Grant of Individual Exemptions; Salomon Smith Barney Inc, et al

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 99-04; Exemption Application No. D-

10288, et al.]

Grant of Individual Exemptions; Salomon Smith Barney Inc, 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, D.C. 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.

Salomon Smith Barney, Inc. Located in New York, New York.

[Prohibited Transaction Exemption 99-04; Exemption Application No.

D-10288]

Exemption

Section I--Transactions

A. The restrictions of section 406(a)(1)(A) through (D) 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 (D) of the Code, shall

not apply to any purchase or sale of securities between certain

affiliates of Salomon Smith Barney, Inc. (SSB) which are foreign

broker-dealers or banks (the Foreign Affiliates, as defined below) and

employee benefit plans (the Plans) with respect to which the Foreign

Affiliates are parties in interest, including options written by a

Plan, SSB, or a Foreign Affiliate, provided that the following

conditions, and the General Conditions of Section II, are satisfied:

(1) The Foreign Affiliate customarily purchases and sells

securities for its own account in the ordinary course of its business

as a broker-dealer or bank;

(2) The terms of any transaction are at least as favorable to the

Plan as those the Plan could obtain in a comparable arm's length

transaction with an unrelated party; and

(3) Neither the Foreign Affiliate nor an affiliate thereof has

discretionary authority or control with respect to the investment of

the 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, and the Foreign Affiliate is a

[[Page 4128]]

party in interest or disqualified person with respect to the Plan

assets involved in the transaction solely by reason of section 3(14)(B)

of the Act or section 4975(e)(2)(B) of the Code, or by reason of a

relationship to a person described in such sections. For purposes of

this paragraph, the Foreign Affiliate shall not be deemed to be a

fiduciary with respect to a Plan solely by reason of providing

securities custodial services for a Plan.

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

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

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

(D) of the Code, shall not apply to any extension of credit to the

Plans by the Foreign Affiliates to permit the settlement of securities

transactions, regardless of whether they are effected on an agency or a

principal basis, or in connection with the writing of options

contracts, provided that the following conditions and the General

Conditions of Section II, are satisfied:

(1) The Foreign Affiliate is not a fiduciary with respect to the

Plan assets involved in the transaction, unless no interest or other

consideration is received by the Foreign Affiliate or an affiliate

thereof, in connection with such extension of credit; and

(2) Any extension of credit would be lawful under the Securities

Exchange Act of 1934 (the 1934 Act) and any rules or regulations

thereunder, if the 1934 Act, rules, or regulations were applicable.

C. The restrictions of section 406(a)(1)(A) through (D) 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 (D) of the Code, shall

not apply to the lending of securities to the Foreign Affiliates by the

Plans, provided that the following conditions, and the General

Conditions of Section II, are satisfied:

(1) Neither the Foreign Affiliate nor an affiliate thereof has

discretionary authority or control with respect to the investment of

the 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;

(2) The Plan receives from the Foreign Affiliate (by physical

delivery, by book entry in a securities depository, wire transfer, or

similar means) by the close of business on the day the loaned

securities are delivered to the Foreign Affiliate, collateral

consisting of cash, securities issued or guaranteed by the U.S.

Government or its agencies or instrumentalities, irrevocable U.S. bank

letters of credit issued by persons other than the Foreign Affiliate or

an affiliate of the Foreign Affiliate, or any combination thereof. All

collateral shall be in U.S. dollars, or dollar-denominated securities

or bank letters of credit, and shall be held in the United States;

(3) The collateral has, as of the close of business on the

preceding business day, a market value equal to at least 100 percent of

the then market value of the loaned securities (or, in the case of

letters of credit, a stated amount equal to same);

(4) The loan is made pursuant to a written loan agreement (the Loan

Agreement), which may be in the form of a master agreement covering a

series of securities lending transactions, and which contains terms at

least as favorable to the Plan as those the Plan could obtain in a

comparable arm's length transaction with an unrelated party;

