchase and lease the Parcels of real property to Les Schwab as a means to provide a secure return on Plan investments. In this

regard, the Plan had intimate knowledge of Les Schwab's business success and creditworthiness, and determined that leasing the Parcels of real property to Les Schwab was a prudent investment decision.

The Applicant seeks an individual exemption for the Sales. The Sales involve five of the Parcels of real property on which Les Schwab has constructed buildings at its own expense (the Parcels). Given that Les Schwab has retained title to such buildings, pursuant to the terms of the relevant leases, the purchases do not involve the buildings themselves. Each Parcel is described below in further detail.

The Bothell Parcel

8. The Plan purchased the Bothell Parcel, which consists of approximately 40,947 square feet, in three separate transactions from unrelated parties. The first transaction involved the purchase by the Plan in November 1986 of approximately 29,382 square feet of land located at 19401 Bothell Everett Highway in Bothell, Washington for $159,791.00. The second purchase involved the Plan's acquisition on August 5, 1988 of an adjacent piece of land, located at 19411 Bothell Way SE., Bothell, Washington, and consisting of approximately 9,420 square feet of land for approximately $63,362.00. The third purchase involved the Plan's acquisition on September 10, 1988 of another piece of adjacent land, consisting of approximately 2,145 square feet and purchased for approximately $50,000.00.

9. The Plan and Les Schwab Washington entered into a ground lease of the Bothell Parcel (the Bothell Lease) on January 1, 1987, with the Plan as landlord and with Les Schwab Washington as tenant. The initial lease term commenced on January 1, 1987, and continued through December 31, 1996. The Bothell Lease also contained a provision for lease renewals of four terms, each of five years' duration. The initial base rent was $1,065.00 per month. Beginning on January 1, 1989 the monthly rent was increased to $1,487.00 to reflect the Plan's acquisition of the additional land. Beginning on September 10, 1998, the base rent was increased to $2,454.00, to reflect the Plan's inclusion of the third parcel of land and the increase in the ten-year the Consumer Price Index (the CPI).

The rent has been increased on the first day of each successive renewal period in proportion to the percentage increase in the CPI during the “applicable period” preceding the effective date of each such increase. Beginning with the renewal term commencing January 1, 2012, the monthly rent has been increased to $3,498.00.

The Bothell Lease permits Les Schwab Washington to construct improvements on the Bothell Parcel with the Plan's approval. Pursuant to the terms of the Bothell Lease, Les Schwab Washington constructed a tire center, an internal warehouse, and a large vehicle service facility, as well as other improvements (the Bothell Improvements).

As provided under the terms of the Bothell Lease, Les Schwab Washington retains sole responsibility with respect to the payment of property taxes and utilities on the Bothell Parcel, as well as sole responsibility for repairing, maintaining, renovating, and insuring the Bothell Improvements. As also provided under the terms of the Bothell Lease, Les Schwab Washington may not assign its interest, absent the Plan's written consent, and must indemnify the Plan against losses.

Finally, the Bothell Lease includes a purchase option under which Les Schwab Washington has the right to purchase the Bothell Parcel as of the following dates: (a) The date on which Les Schwab Washington permanently discontinues operations on the Bothell Parcel; (b) the date the Bothell Lease terminates; (c) the end date of the initial Bothell Lease term; or (d) the end date of any renewal term for which Les Schwab Washington elects to renew. Pursuant to the terms of the Bothell Lease, the applicable option price is based on the greater of $273,153, or the fair market value of the Bothell Parcel (exclusive of the building and other improvements made by Les Schwab Washington) as determined by an appraisal. Les Schwab Washington now seeks to exercise its option to purchase the Bothell Parcel.

The Lacey Parcel

10. The Plan purchased the Lacey Parcel on February 1, 1991 from Puget Sound National Bank,

an unrelated party, for a total purchase price of $499,069.00. The Lacey Parcel is comprised of 2.07 acres or approximately 90,169 square feet of land area. Aside from the initial purchase price, the Plan has not incurred any further expenses with respect to the Lacey Parcel.

Puget Sound National Bank merged into KeyBank in 1992.

11. The Plan and Les Schwab Washington entered into a ground lease of the Lacey Parcel (the Lacey Lease) on March 1, 1991, with the Plan as landlord and with Les Schwab Washington as tenant. The initial term for the Lacey Lease ran for a period of twenty years and nine months (March 1, 1991 through December 31, 2011). The Lacey Lease also includes four renewal terms, with each term set at five years' duration. The base rent for the Lacey Parcel was initially set at $3,746.00 per month and has been subject to adjustment every five years since January 1, 1997. As of each adjustment date, the monthly rent amount has been increased in proportion to corresponding increases to the CPI during the five lease years preceding the effective date of the increase, not to exceed 20%. Since January 1, 2012, Les Schwab Washington has been paying the Plan $9,150.00 per month, which includes the CPI increase.

The Lacey Lease allows Les Schwab Washington to construct improvements on the Lacey Parcel. Accordingly, Les Schwab Washington constructed a 13,013 square foot retail tire center, a vehicle service area, a 4,800 square foot warehouse, and made certain other improvements (the Lacey Improvements). Pursuant to the terms of the Lacey Lease, permissible uses of the Lacey Parcel include the construction and operation of a facility for the retail sale of merchandise, and the provision of automotive services. Additional uses of the Lacey Parcel require the Plan's consent.

As provided under the terms of the Lacey Lease, Les Schwab Washington retains sole responsibility with respect to the payment of property taxes and utilities on the Lacey Parcel, as well as sole responsibility for repairing, maintaining, renovating, and insuring the Lacey Improvements. As also provided under the terms of the Lacey Lease, Les Schwab Washington may not assign its interest, absent the Plan's written consent, and must indemnify the Plan against losses.

The Lacey Lease includes a purchase option under which Les Schwab Washington has the right to purchase the Lacey Parcel as of the following dates: (a) The date on which Les Schwab Washington permanently discontinues operations on the Lacey Parcel; (b) The date such lease terminates; (c) the end date of the initial Lacey Lease term; or (d) the end date of any renewal term for which Les Schwab Washington elects to renew. Pursuant to the terms of the Lacey Lease, the applicable option price is based on: (a) The greater of $499,514.35, plus the Plan's total cost of improvements made on the Lacey Parcel, or (b) the fair market value of Lacey Parcel (exclusive

of the improvements made by Les Schwab Washington made by Les Schwab Washington), as determined by an appraisal. Les Schwab Washington now seeks to exercise its option to purchase the Lacey Parcel from the Plan.

The Renton Parcel

12. The Plan purchased the Renton Parcel in two separate transactions. On May 6, 1986, the Plan entered into a contract to purchase a 34,478 square foot piece of land located in Renton, Washington, from an unrelated party. Subsequently, the Plan purchased an additional 20,266 square feet of adjoining land in a sale that closed in October 1988, from an unrelated party. The two combined parcels make up the Renton Parcel, and cover 1.26 acres, or approximately 54,744 square feet of land area. The combined purchase price for the two parcels, including closing costs, was $317,796.00.

13. The Plan and Les Schwab Washington entered into a lease agreement for the Renton Parcel (the Renton Lease) on October 1, 1986, with the Plan, as landlord, and Les Schwab Washington, as tenant. The initial lease term commenced on October 1, 1986, and ran through December 31, 1996. The Renton Lease includes four renewal terms, each of five years' duration. The Renton Lease provides for an initial base rent amount of $1,297.00 per month and for rent escalations in the event that the Plan incurs any costs in connection with the provision of any additional improvements to the Renton Parcel.

With respect to the Renton Lease, rent escalations occurred on November 1, 1988, and subsequent rent escalations have occurred on the first day of each renewal period, where the rent has been increased in proportion to the percentage increase of the CPI during the “applicable period” preceding the effective date of the increase. Based on these calculations, Les Schwab Washington has been paying the Plan $4,334 per month since January 1, 2012.

The Renton Lease allows Les Schwab Washington to construct improvements on the Renton Parcel. Les Schwab Washington constructed a 13,300 square foot retail tire center, a vehicle service area, a large warehouse, and other improvements (the Renton Improvements). Pursuant to the terms of the Renton Lease, permissible uses of the Renton Parcel also include the operation of a facility for the retail sale of merchandise and the provision of automotive services. Additional uses of the Renton Parcel require the Plan's consent.

As provided under the terms of the Renton Lease, Les Schwab Washington retains sole responsibility with respect to the payment of property taxes and utilities on the Renton Parcel, as well as sole responsibility for repairing, maintaining, renovating, and insuring the Renton Improvements. As also provided under the terms of the Renton Lease, Les Schwab Washington may not assign its interest, absent the Plan's written consent, and must indemnify the Plan against losses.

The Renton Lease includes a purchase option under which Les Schwab Washington has the right to purchase the Renton Parcel as of the following dates: (a) The date on which Les Schwab Washington permanently discontinues operations on the Renton Parcel; (b) the date the Renton Lease terminates; (c) the end date of the initial Renton Lease term; or (d) the end date of any renewal term for which Les Schwab Washington elects to renew. Pursuant to the terms of the Renton Lease, the applicable option price is based on the greater of $194,537.09, or the fair market value of the Renton Parcel (exclusive of the building and other improvements on the Renton Parcel made by Les Schwab Washington), as determined by an appraisal. Les Schwab Washington now seeks to exercise its option to purchase the Renton Parcel from the Plan.

The Twin Falls Parcel

14. The Plan purchased the Twin Falls Parcel from unrelated parties in September 1986, at a final purchase price of $248,250.00. The Twin Falls Parcel is comprised of 1.72 acres or approximately 74,923 square feet of land that is rectangular in shape.

15. The Plan and Les Schwab Idaho entered into a lease agreement (the Twin Falls Lease) on October 1, 1986, with the Plan, as landlord, and Les Schwab Idaho, as tenant. The initial lease term commenced on October 1, 1986, and continued through December 31, 1996. The Twin Falls Lease contains a provision for lease renewals of four terms, each of five years' duration. The initial base rent was set at $1,655.00 per month, and provided for rent escalations in the event the Plan incurred any costs in connection with providing any additional improvements to the Parcel (the Twin Falls Improvements). A scheduled rent escalation occurred on January 1, 1992. Subsequent rent escalations have occurred on the first day of each renewal period. In this regard, rent was increased in proportion to the percentage increase in the CPI. Beginning with the renewal term commencing January 1, 2012, Les Schwab Idaho has been paying the Plan $3,382.00 per month.

In accordance with the Twin Falls Lease, Les Schwab Idaho constructed a 13,000 square foot retail tire center and a 9,216 square foot warehouse on the Twin Falls Parcel. Les Schwab also made additional improvements, which included utilities, parking, landscaping, and a fenced tire storage area.

Pursuant to the Twin Falls Lease, Les Schwab Idaho retains sole responsibility with respect to the payment of property taxes and utilities on the Twin Falls Parcel, as well as sole responsibility for repairing, maintaining, renovating, and insuring the Twin Falls Improvements. As also provided under the terms of the Twin Falls Lease, Les Schwab Idaho may not assign its interest, absent the Plan's written consent.

The Twin Falls Lease includes a purchase option under which Les Schwab Idaho has the right to purchase the Twin Falls Parcel as of the following dates: (a) The date on which Les Schwab Idaho permanently discontinues operations on the Twin Falls Parcel; (b) the date the Twin Falls Lease terminates; (c) the end date of the initial Twin Falls Lease term; or (d) the end date of any renewal term for which Les Schwab Idaho elects to renew. Pursuant to the terms of the Twin Falls Lease, the applicable option price is based on the greater of $248,250.82, or the fair market value of the Twin Falls Parcel (exclusive of the building and other improvements made by Les Schwab Idaho), as determined by an appraisal. Les Schwab Idaho now seeks to exercise its option to purchase the Twin Falls Parcel from the Plan.

The Sandy Parcel

16. The Plan purchased the Sandy Parcel in August 1986 from unrelated parties for $144,671.73. The Sandy Parcel is comprised of 1.08 acres, or approximately 47,045 square feet of land area. Added to the contract price were certain obligations for offsite improvements, as well as shared expenses for an entrance easement with a neighboring property owner.

17. The Plan and Les Schwab Portland entered into a lease agreement (the Sandy Lease) on September 1, 1986, with the Plan, as landlord, and Les Schwab Portland, as tenant. The initial lease term ran until December 31, 1996. The Sandy Lease also contained a provision for lease renewals of four terms, each of five years' duration. The initial base rent under the Sandy Lease was set at $964.00 per month and provided for rent escalations in the event the Plan incurred any costs in

connection with the provision of additional improvements to the Parcel. Scheduled rent escalations occurred on January 1, 1997 and on the first day of each renewal period. On the date of each such renewal, the rent amount was increased in proportion to the percentage increase of the CPI for the “applicable period” preceding the effective date of such increase. Since January 1, 2012, Les Schwab Portland has been paying the Plan $1,980.00 per month.

Pursuant to the Sandy Lease, Les Schwab Portland constructed an 8,352 square foot retail tire center on the Sandy Parcel, as well as other improvements including utilities, parking and landscaping (the Sandy Improvements).

As provided under the terms of the Sandy Lease, Les Schwab Portland retains sole responsibility with respect to the payment of property taxes and utilities on the Sandy Parcel, as well as sole responsibility for repairing, maintaining, renovating, and insuring the Sandy Improvements. As also provided under the terms of the Sandy Lease, Les Schwab Portland may not assign its interest, absent the Plan's written consent.

The Sandy Lease includes a purchase option under which Les Schwab Portland has the right to purchase the Sandy Parcel as of the following dates: (a) The date Les Schwab Portland permanently discontinues operation on the premises; (b) the date the Sandy Lease terminates; (c) at the end of the initial Sandy Lease term; or (d) on the date of each renewal term for which Les Schwab Portland elects to renew. Under the terms of the Sandy Lease, the option price will be the greater of $144,671.73 or the fair market value of the Sandy Parcel (exclusive of the building and other improvements made by Les Schwab Portland) as determined by an appraisal. Les Schwab Portland now seeks to exercise the option to purchase the Sandy Parcel.

Request for Exemptive Relief

18. The Applicant requests an administrative exemption for the proposed Sales of the Parcels by the Plan to Les Schwab Washington, Les Schwab Idaho, and Les Schwab Portland. Accordingly, the Applicant requests exemptive relief from section 406(a)(1)(A) and (D) and section 406(b)(1) and (b)(2) of the Act for such transactions.

