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Secretary of Labor Thomas E. Perez
EBSA (Formerly PWBA) Federal Register Notice Proposed Exemptions; The Walston & High, P.A. Profit Sharing Plan (the Plan) et al. [06/28/2001]

EBSA (Formerly PWBA) Federal Register Notice

PWBA Federal Register Notice Proposed Exemptions; The Walston & High, P.A. Profit Sharing Plan (the Plan) et al. [06/28/2001]

[PDF Version]

Volume 66, Number 125, Page 34471-34484

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10935, et al.]

 
Proposed Exemptions; The Walston & High, P.A. Profit Sharing Plan 
(the Plan) et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions 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).

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 
requests 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.

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, NW., Washington, DC 
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 the Pension and Welfare Benefits Administration, U.S. 
Department of Labor, Room N-5638, 200 Constitution Avenue, NW., 
Washington, DC 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, 5 U.S.C. App. 1 (1996), 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.

The Walston & High, P.A. Profit Sharing Plan (the Plan) Located in 
Wilson, North Carolina

[Application No. D-10935]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, 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 Sale (the Sale) by the Plan to A.J. 
Walston and Arthur T. High, the trustees of the Plan (the Trustees), of 
three parcels of improved real property (the Parcels). This proposed 
exemption is conditioned upon adherence to the material facts and 
representations described herein

[[Page 34472]]

and upon the satisfaction of the following requirements:
    (a) The Sale is a one-time transaction for cash;
    (b) The Plan does not pay any commissions, costs or other expenses 
in connection with the Sale; and
    (c) The Plan will receive an amount equal to the greater of:
    (i) $234,000; or (ii) The current fair market value of the 
Property, as established by an independent, qualified, appraiser at the 
time of the Sale.

Summary of Facts and Representations

    1. Walston & High, P.A., the sponsor of the Plan, is a certified 
public accounting company located in Wilson, North Carolina. The Plan 
is a defined benefit pension plan which, as of September 27, 2000, has 
5 participants. The Plan's assets have an aggregate fair market value 
of $727,102.04.
    2. The Plan's real property holdings consist of three parcels of 
real property. The Parcels have an estimated fair market value of 
$234,000 and constitutes approximately 32% of the total value of Plan 
assets.
    3. The Trustees represent that the Sale is in the interest of the 
Plan, and its participants and beneficiaries. The Trustees represent 
that they are seeking to terminate the Plan and that the Parcels cannot 
be subdivided to achieve a distribution of assets. The Trustees have 
attempted to sell the Parcels to unrelated third parties but have been 
unsuccessful. As a result the Trustees are seeking to purchase the 
Parcels from the Plan for cash, allowing the Plan to distribute the 
assets upon termination. There will be no commissions, costs or other 
expenses incurred by the Plan in connection with the Sale.
    4. The Parcels consist of:
    A 862 square foot parcel of improved real property located at 1112 
Churchill Avenue, Wilson, North Carolina (Churchill). The property was 
acquired by the Plan for investment purposes on September 12, 1979 for 
$27,584.23 from an unrelated third party. The property has generated a 
net income of $19,235 from 1990 through 1999;
    A 1,670 square foot parcel of improved real property located at 
401-403 Maplewood Avenue, Wilson, North Carolina (Maplewood). The 
property was acquired by the Plan for investment purposes on August 27, 
1976 for $35,600.86 from an unrelated third party. The property has 
generated a net income of $37,987 from 1990 through 1999; and
    A 3,264 square foot parcel of improved real property located on 
2213 Candlewood Drive, Wilson, North Carolina (Candlewood). The 
property was acquired by the Plan for investment purposes on January 
30, 1981 for $132,500 from an unrelated third party. The property has 
generated a net income of $112,781 from 1990 through 1999. \1\
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    \1\ The applicant has provided consolidated net income 
statements for the Parcels from 1977 through 1989. These statements 
indicate that during this time period the Parcels generated net 
income of $140,244.
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    5. The Property was appraised (the Appraisal) on July 19, 2000, by 
Fred W. Morgan (Mr. Morgan), a North Carolina state Certified 
Residential Real Estate Appraiser. Mr. Morgan is independent of the 
Employer and is an appraiser with the Bissette Appraisal Services 
located in Wilson, North Carolina.
    Mr. Morgan determined the best use and highest value of the 
Property was associated with valuing the Property with the so-called 
direct sales comparison method. In this method, sales of similar use 
land in the market area are compared to the subject to arrive at an 
indication of value. In arriving at value conclusions, the tracts are 
compared as to the rights conveyed, financing terms, sale conditions, 
market conditions, location, and physical characteristics. Therefore, 
based on the valuation procedure, the fair market value of the Parcels 
was determined as follows: (i) Churchill = $39,000; (ii) Maplewood = 
$62,500; and (iii) Candlewood = $132,500. Therefore, the total fair 
market value of the Parcels is $234,000 as of July 19, 2000 ($39,000 + 
$62,500 + $132,500 = $234,000). The Plan will receive an amount equal 
to the greater of: (i) $234,000; or (ii) The current fair market value 
of the Property, as established by an independent, qualified, appraiser 
at the time of the Sale.
    6. In summary, the Trustees represent that the subject transaction 
satisfies the statutory criteria contained in section 408(a) of the Act 
and section 4975(c)(2) of the Code for the following reasons:
    (a) The Sale is a one-time transaction for cash;
    (b) The Plan does not pay any commissions, costs or other expenses 
in connection with the Sale; and
    (c) The Plan will receive an amount equal to the greater of:
    (i) $234,000; or (ii) The current fair market value of the 
Property, as established by an independent, qualified, appraiser at the 
time of the Sale.
    Notice to Interested Persons: Notice of the proposed exemption 
shall be given to all interested persons in the manner agreed upon by 
the applicant and Department within 15 days of the date of publication 
in the Federal Register. Comments and requests for a hearing are due 
forty-five (45) days after publication of the notice in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Khalif Ford of the Department, 
telephone (202) 219-8883 (this is not a toll-free number).