(5) In return for lending securities, the Plan either: (a) Receives

a reasonable fee, which is related to the value of the borrowed

securities and the duration of the loan, or (b) has the opportunity to

derive compensation through the investment of cash collateral. In the

latter case, the Plan may pay a loan rebate or similar fee to the

Foreign Affiliate, if such fee is not greater than what the Plan would

pay in a comparable arm's length transaction with an unrelated party;

(6) The Plan receives at least the equivalent of all distributions

on the borrowed securities made 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, that the Plan would have received (net of applicable tax

withholdings) 1 had it remained the record owner of such

securities;

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\1\ The Department notes the applicant's representation that

dividends and other distributions on foreign securities payable to a

lending Plan may be subject to foreign tax withholdings and that the

Foreign Affiliate will always put the Plan back in at least as good

a position as it would have been in had it not loaned the

securities.

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(7) If the market value of the collateral as of the close of

trading on a business day falls below 100 percent of the market value

of the borrowed securities as of the close of trading on that day, the

Foreign Affiliate delivers additional collateral, by the close of the

Plan's business on the following business day, to bring the level of

the collateral back to at least 100 percent. However, if the market

value of the collateral exceeds 100 percent of the market value of the

borrowed securities, the Foreign Affiliate may require the Plan to

return part of the collateral to reduce the level of the collateral to

100 percent;

(8) Before entering into a Loan Agreement, the Foreign Affiliate

furnishes to the independent Plan fiduciary: (a) The most recent

available audited statement of the Foreign Affiliate's financial

condition, (b) the most recent available unaudited statement of its

financial condition (if more recent than the audited statement), and

(c) a representation that, at the time the loan is negotiated, there

has been no material adverse change in its financial condition that has

not been disclosed since the date of the most recent financial

statement furnished to the independent Plan fiduciary. Such

representation may be made by the Foreign Affiliate's agreeing that

each loan of securities shall constitute a representation that there

has been no such material adverse change.

(9) The Loan Agreement and/or any securities loan outstanding may

be terminated by the Plan at any time, whereupon the Foreign Affiliate

shall deliver certificates for securities identical to the borrowed

securities (or the equivalent thereof in the event of reorganization,

recapitalization, or merger of the issuer of the borrowed securities)

to the Plan within: (a) The customary delivery period for such

securities, (b) five business days, or (c) the time negotiated for such

delivery by the Plan and the Foreign Affiliate, whichever is least, or,

alternatively, such period as permitted by Prohibited Transaction Class

Exemption (PTCE) 81-6 (46 FR 7527, January 23, 1981, as amended at 52

FR 18754, May 19, 1987), as it may be amended or superseded;

2

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\2\ PTCE 81-6 provides an exemption under certain conditions

from section 406(a)(1)(A) through (D) of the Act and the

corresponding provisions of section 4975(c) of the Code for the

lending of securities that are assets of an employee benefit plan to

a U.S. broker-dealer registered under the 1934 Act (or exempted from

registration under the 1934 Act as a dealer in exempt Government

securities, as defined therein) or to a U.S. bank, that is a party

in interest with respect to such plan.

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(10) In the event that the loan is terminated and the Foreign

Affiliate fails to return the borrowed securities, or the equivalent

thereof, within the time described in paragraph 9, the Plan may

purchase securities identical to the borrowed securities (or their

equivalent as described above) and may apply the collateral to the

payment of the purchase price, any other obligations of the Foreign

Affiliate under the Loan Agreement, and any expenses associated with

the sale and/or purchase. The Foreign Affiliate is obligated to pay,

under the terms of the Loan Agreement,

[[Page 4129]]

and does pay, to the Plan the amount of any remaining obligations and

expenses not covered by the collateral, plus interest at a reasonable

rate. Notwithstanding the foregoing, the Foreign Affiliate may, in the

event it fails to return borrowed securities as described above,

replace non-cash collateral with an amount of cash not less than the

then current market value of the collateral, provided that such

replacement is approved by the independent Plan fiduciary; and

(11) The independent Plan fiduciary maintains the situs of the Loan

Agreement in accordance with the indicia of ownership requirements

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

29 CFR 2550.404(b)-1. However, in the event that the independent Plan

fiduciary does not maintain the situs of the Loan Agreement in

accordance with the indicia of ownership requirements of Section 404(b)

of the Act, the Foreign Affiliate shall not be subject to the civil

penalty which may be assessed under section 502(i) of the Act, or the

taxes imposed by section 4975(a) and (b) of the Code.

