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Federal Register / Vol. 69, No.

226 / Wednesday, November 24, 2004 / Notices 68391

Estimated average number of FOR FURTHER INFORMATION CONTACT: Mr. Agenda: The agenda includes:
respondents: 700. Dusty Pate, Range Technician, Big (1) Opening of the meeting.
Estimated average burden hours per Thicket National Preserve, 3785 Milam (2) Roll call and identification of
response: 2.5 hours. Street, Beaumont, Texas 77701, people in the Somerset Office and on
Estimated annual reporting burden: Telephone: 409 839–2689 ext. 232, e- the conference call line.
1750. mail at Haigler_Pate@nps.gov. (3) Report by the Design Oversight
SUPPLEMENTARY INFORMATION: If you Committee of the Flight 93 Memorial
Dated: October 20, 2004.
wish to submit comments on these Task Force, with recommendations on a
Leonard E. Stowe,
documents within the 30 days; mail Stage 1 jury for the design competition
Acting NPS, Information Collection Clearance for a permanent memorial.
them to the street address provided
Officer, Washington Administrative Program
Center. above, hand-deliver them to the park at FOR FURTHER INFORMATION CONTACT:
the street address provided above, or Joanne M. Hanley, Superintendent,
[FR Doc. 04–26003 Filed 11–23–04; 8:45 am]
electronically file them to the e-mail Flight 93 National Memorial, 109 West
BILLING CODE 4312–52–M
address provided above. Our practice is Main Street, Somerset, PA 15501,
to make comments, including names telephone (814) 443–4457.
DEPARTMENT OF THE INTERIOR and home addresses of respondents, SUPPLEMENTARY INFORMATION: The
available for public review during meeting will be open to the public. Any
National Park Service regular business hours. Individual member of the public may file with the
respondents may request that we Commission a written statement
Plan of Operations, Environmental withhold their home address from the concerning agenda items. The statement
Assessment, and Draft Floodplains record, which we will honor to the should be addressed to the Flight 93
and Wetlands Statements of Findings, extent allowable by law. There also may Advisory Commission, 109 West Main
Big Thicket National Preserve, TX be circumstances in which we would Street, Somerset, PA 15501.
withhold from the record a respondent’s This notice is being published less
AGENCY: National Park Service, identity, as allowable by law. If you than 15 days prior to the meeting date
Department of the Interior. wish us to withhold your name and/or because of the urgent need to complete
ACTION: Notice of availability of a Plan address, you must state this time-sensitive work carried over from
of Operations, Environmental prominently at the beginning of your the Commission’s previous meeting. In
Assessment, and draft Floodplain and comment. We will make all submissions particular, the Commission must
Wetland Statements of Findings for a from organizations or businesses, and complete its consideration of Stage 1
30-day public review at Big Thicket from individuals identifying themselves jury recommendations by the Design
National Preserve. as representatives or officials of Oversight Committee.
organizations or businesses, available
SUMMARY: Notice is hereby given in for public inspection in their entirety. Dated: November 12, 2004.
accordance with § 9.52(b) of Title 36 of Bernard Fagan,
Dated: October 27, 2004.
the Code of Federal Regulations, Part 9, Deputy Chief, National Park Service Office
John T. Crowley, of Policy.
Subpart B, that the National Park
Service (NPS) has received from Acting Director, Intermountain Region, [FR Doc. 04–26002 Filed 11–23–04; 8:45 am]
National Park Service.
Sanchez Oil and Gas Corporation a Plan BILLING CODE 4312–52–M
of Operations for drilling and [FR Doc. 04–26004 Filed 11–23–04; 8:45 am]
production of the WM Rice #1 Well BILLING CODE 4312–CB–P

from a surface location north of County DEPARTMENT OF LABOR


Road 4825 within Big Thicket National
DEPARTMENT OF THE INTERIOR
Preserve, Tyler County, Texas. Employee Benefits Security
Additionally, the NPS has prepared an National Park Service Administration
Environmental Assessment and draft [Prohibited Transaction Exemption (PTE)
Floodplain and Wetland Statements of Flight 93 National Memorial Advisory 2004–19; Exemption Application No. D–
Findings on this proposal. Commission 11220]
DATES: The above documents are
available for public review and ACTION: Meeting notice. ARINC Incorporated Retirement
comment through December 27, 2004. SUMMARY: This notice announces a
Income Plan (the Plan) Located in
December 3, 2004, ‘‘interim’’ meeting of Annapolis, MD
ADDRESSES: The Plan of Operations,
Environmental Assessment, and draft the Flight 93 Advisory Commission. AGENCY: Employee Benefits Security
Floodplain and Wetland Statements of DATES: The public meeting will be held Administration, U.S. Department of
Findings are available for public review on December 3, 2004, from 10 to 11 Labor.
and comment in the Office of the a.m., eastern standard time. ACTION: Grant of individual exemption.
Superintendent, Art Hutchinson, Big Location: The meeting will be held
Thicket National Preserve, 3785 Milam via conference call for all out-of-town SUMMARY: This document contains a
Street, Beaumont, Texas. Copies of the Commissioners and public participants. final exemption issued by the
Plan of Operations are available, for a To call in, the call in number is 866– Department of Labor (the Department)
duplication fee; and copies of the 556–6304; then enter the pass code from certain prohibited transaction
Environmental Assessment and draft number 487846#. For those who are able restrictions of the Employee Retirement
Floodplain and Wetland Statements of to attend in person, the Flight 93 Income Security Act of 1974 (ERISA or
Findings are available upon request, and National Memorial office will be open at the Act) and from certain taxes imposed
at no cost, from the Superintendent, Art 109 West Main Street, Newberry by the Internal Revenue Code of 1986
Hutchinson, Big Thicket National Building, Somerset, PA 15501, from (the Code). The exemption permits: (1)
Preserve, 3785 Milam Street, Beaumont, where the conference call will be The in-kind contribution of the property
Texas 77701. initiated. described as the 27.5 acre headquarters