Retirement Plan of Dime Bancorp, Inc. (The Dime Plan); Retirement 
401(k) Plan of Dime Bancorp, Inc. (the Dime 401(k) Plan); North 
American Mortgage Company Retirement and 401(k) Savings Plan (the 
NAMCO Plan); and Lakeview Savings Bank Employee Stock Ownership 
Plan (the ESOP; together, the Plans) Located in New York, New York

[Application Nos. D-10962 through D-10965]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, 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, as of December 29, 2000, to: (1) The 
past receipt by the Plans of certain Litigation Tracking Warrants (the 
Warrants) pursuant to the distribution of Warrants (the Warrant 
Distribution) by Dime Bancorp, Inc. (Dime) to all of its common 
stockholders as of December 22, 2000 (the Record Date); \2\ (2) the 
past and proposed future holding of the Warrants by the Plans; and (3) 
the disposition or exercise of the Warrants by the Plans; provided that 
the following conditions are satisfied:
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    \2\ In addition to all of Dime's common stockholders as of 
December 22, 2000 receiving Warrants pursuant to the Warrant 
Distribution, any person or entity (including the Plans) who brought 
the common stock of Dime (the Stock) during the period from December 
20, 2000 through December 29, 2000 received such Stock with certain 
accompanying ``due bills'' reflecting the seller's obligation to 
deliver Warrants to the buyer upon the seller's receipt of such 
Warrants pursuant to the Warrant Distribution, and therefore also 
received Warrant's in connection with such purchases of Stock. 
Accordingly, the exemption proposed herein shall also apply to the 
acquisition, holding, disposition and exercise of Warrants acquired 
by the Plans in connection with the purchase of Stock with due 
bills.
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    (A) The Plans' acquisition and holding of the Warrants resulted 
from an independent act of Dime as a corporate entity, and all holders 
of

[[Page 34473]]

Stock, including the Plans, were treated in a like manner with respect 
to the Warrant Distribution (with the exception of one holder of Stock, 
who did not receive Warrants);
    (B) With respect to Warrants allocated to the Dime 401(k) Plan and 
the NAMCO Plan, the Warrants were acquired solely for the accounts of 
participants who had directed investment of all or a portion of their 
account balances in Stock pursuant to Plan provisions for individually-
directed investment of participant accounts;
    (C) With respect to Warrants allocated to the Dime Plan and the 
ESOP, the authority for all decisions regarding the holding, 
disposition or exercise of the Warrants by such Plans will be exercised 
by an independent fiduciary acting on behalf of such Plans; and
    (D) With respect to Warrants allocated to the Dime 401(k) Plan and 
the NAMCO Plan, all 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 Warrant 
Distribution, including all determinations regarding the exercise or 
sale of the Warrants received through the Warrant Distribution,\3\ 
except for those participants who fail to file timely and valid 
instructions concerning the exercise of the Warrants, with respect to 
whom the Warrants allocated to their accounts will, to the extent a 
public trading market for the Warrants exists, be sold.
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    \3\ On January 1, 2001, the NAMCO Plan was merged with and into 
the Dime 401(k) Plan. As a result, for a period of time, there was 
temporary administrative freeze period (the Freeze Period) during 
which former participants of the NAMCO Plan (the Former NAMCO 
Participants) could not direct the investment of their accounts 
under the Dime 401(k) Plan, including any Warrants allocated to such 
accounts. During such Freeze Period, an independent fiduciary had 
the authority to hold, sell or exercise (to the extent the Warrants 
were then exercisable) all of the Warrants transferred from the 
NAMCO Plan and allocated to the accounts of the Former NAMCO 
Participants under the Dime 401(k) Plan. Once the Freeze Period 
ceased, the Former NAMCO Participants immediately regained the 
ability to direct the investment of their accounts under the Dime 
401(k) Plan, including any Warrants allocated to such accounts.
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    Effective Date: This exemption, if granted, will be effective as of 
December 29, 2000.

Summary of Facts and Representations

    1. Dime is a Delaware corporation and a savings and loan holding 
company with its headquarters located in New York, New York. Dime is 
the parent of the Dime Savings Bank of New York, FSB (Dime Savings), a 
federally chartered bank currently serving consumers and businesses in 
the greater New York City metropolitan area. Through Dime Savings and 
its subsidiaries, including North American Mortgage Company (i.e., 
NAMCO), Dime provides consumer loans, insurance products and mortgage 
banking services throughout the United States.
    2. On December 29, 2000, Dime distributed the Warrants to all of 
its holders of common stock (i.e., the Stock), par value $0.01 per 
share.\4\ The Warrants are litigation tracking warrants to purchase 
shares of Stock at an exercise price of $.01 per share of Stock that 
will be issued in connection with a warrant exercise (the Exercise 
Price) during a period of 60 days after the holders of the Warrants are 
given notice of the occurrence of the Triggering Event (as defined in 
representation 6, below). If the Warrants are not exercised by the end 
of the 60-day period (the Expiration Date), they will lapse and be 
canceled. The Warrants have been approved for listing as separately 
tradeable on the NASDAQ National Market under the trading symbol 
``DIMEZ.'' The Stock is currently traded on the New York Stock Exchange 
under the trading symbol ``DME.''
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    \4\ Warburg Pincus Equity Partners, L.P. (Warburg) recently made 
an aggregate $238 million investment in Dime for which it received 
13,607.664 shares of series B junior voting preferred stock (series 
B Stock) of Dime, as well as warrants to purchase 8,142.738 shares 
of Series C junior nonvoting preferred stock (Series C Stock) and 
warrants to purchase 5,464.926 shares of Series D junior nonvoting 
preferred stock (Series D Stock). Each share of Series B Stock has 
the same economic rights equivalent to 1,000 shares of Stock subject 
to antidilution adjustments. The shares of Series B Stock will 
convert into restricted shares of Stock upon, among other events, 
the distribution of the Warrants. Each share of Series C and Series 
D Stock will also have the economic rights equivalent to 1,000 
shares of Stock. However, one of the terms of Warburg's investment 
was that it would not receive any Warrants with respect to the 
shares it acquired or will thereby acquire.
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    3. The Warrants are referred to as ``Litigation Tracking Warrants'' 
because the number of shares of Stock for which the Warrants will be 
converted will depend upon Dime's recovery, if any, in connection with 
a lawsuit that Dime, as the successor to Anchor Savings Bank FSB 
(Anchor), maintains in the United States Court of Federal Claims (the 
Claims Court) against the United States (U.S.) government, whereby it 
alleges a breach of contract and the taking of property without 
compensation in contravention of the Fifth Amendment to the U.S. 
Constitution (the Goodwill Litigation). The action arose because of 
Anchor's assertion that the passage of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and the 
regulations adopted by the Office of Thrift Supervision pursuant to 
FIRREA, deprived Anchor of the ability to include supervisory goodwill 
and certain other assets when computing its regulatory capital. The 
Federal Savings and Loan Insurance Corporation had previously agreed to 
let Anchor use such assets when computing its regulatory capital 
ratios. The direct effect was to cause Anchor to go from an institution 
that substantially exceeded its regulatory capital requirements to one 
that was critically undercapitalized upon the effectiveness of the 
FIRREA-mandated capital requirements. Dime has asked the Claims Court 
to enter partial summary judgment against the U.S. government based on 
the existence of a contract between the U.S. government and Dime and 
the inconsistency of the government's actions with respect to that 
contract. If the Claims Court grants Dime's request, Dime will then 
present the evidence as to damages. It is believed that Dime may 
receive a potentially large recovery of damages in connection with the 
Goodwill Litigation.\5\
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    \5\ By proposing this exemption, the Department is providing no 
opinion or comment on, or support for, the merits of the allegations 
made against the U.S. government with respect to the Goodwill 
Litigation. The purpose of this proposed exemption, if granted, is 
merely to facilitate the rights and benefits inuring to the Plans 
through the receipt of the Warrants as holders of the Stock in order 
to capitalize on whatever economic value the Warrants may have.
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    4. The Warrants will, upon the Triggering Event, entitle the 
holders thereof to purchase shares of Stock with an aggregate market 
value equal to the Adjusted Litigation Recovery (as defined in 
representation 5, below), if any. Each Warrant will be exercisable at a 
fixed Exercise Price for the number of shares of Stock with a market 
value equal to the Adjusted Litigation Recovery divided by the number 
of Warrants issued or reserved for issuance on the Record Date, with 
cash to be paid for fractional shares resulting from a holder's Warrant 
exercise.
    5. The ``Adjusted Litigation Recovery'' will equal 85% \6\ of the 
amount obtained from the following equation:
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    \6\ Dime will retain the remaining 15%, and will not issue 
shares in connection with it.
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    (a) The aggregate amount of any cash payment and the fair market 
value of any property actually received by Dime pursuant to a final, 
non-appealable judgment in or final settlement of the Goodwill 
Litigation (including any post-judgment interest actually received by

