Notice of Proposed Exemption Involving Family Dynamics, Inc., Pension Plan (the Plan), Located in Leesburg, Florida
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Notice of proposed individual exemption.
Citation: "79 FR 43082"
Document Number: "Application No. D-11777"
"Notices"
SUMMARY: This document contains a notice of pendency (the Notice) before the
DATES: Effective Date: This proposed exemption, if granted, shall be effective with regard to the transactions described in Section I below for the period beginning on
DATES: Written comments and requests for a public hearing on the proposed exemption should be submitted
ADDRESSES: All written comments and/or requests for a public hearing concerning the proposed exemption should be sent to the
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:
SUPPLEMENTARY INFORMATION: This document contains a notice of proposed individual exemption from certain prohibitions described in section 406 of the Act and section 4975 of the Code. /1/ The proposed exemption has been requested in an application filed with the Department by
FOOTNOTE 1 All references to specific provisions of Title I of the Act herein shall refer also to the corresponding provisions of the Code. END FOOTNOTE
The application pertaining to the proposed exemption contains facts and representations with regard to the proposed exemption which are summarized below. Interested persons are referred to the application on file with the Department for a complete statement of the facts and representations. The application pertaining to the proposed exemption and the comments received will be available for public inspection in the
Summary of Facts and Representations
The Parties
1. FDI, a
2. In
In connection with the closing of the sale transaction with Rinker, certain of the assets of FCSH, certain liabilities of FCSH, including all of the obligations of FCSH with respect to the Plan, as well as fewer than twenty (20) employees, were transferred to FDI, which at that time was established as a newly-formed subsidiary of FCSH.
3. As an employer any of whose employees are covered by the Plan, FDI is a party in interest with respect to the Plan, pursuant to 3(14)(C) of the Act. FDI is also a party in interest with respect to the Plan, pursuant to 3(14)(A) of the Act, as the named fiduciary and Plan administrator. The stockholders of FDI are members of the Gregg family or are trusts for the benefit of certain members of the Gregg family. There are 828.70 shares outstanding of FDI. The largest individual shareholders of FDI are Mrs.
4. Among the assets transferred to FDI, and therefore not sold to Rinker in 2000, is
5. In 2007, FDI sold all of its equity interests in FDLC to
Mrs. Strimenos and Mrs. Emack through separate limited liability corporations own, respectively, 40.70 percent (40.70%) and 36.12 percent (36.12%) of the interests in
FOOTNOTE 2 While there is overlapping ownership of FDI and
6. Other entities owned by members of the Gregg family include
The Plan
7. The Plan is a defined benefit pension plan established in 1953 by FCSH to provide benefits to its employees. As a result of the sale of FCSH to Rinker in 2000, FDI became the sponsor of the Plan. The Plan covers approximately 740 former employees of FCSH and current employees of FDI and their beneficiaries, including beneficiaries of deceased participants (based on Form 5500 for plan year 2011). In 2003, the Plan was "frozen" by FDI with the result that there have been no additional accruals and no new participants to the Plan since that time. The trustee of the Plan is Mrs. Strimenos.