19. Section 406(a)(1)(A) of the Act provides, in pertinent part, that a fiduciary with respect to a plan may not cause the plan to engage in a transaction if such fiduciary knows or should know that such a transaction constitutes a direct or indirect sale or exchange of any property between the plan and a party in interest. Section 406(a)(1)(D) of the Act provides, in pertinent part, that a fiduciary with respect to a plan may not cause the plan to engage in a transaction if such fiduciary knows or should know that such a transaction constitutes a direct or indirect transfer to, or use by or for the benefit of a party in interest, any assets of the Plan.

Section 3(14)(C) of the Act defines the term “party in interest” to include an employer, any of whose employees are covered by such Plan. The Applicant is a participating employer in the Plan, and as such, the Applicant's employees are covered by the Plan. The Applicant is thus a party in interest with respect to the Plan under section 3(14)(C) and the Sales would violate section 406(a)(1)(A) and (D) of the Act.

Section 406(b)(1) of the Act prohibits a fiduciary from dealing with the assets of a plan in his own interest or for his own account. Section 406(b)(2) of the Act prohibits a fiduciary, with respect to a plan, from acting in a transaction involving the plan on behalf of a party whose interests are adverse to those of the plan or of its participants and beneficiaries. As described above, the Trustees and the Committee are fiduciaries of the Plan. Additionally, the Trustees are also comprised of certain executive officers of Les Schwab, including officers of the Warehouse Center, Les Schwab Washington, Les Schwab Idaho, and Les Schwab Portland, and are appointed by the Chief Executive Officer of the Warehouse Center, the Plan sponsor.

According to the Applicant, the proposed Sales of the Parcels by the Plan to Les Schwab would involve a violation of section 406(b)(1) of the Act because Les Schwab, as a Plan fiduciary, would be dealing with the assets of the Plan for its own interest or own account. Additionally, the Applicant states that Les Schwab, as a Plan fiduciary, in effecting the Sales, could be viewed as simultaneously acting on behalf of itself and of the Plan in violation of section 406(b)(2) of the Act.

As noted above, section 408(e) of the Act states, in pertinent part, that section 406 of the Act does not apply to the acquisition, sale or lease of qualifying employer real property by a plan to a party in interest, provided that certain conditions are satisfied. However, section 408(d)(3) of the Act provides, in pertinent part, that the statutory exemption set forth in section 408(e) does not apply to any transaction in which a plan sells any property to a corporation in which owner-employee with respect to such plan owns, directly or indirectly 50 percent or more of the total combined voting power of all classes of stock entitled to vote on 50 percent or more of the total value of shares of all classes of stock of the corporation. Since Mr. Schwab, Ms. Weibel, Ms. Tomseth, and Ms. Tuftin are owner-employees with respect to the Plan, and such individuals own, indirectly, 50% or more of Les Schwab Idaho, Les Schwab Washington, and Les Schwab Portland, the statutory exemption under section 408(e) of the Act is not available.

Terms of the Sales

20. Each Sale will be a one-time transaction for cash. At the time of the Sales, the Plan will receive no less than the fair market value of each Parcel, as determined by the Appraisers, whose current Appraisals will be updated on the date of the Sales. In this regard, to the extent the terms of any Lease allow a Sale price that is greater than a Parcel's fair market value, then the price received by the Plan for such Parcel will equal such greater Sale price. In addition, the Plan will not pay any costs, including brokerage commissions, fees, appraisal costs, or any other expenses associated with the Sales. Further, the terms and conditions of each Sale will be at least as favorable to the Plan as those obtainable in an arm's length transaction with an unrelated party. Finally, an Independent Fiduciary will represent the interests of the Plan with respect to each Sale. Among other things, the Independent Fiduciary will monitor each sale throughout its duration, review and approve the Appraiser's methodology and ultimate valuation determination, and determine, on behalf of the Plan, whether it is prudent to proceed with the transaction.

The Appraisers

21. Appraisals of the subject Parcels were completed by CBRE, Inc. (CBRE). Specifically, with respect to the Bothell and Lacey Parcels, the Appraisals were conducted by Mitchell J. Olsen and Whitney Haucke. For the Twin Falls and Renton Parcels, the Appraisals were conducted by Shawn Wayt and Whitney Haucke. Finally, with respect to the Sandy Parcel, the Appraisal was conducted by Mike Hall and Whitney Haucke. (Mr. Olsen, Mr. Hall, Ms. Haucke and Ms. Wayt are referred to herein as the “Appraisers.”)

Mr. Olsen and Ms. Haucke are Certified General Real Estate Appraisers in the State of Washington. Mr. Olsen is an Associate Member of the Appraisal Institute, and has experience in appraising residential properties, vacant land, and commercial properties. Ms. Haucke is also a Designated Member of the Appraisal Institute in Seattle, Washington. Her experience includes valuing special use projects, mixed-use developments, as well as commercial and residential properties.

Mr. Wayt is a licensed Real Estate Appraiser in the State of Washington. Since 2012, Mr. Wayt has been appraising investment properties and commercial properties.

Mr. Hall is a designated member of the Appraisal Institute and is a certified Real Estate Appraiser in the State of Washington. Since 2001, Mr. Hall has been appraising retail, industrial, office, multi-family and local properties.

Pursuant to its Appraisal Engagement Letter, CBRE was retained to perform the following tasks, on behalf of the Plan: (a) Provide a fair market valuation of the Parcels using commercially acceptable methods of valuation for unrelated third party transactions, (b) explain whether or not, in the Appraisers' opinion, the Plan has received adequate consideration from the leases, and (c) opine on whether the proper CPI was used for the rent increases for each Parcel. CBRE represents that the total fees it earned from Les Schwab represent less than 2.0% of CBRE's revenues for 2014.

The Appraisals

22. In valuing the Parcels, the Appraisers applied the Sales Comparison Approach to valuation. As represented by the Appraisers, the Sales Comparison Approach is typically used for retail sites that are feasible for either immediate or near-term development.

The Appraisers omitted the use of other valuation methodologies, stating that such methodologies are primarily used when comparable land sales data is non-existent.

According to the Appraisers, the Twin Falls, Sandy and Renton Parcels are suitable for near-term development and the Bothell Property is suitable for immediate development.

23.

Bothell.

According to the Bothell Appraisal, the Appraisers physically inspected the Bothell Parcel on July 26, 2013. They also inspected the Snohomish County Assessor's records and a previous appraisal dated September 30, 2011, which was prepared by Brown, Chudleigh, Schuler, Myers and Associates (BCSMA). In addition, the Appraisers reviewed applicable tax data, zoning requirements, flood zone status, demographics and comparable data.

The Bothell Appraisal provides that the Appraisers evaluated five prior sales of similar Parcels based on zoning and intended uses. Using the Sales Comparison Approach methodology, the Appraisers calculated the value of the Bothell Parcel at $26.86 per square foot, which multiplied by the actual square footage of the Bothell Parcel equaled a fair market value of $1,100,000.00 as of July 31, 2013. In an addendum to the Bothell Appraisal, dated September 22, 2014, the Appraisers projected the fair market value of the Bothell Parcel at $1,150,000.00 as of September 30, 2014. The Appraisers attributed the $50,000.00 increase in value to improved market conditions.

24.

Lacey.

The Lacey Appraisal indicates that the Appraisers physically inspected the Lacey Parcel on June 26, 2013. They also inspected the Thurston County Assessor's Records, reviewed a lease provided by the Plan, and analyzed a previous appraisal dated September 30, 2011, prepared by another appraisal firm. In addition, the Appraisers reviewed the applicable tax data, zoning requirements, flood zone status, demographics and other comparable data.

The Lacey Appraisal provides that the Appraisers valued the Lacey Parcel using the Sales Comparison Approach. In this regard, the Appraisers evaluated six similar sale-listings in the area and determined that land sales ranged from $13.15 per square foot to $15.99 per square foot, with an average of $14.94 per square foot.

The Appraisers placed an emphasis on two of the six Parcels due to the closing date and location. For purposes of the Lacey Appraisal, the Plan instructed the Appraisers to examine the Lacey Parcel without considering the improvements to such Parcel.

The Appraisers determined that the Lacey Parcel value would equate to $14.97 per square foot or a fair market value of $1,350,000 as of July 31, 2013. In an addendum to the Lacey Appraisal dated September 22, 2014, the Appraisers projected the fair market value of the Lacey Parcel at $1,350,000.00, as of September 30, 2014.

25.

Renton.

In connection with the Renton Appraisal, the Appraisers conducted interviews with regional and local market participants, reviewed available published data and other various resources. Additional research included a review of the applicable tax data, zoning requirements, flood zone status, demographics and comparable data.

In valuing the Renton Parcel, the Appraisers applied the Sales Comparison Approach to valuation. The Appraisers evaluated five similar sale-listings in the area and determined that land sales ranged from $10.80 per square foot to $25.01 per square foot, with an average of $18.61 per square foot. The Appraisers placed an emphasis on one of the six Parcels due to its identical characteristics in comparison with the Renton Parcel.

Based on their review and analysis of the Renton Parcel, the Appraisers placed the fair market value of the Parcel at $1,000,000 as of July 31, 2013. In an addendum to the Renton Appraisal dated September 22, 2014, the Appraisers projected the fair market value of the Renton Parcel at $1,000,000.00 as of September 30, 2014.

26.

Twin Falls.

According to the Twin Falls Appraisal, the Appraisers physically inspected the Twin Falls Parcel, conducted interviews with regional and local market participants, and reviewed available published data and other various resources. Additional research included a review of the applicable tax data, zoning requirements, flood zone status, demographics and comparable data.

In valuing the Twin Falls Parcel, the Appraisers applied the Sales Comparison Approach to valuation. The Appraisers evaluated five similar sale-listings in the area and determined that land sales ranged from $12.25 per square foot to $20.00 per square foot, with an average of $15.45 per square foot. The Appraisers placed an emphasis on one of the five Parcels, due to its close proximity to the Twin Falls Parcel.

Based on their review and analysis, the Appraisers placed the fair market value of the Twin Falls Parcel at $1,100,000 as of July 31, 2013. In an addendum to the Twin Falls Appraisal dated September 19, 2014, the Appraisers projected the fair market value of the Twin Falls Parcel at $1,300,000 as of September 30, 2014.

27.

Sandy.

As described in the Sandy Appraisal, the Appraisers also conducted interviews with regional and local market participants, reviewed available published data and other various resources. Additional research included a review of the applicable tax data, zoning requirements, flood zone status, demographics and comparable data.

For the purposes of the Sandy Appraisal, the Appraisers used the Sales Comparison Approach. The Appraisers evaluated five similar sale-listings in the area and determined that land sales ranged from $12.50 per square foot to $17.89 per square foot, with an average of $14.45 per square foot. The Appraisers placed an emphasis on two of the six Parcels due to the location of both sites.

Based on their review and analysis of the Sandy Property, the Appraisers placed the fair market value of the Parcel at $680,000 as of July 31, 2013. In an addendum to the Sandy Appraisal dated September 19, 2014, the Appraiser (Ms. Haucke) projected the

fair market value of the Sandy Parcel to be $680,000 as of September 30, 2014.

The Independent Fiduciary

28. On May 1, 2013, Les Schwab retained American Realty Advisors as the Independent Fiduciary to the Plan with respect to the proposed Sales. The Independent Fiduciary, located in Glendale, California, is an investment management firm managing institutional commercial real estate portfolios, with more than 280 investors and over $5.3 billion assets under management, as of March 31, 2013. The Independent Fiduciary maintains an exclusive focus on commercial real estate investment management. Furthermore, the Independent Fiduciary represents that it has over twenty-four years of real estate experience including, but not limited to, the following: (a) Acquiring real estate for investment; (b) representing secured lenders in real property transactions; (c) providing real estate asset management services; (d) disposing of real estate assets; (e) restructuring and working out of real estate loan assets; and (f) providing independent fiduciary services with respect to real estate assets.

29. The Independent Fiduciary represents that, beyond its engagement as Independent Fiduciary with respect to the Sales, it does not have any relationship with the parties involved in the proposed transactions. The Independent Fiduciary also represents that derived less than 2% of its 2014 gross revenues from Les Schwab.

30. The duties and the responsibilities of the Independent Fiduciary are being undertaken by Daniel Robinson and Alex Miller. Mr. Robinson is the Managing Director of American Realty Advisors, and has thirty years of experience as a licensed real estate broker, and has served as a Qualified Professional Asset Manager (QPAM) for ERISA-covered plans. Mr. Miller is an investment analyst at American Realty Advisors and has been a commercial real estate analyst for nine years.

31. As part of its duties and responsibilities, the Independent Fiduciary completed the following tasks: (a) Toured each of the Parcels and inspected comparable land sales, as outlined in each of the Appraisals; (b) engaged the Appraisers and instructed them with respect to the objectives of each Appraisal, the specific nuances of the leases between Les Schwab and the Plan (the Leases), and the valuation process, taking into account the questions posed by the Department during its review of the Application; (c) reviewed the Appraisals; (d) reviewed the annual audited financial statements for the Plan from 1988 to the present to assess the treatment of the Leases by the auditor and obtained additional documentation from the Warehouse Center in support of the rental payments made under the Leases; (e) reviewed and summarized the terms and conditions of the Leases and relevant amendments; (f) researched additional questions posed by the Department; and (g) reviewed the composition of the existing real estate portfolio of the Plan and the Plan's Statement of Investment Policy dated September 1, 2011.

The Independent Fiduciary also examined whether all twenty-six parcels of land owned by the Plan, including the Parcels, and leased by Les Schwab and its other affiliates, received their rental income on a timely basis from 1988 to 2012. Further, the Independent Fiduciary reviewed copies of the Plan's audited financial statements, prepared by PriceWaterhouseCoopers from 1998 to 2005 and by Jones & Roth from 2006 to 2012.

32. The Independent Fiduciary represents that it will represent the interests of the Plan in the proposed Sales. In so doing, the Independent Fiduciary will: (a) Determine whether it is prudent to go forward with each Sale; (b) negotiate, review, and approve the terms and conditions of each Sale; (c) monitor and manage the Sales on behalf of the Plan throughout their duration, taking any appropriate actions it deems necessary to safeguard the interests of the Plan.

