Proposed Exemptions; Kay Alden, Inc.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-09973, et al.

Proposed Exemptions; Kay Alden, Inc.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

-----------------------------------------------------------------------

SUMMARY: This document contains notices of pendency before the

Department of Labor (the Department) of proposed exemptions from

certain of the prohibited transaction restriction of the Employee

Retirement Income Security Act of 1974 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

All interested persons are invited to submit written comments or

request for a hearing on the pending exemptions, unless otherwise

stated in the Notice of Proposed Exemption, within 45 days from the

date of publication of this Federal Register Notice. Comments and

request for a hearing should state: (1) The name, address, and

telephone number of the person making the comment or request, and (2)

the nature of the person's interest in the exemption and the manner in

which the person would be adversely affected by the exemption. A

request for a hearing must also state the issues to be addressed and

include a general description of the evidence to be presented at the

hearing. A request for a hearing must also state the issues to be

addressed and include a general description of the evidence to be

presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least

three copies) should be sent to the Pension and Welfare Benefits

Administration, Office of Exemption Determinations, Room N-5649, U.S.

Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210.

Attention: Application No. stated in each Notice of Proposed Exemption.

The applications for exemption and the comments received will be

available for public inspection in the Public Documents Room of Pension

and Welfare Benefits Administration, U.S. Department of Labor, Room N-

5507, 200 Constitution Avenue NW., Washington, DC 20210.

Notice to Interested Persons

Notice of the proposed exemptions will be provided to all

interested persons in the manner agreed upon by the applicant and the

Department within 15 days of the date of publication in the Federal

Register. Such notice shall include a copy of the notice of proposed

exemption as published in the Federal Register and shall inform

interested persons of their right to comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in

applications filed pursuant to section 408(a) of the Act and/or section

4975(c)(2) of the Code, and in accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).

Effective December 31, 1978, section 102 of Reorganization Plan No. 4

of 1978 (43 FR 47713, October 17, 1978) transferred the authority of

the Secretary of the Treasury to issue exemptions of the type requested

to the Secretary of Labor. Therefore, these notices of proposed

exemption are issued solely by the Department.

The applications contain representations with regard to the

proposed exemptions which are summarized below. Interested persons are

referred to the applications on file with the Department for a complete

statement of the facts and representations.

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

Illinois

[Application No. D-09973]

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32847, August 10, 1990). If the exemption is

granted, the restrictions of sections 406(a), 406(b)(1) and 406(b)(2)

of the Act and the sanctions resulting from the application of section

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

the Code shall not apply to the purchase of real property (the

Purchase) by the Plan from Mr. Vernon Nelson (Nelson), a party in

interest with respect to the Plan provided that: (a) The Purchase is a

one time transaction for cash; (b) the Plan will pay no more than fair

market value for the Property, as determined by an independent

qualified real estate appraiser at the time of the transaction; (c) the

fair market value of the Property represents no more than 25% of the

value of the Plan's assets; (d) the Plan's interests with respect to

the Purchase are represented by two independent fiduciaries (e) the

Plan will pay no fees or commissions associated with the Purchase; and

(f) all terms and conditions of the Purchase are at least as favorable

to the Plan as those obtainable in an arm's length transaction with an

unrelated party.

Summary of Facts and Representations

1. The Plan is a defined contribution plan having three

participants and assets with a fair market value of $1,533,292 as of

January 12, 1995. The trustees of the Plan are Nelson and Kay Alden

Nelson. The Plan sponsor is in the business of script writing for day

time soap operas.

2. The Property consists of eighteen undeveloped building sites

located in Spyglass Hills, a subdivision in Hutchinson, Kansas. The

Spyglass subdivision is located to the North and East of Hutchinson,

Kansas. The sewer, natural gas, underground electrical and telephone

wires are accessible to all lots. Over the last twenty years, the

development in Hutchinson has been in the general area of Spyglass

Hills. Spyglass Hills currently is the only development with growth

potential which has sewer and utilities in place. Spyglass Hills should

be completely developed within the next five to ten years.

