Notice of Proposed Exemption Involving Family Dynamics, Inc., Pension Plan (the Plan), Located in Leesburg, Florida, 43082-43092 [2014-17425]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 79, Number 142 (Thursday, July 24, 2014)]
[Notices]
[Pages 43082-43092]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17425]


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 DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. D-11777]


Notice of Proposed Exemption Involving Family Dynamics, Inc., 
Pension Plan (the Plan), Located in Leesburg, Florida

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Notice of proposed individual exemption.

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SUMMARY: This document contains a notice of pendency (the Notice) 
before the Department of Labor (the Department) of a proposed 
individual exemption from certain prohibited transaction restrictions 
of the Employee Retirement Income Security Act of 1974, as amended, 
(the Act) and the Internal Revenue Code of 1986, as amended, (the 
Code). The proposed exemption, if granted, will affect the participants 
and beneficiaries of Plan participating in the proposed transactions 
and the fiduciaries with respect to such Plan.

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 September 15, 2011, and ending on December 
28, 2012. This proposed exemption, if granted, shall be effective with 
regard to transactions described in Section III below beginning on the 
date of the publication in the Federal Register of the grant of this 
proposed exemption and ending on the last day any of the Subsequent 
Notes is held in the Plan.

DATES: Written comments and requests for a public hearing on the 
proposed exemption should be submitted September 8, 2014.

ADDRESSES: All written comments and/or requests for a public hearing 
concerning the proposed exemption should be sent to the Office of 
Exemptions Determinations, Employee Benefits Security Administration, 
Room N-5700, U.S. Department of Labor, 200 Constitution Avenue NW., 
Washington, DC 20210, Attention: Application No. D-11777. 
Alternatively, interested persons are invited to submit comments and/or 
requests for a hearing to the Department by email to e-oed@dol.gov or 
by facsimile at (202) 219-0204.
    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: Angelena C. Le Blanc, Office of 
Exemption Determinations, Employee Benefits Security Administration, 
U.S. Department of Labor, telephone (202) 693-8540. (This is not a 
toll-free number.)

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 Family 
Dynamics, Inc. (FDI), pursuant to section 408(a) of the Act and section 
4975(c)(2) of the Code and in accordance with the procedure set forth 
in 29 CFR 2570, Subpart B (76 FR 66637, 66644, October 27, 2011). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, (43 FR 47713, October 17, 1978) transferred the authority of 
the Secretary of the Treasury to issue exemptions of the type requested 
to the Secretary of Labor. Accordingly, this proposed exemption is 
being issued solely by the Department.
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    \1\ All references to specific provisions of Title I of the Act 
herein shall refer also to the corresponding provisions of the Code.
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    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 Public Disclosure Room of the Employee Benefits Security 
Administration, U.S. Department of Labor, Room N-1513, 200 Constitution 
Avenue NW., Washington, DC 20210.

Summary of Facts and Representations

The Parties

    1. FDI, a Florida corporation (formerly known as Gregg Enterprises, 
Inc.), is a subchapter S corporation formed in 2000 to retain certain 
assets and liabilities that were excluded from the sale of Florida 
Crushed Stone Holdings, Inc. and its subsidiaries (FCSH). FCSH, founded 
and owned by Mr. F. Browne Gregg, Sr. (Mr. Gregg, Sr.), produced 
construction aggregates, cement, silica sand, lime rock based 
materials, and other construction materials.
    2. In June 2000, FCSH had approximately 700 employees when FCSH was 
sold to Rinker Materials Corporation (Rinker), an unrelated third 
party. Prior to the sale of FCSH to Rinker, all of the stock of FCSH 
was distributed to certain shareholders.
    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. Gail Gregg-Strimenos (Mrs. 
Strimenos) and Mrs. Jeannie Gregg-Emack (Mrs. Emack), each of whom owns 
a 26.96 percent (26.96%) interest in FDI. Mrs. Strimenos and her 
sister, Mrs. Emack are the daughters of Mr. Gregg, Sr. Mrs. Strimenos 
serves as the Chairman of FDI. The remaining eight (8) shareholders of 
FDI are Gregg family trusts which own, in the aggregate, 46.08 percent 
(46.08) of FDI.
    4. Among the assets transferred to FDI, and therefore not sold to 
Rinker in 2000, is Family Dynamics Land Company, LLC (FDLC). FDLC 
currently owns property (the Property) located in the City of Mineola, 
Florida. The Property is FDLC's only asset. FDLC has no revenues, 
operations, or liabilities.
    5. In 2007, FDI sold all of its equity interests in FDLC to 
Minneola AG, LLC (Minneola), a real estate holding company, in exchange 
for a single promissory note with a principal amount of $29,330,000. 
Minneola's only