Independent Fiduciary Reports

33. In the Independent Fiduciary Reports, the Independent Fiduciary states that the appraised value of each Parcel, as presented by the Appraisers, is an accurate reflection of the current market conditions and forms the basis for establishing a fair market price for the Sale of each respective Parcel to the Plan. The Independent Fiduciary Reports also notes that the Plan's real estate holdings are approximately 15.5% of the total assets of the Plan, and are within the 15-25% parameters of the Plan's Statement of Investment Policy (SIP) dated September 1, 2011. According to the Independent Fiduciary, the proposed Sale of each of the Parcels would reduce the real estate holdings of the Plan to approximately 14.6% of the total assets of the Plan and would modestly increase the liquidity of the Plan. Further, according to the Independent Fiduciary, the Sale of the Parcels would result in a real estate allocation that is nominally under the SIP range and would allow the Plan to continue its diversification strategy away from directly owned real estate.

The Independent Fiduciary concludes that it is an advantageous time for the Plan to sell the Parcels. Specifically, the Independent Fiduciary notes that the Parcels have produced a cash return of 6.70% under the Leases, which is deemed “good” to such fiduciary. However, because of the age of the improvements to the Parcels, the limited future value of the underlying improvements, and the mature nature of the Parcels' locations, the Independent Fiduciary represents that it is prudent for the Plan to sell the Parcels and to reinvest the proceeds in real estate with better future appreciation prospects.

Finally, the Independent Fiduciary states that it would not be appropriate for the Plan to receive a reversionary interest in the improvements that were constructed on the Parcels, given the fact that the Leases, when they were negotiated, were reflective of market conditions at the time, including the purchase option provisions, and given the fact that the Plan contributed nothing toward the construction of the improvements on the Parcels.

Statutory Findings

34. The Applicant represents that the proposed transactions are administratively feasible because they involve one-time Sales of the Parcels for cash. As such, the transactions will not require ongoing oversight by the Department. The Applicant also states that the sale of qualifying employer real property, such as the Parcels, by a plan to an employer participating in the plan is a common and customary transaction.

35. The Applicant represents that the proposed exemption is in the interest of the Plan and its participants and beneficiaries, because: (a) The Sales would reduce the effect of fluctuations in the rental and market values of the qualifying employer real property held as Plan assets; (b) under the express terms of the Sales, the Plan would avoid having to pay real estate brokerage commissions, fees or other expenses in connection with the Sales, which could equal 10% or more of the Purchase Price; (c) the Plan would receive the full fair market value of the Parcels in a lump-sum cash payment; and (d) the Sales would enable the Plan to diversify its assets.

The Applicant represents that after the Plan's divestiture of the Parcels, the Plan will continue to hold twenty-one other parcels of property that satisfy the definition of “qualifying employer real property,” as set forth in section

407(d)(4) of the Act.

The Applicant represents that these remaining parcels of property are geographically dispersed, suitable for more than one use, and are being leased to Les Schwab at a fair market rental value. Therefore, according to the Applicant, once the Sales are consummated, the remaining parcels owned by the Plan and leased to Les Schwab will continue to comply with the exemptive relief provided in section 408(e) of the Act.

The Department is not expressing a view on whether the remaining parcels of property that would be owned by the Plan after the Sales would constitute qualifying employer real property under section 407(d)(4) of the Act, or whether the leases of such parcels of property by the Plan to Les Schwab would satisfy the provisions of section 408(e) of the Act.

36. The Applicant represents that the proposed exemption is protective of the participants and beneficiaries because the Independent Fiduciary will represent the interests of the Plan's participants and beneficiaries with respect to: The decision to sell the Parcels to the Applicant; the terms and execution of the Sales; and the selection of a qualified independent appraiser.

Additionally, the Applicant states that the Independent Fiduciary will determine whether the transactions are prudent and in the best interest of the participants and beneficiaries, including whether or not the terms and conditions of the Sales are equivalent to an arm's length transaction with an unrelated third party.

Furthermore, the Applicant states that the Appraisers will appraise the fair market value of the Parcels as of the transaction date and ensure that the Plan receives adequate consideration. The Applicant also states that the amount received by the Plan will at least equal the fair market value of each Parcel on the date of the Sale (exclusive of the buildings or other improvements that are paid for by Les Schwab, to which Les Schwab retains title). An appropriate appraisal methodology will be used by the Appraisers and the Appraisals report will be updated on the date of each Sale.

Lastly, the Applicant represents that the aggregate value of the Parcels being sold represents a small, non-material portion of the Plan's total investments and the investments of the Plan will remain adequately diversified after the transactions are consummated.

Summary

37. In summary, the Applicant represents that the proposed transactions will satisfy the statutory criteria for an exemption under section 408(a) of the Act for the reasons described above, including the following:

(a) The purchase price to be paid by Les Schwab for each Parcel will be no less than the fair market value of each Parcel, exclusive of buildings or other improvements paid for by Les Schwab, to which Les Schwab retains title), as determined the Appraisers, in updated Appraisals on the date of the Sale;

(b) The Plan will not pay any costs, fees, or commissions associated with each Sale;

(c) The Appraisers will determine the fair market value of their assigned Parcel, on the date of the proposed Sale, using commercially accepted methods of valuation for unrelated third-party transactions; and

(d) The Independent Fiduciary will represent the interests of the Plan with respect to each Sale.

Notice to Interested Parties

The persons who may be interested in the publication in the

Federal Register

of the Notice of Proposed Exemption (the Notice) include all individuals who are participants and beneficiaries in the Plan. It is represented that all such interested persons will be notified of the publication of the Notice by first class mail to each such interested person's last known address within fifteen (15) days of publication of the Notice in the

Federal Register

. Such mailing will contain a copy of the Notice, as it appears in the

Federal Register

on the date of publication, plus a copy of the Supplemental Statement, as required, pursuant to 29 CFR 2570.43(a)(2), which will advise all interested persons of their right to comment on and/or to request a hearing. All written comments or hearing requests must be received by the Department from interested persons within forty-five (45) days of the publication of this proposed exemption in the

Federal Register

. All comments will be made available to the public.

Warning:

Do not include any personally identifiable information (such as name, address, or other contact information) or confidential business information that you do not want publicly disclosed. All comments may be posted on the Internet and can be retrieved by most Internet search engines.

FOR FURTHER INFORMATION CONTACT:

Ms. Jennifer Erin Brown or Mr. Joseph Brennan of the Department at (202) 693-8352 or (202) 693-8456, respectively. (These are not toll-free numbers.)

New England Carpenters Training Fund (the Plan or the Applicant) Located in Millbury, Massachusetts

[Application No. L-11795]

Proposed Exemption

The Department is considering granting an exemption under the authority of section 408(a) of the Act and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011). If the proposed exemption is granted, the restrictions of section 406(a)(1)(A) and (D) of the Act shall not apply to the purchase (the Purchase), by the Plan, of a parcel of improved real property (the Property) from the Connecticut Carpenters Local 24 (Local 24), a party in interest with respect to the Plan; provided that the following conditions are satisfied:

(1) The Purchase price paid by the Plan for the Property is the lesser of $1,280,000 or the fair market value of such Property, as determined by an independent, qualified appraiser (the Appraiser), as of the date of the Purchase;

(2) The Purchase is a one-time transaction for cash;

(3) The terms and conditions of the Purchase are no less favorable to the Plan than those obtainable by the Plan under similar circumstances when negotiated at arm's-length with unrelated third parties;

(4) Prior to entering into the Purchase, an independent, qualified fiduciary (the I/F) determines that the Purchase is in the interest of, and protective of the Plan and of its participants and beneficiaries;

(5) The I/F: (a) Has negotiated, reviewed, and approved the terms of the Purchase prior to the consummation of such transaction; (b) has reviewed and approved the methodology used by the Appraiser; (c) ensures that such methodology is properly applied in determining the fair market value of the Property at the time the transaction occurs, and determines whether it is prudent to go forward with the proposed transaction; and (d) represents the interests of the Plan at the time the proposed transaction is consummated;

(6) Immediately following the Purchase, the fair market value of the Property does not exceed 3 percent (3%) of the fair market value of the total assets of the Plan; and

(7) The Plan does not incur any fees, costs, commissions, or other charges as a result of engaging in the Purchase, other than the necessary and reasonable fees payable to the I/F and to the Appraiser, respectively.

Summary of Facts and Representations

The Summary of Facts and Representations is based on the Applicant's representations and does not reflect the views of the Department, unless indicated otherwise.

1. The Plan is a multiemployer apprenticeship and training fund, which provides education and training in residential and commercial construction skills to carpenter apprentices and journeyman carpenters in six New England states. The carpenter apprentices and journeyman are members of local carpenters unions (the Unions) that are affiliated with the New England Regional Council of Carpenters (the NERCC). The Plan is jointly sponsored by the Unions and signatory building contractors (the Contributing Employers). As of April 30, 2015, the Plan had net assets valued at $36,184,388.30. As of May 1, 2015, the Plan had 1,166 active apprentices in the program (that does not include Connecticut).

2. The Plan is administered by a fourteen member Board of Trustees (the Trustees), consisting of seven Trustees representing the Contributing Employers (the Employer Trustees) and seven Trustees representing the Unions (the Union Trustees). In accordance with the Plan's investment policy, the Trustees have the authority to invest the Plan's assets in real estate and other investments. The Plan currently owns two training facilities in Massachusetts and Maine, and it rents facilities located in New Hampshire, Vermont and Rhode Island. The Plan provides all of its classes and training at these facilities.

It is represented that there are no leases on these properties between the Plan and parties in interest.

3. Local 24 is a local labor organization that is affiliated with the NERCC. The NERCC is an organization made up of 30 local carpenter unions in the six New England states, including Local 24. No officials of Local 24 sit on the Plan's Board of Trustees.

4. The Connecticut Carpenters Training Fund (the CT Fund) is the only carpenters training fund in New England that has not merged into the Plan. The CT Fund has a Board of Trustees, consisting of five trustees that represent its union and four trustees that represent the contributing employers (the CT Fund Trustees).

The Business Manager of Local 24 sits on the Board of Trustees of the CT Fund. As of March 31, 2014, the CT Fund had total net assets of $1,336,104, and 312 participants.

It is represented that the CT Fund has only four employer trustees sitting CT Fund Board of Trustees because one employer trustee resigned, and his position has not been filled due to the pending merger transaction that is described herein in Representations 6 and 7. It is further represented that the union and employer trustees comprising the CT Fund Trustees have a unit vote, so one side cannot outvote the other.

5. The CT Fund operates from a training facility that is located at 500 Main Street, Yalesville, Connecticut. The training facility is owned by Local 24 and is the subject Property of this exemption request. Local 24 uses a portion of the Property as its administrative office and for periodic Executive Board and membership meetings. The Property consists of a 25,560 square foot one-story building. The CT Fund leases 15,949.5 of interior square feet of space in the building from Local 24. An additional 3,142 square feet of interior space in the building is shared jointly by Local 24 and the CT Fund.

The Department notes that the CT Fund is not a party to the proposed transaction that is described herein. Therefore, the Department has not considered whether the leasing arrangement and the joint sharing of space in the Property between Local 24 and the CT Fund fit within the statutory exemptive relief provided under section 408(b)(2) of the Act or Prohibited Transaction Exemption (PTE) 78-6 (43 FR 23024, May 30, 1978).

Section 408(b)(2) of the Act allows a plan to contract or make reasonable arrangements with a party in interest for office space, legal, accounting or other services necessary for the establishment or operation of the plan. Under section 408(b)(2), exemptive relief is permitted from violations of section 406(a) of the Act, exclusively.

PTE 78-6 is a class exemption that allows a contributing employer, a wholly owned subsidiary of a contributing employer, or an employee organization such as a union, to lease real property, other than office space, to an apprenticeship or training plan. PTE 78-6 provides relief from section 406(a)(1)(A),(C) and (D), only.

To the extent the leasing/joint sharing arrangements between Local 24 and the CT Fund do not comply with the terms and conditions of section 408(b)(2) of the Act (and the regulations that have been promulgated thereunder) or PTE 78-6, the Department is not providing an administrative exemption for such arrangements.

6. At their December 12, 2012 Trustee meeting, the Employer Trustees of the Plan voted to begin negotiations for a merger with the CT Fund and to purchase the Property for continuing use as a training facility. The vote was further subject to review by an I/F and the Department's granting an individual exemption. All of the Union Trustees recused themselves from the vote to (a) merge the two training funds, (b) hire an I/F, and (c) purchase the Property.

To date, there has been no vote regarding the proposed lease of the Property by the Plan to Local 24. Once the Purchase takes place, and when that vote is taken, the Applicant represents that all of the Union Trustees will recuse themselves from the leasing decision.

7. Local 24 has decided to sell the Property because it no longer wishes to retain ownership or to act as landlord to the CT Fund. If the Plan does not purchase the Property, it is represented that the Plan will be at risk of losing its current facility and will need to purchase or lease a new Property in order to continue to provide its training programs. In addition, it is represented that the Property is hard to duplicate in the market. To find buildings of the same caliber, the Plan will either need to spend more money on a facility or relocate to a different market.

It is also represented that during the merger discussions, the Plan Trustees and the CT Fund Trustees agreed that it was important to maintain a training facility in Connecticut after the merger. The Plan Trustees and the CT Fund Trustees further determined that in order for the Plan to best serve the Connecticut carpenter apprentices, it would be desirable to maintain the facility in Yalesville, Connecticut due to the suitability of the facility for training purposes and the location.

8. Therefore, an administrative exemption is requested from the Department to allow the Plan to purchase the Property from Local 24. The proposed transaction will be subject to a number of conditions. In this regard, the Purchase price paid by the Plan for the Property will be the lesser of $1,280,000 or the fair market value of such Property, as determined by the Appraiser, on the date of the transaction. In addition, the Purchase will be a one-time transaction for cash. The terms and conditions of the Purchase will reflect arm's-length dealings between the Plan and Local 24. Further, the Purchase has been negotiated, reviewed, and approved by an I/F, who will monitor such transaction on behalf of the Plan and its participants and beneficiaries. The I/F has selected the Appraiser to determine the fair market value of the Property and has reviewed and approved the methodology used by the Appraiser. Finally, the Plan will not incur any fees, costs, commissions, or other charges as a result of engaging in the Purchase, other than the necessary and reasonable fees that will be paid to the I/F and to the Appraiser, respectively.