In 1989, Nelson acquired twenty-five lots. During the past three

years, Nelson has been preparing the subdivision for development. He

has encouraged housing starts by working with developers and

individuals willing to build homes. There is a fully occupied five unit

luxury condominium in Spyglass Hills, and a townhouse complex is to be

built within the next year.

3. The Property was appraised on October 31, 1994 by Ralph E.

Gingerich, an independent and qualified real estate appraiser. Mr.

Gingerich calculated that the fair market value of the Property to be

$324,000 using the comparable sales approach. In his appraisal, he

states that market conditions and growth potential are favorable, and

new housing starts have increased sharply in the past two years causing

values and sales of sites to increase rapidly.

4. The Plan is seeking a suitable replacement for an unrelated real

estate holding it sold in August 1994 and therefore, proposes to

purchase the Property. The Private Bank and Trust Company (the Bank)

has been retained

[[Page 53806]]

to serve as independent fiduciary on behalf of the Plan. The Bank has

reviewed the proposed transaction and represented that the Property is

an appropriate investment for the Plan for the following reasons.

First, even though the Property is not income producing, the economic

attraction of the Property to the Plan is not diminished. All three

Plan participants are relatively young, and not facing retirement in

the near future. Thus, any possible illiquid characteristic of the

investment would not prejudice the Plan. Secondly, following the

Purchase, only 25% of the Plan's assets will be invested in real

estate. Lastly, the Property consists of multiple lots that will be

marketed individually providing a continuing cash flow as each lot is

sold.

Central Bank and Trust Company (Central Bank) has also been

retained to serve as independent fiduciary on behalf of the Plan.

Central Bank represents that the appraisal is a fair representation of

the current market. Further, Central Bank states that the new housing

market in Hutchinson continues to be strong, and Spyglass Hills should

benefit from this trend. Central Banks believes that the Property is an

appropriate investment for the Plan. Lastly, Central Bank represents

that at the time of the purchase of the Property, it will review the

transaction and confirm that the Plan is paying no more than fair

market value for the Property.

5. In summary, the applicant represents that the proposed

transaction satisfies the criteria of section 408(a) of the Act

because: (1) The terms of the purchase are as favorable as the Plan

could obtain in an arm's length transaction with an unrelated party;

(2) the fair market value of the Property has been established by an

independent and qualified appraiser and represents no more than 25% of

the value of the Plan's assets; (3) the Plan has retained an

independent fiduciary who has reviewed the terms of the Purchase and

has determined that the Purchase is in the Plan's interest; and (4) the

Plan has retained a second independent fiduciary who will represent the

interests of the Plan at the time of the Purchase to ensure that the

Plan is not paying more than fair market value for the Property.

For Further Information Contact: Allison Padams of the Department,

at (202)219-8971. (This is not a toll-free number.)

The Chase Manhattan Bank (National Association) Pooled Investment Trust

for Employee Benefit Plans (the Trust) Located in New York, New York

[Exemption Application No. D-09983]

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption

is granted, the restrictions of sections 406(a), 406(b)(1) and

406(b)(2) of the Act and the sanctions resulting from the application

of section 4975 of the Code, by reason of section 4975(c)(1)(A) through

(E) of the Code, shall not apply to the past cash sale of certain

commercial paper notes (the Notes) for $25,129,748 by two collective

investment funds in the Trust known as VAN 1 and VAN 18 (the VANs) to

The Chase Manhattan Bank, N.A. (the Bank), a party in interest with

respect to the employee benefit plans invested in the VANs at the time

of the transaction; provided the following conditions were met:

(a) The sale of each of the Notes was a one-time cash transaction;

(b) The terms and conditions of the sale were at least as favorable

to the VANs as those obtainable in an arm's-length transaction with an

unrelated party;

