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[Exemption Application No. D-10959] Prohibited Transaction Exemption 2002-37; et al.; Grant of Individual Exemptions; Adams Wood Products, Inc. Profit Sharing Plan (the Plan)   [8/22/2002]
[PDF]
[Federal Register: August 22, 2002 (Volume 67, Number 163)]
[Notices]               
[Page 54482-54484]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22au02-93]                         

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Exemption Application No. D-10959]

 
Prohibited Transaction Exemption 2002-37; et al.; Grant of 
Individual Exemptions; Adams Wood Products, Inc. Profit Sharing Plan 
(the Plan)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemption.

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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).
    A notice was published in the Federal Register of the pendency 
before the Department of a proposal to grant such exemption. The notice 
set forth a summary of facts and representations contained in the 
application for exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The application has been available for public inspection at the 
Department in Washington, DC. The notice also invited interested 
persons to submit comments on the requested exemption to the 
Department. In addition the notice stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicant has represented that it has complied with 
the requirements of the notification to interested persons. No requests 
for a hearing were received by the Department. Public comments were 
received by the Department as described in the granted exemption.
    The notice of proposed exemption was issued and the exemption is 
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 exemption is administratively feasible;
    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Adams Wood Products, Inc. Profit Sharing Plan (the Plan), Located 
in Morristown, Tennessee

[Prohibited Transaction Exemption 2002-37; Exemption Application No. D-
10959]

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: (1) a non-interest bearing loan (the Loan) by Adams 
Wood Products, Inc. (AWP), the Plan sponsor, to the Plan to reimburse 
the Plan for losses incurred concerning past investments by the Plan in 
certain promissory notes (the Notes); and (2) the potential repayment 
by the Plan to AWP of certain moneys if the Plan recovers any of the 
investments in the Notes. This exemption is subject to the following 
conditions:
    (a) The Plan pays no interest nor incurs any other expense relating 
to the Loan;
    (b) The amount of the Loan includes the following:
    (1) $340,187.38, which represents the amount due on the 
consolidated note (the Consolidated Note) on June 30, 2000;
    (2) opportunity costs as follows: (a) the amount due on the 
Consolidated Note from June 30, 2000, the last date when the Plan 
received interest on the Consolidated Note to January 26, 2001, the 
date when AWP placed funds in Certificates of Deposit (CDs); and (b) an 
additional amount yet to be determined to provide the Plan with an 
identical rate of return as AWP received as a result of AWP's 
investment in the CDs for the period between January 26, 2001

[[Page 54483]]

and the date the Plan receives the Loan amount; and
    (3) $4,630.84 to reimburse the Plan for all interest on the 1st 
note and 2nd note, due respectively, on April 20, 2001 and April 15, 
2002; and
    (c) Any repayment by the Plan is restricted solely to the amount, 
if any, recovered by the Plan with respect to the Loan.
    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 6, 2002 at 67 FR 
39051.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, 
telephone (202) 693-8540 (this is not a toll-free number).

Unifi, Inc. Retirement Savings Plan (the Plan), Located in 
Greensboro, North Carolina

[Prohibited Transaction Exemption 2002-38; Exemption Application No. D-
11094]

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 prospective cash sale of a certain parcel of 
improved real property (the Property) by the Plan to Unifi, Inc. 
(Unifi), the Plan's sponsor and, as such, a party in interest with 
respect to the Plan; provided that the following conditions are 
satisfied:
    (a) the sale is a one-time cash transaction;
    (b) the Plan receives the greater of: (i) $7,500,000; or (ii) fair 
market value for the Property, as established by an independent 
qualified appraiser at the time of the sale;
    (c) the Plan pays no commissions or other expenses associated with 
the sale; and
    (d) the applicant files Form 5330 with the Internal Revenue Service 
and pays all of the appropriate excise taxes with regard to the past 
and continuing lease of the Property (the Lease) by the Plan to Unifi 
\1\ within 60 days of the date that this exemption is published in the 
Federal Register.
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    \1\ See Prohibited Transaction Exemption 87-28 (PTE 87-29, 52 FR 
8380, Mach 17, 1987) with regard to the Lease.
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    For a more complete statement of the facts and representations 
supporting the Department of Labor's (the Department) decision to grant 
this exemption, refer to the notice of proposed exemption (the Notice) 
published in the Federal Register on June 6, 2002 at 67 FR 39062.