[[Page 43083]]

significant asset is its 100 percent (100%) equity ownership in FDLC.
    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 Minneola. Five (5) other Gregg 
family trusts own 23.18 percent (23.18%) of Minneola.\2\
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    \2\ While there is overlapping ownership of FDI and Minneola, it 
is represented that the ownership of the shareholders of FDI and the 
members of Minneola is sufficiently diverse such that the two 
companies, FDI and Minneola, are not members of a ``control group,'' 
as defined in section 407(d)(7) of the Act. Minneola is a party in 
interest with respect to the Plan, pursuant to 3(14)(G) of the Act, 
as 50 percent (50%) or more of the interests in Minneola are owned 
in the aggregate, directly or indirectly, by Mrs. Strimenos and Mrs. 
Emack who are each 10 percent (10%) or more shareholders of FDI, the 
employer.
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    6. Other entities owned by members of the Gregg family include 
Yeehaw Ranch Land, LLC (Yeehaw); PMCC, LLC (PMCC); Bi-Coastal Holdings, 
LLC (Bi-Coastal); and Arcadia Holdings, LLC (Arcadia).

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 Massachusetts Mutual Life Insurance Company. It is 
represented that the Plan is currently underfunded. In this regard, the 
value of the Plan's assets, as of September 30, 2013, was approximately 
$28.92 million. This represents approximately 77 percent (77%) of the 
Plan's 2013 funding target.
    It is represented that liquidity is not an issue for the Plan. 
According to the Plan's actuary, the projected benefit payments are 
approximately $2.3 million for the 2013 plan year, gradually increasing 
to approximately $2.7 million in plan year 2021. As of September 30, 
2013, the Plan had liquid assets of approximately $28.92 million, while 
the present value of the Plan's projected benefit payments through 
2021, (discounted at 6 percent (6%) the Plan's assumed rate of 
investment return) was approximately $17.56 million, as of December 31, 
2012.
    FDI estimates that its annual minimum funding obligation will be 
$2.1 million or more for a number of years.

The Notes

    8. As discussed briefly in Representation 5, in 2007, Minneola 
issued to FDI a single promissory note (the Single Note) with a face 
amount of $29,330,000 in exchange for a 100 percent (100%) equity 
interest in FDLC. The Single Note carried interest at 4.53 percent 
(4.53%) per year, compounded semi-annually, with principal and interest 
payable at maturity on January 1, 2016. On September 12, 2011, the 
Single Note was re-issued as 29 separate promissory notes 
(collectively, the ``Notes'' and individually, ``Note 1 
through Note 29''), 28 of which have a face amount of $1 
million, and one (1) of which (Note 29) has a face amount of 
$1,330,000. It is represented that the Notes were issued with 
substantially the same terms as the Single Note. The Notes are closely-
held and are not traded on a public market. The Notes are numbered 
consecutively with each successive higher numbered note being 
subordinate to any note with a lower number. Although the Notes 
initially had a maturity date of 2016, effective November 5, 2012, FDI 
and Minneola agreed to amend Note 3 through Note 29 
to extend the maturity date to September 1, 2019, and to correct the 
amount of accrued interest stated in each such note, and to cap the 
default interest rate at 12 percent (12%) per annum.
    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 Minneola; and (b) the unconditional guarantees 
of Mrs. Emack and Mrs. Strimenos, who have jointly and severally 
guaranteed payment of the aggregate amount of such Notes in full. It is 
represented that Mrs. Emack and Ms. Strimenos had a combined net worth 
in excess of $112 million, as of December 31, 2012.

The Property

    9. As discussed briefly above, FDLC is the present owner of the 
Property, which is located in the City of Minneola, Florida. The 
Property, which is irregular in shape, currently consists of 
approximately 1,770 acres of real estate, nine (9) parcels of which are 
contiguous mostly wooded lots or cleared pasture land.\3\ The Property 
is fully entitled by the City of Minneola for a Planned Unit 
Development-Residential development and is subject to a Development of 
Regional Impact order for the Hills of Minneola development that has 
been approved by the City of Minneola and the Florida Department of 
Community Affairs.
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    \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 City of Minneola, which acreage will be 
subtracted from the acreage of the Property.
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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 
Florida real estate market. For example, FDI's assets consist primarily 
of illiquid investment in entities controlled by the Gregg family. Such 
investments held by FDI include notes receivable from entities 
controlled by members of the Gregg family, in the aggregate amount of 
$9.172 million, future royalties from an unrelated phosphate mining 
company, in the amount of $5.216 million, a non-recourse loan in the 
amount of $5.661 million to a Gregg family member, the Notes, and 
miscellaneous assets worth $0.403 million dollars. It is represented 
that none of these investments pays current income to FDI, and none of 
these investments is liquid.

