Grant of Individual Exemptions; Trenam, Kemker, Scharf, Barkin,
Frye, O'Neill & Mullis Professional Association Section 401(k) Profit
Sharing Plan (et. al) [Notices] [03/21/2001]
Grant of Individual Exemptions; Trenam, Kemker, Scharf, Barkin,
Frye, O'Neill & Mullis Professional Association Section 401(k) Profit
Sharing Plan (et. al) [03/21/2001]
Volume 66, Number 55, Page 15907-15909
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 2001-09; Exemption Application
No. D-10856, et al.]
Grant of Individual Exemptions; Trenam, Kemker, Scharf, Barkin,
Frye, O'Neill & Mullis Professional Association Section 401(k) Profit
Sharing Plan (et. al)
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Grant of individual exemptions.
-----------------------------------------------------------------------
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, 5 U.S.C.
App. 1 (1996), 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.
Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis Professional
Association Section 401(k) Profit Sharing Plan (the Plan) Located in
Tampa, Florida
[Prohibited Transaction Exemption 2001-09; Exemption Application
No. D-10856]
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 to the sales by the individually directed accounts of
certain participants (the Participants) in the Plan of certain limited
partnership units (the Units) to the Participants, provided the
following conditions are satisfied: (a) each sale is a one-time
transaction for cash; (b) no commissions are charged in connection with
the sales; (c) the Plan receives not less than the fair market value of
the Units at the time of the transactions; and (d) the fair market
value of the Units is determined by a qualified entity independent of
the Plan and the Participants.
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 January 25, 2001 at 66 FR
7801.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Cranston Print Works Company General Employees' Retirement Plan (the
Plan) Located in Cranston, Rhode Island
[Prohibited Transaction Exemption 2001-10; Exemption Application
No. D-10909]
Exemption
The restrictions of sections 406(a), 406(b)(1) and (b)(2) and
407(a) of the Act and the sanctions resulting from the application of
section 4975 of the Code, by reason of section 4975(c)(1) (A) through
(E) of the Code, shall not apply to: (1) the purchase by the Plan of
shares of common stock (the Stock) of Cranston Print Works Company
(Cranston) from Cranston, the Plan's sponsor; (2) the Plan's holding of
the Stock; (3) the acquisition and holding by the Plan of an
irrevocable put option (the Put
[[Page 15908]]
Option) which permits the Plan to sell the Stock to Cranston at a price
which is the greater of: (i) the fair market value of the Stock
determined by an independent appraisal at the time of the exercise of
the Put Option, or (ii) the price at which the Stock originally was
sold by Cranston to the Plan; and (4) the possible future repurchase of
the Stock by Cranston pursuant to the Put Option or a right of refusal,
provided the following conditions are satisfied: (a) the purchase of
the Stock by the Plan will be a one-time transaction for cash, and no
commissions will be paid by the Plan with respect to the purchase; (b)
the Stock will represent no more than 7.5% of the value of the assets
of the Plan; (c) the Plan pays no more than the fair market value of
the Stock on the date of the acquisition, as determined by an
independent, qualified appraiser; (d) the transactions will be
expressly approved on behalf of the Plan by a qualified, independent
fiduciary based upon a determination that such acquisition is in the
best interests of, and appropriate for, the Plan; (e) the Plan's
independent fiduciary will monitor the holding of the Stock by the Plan
and take whatever action is necessary to protect the Plan's rights,
including, but not limited to, the exercising of the Put Option if the
independent fiduciary, in its sole discretion, determines that such
exercise is appropriate; (f) the purchase price per share for any
shares of the Stock that are repurchased by Cranston pursuant to the
right of first refusal will be the greater of: (i) the then current
fair market value of the Stock, as determined by a bona fide third
party purchase offer from an unrelated party, or (ii) the fair market
value of the Stock, as determined by a contemporaneous independent
appraisal; and (g) Cranston's obligation under the Put Option is
secured by an escrow arrangement, as described in the notice of
proposed exemption (the Notice), which is maintained by the Plan's
independent fiduciary as long as the Plan continues to hold any shares
of the Stock.
For a more complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the Notice, which was published on December 6, 2000 at 65 FR 76304.
Written Comments
The Department received 11 written comments and two requests for a
public hearing from interested persons in response to the Notice. One
of the commentators who had requested a hearing subsequently met with
the Chairman of the Board of Directors of Cranston. The commentator and
his attorney have indicated to the Department that their questions and
concerns regarding the proposed transaction have been addressed. Thus,
this commentator states that he now approves of the transaction and
desires to see the exemption granted as it was proposed. Accordingly,
the commentator has withdrawn his request for a hearing.
The remaining ten comments question the prudence of the Plan's
investment in the Stock, particularly in light of the decline in value
of the Stock in recent years. In addition, some commentators have
alleged that senior level managers at Cranston have made poor
management decisions which have adversely impacted the profitability of
the company.
The Plan's independent fiduciary, State Street Bank and Trust
Company (the Bank) of Boston, Massachusetts, responded to the comments
as follows.
The Bank represents that in evaluating whether to cause the Plan to
acquire the Stock, the Bank and its independent financial advisor,
Willamette Management Associates (Willamette), engaged in an extensive
due diligence process. First, the Bank has reviewed the Plan's
investment guidelines and objectives for the Plan's investments, as
well as the Plan's existing investments, and determined that investment
in the Stock would be appropriate. Willamette provided a financial
analysis of Cranston and the relevant industry. Willamette is prepared
to provide a written opinion that states (i) that the consideration to
be paid by the Plan for the Stock is not greater than fair market
value; and (ii) that such acquisition is fair to the Plan from a
financial point of view.
