Grant of Individual Exemptions; VECO Corporation (VECO), et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-20; Exemption Application No. D-

10622, et al.]

Grant of Individual Exemptions; VECO Corporation (VECO), et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, DC. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR

47713, October 17, 1978) transferred the authority of the Secretary of

the Treasury to issue exemptions of the type proposed to the Secretary

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR part

2570, subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their participants

and beneficiaries; and

(c) They are protective of the rights of the participants and

beneficiaries of the plans.

VECO Corporation (VECO)

Located in Anchorage, Alaska

[Prohibited Transaction Exemption 99-20

Exemption Application Number D-10622]

Exemption

The restrictions of sections 406(a), 406(b)(1) and (2) of the Act

and the sanctions resulting from the application of section 4975 of the

Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall

not apply to the proposed sale (the Sale) of a certain parcel of

unimproved real property (the Property) from the VECO Corporation

Profit Sharing Plan and Trust (the Plan) to Norcon, Inc. (Norcon), a

party in interest with respect to the Plan, provided that the following

conditions are met:

(a) The terms and conditions of the Sale will be at least as

favorable to the Plan as those obtainable in an arm's length

transaction with an unrelated party;

(b) Norcon will pay the greater of $2,940,000 or the fair market

value of the Property on the date of the Sale as established by a

qualified, independent appraiser;

(c) The Sale will be a one-time transaction for cash;

(d) The Plan will pay no fees or commissions with respect to the

Sale; and

(e) An independent fiduciary acting on behalf of the Plan has

reviewed the terms of the Sale and has represented that the transaction

is in the best interest of the Plan and protective of the Plan's

participants and beneficiaries.

For a more complete statement of the facts and representations

supporting this exemption, refer to the notice of proposed exemption

published on March 8, 1999 at 64 FR 11052.

Written Comments: The Department received three letters signed by

49 current or former participants in the Plan endorsing the transaction

as proposed in the Notice.

[[Page 28839]]

FOR FURTHER INFORMATION CONTACT: Mr. Chris Motta of the Department,

telephone (202) 219-8881. (This is not a toll-free number.

Citibank, N.A. (Citibank) and Salomon Smith Barney Inc. (SSB)

Located in New York, NY

[Prohibited Transaction Exemption 99-21;

Exemption Application No. D-10674]

Exemption

The restrictions of sections 406(a)(1)(A) through (D) and 406(b)(1)

and (2) of the Act and the sanctions resulting from the application of

section 4975 of the Code, by reason of section 4975(c)(1)(A) through

(E) of the Code, shall not apply, effective October 8, 1998, to (1) the

past and continued lending of securities to SSB and affiliated U.S.

registered broker-dealers of SSB or Citibank (together, SSB/U.S.) and

certain foreign affiliates (the Foreign Affiliates) of SSB and Citibank

which are broker-dealers or banks based in the United Kingdom (SB/

U.K.), Japan (SSB/Asia), Germany (SSB/Germany), Canada (SSB/Canada) and

Australia (SSB/Australia), including their affiliates or

successors,1 by employee benefit plans (the Client Plans) or

commingled investment funds holding Client Plan assets, for which

Citibank or any U.S. affiliate of Citibank, acts as securities lending

agent (or sub-agent), including those Client Plans for which Citibank

also acts as directed trustee or custodian of the securities being

lent; and (2) to the receipt of compensation by Citibank or any U.S.

affiliate of Citibank in connection with these transactions, provided

that the following conditions are met:

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\1\ Unless otherwise noted, SSB/U.S. and the Foreign Affiliates

are collectively referred to as SSB.

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(a) For each Client Plan, neither Citibank, SSB nor any of their

affiliates either has or exercises discretionary authority or control

with respect to the investment of the Client Plan assets involved in

the transaction, or renders investment advice (within the meaning of 29

CFR 2510.3-21(c)) with respect to those assets.

(b) Any arrangement for Citibank to lend Client Plan securities to

SSB in either an agency or sub-agency capacity is approved in advance

by a Client Plan fiduciary who is independent of SSB and

Citibank.2 In this regard, the independent Client Plan

fiduciary also approves the general terms of the securities loan

agreement (the Loan Agreement) between the Client Plan and SSB,

although the specific terms of the Loan Agreement are negotiated and

entered into by Citibank and Citibank acts as a liaison between the

lender and the borrower to facilitate the lending transaction.