FDI's Efforts To Fund the Plan

    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 
December 31, 2010, FDI sought legal advice from the firm of Constangy 
Brooks & Smith, LLC which advised FDI to seek a funding waiver for plan 
year 2010. Accordingly, FDI applied for a funding waiver from the IRS 
on March 15, 2011, with respect to the 2010 plan year. However, FDI was 
not advised that the funding waiver would not be issued in time to 
prevent a funding deficiency for plan year 2010 and that funding 
waivers are generally not issued in successive years.
    12. On or about May 24, 2011, FDI engaged another law firm, Alston 
& Bird LLP (A&B), an Atlanta law firm. FDI believes it was prudent in 
reaching out to A&B for assistance regarding the matters described 
above, and it was reasonable for FDI to believe that A&B would provide 
it with the guidance that it needed in connection with the in-kind 
contribution to the Plan and for FDI to rely on that belief.

[[Page 43084]]

    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 Internal Revenue Service (IRS) and the Pension Benefit Guaranty 
Corporation (PBGC) regarding the funding waiver.
    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 September 10, 2011, A&B apprised FDI of the following 
three ``paths,'' summarized as: (a) FDI could assume that it would 
obtain a funding waiver, refrain from making contributions to the Plan, 
file for a prohibited transaction exemption, and make the in-kind 
contribution after the prohibited transaction exemption is granted. If 
the funding waiver were not forthcoming, FDI would be subject to tax on 
the unpaid contribution and to excise tax; (b) FDI could make the in-
kind contribution on September 15, 2011, and file for a prohibited 
transaction exemption asking for retroactive relief. If the requested 
exemption were not granted, FDI would be subject to excise tax; or (c) 
FDI could start the process for a distress termination of the Plan in 
which the PBGC would have the right to attach assets of FDI in order to 
satisfy the unfunded liabilities. FDI states that it had to choose one 
of these options by September 15, 2011. On September 14, 2011, the PBGC 
filed a lien on the assets of FDI in the amount of $2.7 million. On or 
about September 15, 2011, FDI determined to go ahead with option (b) 
described above: The in-kind contribution to the Plan of two (2) of the 
Notes (Note 1 and Note 2), followed by the filing of 
an application for retroactive exemption with the Department. FDI 
states that, because discussions with the IRS and the PBGC were 
unsuccessful and the funding waiver was not forthcoming, FDI withdrew 
the waiver request on September 15, 2011. FDI states that, on October 
14, 2011, A&B alerted FDI that hiring an independent fiduciary may be a 
component of obtaining the exemptive relief described above.

Appraisal of All the Notes

    14. On September 12, 2011, Robert H. Buchannan, J.D., ASA and 
Victor E. Jarosiewicz, ASA, CFA (collectively, the PCE Appraisers) of 
PCE Valuations, LLC (PCE), in Winter Park and Tampa, Florida, together 
determined that the aggregate fair market value of all 29 of the Notes 
was $35,405,600 (rounded), as of September 8, 2011 (the PCE Appraisal).
    The PCE Appraisers are qualified as Accredited Senior Appraisers of 
the American Society of Appraisers. Both of the PCE Appraisers are 
independent in that they have no personal interest or bias with respect 
to the parties involved, and their compensation was not contingent on 
the conclusions reached in their report.
    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 $2,511,500, as of September 15, 2011. It is represented that FDI 
allocated $2,315,017 of the aggregate value of Note 1 and Note 
2 to satisfy the minimum funding contribution to the Plan for 
plan year 2010. The remainder of $196,483 FDI applied to satisfy a 
portion of its minimum funding obligation to the Plan for plan year 
2011.