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68392 Federal Register / Vol. 69, No. 226 / Wednesday, November 24, 2004 / Notices

of ARINC Incorporated (ARINC or the that a public hearing be held. In in the Lease that supplement the
Applicant) situated in Annapolis, MD or response to the solicitation of comments provisions of the Lease Term Sheet
the ownership interests of a special from interested persons, the Department described in the Proposed Exemption.
purpose entity (SPE) whose only asset is received: Comments from ARINC; The Lease is an agreement by and
this property (collectively, the Property) comments from Independent Fiduciary between ARINC as Tenant and 2551
to the Plan by ARINC, the plan sponsor Services, Inc (IFS), the Independent Riva Road, Inc., an SPE. ARINC states
and a party in interest with respect to Fiduciary retained to represent the Plan that under the Lease, 2551 Riva Road,
the Plan (the Contribution); (2) the in connection with the exemption Inc., a Delaware corporation, will be the
holding of the Property by the Plan; (3) request; and comments from two other Landlord. This corporation is initially
the leaseback of the Property by the Plan interested persons. None of the being established as a subsidiary of ARI,
to ARINC (the Lease or Leaseback); (4) comments requested that a public which currently holds title to the
the repurchase of the Property by hearing be held on the Proposed Property. ARI will transfer title to the
ARINC (the Repurchase) pursuant to (a) Exemption. The ARINC and IFS Property to 2551 Riva Road, Inc. on or
a right of first offer to ARINC should the comments provided further information before the date of closing when the
Plan wish to sell the Property to a third on the Exemption Transactions and are proposed Contribution and Leaseback
party or (b) a voluntary agreement under discussed below. transactions are consummated in
which the Plan agrees to sell the One comment was received from the accordance with the Transfer Agreement
Property to ARINC at any time during Secretary-Treasurer of Teamsters Local (the Closing). On the date of Closing,
the Lease; and (5) any payments to the 986 (Teamsters). The Teamsters ARI will convey all of the stock of 2551
Plan by ARINC made pursuant to a represent 70 ARINC employees who Riva Road, Inc. to the Plan so that the
make whole obligation as specified participate in the Plan. The Teamsters’ Landlord will be a wholly owned
below (the Make Whole Payment or comment supports the Proposed subsidiary of the Plan. The Certificate of
Obligation) (collectively, the Exemption Exemption, the protective conditions Incorporation of 2551 Riva Road, Inc.
Transactions). The exemption affects imposed on the Contribution by the was filed in the State of Delaware on
participants and beneficiaries of, and Department, and finalizing the November 15, 2004. The initial officers
fiduciaries with respect to, the Plan. exemption as proposed. The other and directors are ARINC employees.
DATES: This exemption is effective on or comment expressed concern about the ARINC expects that new officers and
after November 24, 2004. rental rate of the Lease described in the directors will be appointed by IFS on
FOR FURTHER INFORMATION CONTACT:
Proposed Exemption. This concern was behalf of the Plan the day of or the day
Wendy M. McColough of the Office of addressed in a response from ARINC after Closing.
that is summarized below. ARINC notes that the Department
Exemption Determinations, Employee
Additionally, the following updated described certain provisions of the
Benefits Security Administration, U.S.
versions of documents discussed in the Lease Term Sheet at Paragraph 6 of the
Department of Labor, telephone (202)
Proposed Exemption were submitted to Summary of Facts and Representations
693–8540. (This is not a toll-free
the Department by ARINC and IFS in the Proposed Exemption at column 3
number.)
subsequent to the publication of the of 69 FR 55181. ARINC represents that
SUPPLEMENTARY INFORMATION: On Proposed Exemption in the Federal these descriptions in the Proposed
September 13, 2004, the Department Register. The final transfer agreement Exemption generally remain accurate.
published a notice in the Federal that governs the terms upon which the However, as applicable, ARINC
Register (69 FR 55179) of a proposed Property will be contributed to and held provides the following additional
individual exemption (the Proposed by the Plan and is between ARINC (the information based on modifications to
Exemption). The Proposed Exemption Transferor), Aeronautical Radio, Inc. the terms and conditions of the Lease
was requested in an application filed on (ARI), a wholly-owned subsidiary of Term Sheet as agreed to in the Lease.
behalf of ARINC pursuant to section ARINC, and the Plan through its agent,
408(a) of the Act and section 4975(c)(2) Bondable/Triple Net Lease Structure
IFS, executed on October 12, 2004 (the
of the Code, and in accordance with the Transfer Agreement), was received by As noted in the ARINC comment
procedures set forth in 29 CFR part the Department on October 19, 2004. On below, during the bondable period, the
2570, subpart B (55 FR 32836, August November 5, 2004, the Department Lease Term Sheet and the Lease provide
10, 1990). Effective December 31, 1978, received the November 4, 2004 second for an abatement of rent in the event of
section 102 of Reorganization Plan No. addendum to the December 8, 2004 a partial condemnation at article 14.4(b)
4 of 1978, 5 U.S.C. App. at 214 (2000 letter agreement between IFS, ARINC, of the Lease and the right to terminate
ed.) transferred the authority of the and the Pension Committee of the Plan the Lease under certain circumstances
Secretary of the Treasury to issue concerning the engagement of IFS as the in the condemnation and casualty
exemptions of the type requested to the Independent Fiduciary, as amended July contexts (Lease, arts. 13 and 14).
Secretary of Labor. Accordingly, this 30, 2004 (the IF Agreement). The Lease Term Sheet provides that
final exemption is issued solely by the The final lease that governs the terms there shall be a commercially reasonable
Department. upon which the Property will be leased standard for determining whether
The notice set forth a summary of the back to ARINC by the Plan (Lease) was capital improvements (or repair or
facts and representations contained in received by the Department on replacement) are required for the
ARINC’s application for exemptive November 15, 2004. In correspondence, Property during the bondable period.
relief (Application) and referred dated November 11 and November 15, The Lease provides the commercially
interested persons to the Application for 2004, ARINC submitted the Lease and reasonable standard by requiring the
a complete statement of the facts and stated that the Lease is consistent with preparation of a reasonable annual
representations. The Application has the material terms and conditions of the budget to be approved by Landlord and
been available for public inspection at lease term sheet, as revised on June 11, Tenant for items needing repair,
the Department in Washington, DC. 2004 (Lease Term Sheet). By letter dated maintenance or replacement over the
The notice also invited interested November 15, 2004, ARINC provided coming year (Lease, art. 8.1), based on
persons to submit comments on the additional information to the an annual inspection by a reputable
Proposed Exemption and/or to request Department summarizing the provisions building inspector and an agreed