(c) The VANs received an amount for the Notes that was equal to the

greater of: (i) In the case of a Note that had a scheduled maturity

after the date of the transaction, the original purchase price paid by

the particular VAN for the Note plus interest at the imputed yield to

maturity up to the date of sale, as calculated by the Bank; (ii) in the

case of a Note that had a scheduled maturity on or before the date of

the transaction, the value at maturity plus additional interest to the

date of sale at the daily rates earned by the related VAN (exclusive of

its holdings of the Notes) from the maturity date to the date of sale;

or (iii) the fair market value of each Note as of the time of sale as

determined by an independent, qualified appraiser;

(d) The VANs did not pay any commissions, costs or other expenses

in connection with the sale of the Notes;

(e) If the exercise of any of the Bank's rights, claims or causes

of action in connection with its ownership of the Notes results in the

Bank recovering from the issuer of the Notes, or any third party, an

aggregate amount that is more than the purchase price paid to the VANs

by the Bank for the Notes (i.e. $25,129,748), the Bank will pay such

excess amounts to the respective VANs within thirty (30) days of the

receipt of such recovery amounts; and

(f) Each employee benefit plan with interests in the VANs received

its proportionate share of the proceeds of the sale of the Notes to the

Bank and receives its proportionate share of any recovery amounts

obtained on the Notes in excess of the purchase price received by the

VANs, as described in condition (e) above.

Effective Date: If granted, this proposed exemption will be

effective as of December 19, 1994.

Summary of Facts and Representations

1. The Trust is a collective investment vehicle comprised of

several separate collective funds maintained by the Bank for investment

by employee benefit plans subject to the Act (the Plans) and

governmental employee benefit plans. The Bank is a national banking

association that serves as trustee to the Trust. The Trust includes VAN

1 and VAN 18 (i.e. the VANs), which are two separate collective

investment funds that hold assets of various Plans. The VANs are short-

term investment funds that are designed to be highly liquid. As of

December 31, 1994, VAN 1 and VAN 18 had total assets in the amounts of

$606,241,334 and $558,048,711, respectively.

2. The Bank, acting on behalf of the VANs as trustee of the Trust,

purchased the Notes from the VANs on December 19, 1994. The Notes were

short-term investments with maturities of five months or less that were

issued by Confederation Life Insurance Co. (Confederation) with a total

face amount of $25 million. The Bank states that the Notes, like most

short-term commercial paper, were purchased at a discount with the face

amount to be paid at maturity. No other interest payments were

contemplated during the term of the Notes.

The Notes held by the respective VANs, including the original

purchase price and date, value at maturity, and stated maturity date

are as follows:

----------------------------------------------------------------------------------------------------------------

Original Purchase Value at Maturity

VAN purchase price date maturity date

----------------------------------------------------------------------------------------------------------------

VAN 1............................................. $4,943,750.00 6/09/94 $5,000,000 9/07/94

[[Page 53807]]

VAN 1............................................. 4,959,441.67 7/29/94 5,000,000 9/29/94

VAN 1............................................. 4,871,163.20 8/02/94 5,000,000 1/30/95

VAN 18............................................ 4,959,441.67 7/29/94 5,000,000 9/29/94

VAN 18............................................ 4,871,163.20 8/02/94 5,000,000 1/30/95

----------------------------------------------------------------------------------------------------------------

3. On August 11, 1994, the Canadian insurance regulatory

authorities placed Confederation into a liquidation and winding-up

process, and on August 12, 1994, the insurance authorities of the State

of Michigan commenced legal action to place the U.S. operations of

Confederation into rehabilitation proceedings. The Bank states that, as

a result of these actions, the payments on the Notes were suspended.\1\

The Bank states further that it appeared highly unlikely that the

assets of Confederation would be sufficient to pay the Noteholders,

including the VANs, to any significant extent.

\1\The Department notes that the decisions made by the Bank on

behalf of the VANs to acquire and hold the Notes were subject to the

fiduciary responsibility provisions of Part 4 of Title I of the Act.