[[Page 34474]]

Dime on any cash payment) (the Total Payment), minus
    (b) The sum of the following: (i) The aggregate expenses incurred 
previously and hereafter by Dime in prosecuting the Goodwill Litigation 
and obtaining the Total Payment, (ii) the aggregate expenses incurred 
by Dime in connection with the creation, issuance and trading of the 
Warrants, and (iii) an amount equal to the net Total Payment (Total 
Payment less the expenses described in the preceding clauses (i) and 
(ii)) multiplied by the highest, combined statutory rate of federal, 
state and local income taxes applicable to Dime during the tax year in 
which the full total payment is received.
    6. The ``Triggering Event'' is defined as the occurrence of all of 
the following: (i) receipt by Dime of the full Total Payment, (ii) 
calculation by Dime of the full amount of the Adjusted Litigation 
Recovery, and (iii) Receipt of all regulatory approvals necessary to 
issue the shares of Stock to be issued upon the exercise of the 
Warrants, including the effectiveness of a registration statement 
relating to the issuance of such Stock under the Securities Act of 
1933, as amended.
    7. Once the Triggering Event occurs, Dime will publicly announce, 
by means of a press release and by written notice mailed to each holder 
of Warrants: (i) That the Triggering Event has occurred, (ii) the 
aggregate number of shares for which the Warrants are exercisable, 
(iii) the number of shares of Stock for which each Warrant is 
exercisable, (iv) the exercise price per Warrant, (v) the manner in 
which the Warrants are exercisable, and (vi) the Expiration Date.
    8. Dime sponsors the Dime Plan and the Dime 401(k) Plan, while Dime 
Savings sponsors the Lakeview ESOP and NAMCO sponsors the NAMCO Plan. 
Dime Savings is a wholly-owned subsidiary of Dime, and NAMCO is a 
wholly-owned subsidiary of Dime Savings. All or a portion of the assets 
of each of the Plans is invested in the Stock. The Dime Plan currently 
has approximately 5,234 participants and $182,039,800 in total assets, 
and the Stock represents approximately 10.5% of the assets of the Dime 
Plan. The Dime 401(k) Plan has approximately 3,000 participants and 
total assets of approximately $147,955,000, and the Stock represents 
approximately 15% of its total assets. The NAMCO Plan had approximately 
3,160 Former Participants at the time of its merger into the Dime 
401(k) Plan. The NAMCO Plan had approximately $68,080,600 in total 
assets, and the Stock represented approximately 0.72% of the NAMCO 
Plan's assets. The ESOP has approximately 57 participants and 
approximately $8,193,745 in total assets. The Stock represents 
approximately 96% of the fair market value of the assets of the ESOP. 
As shareholders of Dime, each of the Plans will receive Warrants in the 
same manner as all other shareholders of Dime.\7\
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    \7\ As noted in footnote 3, Warburg will not receive Warrants.
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    9. The assets of the Dime 401(k) Plan and the NAMCO Plan are held 
in accounts for which investments are participant-directed among 
various investment funds, one of which is a fund invested in Stock. 
With respect to accounts of participants in these two plans (which were 
merged on January 1, 2001, as described in representation 10, below), 
and except as provided below, participants will make all decisions 
regarding the disposition or exercise of the Warrants allocated to 
their accounts (with, and as is the case with other investments under 
the Plans, absence of affirmative instruction deemed to be direction to 
continue to hold the Warrants). If the participants do not direct the 
disposition or exercise of the Warrants prior to the Expiration Date, 
the Warrants will be sold by the trustee for the particular Plan so 
that they do not lapse without receipt of some value, assuming there is 
then a market for the Warrants.
    10. As noted in footnote 2, on January 1, 2001, the NAMCO Plan was 
merged with and into the Dime 401(k) Plan. As a result, for a period of 
time, there was an administrative Freeze Period during which former 
participants of the NAMCO Plan (the Former NAMCO Participants) could 
not direct the investment of their accounts under the Dime 401(k) Plan, 
including any Warrants allocated to such accounts. During the Freeze 
Period, HSBC Bank USA (HSBC), acting as an independent fiduciary with 
respect to such accounts, had the authority to hold, sell or exercise 
(to the extent the Warrants were then exercisable) all of the Warrants 
transferred from the NAMCO Plan and allocated to the accounts of the 
Former NAMCO Participants under the Dime 401(k) Plan. Once the Freeze 
Period ceased, the Former NAMCO Participants immediately regained the 
ability to direct the investment of their accounts under the Dime 
401(k) Plan, including any Warrants allocated to such accounts.
    11. HSBC's U.S. headquarters are located in New York, NY. HSBC has 
been in existence for 150 years. The trust department of HSBC has $15 
billion of assets under management, of which $7 billion is held by HSBC 
as fiduciary of approximately 400 plans that are subject to the Act. 
HSBC is not in any way related to Dime, Dime Savings or NAMCO.
    12. In contrast to the Dime 401(k) Plan and the NAMCO Plan, the 
investments of the Dime Plan and the ESOP are not participant-directed. 
The Dime Plan investments are managed either by investment managers 
selected by Dime's Benefits Committee (the Benefits Committee) or are 
directed by the Benefits Committee itself. The investment in the Stock 
is directed by the Benefits Committee. The ESOP, which is required to 
be invested primarily in Stock, has its investments directed by the 
Benefits Committee or by the Plan's trustee, HSBC. In this regard, the 
trust agreement for the ESOP has been amended to clarify that HSBC, as 
the ESOP's trustee, will have all investment authority with respect to 
the Warrants.
    13. HSBC also has been retained by Dime for the purpose of acting 
as the independent fiduciary on behalf of the Dime Plan with respect to 
the Warrants to be received by that Plan. HSBC has the authority to 
direct the holding, sale or exercise of the Warrants received by both 
the Dime Plan and the ESOP.
    14. HSBC has represented that it is fully aware of its duties and 
responsibilities as a fiduciary under the Act with respect to the Dime 
Plan, the Dime 401(k) Plan, and the ESOP. In fulfilling its duties, 
HSBC reviewed the terms and conditions of the Warrants and the Warrant 
Distribution and reviewed the most recent financial statements of Dime 
and other material it considered appropriate to determine the financial 
condition of Dime and the possible market value of the Warrants. Based 
on this review, HSBC concluded, as of December 20, 2000, that it was in 
the best interests of the participants and beneficiaries of the Dime 
Plan, the ESOP and the Dime 401(k) Plan for such Plans to acquire and 
retain all Warrants issued to such Plans pursuant to the Warrant 
Distribution.
    15. HSBC has represented that it will continue to monitor the 
holding of the Warrants by the Dime Plan and the ESOP. In this regard, 
HSBC represents that it monitored the holding of the Warrants by the 
Dime 401(k) Plan during the Freeze Period. In exercising its discretion 
as a fiduciary under the Act, HSBC will on an on-going basis review all 
relevant financial information related to Dime and all relevant 
information related to the market value of the Warrants to determine 
whether those Plans should hold, sell, or, when exercisable, exercise 
the Warrants.

