[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Notices]
[Pages 31958-31962]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15876]



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DEPARTMENT OF LABOR
[Prohibited Transaction Exemption 96-46; Exemption Application No. D-
09844, et al.]


Grant of Individual Exemptions; Jacor Communications Inc.

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.

[[Page 31959]]

Jacor Communications Inc. Retirement Plan (the Plan), Located in 
Cincinnati, Ohio

[Prohibited Transaction Exemption 96-46; Exemption Application No. D-
09844]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) and 
407(a) 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 (1) the past receipt by the Plan of 
certain stock-purchase warrants (the Warrants) pursuant to the 
restructuring of Jacor Communications, Inc. (Jacor), excluding that 
portion of Warrants which was acquired by the Plan's Qualified Matching 
Contribution Account (the QMCA); (2) the past and future holding of the 
Warrants by the Plan; and (3) the disposition or exercise of the 
Warrants by the Plan; provided that the following conditions are 
satisfied:
    (A) With respect to all participant accounts other than the QMCA, 
the Warrants were acquired pursuant to Plan provisions for 
individually-directed investment of such accounts;
    (B) The Plan's receipt and holding of the Warrants occurred in 
connection with the restructuring of Jacor and the Warrants were made 
available to all shareholders of common stock of Jacor;
    (C) The Plan's receipt and holding of the Warrants resulted from an 
independent act of Jacor as a corporate entity, and all holders of the 
common stock of Jacor, including the Plan, were treated in the same 
manner with respect to the restructuring of Jacor; and
    (D) With respect to Warrants allocated to the QMCA, the authority 
for all decisions regarding the holding, disposition or exercise of the 
Warrants by the Plan will be exercised by an independent fiduciary 
acting on behalf of the Plan, to the extent that such decisions have 
not been passed through to Plan participants; and
    (E) With respect to all other accounts, the decisions regarding the 
holding, disposition or exercise of the Warrants have been, and will 
continue to be made in accordance with Plan provisions for 
individually-directed investment of participant accounts, by the 
individual Plan participants whose accounts in the Plan received 
Warrants in connection with the restructuring.
    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 April 25, 1996 at 61 FR 
18421.

EFFECTIVE DATE: This exemption is effective as of January 11, 1993, 
except with respect to the Warrants held by the QMCA. With respect to 
those Warrants, the exemption is effective July 26, 1995.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

EAI Partners, L.P. (EAI), Located in Norwalk, CT

[Prohibited Transaction Exemption 96-47; Exemption Application No. D-
10147]

