Federal Register / Vol. 60, No. 2 / Wednesday, January 4, 1995 / Notices 483

Pension and Welfare Benefits

Administration

[Prohibited Transaction Exemption 94–87;

Exemption Application No. D–9770, et al.]

Grant of Individual Exemptions; The

Lubrizol Corporation Employees’

Stock Purchase and Savings Plan et al.

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Grant of individual exemptions.

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 (were 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) The are protective of the rights of

the participants and beneficiaries of the

plans.

The Lubrizol Corporation Employees’

Stock Purchase and Savings Plan (the

Plan)

Located in Wickliffe, Ohio

[Prohibited Transaction Exemption 94–87;

Exemption Application No. D–9770]

Exemption

The restrictions of section 406(a),

406(b)(1) and (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 (E) of

the Code, shall not apply to the cash

sale by the Plan to the Lubrizol

Corporation, the Plan sponsor and a

party in interest with respect to the

Plan, of the Plan’s interest (the Interest)

in certain securities (the Securities)

issued by Columbia Gas Systems, Inc.,

provided: (a) no commissions or other

expenses are paid by the Plan in

connection with the sale; (b) the Plan

will receive the greater of $227,158.01

or the fair market value of the Plan’s

Interest in the Securities at the time of

the sale as determined by Bankers Trust

Company (BTC), the Plan’s independent

fiduciary; and (c) BTC has determined

that the transaction is appropriate for

the plan and in the best interest of the

Plan and its participants and

beneficiaries.

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

November 1, 1994 at 59 FR 54637.

FOR FURTHER INFORMATION CONTACT: Gary

H. Lefkowitz of the Department,

telephone (202) 219–8881. (This is not

a toll-free number).

Wells Fargo Bank, N.A. (Wells Fargo)

and Wells Fargo Institutional Trust

Company, N.A. (WFITC)

Located in San Francisco, California

[Prohibited Transaction Exemption 94–88;

Application Nos. D–9718 and D–9719]

Exemption

The restrictions of sections 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 that are assets of an

employee benefit plan for which Wells

Fargo, WFITC or an affiliated company

(the Applicants) are fiduciaries,

provided that the following conditions

are met:

(A) The securities are loaned to a

broker-dealer which is registered under

the Securities Exchange Act of 1934 (the

1934 Act) or exempted from registration

under section 15(a)(1) of the 1934 Act as

a dealer in exempted Government

Securities (as defined in section 3(a)(12)

of the 1934 Act) or to a bank (A

Borrower);

(B) Neither the Borrower nor an

affiliate of the Borrower 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;

(C) The lending plan receives from the

Borrower (either by physical delivery or

by book entry in a securities depository)

by the close of the lending fiduciary’s

business on the day in which the

securities lent are delivered to the

Borrower, collateral (the Collateral)

consisting of cash, securities issued or

guaranteed by the United States

Government or its agencies or

instrumentalities, or irrevocable bank

letters of credit issued by a person other

than the Borrower or an affiliate thereof,

or any combination thereof, having, as

of the close of business on the preceding

day, a market value or, in the case of

letters of credit a stated amount, equal

to not less than 100% of the then market

value of the securities lent;

(D) Prior to the loan of any securities,

the Borrower furnishes the Applicants

with the most recent available audited

statements of the Borrower’s financial

condition and a representation that, at

the time the loan is negotiated, there has

been no material adverse change in its

financial condition since the date of the

most recent financial statements

furnished to the plan, that has not been

disclosed to the Applicants. Such

representation may be made by the

Borrower’s agreeing that each such loan

shall constitute a representation by the

Borrower that there has been no such

material adverse change;

(E) The loan is made pursuant to a

written loan agreement, the terms of

which are at least as favorable to the

lending plan as an arm’s length

transaction with an unrelated party

would be. Such agreement may be in the

form of a master agreement covering a

series of securities lending transactions;

(F) (1) The lending plan (a) receives

a reasonable fee that 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. Where the plan has that
484 Federal Register / Vol. 60, No. 2 / Wednesday, January 4, 1995 / Notices

opportunity, the plan may pay a loan

rebate or similar fee to the Borrower, if

such fee is not greater than the plan

would pay in a comparable transaction

with an unrelated party;