9. The Purchase would violate section 406(a)(1)(A) and (D) of the Act.

Section 406(a)(1)(A) of the Act provides, in relevant part, that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such

transaction constitutes a direct or indirect sale of Property between a plan and a party in interest. The term “party in interest” is defined under section 3(14)(A) of the Act to include, a fiduciary such as the Trustees. Under section 3(14)(D), the term party in interest also includes an employee organization, any of whose employees or members are covered by such plan. Local 24 is a party in interest with respect to the Plan because it is an employee organization whose members are covered by the Plan.

The Department notes that the Purchase does not appear to violate the fiduciary self-dealing and conflict of interest provisions of section 406(b)(1) and (b)(2) of the Act because no officials of Local 24 sit on the Plan's Board of Trustees. Therefore, exemptive relief is being provided herein from section 406(a)(1)(A) and (D) only.

In addition, section 406(a)(1)(D) of the Act provides that a fiduciary shall not cause a plan to engage in a transaction, if he knows or should know that such transaction constitutes a transfer to, or use by or for the benefit of, a party in interest, of any assets of the plan. As fiduciaries, the Plan's Trustees would be causing the Plan, in the process of purchasing the Property, to transfer funds to Local 24 in order to consummate the transaction. Thus, in the absence of an administrative exemption, the Purchase would violate section 406(a)(1)(A) and (D) of the Act.

10. As stated above, Local 24 currently maintains office space in the portion of the Property that the CT Fund does not presently occupy. If the Property is sold to the Plan, Local 24 intends to lease the same portion of the Property that it currently occupies from the Plan. According to the Applicant, the rental rate will be based on the fair market rental rates for office space in the Yalesville, Connecticut area, and the terms of the lease will comply with PTEs 76-1 and 77-10.

Part C of PTE 76-1 (41 FR 12740, March 26, 1976, as corrected at 41 FR 16620 (April 20, 1976)) provides exemptive relief from the prohibited transaction provisions of sections 406(a) and 407(a) of the Act for the leasing of office space, or the provision of administrative services, or the sale or leasing of goods by a multiple employer plan to a participating employee organization, participating employer or another multiple employer plan. PTE 77-10 (42 FR 33918, July 1, 1977), which complements PTE 76-1, provides exemptive relief from the prohibited transaction provisions of section 406(b)(2) of the Act with respect to the sharing of office space, administrative services or goods, or the leasing of office space, or the provision of administrative services or the sale or leasing of goods. In addition, with respect to the sharing of office space, PTE 77-10 requires that the plan must receive reasonable compensation. The costs of securing such space are assessed and paid on a pro-rata basis with respect to each party's use of such space, services and goods.

Notwithstanding the applicant's views on the applicability of PTEs 76-1 and 77-10 to the proposed leases, the Department expresses no opinion on whether the lease will satisfy the terms and conditions of these class exemptions.

11. Integra Realty Resources, Inc. (Integra) of New York City, New York has been retained to serve as the Appraiser. Specifically, Mark Bates, the Senior Managing Director for Integra and a Member of the Appraisal Institute, prepared the appraisal report (the Appraisal Report) for the Property to determine the fair market value of the Property. Mr. Bates represents that he provides advisory and valuation services to leading institutions, developers and owners, involving major commercial and residential properties throughout the United States. He also represents that Integra's gross revenues received from parties in interest with respect to the Plan, including the preparation of the Appraisal Report, represents less than 1% of Integra's actual gross revenues in 2014.

12. In the Appraisal Report dated July 3, 2014, Mr. Bates describes the Property as an existing industrial building containing 25,560 square feet of rentable area, including 53% finished office space used as administration space and classrooms. He explains that the improvements were constructed in 1973 and are 100% owner-occupied as of the effective appraisal date. The site consists of 3.10 acres or 135,036 square feet.

13. Mr. Bates considered two standard approaches for valuing older properties similar to the Property: (a) The Income Capitalization Approach; and (b) the Sales Comparison Approach. According to Mr. Bates, the Income Capitalization Approach is an applicable valuation method because there is an active rental market for similar properties that permits the estimation of the Property's income-generating potential. However, he believes the Sales Comparison Approach is the best valuation method because: (a) There is an active market for similar properties plus sufficient sales data available for analysis; (b) this approach directly considers the prices of alternative properties having similar utility; and (c) this approach is typically most relevant for owner-user properties.

Using the Sales Comparison Approach, Mr. Bates arrived at a value for the Property of $1,280,000, as of July 3, 2014, or 3% of the value of the Plan's assets. The Appraisal Report will be updated by the Appraiser on the date of the closing.

14. The Plan's Employer Trustees retained Gallagher Fiduciary Advisors, LLC (GFA) of Newark, NJ to serve as the I/F on behalf of the Plan. Under its engagement letter, the I/F agreed to: (a) Evaluate the proposed transaction to determine whether it is in the interest of the Plan's participants and beneficiaries; (b) negotiate and agree on behalf of the Plan to the specific terms of the proposed transaction, to decide on behalf of the Plan whether to consummate the proposed transaction, and (c) to direct the appropriate Plan fiduciaries to execute the instruments necessary for the proposed transaction, if it is consummated.

15. The I/F is a registered investment adviser subsidiary of Gallagher Benefit Services, Inc., an employee benefits consulting firm. The I/F has served, and continues to serve, as an independent fiduciary in connection with numerous pension and welfare funds' investment transactions, involving substantial issues under the fiduciary responsibility provisions of the Act. GFA has acted in a variety of independent fiduciary roles, including independent fiduciary, named fiduciary, investment manager and advisor or special consultant.

16. The I/F represents that it is a “qualified independent fiduciary” because it and its employees have the appropriate training, experience, and facilities to act on behalf of the Plan regarding the proposed transaction, in accordance with the fiduciary duties and responsibilities prescribed by the Act. In this regard, the I/F states that its staff includes professionals experienced with the management and disposition of portfolio assets, including real estate, as well as ERISA lawyers, who are aware of the fiduciary responsibilities involving investment activities.

The I/F further represents that it is “independent” because it has no relationship with Local 24 or other parties in interest, except for its role as the Plan's independent fiduciary with respect to the proposed transaction. The I/F's fee for its services for the Plan will be less than 1% of its annual gross revenues.

17. Besides retaining the Appraiser, the I/F retained Cardno ATC of Portland, Oregon (U.S. headquarters) to conduct a property condition assessment (PCA). The PCA identified some immediately needed repairs, which the I/F will require to be made by Local 24 before closing or “reserved for in the Purchase price,” meaning the value of the cost of those repairs will be deducted from the Purchase price. The repairs identified by Cardno ATC are site conditions, structural frame repair, HVAC system repair and handicapped access, totaling $35,200.

The I/F also retained Cardno ATC to conduct a phase one environmental survey of the Property. The survey identified an open question regarding the previous removal of an underground storage tank. This will likely require additional testing to ascertain soil conditions. The I/F will require this to be fully resolved or otherwise reserved prior to closing.

18. In addition, the I/F retained real estate consultants Bertram & Cochran,

Inc (B&C) of Hartford, Connecticut, to conduct a survey of other available properties that were potentially suitable for the purchase or leasing by the Plan. As mentioned above, the result of the survey was that purchasing the Property was the least expensive alternative and in the interest of the Plan's participants.

19. The I/F has reviewed and approved the methodology used by the Appraiser and it will ensure that such methodology is properly applied in determining the fair market value of the Property. In addition, the I/F will determine whether it is prudent to go forward with the proposed transaction. Further, the I/F will represent the interests of the Plan at the time the proposed transaction is consummated.

In carrying out its duties, the I/F requested, received and reviewed numerous documents concerning the Plan and the transaction. Among the documents the I/F reviewed were the: (a) Exemption application; (b) recent audited financial statements of the Plan; (c) the Appraisal Report for the Property; (d) the PCA; (e) the environmental assessment of the Property; (f) a competitive property market evaluation; (g) Local 24 financial statements; and (h) the existing lease between Local 24 and the CT Fund. In addition, the I/F visited the Property and met with the Plan's counsel and the NERCC Business Representative.

The I/F represents that the exemption request is administratively feasible because the purchase by the Plan from Local 24 will be a one-time transaction for cash, rather than a mortgage arrangement. Further, once the Property is owned by the Plan, the I/F represents that there will be no oversight required by the Department other than its usual and customary regulatory audits of all welfare benefit plans.

The I/F has opined that it is less expensive for the Plan to purchase the Property rather than find a similar facility and expend even more funds to convert it to an appropriate carpenter training facility. In this regard, the I/F hired a real estate appraiser to seek out other facilities that might serve as a training facility for the Plan that would also be less expensive than purchasing the Property. The result of the survey was that purchasing the Property was the least expensive alternative and in the interest of the Plan's participants.

20. In summary, it is represented that the proposed transaction has satisfied or will satisfy the statutory requirements for an exemption under section 408(a) of the Act because:

(a) The Purchase price paid by the Plan for the Property will be the lesser of $1,280,000 or the fair market value of such Property, as determined by an Appraiser, as of the date of the Purchase;

(b) The Purchase will be a one-time transaction for cash;

(c) The terms and conditions of the Purchase will be no less favorable to the Plan than those obtainable by the Plan under similar circumstances when negotiated at arm's length with unrelated third parties;

(d) Prior to entering into the Purchase, the I/F will determine that the Purchase is in the interest of, and protective of the Plan and of its participants and beneficiaries;

(e) The I/F has negotiated, reviewed, and approved the terms of the Purchase prior to the consummation of such transaction;

(f) The I/F has reviewed and approved the methodology used by the Appraiser, and it will ensure that such methodology is properly applied in determining the fair market value of the Property, and determine whether it is prudent to go forward with the proposed transaction. In addition, the I/F will represent the interests of the Plan at the time the proposed transaction is consummated;

(g) Immediately following the Purchase, the fair market value of the Property will not exceed 3 percent (3%) of the fair market value of the total assets of the Plan; and

(h) The Plan will not incur any fees, costs, commissions, or other charges as a result of engaging in the Purchase, other than the necessary and reasonable fees payable to the I/F and to the Appraiser.

Notice to Interested Persons

Notice of the proposed exemption (the Notice) will be given to interested persons within 7 days of the date of publication of the Notice in the

Federal Register

. The Notice will be given to interested persons by first class mail, with postage prepaid. Such Notice will contain a copy of the Notice, as published in the

Federal Register

, and a supplemental statement, as required pursuant to 29 CFR 2570.43(b)(2). The supplemental statement will inform interested persons of their right to comment on and/or to request a hearing with respect to the pending exemption. Written comments and hearing requests are due within 37 days of the publication of the Notice in the

Federal Register

All comments will be made available to the public.

Warning:

FOR FURTHER INFORMATION CONTACT:

Blessed Chuksorji-Keefe of the Department at (202) 693-8567. (This is not a toll-free number).

Virginia Bankers Association Defined Contribution Plan for First Capital Bank (the Plan), Located in Glen Allen, Virginia

[Application No. D-11818]

Proposed Exemption

The Department is considering granting an exemption under the authority of section 408(a) of the Employee Retirement Income Security Act of 1974, as amended, (ERISA or the Act) and section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code), and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).

Section I. Covered Transactions

If the proposed exemption is granted, the restrictions of sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407(a)(1)(A) of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of sections 4975(c)(1)(A) and 4975(c)(1)(E) of the Code,

shall not apply to: (1) The acquisition of certain warrants (the Warrants) to purchase a half-share of common stock (the Stock) of First Capital Bancorp, Inc. (First Capital) by the participant-directed accounts (the Accounts) of certain participants in the Plan (the Participants) in connection with a rights offering (the Rights Offering) of shares of Stock by First Capital, a party in interest with respect to the Plan; and (2) the holding of the Warrants received by the Accounts, provided that the conditions set forth in Section II below were satisfied for the duration of the acquisition and holding.

For purposes of this proposed exemption, references to specific provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code.

Section II. Conditions for Relief

(a) The acquisition of the Warrants by the Accounts of the Participants occurred in connection with the exercise of subscription rights to purchase Stock and Warrants (the Subscription Rights) pursuant to the Rights Offering, which was made available by First Capital to all

shareholders of Stock, including the Plan;

(b) The acquisition of the Warrants by the Accounts of the Participants resulted from their participation in the Rights Offering, an independent corporate act of First Capital;

(c) Each shareholder of Stock, including each of the Accounts of the Participants, was entitled to receive the same proportionate number of Warrants, and this proportionate number of Warrants was based on the number of shares of Stock held by each such shareholder on the record date of the Rights Offering;

(d) The Warrants were acquired pursuant to, and in accordance with, provisions under the Plan for individually-directed investments of the Accounts by the individual participants in the Plan, a portion of whose Accounts in the Plan held the Stock;

(e) The decisions with regard to the acquisition, holding, and disposition of the Warrants by an Account have been made, and will continue to be made, by the individual Participant whose Account received the Subscription Right in respect of which such Warrants were acquired;

(f) The trustee of the Plan's fund maintained to hold Stock, the First Capital Stock Fund, will not allow Participants to exercise the Warrants unless the fair market value of the Stock exceeds the exercise price of the Warrants on the date of exercise; and

(g) No brokerage fees, commissions, or other fees or expenses were paid or will be paid by the Plan in connection with the acquisition, holding and/or exercise of the Subscription Right or the Warrants.

Effective Date:

This proposed exemption, if granted, will be effective for the period beginning on April 30, 2012, until the date the Warrants are exercised or expire.

Summary of Facts and Representations

The Summary of Facts and Representations is based on First Capital's representations and does not reflect the views of the Department, unless indicated otherwise.

Background

1. First Capital Bancorp, Inc. (First Capital or the Applicant) is a Virginia corporation maintaining its principal place of business in Glen Allen, Virginia. First Capital Bank (the Bank) is a subsidiary of First Capital that maintains its principal place of business in Glen Allen, Virginia.

2. First Capital represents that the Bank sponsors the Virginia Bankers Association Defined Contribution Plan for First Capital Bank (the Plan), a 401(k) plan that provides for participant-directed investments. The Applicant represents that the Plan was adopted by the Bank effective May 1, 1999. As of December 31, 2012, the Plan had total assets of approximately $4,252,512 and 97 participants.