If the Foreign Affiliate fails to comply with any condition of the

exemption in the course of engaging in a securities lending

transaction, the Plan fiduciary who caused the Plan to engage in such

transaction shall not be deemed to have caused the Plan to engage in a

transaction prohibited by section 406(a)(1)(A) through (D) of the Act

solely by reason of the Foreign Affiliate's failure to comply with the

conditions of the exemption.

Section II--General Conditions

A. The Foreign Affiliate is a registered broker-dealer or bank

subject to regulation by a governmental agency, as described in Section

III.B, and is in compliance with all applicable rules and regulations

thereof in connection with any transactions covered by this exemption;

B. The Foreign Affiliate, in connection with any transactions

covered by this exemption, is in compliance with the requirements of

Rule 15a-6 (17 CFR 240.15a-6) of the 1934 Act, and Securities and

Exchange Commission (S.E.C.) interpretations thereof, providing for

foreign affiliates a limited exemption from U.S. broker-dealer

registration requirements;

C. Prior to any transaction, the Foreign Affiliate enters into a

written agreement with the Plan in which the Foreign Affiliate consents

to the jurisdiction of the courts of the United States for any civil

action or proceeding brought in respect of the subject transactions;

D. The Foreign Affiliate maintains, or causes to be maintained,

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

transaction such records as are necessary to enable the persons

described in paragraph E to determine whether the conditions of the

exemption have been met, except that----

(1) a party in interest with respect to a Plan, other than the

Foreign Affiliate, shall not be subject to a civil penalty under

section 502(i) of the Act or the taxes imposed by section 4975 (a) and

(b) of the Code, if such records are not maintained, or not available

for examination, as required by paragraph E; and

(2) a prohibited transaction shall not be deemed to have occurred

if, due to circumstances beyond the Foreign Affiliate's control, such

records are lost or destroyed prior to the end of the six year period;

E. Notwithstanding any provisions of subsections (a)(2) and (b) of

section 504 of the Act, the Foreign Affiliate makes the records

referred to in paragraph (D) unconditionally available during normal

business hours at their customary location to the following persons or

a duly authorized representative thereof: (1) The Department, the

Internal Revenue Service, or the S.E.C.; (2) any fiduciary of a Plan;

(3) any contributing employer to a Plan; (4) any employee organization

any of whose members are covered by a Plan; and (5) any participant or

beneficiary of a Plan. However, none of the persons described in (2)

through (5) of this subsection are authorized to examine the trade

secrets of the Foreign Affiliate or commercial or financial information

which is privileged or confidential.

Section III--Definitions

A. The term affiliate of another person shall include: (1) Any

person directly or indirectly, through one or more intermediaries,

controlling, controlled by, or under common control with such other

person; (2) any officer, director, or partner, employee or relative (as

defined in section 3(15) of the Act) of such other person; and (3) any

corporation or partnership of which such other person is an officer,

director or partner. For purposes of this definition, the term

``control'' means the power to exercise a controlling influence over

the management or policies of a person other than an individual;

B. The term Foreign Affiliate shall mean an affiliate of Salomon

Smith Barney Inc. (or its successor in name within Citigroup) that is

subject to regulation as a broker-dealer or bank by (1) the Ontario

Securities Commission and the Investment Dealers Association in Canada;

(2) the Securities and Futures Authority in the United Kingdom; (3) the

Deutsche Bundesbank and the Federal Banking Supervisory Authority,

i.e., der Bundesaufsichtsamt fuer das Kreditwesen (the BAK) in Germany;

or

(4) the Ministry of Finance and the Tokyo Stock Exchange in Japan;

C. The term security shall include equities, fixed income

securities, options on equity and on fixed income securities,

government obligations, and any other instrument that constitutes a

security under U.S. securities laws. The term ``security'' does not

include swap agreements or other notional principal contracts.