[[Page 34475]]

    16. In the event that HSBC is relieved of its obligation to act as 
the independent fiduciary on behalf of the Dime Plan and the ESOP, Dime 
and Dime Savings have established a process to replace HSBC as 
independent fiduciary. Dime and Dime Savings represent that any new 
independent fiduciary will be an established institution that has 
substantial experience as a fiduciary of plans that are subject to the 
Act, and that is not related to, or otherwise controlling of, 
controlled by or under common control with Dime, Dime Savings or NAMCO. 
Dime further represents that any new independent fiduciary will be in 
place at the time HSBC's departure as independent fiduciary so that 
there will be no period of time without an independent fiduciary acting 
on behalf of the Dime Plan and the ESOP with respect to the Warrants.
    17. The applicants represent that the Plans are all holders of 
Stock. As a result of Dime's corporate business decision to distribute 
the Warrants to all of its common stockholders, the Plans received 
Warrants through no request or action on their part, but solely as a 
result of their ownership of Stock. Thus, the Plans' acquisition of the 
warrants was not volitional on the part of any of the Plans or their 
respective trustees or other fiduciaries.
    18. The applicants represent that each Plan's acquisition of the 
Warrants enables its participants to have the same economic investment 
opportunities offered to other holders of Stock. With respect to the 
Dime 401(k) Plan and, to the extent applicable, the NAMCO 401(k) Plan, 
the sale or exercise direction opportunities will be passed through 
under each Plan to participants who had account balances invested in 
the Plan's Stock Fund as of the Record Date, thereby affording them the 
same rights and privileges as other holders of Stock as well as the 
same investment rights and privileges they have with respect to other 
amounts credited to their accounts. With respect to the Dime Plan and 
the ESOP, the applicants state that participants will be able to reap 
the potential economic rewards of their Plan's acquisition and ultimate 
disposition or exercise of the warrants. To deny the Plans' ability to 
participate in the warrant Distribution would deny participants the 
opportunity to be treated in the same manner as other holders of Stock. 
It is noted that, while the Warrants are expected to trade on a 
national securities market, an exemption is not being requested to 
permit the Plans to acquire additional Warrants on the market. Thus, 
the requested exemption relates only to the past distribution of 
Warrants to the Plans by Dime.
    19. In summary, the applicants represent that the transactions 
satisfy the criteria of section 408(a) of the Act for the following 
reasons: (a) The Plans' acquisition of the Warrants resulted from an 
independent act of Dime as a corporate entity, and all holders of 
Stock, including the Plans, were treated in a like manner with respect 
to the Warrant Distribution (with the exception of one holder of Stock 
(i.e., Warburg), who did not receive Warrants); (b) with respect to 
Warrants allocated to the Dime 401(k) Plan and the NAMCO Plan, the 
Warrants were acquired solely for the accounts of participants who had 
directed investment of all or a portion of their account balances in 
Stock pursuant to plan provisions for individually-directed investment 
of participant accounts; (c) with respect to Warrants allocated to the 
Dime Plan and the ESOP, the authority for all decisions regarding the 
holding, disposition or exercise of the Warrants by such Plans will be 
exercised by an independent fiduciary (i.e., HSBC or its successor) 
acting on behalf of such Plans; and (d) with respect to Warrants 
allocated to the Dime 401(k) Plan and the NAMCO Plan, all decisions 
regarding the holding, disposition or exercise of the Warrants have 
been made (other than during the Freeze Period), 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 
Warrant Distribution.

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

Barclays Bank PLC and Barclays Capital Inc. Located in London, 
England and New York, New York

[Application No. D-10966]

Proposed Exemption

    The Department of Labor is considering granting an exemption under 
the authority of section 408(a) of the Act and section 4975(c)(2) of 
the Code and in accordance with the procedures as set forth in 29 
C.F.R. Part 2570, Subpart B (55 Fed. Reg. 32836, 32847, August 10, 
1990).\8\
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    \8\ For the purposes of this proposed exemption, references to 
specific provisions of Title I of the Act, unless otherwise 
specified, refer to the corresponding provisions of the Code.
---------------------------------------------------------------------------