3. First Capital represents that the participants in the Plan (the Participants) may direct the investments of their Plan accounts (individually, the Account, and collectively, the Accounts) into various investment funds, including a First Capital Stock Fund (the Stock Fund). The Applicant represents that the Plan does not impose requirements with respect to investing in First Capital Stock (the Stock). First Capital represents that, as of December 31, 2012, the Stock Fund was valued at $332,197, which represented approximately 8% of the fair market value of total Plan assets, and those shares of the Stock Fund were allocated to the Accounts of 35 Participants.

First Capital represents that Participants may make investment directions in the Stock Fund in increments of 1% of their pre-tax elective deferral Account under the Plan, subject to a 25% limit. Account balances invested in the Stock Fund are distributed in whole shares of Stock and cash instead of fractional shares.

4. First Capital represents that, at the time the transactions described herein occurred, the VBA Benefits Corporation, located in Glen Allen, Virginia, served as the trustee of the Plan (the Trustee). However, effective June 1, 2014, Reliance Trust Company (Reliance), located in Atlanta, Georgia, assumed the role of Trustee and is the Custodian of the Stock Fund (the Custodian). The Applicant represents that the Trustee holds the Plan's assets, and executes investment directions in accordance with Participants' instructions.

The Rights Offering

5. In a prospectus, dated February 13, 2012 (the Offering Prospectus), First Capital initiated a rights offering (the Rights Offering) to permit shareholders of record as of February 10, 2012 (the Record Date), including the Plan, to purchase Stock and transferable 10-year warrants (the Warrants). As of the Record Date, there were 2,971,171 shares of Stock issued and outstanding.

6. The Applicant represents that the Rights Offering was undertaken as an independent act on the part of First Capital, as a corporate entity under which all shareholders of Stock, including the Plan, were treated in a like manner. The Applicant represents that First Capital engaged in the Rights Offering in order to raise equity capital and improve its capital position. Under the terms set forth in the Offering Prospectus, the Rights Offering commenced on February 13, 2012, and was intended to terminate on April 16, 2012 (the Subscription Period). First Capital had reserved the right to extend the Subscription Period to no later than June 29, 2012. On April 4, 2012, First Capital exercised its right to extend the Subscription Period, and extended it until April 30, 2012.

7. First Capital represents that the Stock and the Warrants were issued separately, but were offered together as “Units” consisting of one share of Stock and one Warrant to purchase one-half of a share of Stock at a price of $2.00 per share. The Rights Offering provided that, for every share of Stock held as of the Record Date, each shareholder had the nontransferable right to subscribe for up to three Units (the Subscription Right) for an exercise price of $2.00 per Unit. Furthermore, First Capital represents, shareholders who exercised the Subscription Right in full for three Units subsequently had the opportunity to purchase Units not purchased by other shareholders (the Over-Subscription Privilege). The Applicant represents that the exercise of the Over-Subscription Privilege was subject to a right of first refusal that First Capital granted to a private investor (the Standby Purchaser).

The Applicant represents that First Capital also entered into a standby purchase agreement (the Standby Agreement) with the Standby Purchaser, pursuant to which the Standby Purchaser agreed to acquire from First Capital, at the price of $2.00 per Unit, 350,000 Units if such Units were available after exercise of the Subscription Right.

8. First Capital represents that, while the Stock is traded on the NASDAQ under the ticker symbol “FCVA,” neither the Subscription Rights nor the Warrants were listed for trading on the NASDAQ or any other stock exchange or market.

First Capital represents that the shares of Stock issuable upon the exercise of the Warrants will be listed for trading on the NASDAQ with the other outstanding shares of Stock.

First Capital reserved its right to apply to list the Warrants for trading on the NASDAQ following the Rights Offering. However, the Applicant represents that First Capital has thus far not elected to do so and does not currently expect to do so.

9. First Capital represents that Participants were offered the opportunity to purchase Units through the Stock Fund investment option under the Plan. In this regard, Participants completed a Rights Offering Election Form (the Election Form) and submitted it to the Bank, indicating the total number of Units to be purchased for their Accounts and the total purchase

price, or their election not to participate in the Rights Offering. First Capital represents that the Election Form also provided for the Participant to designate which Plan investment fund(s) in the Participant's Account were to be liquidated in order to pay for the Units and the designated amounts to be liquidated from each fund. The Applicant represents that the Bank provided the Election Form to the Custodian to facilitate the Participants' elections to participate in or opt out of the Rights Offering.

10. The Applicant represents that First Capital engaged a financial advisor, Davenport & Company LLC (Davenport), to advise it on the Rights Offering. The Applicant represents that First Capital paid Davenport's fees in connection with the Rights Offering, with no fees paid with Plan assets. The Applicant represents that Davenport helped to negotiate the terms of the Standby Agreement and render a fairness opinion to the First Capital's Board of Directors that the consideration to be received by First Capital for the Units was fair.

First Capital represents that, on February 13, 2012, the closing sale price of the Stock on the NASDAQ Capital Market (NASDAQ) was $2.65 per share. First Capital further notes that, on April 30, 2012, the closing sale price of the Stock on the NASDAQ was $2.03 per share. Therefore, the per-Unit exercise price of $2.00 per share was below the price at which the Stock was trading on the date that the Rights Offering commenced as well as the date of the exercise of the Rights.

The Warrants

11. As described above, the Warrants entitled each shareholder who participated in the Rights Offering the right to purchase one-half a share of Stock at $2.00 per share, paid in cash at the time of exercise. Pursuant to the Offering Prospectus, each Warrant was exercisable immediately upon completion of the Rights Offering and will expire on the tenth anniversary of the end of the Subscription Period. The Offering Prospectus notes that the Warrants will be subject to redemption by First Capital for $0.01 per Warrant, on not less than 30 days written notice, at any time after the closing price of the Stock exceeds $4.00 per share for 20 consecutive business days ending within 15 days of the date on which notice of redemption is given, provided that the Warrant may not be redeemed before the first anniversary of the completion of the Rights Offering.

The Offering Prospectus indicates that the Warrants will be adjusted to reflect any stock split, stock dividend or similar recapitalization with respect to the Stock. Furthermore, as no fractional shares of Stock would be issued, the Offering Prospectus explains that if a shareholder purchased an odd number of Units, the number of shares of Stock to be purchased through the Warrants would be rounded down to the nearest whole share.

The Department notes that the redemption of the Warrants by First Capital from the Plan in exchange for cash would constitute a prohibited transaction under sections 406(a)(1)(A), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of the Act, for which exemptive relief is not provided hereunder.

12. First Capital represents that, with respect to the exercise and disposition of the Warrants, the Trustee will follow the directions of the Participants in accordance with the procedures set forth in the Warrant Certificate and established by the Bank. However, First Capital states, the Trustee will not allow Participants to exercise the Warrants unless the fair market value of the Stock exceeds the exercise price of the Warrants. The Applicant represents that the shares of Stock received upon the exercise of the Warrants will be credited to Participants' Accounts.

13. First Capital represents that all shareholders of Stock, including Participants, were treated in a similar manner with respect to their acquisition and holding of the Warrants. First Capital further represents that no Participant in the Plan paid, or will pay, any fees or commissions in connection with the acquisition, holding or exercise of the Warrants. Finally, First Capital represents that all decisions regarding the acquisition, holding, and disposition of the Warrants have been and will be made by the Participants to whose Plan accounts the Warrants were allocated.

Exemptive Relief Requested

14. First Capital previously requested retroactive exemptive relief to cover the Plan's acquisition and holding of both the Subscription Rights and the Warrants. However, the Department was unable to make the required statutory findings under section 408(a) of the Act for retroactive exemptive relief, due to, among other things, the length of time between the end of the Subscription Period and the filing of the application for exemptive relief, and the inadequacy of the information presented to Participants with respect to the Rights Offering. Consequently, First Capital withdrew its request for retroactive exemptive relief with respect to the acquisition and holding of Subscription Rights by the Plan. First Capital filed a Form 5330 with the IRS disclosing a prohibited transaction with no related loss.

Therefore, the Department is proposing relief only for the acquisition and holding of the Warrants.

The Department is taking no view herein regarding whether First Capital properly filed the Form 5330, including properly reporting such loss amount.

15. First Capital states that the acquisition and holding of the Warrants violates certain prohibited transaction restrictions of the Act. In this regard, First Capital states that, although the Warrants constitute “employer securities” as defined under section 407(d)(1) of the Act, they do not satisfy the definition of “qualifying employer securities” as defined under section 407(d)(5) of the Act because they are not stock or marketable debt securities. Under section 407(a)(1)(A) of the Act, a plan may not acquire or hold any “employer security” which is not a “qualifying employer security.” In addition, section 406(a)(1)(E) of the Act prohibits the acquisition, on behalf of a plan, of any “employer security in violation of section 407(a) of the Act.” Finally, section 406(a)(2) of the Act prohibits a fiduciary who has authority or discretion to control or manage the assets of a plan to permit the plan to hold any “employer security” in violation of section 407(a) of the Act. Therefore, First Capital states that the acquisition and holding of the Warrants by the Plan constitute prohibited transactions in violation of sections 406(a)(1)(E) and 406(a)(2) of the Act.

16. Furthermore, First Capital states that the acquisition of the Warrants violates section 406(a)(1)(A) of the Act. First Capital notes that, in relevant part, section 406(a)(1)(A) of the Act provides that a fiduciary with respect to a plan shall not cause the plan to engage in a transaction if the fiduciary knows or should know that the transaction is a sale or exchange of any property between a plan and a party in interest. First Capital states that, because the Plan fiduciaries acquired the Warrants on behalf of Participants through the exercise of Subscription Rights in the Rights Offering, the acquisition of the Warrants constituted a sale or exchange of property between a Plan and a party in interest, in violation of section 406(a)(1)(A) of the Act.

17. First Capital states further that the acquisition and holding of the Warrants may violate sections 406(b)(1) and 406(b)(2) of the Act. First Capital notes that section 406(b)(1) of the Act prohibits a fiduciary from dealing with the assets of a plan in his own interest

or for his own account. Furthermore, section 406(b)(2) of the Act prohibits a fiduciary with respect to a plan from acting in any transaction involving the plan on behalf of a party, or representing a party, whose interests are adverse to the interests of the plan or its participants and beneficiaries. First Capital states that, in effecting the Plan's participation in the Rights Offering and allowing the Plan to purchase and hold the Warrants, the Plan fiduciaries may have violated section 406(b)(1) of the Act because they dealt with the assets of the Plan in their own interest. Furthermore, the Applicant states that the Plan fiduciaries may have violated section 406(b)(2) of the Act because they acted on their own behalf as well as the Plan's behalf in the Rights Offering. Therefore, First Capital requests that the Department grant an exemption from the prohibitions of sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407(a)(1)(A) of the Act, for the acquisition and holding of the Warrants.

18. As explained above, First Capital represents that the acquisition of the Warrants has been completed. First Capital represents that, to date, no Plan Participants have exercised any of their Accounts' Warrants. First Capital further represents that, to date, no Plan Participants have transferred any Warrants in their Accounts to third parties. According to First Capital, all Accounts that received the Warrants may hold them until exercised for Stock or transferred to a third party, or until the Warrants expire, ten years from the date that the Rights Offering closed. First Capital seeks retroactive relief effective from April 30, 2012, the date that the Accounts of Participants exercised their Subscription Rights, until the Warrants are exercised or expire.

Statutory Findings

19. First Capital represents that the proposed exemption is administratively feasible. First Capital represents that all shareholders, including the Plan, were, and will continue to be treated in a like manner with respect to the acquisition and holding of the Warrants. First Capital represents that the Plan recordkeeper has indicated that it can administer the Warrants as part of the Plan's assets, of which the Warrants comprise less than 1 percent. As such, First Capital represents that there is no reason for any continuing Departmental oversight with respect to the holding of the Warrants.

20. First Capital represents that the Plan's acquisition of the Warrants through its participation in the Rights Offering was in the interests of the Plan and its Participants because it provides Participants with the opportunity to purchase additional Stock at below fair market value price. Furthermore, First Capital represents that rights offerings are a very common approach used by banks and other issuers to raise capital, and that they provide shareholders, including the Plan, with an additional opportunity to invest in the entity. Furthermore, the price of a Unit, which included one share of Stock and one Warrant to purchase a half-share of Stock, was lower than the price of Stock, as reflected on the NASDAQ, on the date the Rights Offering commenced and the date of the exercise of the Rights.

21. First Capital represents that the acquisition and holding of the Warrants in the Rights Offering was protective of the rights of Participants and beneficiaries because all decisions regarding the holding, exercise and disposition of the Warrants by an Account were made or will be made by the Participant whose Account received such Warrants. Furthermore, the Trustee will not allow Participants to exercise the Warrants unless the fair market value of the Stock exceeds the exercise price of the Warrants on the date of exercise.

Summary

22. In summary, First Capital represents that the proposed exemption satisfies the statutory criteria for an exemption under section 408(a) of the Act for the reasons stated above and for the following reasons:

a. The acquisition of the Warrants by the Accounts of the Participants occurred in connection with the exercise of Subscription Rights pursuant to the Rights Offering, which was made available by First Capital to all shareholders of Stock, including the Plan;

b. The acquisition of the Warrants by the Accounts of the Participants resulted from their participation in the Rights Offering, an independent corporate act of First Capital;

c. Each shareholder of Stock, including each of the Accounts of the Participants, was entitled to receive the same proportionate number of Warrants, and this proportionate number of Warrants was based on the number of shares of Stock held by each such shareholder;

d. The Warrants were acquired pursuant to, and in accordance with, provisions under the Plan for individually-directed investments of the Accounts by the individual Participants, a portion of whose Accounts in the Plan held the Stock;

e. The decisions with regard to the holding, exercise and disposition of the Warrants by an Account were made and are to be made by the Participant whose Account received the Warrants;

f. The Trustee will not allow Participants to exercise the Warrants unless the fair market value of the Stock exceeds the exercise price of the Warrants on the date of exercise; and

g. No brokerage fees, commissions, or other fees or expenses were paid by the Plan in connection with the acquisition, holding or exercise of any of the Warrants.

Notice to Interested Persons

Notice of the proposed exemption will be given to all Interested Persons within 15 days of the publication of the notice of proposed exemption in the

Federal Register

, by first class U.S. mail to the last known address of all such individuals. Such notice will contain a copy of the notice of proposed exemption, as published in the

Federal Register

, and a supplemental statement, as required pursuant to 29 CFR 2570.43(a)(2). The supplemental statement will inform interested persons of their right to comment on and to request a hearing with respect to the pending exemption. Written comments and hearing requests are due within 45 days of the publication of the notice of proposed exemption in the

Federal Register

All comments will be made available to the public.