The assets of the Plan are currently held through annuity contracts issued by
It is represented that liquidity is not an issue for the Plan. According to the Plan's actuary, the projected benefit payments are approximately
FDI estimates that its annual minimum funding obligation will be
The Notes
8. As discussed briefly in Representation 5, in 2007,
All of the Notes are subject to: (a) The partial guarantees of certain Gregg family trusts, based on the respective ownership of such trusts of interests in
The Property
9. As discussed briefly above, FDLC is the present owner of the Property, which is located in the
FOOTNOTE 3 For the purpose of constructing an interchange (the Interchange), FDLC, as owner of the Property, is working on donating a portion of the Property, consisting of approximately 50 acres, free and clear to the
FDI's Financial Situation
10. It is represented that FDI's cash flow is quite limited. FDI's ability to liquidate assets to satisfy the minimum funding requirement for the Plan has also been impacted by the implosion in 2008 of the
11. When FDI realized it would be unable to make the required contribution in cash to the Plan in 2011 for the plan year ended
12. On or about
Although A&B continued to pursue the funding waiver, there was uncertainty on whether the waiver request would be granted. Therefore, A&B advised FDI to seek a prospective prohibited transaction exemption from the Department, which, if granted, would enable FDI to contribute any of the Notes in-kind to the Plan, as needed. In this connection, it is represented that A&B prepared a draft exemption application, drafted the trust agreement that was required in order to make the contribution in-kind to the Plan, advised FDI to obtain an independent appraisal of the fair market value of the Notes, while continuing discussions with the
13. FDI did not make quarterly contributions to the Plan for the 2010 plan year. The failure to make quarterly contributions to the Plan is a reportable event which was reported to the PBGC, as required. FDI states that, on
Appraisal of All the Notes
14. On
The PCE Appraisers are qualified as Accredited Senior Appraisers of the
Based on the PCE Appraisal and a discount rate of 4.09% and 4.10%, respectively for Note #1 and Note #2, the PCE Appraisers determined that the present value of the aggregate face amount on Note #1 and Note #2, plus accrued interest was
Legal Analysis
15. Retroactive and prospective relief is proposed, herein, from sections 406(a)(1)(A), 406(a)(1)(D), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of the Act, and the corresponding provisions of the Code for the in-kind contribution, holding, and redemption of Note #1 and Note #2 in the past, and for the prospective in-kind contribution, holding, and redemption of certain of the Notes (the Subsequent Notes) in the future. Retroactive and prospective relief is also proposed, herein, from section 406(a)(1)(B) for the extensions of credit by the Plan to
Section 406(a)(1)(A) of the Act prohibits a sale or exchange between a party in interest and a plan. As the past in-kind contribution of Note #1 and Note #2 was made by FDI to the Plan, and as future in-kind contributions of the Subsequent Notes will be made by FDI to the Plan for the purpose of satisfying FDI's minimum funding obligations to the Plan, retroactive and prospective relief from section 406(a)(1)(A) of the Act is needed, because the Plan will receive the contribution in-kind of the Subsequent Notes in exchange for receiving a cash contribution. /4/
FOOTNOTE 4 In Commissioner v.
Section 406(a)(1)(B) of the Act prohibits a loan or an extension of credit between a plan and a party in interest. As
In addition, the partial guarantees of the Notes by certain Gregg family trusts that would be considered parties in interest with respect to the Plan under section 3(14)(E) of the Act as owners of the capital or profits interest of
Section 406(a)(1)(E) of the Act prohibits a fiduciary from causing a plan to engage in a transaction, if he knows or should know that such transaction constitutes the direct or indirect acquisition, on behalf of a plan, of any employer security in violation of section 407(a) of the Act. 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 a plan to hold any "employer security" in violation of section 407(a) of the Act. Section 407(a)(1) of the Act states that a plan may not acquire or hold any "employer security" that is not a "qualifying employer security."
The Notes may be considered "employer securities," as defined in section 407(d)(1) of the Act, because Mrs. Strimenos and Mrs. Emack own, in the aggregate, directly or indirectly, more than 50 percent (50%) of both FDI and
Furthermore, relief from section 406(a)(1)(A) and 406(a)(1)(D) of the Act is needed in the past, because Note #1 and Note #2 held in the Plan were transferred to and redeemed by
In addition, both retroactive and prospective relief is needed from the provisions of section 406(b)(1) of the Act in connection with the past decision by FDI, a fiduciary with respect to the Plan, to contribute Note #1 and Note #2 in-kind to the Plan and with respect to any future decisions by FDI to contribute in-kind any of the Subsequent Notes to the Plan. Both retroactive and prospective relief is needed from the prohibitions of section 406(b)(2) of the Act due to FDI's presence on both sides of the transactions, as the sponsor and fiduciary of the Plan.
Property Appraisal
16. Subsequent to the in-kind contribution of Note #1 and Note #2, on
The Integra Appraisers are qualified as State-Certified General Real Estate Appraisers. The Integra Appraisers are independent in that they have no bias with respect to the Property or the parties involved and their engagement and compensation was not contingent upon developing or reporting a predetermined value. It is represented that the percentage of revenue derived from this appraisal engagement was a de minimis percentage of Integra's 2011 revenues.