Section I--Transactions
    If the exemption is granted, 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 as of January 
24, 2001, to:
    (a) The lending of securities, under certain exclusive borrowing 
arrangements, to:
    (1) Barclays Bank PLC (Barclays);
    (2) Barclays Capital Inc. (BCI) and any other affiliate of Barclays 
that, now or in the future, is a U.S. registered broker-dealer or a 
government securities broker or dealer or U.S. bank;
    (3) Barclays Capital Securities Limited, which is subject to 
regulation in the United Kingdom by the Securities and Futures 
Authority of the United Kingdom (the UK SFA); and
    (4) Any broker-dealer or bank that, now or in the future, is an 
affiliate of Barclays which is subject to regulation by the UK SFA or 
the Bank of England, (each such affiliated foreign broker-dealer or 
bank referred to as a ``Foreign Borrower,'' and, together with Barclays 
and BCI, collectively referred to as the ``Borrowers''), by employee 
benefit plans, including commingled investment funds holding assets of 
such plans (Plans), with respect to which Barclays or any of its 
affiliates is a party in interest; and
    (b) The receipt of compensation by Barclays or any of its 
affiliates in connection with securities lending transactions, provided 
that the following conditions set forth in Section II, below, are 
satisfied.
Section II--Conditions
    (a) For each Plan, neither the Borrower nor any affiliate has or 
exercises discretionary authority or control over the Plan's investment 
in the securities available for loan, nor do they render investment 
advice (within the meaning of 29 CFR 2510.3-21(c)) with respect to 
those assets.
    (b) The party in interest dealing with the Plan is a party in 
interest with respect to the Plan (including a fiduciary) solely by 
reason of providing services to the Plan, or solely by reason of a 
relationship to a service provider described in section 3(14)(F), (G), 
(H) or (I) of the Act.
    (c) The Borrower directly negotiates an exclusive borrowing 
agreement (the Borrowing Agreement) with a Plan fiduciary which is 
independent of the Borrower and its affiliates.
    (d) The terms of each loan of securities by a Plan to a Borrower 
are at

[[Page 34476]]

least as favorable to such Plan as those of a comparable arm's-length 
transaction between unrelated parties, taking into account the 
exclusive arrangement.
    (e) In exchange for granting the Borrower the exclusive right to 
borrow certain securities, the Plan receives from the Borrower either 
(i) a flat fee (which may be equal to a percentage of the value of the 
total securities subject to the Borrowing Agreement from time to time), 
(ii) a periodic payment that is equal to a percentage of the value of 
the total balance of outstanding borrowed securities, or (iii) any 
combination of (i) and (ii) (collectively, the Exclusive Fee). If the 
Borrower deposits cash collateral, all the earnings generated by such 
cash collateral shall be returned to the Borrower; provided that the 
Borrower may, but shall not be obligated to, agree with the independent 
fiduciary of the Plan that a percentage of the earnings on the 
collateral may be retained by the Plan or the Plan may agree to pay the 
Borrower a rebate fee and retain the remaining earnings on the 
collateral (the Shared Earnings Compensation). If the Borrower deposits 
non-cash collateral, all earnings on the non-cash collateral shall be 
returned to the Borrower; provided that the Borrower may, but shall not 
be obligated to, agree to pay the Plan a lending fee (the Lending Fee) 
(the Lending Fee and the Shared Earnings Compensation are collectively 
referred to as the ``Transaction Lending Fee''). The Transaction 
Lending Fee, if any, shall be either in addition to the Exclusive Fee 
or an offset against such Exclusive Fee. The Exclusive Fee and the 
Transaction Lending Fee may be determined in advance or pursuant to an 
objective formula, and may be different for different securities or 
different groups of securities subject to the Borrowing Agreement. Any 
change in the Exclusive Fee or the Transaction Lending Fee that the 
Borrower pays to the Plan with respect to any securities loan requires 
the prior written consent of the independent fiduciary of the Plan, 
except that consent is presumed where the Exclusive Fee or the 
Transaction Lending Fee changes pursuant to an objective formula. Where 
the Exclusive Fee or the Transaction Lending Fee changes pursuant to an 
objective formula, the independent fiduciary of the Plan must be 
notified at least 24 hours in advance of such change and such 
independent Plan fiduciary must not object in writing to such change, 
prior to the effective time of such change.
    (f) The Borrower may, but shall not be required to, agree to 
maintain a minimum balance of borrowed securities subject to the 
Borrowing Agreement. Such minimum balance may be a fixed U.S. dollar 
amount, a flat percentage or other percentage determined pursuant to an 
objective formula.
    (g) By the close of business on or before the day the loaned 
securities are delivered to the Borrower, the Plan receives from the 
Borrower (by physical delivery, book entry in a securities depository 
located in the United States, wire transfer, or similar means) 
collateral consisting of U.S. currency, securities issued or guaranteed 
by the U.S. Government or its agencies or instrumentalities, 
irrevocable bank letters of credit issued by a U.S. bank other than 
Barclays or any affiliate thereof, or any combination thereof, or other 
collateral permitted under Prohibited Transaction Exemption 81-6 (46 FR 
7527, Jan. 23, 1981, as amended at 52 FR 18754, May 19, 1987) (PTE 81-
6) (as amended or superseded).\9\ Such collateral will be deposited and 
maintained in an account which is separate from the Borrower's accounts 
and will be maintained with an institution other than the Borrower. For 
this purpose, the collateral may be held on behalf of the Plan by an 
affiliate of the Borrower that is the trustee or custodian of the Plan.
---------------------------------------------------------------------------

    \9\ PTE 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 Securities Exchange Act of 1934 
(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.
---------------------------------------------------------------------------

    (h) The market value (or in the case of a letter of credit, the 
stated amount) of the collateral initially equals at least 102 percent 
of the market value of the loaned securities on the close of business 
on the day preceding the day of the loan and, if the market value of 
the collateral at any time falls below 100 percent (or such higher 
percentage as the Borrower and the independent fiduciary of the Plan 
may agree upon) of the market value of the loaned securities, the 
Borrower delivers additional collateral on the following day to bring 
the level of the collateral back to at least 102 percent. The level of 
the collateral is monitored daily by the Plan or its designee, which 
may be Barclays or any of its affiliates which provides custodial or 
directed trustee services in respect of the securities covered by the 
Borrowing Agreement for the Plan. The applicable Borrowing Agreement 
shall give the Plan a continuing security interest in and lien on the 
collateral.
    (i) Before entering into a Borrowing Agreement, the Borrower 
furnishes to the Plan the most recent publicly available audited and 
unaudited statements of its financial condition, as well as any 
publicly available information which it believes is necessary for the 
independent fiduciary to determine whether the Plan should enter into 
or renew the Borrowing Agreement.
    (j) The Borrowing Agreement contains a representation by the 
Borrower that, as of each time it borrows securities, there has been no 
material adverse change in its financial condition since the date of 
the most recently furnished financial statements.
    (k) The Plan receives the equivalent of all distributions made 
during the loan period, 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 tax withholdings)\10\ had it remained the record owner 
of the securities.
---------------------------------------------------------------------------