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Federal Register / Vol. 69, No. 226 / Wednesday, November 24, 2004 / Notices 68393

standard of keeping the buildings in any manner other than as previously provides that the Landlord waives the
good condition and repair, in a manner approved by Tenant (Lease, art. 21.4). late charge and default interest the first
befitting that of comparable buildings in ARINC provides that in article 21.6 of time in any 12-month period that
the Annapolis, Maryland area and in the Lease, the ROFO terms have been Tenant fails to make a payment when
accordance with all applicable laws and clarified so that it is not applicable with due, provided the payment is made
the Lease (Lease, art. 8.2). respect to easements and the like, as prior to the expiration of the five-
Disagreements regarding the timing or well as to any (i) transfer to an affiliate business day notice and cure period.
scope of any repair, maintenance or of the Landlord, (ii) transfer to By correspondence dated November
replacement, if any, are resolved in Landlord’s lender (or a third party) as a 11, 2004, ARINC’s real estate counsel
accordance with a neutral third-party result of a foreclosure or deed in lieu of provided the following Lease provisions
arbitration process that is binding on the foreclosure, or (iii) transfer to a third that counsel believes expanded the
parties (Lease, art. 23.4). party in a condemnation proceeding, protections for the Plan from that
however, in the event of a transfer contemplated by the Lease Term Sheet.
Rental Rate described in clause (i), the ROFO shall
The Lease provides for base rent of Hazardous Materials
apply to the first transfer by the affiliate
$4,290,189 during the first year of the of the Landlord, and in the event of a Article 6.3 of the Lease provides that
Lease (Lease, art. 1.5), increased by transfer described in clause (ii), the ARINC take substantially increased
2.5% annually (Lease, art. 4.2), with an ROFO shall apply to the first transfer by liability for hazardous materials. The
increase to $6,488,302 for the first year the lender/third party. The Tenant loses ARINC real estate counsel asserts that
of the non-bondable period (Lease, art. its rights altogether in the event of a ARINC is taking virtually all liability for
4.1), increased by 2.5% annually (Lease, transfer described in clause (iii). asbestos, tanks and transformers,
art. 4.2). ARINC notes that these figures Article 21 of the Lease adds a whether or not caused by ARINC or its
are consistent with those described in provision whereby if the purchase price Invitees, and taking expanded liability
the Proposed Exemption. of the unsolicited offer that Tenant for other hazardous materials violations
The terms of the Exemption elects to match is to be paid by other not caused by ARINC.
Transactions, however, require an than cash, the Tenant will be required Insurance
updated appraisal prior to Closing, and to pay the fair market value of the non-
ARINC states that the rental amounts cash consideration (Lease, art. 21.7). In article 11.1 of the Lease, ARINC has
may be modified based on such updated agreed to obtain a substantially larger
appraisal. ARINC believes that a Indemnification amount of liability insurance from that
substantial change in the rent is not ARINC represents that the Tenant’s specified in the Lease Term Sheet. The
expected. indemnification of the Landlord during umbrella liability coverage has been
the non-bondable period has been increased from $5,000,000 to
The Right of First Offer (ROFO) broadened in the Lease to include $25,000,000 in the Lease. ARINC’s all-
ARINC states that article 21 of the violations of environmental laws, the risk property insurance coverage has
Lease provides an additional right for Americans with Disabilities Act and been increased to include $5,000,000 of
the Landlord in the event the ROFO is other health and/or safety laws resulting ordinance or law coverage and in
triggered from or after the 15th from acts or omissions of any invitee, addition, ARINC has agreed to purchase
anniversary of the Lease commencement agent, employee, affiliate, subtenant, a separate liability policy for the Plan
date (the date of Closing under the assignee, contractor, client, family with excess umbrella coverage of
Transfer Agreement) and a three- member, licensee, customer or guest of $10,000,000.
appraiser method is used for the Tenant (collectively, Invitees) as Casualty
determination of fair market value for opposed solely to acts or omissions of
the Property. In this situation, the Tenant or any sublessee or assignee ARINC’s real estate counsel states that
Landlord has the right, exercisable (Lease, art. 12.2). Additionally, article ARINC has agreed to a substantial
within 10 days following the appraisers’ 12.6 of the Lease provides that the additional condition to its ability to
determination, to withdraw its notice of liability of the Landlord is limited to its terminate the Lease in the event of a
transfer and continue to hold the interest in the Property and any sales casualty during the non-bondable
Property (Lease, art. 21.2). proceeds, rents, insurance proceeds and period as provided in article 13.2 of the
The Lease includes a provision condemnation awards related thereto. Lease. If the Property is totally or
whereby if the Tenant elects to purchase partially damaged or destroyed, the
under the ROFO, the parties are to enter ARINC Default remainder of the Property must be
into a purchase and sale agreement that In the event of a Tenant payment unsuitable for ARINC’s business
incorporates the terms of the right of default, the Proposed Exemption stated purposes for ARINC to have the right to
first offer but is otherwise in that the Lease would contain terminate the Lease.
substantially the same form as the commercially reasonable provisions Reporting Requirements
Transfer Agreement for the initial regarding late fees and default interest.
transfer of the Property to Landlord, To address this, the Lease provides for In article 23.3 of the Lease, ARINC has
except that (i) no additional appraisal is a late fee of $1,000 if the Tenant fails to agreed to additional ongoing reporting
required (inapplicable, since it is not make any payment within five days requirements by notifying the Landlord
necessary to set any rent), (ii) only a after due without regard to any notice regarding defaults under ARINC loans
subset of the representations and and cure period otherwise provided that could materially adversely affect
warranties provided to the Landlord under the Lease (Lease, art. 15.7) and ARINC’s ability to perform its
upon the initial transfer shall be default interest on such overdue obligations under the Lease.
required to be provided to the Tenant/ payment from the date due until Discussion of the Comments
purchaser (Exhibit F of the Lease), and payment at the lesser of (i) one
(iii) Tenant/purchaser will not be percentage point above the prime rate or IFS Comment
entitled to any study period as long as (ii) the highest lawful rate per annum By letters dated October 19 and
title to the Property has not changed in (Lease, arts. 15.6 and 15.7). Article 15.7 November 5, 2004, IFS provided the