Exemption

Section I. Exemption for the In-Kind Transfer of Assets
    The restrictions of sections 406(a) and 406(b) 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 (F) of the Code, shall not 
apply, as of December 29, 1995, to the in-kind transfer of assets of 
employee benefit plans that are participant-directed account plans 
intended to satisfy section 404(c) of the Act and as to which EAI 
serves as a fiduciary (the Client Plans), including a plan established 
by EAI (the EAI Plan), as well as two plans that are sponsored by 
affiliates of EAI, namely, the Harding Service Corporation et al. 
Profit Sharing Plan and Trust (the Harding Plan) and the Stockwood VII, 
Inc. 401(k) Plan (the Stockwood Plan),<SUP>* that are held in the Small 
Managers Equity Fund Trust (SMEF) maintained by EAI in exchange for 
shares of the EAI Select Managers Equity Fund (the Fund), an open-end 
investment company registered under the Investment Company Act of 1940 
(the '40 Act) for which Evaluation Associates Capital Markets, Inc. 
(EACM), a wholly owned subsidiary of EAI, acts as investment adviser, 
in connection with the partial termination of SMEF.
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    \*\ The Client Plans, the EAI Plan, the Harding Plan and the 
Stockwood Plan are collectively referred to herein as the Plans. In 
addition, the EAI Plan, the Harding Plan and the Stockwood Plan are 
collectively referred to herein as the Related Plans.
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    This exemption is subject to the following conditions:
    (a) No sales commissions or other fees, including any fees payable 
pursuant to Rule 12b-1 of the '40 Act, are paid by a Plan in connection 
with the purchase of Fund shares through the in-kind transfer of SMEF 
assets.
    (b) All of the assets of a Plan that are held in SMEF are 
contributed by such Plan in-kind to the Fund in exchange for shares of 
such Fund. A Plan not electing to invest in the Fund receives a 
distribution of its allocable share of the assets of SMEF either in 
cash or in-kind.
    (c) Each Plan receives shares of the Fund which have a total net 
asset value that is equal in value to such Plan's allocable share of 
the assets of SMEF as determined in a single valuation performed in the 
same manner at the close of the same business day, using independent 
sources in accordance with the procedures set forth in Rule 17a-7(b) 
(Rule 17a-7) under the '40 Act, as amended, and the procedures 
established by the Fund pursuant to Rule 17a-7 for the valuation of 
such assets. Such procedures must require that all securities for which 
a current market price cannot be obtained by reference to the last sale 
price for transactions reported on a recognized securities exchange or 
NASDAQ be valued based on an average of the highest current independent 
bid and lowest current independent offer, as of the close of business 
on the Friday preceding the weekend of the in-kind contribution of SMEF 
assets to the Fund, determined on the basis of reasonable inquiry from 
at least three sources that are broker-dealers or pricing services 
independent of EAI.
    (d) On behalf of each Plan, a second fiduciary who is independent 
of and unrelated to EAI (the Second Fiduciary) receives advance written 
notice of the in-kind transfer of assets of SMEF to the Fund and full 
written disclosure, which includes, but is not limited to, the 
following information concerning the Fund:
    (1) A current prospectus for the Fund in which a Plan is 
considering investing.
    (2) A statement describing the fees for investment advisory or 
similar services that are to be paid by the Fund to EACM; the fees 
retained by EACM for secondary services (the Secondary Services), as 
defined in paragraph g of Section II below; and all other fees to be 
charged to or paid by the Plan and by such Fund to EAI, EACM or to 
unrelated parties, including the nature and extent of any differential 
between the rates of the fees.
    (3) The reasons why EAI considers such investment to be appropriate 
for the Plan.
    (4) Upon request of the Second Fiduciary, copies of the proposed 
and final exemptions relating to the transaction described herein.
    (e) On the basis of the foregoing information, the Second Fiduciary 
authorizes in writing the in-kind transfer of a Plan's assets invested 
in SMEF to the Fund, in exchange for shares of the Fund, and the fees 
received by EACM in connection with

[[Page 31960]]