EFFECTIVE DATE: This exemption is effective as of June 7, 1996.

For a more complete statement of the facts and representations

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

the notice of proposed exemption published on October 6, 1998 at 63 FR

53703.

Written Comments

The Department received written comments with respect to the notice

of proposed exemption (the Notice), which were submitted by the

applicant. The comments request certain modifications and additions to

the operative language of the final exemption and to the Summary of

Facts and Representations (the Summary) contained in the Notice (see 63

FR 53705). These modifications and additions are discussed below.

1. First, in order to perfect the record upon which the Notice was

based, the comments provide new information regarding certain corporate

mergers and restructurings that have occurred. In November, 1997, a

subsidiary of the then Travelers Group Inc. (now, Citigroup Inc., as

discussed below) acquired all of the shares of Salomon Inc., the

ultimate parent of Salomon Brothers Inc. (Salomon Bros.). Initially,

Salomon Bros. and Smith Barney Inc. (Smith Barney), an affiliate of

Travelers Group Inc., were operated as separately registered broker-

dealers. However, on September 1, 1998, Salomon Bros. was merged into

Smith Barney, and Smith Barney became the surviving corporation and

changed its name to Salomon Smith Barney Inc. On October 15, 1998,

Salomon Smith Barney Inc. was merged into Pendex Real Estate

Corporation, a New York corporation. The New York entity survived the

merger and changed its name to Salomon Smith Barney Inc., a New York

[[Page 4130]]

corporation. In addition, in April of 1998, Travelers Group Inc. and

Citicorp announced a proposed merger. On October 8, 1998, the merger

closed, and Citicorp was merged into a subsidiary of Travelers Group

Inc. Travelers Group Inc. became a bank holding company and changed its

name to Citigroup Inc.

Accordingly, the applicant requests, and the Department concurs

with, the following revisions to the Notice, which are reflected in

this exemption.

a. All references to Salomon Brothers Inc. should be changed to

Salomon Smith Barney Inc. and all references to Salomon Bros. to SSB.

b. In Paragraph 1 of the Summary, the first two full subparagraphs

and the first sentence of the third subparagraph (see 63 FR 53705,

column 3) should be replaced with the following:

Salomon Smith Barney Inc., a New York corporation, is an

indirect subsidiary of Salomon Smith Barney Holdings Inc., a

Delaware corporation, which in turn is a subsidiary of the Citigroup

Inc. (formerly the Travelers Group Inc.). Salomon Smith Barney Inc.

is one of the largest full-line investment service firms in the

United States. It is registered with and regulated by the S.E.C. as

a broker-dealer, is registered with and regulated by the Commodities

Futures Trading Commission as a futures commission merchant, is a

member of the New York Stock Exchange and other principal securities

exchanges in the United States, and is also a member of the National

Association of Securities Dealers, Inc. As of December 31, 1997, the

then Travelers Group Inc. had approximately $387 billion in assets

and approximately $21 billion in stockholders' equity.

SSB has several affiliates which are broker-dealers or banks.

Those covered by the proposed exemption * * * etc.

c. The references to Salomon Bros. Canada Inc., Salomon Bros. U.K.

Limited, Salomon Bros. U.K. Equity Limited, Salomon Bros. International

Limited, Salomon Bros. AG, and Salomon Bros. Asia should be changed to

Salomon Smith Barney Canada Inc., Salomon Brothers U.K. Limited,

Salomon Brothers U.K. Equity Limited, Salomon Brothers International

Limited, Salomon Brothers AG, and Salomon Smith Barney (Japan) Limited,

respectively.