    \10\ The Department notes the Applicants' representation that 
dividends and other distributions on foreign securities payable to a 
lending Plan are subject to foreign tax withholdings and that the 
Borrower will always put the Plan back in at least as good a 
position as it would have been had it not loaned securities.
---------------------------------------------------------------------------

    (l) The Borrowing Agreement and/or any securities loan outstanding 
may be terminated by either party at any time without penalty (except 
for, if the Plan has terminated its Borrowing Agreement, the return to 
the Borrower of a pro-rata portion of the Exclusive Fee paid by the 
Borrower to the Plan) whereupon the Borrower delivers 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 the lesser of five business 
days of written notice of termination or the customary settlement 
period for such securities.
    (m) In the event that the Borrower fails to return securities in 
accordance with the Borrowing Agreement, the Plan will have the right 
under the Borrowing Agreement to purchase securities identical to the 
borrowed securities and apply the collateral to payment of the purchase 
price. If the collateral is insufficient to satisfy the Borrower's 
obligation to return the Plan's securities, the Borrower will indemnify 
the Plan in the U.S. with respect to the difference between the 
replacement cost of securities and the market value of the collateral 
on the date the loan is declared in default, together with

[[Page 34477]]

expenses incurred by the Plan plus applicable interest at a reasonable 
rate, including reasonable attorneys' fees incurred by the Plan for 
legal action arising out of default on the loans, or failure by the 
Borrower to properly indemnify the Plan.
    (n) Except as otherwise provided herein, all procedures regarding 
the securities lending activities, at a minimum, conform to the 
applicable provisions of PTE 81-6 (as amended or superseded), as well 
as to applicable securities laws of the United States and/or the United 
Kingdom, as appropriate.
    (o) Only Plans with total assets having an aggregate market value 
of at least $50 million are permitted to lend securities to the 
Borrowers; provided, however, that--
    (1) In the case of two or more Plans which are maintained by the 
same employer, controlled group of corporations or employee 
organization (the Related Plans), whose assets are commingled for 
investment purposes in a single master trust or any other entity the 
assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the Plan 
Asset Regulation), which entity is engaged in securities lending 
arrangements with the Borrowers, the foregoing $50 million requirement 
shall be deemed satisfied if such trust or other entity has aggregate 
assets which are in excess of $50 million; provided that if the 
fiduciary responsible for making the investment decision on behalf of 
such master trust or other entity is not the employer or an affiliate 
of the employer, such fiduciary has total assets under its management 
and control, exclusive of the $50 million threshold amount attributable 
to plan investment in the commingled entity, which are in excess of 
$100 million.
    (2) In the case of two or more Plans which are not maintained by 
the same employer, controlled group of corporations or employee 
organization (the Unrelated Plans), whose assets are commingled for 
investment purposes in a group trust or any other form of entity the 
assets of which are ``plan assets'' under the Plan Asset Regulation, 
which entity is engaged in securities lending arrangements with the 
Borrowers, the foregoing $50 million requirement is satisfied if such 
trust or other entity has aggregate assets which are in excess of $50 
million (excluding the assets of any Plan with respect to which the 
fiduciary responsible for making the investment decision on behalf of 
such group trust or other entity or any member of the controlled group 
of corporations including such fiduciary is the employer maintaining 
such Plan or an employee organization whose members are covered by such 
Plan). However, the fiduciary responsible for making the investment 
decision on behalf of such group trust or other entity--
    (i) Has full investment responsibility with respect to plan assets 
invested therein; and
    (ii) Has total assets under its management and control, exclusive 
of the $50 million threshold amount attributable to plan investment in 
the commingled entity, which are in excess of $100 million. (In 
addition, none of the entities described above are formed for the sole 
purpose of making loans of securities.)
    (p) Prior to any Plan's approval of the lending of its securities 
to the Borrowers, a copy of this exemption, if granted, (and the notice 
of pendency) is provided to the Plan, and the Borrower informs the 
independent fiduciary that the Borrower is not acting as a fiduciary of 
the Plan in connection with its borrowing securities from the Plan.\11\
---------------------------------------------------------------------------

    \11\ The Department notes the Applicants' representation that, 
under the proposed exclusive borrowing arrangements, neither the 
Borrower nor any of its affiliates will perform the essential 
functions of a securities lending agent, i.e., the Applicants will 
not be the fiduciary who negotiates the terms of the Borrowing 
Agreement on behalf of the Plan, the fiduciary who identifies the 
appropriate borrowers of the securities or the fiduciary who decides 
to lend securities pursuant to an exclusive arrangement. However, 
the Applicants or their affiliates may monitor the level of 
collateral and the value of the loaned securities.
---------------------------------------------------------------------------

    (q) The independent fiduciary of the Plan receives monthly reports 
with respect to the securities lending transactions, including but not 
limited to the information set forth in the following sentence, so that 
an independent Plan fiduciary may monitor such transactions with the 
Borrowers. The monthly report will list for a specified period all 
outstanding or closed securities lending transactions. The report will 
identify for each open loan position, the securities involved, the 
value of the security for collateralization purposes, the current value 
of the collateral, the rebate or premium (if applicable) at which the 
security is loaned, and the number of days the security has been on 
loan. At the request of the Plan, such a report will be provided on a 
daily or weekly basis, rather than a monthly basis. Also, upon request 
of the Plan, the Borrower will provide the Plan with daily 
confirmations of securities lending transactions.
    (r) In addition to the above conditions, all loans involving 
Foreign Borrowers must satisfy the following supplemental requirements:
    (1) Such Foreign Borrower is a bank which is subject to regulation 
by the Bank of England or is a registered broker-dealer subject to 
regulation by the UK SFA;
    (2) Such Foreign Borrower is in compliance with all applicable 
provisions of Rule 15a-6 (17 CFR 240.15a-6) under the Securities 
Exchange Act of 1934 (the 1934 Act) which provides foreign broker-
dealers a limited exception from United States registration 
requirements;
    (3) All collateral is maintained in United States dollars or in 
U.S. dollar-denominated securities or letters of credit;
    (4) All collateral is held in the United States and the situs of 
the Borrowing Agreement is maintained in the United States under an 
arrangement that complies with the indicia of ownership requirements 
under section 404(b) of the Act and the regulations promulgated under 
29 CFR 2550.404(b)-1; and
    (5) Prior to entering into a transaction involving a Foreign 
Borrower, Barclays or the Foreign Borrower must:
    (i) Agree to submit to the jurisdiction of the United States;
    (ii) Agree to appoint an agent for service of process in the United 
States, which may be an affiliate (the Process Agent);
    (iii) Consent to the service of process on the Process Agent; and
    (iv) Agree that enforcement by a Plan of the indemnity provided by 
Barclays or the Foreign Borrower will occur in the United States 
courts.
    (s) Barclays or the Borrower maintains, or causes to be maintained, 
within the United States for a period of six years from the date of 
such transaction, in a manner that is convenient and accessible for 
audit and examination, such records as are necessary to enable the 
persons described in paragraph (t)(1) to determine whether the 
conditions of the exemption have been met, except that--
    (1) A prohibited transaction will not be considered to have 
occurred if, due to circumstances beyond the control of Barclays and/or 
its affiliates, the records are lost or destroyed prior to the end of 
the six year period; and
    (2) No party in interest other than the Borrower shall be subject 
to the civil penalty that may be assessed under section 502(i) of the 
Act, or to the taxes imposed by section 4975(a) and (b) of the Code, if 
the records are not maintained, or are not available for examination as 
required below by paragraph (t)(1).
    (t)(1) Except as provided in subparagraph (t)(2) of this paragraph 
and notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of the Act, the records referred to in