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68394 Federal Register / Vol. 69, No. 226 / Wednesday, November 24, 2004 / Notices

following comments and additional so that the provision would read as To deduct the costs from the actual
information to the Department. follows: return, and then add them to the target
(h) The Independent Fiduciary determines return, would be to count them twice.
1. Diversification of the Plan’s Assets
on an ongoing basis that the amount of Plan Accordingly, IFS requests that section
Condition
assets invested in the Property complies with II(i) be amended to delete the phrase
IFS observes that subsection (h) of section 404(a)(1) of ERISA; ‘‘plus the costs of holding and
section II of the Proposed Exemption IFS believes that this would be maintaining the Property’’ from
describes one of the duties of IFS as sufficient to make clear that IFS is subparagraph (ii) in the second
Independent Fiduciary as follows: obligated to determine on an ongoing paragraph. To the extent the IFS Report
(h) The Independent Fiduciary determines basis that the concentration of Plan does not accurately reflect this
on an ongoing basis that the amount of plan assets in the Property is consistent with provision, IFS states that it hereby
assets invested in employer real property and the ERISA fiduciary duty of amends the IFS Report to be consistent
employer securities, including its interests in with this discussion and that this
the Property, complies with ERISA; diversification, without requiring IFS to
make determinations as to Plan change does not affect the conclusions
IFS believes that its specific obligations investments other than the Property. in the IFS Report.
in regard to the diversification of plan The Department has determined that The Department has determined that
assets are set forth in the July 20, 2004 it would be appropriate to modify it would be appropriate to modify
amendment and addendum to the IF section II(h) as requested by IFS. section II(i) as requested by IFS.
Agreement, and as described at the first
bullet in the second column at 69 FR 2. Make Whole Payment Condition 3. Status of the Monetization
55187 of the Proposed Exemption, as IFS notes that subsection (i) of section IFS comments that Paragraph 11 of
follows: II of the Proposed Exemption describes the Summary of Facts and
In considering whether and on what terms the Make Whole Payment using Representations in the Proposed
to seek prudently to sell the Property, IFS language that is based on the IFS report Exemption at column 3 of 69 FR 55191,
shall consider the nature, value and other to the Department on June 18, 2004 (the in describing the IFS Report, states the
relevant aspects of the Property in isolation, IFS Report). The two elements of the following regarding the status of
as well as the nature and diversification of Make Whole Payment are set forth in proposals to monetize the lease payment
the Plan’s overall investment portfolio. section II(i) as follows: stream:
Insofar as IFS determines that continued
ownership of the Property poses undue risk The actual return component—‘‘the IFS notes that while they continue to
to the Plan of over concentration from an combination of the proceeds from a sale of engage financial institutions in discussions of
investment perspective, IFS shall determine the Property (or the change in the value of various proposals, they do not expect that a
and take appropriate action to seek prudently the Property if the Plan continues holding it monetization transaction will occur.
to reduce such risk. over the full five years) plus the Plan’s net
income on the Property under the Lease prior Since the date of the IFS Report, IFS
IFS’ concern is that section II(h) in the to the sale (or over the full five years)’’ represents that it has ceased to engage
Proposed Exemption overstates IFS’’ The target return component—‘‘the financial institutions in discussions. IFS
authority. IFS notes that while IFS is Property’s value as of the date of the remains open to proposals to monetize
required to consider the other assets of Contribution plus a 5% compounded rate of the stream of lease payments, but is not
the Plan, including any employer real return on that value plus the costs of holding actively pursuing that course at this
property and employer securities, in and maintaining the Property’’ time. IFS continues to expect that it is
determining whether and to what extent If the target return component exceeds unlikely that a monetization transaction
continued ownership of the Property the actual return component at the time will occur, for the reasons described in
may adversely affect the diversification for determining the Make Whole the IFS Report.
of the Plan’s overall portfolio, the IF Payment, then ARINC is obligated to
4. Status of Due Diligence
Agreement does not give IFS any contribute the difference to the Plan.
responsibility for or authority over those IFS explains that the description in IFS notes that, in Paragraph 5 of the
other assets. Section II(h), however, the IFS Report was based on an early Summary of Facts and Representations
could be read to mean that IFS must version of the Make Whole Payment in the Proposed Exemption at column 3
determine on an ongoing basis whether provision of the Lease Term Sheet, of 69 FR 55180, under the terms of the
all investments by the Plan in employer which has since been refined. IFS states Transfer Agreement, the Plan will have
real property and employer securities, that the final version is contained in a 60-day Review Period after execution
not just the Property, comply with any article 22 of the Lease and that the of the Transfer Agreement to undertake
aspect of ERISA, not just diversification. language in section II(i), while less a review and examination of all aspects
Under that reading, IFS would be detailed than the final provision in the of the Property prior to closing the
obligated to take action if, for example, Lease, is generally consistent with that transaction, should IFS approve going
the Plan has invested in employer provision, except in one respect: The forward with the transaction.
securities that are not qualifying target return component in the Lease IFS reports that the Transfer
employer securities under ERISA provision does not include the costs of Agreement has now been executed,
section 407. IFS asserts that this goes holding and maintaining the Property. effective October 12, 2004, so that the
beyond IFS’’ role as contemplated by The reason is that these costs have 60-day review period runs until
the IF Agreement, as amended. already been deducted from the actual December 11th. However, prior to the
To clarify that the objective of section return component, as reflected in the execution date, and consistent with the
II(h) is to require compliance with the use of the term ‘‘net income’’ in the intent of the Transfer Agreement,
fiduciary responsibility provision of above language. The Lease provision ARINC and ARI made the requested
ERISA, IFS proposes that the phrase itself refers to the rental income Property documents available to IFS for
‘‘employer real property and employer received by Landlord under this Lease review, and IFS’ representatives and
securities, including its interests in’’ be up to the Make-Whole Date, ‘‘less consultants were permitted to enter
deleted and that the phrase ‘‘section expenses incurred by Landlord with upon the Property to conduct specific
404(a)(1) of’’ be inserted in section II(h), respect to the Premises and this Lease.’’ examinations, such as structural