In this proposed exemption, the Department is not providing an

opinion as to whether any violations of Part 4 of Title I may have

arisen as a result of the acquisition and holding of the Notes by

the VANs.

---------------------------------------------------------------------------

4. The Bank represents that once it received notice of the seizure

of Confederation, it segregated the Notes in separate liquidating

accounts within the Trust. There were two liquidating accounts, one

with respect to each of the VANs (the Liquidating Accounts). The

proportional interest of each Plan in a Liquidating Account following

the segregation equalled its proportional interest in the affected VAN

immediately before the segregation. The estimated number of Plans

participating in each of the Liquidating Accounts established with

respect to VAN 1 and VAN 18 were 100 and 19, respectively. Among the

Plans invested in one or both of the VANs were the Retirement and

Family Benefit Plan of The Chase Manhattan Bank, N.A., and The Chase

Manhattan Bank, N.A. Thrift Investment Plan.

5. The Bank represents that because it desired to make the Plans

``whole'' for the losses that would have occurred in connection with

the Plans' investment in the Notes, the Bank purchased the Notes from

the Liquidating Accounts on December 19, 1994 for the value the Notes

would have had in the particular VAN at the time of the transactions

but for the placement of Confederation in liquidation. The Bank entered

into the transactions prior to the end of 1994 in response to the

demands of Plan fiduciaries that the Plans be made ``whole'' on these

investments and completely liquid for purposes of year-end valuations

of the assets held by the VANs. Accordingly, the Bank requests a

retroactive administrative exemption from the Department to permit the

past sale of the Notes under the terms and conditions described herein.

6. The Bank paid to the Liquidating Accounts a total of $25,129,748

for the Notes. The Bank states that the sale price received by the VANs

for the Notes was equal to: (i) In the case of a Note that had a

scheduled maturity after the date of the transaction, the original

purchase price paid by the particular VAN for the Note plus interest at

the imputed yield to maturity up to the date of sale, as calculated by

the Bank;\2\ and (ii) in the case of a Note that had a scheduled

maturity on or before the date of the transaction, the value at

maturity plus additional interest to the date of sale at the daily

rates earned by the related VAN (exclusive of its holdings of the

Notes) from the maturity date to the date of sale. The Bank represents

that the guiding principal in determining the price of the Notes for

the transactions was to place the VANs in exactly the position they

would have occupied on the date of the transactions if Confederation

had not defaulted.

\2\The Bank represents that the imputed yield to maturity for

the Notes held by the VANs, as listed above in Paragraph 2, was

4.5%, 4.71%, 5.125%, 4.71% and 5.125%, respectively, when calculated

on an annualized basis. However, as noted above, the Notes bore no

coupon or other current yield. The imputed yield consisted of the

difference between the face amount due at maturity and the original

discounted purchase price. The Bank states that the method used for

calculating earnings on the non-matured Notes at the time of the

transaction was consistent with the cost basis accounting rules

permitted for short-term investment funds by the Office of the

Comptroller of the Currency (see OCC Rule 9.18).

In addition, the Bank states that by selling the non-matured

Notes to the Bank prior to their maturity dates (i.e. 1/30/95), the

VANs were able to reinvest the proceeds of the sales as of the date

of the transactions rather than as of the later maturity dates, a

period of almost six weeks later. The VANs' earnings rate during

that six-week period was higher than the imputed yield to maturity

of the Notes that had not already matured. Thus, the Bank maintains

that the sale of the non-matured Notes on December 19, 1994 was more

financially advantageous to the VANs than if the sale had not

occurred until January 30, 1995, the last maturity date of the Notes

held by the VANs.