According to the Integra Appraisers, the holding of the Property by FDLC for future development is the only use that meets the four tests of highest and best use. Therefore, the Integra Appraisers concluded that the highest and best use of the Property is as vacant. In this regard, the Integra Appraisers represented that the most probable buyer of the Property would be an investor/developer that would continue the existing agricultural uses of the Property until such time that demand for the Property warrants moving forward with the development of the Property. In the opinion of the Integra Appraisers, a reasonable marketing period for the Property is estimated at 18 to 24 months.
Accordingly, based solely on the Sales Comparison Approach to valuation, the Integra Appraisers, in a report dated
Re-Appraisal of Note #1 and Note #2
17. On
Discounting the payments for Note #1 and Note #2 using the discount rates, respectively, of 5.9 percent (5.9%) and 6.2 percent (6.2%), the Empire Appraisers determined that looking back to
It is represented that the First Empire Appraisal valuation though somewhat lower than the
Redemption of Note #1 and Note #2
18. FDI had
It is also represented that because Note #1 and Note #2 had been contributed at a discounted value (i.e., the First Empire Appraisal established the fair market value of such notes in the aggregate at
Current Exemption Request
19. FDI filed the subject application (D-11777) for an individual exemption (the Current Application) on
Further, FDI is seeking prospective relief for the in-kind contribution, the holding, and the redemption of the Subsequent Notes. Both prospective and retroactive relief is also needed for the guarantees and extensions of credit between the Plan and certain parties in interest.
With regard to the prospective relief, FDI estimates that its mandatory minimum funding contribution for each of the next several plan years will be approximately
This proposed exemption, if granted, shall be effective with regard to transactions, involving Note #1 and Note #2 for the period beginning on
Appointment of GFA
20. FDI, acting in its corporate capacity and as named fiduciary for the Plan, engaged GFA pursuant to an agreement, dated
GFA, a
To supplement in-house legal resources and advice from local counsel in
GFA requested, received, and reviewed a number of documents concerning the Plan, FDI,
GFA has evaluated for methodological soundness, and mathematical and textual accuracy both the Integra Appraisal of the Property and a preliminary, unsigned, updated appraisal of Note#3, Note#4, and Note#5, dated
Pledges and Covenants Negotiated by GFA
21. GFA has negotiated several additional protections for the Plan, as set forth in the term sheet that was attached to the Current Application. As a result of these negotiations, FDI has, among other things, agreed to the following:
(a) Upon the contribution in-kind of any of the Subsequent Notes to the Plan, the Plan will receive a security interest in the Property (or in a relevant portion of such Property) (the Security Interest) and will retain such Security Interest, until the Plan no longer holds any of the Subsequent Notes. The Property (or the relevant portion, thereof) in which the Plan holds a Security Interest will have at least an appraised value equal to a minimum of five (5) times the aggregate outstanding balance, including all principal and accrued interest thereon, of all the Subsequent Notes held by the Plan, where such appraised value is determined by an IQA immediately after the most recent contribution in-kind of such Subsequent Notes and immediately after the sale or disposition of any portion of the Property;
(b) FDLC will covenant to refrain from mortgaging the Property and will covenant to distribute to
(c) FDI will cause
(d) FDI will apply any funds it receives from Yeehaw, PMCC, Bi-Coastal, and Arcadia for the benefit of the Plan, pursuant to written covenants and agreements that such entities will use the available proceeds from the sale of any real property owned by such entities, and all net royalties received by Arcadia from third parties, to first pay off any debts owed to FDI by such entities. In this regard, at the option of FDI, such available proceeds and such royalties either will be contributed to the Plan (as a current contribution or a pre-contribution of a future funding obligation) or will be loaned to
(e) The covenants and agreements are entered into prior to any in-kind contribution of any Subsequent Notes to the Plan; and such notes will be amended to treat a breach of any such covenants and agreements as an event of default under such notes;
(f) The Subsequent Notes contributed in-kind to the Plan will be contributed in the next order of seniority of such notes. The aggregate fair market value of the Subsequent Notes that may be contributed in-kind to the Plan shall not exceed 20 percent (20%) of the fair market value of the total assets of the Plan, in each case determined by GFA immediately after the in-kind contribution of such notes;
(g) If, at any time, the fair market value of the Property, all or a portion of which serves as collateral for the Subsequent Notes contributed in-kind to the Plan is less than 150 percent (150%) of the aggregate outstanding principal and accrued interest balance of such notes held by the Plan, the Plan will have the right, exercisable on 120 days' prior written notice by GFA, to accelerate the payment of such notes to the extent necessary to cause the fair market value of the Property to be at least 150 percent (150%) of the outstanding principal and accrued interest amount of such notes; and
(h) If at any time, GFA determines that the Plan does not have sufficient liquidity to meet its projected 12-month forward expense obligations (including benefit payment obligations), the Plan will have a right, exercisable on ninety (90) days' prior written notice to FDI, to accelerate the repayment of any of the Subsequent Notes held in the Plan; provided that such acceleration right shall only be to the extent necessary to pay down the aggregate outstanding principal and accrued interest balance of such notes, in an amount as determined by GFA to be necessary to provide the Plan with sufficient liquid assets to meet its twelve (12) month forward expense obligation.