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Federal Register / Vol. 69, No. 226 / Wednesday, November 24, 2004 / Notices 68395

examinations of buildings and to excise tax penalties under Code 3. Liability for Hazardous Substances
environmental testing. If IFS completes section 4975. As a result of ARINC’s ARINC states that section II(m) of the
its due diligence to its satisfaction prior decision, the relief necessary under the Proposed Exemption includes a
to the expiration of the 60-day Review exemption need be only prospective condition which provides that ‘‘ARINC
Period, it may waive any remaining since the transaction will not occur indemnifies the Plan with respect to all
portion of the Review Period, in order until after a final exemption is granted. liability for hazardous substances
to close the transaction sooner so that ARINC adds that the decision to delay released on the Property prior to the
the Plan may begin to benefit from the transaction, while made by ARINC, execution and closing of the
receipt of the rental income. is supported by IFS, the Plan’s Contribution of the Property.’’ ARINC
By letter dated November 5, 2004, IFS Independent Fiduciary.
requests that the Department confirm
informed the Department that Custer The Department concurs with the
ARINC’s understanding that the
Environmental, Inc. (Custer), retained ARINC comment and has determined
by IFS to conduct a ‘‘Phase One that the effective date of the exemption provisions of the Transfer Agreement
Environmental Site Assessment’’ of the will be on or after the date of satisfy this condition. In particular,
Property, provided a final publication of this final exemption in under section 5(a)(12) of the Transfer
environmental report to IFS dated the Federal Register. Agreement, ARINC has represented that
October 25, 2004. On the basis of its to its knowledge no hazardous
2. The Lease Terms substances have been released on the
review of the Custer report, IFS states
that it is satisfied that there are no ARINC notes that the Proposed Property as of the closing date of the
environmental issues that would cause Exemption was issued based on a Lease Transfer Agreement. Section 5(f) of the
it not to close on the acquisition of the Term Sheet, which was submitted to the Transfer Agreement provides an
Property and the lease to ARINC in Department while ARINC and IFS indemnity in the event that ARINC
accordance with the provisions of the negotiated the more detailed terms of breaches this representation.
the Lease. However, ARINC represented ARINC notes that in response to a
Transfer Agreement and the Lease.
that the Lease Term Sheet would request by IFS, the Plan’s Independent
5. Liability Insurance accurately reflect the provisions of the Fiduciary, ARINC agreed to modify its
IFS notes that in addition to the more detailed final Lease. representation in section 5(a)(12) of the
expenses that may be Incurred by the ARINC submits two clarifications Transfer Agreement to state that, to
special purpose entity owned by the regarding the description of the Lease in ARINC’s knowledge, the construction
Plan (the SPE) as the Landlord under the Proposed Exemption. In Paragraph 6 and condition of certain rooms in
the terms of the Lease, and by the Plan of the Summary of Facts and buildings on the Property that were not
pursuant to the IF Agreement, the Plan Representations in the Proposed accessible to Custer Environmental, Inc.
will be incurring the expense of Exemption at column 1 of 69 FR 55182, (IFS’s environmental consultant), are
directors’ and officers’ liability under the discussion entitled the same in all material respects as other
insurance in connection with the ‘‘Bondable/Triple Net Lease Structure,’’ rooms in the same buildings that were
ongoing operation of the SPE. This the Department states ‘‘Under the inspected by Custer, and that the
expense is presently estimated to be bondable lease structure, the rent inaccessible rooms do not have any
$18,000 per year, which may change payable by ARINC to the Plan remains Hazardous Substances in violation of
over time in accordance with market payable under all circumstances Environmental Laws. This change is an
conditions. * * *.’’ (emphasis added). ARINC states improvement from the Plan’s
that this is consistent with the Lease perspective and provides greater
ARINC Comment Term Sheet, but ARINC notes that the assurance to IFS and the Plan of the
By letter dated October 19, 2004, the Lease Term Sheet also provides for an condition of the Property. As stated
Department received the following abatement of rent in the event of partial previously, on the basis of IFS’s review
comments from ARINC. condemnation (based on the portion of of the Custer report, IFS is satisfied that
the property subject to condemnation) there are no environmental issues that
1. Effective Date of the Exemption as well as a tenant right to terminate the would cause it not to close on the
ARINC explains that, at the request of lease under certain circumstances, such Exemption Transactions.
ARINC, the Proposed Exemption as in the event of condemnation or The Department confirms that the
provides that, if granted, the final casualty. provisions of the Transfer Agreement
exemption will have an effective date of Secondly, at column 2 of 69 FR and the Lease, IFS’s due diligence
September 7, 2004. This effective date 55183, under the Department’s regarding the Property as stated in the
was requested to allow ARINC to make discussion entitled ‘‘The Right of First IFS Report, and IFS’s approval of the
the Contribution prior to the grant of a Offer,’’ ARINC and the IFS Report Custer Environmental Site Assessment
final exemption. ARINC considered described the fair market value (as described above) appears to satisfy
making the Contribution before determination for the purchase price as the condition of section II(m) of the
September 15, 2004 to, among other changing for year 15 of the Lease and Proposed Exemption.
considerations, avoid having to make a beyond. ARINC clarifies that this is not
variable rate premium payment to the entirely accurate, because the Lease 4. The Make Whole Payment Condition
Pension Benefit Guaranty Corporation Term Sheet and the Lease provides for ARINC represents that the Make
in the amount of $910,000. However, the fair market value determination to Whole Payment condition provided
ARINC reports that it has subsequently change from and after the 15th under the Proposed Exemption is
decided not to Contribute the Property anniversary of the Lease commencement consistent with the agreement of ARINC
until after the grant of a final exemption. date (which would actually be year 16 and IFS in the Lease Term Sheet and the
By doing so, ARINC avoids the and beyond). Accordingly, the two Lease. ARINC notes, however, that both
possibility that a final exemption would references in the Proposed Exemption at the Lease Term Sheet and the Lease
be granted on terms different than 69 FR 55183 to ‘‘14’’ should instead provide ARINC 180 days from the date
provided for in the Proposed refer to ‘‘15,’’ and the two references to that is the earlier of the date of sale of
Exemption, which could expose ARINC ‘‘15’’ should instead refer to ‘‘16.’’ the Property by the Plan or five years

