Grant of Individual Exemptions; Premier Funding Group, Inc.; Employees Profit Sharing Plan, et al

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-30; Exemption Application No. D-

10669, et al.]

Grant of Individual Exemptions; Premier Funding Group, Inc.;

Employees Profit Sharing Plan, et al

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, DC. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, 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 proposed to the Secretary

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR part

2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their participants

and beneficiaries; and

(c) They are protective of the rights of the participants and

beneficiaries of the plans.

Premier Funding Group, Inc. Employees Profit Sharing Plan (the P/S

Plan) and the Money Purchase Pension Plan for Employees of Premier

Funding Group, Inc. (the M/P Plan, collectively; the Plans) Located in

Arlington, Texas

[Prohibited Transaction Exemption 99-30; Exemption Application Nos. D-

10669 and D-10670]

Exemption

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

Act and the sanctions resulting from the application of section 4975 of

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

shall not apply as of February 1, 1999, to a lease (the Lease) of

certain second-floor space (the Leased Premises) in a building by the

Plans to LM Holdings, Inc., a party in interest with respect to the

Plans; provided that the following conditions are satisfied:

(a) All terms and conditions of the Lease are at least as favorable

to the Plans as those which the Plans could obtain in an arm's-length

transaction with an unrelated party;

(b) The fair market rental amount for the Lease has been determined

by an independent qualified appraiser;

(c) Each Plan's allocable portion of the fair market value of both

the Leased Premises and the building where the Leased Premises are

located represents no more than 20 percent (20%) of the total assets of

each Plan throughout the duration of the Lease;

(d) The interests of the Plans under the Lease are represented by

an independent, qualified fiduciary (the Independent Fiduciary);

(e) The fees received by the Independent Fiduciary, combined with

any other fees derived from any related parties, will not exceed 1% of

that person's annual income for each fiscal year that such person

continues to serve in the independent fiduciary capacity with respect

to the Lease;

(f) The Independent Fiduciary evaluated the Lease and deemed it to

be administratively feasible, protective and in the best interest of

the Plans;

(g) The Independent Fiduciary monitors the terms and the conditions

of the exemption and the Lease throughout its duration, and takes

whatever action is necessary to protect the Plans' rights;

(h) At the discretion of the Independent Fiduciary, the Lease can

be extended for two additional five-year terms, provided that the

Independent Fiduciary requires independent appraisals of the Leased

Premises to be performed at the time of each extension of the Lease so

as to ensure that LM Holdings continues to pay fair market

[[Page 40627]]

rent, and such rent is not less that either the initial base rent or

the amount paid during the most recent annual term; and

(i) Within 90 days of publication in the Federal Register of this

exemption, LM Holdings files with the Internal Revenue Service (IRS)

Form 5330 (Return of Initial Excise Taxes for Pension and Profit

Sharing Plans) and pays all excise taxes applicable under section

4975(a) of the Code that are due by reason of the existence of the

Lease as a prohibited transaction prior to February 1, 1999.

EFFECTIVE DATE: This exemption is effective as of February 1, 1999.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption, refer to

the notice of proposed exemption published on June 3, 1999 at 64 FR

29906.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department,

telephone (202) 219-8883. (This is not a toll-free number.)

The Unaka Company, Incorporated Employees' Profit Sharing Plan and

Trust (the Plan) Located in Greenville, Tennessee

[Prohibited Transaction Exemption 99-31; Application No. D-10722]

Exemption

The restrictions of sections 406(a)(1)(A) through (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 section

4975(c)(1)(A) through (E) of the Code shall not apply to: 1

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\1\ For purposes of this exemption, references to specific

provisions of Title I of the Act, unless otherwise specified, refer

also to the corresponding provisions of the Code.

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(a) The assignment (the Assignment) by the Plan to the Unaka

Company, Incorporated (Unaka), the sponsoring employer and a party in

interest with respect to the Plan, of any and all claims, demands, and/

or causes of action which the Plan may have against certain members of

the Plan Administrative Committee (the PAC) and other involved parties

(collectively, the Responsible Fiduciaries) for breach of fiduciary

duty under the Act, during the period from July 1, 1996 to July 31,

1998;

(b) In exchange for the Assignment, described in paragraph (a),

above, the interest-free, non-recourse loan (the Loan) by Unaka to the

Plan in an amount equal to the difference between $413 and the fair

market value per share for the common stock of Unaka (the Stock) held

by the Plan, in connection with the sale of such Stock by the Plan to

Unaka, pursuant to the statutory exemption, as set forth in section

408(e) of the Act; 2

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\2\ The Department, herein, expresses no opinion as to the

applicability of the statutory exemption provided by section 408(e)

of the Act to the sale by the Plan of its Unaka Stock to Unaka or as

to whether the conditions set forth in such statutory exemption are

satisfied in the execution of such transaction. Further, the

Department, herein, is offering no relief for transactions other

than the transactions described in this exemption.