GFA represents that it will consider at the time of each proposed in-kind contribution of any of the Subsequent Notes whether FDI has sufficient cash or other assets to render such an in-kind contribution unnecessary to satisfy the Plan's minimum funding requirements, or whether such an in-kind contribution can be made in addition to rather than in lieu of a payment of a cash contribution then due.
22. GFA notes that its ability to extend the maturity date on the Subsequent Notes will give
GFA represents that it will be responsible for monitoring and managing all of the Subsequent Notes contributed in-kind to the Plan and is authorized to enforce all of the Plan's rights under the instruments governing such notes, including the additional covenants, pledges, and agreements designed by GFA to serve as security for the Plan, which are outlined, above. In this regard, GFA is responsible for taking prudent action on behalf of the Plan in the event of default on any of the Subsequent Notes held in the Plan and in the event of default on any of the terms of the covenants, pledges, and agreements designed to provide security for the Plan.
GFA has made a preliminary determination in a report (the Report) attached to the Current Application, that the contribution of the Subsequent Notes in satisfaction of FDI's funding obligation will be in the interest of the Plan and its participants and protective of the rights and interests of such participants and beneficiaries. As described more fully in the Report, the Plan will receive in-kind contributions of fairly valued fixed income securities that will satisfy the minimum funding requirements of the Plan and improve the Plan's funding status, as compared to the Plan's funding status in the absence of such in-kind contributions.
Merits of the Proposed Exemption
23. The Applicant submits that proposed exemption will satisfy the requirement that an individual exemption must be administratively feasible. In this regard, GFA will determine, in each instance, whether the Plan should accept the Subsequent Notes as in-kind contributions to the Plan. Moreover, GFA will be authorized to manage and make all decisions with respect to any of the Subsequent Notes contributed in-kind to the Plan for as long as any such notes remain in the Plan. Hence, FDI maintains that the proposed exemption requires no on-going oversight by the Department and is administratively feasible.
24. FDI maintains that the in-kind contribution of Note #1 and Note #2 was, and the in-kind contribution of Subsequent Notes will be, in the interest of the Plan because such past and prospective in-kind contributions have substantially improved and will improve the security of benefits for the Plan participants without endangering the value of the Plan or creating any liquidity concerns. Further, FDI maintains that the redemptions of Note #1 and Note #2 were in the interest of the Plan in that the Plan achieved a favorable return of approximately 10.39 percent (10.39%) per annum over the relatively short period the Plan held such notes.
FDI represents that it is in the interest of the Plan to accept the in-kind contribution of the Subsequent Notes, as the Plan will receive fairly valued fixed income securities. In this regard, FDI submitted with the Current Application the Second Empire Appraisal, dated
It is represented that many factors were incorporated into the Empire Appraisers' analysis. Accordingly, in the Second Empire Appraisal, using a discount rate of 5.9 percent (5.9%) for Note #3, 6.1 percent (6.1%) for Note #4, and 6.3 percent (6.3%) for Note #5, the Empire Appraisers estimated that the aggregate present value of Note #3, Note #4, and Note #5 was
It is represented that GFA will review and approve an updated appraisal prepared by an IQA engaged by GFA, of any Subsequent Notes to be contributed in-kind to the Plan prior to such contribution.