---------------------------------------------------------------------------

These calculations by the Bank resulted in VAN 1 receiving the

following sale prices for the Notes on December 19, 1994, the date of

sale: $5,073,286 for the Note which matured on 9/7/94; $5,058,484 for

the Note which matured on 9/29/94; and $4,970,109 for the Note which

was due to mature on 1/30/95. In addition, on such date, VAN 18

received $5,057,760 for the Note which matured on 9/29/94 and

$4,970,109 for the Note which was due to mature on 1/30/95.

The VANs received such amounts in cash on the date of sale in

exchange for the transfer to the Bank of all right, title and interest

in the Notes, together with all causes of action, suits or other claims

that the VANs may have against any person with respect to the Notes.

The Bank states that each Plan with an interest in the respective VANs

received its proportionate share of the proceeds of the sale of the

Notes to the Bank.

7. The Bank engaged Deloitte & Touche (D&T), an independent,

qualified appraiser in New York City, to determine the fair market

value of the Notes. With respect to the independence of D&T, the Bank

represents that D&T at times performs services for the Bank and its

affiliates. However, the Bank states that payments made by the Bank and

its affiliates for such services constitute less than one (1) percent

of D&T's annual gross revenues.

On the basis of discussions with three independent brokers, D&T

estimated the fair market value of the Notes at approximately ten cents

for each one dollar of principal amount due on the Notes.\3\ Thus,

since each Note had a face value of $5 million, D&T concluded that each

Note would be worth approximately $500,000 at the time of the

transaction.

\3\D&T represents that its inquiry to establish the value of the

Notes was intended to be consistent with the procedure for

determining current market price under SEC Rule 17a-7(b) of the

Investment Company Act of 1940.

---------------------------------------------------------------------------

Based on the pricing information obtained from D&T, the Bank

represents that the fair market value of the Notes was significantly

below the purchase price paid by the respective VANs for the Notes (as

noted below).

[[Page 53808]]

----------------------------------------------------------------------------------------------------------------

Fair

Fund Purchase Principal Purchase market Price red.'d

date amount price value

----------------------------------------------------------------------------------------------------------------

VAN 1........................................ 6/09/94 $5,000,000 $4,943,750 $500,000 $5,073,286

VAN 1........................................ 7/29/94 5,000,000 4,959,442 500,000 5,058,484

VAN 1........................................ 8/02/94 5,000,000 4,871,163 500,000 4,970,109

VAN 18....................................... 7/29/94 5,000,000 4,959,442 500,000 5,057,760

VAN 18....................................... 8/02/94 5,000,000 4,871,163 500,000 4,970,109

----------------------------------------------------------------------------------------------------------------

8. The VANs did not pay any commissions, costs or other expenses in

connection with the sale. In addition, the Bank is willing to bear all

costs and expenses associated with the transactions, including any

expenses incurred in pursuing other claims with respect to the Notes.

The Bank states that it will indemnify the VANs for any amounts

recovered from Confederation, or any third party, in connection with

the enforcement of the Bank's rights and remedies as owner of the

Notes. In this regard, the Bank notes that it is unlikely that the

proceeds from any such recoveries on the Notes will exceed the payments

that the Bank made to the VANs. However, the Bank represents that if

such recoveries ultimately exceed the purchase price paid by the Bank

to the VANs for the Notes, the Bank will return any excess amounts to

the respective VANs within thirty (30) days of the receipt of the

recovery amounts. In addition, each employee benefit plan with

interests in the VANs will receive its proportionate share of any

recovery amounts obtained on the Notes in excess of the purchase price

received by the VANs.