(2) The plan receives the equivalent of

all distributions made on or with

respect to the loaned securities during

the term of the loan;

(G) If the market value of the

Collateral at the close of trading on a

business day is less than 100% of the

market value of the borrowed securities

at the close of trading on that day, the

Borrower shall deliver, by the close of

business on the following business day,

an additional amount of Collateral (as

described in paragraph C) the market

value of which, together with the market

value of all previously delivered

Collateral, equals at least 100% of the

market value of all the borrowed

securities as of such preceding day.

Notwithstanding the foregoing, part of

the Collateral may be returned to the

Borrower if the market value of the

Collateral exceeds 100% of the market

value of the borrowed securities, as long

as the market value of the remaining

Collateral equals at least 100% of the

market value of the borrowed securities;

(H) The loan may be terminated by

the lending plan at any time. In the

event of termination, the Borrower shall

deliver Replacement Securities, as

defined below, to the lending plan

within 5 business days of notice of

termination of the loan. The value of the

securities that the Borrower is obligated

to deliver upon termination of a loan of

Agency Securities will be no less than

the value of the loaned Agency

Securities at the termination of the loan.

For purposes of this exemption, the

term ‘‘Replacement Securities’’ means

securities that: (a) are issued and/or

guaranteed by the same agency as the

loaned securities, (b) have the same

coupon as the loaned securities, (c) have

a principal amount at least equal to but

no more than 2% greater than the then

current principal amount of the loaned

securities, (d) are of the same program

or class as the loaned securities, and (e)

either (i) have an aggregate weighted

average maturity within a 12-month

variance of the then current aggregate

weighted average maturity of the loaned

securities, but in no case will the

variance be more than 10% of such

aggregate weighted average maturity of

the loaned securities, or (ii) meet some

other comparable objective standard

containing a range of variance that is no

greater than that described in (i) above

and that assures that the aging of the

loaned securities is properly taken into

account.

If the Borrower fails to return the

Replacement Securities, the lending

fiduciary may apply the Collateral to

purchase other Replacement Securities,

to cover any other obligations of the

Borrower under the agreement, or to pay

other expenses associated with the sale

and/or purchase. In addition, the

Borrower is obligated to pay the amount

of any remaining obligations and

expenses not covered by the Collateral

plus interest at a reasonable rate.

Notwithstanding the foregoing, the

Borrower may, in the event the

Borrower 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

such replacement is approved by the

lending fiduciary.

If the Borrower fails to comply with

any condition of this 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 Borrower’s

failure to comply with the conditions of

the exemption.

For purposes of this exemption the

term ‘‘affiliate’’ of another person shall

include: (a) Any person directly or

indirectly, through one or more

intermediaries, controlling, controlled

by, or under common control with such

other person; (b) Any officer, director, or

partner, employee or relative (as defined

in section 3(15) of the Act) of such other

person; and (c) Any corporation or

partnership of which such other person

is an officer, director 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.

EFFECTIVE DATE: This exemption is

effective May 27, 1994.

WRITTEN COMMENTS: In the Notice of

Proposed Exemption (the Notice), the

Department invited all interested

persons to submit written comments on

the proposed exemption within 45 days

from the date of publication of the

Notice in the Federal Register. All

written comments were to have been

received by the Department by

December 16, 1994. The Department

received one written comment. The

comment was submitted on behalf of the

Applicants. The issues addressed in the

comment and the Department’s

responses are summarized as follows:

1. The Applicants request the

following modifications be made in

order to make the exemption consistent

with the terms and conditions of PTE

81–6:

(a) Condition (D) of the proposed

exemption would require the Borrower

to furnish the Applicants with the most

recent available audited statements of

the Borrower’s financial condition and a

representation that, at the time the loan

is negotiated, there has been no material

adverse change in its financial condition

since the date of those statements. The

Applicants request that the following

language be added at the end of

condition (D):

Such representation may be made by the

Borrower’s agreeing that each such loan shall

constitute a representation by the Borrower

that there has been no such material adverse

change.