Warning:

If you submit a comment, EBSA recommends that you include your name and other contact information in the body of your comment, but DO NOT submit information that you consider to be confidential, or otherwise protected (such as Social Security number or an unlisted phone number) or confidential business information that you do not want publicly disclosed. All comments may be posted on the Internet and can be retrieved by most Internet search engines.

FOR FURTHER INFORMATION CONTACT:

Scott Ness of the Department, telephone (202) 693-8561. (This is not a toll-free number.)

Idaho Veneer Company/Ceda-Pine Veneer, Inc. Employees' Retirement Plan, Located in Post Falls, ID

[Application No. D-11823]

Proposed Exemption

The Department is considering granting an exemption under the authority of section 408(a) of the

Employee Retirement Income Security Act of 1974, as amended (ERISA or the Act) and section 4975(c)(2) of the Internal Revenue Code of 1986, as amended (the Code) and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).

For purposes of this proposed exemption, references to the provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code.

Section I. Covered Transactions

If the proposed exemption is granted, the restrictions of sections 406(a)(1)(A), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of the Act and the sanctions resulting from the application of section 4975(a) and (b) of the Code, by reason of section 4975(c)(1)(A), (D) and (E) of the Code, shall not apply to the in-kind contribution (the Contribution) by Idaho Veneer Company (Idaho Veneer or the Applicant) of unimproved real property (the Property) to the Idaho Veneer Company/Ceda-Pine Veneer, Inc. Employees' Retirement Plan (the Plan), provided that the conditions described in Section II below have been met.

Section II. Conditions for Relief

(a) The Property is contributed to the Plan at the greater of either: (1) $1,249,000; or (2) the fair market value of the Property, as determined by a qualified independent appraiser, in an appraisal (the Appraisal) that is updated on the date of the Contribution;

(b) A qualified independent fiduciary (the Independent Fiduciary), acting on behalf of the Plan, represents the interests of the Plan and its participants and beneficiaries with respect to the Contribution, and in doing so: (1) Determines that the Contribution is in the interests of the Plan and of its participants and beneficiaries and is protective of the rights of participants and beneficiaries of the Plan; (2) reviews the Appraisal to approve of the methodology used by the appraiser and to verify that the appraiser's methodology was properly applied; and (3) ensures compliance with the terms of the Contribution and the conditions for the proposed exemption, if granted;

(c) All rights exercisable in connection with any existing third-party lease for billboard space (the Lease) on the Property are transferred to the Plan along with the Property;

(d) The Plan does not incur any expenses with respect to the Contribution;

(e) As of the date of the Contribution, there are no adverse claims, liens or debts to be levied against the Property, and Idaho Veneer is not aware of any pending adverse claims, liens or debts to be levied against the Property;

(f) On the date of the Contribution, and to the extent that the value of the Property as of the date of the Contribution is less than the cumulative cash contributions Idaho Veneer would have been required to make to the Plan in the absence of the Contribution, Idaho Veneer will make a cash contribution to the Plan equal to the difference between the value of the Property at the date of the Contribution and the outstanding required cash contributions;

(g) The Property represents no more than 20% of the fair market value of the total assets of the Plan at the time it is contributed to the Plan; and

(h) The terms and conditions of the Contribution are no less favorable to the Plan than those the Plan could negotiate in an arms-length transaction with an unrelated third party.

Effective Date:

The proposed exemption, if granted, will be effective as of the date that a final notice of granted exemption is published in the

Federal Register

Summary of Facts and Representations

The Summary of Facts and Representations is based on the Applicant's representations and does not reflect the views of the Department, unless indicated otherwise.

Background

1. Idaho Veneer Company (Idaho Veneer or the Applicant) is a producer of white pine lumber and veneer products based in Post Falls, Idaho. Idaho Veneer was first established in 1953 and has operated from its headquarters in Post Falls for over 60 years. Idaho Veneer also owns a property in Samuels, Idaho, on which it operated a mill until recently. From 1993 to 2013, Idaho Veneer and Ceda-Pine Veneer, Inc. (Ceda-Pine) were wholly-owned subsidiaries of Excaliber, Inc. (Excaliber), a holding company for all Idaho Veneer and Ceda-Pine stock. In October 2013, Ceda-Pine was liquidated and dissolved. Idaho Veneer was merged with Excaliber, the surviving corporation, which subsequently changed its name to “Idaho Veneer Company.” The Applicant represents that during its boom years in the 1980s, Idaho Veneer employed more than 200 workers and distributed its products in North America, Asia, and Europe. However, the Applicant explains, a decline in demand for timber products in recent years caused Idaho Veneer to modify its product lineup, and has occasionally resulted in seasonal layoffs. The Applicant represents that, due to low demand, Idaho Veneer ceased production at the Samuels Mill in 2009 and auctioned the mill equipment in May 2012.

2. Idaho Veneer is the sponsor of the Idaho Veneer Company/Ceda-Pine Veneer, Inc. Employees' Retirement Plan (the Plan), a defined benefit plan established effective December 4, 1972. The Plan was later amended to freeze benefit accruals, effective December 31, 2006. In addition, no future accrual service would be credited and no future compensation will be taken into account when determining the participant's accrued benefit, and no additional employees will become active participants. As of December 31, 2013, the Plan had 236 participants and total net assets valued at $7,139,481. Idaho Veneer represents that the current trustees of the Plan (the Trustees) include: John Malloy, the President and

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owner of Idaho Veneer; Daniel J. Malloy, Director and

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owner of Idaho Veneer; and Terry Newcomb, the chief financial officer of Idaho Veneer.

3. Idaho Veneer represents that it owns a parcel of vacant, unimproved land (the Property), consisting of 11.8 acres bordering Interstate 90, and in close proximity to its primary business location and mill site in Post Falls. The Applicant purchased the Property in 1980 from John and Julia Gregor, the original founders of Idaho Veneer. Idaho Veneer represents that it originally purchased the Property with the intention to expand its mill site operations. However, Idaho Veneer represents that it ultimately abandoned its plans for expansion onto the Property as another site proved adequate.

4. Idaho Veneer represents that the Property, though currently undeveloped, generates advertising revenue from two billboard signs located on the Property. On September 14, 2010, Idaho Veneer entered into a ten-year lease (the Lease) with the Lamar Advertising Company (Lamar) beginning on December 1, 2010. Lamar is one of the largest advertising companies in North America, with more than 300,000 displays in the United States, Canada, and Puerto Rico. Lamar offers billboard, interstate logo, and transit advertising formats, as well as a network of digital billboards with over 2,000 displays. The Lease provides Lamar access to the Property to construct and maintain the billboards, in exchange for paying Idaho Veneer the greater of $5,000 annually or 20% of the annual gross income generated from the billboard rentals. Idaho Veneer represents that it has earned approximately $18,000 per year in

advertising income in 2013 and 2014 through its ownership of the Property. Idaho Veneer states that, as of May 14, 2014, the Property has an appraised value of $1,249,000. Idaho Veneer represents that it paid $9,140 in 2013 and $8,736 in 2014 in property taxes with respect to the Property.

Plan Funding Shortfalls

5. According to projections prepared by Milliman, the Plan's actuary (the Actuary), the Plan had a 78% Adjusted Funding Target Attainment Percentage (AFTAP)funded status as of January 1, 2015.

The projections indicate that the Plan's funded status will decline to 77.6% funded after 1 year, 75% after 2 years, and 55.8% after 7 years. Idaho Veneer further represents that it lacks the financial resources to meet its current minimum required contribution, as required under section 305 of the Act and section 412(d) of the Code, through a contribution of cash. Idaho Veneer explains that it applied for and was granted a partial Minimum Funding Waiver (the Waiver) from the IRS for the 2011 Plan year. Pursuant to the terms of the Waiver, Idaho Veneer, on June 7, 2012, contributed the first two quarterly payments for the 2011 Plan year, in the amounts of $78,705 and $78,709. However, the Applicant explains, the partial relief provided under the Waiver did not sufficiently improve Idaho Veneer's financial condition so as to allow it to make its minimum required contributions for either Plan years 2012 or 2013.

Idaho Veneer notes that the funding valuation results prepared by the Actuary were made utilizing interest rate assumptions provided under the Moving Ahead for Progress in the 21st Century Act (MAP-21) legislation enacted on July 6, 2012, that, among other things, changed the interest rate that pension plans use to measure their liabilities.

The Applicant represents that it has filed a Form 5330 with the IRS in connection with Idaho Veneer's missed minimum required contributions.

The In-Kind Contribution

6. Idaho Veneer wishes to satisfy its funding obligation to the Plan through an in-kind contribution of the Property to the Plan (the Contribution). The Applicant represents that the Contribution will fully satisfy Idaho Veneer's minimum funding obligations with respect to the 2011 and 2012 Plan Years. The Applicant further contends that the Contribution will satisfy most of the minimum funding obligation for the 2013 Plan Year, and that Idaho Veneer will contribute the remaining amount for the 2013 Plan Year in cash. Furthermore, Milliman projects, the Plan's AFTAP following the Contribution will increase to 91.4% after 1 year, then decrease to 89.1% after 2 years, and 67.5% after 7 years.

7. The Trustees have determined that the Property is a prudent investment for the Plan. Idaho Veneer represents that, although the Property is already valuable, the Trustees believe there is still significant opportunity for increased upside as the real estate market in the western United States continues to recover. On the other hand, the Applicant notes, if the Property does decline in value, Idaho Veneer will have to supplement its future contributions in order to account for any resulting shortfall in the Plan's funding status.

8. The Applicant notes that Idaho Veneer has previously used the Property for storage space. However, all items owned by Idaho Veneer will be removed from the Property, and nothing will be stored on the Property after the Contribution. According to Idaho Veneer, the Property is clear of any adverse claims and there are no liens or debts to be levied against the Property, and Idaho Veneer is not aware of any pending adverse claims, liens or debts to be levied against the Property. Idaho Veneer represents that all rights under the Lease will transfer to the Plan along with the Property. Furthermore, Idaho Veneer represents that a Phase 1 environmental site assessment was done on October 21, 2013 by Hoy Environmental, PLLC located in Spokane, Washington. According to Idaho Veneer, the assessment revealed no evidence of recognized adverse environmental conditions.

9. Idaho Veneer notes that it has been actively marketing the Property. A third-party buyer, Active West Development, LLC, has expressed interest in purchasing the Property, as well as another parcel Idaho Veneer owns, as part of a larger development in Post Falls.

The Applicant notes that, if the proposed exemption is granted and Idaho Veneer contributes the Property to the Plan, the Trustees will continue to market the Property for sale to potential buyers. According to Idaho Veneer, the Property is currently zoned industrial, but re-zoning is not required for the Plan to market the Property.

The Applicant expects that discussions with Active West Development, LLC will continue after the Contribution and that the Plan may be able to sell the Property shortly after the Contribution.

10. The Applicant represents that, to the extent that the value of the Property at the date of the Contribution is less than the cumulative cash contributions Idaho Veneer would have been required to make to the Plan in the absence of the Contribution, Idaho Veneer will make a cash contribution to the Plan on the date of the Contribution equal to the difference between the value of the Property at the date of the Contribution and the outstanding required cash contributions.

11. The Applicant represents that Idaho Veneer plans to satisfy its minimum required contributions for any subsequent years following the Contribution. The Applicant represents that Idaho Veneer intends to take into account the value of the Property in calculating its minimum required payment.

The Independent Fiduciary Report

12. The Trustees engaged William J. Kropkof, Managing Member of the ERISA Advisory Group, to serve as the qualified independent fiduciary (the Independent Fiduciary) on behalf of the Plan. The Independent Fiduciary represents that he has served in various engagements as a qualified independent fiduciary for 19 years, including reviewing various types of real estate transactions for ERISA-covered plans.

13. The Independent Fiduciary represents that he understands that his duties and responsibilities under ERISA require him to act on behalf of the participants and beneficiaries of the Plan, and not on behalf of Idaho Veneer. To this end, the Independent Fiduciary represents that he has no current or former relationship with any party in interest with respect to the Contribution, including Stanley Moe of Columbia Valuation Group, Inc., the qualified independent appraiser (the Appraiser), or any affiliates except to the extent necessary to perform his duties as Independent Fiduciary. The Independent Fiduciary estimates that the percentage of his current revenue derived from any party in interest involved in the proposed transaction will be 1.26%, determined by comparing, in fractional form, his revenues from Idaho Veneer (or its affiliates) and any party in interest, in the current federal income tax year (expressed as a numerator), and his revenues from all sources (excluding fixed, non-discretionary retirement income) for the prior federal income tax year (expressed as a denominator).

14. The Independent Fiduciary submitted to the Department his report, dated November 4, 2014 (the Independent Fiduciary Report), in which he analyzed the proposed transaction and submitted and formulated recommendations for the Trustees.

In the Independent Fiduciary Report, the Independent Fiduciary explains that he identified and considered several issues in forming the recommendation,

including: The prudence of the proposed transaction; the impact of the proposed transaction on the Plan, including the need to diversify the Plan's investments, the Plan's current and projected liquidity needs based on actuarial models, and the Property's fit with the Plan's other investments in light of the overall investment objectives; the impact of alternatives to proceeding with the proposed transaction; the risks associated with the proposed transaction; and the need to monitor the Plan's real estate investments going forward.

15. In the Independent Fiduciary Report, the Independent Fiduciary represents that he evaluated numerous aspects of the proposed transaction in analyzing the impact of the Contribution on the Plan. The Independent Fiduciary reviewed the appraisal of the Property (the Appraisal), completed by the Appraiser. Furthermore, the Independent Fiduciary discussed the actuarial projections with the Actuary and analyzed the Plan's ability to pay required benefits as well as the liquidity of all the Plan's assets. The Independent Fiduciary represents that he also conducted an analysis of the Plan's existing investment allocation mix and the impact the Contribution would have on the Plan's overall investment strategy. Finally, the Independent Fiduciary evaluated the current real estate conditions and the potential for short- and mid-term appreciation of the value of the Property.