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68396 Federal Register / Vol. 69, No. 226 / Wednesday, November 24, 2004 / Notices

from the closing of the transaction to updated its contribution information Department has determined to grant the
make the Make Whole Payment. and stated that on October 29, 2004, exemption subject to the modifications
However, the 180-day period is not ARINC contributed an additional $2 discussed above. The Department has,
specifically reflected in the language of million to the Plan for a cumulative in transactions of this nature, placed
the Make Whole Payment condition in total contribution of $8 million thus far emphasis on the need for an
section II(i) of the Proposed Exemption. for the 2004 plan year. ARINC noted Independent Fiduciary and on such
ARINC ask that the Department confirm that these contributions far exceed the Independent Fiduciary’s considered and
ARINC’s understanding that, consistent minimum required contribution of $2.24 objective evaluation of the transactions.
with the Lease Term Sheet, the Lease, million for the 2004 Plan Year. In its deliberations, which included its
and the Summary of Facts and analysis of all aspects of the
Rental Rate Comment
Representations in the Proposed transactions, the Independent Fiduciary
Exemption at column 2 of 69 FR 55183, By letter to the Department, dated has consistently represented for the
ARINC will have 180 days to make a October 8, 2004, one commenter record that no transactions concerning
Make Whole Payment if any such objected to the annual base rent of the Property will be accepted on behalf
payment is required. $12.40 per square foot under the of the Plan unless such transactions are
The Department confirms that the bondable structure at column 2 of 69 FR found by the Independent Fiduciary to
Lease Term Sheet, the Lease, and the 55182. be in the interests of the Plan. Finally,
language of the Proposed Exemption The commenter stated that the the Department notes that the
provide that ARINC will have 180 days independent appraiser, Deloitte & Independent Fiduciary’s satisfaction of
to make the Make Whole Payment. Touche LLP (Deloitte), recommended its obligations in connection with the
that the initial rate for the bondable determination of the fair market value of
5. Diversification of the Plan Assets period be set at a higher rate of $13.35
Condition the Property, the ongoing determination
per square foot, and provided the that the amount of Plan assets invested
ARINC states that subsection (h) of opinion that ‘‘[t]here is no justification in the Property complies with section
section II of the Proposed Exemption for ARINC to not pay the full amount 404(a)(1) of ERISA as described above,
includes a condition that requires that recommended by the independent and other obligations as previously
the ‘‘Independent Fiduciary determines appraiser.’’ described by the Department in the
on an ongoing basis that the amount of By letter to the Department, dated Summary of Facts and Representations
plan assets invested in employer real November 2, 2004, ARINC responded to in the Proposed Exemption is a critical
property and employer securities, the October 8, 2004 comment. ARINC factor in the Department’s decision to
including its interest in the Property, explained that the $13.35 initial rent for grant a final exemption.
complies with ERISA.’’ ARINC notes the bondable period was set forth in the The Application pertaining to the
that ARINC’s engagement of IFS grants Deloitte draft report dated May 25, 2004. exemption, the Proposed Exemption,
IFS the discretion to determine whether That appraisal set an overall property the comments submitted to the
the holding of the Property satisfies value of the ARINC headquarters Department and the responses to the
ERISA’s fiduciary requirements, and the Property at $52 million. The final report comments, and all other documents
engagement letter requires that IFS by Deloitte, dated June 17, 2004, submitted to the Department concerning
evaluate the nature and diversification reduced the overall Property value to this exemption have been included as
of the Plan’s overall investment $49 million. The reductions were made part of the public record of the
portfolio in making this judgment. in response to specific concerns raised Application. The complete Application
However, IFS has not been appointed by IFS that the $52 million valuation file, including all supplemental
Independent Fiduciary of the Plan to was too high as described in the submissions received by the
make decisions with respect to real Proposed Exemption at 69 FR 55189 to Department, is available for public
property or securities other than the 55190. ARINC states that when Deloitte inspection in the Public Disclosure
Property. As such, ARINC believes that reduced the Property’s appraised value, Room of the Employee Benefits Security
this condition should be narrowed it also reduced the rental rate. For the Administration, U.S. Department of
somewhat. ARINC understands that IFS bondable period, the reduction was Labor, Room N–1513, 200 Constitution
concurs with this comment, and has from $13.35 per square foot to $12.40 Avenue, NW., Washington, DC 20210.
filed its own letter requesting that this per square foot. ARINC notes that this For a complete statement of the facts
condition be narrowed. ARINC supports change in lease rates is discussed in the and representations supporting the
their request. Proposed Exemption in the first column Department’s decision to grant this
at 69 FR 55190. The summary table that exemption, refer to the September 13,
6. Plan Contributions Update appears on the same page did not 2004 Notice of Proposed Exemption at
ARINC confirms that it made $18 include the changed lease rates. ARINC 69 FR 55179.
million in contributions for the 2003 emphasizes that the IFS Report
Plan Year. In addition, ARINC still concludes that the $49 million property General Information
expects to fully fund the Plan to the valuation, and the corresponding $12.40 The attention of interested persons is
ABO level after all cash contributions per square foot rental rate, are directed to the following:
and the Property contribution are made appropriate and the transaction is in the (1) The fact that a transaction is the
for the 2004 Plan Year (subject to any interest of the Plan. subject of an exemption under section
unexpected declines in the market value 408(a) of the Act and section 4975(c)(2)
of assets or further declines in interest Determination of the Department of the Code does not relieve a fiduciary
rates). To date, ARINC represents that it Accordingly, based upon the or other party in interest or disqualified
has already contributed $6 million for representations made by the Applicant, person from certain other provisions of
the 2004 Plan Year, which exceeds the the additional documents submitted to the Act and the Code, including any
minimum required contribution of the Department, the written comments prohibited transaction provisions to
$2.224 million for the Plan Year. received in response to the Proposed which the exemption does not apply
By letter to the Department, dated Exemption, and the analysis conducted and the general fiduciary responsibility
November 2, 2004, ARINC further by the Independent Fiduciary, the provisions of section 404 of the Act,