25. Additionally, FDI explains that any contribution in-kind of the Subsequent Notes to the Plan will be protective of the Plan and its participants and beneficiaries. In this regard, the Notes are ordered as to seniority such that each successive higher numbered note is subordinate to any note with a lower number. For example, no amount can be paid on Note #8 until all principal and interest has been paid on Note #3 through Note #7. Given the redemptions of Note #1 and Note #2, on
Other than the Subsequent Notes that are the subject of this proposed exemption, FDI will not contribute any employer real property or employer securities to the Plan for so long as the Plan owns any such notes.
27. If the proposed exemption is granted, FDI represents that the Plan will continue to exist, will be adequately funded, and will eventually be terminated in a standard termination. However, FDI maintains that if the proposed exemption is not granted, it is not clear how the Plan will be funded over the next several years, nor is it clear whether FDI will continue in business due to its large minimum funding obligations to the Plan and its current lack of liquid assets.
Moreover, if the proposed exemption is denied, FDI states that there will be hardship and economic loss to the Plan. In particular, given FDI's current lack of liquid assets and its anticipated lack of liquidity over the next several years, FDI explains that it is highly unlikely that it can make the required contributions to the Plan in cash. Consequently, some or all of the required contributions might not be made, resulting in economic loss to the Plan and its participants and beneficiaries.
26. In summary, FDI represents that the subject retroactive transactions satisfy the statutory criteria of section 408(a) of the Act because:
(a) Prior to the in-kind contribution of Note #1 and Note #2, the fair market value of such notes was determined to be at least
(b) Prior to the in-kind contribution of Note #1 and Note #2, FDI engaged the law firm of A&B, and FDI thereafter contributed Note #1 and Note #2 in a manner consistent with written guidance provided by A&B on
(c) The Notes were redeemed for
(d) The terms and conditions of the transactions were no less favorable to the Plan than the terms and conditions negotiated at arm's length under similar circumstances between unrelated parties; and
(e) The Plan did not incur any commissions, fees, costs, other charges, or expenses in connection with the acquisition, the in-kind contribution, the holding, and/or the redemption of Note #1 and Note #2, except for the fees of the I/F, or persons engaged by the I/F to act on behalf of the Plan.
27. In summary, FDI represents that the subject prospective transactions satisfy the statutory criteria of section 408(a) of the Act because, among other things:
(a) The terms and conditions of the transactions will be no less favorable to the Plan than the terms and conditions negotiated at arm's length under similar circumstances between unrelated parties;
(b) The terms of the transactions will be determined in advance by the I/F, acting on behalf of the Plan, to be administratively feasible, in the interest of, and protective of the Plan and its participants and beneficiaries;
(c) The I/F is engaged with full discretionary authority to act on behalf of the Plan with respect to each of the Subsequent Notes contributed in-kind of the Plan, including the exercise of any of the rights of the Plan under such notes, and the responsibility to monitor such notes, and to ensure compliance by FDI,
(d) The Subsequent Notes will be contributed in-kind to the Plan in the next order of seniority of such notes (i.e., Note #3, Note #4, Note #5, etc.);
(e) Prior to the in-kind contribution of any of the Subsequent Notes, the fair market value of such notes will be determined by an IQA, engaged by the I/F;
(f) Upon the contribution in-kind of any Subsequent Notes to the Plan,
(1) The Plan will receive a recorded, perfected Security Interest in the Property (or in a relevant portion of such Property) and will retain such Security Interest until the Plan no longer holds any Subsequent Notes; and
(2) The Property in which the Plan holds the Security Interest will have, at all times throughout the duration of the contributed Subsequent Notes, an appraised value equal to a minimum of five (5) times the aggregate outstanding balance, including all principal and accrued interest thereon, of all of the Subsequent Notes held by the Plan;
(g) The aggregate fair market value of the Subsequent Notes proposed to be contributed in-kind to the Plan shall not exceed 20% of the fair market value of the total assets of such Plan, in each case determined by the I/F immediately after the in-kind contribution of such notes;
(h) The Plan will not incur any commissions, fees, costs, other charges, or expenses in connection with the acquisition, the in-kind contribution, the holding, and/or the redemption of any of the Subsequent Notes, including the fees and expenses of the I/F, and the fees and expenses of an IQA, counsel, or other persons engaged by the I/F;