16. After performing the necessary due diligence, the Independent Fiduciary recommends in the Independent Fiduciary Report that the parties engage in the Contribution. The Independent Fiduciary notes that the Plan currently has sufficient liquidity to pay benefits as they become due. The asset projections prepared for the Plan indicate that the Plan will continue to have sufficient liquidity to meet its benefit obligations for at least the next 10 years, with or without the Contribution.

17. Furthermore, according to the Independent Fiduciary Report, the Independent Fiduciary believes that the Contribution is in the interests of the Plan's Participants. The Independent Fiduciary Report notes that the Contribution will satisfy most of the minimum funding requirements for Plan years 2012 and 2013. As such, the Independent Fiduciary contends that the Contribution would alleviate the cash burden on Idaho Veneer, and make it more likely that Idaho Veneer will remain financially stable and able to make required cash contributions to the Plan in future years.

The Independent Fiduciary states that the interests of the Plan sponsor, Idaho Veneer, are relevant only insofar as the Contribution will affect the Applicant's continuing financial viability and its ability to fund the Plan.

18. The Independent Fiduciary represents that he reviewed the credentials of the Appraiser and determined that he is a certified appraiser in good standing with the Idaho Bureau of Occupational Licenses and the Washington State Department of Licensing. Based on the Appraiser's credentials and the Appraisal completed in connection with the Contribution, the Independent Fiduciary believes that the valuation is fair and reasonable.

19. The Independent Fiduciary also notes that because local real estate values remain depressed relative to historical trends, the Property has significant upside potential. The Independent Fiduciary states that, based on recent interest in the Property by third-party potential buyers, even a sale in the near future may yield proceeds in excess of the current appraised value. Furthermore, according to the Independent Fiduciary, the Property generates a stable cash flow through the Lease without posing substantial risks to the Plan.

20. In the Independent Fiduciary Report, the Independent Fiduciary concludes that the Contribution is protective of the rights of the Plan participants and beneficiaries because the Trustees will perform the following duties on an on-going basis: Inspect the Property at least annually; review the Plan's financial stability each year; review and update the insurance provided for the Property (including liability and fire insurance) as necessary; commission a full appraisal of the Property every three years and order an update from the Appraiser every year in which a full appraisal is not done; review with the Actuary the impact that the continued investment in the Property will have on the Plan's liquidity; negotiate all current and/or future leases, collect stated rents and ensure tenant(s) are performing consistent with the terms of those leases; periodically (at least annually) review compliance with the terms of any current or future leases; maintain the Property in a safe, stable and marketable condition, including performing any necessary maintenance on, or removal of, personal property, improvements, or other items that are in the best interest of the Plan, and keeping the Property free of hazards, noxious weeds and other items that could increase risk to the Plan or interfere with the Property's value; periodically (at least annually) discuss the current strategy for holding the Property and document any changes to such strategy; and review, and approve or reject, all purchase offers or other proposed transactions involving real estate held by the Plan.

The Appraisal of the Property

21. In the Appraisal, dated May 14, 2014, and addendum, dated July 9, 2014, the Appraiser represents that he was hired to perform a market appraisal of the property, to be submitted to the Department for the purpose of obtaining a prohibited transaction exemption, and that the Appraisal was completed solely on behalf of the Plan. The Appraiser represents that he is a Member of the Appraisal Institute and has performed real estate appraisals in Idaho since 1976. The Appraiser represents that he has performed two Appraisals on behalf of the Plan. However, the Appraiser represents that he has no other relationship with any party in interest with respect to the Contribution, or its affiliates, that may influence the Appraiser's actions. The Appraiser represents that less than 1% of his revenue in 2014 was derived from Idaho Veneer.

22. In the Appraisal, the Appraiser represents that he employed the sales comparison approach to valuing the property. The Appraiser explains that the sales comparison approach reflects the opinions of buyers and sellers of comparable properties in the local real estate market, evaluating certain benchmark value indicators such as price per square foot, price per unit, price per room, or an indication of value through some variant of the gross income multiplier. The Appraiser states that the sales comparison approach is usually the only applicable valuation method for unimproved real property.

23. In the Appraisal, the Appraiser explains that he examined four land sales and one active listing that represent the most recent comparable land deals with similarities to the Property. The Appraiser represents that, after adjustments for differences in economic and physical conditions, the land sales indicate a range of value between $1.89 and $2.40 per square foot for the Property. The Appraiser concludes that this is the most probable transaction range in which a sale of the subject property would occur. The Appraiser also observes that location, configuration, access and utility are all considered good for light industrial or a mixed use development, although access and visibility from the freeway are less than ideal. Based on the

comparison, the Appraiser derived the current market value of the Property at $2.25 per square foot, or $1,157,000.

24. The Appraiser then considered the effect that the Lease would have on the value of the Property. The Appraiser notes that the signs cover very little land area and are located close to the freeway in the least likely location to place buildings. As such, even if a prospective buyer wished to develop the Property, a prudent investor would continue leasing to Lamar. The Lease would add income to whatever other use might develop over time. Therefore, the Appraiser reasons, the minimum value added would be the present value income over the remaining Lease term. In calculating the present value, the Appraiser applied a discount rate of 8%, recognizing this income is virtually guaranteed for 7 more years. The Appraiser concluded that the added value from the Lease would be $92,000. As such, the Appraiser concluded that the total value of the Property, including the Lease, is $1,249,000.

Exemptive Relief Requested

25. Idaho Veneer requests exemptive relief from certain of the prohibited transaction restrictions of section 406 of ERISA for the Contribution.

Idaho Veneer represents that the Contribution violates section 406(a)(1)(A) of the Act, which prohibits the sale or exchange of property between a plan and a party in interest. Idaho Veneer notes that the Department concluded in Interpretive Bulletin 2509.94-3 that an in-kind contribution of property by a plan sponsor to an employee pension plan constitutes a prohibited transaction in violation of section 406(a)(1)(A) of the Act. Furthermore, an employer whose employees participate in the plan is a “party in interest” under section 3(14) of the Act. As such, Idaho Veneer requests exemptive relief from section 406(a)(1)(A) of the Act for the transfer of the Property to the Plan through the Contribution.

For purposes of this proposed exemption, references to the provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code.

26. Idaho Veneer states that section 406(a)(1)(D) of the Act provides that any transfer to, or use by or for the benefit of, a party in interest or disqualified person, of any assets of the Plan is a prohibited transaction. Idaho Veneer states that, accordingly, the Contribution may also violate section 406(a)(1)(D) of the Act. Thus, Idaho Veneer requests exemptive relief from 406(a)(1)(D) of the Act.

27. The Applicant further requests exemptive relief from sections 406(b)(1) and 406(b)(2) of the Act. The Applicant represents that section 406(b)(1) of the Act prohibits a plan fiduciary from dealing with the assets of the plan in its own interest or for its own account (

i.e.,

self-dealing). The Applicant represents that the current Trustees, other than the Independent Fiduciary, are full-time executives and are each

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owners of Idaho Veneer. As such, the proposed Contribution may constitute transactions in which the Trustees deal with Plan assets in a manner which benefits themselves by strengthening the financial prospects of Idaho Veneer. The Applicant states further that section 406(b)(2) of the Act prohibits a fiduciary from acting in its individual or any other capacity in any transaction involving the plan, on behalf of a party whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries. In acting on behalf of the Plan as Trustees and on behalf of Idaho Veneer as executives and owners in connection with the Contribution, the Trustees will have acted on behalf of a party whose interests are adverse to the interests of the Plan.

Statutory Findings

28. Idaho Veneer represents that the proposed exemption is administratively feasible because the Contribution is a one-time transaction. The Applicant represents that Idaho Veneer has clear title to the Property and that it is authorized to transfer title to the Plan. Idaho Veneer further represents that the Independent Fiduciary will review and approve the terms of the Contribution on behalf of the Plan. Idaho Veneer represents that, once the Contribution is completed, the Plan Trustees will continue to seek a third-party buyer for the Property, unrelated to either the Plan or the parties in interest.

29. Idaho Veneer represents that the Contribution is in the interests of the Plan and its participants and beneficiaries because the Plan will enjoy the potential appreciation of the Property. Furthermore, the Property has the potential for future development because of its prime location close to a major interstate highway. In addition, there will be no restrictions on the resale of the Property by the Plan, and the Trustees have stated that they intend to market its subsequent sale to third parties. The Applicant notes further that, as Idaho Veneer's current financial state precludes it from making its timely minimum required contributions, the Contribution currently provides the only means of providing additional assets to the Plan.

30. Finally, Idaho Veneer represents that the Contribution is protective of the rights of the participants and beneficiaries because the Property will be contributed at the greater of (1) $1,249,000, or (2) the fair market value of the Property, as determined by a qualified independent appraiser updated on the date of the Contribution. Furthermore, the Independent Fiduciary was engaged by the Plan to represent the Plan's interests related to the Contribution. In this capacity, the Independent Fiduciary represents that it reviewed the terms of the Contribution and the Appraisal; approved of the methodology used in the Appraisal; and verified that the Appraiser's methodology was properly applied. The Independent Fiduciary will ensure compliance with the terms of the Contribution and the conditions for the proposed exemption, if granted. Idaho Veneer represents that all rights exercisable in connection with the Lease on the Property will be transferred to the Plan along with the Property. Idaho Veneer notes that the Plan will not incur any expenses with respect to the Contribution. In addition, the Property will represent no more than 20% of the fair market value of the total assets of the Plan at the time it is contributed to the Plan. Finally, Idaho Veneer represents that the Trustees will closely monitor the Plan's investment in the Property and will continue to solicit third-party buyers for the Property in order to facilitate an expeditious sale.

Summary

31. In summary, in addition to the reasons described above, Idaho Veneer represents that the proposed exemption, if granted, satisfies the statutory criteria of section 408 of the Act for the following reasons:

(a) The Property will be contributed to the Plan at the greater of either: (1) $1,249,000; or (2) its fair market value of the Property, as determined in the Appraisal that is updated on the date of the Contribution;

(b) The Independent Fiduciary has been retained to represent the interests of the Plan and its participants and beneficiaries with respect to the Contribution, and in doing so: (1) Determined that the Contribution is in the interests of the Plan and of its participants and beneficiaries and is protective of the rights of participants and beneficiaries of the Plan; (2) reviewed the Appraisal to approve of the methodology used by the Appraiser and to verify that the Appraiser's methodology was properly applied; and (3) will ensure compliance with the terms of the Contribution and the

conditions for the proposed exemption, if granted;

(c) All rights exercisable in connection with any existing Lease will be transferred to the Plan along with the Property;

(d) As of the date of the Contribution, there are no adverse claims, liens or debts to be levied against the Property, and Idaho Veneer is not aware of any pending adverse claims, liens or debts to be levied against the Property;

(e) On the date of the Contribution, and to the extent that the value of the Property as of the date of the Contribution is less than the cumulative cash contributions the Applicant would have been required to make to the Plan in the absence of the Contribution, the Applicant will make a cash contribution to the Plan equal to the difference between the value of the Property at the date of the Contribution and the outstanding required cash contributions; and

(f) The Property represents no more than 20% of the fair market value of the total assets of the Plan at the time it is contributed to the Plan.

Notice to Interested Persons

Notice of the proposed exemption will be given to all Interested Persons in the manner agreed to with the Department within 15 days of the publication of the notice of proposed exemption in the

Federal Register

, by first class U.S. mail to the last known address of all such individuals. Such notice will contain a copy of the notice of proposed exemption, as published in the

Federal Register

All comments will be made available to the public.

Warning:

FOR FURTHER INFORMATION CONTACT:

Scott Ness of the Department, telephone (202) 693-8561. (This is not a toll-free number.)

United States Steel and Carnegie Pension Fund (UCF or the Applicant), Located in New York, New York

[Application No. D-11835]

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, as amended, and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October 27, 2011).

For purposes of this proposed exemption references to specific provisions of Title I of the Act, unless otherwise specified, refer also to the corresponding provisions of the Code.

Section I. Covered Transactions

If the proposed exemption is granted, the restrictions of section 406(a)(1)(A) through (D) 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 (D) of the Code, shall not apply, effective from January 1, 2015, through December 31, 2017, to a transaction between a party in interest with respect to Former U.S. Steel Related Plan(s), as defined in Section II(e), and an investment fund, as defined in Section II(k), in which such plans have an interest (the Fund), provided that UCF has discretionary authority or control with respect to the plan assets involved in the transaction, and the following conditions are satisfied:

(a) UCF is an investment adviser registered under the Investment Advisers Act of 1940 (the 1940 Act) that has, as of the last day of its most recent fiscal year, total client assets, including in-house plan assets (the In-House Plan Assets), as defined in Section II(g), under its management and control in excess of $100,000,000 and equity, as defined in Section II(j), in excess of $1,000,000 (as measured yearly on UCF's most recent balance sheet prepared in accordance with generally accepted accounting principles); and provided UCF has acknowledged in a written management agreement that it is a fiduciary with respect to each Former U.S. Steel Related Plan that has retained it;

(b) At the time of the transaction, as defined in Section II(m), the party in interest, as defined in Section II(h), or its affiliate, as defined in Section II(a), does not have the authority to—

(1) Appoint or terminate UCF as a manager of any of the plan assets of the Former U.S. Steel Related Plans, or

(2) Negotiate the terms of the management agreement with UCF (including renewals or modifications thereof) on behalf of the Former U.S. Steel Related Plans.

(1) Prohibited Transaction Exemption 2006-16 (PTE 2006-16),

relating to securities lending arrangements (as amended or superseded);

71 FR 63786, October 31, 2006.

(2) Prohibited Transaction Exemption 83-1 (PTE 83-1),

relating to acquisitions by plans of interests in mortgage pools (as amended or superseded), or

48 FR 895, January 7, 1983.

(3) Prohibited Transaction Exemption 88-59 (PTE 88-59),

relating to certain mortgage financing arrangements (as amended or superseded);

53 FR 24811, June 30, 1988.

(d) The terms of the transaction are negotiated on behalf of the Fund by, or under the authority and general direction of, UCF, and either UCF, or (so long as UCF retains full fiduciary responsibility with respect to the transaction) a property manager acting in accordance with written guidelines established and administered by UCF, makes the decision on behalf of the Fund to enter into the transaction;

(e) At the time the transaction is entered into, and at the time of any subsequent renewal or modification thereof that requires the consent of UCF, the terms of the transaction are at least as favorable to the Fund as the terms generally available in arm's-length transactions between unrelated parties;

(f) Neither UCF nor any affiliate thereof, as defined in Section II(b), nor any owner, direct or indirect, of a 5 percent (5%) or more interest in UCF is a person who, within the ten (10) years immediately preceding the transaction has been either convicted or released from imprisonment, whichever is later, as a result of:

(1) Any felony involving abuse or misuses of such person's employee benefit plan position or employment, or position or employment with a labor organization;

(2) Any felony arising out of the conduct of the business of a broker, dealer, investment adviser, bank, insurance company, or fiduciary;

(3) Income tax evasion;

(4) Any felony involving the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion,

or misappropriation of funds or securities; conspiracy or attempt to commit any such crimes or a crime in which any of the foregoing crimes is an element; or

(5) Any other crimes described in section 411 of the Act.