[[Page 34478]]

paragraph (s) are unconditionally available at their customary location 
for examination during normal business hours by--
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service or the Securities and Exchange 
Commission (SEC);
    (ii) Any fiduciary of a participating Plan or any duly authorized 
representative of such fiduciary;
    (iii) Any contributing employer to any participating Plan or any 
duly authorized employee representative of such employer; and
    (iv) Any participant or beneficiary of any participating Plan, or 
any duly authorized representative of such participant or beneficiary.
    (2) None of the persons described above in subparagraphs 
(t)(1)(ii)-(t)(1)(iv) are authorized to examine the trade secrets of 
Barclays or its affiliates or commercial or financial information which 
is privileged or confidential.
Section III--Definitions
    (a) An ``affiliate'' of a person means:
    (i) any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person. (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);
    (ii) any officer, director, employee or relative (as defined in 
section 3(15) of the Act) of any such other person or any partner in 
any such person; and
    (iii) any corporation or partnership of which such person is an 
officer, director or employee, or in which such person is a partner.
    (b) The term ``Foreign Borrower'' or ``Foreign Borrowers'' means 
Barclays Capital Securities Limited and any broker-dealer or bank that, 
now or in the future, is an affiliate of Barclays which is subject to 
regulation by the UK SFA or the Bank of England.
    (c) The term ``Borrower'' includes Barclays, BCI, the Foreign 
Borrowers and any other affiliate of Barclays that, now or in the 
future, is a U.S. registered broker-dealer or a government securities 
broker or dealer or U.S. bank.
    Effective Date: This proposed exemption, if granted, will be 
effective as of January 24, 2001.

Summary of Facts and Representations

    1. Barclays, a full-line investment service firm, is an authorized 
institution under the Banking Act of 1987 of the United Kingdom and is 
regulated by the Bank of England. As of June 30, 2000, Barclays (based 
on its Consolidated Balance Sheet) had approximately 
286,385 million in assets and 9,237 million in 
stockholder's equity.
    Barclays has several affiliates which are broker-dealers or banks. 
BCI, a subsidiary of Barclays, is incorporated under the laws of the 
State of Connecticut and is registered with and regulated by the 
Securities and Exchange Commission (the SEC) as a U.S. broker-dealer 
under Section 15 of the Securities Exchange Act of 1934, as amended 
(the 1934 Act). As of November 2000, BCI had approximately $55 billion 
in assets. The affiliated foreign broker-dealers of Barclays that will 
be covered by this proposed exemption (i.e., the Foreign Borrowers), 
and their respective regulating entities, are as follows: (a) Barclays 
Capital Securities Limited (BCSL) is a foreign broker-dealer affiliate 
of Barclays located in London, and is subject to regulation by the 
United Kingdom Securities and Futures Authority (the UK SFA) and (b) 
any broker-dealer or bank that, now or in the future, is an affiliate 
of Barclays which is subject to regulation by the UK SFA or the Bank of 
England. As of June 30, 2000, BCSL had approximately 18,942 
million in assets. Barclays, BCI and the Foreign Borrowers are 
collectively referred to as the Borrowers or the Applicants.
    2. The Borrowers, acting as principal, actively engage in the 
borrowing and lending of securities. The Borrowers utilize borrowed 
securities either to satisfy their own trading requirements or to re-
lend to other broker-dealers and entities which need a particular 
security for a certain period of time. The Applicants represent that in 
the United States, as described in the Federal Reserve Board's 
Regulation T, borrowed securities are often used in short sales, for 
non-purpose loans to exempted borrowers, or in the event of a failure 
to receive securities that a broker-dealer is required to deliver.
    The Applicants wish to enter into exclusive borrowing arrangements 
with employee benefit plans, including commingled investment funds 
holding assets of such plans (Plans), for which Barclays or any 
affiliate of Barclays may be a party in interest. For example, Barclays 
or an affiliate of Barclays may be an investment manager for assets of 
a Plan that are unrelated to the assets involved in the transaction. 
Barclays or any of its affiliates may provide securities custodial 
services, directed trustee services, clearing and/or reporting 
functions in connection with securities lending transactions, or other 
services to the Plan.
    3. Barclays represents that it or any other Foreign Borrower that 
is a bank is regulated by the Bank of England whose powers include 
licensing banks in the United Kingdom, issuing directives to address 
violations by or irregularities involving such banks, requiring 
information from a bank or its auditor regarding supervisory matters 
and revoking bank licenses. Barclays also states that the Bank of 
England ensures that it has procedures for monitoring and controlling 
its worldwide activities through various statutory and regulatory 
standards. Among these standards are requirements for adequate internal 
controls, oversight, administration and financial resources. Barclays 
further states that it is required to provide the Bank of England on a 
recurring basis with information regarding capital adequacy, country 
risk exposure and foreign exchange exposures as well as periodic, 
consolidated financial reports on the financial condition of Barclays 
and its affiliates.
    4. The Applicants represent that although the Foreign Borrowers 
that are broker-dealers will not be registered with the SEC, their 
activities are governed by the rules, regulations and membership 
requirements of the UK SFA. In this regard, the Applicants state that 
the Foreign Borrowers are subject to the UK SFA rules relating to, 
among other things, minimum capitalization, reporting requirements, 
periodic examinations, client money and safe custody rules, and books 
and records requirements with respect to client accounts. The 
Applicants represent that the rules and regulations set forth by the UK 
SFA and the SEC share a common objective: the protection of the 
investor by the regulation of the securities industry. The Applicants 
represent that the UK SFA rules require each firm which employs 
registered representatives or registered traders to have positive 
tangible net worth and to be able to meet its obligations as they may 
fall due, and that the UK SFA rules set forth comprehensive financial 
resource and reporting/disclosure rules regarding capital adequacy. In 
addition, to demonstrate capital adequacy, the Applicants state that 
the UK SFA rules impose reporting/disclosure requirements on broker-
dealers with respect to risk management, internal controls, and 
transaction reporting and recordkeeping requirements. In this regard, 
required records must be produced at the request of the UK SFA at any 
time. The Applicants further state that the rules and regulations of 
the UK SFA for broker-dealers are backed up by