2. Second, in consideration of the corporate mergers and

restructurings that have occurred or may occur in the future involving

SSB, the comments request that the Department confirm that this

exemption will continue to be effective for any successor entity to

SSB, provided that Citigroup remains the indirect parent corporation of

such successor entity. In this regard, the Department notes that this

exemption would be effective if SSB reorganized or changed its name,

provided that such actions did not occur in connection with the sale of

the underlying assets of SSB to an unrelated third party. Thus, in

response to this comment, the Department has modified the definition of

the term ``Foreign Affiliate'' in Section III.B. of the exemption to

clarify that such term applies to an affiliate of SSB or its successor

in name within Citigroup.

3. Third, the comments request certain modifications in order to

clarify that the provisions of this exemption are consistent with other

recent similar exemptions granted by the Department.3

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\3\ See, e.g., Prohibited Transaction Exemption (PTE) 97-08 (62

FR 4811, January 31, 1997) regarding Morgan Stanley & Co., PTE 97-57

(62 FR 56203) regarding NatWest Securities Corp., and PTE 98-62 (63

FR 71307) regarding Barclays Bank PLC.

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a. The comments state that Section I.A. of the Notice (see 63 FR

53703-4) should be revised to read as follows (note deleted and

italicized language):

A. The restrictions of section 406(a)(1)(A) through (D) 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 (D) of the

Code, shall not apply to any purchase or sale of securities [delete

``including options on securities''] between certain affiliates of

Salomon Smith Barney Inc. (SSB) which are foreign broker-dealers or

banks (the Foreign Affiliates, as defined below) and employee

benefit plans (the Plans) with respect to which the Foreign

Affiliates are parties in interest, including options written by a

Plan, SSB, or a Foreign Affiliate,* * *

The revised language regarding options, above, is more specific in

order to clarify that such options may be written by a Plan. In this

regard, the Department cautions Plan fiduciaries to understand the

risks and benefits associated with particular options strategies and to

monitor such strategies effectively, in order to act prudently, as

required under section 404(a) of the Act, when making investment

decisions on behalf of a Plan.

b. The comments state that the following sentence should be added

to the end of Section I.A., Paragraph 3 of the Notice (see 63 FR 53704,

column 1):

For purposes of this paragraph, the Foreign Affiliate shall not

be deemed to be a fiduciary with respect to a Plan solely by reason

of providing securities custodial services for a Plan.

c. The comments state that the word ``any'' in Section I.B,

Paragraph 1 of the Notice (see 63 FR 53704, column 1) should be

replaced with the word ``such'' so that the phrase reads ``in

connection with such extension of credit.''

d. The comments state that, in order to avoid any ambiguity,

Footnote 4 of the Summary (see 63 FR 53707, center column) should be

modified by adding the following italicized language:

SSB represents that currently all such requirements under Rule

15a-6 relating to record-keeping of principal transactions would be

applicable [delete ``to''] in respect of any Foreign Affiliate in a

principal transaction that would be covered by this proposed

exemption.

The Department concurs with the applicant's requests and, where

necessary, has so modified the language of this exemption.

4. Fourth, the comments request, as a matter of clarification, that

the following sentence be added to the end of the first subparagraph of

Paragraph 11 in Section I.C. of the Notice (see 63 FR 53705, column 1):

However, in the event that the independent Plan fiduciary does

not maintain the situs of the Loan Agreement in accordance with the

indicia of ownership requirements of Section 404(b) of the Act, the

Foreign Affiliate shall not be subject to the civil penalty which

may be assessed under section 502(i) of the Act, or the taxes

imposed by section 4975(a) and (b) of the Code.

The Department acknowledges the above-described clarification to

the Notice and has so modified the language of this exemption.