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 Minneola and 
to FDI in connection with the Plan's past acquisition and holding of 
Note 1 and Note 2 and the Plan's acquisition and 
holding in the future of any Subsequent Notes.
    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\
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    \4\ In Commissioner v. Keystone Consolidated Industries, 508 US 
152 (1993), the Supreme Court held that an employer's contribution 
of property in satisfaction of the plan's funding obligation was a 
``sale or exchange'' for purposes of section 4975 of the Code. 
Moreover, the Department has held that an in-kind contribution to a 
plan constitutes a prohibited transaction, if the contribution 
reduces an obligation of a plan sponsor or employer to make a cash 
contribution to the plan. See Interpretive Bulletin 94-3.
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    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 Minneola, the issuer 
of the Notes, is a party in interest with respect to the Plan, the 
acquisition and holding of any of the Notes would constitute a 
prohibited loan or extension of credit by the Plan to Minneola for 
which relief from 406(a)(1)(B) is needed.
    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 Minneola. Similarly, the unconditional 
guarantees of the Notes by Mrs. Emack and Mrs. Strimenos would violate 
section 406(a)(1)(B) of the Act because these individuals would each be 
considered a party in interest with respect to the Plan under section 
3(14)(H) of the Act as an officer and/or a 10 percent (10%) or more 
shareholder of FDI, an employer any of whose employees are covered by 
the Plan.
    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

[[Page 43085]]

and Minneola. Section 407(d)(5) of the Act defines a ``qualifying 
employer security'' as an employer security that is either stock, a 
marketable obligation (as defined by section 407(e) of the Act), or an 
interest in certain publicly traded partnerships. The Notes are not 
stock or interests in a publicly traded partnership. Neither are the 
Notes marketable obligations. A ``marketable obligation'' is defined, 
in part, under section 407(e) of the Act as a ``bond, debenture, note, 
or certificate, or other evidence of indebtedness'' if such obligation 
is acquired on the market, from an underwriter, or directly from the 
issuer, and immediate following the acquisition of such obligation, not 
more than 25% of the aggregate amount of obligations issued in such 
issue and outstanding at the time of acquisition is held by the plan; 
at least 50% of the aggregate amount of the obligations in such issue 
is held by persons independent of the issuer; and immediately following 
such acquisition not more than 25 percent (25%) of the assets of the 
plan is invested in obligations of the employer or an affiliate. As the 
Notes are closely-held and not traded on the market, were not acquired 
by the Plan from the issuer, and at least 50% of the aggregate amount 
of such Notes are held by FDI, who is not independent of Minneola, the 
issuer, the Notes do not satisfy the definition of a ``marketable 
obligation,'' as defined under section 407(e) of the Act. Accordingly, 
relief from section 407(a)(1)(E) and 406(a)(2) is needed for the 
acquisition and holding of the Notes by the Plan.
    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 
Minneola, a party in interest with respect to the Plan, and relief from 
the same sections of the Act will be needed in the future in the event 
that the Subsequent Notes are transferred to and redeemed by FDI, FDLC, 
Minneola, or any other a party in interest with respect to the Plan.
    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 January 1, 2012, FDI engaged Independent Fiduciary 
Services, Inc. (IFS), a Division of GBS Investment Consulting, LLC, and 
a predecessor of Gallagher Fiduciary Advisers, LLC (GFA), to serve as 
the independent, qualified, fiduciary (the I/F) and the investment 
manager on behalf of the Plan. GFA, the successor to IFS, hired Integra 
Realty Resources (Integra) of Orlando, Florida, to determine the ``as 
is'' fair market value of the fee simple interest in the Property (the 
Integra Appraisal). The Integra Appraisal was prepared by Stephen J. 
Matonis, MAI, MRICS, Director/Partner of Integra, and Marti M. Hornell, 
Senior Analyst of Integra (together, the Integra Appraisers). The 
Integra Appraisers conducted an on-site inspection of the Property, 
respectively, on April 22, 2012, and April 25, 2012.
    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 May 3, 2012, 
determined that the ``as is'' fair market value of the fee simple 
interest in the Property, as of April 22, 2012, was $48,000,000 
($27,405 per usable acre), including approximately fifty (50) acres of 
land that would be transferred to the City of Minneola for construction 
of the Interchange.