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\2\ The Department, herein, is not providing exemptive relief

for securities lending transactions engaged in by primary lending

agents, other than Citibank and its affiliates, beyond that provided

pursuant to Prohibited Transaction Exemption (PTE) 81-6 (46 FR 7527,

January 23, 1981, as amended at 52 FR 18754, May 19, 1987) and PTE

82-63 (47 FR 14804, April 6, 1982).

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(c) The terms of each loan of securities by a Client Plan to SSB is

at least as favorable to such Client Plans as those of a comparable

arm's length transaction between unrelated parties.

(d) A Client Plan may terminate the agency or sub-agency

arrangement at any time without penalty to such Client Plan on five

business days notice.

(e) The Client Plan receives from SSB (either by physical delivery

or by book entry in a securities depository located in the United

States, wire transfer or similar means) by the close of business on or

before the day the loaned securities are delivered to SSB, collateral

consisting of cash, securities issued or guaranteed by the United

States Government or its agencies or instrumentalities, or irrevocable

United States bank letters of credit issued by a person other than

Citibank, SSB or an affiliate thereof, or any combination thereof, or

other collateral permitted under PTE 81-6, as it may be amended or

superseded.

(f) As of the close of business on the preceding business day, the

fair market value of the collateral initially equals at least 102

percent of the market value of the loaned securities and, if the market

value of the collateral falls below 100 percent, SSB delivers

additional collateral on the following day such that the market value

of the collateral again equals at least 102 percent.

(g) Prior to entering into the Loan Agreement, SSB furnishes

Citibank its most recently available audited and unaudited financial

statements, which are, in turn, provided to a Client Plan, as well as a

representation by SSB, that as of each time it borrows securities,

there has been no material adverse change in its financial condition

since the date of the most recently-furnished statement that has not

been disclosed to such Client Plan; provided, however, that in the

event of a material adverse change, Citibank does not make any further

loans to SSB unless an independent fiduciary of the Client Plan is

provided notice of any material adverse change and approves the loan in

view of the changed financial condition.

(h) In return for lending securities, the Client Plan either--

(1) Receives a reasonable fee, which is related to the value of the

borrowed securities and the duration of the loan; or

(2) Has the opportunity to derive compensation through the

investment of cash collateral. (Under such circumstances, the Client

Plan may pay a loan rebate or similar fee to SSB, if such fee is not

greater than the fee the Client Plan would pay in a comparable arm's

length transaction with an unrelated party.)

(i) All procedures regarding the securities lending activities

conform to the applicable provisions of Prohibited Transaction

Exemptions PTE 81-6 and PTE 82-63 as such class exemptions may be

amended or superseded as well as to applicable securities laws of the

United States, the United Kingdom, Japan, Germany, Canada or Australia.

(j) Each SSB borrower indemnifies and holds harmless each lending

Client Plan in the United States against any and all losses, damages,

liabilities, costs and expenses (including attorney's fees) which the

Client Plan may incur or suffer directly arising out of the use of

securities of such Client Plan by such SSB borrower or the failure of

such borrower to return such securities to the Client Plan. In the

event that the Foreign Affiliate defaults on a loan, Citibank, as agent

for the lending Client Plan, will liquidate the loan collateral to

purchase identical securities for the Client Plan. With respect to a

default by a Foreign Affiliate, if the collateral is insufficient to

accomplish such purchase, Citibank will indemnify the Client Plan for

any shortfall in the collateral plus interest on such amount and any

transaction costs incurred. Alternatively, with respect to a default by

the Foreign Affiliate, if such identical securities are not available

on the market, Citibank will pay the Client Plan cash equal to (1) the

market value of the borrowed securities as of the date they should have

been returned to the Client Plan, plus (2) all the accrued financial

benefits derived from the beneficial ownership of such loaned

securities as of such date, plus (3) interest from such date to the

date of payment. (The amounts paid shall include the cash collateral or

other collateral that is liquidated and held by Citibank on behalf of

the Client Plan.)

(k) The Client Plan receives the equivalent of all distributions

made to holders of the borrowed securities during the term of the loan,

including, but not limited to, cash dividends, interest payments,

shares of stock as a result of stock splits and rights to purchase

additional securities, or other distributions.

(l) Prior to the approval of the lending of its securities to SSB

by a new Client

[[Page 28840]]

Plan, copies of the notice of proposed exemption (the Notice) and, once

published in the Federal Register, the final exemption, are provided to

such Client Plan.