The Department has no objection to the

proposed modification, and accordingly,

has amended the language of condition

(D).

(b) Condition (G) of the proposed

exemption would require the Collateral

received by the lending plan to be equal

to at least 102% of the market value of

the loaned securities. The Applicants

request that this condition be modified

to require that the Collateral be equal to

100% of the market value of the loaned

securities. According to the Applicants,

requiring collateral equal to 102% of the

market value of the loaned securities

will discourage the lending of securities,

thereby defeating the purpose of the

exemption, which is to permit lending

as a safe and valuable way of increasing

the earnings of a portfolio. The

Applicants note that the Department

originally set the minimum level of

collateral at 102% when PTE 81–6 was

proposed but was subsequently

convinced by commentators that a

collateral value of 100% would provide

adequate protection to plans. The

Department is persuaded by the

Applicants’ comment that a collateral

value of 100% will provide sufficient

protection for the participants and

beneficiaries of the Plans. Accordingly,

the Department has made the requested

modification. The Department notes,

however that nothing contained in the

exemption prohibits a lending plan for

negotiating a higher collateral value if it

is appropriate under the circumstances.

The Applicants also request that the

following language be added to the end

of condition (G):

Notwithstanding the foregoing, part of the

Collateral may be returned to the Borrower if

the market value of the Collateral exceeds

100% of the market value of the borrowed

securities, as long as the market value of the
Federal Register / Vol. 60, No. 2 / Wednesday, January 4, 1995 / Notices 485

remaining collateral equals at least 100% of

the market value of the borrowed securities.

With the respect to the proposed

languages concerning the return of a

portion of the collateral under certain

circumstances, the Department has no

objection to the proposed additional

language, and accordingly, has inserted

this language at the end of condition

(G).

(c) Condition (H) of the proposed

exemption contains an explanation of

the procedure involved in terminating

the loan of securities. The Applicant

requests that the first 3 sentences of

condition (H) be replaced with the

following:

The loan may be terminated by the lending

plan at any time, whereupon the Borrower

shall deliver Replacement Securities to the

lending plan within 5 business days of notice

of termination of the loan.

Although the Department does not

object to the deletion of the reference to

the trustee of the fund, the Department

wants to make clear that the value of the

securities that the Borrower is obligated

to deliver upon termination of a loan of

Agency Securities must be no less than

the value of the loaned Agency

Securities at the termination of the loan,

as represented by the Applicants in

correspondence dated September 26,

1994. The Department believes that this

condition is integral to the proposed

exemption and in the best interests of

the participants and beneficiaries of the

Plans. Consequently, in response to the

Applicants’ comments, the Department

has modified the first 2 sentences of

condition (H), and replaced the third

sentence with the following:

The value of the securities that the

Borrower is obligated to deliver upon

termination of a loan of Agency Securities

will be no less than the value of the loaned

Agency Securities at the termination of the

loan.

(d) The Applicants also request that

the first sentence of the second

paragraph of condition (H) be replaced

with the following sentence:

If the Borrower fails to return Replacement

Securities, the Collateral may be applied to

purchase other Replacement Securities, to

cover any other obligations of the Borrower

under the agreement, or to pay other

expenses associated with the sale and/or

purchase.

The Department has no objection to the

proposed modification, and accordingly,

has made this substitution.

(e) In addition, the Applicants have

requested that the following language be

added immediately preceding the last

paragraph of condition (H):

Notwithstanding the foregoing, the

Borrower may, in the event the Borrower 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 such

replacement is approved by the lending

fiduciary.

If the Borrower fails to comply with any

condition of this 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 Borrower’s failure to comply with the

conditions of the exemption.

The Department has no objection to the

proposed additional language, and

accordingly, has made the requested

modification.

2. The Applicants have requested that

the phrase ‘‘issued and/or guaranteed’’

replace the term ‘‘issued’’ wherever that

term is used, in order to clarify that the

Agency Securities may be either issued

and/or guaranteed by an agency. In

accordance with the Applicants’

request, the Department has made the

appropriate modifications to the

exemption.