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(c) The possible repayment of such Loan to Unaka from the cash

proceeds of the recovery, if any, from a judgment or settlement of the

litigation against the Responsible Fiduciaries;

(d) The interest-free, non-recourse extension of credit (the

Extension of Credit) by Unaka to the Plan of certain expenses arising

out of the litigation against the Responsible Fiduciaries, effective as

of, May 1, 1999, the date when expenses incurred by the Plan in

bringing such litigation were first paid by Unaka; and

(e) The possible receipt by Unaka of reimbursement of such

litigation expenses from the cash proceeds of the recovery, if any,

from a judgment or settlement of the litigation against the Responsible

Fiduciaries; provided that the following conditions are satisfied:

(1) The Plan will pay no interest in connection with the Loan or

the Extension of Credit;

(2) None of the assets of the Plan will be pledged to secure either

the amount of the Loan or the amount of the Extension of Credit;

(3) Repayment to Unaka of the amount of the Loan and reimbursement

to Unaka of the amount of the Extension of Credit shall be restricted

solely to the cash proceeds of the recovery, if any, from a judgment or

settlement of the litigation against the Responsible Fiduciaries;

(4) To the extent the amount of the cash proceeds, if any, from any

judgment or settlement of the litigation against the Responsible

Fiduciaries is equal to or less than the amount due to Unaka as

repayment for the Loan and reimbursement of the Extension of Credit,

the Plan shall not be liable to Unaka for any amount;

(5) To the extent the cash proceeds, if any, from any judgment or

settlement of the litigation against the Responsible Fiduciaries

exceeds the total amount of the Loan, plus the amount of the Extension

of Credit, such excess amount will be allocated to the accounts of the

participants of the Plan; with the exception that no such allocation

will be made to the account of Robert Austin, Jr. in the Plan;

(6) The transactions which are the subject of this exemption do not

involve any risk of loss either to the Plan or to any of the

participants and beneficiaries of the Plan;

(7) The Plan will not incur any expenses as a result of the

transactions which are the subject of this exemption;

(8) Notwithstanding the Assignment by the Plan of its rights

against the Responsible Fiduciaries, the Plan does not release any

claims, demands, and/or causes of action which it may have against

Unaka and/or its affiliates;

(9) All of the terms of the transactions are at least as favorable

to the Plan as those which the Plan could obtain in similar

transactions negotiated at arm's-length with unrelated third parties;

(10) The Plan receives no less than the fair market value for the

Assignment, as of the date of the closing on the transfer of the

Assignment;

(11) Prior to the Plan's entering the transactions, an independent,

qualified fiduciary (the I/F), who is acting on behalf of the Plan and

who is independent of Unaka and its affiliates, reviews, negotiates,

and approves the terms and conditions of the Loan, the Assignment, and

the Extension of Credit and determines that such transactions are

prudent, administratively feasible, in the interest of the Plan and its

participants and beneficiaries, and protective of the participants and

beneficiaries of the Plan;

(12) Throughout the duration of the transactions, the I/F monitors

the prosecution of the lawsuit against the Responsible Fiduciaries,

including but not limited to monitoring all costs and fees incurred in

connection with any litigation related to the transactions, monitors

the division of the recovery, if any, from any judgment or settlement

of the litigation against the Responsible Fiduciaries to ensure that

the Plan receives the portion to which it is entitled and that the

Plan's interests are served, and monitors the terms and conditions of

the transactions to ensure that such terms and conditions are at all

times satisfied;

(13) The I/F, acting on behalf of the Plan, shall have final

approval authority over any settlement of any legal proceedings against

the Responsible Fiduciaries brought pursuant to the terms of the

Assignment; and

(14) In the event the I/F resigns, is removed, or for any reason is

unable to serve, including but not limited to the death or disability

of such I/F, or if at any time such I/F does not remain independent of

Unaka and its affiliates, such I/F will be replaced by a successor: (i)

Who is appointed immediately upon the occurrence of such event; (ii)

who is independent of Unaka and its affiliates; (iii) who is qualified

to serve as the I/

[[Page 40628]]

F; and (iv) who assumes all the duties and responsibilities of the

predecessor I/F.

Written Comments

In the Notice of Proposed Exemption (the Notice), the Department of

Labor (the Department) invited all interested persons to submit written

comments and requests for a hearing on the proposed exemption within

forty-five (45) days of the date of the publication of the Notice in

the Federal Register on June 3, 1999. All comments and requests for a

hearing were due by July 19, 1999.

During the comment period, the Department received no requests for

a hearing. However, on June 16, 1999, the Department did receive a

favorable comment letter from one commentator. In this regard, the

commentator noted that the exemption would move the Plan away from the

internal family lawsuits and the transactions posed no risk of loss to

the Plan or any of the participants.

After giving full consideration to the entire record, including the

written comment from the commentator, the Department has decided to

grant the exemption. In this regard, the comment letter submitted to

the Department has been included as part of the public record of the

exemption application. The complete application file, including all

supplemental submissions received by the Department, is made available

for public inspection in the Public Documents Room of the Pension

Welfare Benefits Administration, Room N-5638, U. S. Department of

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

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption refer to

the Notice of Proposed Exemption published on June 3, 1999, at 64 FR

29908.

FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the Department,

telephone (202) 219-8883 (This is not a toll-free number.)

General Information

The attention of interested persons is directed to the following:

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

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

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

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

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

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

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

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

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

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

any other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application accurately describes all material terms of the transaction

which is the subject of the exemption.

Signed at Washington, DC, this 22nd day of July, 1999.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 99-19153 Filed 7-26-99; 8:45 am]

BILLING CODE 4510-29-P