(m) Each Client Plan receives monthly reports with respect to its

securities lending transactions, including, but not limited to the

information described in Representation 28 of the Notice so that an

independent fiduciary of the Client Plan may monitor such transactions

with SSB.

(n) Only Client Plans with total assets having an aggregate market

value of at least $50 million are permitted to lend securities to SSB;

provided, however, that--

(1) In the case of two or more Client Plans which are maintained by

the same employer, controlled group of corporations or employee

organization (the Related Client Plans), whose assets are commingled

for investment purposes in a single master trust or any other entity

the assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the

Plan Asset Regulation), which entity is engaged in securities lending

arrangements with SSB, the foregoing $50 million requirement shall be

deemed satisfied if such trust or other entity has aggregate assets

which are in excess of $50 million; provided that if the fiduciary

responsible for making the investment decision on behalf of such master

trust or other entity is not the employer or an affiliate of the

employer, such fiduciary has total assets under its management and

control, exclusive of the $50 million threshold amount attributable to

plan investment in the commingled entity, which are in excess of $100

million.

(2) In the case of two or more Client Plans which are not

maintained by the same employer, controlled group of corporations or

employee organization (the Unrelated Client Plans), whose assets are

commingled for investment purposes in a group trust or any other form

of entity the assets of which are ``plan assets'' under the Plan Asset

Regulation, which entity is engaged in securities lending arrangements

with SSB, the foregoing $50 million requirement is satisfied if such

trust or other entity has aggregate assets which are in excess of $50

million (excluding the assets of any Client Plan with respect to which

the fiduciary responsible for making the investment decision on behalf

of such group trust or other entity or any member of the controlled

group of corporations including such fiduciary is the employer

maintaining such Client Plan or an employee organization whose members

are covered by such Client Plan). However, the fiduciary responsible

for making the investment decision on behalf of such group trust or

other entity--

(i) Has full investment responsibility with respect to plan assets

invested therein; and

(ii) Has total assets under its management and control, exclusive

of the $50 million threshold amount attributable to plan investment in

the commingled entity, which are in excess of $100 million. (In

addition, none of the entities described above are formed for the sole

purpose of making loans of securities.)

(o) With respect to each successive two-week period, on average, at

least 50 percent or more of the outstanding dollar value of securities

loans negotiated on behalf of Client Plans will be to unrelated

borrowers.

(p) In addition to the above, all loans involving the Foreign

Affiliates have the following supplemental requirements:

(1) Such Foreign Affiliate is registered as a broker-dealer or bank

with--

(i) The Securities and Futures Authority of the United Kingdom in

the case of SB/U.K.;

(ii) The Ministry of Finance and the Tokyo Stock Exchange in the

case of SSB/Asia;

(iii) The Deutsche Bundesbank and the Federal Banking Supervisory

Authority in the case of SSB/Germany;

(iv) The Ontario Securities Commission and the Investment Dealers

Association in the case of SSB/Canada; and

(v) The Australian Securities & Investments Commission and the

Australian Stock Exchange Limited in the case of SSB/Australia.

(2) Such broker-dealer or bank is in compliance with all applicable

rules and regulations thereof as well as with all requirements of Rule

15a-6 (Rule 15a-6) (17 CFR 240.15a-6) under the Securities Exchange Act

of 1934 (the 1934 Act) which provides foreign broker-dealers and banks

a limited exemption from United States registration requirements and

interpretations and amendments thereof to Rule 15a-6 by the Securities

and Exchange Commission (the SEC), to the extent applicable;

(3) All collateral is maintained in United States dollars or

dollar-denominated securities or letters of credit;

(4) All collateral is held in the United States and Citibank

maintains the situs of the securities Loan Agreements in the United

States under an arrangement that complies with the indicia of ownership

requirements under section 404(b) of the Act and the regulations

promulgated under 29 CFR 2550.404(b)-1; and

(5) The Foreign Affiliate provides SSB (i.e., Salomon Smith Barney

Inc.) a written consent to service of process in the United States for

any civil action or proceeding brought in respect of the securities

lending transaction, which consent provides that process may be served

on such borrower by service on SSB (i.e., Salomon Smith Barney Inc.).