Re-Appraisal of Note 1 and Note 2

    17. On July 21, 2012, GFA also hired Kevin P. Steeley (Mr. Steeley) 
and Hugh H. Woodside (Mr. Woodside), ASA, CFA, Managing Director, of 
Empire Valuation Consultants, LLC (Empire), in Rochester, NY, 
(collectively, the Empire Appraisers) as a second IQA to establish the 
value of Note 1 and Note 2, exclusively. Both the 
Empire Appraisers are qualified, in that Mr. Steeley has been 
associated with Empire since 2006, and Mr. Woodside is an Accredited 
Senior Appraiser affiliated with the American Society of Appraisers and 
is a Chartered Financial Analyst. Both the Empire Appraisers are 
independent in that neither Mr. Steeley nor Mr. Woodside has an 
interest in Note 1 and Note 2. Further, it is 
represented that the Empire Appraiser's fees were not contingent upon 
the determination of value of Note 1 and Note 2.
    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 
September 15, 2011, the aggregate fair market value of for Note 
1 and Note 2 was $2,316,047 (the First Empire 
Appraisal).
    It is represented that the First Empire Appraisal valuation though 
somewhat lower than the $2,511,500 aggregate value for Note 1 
and Note 2, as set forth in the PCE Appraisal, was still in 
excess of FDI's funding obligation for the plan year 2010. Accordingly, 
once the First Empire Appraisal was obtained, the I/F determined to use 
the lower valuation for the purpose of satisfying FDI's funding 
obligation to the Plan.

Redemption of Note 1 and Note 2

    18. FDI had Minneola redeem Note 1 and Note 2 
from the Plan. Such redemptions required Minneola to pay an amount in 
cash to the Plan equal to the $1 million principal amount of each note, 
plus all accrued interest due through the date of such redemptions.
    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 $2,316,047, looking back to September 15, 2011) (See, 
Representation 17), as compared to the outstanding balance of such 
notes, which was approximately $2,468,930, as of September 15, 2011, 
the pre-mature redemption of Note 1 and Note 2 for 
$2,616,702.01, well in advance of the

[[Page 43086]]

January 1, 2016 maturity date of such notes, resulted in the Plan 
achieving a very favorable return of approximately 10.39 percent 
(10.39%) per annum over the relatively short period of time (from 
September 15, 2011, to December 28, 2012) that the Plan held such 
notes.

Current Exemption Request

    19. FDI filed the subject application (D-11777) for an individual 
exemption (the Current Application) on May 6, 2013, seeking both 
retroactive and prospective relief. Specifically, in the Current 
Application, FDI is relying on the Department's retroactive policy, as 
set forth at 29 CFR section 2570.35(a)(8), and has requested 
retroactive relief for the in-kind contribution of Note 1 and 
Note 2 to the Plan, for the holding of such notes by the Plan, 
and for the redemption of such notes from the Plan by Minneola. In this 
regard, FDI explains that it followed and relied on the written 
guidance provided by A&B, to file an exemption application with the 
Department, as discussed more fully in Representations 12 and 13, 
above, prior to the contribution in-kind of Note 1 and Note 
2 to the Plan.
    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 $2.1 million or more per year. In this 
regard, the proposed prospective relief, if granted prior to September 
15, 2014, would enable FDI, subject to obtaining the approval of the I/
F, to contribute in-kind of certain Subsequent Notes to the Plan on 
September 15, 2014, depending on the final valuations of such notes, in 
order to satisfy FDI's minimum funding obligation for the 2013 plan 
year, and further to contribute certain Subsequent Notes to satisfy its 
minimum funding obligations for future plan years.
    This proposed exemption, if granted, shall be effective with regard 
to transactions, involving Note 1 and Note 2 for the 
period beginning on September 15, 2011, and ending on December 28, 
2012. This proposed exemption, if granted, shall be effective with 
regard to transactions, involving the Subsequent Notes, beginning on 
the date of the publication in the Federal Register of the grant of 
this proposed exemption and ending on the last day any of the 
Subsequent Notes is held in the Plan.