its investment advisory services to the Fund. Such authorization by the 
Second Fiduciary will be consistent with the responsbilities, 
obligations and duties imposed on fiduciaries under Part 4 of Title I 
of the Act.
    (f) EAI sends by regular mail to the Second Fiduciary of each 
affected Plan, the following information:
    (1) Not later than 30 days after the completion of the in-kind 
transfer transaction, a written confirmation which contains--
    (A) The identity of each security that was valued for purposes of 
the transaction in accordance with Rule 17a-7(b)(4) of the '40 Act;
    (B) The price of each such security involved in the transaction; 
and
    (C) The identity of each pricing service or market maker consulted 
in determining the value of such securities.
    (2) Within 90 days after the completion of each transfer, a written 
confirmation which contains--
    (A) The number of SMEF units held by the Plan immediately before 
the transfer, the related per unit value and the total dollar amount of 
such SMEF units; and
    (B) The number of shares in the Fund that are held by the Plan 
following the transfer, the related per share net asset value and the 
total dollar amount of such shares.
    (g) On an ongoing basis, EAI provides a Plan investing in the Fund 
with--
    (1) A copy of an updated prospectus of such Fund, at least 
annually; and
    (2) Upon request, a report or statement (which may take the form of 
the most recent financial report, the current statement of additional 
information, or some other written statement) containing a description 
of all fees paid by the Fund to EAI and its affiliates.
    (h) As to each Plan, the combined total of all fees received by EAI 
and/or its affiliates for the provision of services to the Plan, and in 
connection with the provision of services to the Fund in which the Plan 
invests, is not in excess of ``reasonable compensation'' within the 
meaning of section 408(b)(2) of the Act.
    (i) All dealings between a Plan and the Fund are on a basis no less 
favorable to the Plan than dealings between the Fund and other 
shareholders.
    (j) EAI maintains for a period of six years the records necessary 
to enable the persons described below in paragraph (k) to determine 
whether the conditions of this 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 EAI, the records are lost or 
destroyed prior to the end of the six year period, and (2) no party in 
interest other than EAI, 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 by paragraph (k) of 
this Section II; and
    (k)(1) Except as provided in paragraph (k)(2) and notwithstanding 
any provisions of section 504(a)(2) and (b) of the Act, the records 
referred to in paragraph (j) are unconditionally available at their 
customary location for examination during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service or the Securities and Exchange 
Commission;
    (B) Any fiduciary of a Plan who has authority to acquire or dispose 
of shares of the Fund owned by such Plan, or any duly authorized 
employee or representative of such fiduciary;
    (C) Any contributing employer to any participating Plan or any duly 
authorized employee representative of such employer; and
    (D) Any participant or beneficiary of any participating Plan, or 
any duly authorized representative of such participant or beneficiary.
    (2) None of the persons described in paragraph (k)(1)(B)-(D) shall 
be authorized to examine trade secrets of EAI, or commercial or 
financial information which is privileged or confidential.
Section II. Definitions
    For purposes of this exemption:
    (a) The term ``EAI'' means EAI Partners, L.P. and the term ``EACM'' 
refers to Evaluation Associates Capital Markets, Inc.
    (b) An ``affiliate'' of EAI includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with EAI. (For purposes of this paragraph, the term ``control'' means 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual.)
    (2) Any officer, director, employee, relative or partner in such 
person, and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner or employee.
    (c) The term ``Fund'' refers to the EAI Select Managers Investment 
Fund, a diversified open-end investment company registered under the 
'40 Act for which EACM serves as an investment adviser and may also 
provide some other ``Secondary Service'' (as defined below in paragraph 
(g) of this Section II) which has been approved by the Fund.
    (d) The term ``net asset value'' means the amount for purposes of 
pricing all purchases and redemptions of Fund shares, calculated by 
dividing the value of all securities, determined by a method as set 
forth in a Fund's prospectus and statement of additional information, 
and other assets belonging to the Fund, less the liabilities chargeable 
to the portfolio, by the number of outstanding shares.
    (e) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or member of the ``family'' as 
that term is defined in section 4975(e)(6) of the Code), or a brother, 
a sister, or a spouse of a brother or a sister.
    (f) The term ``Second Fiduciary'' means a fiduciary of a plan who 
is independent of and unrelated to EAI. For purposes of this exemption, 
the Second Fiduciary will not be deemed to be independent of and 
unrelated to EAI if--
    (1) Such Second Fiduciary directly or indirectly controls, is 
controlled by, or is under common control with EAI;
    (2) Such Second Fiduciary, or any officer, director, partner, 
employee, or relative of such Second Fiduciary is an officer, director, 
partner or employee of EAI (or is a relative of such persons;
    (3) Such Second Fiduciary directly or indirectly receives any 
compensation or other consideration for his or her own personal account 
in connection with any transaction described in this proposed 
exemption. However, with respect to the Related Plans (i.e., the EAI 
Plan, the Harding Plan and the Stockwood Plan), the Second Fiduciary 
may receive compensation from EAI in connection with the transaction 
contemplated herein, but the amount or payment of such compensation may 
not be contingent upon or be in any way affected by the Second 
Fiduciary's ultimate decision regarding whether the Related Plans may 
participate in such transaction.
    With the exception of the Related Plans, if an officer, director, 
partner or employee of EAI (or relative of such persons), is a director 
of such Second Fiduciary, and if he or she abstains from participation 
in the choice of a Client Plan's investment adviser, the approval of 
any such purchase or sale between a Client Plan and the Fund, and the 
approval of any change of fees charged to or paid by the Client Plan, 
the transaction described in Section I above, then paragraph (f)(2) of 
this Section II, shall not apply.

[[Page 31961]]

    (g) The term ``Secondary Service'' means a service, other than 
investment advisory or similar service which is provided by EACM to the 
Fund. However, the term ``Secondary Service'' does not include any 
brokerage services provided by EAI Securities Inc. to the Fund.