5. Fifth, the comments request certain clarifications and additions

to the information contained in Paragraph 6 of the Summary (see 63 FR

53706-07), in order to conform the language of the Summary to the

relevant language of S.E.C. Rule 15a-6 and to reflect certain S.E.C.

interpretations or modifications to that rule, pursuant to a No-Action

letter issued to Cleary, Gottlieb, Steen & Hamilton on April 9, 1997.

a. The comments state that references to ``U.S. major institutional

investor'' and ``major institutional investor'' should be changed to

``major U.S. institutional investor'' in order to be consistent with

Rule 15a-6.

b. The comments state that a footnote should be inserted after the

definition of ``major U.S. institutional investor'' in the third full

subparagraph of Paragraph 6 of the Summary (see 63 FR 53707, column 1)

which reads as follows:

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

U.S. institutional investors'' has been expanded by an S.E.C. No-

Action letter. See No-Action Letter issued to Cleary, Gottlieb,

Steen & Hamilton on April 9, 1997 (the April 9, 1997 No-Action

Letter).

c. The comments state that another footnote should be inserted

after the text of subparagraph (c)(5) of Paragraph 6 of the Summary

(see 63 FR 53707, center column) which reads as follows:

Under certain circumstances described in the April 9, 1997 No-

Action Letter (e.g.,

[[Page 4131]]

clearance and settlement transactions), there may be direct

transfers of funds and securities between a Plan and a Foreign

Affiliate. Please note that in such situations (as in the other

situations covered by Rule 15a-6), the U.S. broker-dealer will not

be acting as a principal with respect to any duties it is required

to undertake pursuant to Rule 15a-6.

d. The comments state that the following sentence should be

inserted at the end of subparagraph (c)(6) of Paragraph 6 of the

Summary (see 63 FR 53707, center column):

Under certain circumstances, the foreign associated person may

have direct communications and contact with the U.S. institutional

investor. (See April 9, 1997 No-Action Letter.)

The Department acknowledges the above-described clarifications to

the information included in the Summary.

6. Finally, with respect to the lending of securities by a Plan to

a Foreign Affiliate, the applicant states that it wishes to avoid the

necessity of amending this individual exemption each time PTCE 81-6 is

further amended or superseded. Therefore, the comments request that the

following phrase be added to the language at the end of Section I.C.,

Paragraph 9 of the Notice (see 63 FR 53704, column 3), relating to the

required time for delivery of borrowed securities back to the plan:

``or, alternatively, such period as permitted by Prohibited

Transaction Class Exemption (PTCE) 81-6 (46 FR 7527, January 23,

1981, as amended at 52 FR 18754, May 19, 1987), as it may be amended

or superseded.''

In addition, the comment states that the above phrase should be

inserted after the sentence ending ``. . . whichever is least'' in

Paragraph 18 of the Summary (see 63 FR 53708, column 3), also relating

to the required time for delivery of borrowed securities back to the

plan.

The Department has modified the language of this exemption to

reflect the applicant's clarifications to the record, as discussed

above, and also acknowledges such clarifications as they relate to the

information contained in the Notice, as published in the Federal

Register on October 6, 1998.

No other comments were received by the Department.

Accordingly, based on the information contained in the entire

record, the Department has determined to grant the proposed exemption

as modified herein.

FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department,

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

Individual Retirement Accounts (the IRAs) for Sharilyn Brune,

Richard C. Glowacki, Carl B. Mockensturm, Arthur T. Parrish, W. Alan

Robertson, David A. Snavely and Duane Stranahan, Jr. (collectively,

the IRA Participants) Located in Holland, OH.

(Prohibited Transaction Exemption 99-05; Application Nos. D-10636--

D-10642, respectively)

Exemption

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 December 1, 1998 to (1) the cash sale by the

IRAs 4 to TTC Holdings, Inc. (TTC), the parent of The Trust

Company of Toledo, N.A., the trustee of the IRAs and a disqualified

person, of certain preferred stock (the Preferred Stock) issued by TTC;

and (2) the arrangement for the subsequent purchase by the IRA

Participants in their individual capacities, from TTC, pursuant to an

agreement with TTC, of an equal number of shares of common stock (the

Common Stock) issued by TTC, provided the following conditions are met:

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\4\ Pursuant to 29 CFR 2510.3-2(d), the IRAs are not within the

jurisdiction of Title I of the Employee Retirement Income Security

Act of 1974 (the Act). However, there is jurisdiction under Title II

of the Act pursuant to section 4975 of the Code.

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(a) The terms and conditions of the sale and purchase transactions

were at least as favorable to each IRA as the terms obtainable in an

arm's length transaction with an unrelated party.