For purposes of this Section I(f), a person shall be deemed to have been “convicted” from the date of the judgment of the trial court, regardless of whether the judgment remains under appeal;

(g) The transaction is not part of an agreement, arrangement, or understanding designed to benefit a party in interest;

(h) The party in interest dealing with the Fund:

(1) Is a party in interest with respect to the Former U.S. Steel Related Plans (including a fiduciary) solely by reason of providing services to the Former U.S. Steel Related Plans, or solely by reason of a relationship to a service provider described in section 3(14)(F), (G), (H), or (I) of the Act;

(2) Does not have discretionary authority or control with respect to the investment of plan assets involved in the transaction and does not render investment advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to those assets; and

(3) Is neither UCF nor a person related to UCF, as defined, in Section II(i).

(i) UCF adopts written policies and procedures that are designed to assure compliance with the conditions of this proposed exemption;

(j) An independent auditor, who has appropriate technical training or experience and proficiency with the fiduciary responsibility provisions of the Act, and who so represents in writing, conducts an exemption audit, as defined in Section II(f) of this proposed exemption, on an annual basis. Following completion of each such exemption audit, the independent auditor must issue a written report to the Former U.S. Steel Related Plans that engaged in such transactions, presenting its specific findings with respect to the audited sample regarding the level of compliance with the policies and procedures adopted by UCF, pursuant to Section I(i) of this proposed exemption, and with the objective requirements of this proposed exemption. The written report also shall contain the auditor's overall opinion regarding whether UCF's program as a whole complies with the policies and procedures adopted by UCF and the objective requirements of this proposed exemption. The independent auditor must complete each such exemption audit and must issue such written report to the administrators, or other appropriate fiduciary of the Former U.S. Steel Related Plans, within six (6) months following the end of the year to which each such exemption audit and report relates; and

(k)(1) UCF or an affiliate maintains or causes to be maintained within the United States, for a period of six (6) years from the date of each transaction, the records necessary to enable the persons described in Section I(k)(2) to determine whether the conditions of this proposed exemption have been met, except that (A) a separate prohibited transaction will not be considered to have occurred if, due to circumstances beyond the control of UCF and/or its affiliates, the records are lost or destroyed prior to the end of the six (6) year period, and (B) no party in interest or disqualified person other than UCF shall be subject to the civil penalty that may be assessed under section 502(i) of the Act, or to the taxes imposed by section 4975(a) and (b) of the Code, if the records are not maintained, or are not available for examination as required by Section I(k)(2), of this proposed exemption.

(2) Except as provided in Section I(k)(3), and notwithstanding any provisions of subsections (a)(2) and (b) of section 504 of the Act, the records referred to in Section I(k)(1), of this proposed exemption are unconditionally available for examination at their customary location during normal business hours by:

(A) Any duly authorized employee or representative of the Department of Labor (the Department) or of the Internal Revenue Service;

(B) Any fiduciary of any of the Former U.S. Steel Related Plans investing in the Fund or any duly authorized representative of such fiduciary;

(C) Any contributing employer to any of the Former U.S. Steel Related Plans investing in the Fund or any duly authorized employee representative of such employer;

(D) Any participant or beneficiary of any of the Former U.S. Steel Related Plans investing in the Fund, or any duly authorized representative of such participant or beneficiary; and

(E) Any employee organization whose members are covered by such Former U.S. Steel Related Plans;

(3) None of the persons described in Section I(k)(2)(B) through (E), of this proposed exemption shall be authorized to examine trade secrets of UCF or its affiliates or commercial or financial information which is privileged or confidential.

Section II. Definitions

(a) For purposes of Section I(b) of this proposed exemption, an “affiliate” of a person means—

(1) Any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the person,

(2) Any corporation, partnership, trust, or unincorporated enterprise of which such person is an officer, director, five percent (5%) or more partner, or employee (but only if the employer of such employee is the plan sponsor), and

(3) Any director of the person or any employee of the person who is a highly compensated employee, as defined in section 4975(e)(2)(H) of the Code, or who has direct or indirect authority, responsibility, or control regarding the custody, management, or disposition of plan assets.

A named fiduciary (within the meaning of section 402(a)(2) of the Act) or a plan, with respect to the plan assets and an employer any of whose employees are covered by the plan will also be considered affiliates with respect to each other for purposes of Section I(b), if such employer or an affiliate of such employer has the authority, alone or shared with others, to appoint or terminate the named fiduciary or otherwise negotiate the terms of the named fiduciary's employment agreement.

(b) For purposes of Section I(f), of this proposed exemption, an “affiliate” of a person means—

(1) Any person directly or indirectly through one or more intermediaries, controlling, controlled by, or under common control with the person,

(2) Any director of, relative of, or partner in, any such person,

(3) Any corporation, partnership, trust, or unincorporated enterprise of which such person is an officer, director, or a 5 percent (5%) or more partner or owner, and

(4) Any employee or officer of the person who—

(A) Is a highly compensated employee (as defined in section 4975(e)(2)(H) of the Code) or officer (earning 10 percent (10%) or more of the yearly wages of such person) or

(B) Has direct or indirect authority, responsibility or control regarding the custody, management, or disposition of plan assets.

(c) For purposes of Section II(e) and (g), of this proposed exemption, an “affiliate” of UCF includes a member of either:

(1) A controlled group of corporations, as defined in section

414(b) of the Code, of which United States Steel Corporation (U.S. Steel) is a member, or

(2) A group of trades or business under common control, as defined in section 414(c) of the Code of which U.S. Steel is a member; provided that “50 percent” shall be substituted for “80 percent” wherever “80 percent” appears in section 414(b) or 414(c) or the rules thereunder.

(d) The term “control” means the power to exercise a controlling influence over the management or policies of a person other than an individual.

(e) ”Former U.S. Steel Related Plan(s)” mean:

(1) The Marathon Petroleum Retirement Plan and the Speedway Retirement Plan (the Marathon Plans);

(2) The Pension Plan of RMI Titanium Company, the Pension Plan of Eligible Employees of RMI Titanium Company, the Pension Plan for Eligible Salaried Employees of RMI Titanium Company, and the TRADCO Pension Plan;

(3) Any plan the assets of which include or have included assets that were managed by UCF as an in-house asset manager, pursuant to Prohibited Transaction Class Exemption 96-23 (PTE 96-23)

but as to which PTE 96-23 is no longer available because such assets are not held under a plan maintained by an affiliate of UCF (as defined in Section II(c) of this proposed exemption); and

61 FR 15975, April 10, 1996.

(4) Any plan (an Add-On Plan) that is sponsored or becomes sponsored by an entity that was, but has ceased to be, an affiliate of UCF (as defined in Section II(c), of this proposed exemption; provided that:

(A) The assets of the Add-On Plan are invested in a commingled fund (the Comingled Fund), as defined in Section II(n) of this proposed exemption, with the assets of a plan or plans, described in Section II(e)(1)-(3) of this proposed exemption and

(B) The assets of the Add-On Plan in the Commingled Fund do not comprise more than 25 percent (25%) of the value of the aggregate assets of such fund, as measured on the day immediately following the initial commingling of their assets (the 25% Test). For purposes of the 25% Test, as set forth in Section II(e)(4);

(i) In the event that less than all of the assets of an Add-On Plan are invested in a Commingled Fund on the date of the initial transfer of such Add-On Plan's assets to such fund, and if such Add-On Plan subsequently transfers to such Commingled Fund some or all of the assets that remain in such plan, then for purposes of compliance with the 25% Test, the sum of the value of the initial and each additional transfer of assets of such Add-On Plan shall not exceed 25 percent (25%) of the value of the aggregate assets in such Commingled Fund, as measured on the day immediately following the addition of each subsequent transfer of such Add-On Plan's assets to such Commingled Fund;

(ii) Where the assets of more than one Add-On Plan are invested in a Commingled Fund with the assets of plans described in Section II(e)(1)-(3) of this proposed exemption, the 25% Test will be satisfied, if the aggregate amount of the assets of such Add-On Plans invested in such Commingled Fund do not represent more than 25 percent (25%) of the value of all of the assets of such Commingled Fund, as measured on the day immediately following each addition of Add-On Plan assets to such Commingled Fund;

(iii) If the 25% Test is satisfied at the time of the initial and any subsequent transfer of an Add-On Plan's assets to a Commingled Fund, as provided in Section II(e), this requirement shall continue to be satisfied notwithstanding that the assets of such Add-On Plan in the Commingled Fund exceed 25 percent (25%) of the value of the aggregate assets of such fund solely as a result of:

(AA) A distribution to a participant in a Former U.S. Steel Related Plan;

(BB) Periodic employer or employee contributions made in accordance with the terms of the governing plan documents;

(CC) The exercise of discretion by a Former U.S. Steel Related Plan participant to re-allocate an existing account balance in a Commingled Fund managed by UCF or to withdraw assets from a Commingled Fund; or

(DD) An increase in the value of the assets of the Add-On Plan held in such Commingled Fund due to investment earnings or appreciation;

(iv) If, as a result of a decision by an employer or a sponsor of a plan, described in Section II(e)(1)-(3) of this proposed exemption, to withdraw some or all of the assets of such plan from a Commingled Fund, the 25% Test is no longer satisfied with respect to any Add-On Plan in such Commingled Fund, then the exemption will immediately cease to apply to all of the Add-On Plans invested in such Commingled Fund; and

(v) Where the assets of a Commingled Fund include assets of plans other than Former U.S. Steel Related Plans, as defined in Section II(e) of this proposed exemption, the 25% Test will be determined without regard to the assets of such other plans in such Commingled Fund.

(f) An “Exemption Audit” of any of the Former U.S. Steel Related Plans must consist of the following:

(1) A review by an independent auditor of the written policies and procedures adopted by UCF, pursuant to Section I(i), for consistency with each of the objective requirements of this proposed exemption (as described in Section II(f)(5)).

(2) A test of a representative sample of the subject transactions during the audit period that is sufficient in size and nature to afford the auditor a reasonable basis:

(A) To make specific findings regarding whether UCF is in compliance with

(i) The written policies and procedures adopted by UCF pursuant to Section I(i) of the proposed exemption and

(ii) The objective requirements of the proposed exemption; and

(B) To render an overall opinion regarding the level of compliance of UCF's program with this Section II(f)(2)(A)(i) and (ii) of the proposed exemption;

(3) A determination as to whether UCF has satisfied the requirements of Section I(a), of this proposed exemption;

(4) Issuance of a written report describing the steps performed by the auditor during the course of its review and the auditor's findings; and

(5) For purposes of Section II(f) of this proposed exemption, the written policies and procedures must describe the following objective requirements of the proposed exemption and the steps adopted by UCF to assure compliance with each of these requirements:

(A) The requirements of Section I(a) of this proposed exemption regarding registration under the 1940 Act, total assets under management, and equity;

(B) The requirements of Section I(d) of this proposed exemption regarding the discretionary authority or control of UCF with respect to the assets of the Former U.S. Steel Related Plans involved in the transaction, in negotiating the terms of the transaction, and with regard to the decision on behalf of the Former U.S. Steel Related Plans to enter into the transaction;

(D) The transaction is not entered into with any person who is excluded from relief under Section I(h)(1) of this proposed exemption or Section I(h)(2), to the extent that such person has

discretionary authority or control over the plan assets involved in the transaction, or Section I(h)(3); and

(E) The transaction is not described in any of the class exemptions listed in Section I(c) of this proposed exemption.

(g) “In-house Plan Assets” mean the assets of any plan maintained by an affiliate of UCF, as defined in Section II(c) of this proposed exemption, and with respect to which UCF has discretionary authority of control.

(h) The term “party in interest” means a person described in section 3(14) of the Act and includes a “disqualified person,” as defined in section 4975(e)(2) of the Code.

(i) UCF is “related” to a party in interest for purposes of Section I(h)(3) of this proposed exemption, if the party in interest (or a person controlling, or controlled by, the party in interest) owns a 5 percent (5%) or more interest in U.S. Steel, or if UCF (or a person controlling, or controlled by UCF) owns a 5 percent (5%) or more interest in the party in interest.

For purposes of this definition:

(1) The term “interest” means with respect to ownership of an entity—

(A) The combined voting power of all classes of stock entitled to vote or the total value of the shares of all classes of stock of the entity if the entity is a corporation;

(B) The capital interest or the profits interest of the entity if the entity is a partnership; or

(2) A person is considered to own an interest held in any capacity if the person has or shares the authority—

(A) To exercise any voting rights or to direct some other person to exercise the voting rights relating to such interest, or

(B) To dispose or to direct the disposition of such interest.

(j) For purposes of Section I(a) of this proposed exemption, the term “equity” means the equity shown on the most recent balance sheet prepared within the two (2) years immediately preceding a transaction undertaken pursuant to this proposed exemption, in accordance with generally accepted accounting principles.

(k) “Investment Fund” includes single customer and pooled separate accounts maintained by an insurance company, individual trust and common collective or group trusts maintained by a bank, and any other account or fund to the extent that the disposition of its assets (whether or not in the custody of UCF) is subject to the discretionary authority of UCF.

(l) The term “relative” means a relative as that term is defined in section 3(15) of the Act, or a brother, sister, or a spouse of a brother or sister.

(m) The “time of the transaction” is the date upon which the transaction is entered into. In addition, in the case of a transaction that is continuing, the transaction shall be deemed to occur until it is terminated. If any transaction is entered into on or after the effective date of this Final Exemption or a renewal that requires the consent of UCF occurs on or after such effective date and the requirements of this proposed exemption are satisfied at the time the transaction is entered into or renewed, respectively, the requirements w

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