Appointment of GFA

    20. FDI, acting in its corporate capacity and as named fiduciary 
for the Plan, engaged GFA pursuant to an agreement, dated March 21, 
2013, (the Agreement) to serve as the I/F on behalf of the Plan. Under 
the terms of the Agreement, GFA will be retained for as long as the 
Plan holds any of the Subsequent Notes. GFA will be authorized to make 
all decisions on whether the Plan should accept the in-kind 
contribution of the Subsequent Notes in satisfaction of FDI's minimum 
funding obligations and otherwise to manage such notes on behalf of the 
Plan. It is represented that GFA's fees and expenses will be paid by 
the Plan.
    GFA, a Delaware limited liability company, is a registered 
investment adviser. On June 1, 2011, GFA acquired substantially all of 
the assets of IFS. GFA represents that it is qualified to serve as the 
I/F through its experience and through the experience of its 
predecessor, IFS, in acting as the I/F for plans in connection with 
contributions of non-cash assets to satisfy funding obligations, and 
the management of such assets, including both private securities and 
real estate. GFA represents that it has acted as independent fiduciary 
in connection with numerous transactions that have been the subject of 
individual prohibited transaction exemptions. In addition, GFA serves 
as an on-going investment consultant to plans with assets totaling 
approximately $37.1 billion. GFA is independent in that neither it nor 
any of its affiliates has any relationship with FDI, Minneola, FDLC, 
and the guarantors of the Notes, except that: (a) FDI has undertaken to 
provide a limited indemnification to GFA as set forth in the Agreement; 
and (b) FDI is secondarily liable (after the Plan) for GFA's fees and 
expenses, as set forth in the Agreement. It is represented that GFA's 
projected fee revenues during its 2013 Federal income tax year that may 
be derived from FDI will be less than two percent (2%) of GFA's total 
revenues for the 2013 income tax year.
    To supplement in-house legal resources and advice from local 
counsel in Florida, GFA retained the law firm of Steptoe & Johnson LLP 
to provide legal advice on the fiduciary and related business issues 
raised by the proposed transactions, including the fiduciary 
responsibilities under the Act. In this regard, GFA has acknowledged 
that is understands the duties and responsibilities under the Act of 
serving as a fiduciary on behalf of the Plan.
    GFA requested, received, and reviewed a number of documents 
concerning the Plan, FDI, Minneola, FDLC, the guarantors, the Notes, 
and the Property. Further, GFA met in-person and by telephone with FDI 
executives, their legal and financial advisors, and several of the 
guarantors to learn about the history, ownership, business model, and 
financial performance of FDI, Minneola, and FDLC. GFA's professional 
team also toured the Property.
    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 Note3, 
Note4, and Note5, dated September 7, 2012, prepared 
in draft by the Empire Appraisers (the Second Empire Appraisal). It is 
represented that the fair market value appraisal of the Property will 
be updated by an independent, qualified, appraiser (IQA) engaged by 
GFA, prior to GFA's determination on whether to accept on behalf of the 
Plan any of the Subsequent Notes, and prior to the contribution in-kind 
of such notes to the Plan. Similarly, the fair market value of any of 
the Subsequent Notes that are contributed in-kind to the Plan will be 
determined by the IQA engaged by GFA, prior to such in-kind 
contribution. Each such appraisal of the Subsequent Notes will reflect 
the then-current terms of such notes, and will take into account all 
factors deemed relevant, including the then-current value of the 
Property and the additional pledges and covenants GFA has negotiated on 
behalf of the Plan (as discussed below in Representation 21). The same 
procedure will be followed by GFA for additional contributions in-kind 
of Subsequent Notes to the Plan.

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

[[Page 43087]]

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 Minneola the net proceeds (after the 
payment of expenses) from the sale of all or a portion of the Property 
by FDLC. If any mortgage is placed on the Property, such mortgage will 
create a default under the Subsequent Notes held in the Plan that will 
allow the Plan to enforce its rights under such a default;
    (c) FDI will cause Minneola, at the option of FDI, either to pay 
the funds Minneola receives from FDLC to the Plan as payment on the 
Subsequent Notes held in the Plan or will loan such funds to FDI for 
the purpose of FDI making a contribution to the Plan within thirty (30) 
days of such loan (either as a current contribution or a pre-
contribution of a future funding obligation);
    (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 
Minneola with a written direction that Minneola pay the proceeds of 
such loan to the Plan as payment on any of the Subsequent Notes held by 
the Plan;
    (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 Minneola the necessary time it needs to 
market and sell the Property, which time may be more than the 18-24 
months estimated by Integra Appraisal to sell the Property in order to 
generate sufficient cash to pay off the Subsequent Notes contributed 
in-kind to the Plan.
    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 
September 7, 2012, prepared in draft by the Empire Appraisers. Prior to 
the in-kind contribution of any of the Subsequent Notes to the Plan, 
the then-

[[Page 43088]]

current fair market value of such notes will be determined by an IQA, 
before GFA makes a determination on whether to accept such notes on 
behalf of the Plan.
    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 $3,468,935, as of September 7, 2012.
    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 December 28, 2012, Note 
3 is now the most senior of the Notes. FDI states that the 
Subsequent Notes will be contributed to the Plan in the next order of 
their seniority, starting with Note 3, as necessary to satisfy 
FDI's future funding obligations to the Plan, subject to the conditions 
set forth in this proposed exemption.
    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 $2,316,047, as determined by the IQA;
    (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 September 10, 2011;
    (c) The Notes were redeemed for $2,616,702.01, providing the Plan 
with a 10.39% annual rate of return in connection with its holding of 
Note 1 and Note 2;
    (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, Minneola, FDLC, and any 
affiliates thereof, with the terms and conditions of such notes, and 
with the terms and conditions of this proposed exemption;
    (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

[[Page 43089]]

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 Minneola; and unconditionally guaranteed by Mrs. Emack and Mrs. 
Strimenos, who jointly and severally will guarantee payment of the 
aggregate amount of such notes in full.