Written Comments

    The Department received one written comment (the Comment) with 
respect to the Notice and no requests for a hearing. The Comment was 
filed by legal counsel for Wachovia Bank, N.A. (Wachovia). The Comment 
responds to certain statements concerning Wachovia's conduct as the 
independent fiduciary for the Lease under PTE 87-28. These statements 
were made in the exemption application filed by Unifi (the Application) 
and in the Notice. PTE 87-28 permitted the Lease, pursuant to the terms 
and conditions contained therein, until its expiration. The Lease 
expired, by its terms, on March 12, 2002. Wachovia was the designated 
independent fiduciary for the Plan in the transaction.
    The Comment was subsequently sent by the Department to Unifi for 
their response. Set forth below are the points made by Wachovia 
together with responses to those points made by Unifi.
I. Discussion of Wachovia's Comment
    Paragraph 2 of the Summary of the Facts and Representations (the 
Summary) contained in the Notice states, in relevant part, that the 
applicant maintains that all terms and conditions of PTE 87-28 have 
been met. The applicant, however, makes no representation as to whether 
Wachovia fulfilled all of its obligations as the independent fiduciary 
under PTE 87-28.
    In the Comment, Wachovia states that in a letter dated May 7, 2002 
to counsel for Unifi, a copy of which was provided to the Department, 
they discussed certain business relationships between Unifi and 
Wachovia's banking department and certain Wachovia affiliates. For the 
reasons set forth in that letter, Wachovia states again for the record 
that it has at all times performed all its obligations as independent 
fiduciary with respect to the Lease under PTE 87-28.
    Paragraph 2 of the Summary also states that the applicant 
represents that Wachovia, as the independent fiduciary for the Lease 
under PTE 87-28, unilaterally elected to cease functioning as the 
independent fiduciary for the Plan effective on or before March 13, 
2002. Therefore, as of that date, Unifi states that it was engaging in 
a prohibited transaction under the Act by continuing the Lease, 
pursuant to a holdover provision contained therein.
    In the Comment, Wachovia responds that it was Unifi's continuation 
of the Lease that caused Unifi to engage in a prohibited transaction 
with the Plan. Wachovia informed Unifi that the Department likely would 
require, as a condition to any exemption providing retroactive relief 
for continuation of the Lease after the original termination date, that 
an independent fiduciary represent the Plan at all times after the 
expiration of the Lease. Wachovia identified potential successor 
independent fiduciaries with whom Unifi engaged in discussions. 
However, Wachovia states that Unifi failed to reach an agreement with 
any of them.
    Additionally, the Comment contains Wachovia's clarifications on 
certain statements contained in the Application. In a letter dated May 
20, 2002, counsel to Unifi stated to the Department that Unifi is 
contemplating legal action against Wachovia, in which Unifi would 
allege that Wachovia failed to locate a suitable tenant for the 
Property upon termination of the Lease as required by paragraph 2(b)(v) 
of the independent fiduciary agreement (the I/F Agreement), therefore 
causing monetary damages to Unifi.
    In the Comment, Wachovia clarifies that Wachovia worked with Unifi 
to find a purchaser for the Property, and identified two potential 
buyers. Unifi indicated in these sales negotiations that it intended to 
lease the Property after it was sold. These sales negotiations were 
terminated when Unifi rejected the terms of a proposed future lease. 
Unifi has acknowledged that these negotiations were consistent with 
Wachovia's duties as the independent fiduciary. After negotiations with 
potential buyers terminated, Wachovia assisted Unifi in applying for an 
extension of Unifi's existing exemption (i.e., PTE 87-28).
    In the Application, Unifi represented to the Department that 
Wachovia is refusing to perform its services under the I/F Agreement 
dated September 3, 1996, between Wachovia and Unifi.
    In the Comment, Wachovia states that as indicated in Wachovia's 
letter to Unifi dated March 11, 2002, Unifi was aware that Wachovia was 
not prepared to continue to serve as the independent fiduciary, and 
Unifi's representatives apparently concurred with that decision. Again, 
Wachovia represents that it assisted Unifi in finding potential 
successor independent fiduciaries, but Unifi failed to reach agreement 
with any of them.
    In summary, Wachovia states that it met all its obligations as the 
independent fiduciary for the Plan with respect to the Lease. Wachovia 
maintains that all terms and conditions of PTE 87-28 relating to its 
duties and responsibilities as the independent fiduciary for the Plan 
were satisfied.

[[Page 54484]]

II. Discussion of Unifi's Response to the Comment
    In its response to the Comment (the Response), Unifi states that 
the Comment made by Wachovia does not discuss the substance of the 
proposed sale of the Property by the Plan to Unifi, which is the 
subject transaction in the Notice.
    The Response further states that the reason Unifi mentioned 
Wachovia in the Application was to clarify to the Department why Unifi, 
and not Wachovia, was submitting the Application to the Department. 
Unifi states that apart from Wachovia's status as the independent 
fiduciary for the Lease under PTE 87-28, Wachovia is not an interested 
party to the proposed sale.
    In conclusion, Unifi states that Wachovia has no real interest in 
the proposed sale of the Property by the Plan to Unifi. There are no 
statements in the Comment that are in support or against the terms of 
the proposed sale. Therefore, Unifi respectfully requests that the 
Department grant the exemption as proposed.
    The Department notes that it is offering no views at this time with 
regard to either Wachovia's conduct as the independent fiduciary for 
the Plan for purposes of the Lease, pursuant to PTE 87-28, or Unifi's 
concerns relating thereto. In this regard, the Department notes that 
the Comment does not object to the proposed sale of the Property by the 
Plan to Unifi.
    Copies of the letters mentioned above, as well as other relevant 
correspondence, are available for public inspection and may be obtained 
by interested persons from the Public Documents Room, Pension and 
Welfare Benefits Administration, U.S. Department of Labor, Room N-1513, 
200 Constitution Avenue, NW., Washington, DC 20210. Interested persons 
should request File No. D-11094 (with respect to the proposed sale of 
the Property by the Plan to Unifi) and File No. D-11080 (with respect 
to Unifi's initial exemption request for a continuation of the Lease).
    Upon consideration of the entire record, the Department has 
determined to grant the exemption as proposed.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department 
at (202) 693-8540. (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 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) This exemption is 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 this exemption is subject to the express 
condition that the material facts and representations contained in the 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 19th day of August, 2002.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 02-21431 Filed 8-21-02; 8:45 am]
BILLING CODE 4510-29-P