3. The Applicants wish to clarify that

their assertion that over 95% of the

Agency Securities traded in the market

are effected using a generic trading

method is merely an estimate and is not

intended as a representation of fact.

4. The Applicants also wish to clarify

that the Applicants’ obligation to

monitor the market value of the loaned

securities on a daily basis extends to

business days only.

5. The Department notes that the

parenthetical ‘‘plus interest’’ in

condition (e) of paragraph number 5 in

the proposed exemption was included

in the notice inadvertently.

The changes described above are

hereby incorporated into the exemption

as granted. Accordingly, after giving full

consideration to the record, the

Department has determined to grant the

exemption, as described herein. In this

regard, the Applicants’ comments have

been included as part of the public

record for the exemption application.

The complete application file is 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.

For a more complete statement of the

facts and representations supporting the

Department’s decision to grant this

exemption refer to the Notice published

on November 1, 1994 at 59 FR 54635.

FOR FURTHER INFORMATION CONTACT:

Virginia J. Miller of the Department,

telephone (202) 219–8971. (This is not

a toll-free number.)

Vaquero Farms, Inc. Profit Sharing

Plan and Agri-Bis, Inc. Profit Sharing

Plan (the Plans)

Located in Stockton, California

[Prohibited Transaction Exemption 94–89;

Application Nos. D–9711 and D–9712]

Exemption

The restrictions of sections 406(a),

406 (b)(1) and (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 (E) of

the Code shall not apply to the past cash

sale (the Sale) by the plans of certain

promissory notes (the Notes) to Vaquero

Farms, Inc. (the Applicant) and AgriBis, Inc., a related company, provided

that the following conditions were met

at the time of the sale: (1) The sales

price of the Notes was not less than

their aggregate fair market value on the

date of the Sale; (2) the Sale was a onetime transaction for cash; (3) the Plans

did not pay any fees or commissions in

connection with the Sale; and (4) the

Plans’ independent fiduciary

determined that the transaction was

appropriate for and in the best interests

of the Plans and their participants and

beneficiaries.

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

September 30, 1994 at 59 FR 50013.

EFFECTIVE DATE: This exemption is

effective as of May 31, 1994, the date of

the Sale.

FOR FURTHER INFORMATION CONTACT:

Virginia J. Miller of the Department,

telephone (202) 219–8971. (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 exemption 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
486 Federal Register / Vol. 60, No. 2 / Wednesday, January 4, 1995 / Notices

1Because Mr. Civera is the only participant in the

Plan and the Employer is wholly owned by Mr.

Civera there is no jurisdiction with respect to the

Plan under Title I of the Act pursuant to CFR

2510.3–3(b) and (c). However, there is jurisdiction

under Title II of the Act pursuant to section 4975

of the Code.

2 In this regard, the Plan’s financial statement lists

the aggregate value of the Properties as $485,000.

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 accurately describes all

material terms of the transaction which

is the subject of the exemption.

Signed at Washington, DC, this 29th day of

December, 1994.

Ivan Strasfeld,

Director of Exemption Determinations,

Pension and Welfare Benefits Administration,

U.S. Department of Labor.

[FR Doc. 95–110 Filed 1–3–95; 8:45 am]

BILLING CODE 4510–29–M

[Application No. D–9727, et al.]

Proposed Exemptions; Hospital

Supplies, Inc. Pension Plan, et al.

AGENCY: Pension and Welfare Benefits

Administration, Labor.

ACTION: Notice of proposed exemptions.

SUMMARY: This document contains

notices of pendency before the

Department of Labor (the Department) of

proposed exemptions from certain of the

prohibited transaction restriction of the

Employee Retirement income Security

Act of 1974 (the Act) and/or the Internal

Revenue Code of 1986 (the Code).