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Federal Register / Vol. 69, No. 226 / Wednesday, November 24, 2004 / Notices 68397

which require, among other things, that (a) the transfer of the property determining the fair market value of the
a fiduciary discharge his or her duties described as the 27.5 acre headquarters Property, the Independent Fiduciary
respecting the plan solely in the interest of ARINC Incorporated (ARINC) situated obtains an updated appraisal from a
of the participants and beneficiaries of in Annapolis, MD or the ownership qualified, independent appraiser
the plan and in a prudent fashion in interests of a special purpose entity selected by the Independent Fiduciary,
accordance with section 404(a)(1)(B) of (SPE) whose sole asset is this property and ensures that the appraisal is
the Act; nor does it affect the (collectively, the Property) to the Plan consistent with sound principles of
requirements of section 401(a) of the through the in-kind contribution of such valuation;
Code that the plan operate for the Property by ARINC, the plan sponsor (f) The Lease has an initial term of
exclusive benefit of the employees of and a party in interest with respect to twenty years, with a three-year renewal
the employer maintaining the plan and the Plan (the Contribution); term. The Lease is a bondable lease for
their beneficiaries; (b) the holding of the Property by the the first ten years of the Lease (or such
(2) The exemption will not extend to Plan; earlier date specified in the Lease as
transactions prohibited under section (c) the leaseback of the Property by agreed to between the Lessor and
406(b)(3) of the Act and section the Plan to ARINC (the Lease or ARINC). During the bondable period
4975(c)(1)(F) of the Code; Leaseback); ARINC, as lessee, pays, in addition to
(3) In accordance with section 408(a) (d) the repurchase of the Property, by the base rent, all costs associated with
of the Act and section 4975(c)(2) of the ARINC (the Repurchase) pursuant to (1) the Property, including capital
Code and the procedures set forth in 29 a right of first offer as specified in the expenditures. After the bondable period
CFR Part 2570, Subpart B (55 FR 32836, Lease should the Plan wish to sell the expires, the Lease shall convert to a
32847, August 10, 1990) and based upon Property to a third party or (2) a traditional triple net lease under which
the entire record, the Department finds voluntary agreement under which the ARINC, as lessee, pays, in addition to
that the exemption is administratively Plan agrees to sell the Property to the base rent, all normal operating
feasible, in the interests of the plans and ARINC at any time during the Lease; expenses of the Property, including
their participants and beneficiaries and and taxes, insurance, maintenance, repairs,
protective of the rights of the (e) any payments to the Plan by and utilities, but does not pay capital
participants and beneficiaries of the ARINC made pursuant to the make expenditures;
plans; whole obligation as specified in the (g) The Independent Fiduciary has
(4) This exemption is supplemental Lease (Make Whole Payment) sole authority to determine if it is in the
to, and not in derogation of, any other (collectively, the Exemption interest of the Plan to enter into a
provisions of the Act and/or the Code, Transactions). transaction to sell the stream of lease
including statutory or administrative income on the Property to a third party
Section II. Conditions for cash (the Monetization);
exemptions and transitional rules.
Furthermore, the fact that a transaction This exemption is conditioned upon (h) The Independent Fiduciary
is subject to an administrative or adherence to the material facts and determines on an ongoing basis that the
statutory exemption is not dispositive of representations described herein and amount of Plan assets invested in the
whether the transaction is in fact a upon satisfaction of the following Property complies with section 404(a)(1)
prohibited transaction; and requirements: of ERISA;
(5) The availability of this exemption (a) A qualified independent fiduciary (i) At the earlier of: (i) The date the
is subject to the express condition that (the Independent Fiduciary) acting on Plan sells the Property for fair market
the material facts and representations behalf of the Plan, represents the Plan’s value or (ii) the date five years from the
contained in the Application are true interests for all purposes with respect to date of the Contribution, ARINC will
and complete and accurately describe the Contribution and determines, prior transfer to the Plan a Make Whole
all material terms of the transactions to entering into any of the Exemption Payment, as described below, in order to
that are the subjects of the exemption. Transactions described herein, that each guarantee the Plan a minimum rate of
such transaction is in the interests of the return of 5% compounded per annum
Exemption Plan; on the initial contributed value of the
In accordance with section 408(a) of (b) The Independent Fiduciary Property; provided that, if a Make
the Act and section 4975(c)(2) of the negotiates and approves the terms of Whole Payment is due and if, for the
Code and the procedures set forth in 29 any of the transactions between the Plan taxable year of ARINC in which the
CFR Part 2570, Subpart B (55 FR 32836, and ARINC that relate to the Property; Make Whole Payment is to be made,
32847, August 10, 1990) and based upon (c) The Independent Fiduciary such Make Whole Payment (i) would
the entire record, the Department finds manages the holding, leasing, and not be deductible under section
that the exemption is: disposition of the Property and takes 404(a)(1) of the Code or (ii) would result
(a) Administratively feasible; whatever actions it deems necessary to in the imposition of an excise tax under
(b) In the interests of the Plan and its protect the rights of the Plan with section 4972 of the Code, such Make
participants and beneficiaries; and respect to the Property; Whole Payment would not be made
(c) Protective of the rights of the (d) The terms and conditions of any until the next taxable year of ARINC for
participants and beneficiaries of the transactions between the Plan and which the Make Whole Payment is
Plan. ARINC concerning the Property are no deductible under section 404(a)(1) of the
less favorable to the Plan than terms Code and does not result in an excise
Section I. Covered Transactions negotiated at arm’s length under similar tax under section 4972 of the Code;
The restrictions of sections 406(a), circumstances between unrelated third ARINC will guarantee a minimum
406(b)(1) and (b)(2), and 407(a) of the parties; return of 5% to the Plan by agreeing that
Act, and the sanctions resulting from (e) The contribution value of the if (i) the combination of the proceeds
the application of section 4975(a) and Property is the fair market value of the from a sale of the Property (or the
(b) of the Code, by reason of section Property as determined by the change in the value of the Property if
4975(c)(1)(A) through (E) of the Code, Independent Fiduciary on the date the the Plan continues holding it over the
shall not apply to: Property is contributed to the Plan. In full five years) plus the Plan’s net