(i) If, at any time, the fair market value of the Property, all or a portion of which serves as collateral for the Subsequent Notes contributed in-kind to the Plan, is less than 150 percent (150%) of the aggregate outstanding principal balance and accrued interest of such notes held by the Plan, the Plan has the right, exercisable on 120 days' prior written notice by the I/F to FDI, to accelerate the payment of such notes in order to cause the fair market value of the Property to be at least 150 percent (150%) of the aggregate outstanding principal and accrued interest amount of such Subsequent Notes;
(j) If, at any time, the I/F determines that the Plan does not have sufficient liquidity to meet its projected 12-month forward expense obligations (including benefit payment obligations), the Plan will have a right, exercisable, by the I/F, on ninety (90) days' prior written notice to FDI, to accelerate the repayment of the Subsequent Notes held by the Plan;
(k) Any extension of the maturity date of the Subsequent Notes is subject to the approval of the I/F; and
(l) The Notes will be partially guaranteed by certain family trusts, based on the respective ownership of such trusts of interests in
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 (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,
Section I: Retroactive Transactions
If the proposed exemption is granted, the restrictions of sections 406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407 of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A), 4975(c)(1)(B), and 4975(c)(1)(E) of the Code, /5/ shall not apply, effective
FOOTNOTE 5 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. END FOOTNOTE
(a) The contribution in-kind to the Plan of two (2) promissory notes (Note #1 and Note #2), of a series of twenty-nine (29) numbered promissory notes (collectively, the "Notes" and individually, "Note #1 through Note #29"), as defined below in Section VI(d), by
(b) The holding by the Plan of Note #1 and Note #2 until
(c) The extension of credit by the Plan to
(d) The extension of credit to the Plan: (1) by certain stockholders of FDI; and (2) by the members of
(e) The redemption of Note #1 and Note #2 on
Section II: Conditions for Retroactive Transactions
(a) Prior to the in-kind contribution of Note #1 and Note #2, the fair market value of such notes was determined to be at least
(b) Prior to the in-kind contribution of Note #1 and Note #2, FDI engaged the law firm of Alston and
(c) The Notes were redeemed for
(d) The terms and conditions of the transactions, as described in Section I, were no less favorable to the Plan than the terms and conditions negotiated at arm's length under similar circumstances between unrelated parties;
(e) The Plan did not incur any commissions, fees, costs, other charges, or expenses in connection with the acquisition, the in-kind contribution, the holding, and/or the redemption of Note #1 and Note #2, except for the fees of a qualified, independent fiduciary acting on behalf of the Plan (the I/F), as defined below in Section VI(c), or persons engaged by the I/F on behalf of the Plan.
Section III: Prospective Transactions
If the proposed exemption is granted, the restrictions of sections 406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2), and 407 of the Act and the sanctions resulting from the application of section 4975 of the Code, by reason of section 4975(c)(1)(A), 4975(c)(1)(B), and 4975(c)(1)(E) of the Code, shall not apply as of the date the final exemption is published in the
(a) The contribution in-kind to the Plan of the Subsequent Notes for the purpose of satisfying FDI's minimum funding obligations to the Plan;
(b) The holding of the Subsequent Notes until the maturity date of such notes;
(c) The extension of credit by the Plan to
(d) The extension of credit to the Plan by: (1) Certain major stockholders of FDI; and (2) the members of
(e) The redemption by FDI,
Section IV: Conditions for Prospective Transactions
(a) The terms and conditions of the transactions will be no less favorable to the Plan than the terms and conditions negotiated at arm's length under similar circumstances between unrelated parties;
(b) The terms of the transactions, as described in Section III, are determined in advance by the I/F, acting on behalf of the Plan, to be administratively feasible, in the interest of, and protective of the Plan and its participants and beneficiaries;
(c) The I/F is engaged with full discretionary authority to act on behalf of the Plan with respect to each of the Subsequent Notes contributed in-kind of the Plan, including the exercise of any of the rights of the Plan under such notes, and the responsibility to monitor such notes, and to ensure compliance by FDI,
(d) The Subsequent Notes will be contributed in-kind to the Plan in the next order of seniority of such notes (i.e., Note #3, Note #4, Note #5, etc.);
(e) Prior to the in-kind contribution of any of the Subsequent Notes, the fair market value of such notes will be determined by an IQA, engaged by the I/F. The fair market value must reflect the then-current terms of such Subsequent Notes, and take into account all factors deemed relevant, including the then-current value of a certain parcel of real property (the Property), as defined below in Section VI(f), all or a portion of which secures such notes, as well as the additional pledges and covenants the I/F has negotiated on behalf of the Plan;
(f) Upon the contribution in-kind of any Subsequent Notes to the Plan,