Written Comments and Hearing

Requests

All interested persons are invited to

submit written comments or request for

a hearing on the pending exemptions,

unless otherwise stated in the Notice of

Proposed Exemption, within 45 days

from the date of publication of this

Federal Register Notice. Comments and

request for a hearing should state: (1)

the name, address, and telephone

number of the person making the

comment or request, and (2) the nature

of the person’s interest in the exemption

and the manner in which the person

would be adversely affected by the

exemption. A request for a hearing must

also state the issues to be addressed and

include a general description of the

evidence to be presented at the hearing.

A request for a hearing must also state

the issues to be addressed and include

a general description of the evidence to

be presented at the hearing.

ADDRESSES: All written comments and

request for a hearing (at least three

copies) should be sent to the Pension

and Welfare Benefits Administration,

Office of Exemption Determinations,

Room N–5649, U.S. Department of

Labor, 200 Constitution Avenue, N.W.,

Washington, D.C. 20210. Attention:

Application No. stated in each Notice of

Proposed Exemption. The applications

for exemption and the comments

received will be available for public

inspection in the Public Documents

Room of Pension and Welfare Benefits

Administration, U.S. Department of

Labor, Room N–5507, 200 Constitution

Avenue, N.W., Washington, D.C. 20210.

Notice to Interested Persons

Notice of the proposed exemptions

will be provided to all interested

persons in the manner agreed upon by

the applicant and the Department

within 15 days of the date of publication

in the Federal Register. Such notice

shall include a copy of the notice of

proposed exemption as published in the

Federal Register and shall inform

interested persons of their right to

comment and to request a hearing

(where appropriate).

SUPPLEMENTARY INFORMATION: The

proposed exemptions were requested in

applications filed pursuant to section

408(a) of the Act and/or section

4975(c)(2) of the Code, and in

accordance with procedures set forth in

29 CFR Part 2570, Subpart B (55 FR

32836, 32847, August 10, 1990).

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. Therefore, these notices of

proposed exemption are issued solely

by the Department.

The applications contain

representations with regard to the

proposed exemptions which are

summarized below. Interested persons

are referred to the applications on file

with the Department for a complete

statement of the facts and

representations.

Hospital Supplies, Inc. Pension Plan

(the Plan) Located in Radnor,

Pennsylvania; Proposed Exemption

[Application No. D–9727]

The Department is considering

granting an exemption under the

authority of section 4975(c)(2) of the

Code and in accordance with the

procedures set forth in 29 C.F.R. Part

2570, Subpart B (55 FR 32836, 32847,

August 10, 1990.) If the exemption is

granted, 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 cash sale of two

adjacent parcels of real property (the

Properties) by the Plan to Armond J.

Civera, Jr. (Mr. Civera) 1, a disqualified

person with respect to the Plan,

provided that the following conditions

are satisfied:

(a) the proposed sale will be a onetime cash transaction;

(b) the Plan will receive for each

Property the current fair market value

established at the time of the sale by an

independent qualified appraiser;

(c) the Plan will pay no expenses

associated with the sale.

Summary of Facts and Representations

1. The Plan is a defined benefit

pension plan with one participant, Mr.

Civera, who is also the trustee of the

Plan and the owner of the Plan sponsor.

Mr. Civera is a sole participant of the

Plan. As of December 31, 1993, the

Plan’s assets were $594,061.63.2 The

Plan sponsor is a Pennsylvania

corporation which provides consulting

services to the medical industry and to

the print technology industry (the

Employer).

2. In October 1989, the Plan acquired

a 100 percent interest in a single family

residence built on a 1.17 acres of land,

which is located at 1128 King of Prussia

Road, Tredyffrin Township,

Pennsylvania (Property 1). The total

purchase price of Property 1, including

related closing costs, was $170,000. In

March 1993, the Plan also allocated

approximately $60,000 for certain

structural improvements for Property 1.

This construction work was done by

companies that have no relationship to

the Plan and the Employer. It is

represented that Property 1 was

purchased from Roseanne Koczicki,

who has no relationship to the Plan and

the Employer. In March 1993, the Plan

acquired a 100 percent interest in a

1.026 acre parcel of vacant land

(Property 2), which is adjacent to

Property 1. The total purchase price of

Property 2, including related closing