9. In summary, the applicant represents that the transaction

satisfied the statutory criteria of section 408(a) of the Act because:

(a) The terms and conditions of the transaction were at least as

favorable to the VANs as those which the VANs could have obtained in an

arm's-length transaction with an unrelated party; (b) the sale of the

Notes was a one-time cash transaction; (c) the VANs were not required

to pay any commissions, costs or other expenses in connection with the

sale; (d) the VANs received an amount for the Notes that was equal to

the greater of: (i) in the case of a Note that had a scheduled maturity

after the date of the transaction, the original purchase price paid by

the particular VAN for the Note plus interest at the imputed yield to

maturity up to the date of sale, as calculated by the Bank; (ii) in the

case of a Note that had a scheduled maturity on or before the date of

the transaction, the value at maturity plus additional interest to the

date of sale at the daily rates earned by the related VAN (exclusive of

its holdings of the Notes) from the maturity date to the date of sale;

or (iii) the fair market value of each Note as determined by an

independent, qualified appraiser at the time of the transaction; (e) if

the exercise of any of the Bank's rights, claims or causes of action in

connection with its ownership of the Notes results in the Bank

recovering from the issuer of the Notes, or any third party, an

aggregate amount that is more than the purchase price paid to the VANs

by the Bank for the Notes (i.e. $25,129,748), the Bank will pay such

excess amounts to the respective VANs within thirty (30) days of the

receipt of such recovery amounts; and (f) each Plan with an interest in

the VANs received its proportionate share of the proceeds of the sale

of the Notes to the Bank and will receive its proportionate share of

any recovery amounts obtained on the Notes in excess of the purchase

price received by the VANs.

Notice to Interested Persons

The applicant states that notice of the proposed exemption shall be

made by first class mail to the appropriate plan fiduciaries for each

employee benefit plan that had an interest in the Liquidating Accounts

at the time of the transaction. Notice to the plan fiduciaries shall be

made within fifteen (15) days following the publication of the proposed

exemption in the Federal Register. This notice shall include a copy of

the notice of proposed exemption as published in the Federal Register

and a supplemental statement (see 29 CFR 2570.43(b)(2)) which informs

interested persons of their right to comment on and/or request a

hearing with respect to the proposed exemption. Comments and requests

for a public hearing are due within forty-five (45) days following the

publication of the proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department,

telephone (202) 219-8194. (This is not a toll-free number.)

WLI Industries, Inc. Employees' Stock Ownership Plan (the Plan) Located

in Villa Park, IL

[Application No. D-09987]

Proposed Exemption

The Department is considering granting an exemption under the

authority of section 408(a) of the Act and section 4975(c)(2) of the

Code and in accordance with the procedures set forth in 29 CFR 2570,

Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption is

granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2) of

the Act and the sanctions resulting from the application of section

4975 of the Code, by reason of section 4975(c)(1)(A) through (E) shall

not apply to the proposed cash sale by the Plan of its interest (the

Interest) in a limited partnership (the Partnership) to James Van

DeVelde and Robert Van DeVelde, the general partners of the Partnership

and parties in interest with respect to the Plan, provided (1) all

terms and conditions of the sale are at least as favorable to the Plan

as those obtainable in an arm's length transaction with an unrelated

party; (2) the sale is a one-time transaction for cash; (3) the Plan is

not required to pay any commissions, costs or other expenses in

connection with the sale; (4) the Plan receives a price for the

Interest which is not less than the greater of: (i) $2,500 or (ii) the

fair market value of the Interest as determined by a qualified,

independent appraiser and; (5) within 30 days of the publication, in

the Federal Register, of the notice granting this proposed exemption,

WLI files a Form 5330 with the Internal Revenue Service (the Service)

and pays all applicable excise taxes by reason of such prior or

continuing prohibited transactions.

Summary of Facts and Representations

1. The Plan is an employee stock ownership plan with 116

participants and net assets available for benefits of $1,210,898 as of

February 28, 1994. The trustees of the Plan and the decisionmakers with

respect to the Plan's investments are James Van DeVelde, Robert Van

DeVelde and Joseph S. Ott, Jr. These individuals also participate in

the Plan.

[[Page 53809]]

2. WLI Industries, Inc. (WLI), the Plan sponsor, is engaged in the

sale and/or rental of warning lights, signage, barricades and other

materials utilized in connection with the construction and resurfacing

of roads and highways. WLI maintains its principal place of business at

880 North Addison Road, Villa Park, Illinois (the North Addison Road

Property). James Van DeVelde is the President of WLI. Robert Van

DeVelde is the Executive Vice President and Secretary of WLI. Joseph S.