(1) The Plan receives a recorded, perfected security interest in the Property (or in a relevant portion of such Property) (the Security Interest) and retains such Security Interest until the Plan no longer holds any Subsequent Notes; and
(2) The Property in which the Plan holds the Security Interest has, at all times throughout the duration of the contributed Subsequent Notes, an appraised value equal to a minimum of five (5) times the aggregate outstanding balance, including all principal and accrued interest thereon, of all of the Subsequent Notes held by the Plan, where such appraised value is determined by an IQA,
(A) Immediately after the most recent contribution in-kind of such Subsequent Notes; and
(B) Immediately after the sale or disposition of any portion of the Property;
(g) The aggregate fair market value, as determined pursuant to Section IV(e) above, of the Subsequent Notes proposed to be contributed in-kind to the Plan shall not exceed 20% of the fair market value of the total assets of such Plan, in each case determined by the I/F immediately after the in-kind contribution of such notes;
(h) The Plan will not incur any commissions, fees, costs, other charges, or expenses in connection with the acquisition, the in-kind contribution, the holding, and/or the redemption of any of the Subsequent Notes, including the fees and expenses of the I/F, and the fees and expenses of an IQA, counsel, or other persons engaged by the I/F;
(i) If, at any time, the fair market value of the Property, all or a portion of which serves as collateral for the Subsequent Notes contributed in-kind to the Plan, is less than 150 percent (150%) of the aggregate outstanding principal balance and accrued interest of such notes held by the Plan, the Plan has the right, exercisable on 120 days' prior written notice by the I/F to FDI, to accelerate the payment of such notes in order to cause the fair market value of the Property to be at least 150 percent (150%) of the aggregate outstanding principal and accrued interest amount of such Subsequent Notes;
(j) If, at any time, the I/F determines that the Plan does not have sufficient liquidity to meet its projected 12-month forward expense obligations (including benefit payment obligations), the Plan has a right, exercisable, by the I/F, on ninety (90) days' prior written notice to FDI, to accelerate the repayment of the Subsequent Notes held by the Plan;
(k)(1) FDI provides to the I/F a report from the custodian of the Plan no later than ten (10) days after the end of each calendar quarter detailing the assets of the Plan (excluding the Subsequent Notes held by the Plan) as of the last day of the calendar quarter just ended so long as the Plan owns any Subsequent Notes; and
(2) FDI provides to the I/F, not later than thirty (30) days after the written request of the I/F, a report from the actuary of the Plan projecting the Plan's forward expense obligations for the following twelve (12) months;
(l) The following FDI-related entities:
(m) The covenants and agreements described in Section IV(m) above of this proposed exemption are entered into prior to any in-kind contribution of any Subsequent Notes to the Plan; and such notes will be amended to treat a breach of any such covenants and agreements as an event of default under such notes;
(n) FDLC enters into a covenant agreement with the Plan, pursuant to which FDLC covenants to: (1) Refrain from mortgaging the Property; and (2) distribute to
(o) FDI enters into an agreement with the Plan, whereby FDI shall apply all the funds that FDI receives during the Prospective Exemption Period, as defined below in Section VI(e), with respect to certain of FDI's illiquid assets, as defined below in Section VI(k), either to the repayment of the principal and accrued interest on the Subsequent Notes then held in the Plan, or to the use of such funds to satisfy FDI's current and future funding obligations to the Plan;
(p) FDI will cause
(q) Any extension of the maturity date of the Subsequent Notes is subject to the approval of the I/F; and
(r) The Notes are partially guaranteed by certain family trusts, based on the respective ownership of such trusts of interests in
Section V: General Conditions
(a) FDI,
(1) A separate prohibited transaction shall not be considered to have occurred solely because, due to circumstances beyond the control of FDI,
(2) No party in interest with respect to the Plan, other than FDI,
(b)(1) Except as provided in Section V(b)(2), and notwithstanding any provisions of subsections (a)(2) and (b) of section 504 of the Act, the records referred to, above, in Section V(a) are unconditionally available for examination at their customary location during normal business hours by:
(A) Any duly authorized employee or representative of the Department, or the
(B) Any fiduciary of the Plan, and any duly authorized representative of such fiduciary; and
(C) Any participant or beneficiary of the Plan, and any duly authorized representative of such participant or beneficiary;
(2) None of the persons, described above in Section V(b)(1)(B) through (C), shall be authorized to examine trade secrets of FDI,
Section VI: Definitions
(a) An "affiliate" of a person includes:
(1) Any person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the person;
(2) Any officer, director, employee, relative, or partner in any such person; and
(3) Any corporation or partnership of which such person is an officer, director, partner, or employee.