(q) Citibank and its affiliates maintain, or cause to be maintained

within the United States for a period of six years from the date of

such transaction, in a manner that is convenient and accessible for

audit and examination, such records as are necessary to enable the

persons described in paragraph (r)(1) to determine whether the

conditions of the exemption have been met, except that--

(1) A prohibited transaction will not be considered to have

occurred if, due to circumstances beyond the control of Citibank and/or

its affiliates, the records are lost or destroyed prior to the end of

the six year period; and

(2) No party in interest other than Citibank 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 paragraph (r)(1).

(r)(1) Except as provided in subparagraph (r)(2) of this paragraph

and notwithstanding any provisions of subsections (a)(2) and (b) of

section 504 of the Act, the records referred to in paragraph (q) are

unconditionally available at their customary location during normal

business hours for examination by:

(i) Any duly authorized employee or representative of the

Department, the Internal Revenue Service or the SEC;

(ii) Any fiduciary of a participating Client Plan or any duly

authorized representative of such fiduciary;

(iii) Any contributing employer to any participating Client Plan or

any duly authorized employee representative of such employer; and (iv)

Any participant or beneficiary of any participating Client Plan, or any

duly authorized representative of such participant or beneficiary.

(r)(2) None of the persons described above in paragraphs

(r)(1)(ii)-(r)(1)(iv) of this paragraph (r)(1) are authorized to

examine the trade secrets of SSB or commercial or financial information

which is privileged or confidential.

EFFECTIVE DATE: This exemption is effective as of October 8, 1998.

[[Page 28841]]

For a more complete statement of the facts and representations

supporting Department's decision to grant this exemption, refer to the

notice of proposed exemption (the Notice) published on March 4, 1999 at

64 FR 10493.

Written Comments

The Department received one written comment with respect to the

Notice. The comment was submitted by Citibank and SSB (hereinafter, the

Applicants) and it requests modifications to the conditional language

and the Summary of Facts and Representations (the Summary) of the

Notice for purposes of clarification or to revise several typographical

errors. Following is a discussion of the Applicants' comments, the

Department's responses to these comments and a comment made by the

Department on its own initiative.

1. Paragraph (g) of the Notice. On page 10494 of the Notice,

paragraph (g) provides, in part, that prior to entering the Loan

Agreement, SSB will furnish Citibank its most recently available

``audited and unaudited statements'' which will be provided to the

Client Plan. To clarify that the statements will be of a financial

nature, the Applicants suggest that the word ``financial'' be inserted

in the condition after the phrase ``audited and unaudited.'' The

Applicants also suggest that the verb ``is'', which follows the word

``which'' be replaced with the verb ``are.''

In response to this comment, the Department has revised the

beginning of paragraph (g) to read as follows:

(g) Prior to entering into the Loan Agreement, SSB furnishes

Citibank its most recently available audited and unaudited financial

statements, which are in turn, * * *

2. Paragraph (l) of the Notice. On page 10494 of the Notice,

paragraph (l) states that prior to the approval of the lending of its

securities to SSB by a new Client Plan, copies of the proposed

exemption and the final exemption will be provided to such Client Plan.

The Applicants recommend that the Department revise this condition to

clarify that copies of the final exemption will be made available to

Client Plans once they are published in the Federal Register.

In response to this comment, the Department has revised paragraph

(l) of the Notice to read as follows:

(l) Prior to the approval of the lending of its securities to

SSB by a new Client Plan, copies of the notice of proposed exemption

(the Notice) and, once published in the Federal Register, the final

exemption, are provided to such Client Plan.

3. Paragraph (r)(1) of the Notice. On page 10495 of the Notice,

paragraph (r)(1) provides that the records Citibank is required to

maintain for purposes of the requested exemption are to be made

available at their customary location during normal business hours for

certain designated persons (i.e., the Service, the Department, a Client

Plan fiduciary, etc.) and their authorized representatives. For

purposes of clarification, the Applicants suggest that the phrase ``for

examination'' be inserted in the condition immediately following the

phrase ``normal business hours.''

The Department concurs with this clarification and has modified

paragraph (r)(1) of the Notice, accordingly.

4. Preamble and General Summary Changes. On page 10495 of the

Notice, the Preamble describes the 1998 merger (the Merger) between

Citicorp Inc. (Citicorp) and a subsidiary of the Travelers Group

(Travelers), the restructuring of Travelers as a bank holding company

and its redesignation as ``Citigroup, Inc.'' (Citigroup). The Preamble

also discusses the Applicants' request that the exemption apply

retroactively to pre-existing securities lending arrangements between

Citibank and broker-dealers associated with Citigroup which became

affiliated with Citibank following the Merger.