The Bank represents that as part of the due diligence process,
representatives of the Bank and Willamette met with Cranston management
and reviewed the factors influencing past corporate performance as well
as business plans for the future. Willamette reviewed the financial
statement of Cranston for the years ending 1997, 1998, and 1999 and
unaudited statements from 2000 in order to make their determinations.
The Bank has also reviewed those financial statements.
The Bank represents that in evaluating the possible purchase of the
Stock, the Bank and Willamette probed into the reasons for its past
decline. The decline was found to be attributable primarily to the
Cranston Apparel Fabrics division. The Bank represents that throughout
the 1990's the domestic textile industry as a whole declined
significantly due to the increase in apparel imports and consumer
demand for value-priced garments. The Bank notes that, at the present
time, only about 15% of the apparel acquired in the United States is
actually sewn here. Reviewing Cranston's current situation, the Bank
states that it is clear that changes have been made by Cranston's
management which have put the company in a more favorable position.
Specifically, Cranston implemented a major restructuring in 1996 and
1998, closing two plants which specialized in apparel fabrics printing.
These closings have curtailed a significant portion of Cranston's
losses related to this troubled industry. Currently, Cranston is
primarily composed of three diversified businesses: trucking, chemical,
and textile manufacturing (i.e., non-apparel fabrics). The current fair
market value of the Stock reflects the business projections for these
operating divisions of Cranston.
The Bank states that the above information provided the basis for
assessing the prudence of an investment in the Stock. The Plan's
proposed investment in the Stock was further reviewed by the Bank's
Fiduciary Committee (the Committee). The Committee is composed of
senior management of the Bank. The Committee received a presentation of
the due diligence process related to the Stock that was performed by
the Bank. Willamette also presented a financial analysis of Cranston
and the Stock. The valuation methodologies employed by Willamette were
the comparable company method and the capitalization of earnings
method. These methods are commonly used by financial advisors in
valuing closely-held companies. The Committee also discussed the Put
Option, which provides that if the independent fiduciary (i.e., the
Bank) determines that the Stock is no longer a prudent investment for
the Plan, it may require Cranston to repurchase the Stock at the
greater of (i) the price paid for the Stock by the Plan, or (ii) the
fair market value at the date the Put Option is exercised.
After the granting of this exemption, the Bank represents that it
will convene another Committee meeting to consider finalizing the
purchase of the Stock. This meeting will involve an update by
Willamette related to Cranston's financial situation and the Stock. The
purpose of the meeting will be to ensure that the purchase price to be
paid by the Plan will not exceed the Stock's current fair market value
and that the investment is still prudent.
Therefore, the Bank, acting as the Plan's independent fiduciary
with
[[Page 15909]]
respect to the proposed purchase by the Plan of the Stock, will ensure
that the transaction is appropriate for, and in the best interests of,
the Plan. In addition, the Bank represents that it will monitor the
proposed holding of the Stock by the Plan and will take whatever
actions are necessary to safeguard the interests of the Plan in
accordance with the terms and conditions of the final exemption.\*\
With respect to the request for a hearing made by one commentator
that was not withdrawn, the Department has determined that a public
hearing is not necessary in this case. In addition, the Department is
satisfied that the exemption contains adequate independent safeguards
to protect the interests of the Plan and of its participants and
beneficiaries. Accordingly, based on all of the information contained
in the record, including the comments submitted and the applicant's
response thereto, the Department has determined to grant the exemption
as proposed.
---------------------------------------------------------------------------
\*\ The Department notes that any decision made by the Bank as
the Plan's independent fiduciary with respect to the approval of the
acquisition of the Stock, the continued retention of the Stock by
the Plan, and the exercise of the Plan's rights under the Put Option
shall be fully subject to the fiduciary responsibility provisions of
the Act. However, by granting this exemption, the Department is not
expressing an opinion regarding whether any actions taken by the
Bank would be consistent with its fiduciary obligations under Part 4
of Title I of the Act. In this regard, section 404(a) requires,
among other things, that a plan fiduciary act prudently, solely in
the interest of the plan's participants and beneficiaries, and for
the exclusive purpose of providing benefits to participants and
beneficiaries when making decisions on behalf of a plan. In
addition, section 409 provides, in part, that a fiduciary with
respect to a plan who breaches any of the responsibilities,
obligations, or duties imposed upon fiduciaries by Title I of the
Act shall be personally liable to make good to such plan any losses
to the plan resulting from each such breach, and to restore to such
plan any profits of such fiduciary which have been made through use
of assets of the plan by the fiduciary, and shall be subject to such
other equitable or remedial relief as the court may deem
appropriate, including removal of such fiduciary.
---------------------------------------------------------------------------
Interested persons are invited to review the complete exemption
file, which is available for public inspection in the Public Disclosure
Room of the Pension and Welfare Benefits Administration, Room N-1513,
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington,
D.C. 20210.
FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz 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 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, D.C., this 15th day of March, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 01-7045 Filed 3-20-01; 8:45 am]
BILLING CODE 4510-29-P
|