Ott, Jr. is an employee of WLI.

3. Among the assets of the Plan is a 33 percent limited partnership

interest in the J&R Limited Partnership. The Partnership holds 100

percent of the beneficial interest in an Illinois Land Trust which, in

turn, holds fee simple title to a 10.38 acre parcel of real property.

The property is located at the North Addison Road address and serves as

the headquarters of WLI. The general partners of the Partnership are

James Van DeVelde and Robert Van DeVelde. The Van DeVeldes each hold a

33.5 percent interest in the Partnership. It is represented that the

subject property is not located near any other property that is owned

by WLI.

4. As the general partners of the Partnership, the Van DeVeldes

wished to obtain financing from the Small Business Administration (the

SBA) in order to construct a building. However, as a precondition to

obtaining such financing, the SBA required that all shareholders of WLI

hold a percentage of the Partnership. Because the Plan owned

approximately 41 percent of the outstanding stock of WLI, it was

obliged to purchase a 33 percent limited partnership interest in the

Partnership from the Van DeVeldes. Thus, on October 23, 1992, the Plan

paid $1.00 to the Van DeVeldes in order to acquire the Interest. In

December 1992, the SBA executed the construction loan with the

Partnership. With the exception of the Plan, the Van DeVeldes were

required to guarantee the SBA indebtedness. Currently, the Plan owns an

equity interest in the Partnership which it holds without any liability

to either the SBA or other parties.

5. On December 1, 1993, the Partnership commenced leasing an 84,943

square foot office building that it had constructed on the North

Addison Road Property to WLI under the terms of a triple net lease. The

lease has an initial term of 10 years and it requires WLI to pay the

Partnership a rental of $35,259.57 per month.4 Also during the

term of the lease, WLI is required to pay the Partnership all taxes,

utility expenses and casualty and liability insurance premiums.

\4\According to the application file, the fair market rental

value of the building was determined on March 15, 1993 by Michael R.

Kay, Associate Appraiser, and Douglas X. Adams, MAI, qualified,

independent appraisers who are affiliated with Adams Valuation

Corporation of Elmhurst, Illinois. The appraisers determined that

the fair market rental value of the building was $372,422 annually

or $31,035 monthly.

---------------------------------------------------------------------------

6. The Partnership is using WLI's rental payments under the lease

to amortize a loan made by Harriet Van DeVelde, the mother of James and

Robert Van DeVelde, to the Partnership. The loan, which is evidenced by

a promissory note dated August 30, 1991, is in the original principal

amount of $900,000. The note was executed between Mrs. Van DeVelde and

the Partnership to enable the Partnership to purchase the North Addison

Road Property. The note carries interest at the rate of prime plus one

percent over a five year period. The note requires both principal and

interest payments on a quarterly basis. At the end of the loan term, a

balloon payment of $600,000 will become due and payable. Then, it is

anticipated that the loan will be refinanced through unrelated lenders.

As of September 19, 1995, the applicants represent that the note had an

outstanding principal balance of $824,687. The applicants also

represent that the Partnership has made payments under the note in a

timely manner.

7. James and Robert Van DeVelde request an administrative exemption

from the Department in order that they may purchase the Interest from

the Plan. The Van DeVeldes are aware that the purchase of the Interest

by the Plan, the loan by Mrs. Van DeVelde to the Partnership and the

leasing of the property by the Partnership to WLI have resulted in

prohibited transactions in violation of the Act. Therefore, within 30

days of the publication, in the Federal Register, of the notice

granting this proposed exemption, WLI will file a Form 5330 with the

Service and pay all applicable excise taxes by reason of such

prohibited transactions.