(b) The term "control" means the power to exercise a controlling influence over the management or policies of a person other than an individual.
(c) The term "I/F" means
(d) The term "Notes" means a series of twenty-nine (29) promissory notes (declining in seniority from Note#1 to Note#29), issued by
(e) The term "Prospective Exemption Period" means the period beginning on the date of publication in the
(f) The term "Property" means a certain tract of approximately 1,770 acres of real estate which is located in the
(g) The term "
(h) The term "FDI" means
(i) The term "FDLC" means
(j) The term "Plan" means the
(k) The phrase "FDI's illiquid assets" means the following assets:
(1) A
(2) A
(3) A
(4) A non-recourse loan to a Gregg family member in the amount of
(5) The Notes with an aggregate value of
(6) Miscellaneous assets worth
(l) The term "available proceeds" means the proceeds from the sale of property less: (1) All reasonable expenses, including any brokerage commissions, payable to parties unrelated to FDI or its principals/beneficial owners; and (2) all debt required to be paid as a condition to closing on such sale to obtain a release of any mortgage on such property.
(m) The term "Subsequent Notes" means Note#3 through Note#29.
Notice To Interested Persons
The persons who may be interested in the publication in the
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
All comments will be made available to the public.
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 section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of the Act and the Code, including any prohibited transaction provisions to which the proposed exemption does not apply and the general fiduciary responsibility provisions of section 404 of the Act, which require, among other things, a fiduciary to discharge his or her duties respecting a plan solely in the interest of the participants and beneficiaries of a plan and in a prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it affect the requirements of section 404(a) of the Code that a plan operate for the exclusive benefit of the employees of the employer maintaining a plan and their beneficiaries;
(2) Before a proposed exemption can be granted under section 408(a) of the Act and section 4975(c)(2) of the Code, the Department must find that the exemption is administratively feasible, in the interest of a plan and of its participants and beneficiaries and protective of the rights of participants and beneficiaries of a plan;
(3) This proposed exemption, if granted, will be supplemental to, and not in derogation of, any other provisions of the Act and the Code, including statutory or administrative exemptions. 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) This proposed exemption, if granted, is subject to the express condition that the facts and representations set forth in this notice, accurately describe, where relevant, the material terms of the transactions to be consummated pursuant to this proposed exemption.
Written Comments and Hearing Requests
All interested person are invited to submit written comments and/or requests for a public hearing on the proposed exemption to the address, as set forth above, within the time frame, as set forth above. All comments and requests for a public hearing will be made a part of the record. Comments and hearing requests should state the reasons for the writer's interest in the proposed exemption. A request for a public hearing must also state the issues to be addressed and include a general description of the evidence to be presented at the hearing. Comments and hearing requests received will also be available for public inspection with the referenced application at the address, as set forth above.
Signed at
Lyssa
Director of Exemption Determinations,
[FR Doc. 2014-17425 Filed 7-23-14;
BILLING CODE 4510-29-P
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Exemptions From Certain Prohibited Transaction Restrictions
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