To clarify more accurately the status of Citibank with respect to

securities lending arrangements before the Merger, the Applicants have

requested that the Department modify the third sentence of the second

paragraph of the Preamble to read as follows:

Although prior to the Merger Citibank did not lend Client Plan

securities to any of its then-current affiliates, upon consummation

of the Merger, loans to SSB entity borrowers * * *

In addition, the Applicants request that the Department change

references to the word ``Travelers'' appearing in the Preamble and

elsewhere in the Summary to ``Citigroup'' to reflect the new name for

the entity.

The Department concurs with the requested changes and has modified

the Preamble and made corresponding changes to Representation 1(a), (b)

and (d) of the Summary.

5. Representation 1 of the Summary. On page 10495 of the Notice,

Representation 1 of the Summary provides descriptions of the Applicants

and their Foreign Affiliates. To clarify that SSB is a New York

corporation and not a Delaware corporation, the Applicants request that

the Department modify the first sentence of the first paragraph of

Representation 1(a), accordingly.

In addition, the Applicants wish to revise the sixth sentence of

the first paragraph of Representation 1(a) as follows to reflect the

updated financial information obtained for Citicorp:

* * * As of December 31, 1998, Citigroup had approximately $668

billion in assets and approximately $42.7 billion in shareholders'

equity.

In response to these comments, the Department has made the changes

suggested by the Applicants.

6. Representation 2 of the Summary. On page 10496 of the Notice,

Representation 2 of the Summary describes the governmental entities

regulating the Foreign Affiliates. The Applicants, however, wish to

point out that due to a typographical error, the verb ``is'' was

omitted from the third sentence of the first paragraph of

Representation 2 following the reference to ``SSB/Asia.''

In response to this comment, the Department has revised

Representation 2 by inserting the missing word.

7. Representations 4 and 5 and Footnote 8 of the Summary. On page

10497 of the Notice, Representations 4 and 5 and Footnote 8 of the

Summary describe Rule 15a-6 of the 1934 Act and its applicability to

and compliance by the Foreign Affiliates. In order to be consistent

with the requirements of Rule 15a-6, the Department has, on its own

initiative, revised references to the terms ``U.S. major institutional

investor'' and ``major institutional investor,'' which appear in

Representations 4 and 5 and in Footnote 8 of the Summary, to the term

``major U.S. institutional investor.'' Moreover, for purposes of

clarification, the Department has inserted the following language at

the beginning of Footnote 8:

Note that the categories of entities that qualify as ``major

U.S. institutional investors'' has been expanded by a SEC No-Action

letter.

The Applicants have concurred with the foregoing changes made by

the Department.

8. Representation 12 of the Summary. On pages 10498 and 10499 of

the Notice, Representation 12 of the Summary describes the various

forms of securities lending agreements that may be entered into by

Client Plans with Citibank and the relevant terms of such agreements.

However, to correct a typographical error, the Applicants suggest that

the Department change the reference to ``Representation 10,'' in the

second sentence of the third paragraph of Representation 12, to

``Representation 11.''

[[Page 28842]]

In response to this comment, the Department has made the requested

modification.

9. Footnote 17 of the Summary. On page 10499 of the Summary,

Footnote 17 discusses the capital adequacy requirements for the

Applicants' U.S.-domiciled and Foreign Affiliates. To correct a

typographical error appearing in the footnote, the Applicants request

that the Department change the reference to ``SSB,'' appearing in the

first sentence of Footnote 17, to ``SSB/U.S.'' In addition, the

Applicants request that the Department delete one of the duplicate

references to SSB/Canada, appearing in the first sentence of the second

paragraph of the footnote, and substitute the Foreign Affiliate, ``SSB/

Australia,'' in its stead.

In response to these comments, the Department has made the

suggested changes.

10. Representation 16 of the Summary. On page 10499 of the Notice,

Representation 16 of the Summary provides further details regarding the

terms of the Agency Agreement and the Primary Lending Agreement,

including the compensation paid to Citibank for its services as lending

agent, custodian and manager of the cash collateral received. To

emphasize that Citibank may also serve as a ``directed trustee'' to a

Client Plan, the Applicants recommend that the term ``directed

trustee'' be inserted immediately preceding the word ``custodian'' in

the second sentence of the first paragraph of Representation 16.