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68398 Federal Register / Vol. 69, No. 226 / Wednesday, November 24, 2004 / Notices

income on the Property under the Lease independent of and unrelated to ARINC the Employee Retirement Income
prior to the sale (or over the full five if: Security Act of 1974 (the Act) and/or
years) is less than (ii) the Property’s (1) such fiduciary directly or the Internal Revenue Code of 1986 (the
value as of the date of the Contribution indirectly controls, is controlled by or is Code).
plus a 5% compounded rate of return on under common control with ARINC, A notice was published in the Federal
that value, then (iii) ARINC will (2) such fiduciary directly or Register of the pendency before the
contribute to the Plan the difference indirectly receives any compensation or Department of a proposal to grant such
necessary to provide the 5% return. The other consideration in connection with exemption. The notice set forth a
calculation of the Make Whole Payment any transaction described in this summary of facts and representations
will take into account the status of any exemption; except that an Independent contained in the application for
Monetization of the lease payments as of Fiduciary may receive compensation for exemption and referred interested
the time of sale or five-year anniversary acting as an Independent Fiduciary from persons to the application for a
of the Contribution. ARINC in connection with the complete statement of the facts and
(j) If the Plan desires to sell or convey transactions contemplated herein if the representations. The application has
the Property or its interest therein amount or payment of such been available for public inspection at
during the Lease Term, the Plan must compensation is not contingent upon or the Department in Washington, DC. The
first offer ARINC the right to purchase in any way affected by the Independent notice also invited interested persons to
or otherwise acquire the Property or Fiduciary’s ultimate decision, and submit comments on the requested
such interest therein on such terms and (3) the annual gross revenue received exemption to the Department. In
conditions as the Plan proposes to by such fiduciary, during any year of its addition the notice stated that any
market the Property or such interest engagement, from ARINC and its interested person might submit a
therein for sale (the Right of First Offer). affiliates exceeds 5 percent (5%) of the written request that a public hearing be
If ARINC fails to exercise such right to fiduciary’s annual gross revenue from held (where appropriate). The applicant
purchase, the Plan generally is free to all sources for its prior tax year. has represented that it has complied
sell the Property to a third party. The (b) The term ‘‘affiliate’’ means: with the requirements of the notification
right of first offer shall terminate upon (1) Any person directly or indirectly to interested persons. No requests for a
the commencement of the exercise by through one or more intermediaries, hearing were received by the
the Plan of its remedies under the Lease controlling, controlled by, or under Department. Public comments were
as the result of a monetary event of common control with the person; received by the Department as described
default by ARINC as described in the (2) Any officer, director, employee, in the granted exemption.
Lease that continues uncured following relative, or partner of any such person; The notice of proposed exemption
notice and the expiration of applicable and was issued and the exemption is being
cure periods (and a second notice and (3) Any corporation or partnership of granted solely by the Department
cure period provided fifteen (15) days which such person is an officer, because, effective December 31, 1978,
before the loss of such right on account director, partner, or employee. section 102 of Reorganization Plan No.
of such default); (c) The term ‘‘control’’ means the 4 of 1978, 5 U.S.C. App. 1 (1996),
(k) The Plan pays no commissions or power to exercise a controlling transferred the authority of the Secretary
fees in connection with the influence over the management or of the Treasury to issue exemptions of
Contribution, the Lease, the Repurchase, policies of a person other than an the type proposed to the Secretary of
or the Monetization of the Property. individual. Labor.
This condition does not preclude the Signed at Washington, DC, this 19th day of Statutory Findings
Plan from paying the ongoing costs November 2004.
associated with the holding of the In accordance with section 4089a) of
Ivan L. Strasfeld,
Property that are not the responsibility the Act and/or section 4975(c)(2) of the
Director, Office of Exemption Determinations,
of ARINC under the Lease; Code and the procedures set forth in 29
Employee Benefits Security Administration,
(l) Subject to ARINC’s Right of First U.S. Department of Labor. CFR part 2570, subpart B (55 FR 32836,
Offer, the Plan retains the right to sell 32847, August 10, 1990) and based upon
[FR Doc. 04–26067 Filed 11–23–04; 8:45 am]
or assign, in whole or in part, any of its the entire record, the Department makes
BILLING CODE 4510–29–P
Property interests to any third party the following findings:
purchaser; and (a) The exemption is administratively
(m) ARINC indemnifies the Plan with feasible;
DEPARTMENT OF LABOR
respect to all liability for hazardous (b) The exemption is in the interests
substances released on the Property Emergency Benefits Security of the plan and its participants and
prior to the execution and closing of the Administration beneficiaries; and
Contribution of the Property. (c) The exemption is protective of the
[Prohibited Transaction Exemption 2004– rights of the participants and
Section III. Definitions 20; Exemption Application No. D–11098, et beneficiaries of the plan.
al.]
(a) The term ‘‘Independent Fiduciary’’
Comerica Bank
means a fiduciary who is: Grant of Individual Exemption; Located in Detroit, Michigan
(1) independent of and unrelated to Comerica Bank [Prohibited Transaction Exemption 2004–20;
ARINC or its affiliates, and Exemption Application No. D–11098]
(2) appointed to act on behalf of the AGENCY: Employee Benefits Security
Plan for all purposes related to, but not Administration, Labor. Exemption
limited to (i) the in-kind contribution of ACTION: Grant of individual exemptions.
the Property by ARINC to the Plan, and Section I. Exemption for Receipt of Fees
(ii) other transactions between the Plan SUMMARY: This document contains The restrictions of sections 406(a) and
and ARINC related to the Property. exemptions issued by the Department of 406(b) of the Act and the sanctions
For purposes of this exemption, a Labor (the Department) from certain of resulting from the application of section
fiduciary will not be deemed to be the prohibited transaction restrictions of 4975 of the Code, by reason of section

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