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, October 27, 2011).

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 September 15, 2011, through December 28, 2012, to 
the following transactions, provided that the conditions, as set forth 
in Section II and Section V of this proposed exemption, are satisfied;
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    (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 Family Dynamics, Inc. (FDI), the sponsor of 
the Plan, for the purpose of satisfying the minimum funding obligation 
of FDI to the Plan for the plan year ending December 31, 2010;
    (b) The holding by the Plan of Note 1 and Note 2 
until December 28, 2012;
    (c) The extension of credit by the Plan to Minneola AG, LLC 
(Minneola), the issuer of the Notes and a party in interest with 
respect to the Plan, resulting from the holding of Note 1 and 
Note 2 by the Plan;
    (d) The extension of credit to the Plan: (1) by certain 
stockholders of FDI; and (2) by the members of Minneola, by reason of 
each such stockholder's and/or each such member's personal guaranty of 
all or a portion of the face amounts, plus accrued interest thereon, of 
Note 1 and Note 2; and
    (e) The redemption of Note 1 and Note 2 on 
December 28, 2012, by Minneola for a cash payment that equaled the fair 
market value of such notes, including principal and all accrued 
interest thereon through the date of redemption.

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 $2,316,047, as determined by an independent, qualified appraiser 
(the IQA);
    (b) Prior to the in-kind contribution of Note 1 and Note 
2, FDI engaged the law firm of Alston and Bird, LLP (A&B), and 
FDI thereafter contributed Note 1 and Note 2 in a 
manner consistent with written guidance provided by A&B on September 
10, 2011;
    (c) The Notes were redeemed for $2,616,702.01, providing the Plan 
with a 10.39 percent (10.39%) annual rate of return in connection with 
its holding of Note 1 and Note 2;
    (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 Federal 
Register and ending on the last day certain of the Notes (the 
Subsequent Notes), as defined below in Section VI(m), are held by the 
Plan, to the following transactions, provided that the conditions as 
set forth in Section IV and Section V of this proposed exemption are 
satisfied:
    (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 Minneola resulting from 
the holding of the Subsequent Notes by the Plan;
    (d) The extension of credit to the Plan by: (1) Certain major 
stockholders of FDI; and (2) the members of Minneola that are family 
trusts, by reason of each such stockholder's and/or each such member's 
personal guaranty of all or a portion of the face amount, plus accrued 
interest thereon, of any of the Subsequent Notes; and
    (e) The redemption by FDI, Family Dynamics Land Company, LLC 
(FDLC), Minneola, or any affiliate thereof, as affiliate is defined 
below in Section VI(a), of any of the Subsequent Notes on or before the 
maturity date of such notes for the greater of: (1) The aggregate 
principal plus accrued interest thereon of such notes, as of the date 
of redemption; or (2) the fair market value of such notes, as 
determined by an IQA, as of the date of redemption.

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, Minneola, FDLC, and any 
affiliates thereof, with the terms and conditions of such notes, and 
with the terms and conditions of this proposed exemption;
    (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

[[Page 43090]]

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: Yeehaw Ranch Land, LLC 
(Yeehaw), PMCC, LLC (PMCC), Bi-Coastal Holdings, LLC (Bi-Coastal), and 
Arcadia Holdings, LLC (Arcadia): Will covenant with FDI to use the 
``available proceeds,'' as defined in Section VI(1), from the sale of 
any real property owned by such entities, and all net royalties 
received by Arcadia from third parties, to pay off any debts owned by 
such entities to FDI. 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 Minneola with a written direction that Minneola pay 
the proceeds of such loan to the Plan as payment on any of the 
Subsequent Notes held by the Plan;
    (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 Minneola the net proceeds (after the payment of 
expenses) from the sale of all or a portion of the Property by FDLC. If 
any mortgage is placed on the Property, such mortgage will create a 
default under the Subsequent Notes held in the Plan that will allow the 
Plan to enforce its rights under such a default;
    (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 Minneola, at the option of FDI, either to pay to 
the Plan any funds Minneola receives from FDLC to the Plan, as payment 
on the Subsequent Notes held in the Plan, or to loan such funds to FDI 
for the purpose of FDI making a contribution to the Plan within thirty 
(30) days of such loan (either as a current contribution or a pre-
contribution of a future funding obligation);
    (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 
Minneola; and unconditionally guaranteed by Mrs. Gail Gregg-Strimenos 
and Mrs. Jeannie Gregg-Emack, who jointly and severally guarantee 
payment of the aggregate amount of such notes in full.