8. The Van DeVeldes propose to purchase the Interest from the Plan

for cash at price that is not less than the greater of $2,500 or the

fair market value of the Interest. In an independent appraisal report

of the Partnership that is dated February 28, 1995, Ira D. Berk, CPA of

Premiere Financial Consultants, Inc. of Northbrook, Illinois, a

qualified, independent appraiser, determined that the Interest held by

the Plan had no value as of February 28, 1995. In valuing the

Partnership, Mr. Berk reviewed and relied upon an appraisal of the

property that was performed by Kristy A. DeCleene, Staff Appraiser and

Douglas X. Adams, of Adams Valuation Corporation. (This was the same

independent appraisal firm that had valued the property prior to the

inception of the lease.) In that appraisal, the appraisers placed the

fair market value of a leased fee interest in the Property at

$4,212,000 as of February 21, 1995. In addition, Mr. Berk indicated

that he had reduced the appraised value of the property by estimated

real estate commissions of $126,360 and by the Partnership's

liabilities which totaled $4,225,554 as of December 31, 1994.5

\5\As of December 31, 1994, it is represented that the

Partnership's liabilities consisted of the following: (a) the

$854,686 outstanding principal balance of the loan from Mrs. Van

DeVelde; (b) the $726,896 outstanding principal balance of the loan

from the SBA; and (c) the $2,455,905 outstanding principal balance

of a loan from Merchants Bank; and (d) $188,067 owed to WLI.

---------------------------------------------------------------------------

These calculations resulted in equity positions of $0 for the

Partnership, the general partners and the Plan. Accordingly, the Plan

will sell its Interest to the Van DeVelde's for $2,500.

9. In summary, it is represented that the proposed transaction will

satisfy the statutory criteria for an exemption under section 408(a) of

the Act because: (a) All terms and conditions of the sale will be at

least as favorable to the Plan as those obtainable in an arm's length

transaction with an unrelated party; (b) the sale will be a one-time

transaction for cash; (c) the Plan will not be required to pay any

commissions, costs or other expenses in connection with the sale; (d)

the Plan will receive a price for the Interest which is not less than

the greater of: (i) $2,500 or (ii) the fair market value of the

Interest as determined by a qualified, independent appraiser; and (e)

within 30 days of the publication, in the Federal Register, of the

notice granting this proposed exemption, WLI will file a Form 5330 with

the Service and pay all applicable excise taxes by reason of such prior

or continuing prohibited transactions.

Notice to Interested Persons

Notice of the proposed exemption will be given to all interested

persons by first-class mail within 30 days of the date of publication

of the notice of pendency in the Federal Register. Such notice will

include a copy of the notice of proposed exemption as published in the

Federal Register and shall inform interested persons of their right to

comment on and/or to request a hearing. Comments with respect to the

notice of proposed exemption are due within 60 days after the date of

publication of this

[[Page 53810]]

proposed exemption in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,

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

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest of disqualified

person from certain other provisions of the Act and/or the Code,

including any prohibited transaction provisions to which the exemption

does not apply and the general fiduciary responsibility provisions of

section 404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(b) of the act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be granted under section 408(a) of the

Act and/or section 4975(c)(2) of the Code, the Department must find

that the exemption is administratively feasible, in the interests of

the plan and of its participants and beneficiaries and protective of

the rights of participants and beneficiaries of the plan;

(3) The proposed exemptions, if granted, will be supplemental to,

and not in derogation of, any other provisions of the Act and/or the

Code, including statutory or administrative exemptions and transitional

rules. Furthermore, the fact that a transaction is subject to an

administrative or statutory exemption is not dispositive of whether the

transaction is in fact a prohibited transaction; and

(4) The proposed exemptions, if granted, will be subject to the

express condition that the material facts and representations contained

in each application are true and complete, and that each application

accurately describes all material terms of the transaction which is the

subject of the exemption.

Signed at Washington, DC, this 12th day of October, 1995.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 95-25717 Filed 10-16-95; 8:45 am]

BILLING CODE 4510-29-P