(b) The sale by the IRAs of the Preferred Stock and the purchase by

the IRA Participants of the Common Stock, in their individual

capacities, were one-time transactions for cash which occurred on the

same business day;

(c) Each IRA received from TTC, as the sales price for the

Preferred Stock, cash consideration reflecting the fair market value of

such stock as determined by a qualified, independent appraiser;

(d) Each IRA Participant purchased, in his or her individual

capacity, shares of the Common Stock which were equal in number to the

shares of Preferred Stock sold by TTC;

(e) No IRA was required to pay any commissions, fees or other

expenses in connection with each sale transaction; and

(f) An independent fiduciary determined that the transactions

described herein were in the best interest and protective of the IRAs

at the time of the transactions; supervised and monitored such

transactions on their behalf; assured that the conditions of the

proposed exemption were met; and took whatever actions were necessary

and proper to protect the interests of the IRAs, including reviewing

amounts paid by TTC for the Preferred Stock.

EFFECTIVE DATE: This exemption is effective as of December 1, 1998.

For a more complete statement of the facts and representations

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

the notice of proposed exemption published on December 16, 1998 at 63

FR 69319.

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

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

Individual Retirement Accounts (the IRAs) for Robert C. Hummel,

Garth L. Gibson, Hugh B. Force, Ellen K. Davidson and Michael

Davidson (Collectively; the Participants) Located respectively in

Greeley, Colorado; Montrose, Colorado; Fort Collins, Colorado; Green

River, Wyoming; and Green River, Wyoming.

(Prohibited Transaction Exemption 99-06; Exemption Application Nos.

D-10683, D-10684, D-10685, D-10697 and D-10698)

Exemption

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 December 15, 1998, to the cash sales (the Sales)

of certain shares of closely-held common stock of First Mountain

Company (the Stock) by the IRAs 5 to the Participants,

disqualified persons with respect to the IRAs, provided that the

following conditions have been met:

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\5\ Because each IRA has only one Participant, there is no

jurisdiction under 29 CFR 2510.3-3(b). However, there is

jurisdiction under Title II of the Act pursuant to section 4975 of

the Code.

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1. The terms and conditions of the Sales were at least as favorable

to each IRA as those obtainable in an arm's-length transaction with an

unrelated party;

2. The Sale of the Stock by each IRA was a one-time transaction for

cash;

3. Each IRA received the fair market of the Stock, as was

established by a qualified, independent appraiser, at the time of the

Sale; and

4. The IRAs did not pay any commissions, costs or other expenses in

connection with the Sales.

Effective Date: The exemption is effective as of December 15, 1998.

For a more complete statement of the facts and representations

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

the notice of proposed exemption published on December 16, 1998 at 63

FR 69323 (the Notice).

[[Page 4132]]

Written Comments

The Department received one written comment from the applicant (the

Comment) with respect to the Notice and no requests for a public

hearing. The Comment states that Robb and Lynne Morgan Ruyle did not

consummate the transaction as outlined in the Notice. Instead, Robb and

Lynne Morgan Ruyle each decided to terminate their respective IRAs,

distribute the IRAs' assets to themselves, file the appropriate tax

returns, and pay the penalties and taxes associated with such

distributions. As such, the Applicant states that this exemption need

not apply to the Robb and Lynne Morgan Ruyle IRAs.

The Department concurs and has eliminated all references to the

Robb and Lynne Morgan Ruyle IRAs in this exemption. 6

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\6\ The files containing exemption requests for Robb and Lynn

Morgan Ruyle were assigned numbers D-10687 and D-10686,

respectively. Because the applicant requested that this exemption

not apply to the Robb and Lynn Morgan Ruyle IRAs, the Department has

closed these files administratively.

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Accordingly, the Department has determined to grant the proposed

exemption as modified herein.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department

at (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 do 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

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, DC, this 21st day of January, 1999.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, Department of Labor.

[FR Doc. 99-1849 Filed 1-26-99; 8:45 am]

BILLING CODE 4510-29-P