Section V: General Conditions

    (a) FDI, Minneola, FDLC, and any affiliates thereof, as applicable, 
maintain or causes to be maintained within the United States, starting 
on September 15, 2011, and ending on the date which is six (6) years 
after the last day any of the Subsequent Notes is held by the Plan, the 
records necessary to enable the persons, described below in Section 
V(b)(1)(A)-(C), to determine whether the conditions of this proposed 
exemption have been met, except that:
    (1) A separate prohibited transaction shall not be considered to 
have occurred solely because, due to circumstances beyond the control 
of FDI, Minneola, FDLC, or their affiliates, as applicable, such 
records are lost or destroyed prior to the end of the six (6) year 
period, described in Section V(a) above, and
    (2) No party in interest with respect to the Plan, other than FDI, 
Minneola, FDLC, and their affiliates, as applicable, shall be subject 
to the civil penalty that may be assessed under section 502(i) of the 
Act, or to the taxes imposed by section 4975(a) and (b) of the Code, if 
the records are not maintained, or are not available for examination, 
as required, below, by Section V(b)(1).

[[Page 43091]]

    (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 Internal Revenue Service; and
    (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, 
Minneola, FDLC, or their affiliates or commercial or financial 
information which is privileged or confidential.

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 Gallagher Fiduciary Advisers, LLC or any 
successor that has satisfied all of the criteria for a ``qualified 
independent fiduciary'' within the meaning of 29 CFR 2570.31(j).
    (d) The term ``Notes'' means a series of twenty-nine (29) 
promissory notes (declining in seniority from Note1 to 
Note29), issued by Minneola and acquired by FDI from Minneola 
as a result of the sale of FDLC which owns the Property by FDI to 
Minneola. Each of the Notes has a face value of $1,000,000, except for 
Note29, which has a face value of $1,330,000. Each of the 
Notes has an interest rate of 4.53 percent (4.53%) per annum compounded 
semi-annually.
    (e) The term ``Prospective Exemption Period'' means the period 
beginning on the date of publication in the Federal Register of the 
grant of this proposed exemption and ending on the last day any of the 
Subsequent Notes is held by the Plan.
    (f) The term ``Property'' means a certain tract of approximately 
1,770 acres of real estate which is located in the City of Minneola, 
Florida.
    (g) The term ``Minneola'' means Minneola AG, LLC, a Florida limited 
liability company.
    (h) The term ``FDI'' means Family Dynamics, Inc., a Florida 
corporation.
    (i) The term ``FDLC'' means Family Dynamics Land Company, LLC, a 
Florida limited liability company.
    (j) The term ``Plan'' means the Family Dynamics, Inc. Pension Plan.
    (k) The phrase ``FDI's illiquid assets'' means the following 
assets:
    (1) A $6.730 million dollar note from Yeehaw;
    (2) A $2.872 million dollar note from PMCC;
    (3) A $5.463 million dollar note from Bi-Coastal the sole owner of 
Arcadia;
    (4) A non-recourse loan to a Gregg family member in the amount of 
$5.661 million dollars;
    (5) The Notes with an aggregate value of $35.757 million dollars 
issued by Minneola and held by FDI which are the subject of this 
proposed exemption; and
    (6) Miscellaneous assets worth $0.403 million dollars.
    (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 Note3 through 
Note29.

Notice To Interested Persons

    The persons who may be interested in the publication in the Federal 
Register of the Notice of Proposed Exemption include all the 
participants and the beneficiaries of deceased participants in the Plan 
at the time the proposed exemption is issued.
    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 Federal Register. Such mailing will 
contain a copy of the Notice, as it appears in the Federal Register on 
the date of publication, plus a copy of the Supplemental Statement, as 
required, pursuant to 29 CFR 2570.43(a)(2), which will advise all 
interested persons of their right to comment and to request a hearing. 
All written comments and/or requests for a hearing must be received by 
the Department from interested persons within 45 days of the 
publication of this proposed exemption in the Federal Register.
    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

[[Page 43092]]

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 Washington, DC, this 11th day of July, 2014.
Lyssa E. Hall,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
[FR Doc. 2014-17425 Filed 7-23-14; 8:45 am]
BILLING CODE 4510-29-P