In response, the Department has made the suggested change.

11. Representations 29 and 30 of the Summary. On page 10501 of the

Notice, Representation 29 of the Summary describes the functions of the

monthly report that will be provided to each Client Plan participating

in the Applicants' securities lending program. The Applicants, however,

request that the second sentence of Representation 29 be modified by

inserting the phrase ``upon the request of the Client Plan''

immediately following the phrase ``In addition'' in order to be

consistent with previously-agreed to language.

In addition, on page 10502 of the Notice, Representation 30 of the

Summary discusses the requirements for securities lending by two or

more Unrelated Client Plans whose assets are commingled in a group

trust or a ``plan assets'' investment entity and describes an ``outside

business test'' that will be imposed on the fiduciary exercising

investment discretion over the commingled entity.

To correct a typographical error appearing in the Notice, the

Applicants request that the Department insert the phrase ``member of

the controlled group of corporations'' immediately following the phrase

``or other entity or any'' in the second paragraph of Representation

30.

In response to the comments discussed above, the Department has

made the requested changes.

For further information regarding the Applicants' comment letter or

other matters discussed herein, interested persons are encouraged to

obtain copies of the exemption application file (Exemption Application

No. D-10674) the Department is maintaining in this case. The complete

application file, as well as all supplemental submissions received by

the Department, are made available for public inspection in the Public

Documents Room of the Pension and Welfare Benefits Administration, Room

N-5638, U.S. Department of Labor, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210.

Accordingly, after giving full consideration to the entire record,

including the written comment provided by the Applicants, the

Department has made the aforementioned changes to the Notice and has

decided to grant the exemption subject to the modifications described

above.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

Operating Engineers Local 324 Journeyman and Apprentice Training

Fund (the Plan)

Located in Howell, Michigan

(Prohibited Transaction Exemption 99-22

Exemption Application No. L-10645)

Exemption

The restrictions of sections 406(a), 406(b)(1) and (2) of the Act

shall not apply to: (1) the proposed loan of $1,500,000 (the Loan) to

the Plan by the International Union of Operating Engineers Local 324,

AFL-CIO (the Union), a party in interest with respect to the Plan, for

the repayment of certain outstanding loans (the Original Loans) made to

the Plan by the Michigan National Bank (the Bank), an unrelated party;

and (2) as of March 12, 1998, the pledging of certificates of deposit

by the Union as security for the Original Loans; provided that the

following conditions are met:

(a) The terms and conditions of the Loan are at least as favorable

to the Plan as those which the Plan could have obtained in an arm's-

length transaction with an unrelated party;

(b) The Plan's trustees determine that the Loan is appropriate for

the Plan and in the best interests of the Plan's participants and

beneficiaries;

(c) An independent fiduciary acting on behalf of the Plan (the

Independent Fiduciary) reviews the terms of the Loan and determines

that the Loan is protective of and in the best interests of the Plan;

(d) The Independent Fiduciary monitors the Loan, as well as the

conditions of this exemption, and takes whatever actions are necessary

to safeguard the interests of the Plan under the Loan;

(e) The Loan is repaid by the Plan solely with funds the Plan

retains after paying all of its operational expenses; and

(f) The terms and conditions relating to the pledging of the

certificates of deposit by the Union as security for the Original Loans

were in the best interest of the Plan and its participants and

beneficiaries.

EFFECTIVE DATE: This exemption is effective as of March 12, 1998.

For a more complete statement of the facts and representations

supporting this exemption, refer to the notice of proposed exemption

published on January 21, 1999 at 64 FR 3356.

FOR FURTHER INFORMATION CONTACT: Christopher J. Motta of the

Department, telephone (202) 219-8883 (this is not a toll free number).

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

any other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

[[Page 28843]]

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application are true and complete and accurately describe all material

terms of the transaction which is the subject of the exemption. In the

case of continuing exemption transactions, if any of the material facts

or representations described in the application change after the

exemption is granted, the exemption will cease to apply as of the date

of such change. In the event of any such change, application for a new

exemption may be made to the Department.

Signed at Washington, D.C., this 24th day of May, 1999.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 99-13496 Filed 5-26-99; 8:45 am]

BILLING CODE 4510-29-P