EFFECTIVE DATE: This exemption will be effective December 29, 1995.
    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 April 25, 1996 at 61 FR 
18424.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

Pension Plan of Roper Hospital, Inc. (the Plan), Located in Charleston, 
South Carolina

[Prohibited Transaction Exemption 96-48; Exemption Application No. D-
10163]

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 cash sale (the Sale) by the Plan of Separate 
Investment Account Group Annuity Policy No. GA-4619 (the Policy) 
maintained by New England Mutual Life Insurance Company to Roper Health 
System, Inc., the Plan sponsor and a party in interest with respect to 
the Plan, provided the following conditions are satisfied: (a) the Sale 
is a one-time transaction for cash; (b) the Plan receives no less than 
the greater of the fair market value of the Policy at the time of the 
Sale, or $494,130; and (c) the Plan does not pay any commissions or 
other expenses in connection with the transaction.
    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 April 25, 1996 at 61 FR 
18428.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (This is not a toll-free number.)

First Security Group Life Insurance Plan (the Plan), Located in Salt 
Lake City, Utah

[Prohibited Transaction Exemption 96-49; Exemption Application No. L-
10178]

Exemption

    The restrictions of sections 406(a) and (b) of the Act shall not 
apply to the reinsurance of risks and the receipt of premiums therefrom 
by First Security Life Insurance Company of Arizona (FSLIA) from the 
insurance contracts sold by Minnesota Mutual Life Insurance Company 
(MM) or any successor insurance company to MM which is unrelated to 
First Security Corporation (FSC), to provide life insurance benefits to 
participants in the Plan, provided the following conditions are met:
    (a) FSLIA--
    (1) Is a party in interest with respect to the Plan by reason of a 
stock or partnership affiliation with FSC that is described in section 
3(14)(E) or (G) of the Act,
    (2) Is licensed to sell insurance or conduct reinsurance operations 
in at least one of the United States or in the District of Columbia,
    (3) Has obtained a Certificate of Authority from the Insurance 
Commissioner of its domiciliary state which has neither been revoked 
nor suspended, and
    (4)(A) Has undergone an examination by an independent certified 
public accountant for its last completed taxable year immediately prior 
to the taxable year of the reinsurance transaction; or
    (B) Has undergone a financial examination (within the meaning of 
the law of its current domiciliary State, Arizona) by the Insurance 
Commissioner of the State of Arizona within 5 years prior to the end of 
the year preceding the year in which the reinsurance transaction 
occurred.
    (b) The Plan pays no more than adequate consideration for the 
insurance contracts;
    (c) No commissions are paid with respect to the direct sale of such 
contracts or the reinsurance thereof; and
    (d) For each taxable year of FSLIA, the gross premiums and annuity 
considerations received in that taxable year by FSLIA for life and 
health insurance or annuity contracts for all employee benefit plans 
(and their employers) with respect to which FSLIA is a party in 
interest by reason of a relationship to such employer described in 
section 3(14)(E) or (G) of the Act does not exceed 50% of the gross 
premiums and annuity considerations received for all lines of insurance 
(whether direct insurance or reinsurance) in that taxable year by 
FSLIA. For purposes of this condition (d):
    (1) the term ``gross premiums and annuity considerations received'' 
means as to the numerator the total of premiums and annuity 
considerations received, both for the subject reinsurance transactions 
as well as for any direct sale or other reinsurance of life insurance, 
health insurance or annuity contracts to such plans (and their 
employers) by FSLIA. This total is to be reduced (in both the numerator 
and the denominator of the fraction) by experience refunds paid or 
credited in that taxable year by FSLIA.
    (2) all premium and annuity considerations written by FSLIA for 
plans which it alone maintains are to be excluded from both the 
numerator and the denominator of the fraction.
    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 April 25, 1996 at 61 FR 
18433.

EFFECTIVE DATE: This exemption is effective August 1, 1993.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department, 
telephone (202) 219-8881. (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 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the

[[Page 31962]]

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, D.C., this 18th day of June, 1996.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits, 
Administration, U.S. Department of Labor.
[FR Doc. 96-15876 Filed 6-20-96; 8:45 am]
BILLING CODE 4510-29-P