[[Page 34479]]

potential fines and penalties as well as a comprehensive disciplinary 
system.
    5. The Applicants represent that in addition to the protections 
afforded by the Bank of England and the UK SFA, compliance by the 
Applicants with the requirements of Rule 15a-6 of the 1934 Act (and the 
amendments and interpretations thereof) will offer further protections 
to the Plans.\12\ SEC Rule 15a-6 provides an exemption from U.S. 
registration requirements for a foreign broker-dealer that induces or 
attempts to induce the purchase or sale of any security (including 
over-the-counter equity and debt options) by a ``U.S. institutional 
investor'' or a ``major U.S. institutional investor,'' provided that 
the foreign broker-dealer, among other things, enters into these 
transactions through a U.S. registered broker-dealer intermediary. The 
term ``U.S. institutional investor,'' as defined in Rule 15a-6(b)(7), 
includes an employee benefit plan within the meaning of the Act if (a) 
the investment decision is made by a plan fiduciary, as defined in 
section 3(21) of the Act, which is either a bank, savings and loan 
association, insurance company or registered investment advisor, or (b) 
the employee benefit plan has total assets in excess of $5 million, or 
(c) the employee benefit plan is a self-directed plan with investment 
decisions made solely by persons that are ``accredited investors'' as 
defined in Rule 501(a)(1) of Regulation D of the Securities Act of 
1933, as amended. The term ``major U.S. institutional investor'' is 
defined as a person that is a U.S. institutional investor that has, or 
has under management, total assets in excess of $100 million or an 
investment adviser registered under section 203 of the Investment 
Advisers Act of 1940 that has total assets under management in excess 
of $100 million.\13\ The Applicants represent that the intermediation 
of the U.S. registered broker-dealer imposes upon the foreign broker-
dealer the requirement that the securities transaction be effected in 
accordance with a number of U.S. securities laws and regulations 
applicable to U.S. registered broker-dealers.
---------------------------------------------------------------------------

    \12\ According to the Applicants, section 3(a)(4) of the 1934 
Act defines ``broker'' to mean ``any person engaged in the business 
of effecting transactions in securities for the account of others, 
but it does not include a bank.'' Section 3(a)(5) of the 1934 Act 
provides a similar exclusion for ``banks'' in the definition of the 
term ``dealer.'' However, section 3(3)(6) of the 1934 Act defines 
``bank'' to mean a banking institution organized under the laws of 
the United States or a State of the United States. Further, Rule 
15a-6(b)(3) provides that the term ``foreign broker-dealer'' means 
``any non-U.S. resident person * * * whose securities activities, if 
conducted in the United States, would be described by the definition 
of `broker' or `dealer' in sections 3(a)(4) or 3(a)(5) of the [1934] 
Act.'' Therefore, the test of whether an entity is a ``foreign 
broker'' or ``dealer'' is based on the nature of such foreign 
entity's activities and, with certain exceptions, only banks that 
are regulated by either the United States or a State of the United 
States are excluded from the definition of the term ``broker'' or 
``dealer.'' Thus, for purposes of this exemption request, the 
Applicants are willing to represent that they will comply with the 
applicable provisions and relevant SEC interpretations and 
amendments of Rule 15a-6.
    \13\ Note that the categories of entities that qualify as 
``major U.S. institutional investors'' has been expanded by a No-
Action letter issued by the SEC. See SEC No-Action Letter issued to 
Cleary, Gottlieb, Steen & Hamilton on April 9, 1997 (April 9, 1997 
No-Action Letter).
---------------------------------------------------------------------------

    The Applicants represent that under SEC Rule 15a-6, a foreign 
broker-dealer that induces or attempts to induce the purchase or sale 
of any security by a U.S. institutional or major U.S. institutional 
investor in accordance with Rule 15a-6 \14\ must, among other things:
---------------------------------------------------------------------------

    \14\ If it is determined that applicable regulation under the 
1934 Act does not require Barclays or the borrower to comply with 
SEC Rule 15a-6, both entities will nevertheless comply with 
subparagraphs (a) and (b) of Representation 5 above.
---------------------------------------------------------------------------

    (a) Consent to service of process for any civil action brought by, 
or proceeding before, the SEC or any self-regulatory organization;
    (b) Provide the SEC with any information or documents within its 
possession, custody or control, any testimony of any such foreign 
associated persons, and any assistance in taking the evidence of other 
persons, wherever located, that the SEC requests and that relates to 
the transactions effected pursuant to the Rule;
    (c) Rely on the U.S. registered broker-dealer through which the 
transactions with the U.S. institutional and major U.S. institutional 
investors are effected to (among other things):
    (1) Effect the transactions, other than negotiating the terms;
    (2) Issue all required confirmations and statements;
    (3) As between the foreign broker-dealer and the U.S. registered 
broker-dealer, extend or arrange for the extension of credit in 
connection with the transactions;
    (4) Maintain required books and records relating to the 
transactions, including those required by SEC Rules 17a-3 (Records to 
be Made by Certain Exchange Members) and 17a-4 (Records to be Preserved 
by Certain Exchange Members, Brokers and Dealers) of the 1934 Act;
    (5) Receive, deliver, and safeguard funds and securities in 
connection with the transactions on behalf of the U.S. institutional 
investor or major U.S. institutional investor in compliance with Rule 
15c3-3 of the 1934 Act (Customer Protection--Reserves and Custody of 
Securities)\15\ and
---------------------------------------------------------------------------

    \15\ Under certain circumstances described in the April 9, 1997 
No-Action Letter (e.g., clearance and settlement transactions), 
there may be direct transfers of funds and securities between a Plan 
and Barclays or between a Plan and the Foreign Borrower. The 
Applicants note that in such situations, the U.S. registered broker-
dealer will not be acting as principal with respect to any duties it 
is required to undertake pursuant to Rule 15a-6.
---------------------------------------------------------------------------

    (6) Participate in certain oral communications (e.g., telephone 
calls) between the foreign associated person and the U.S. institutional 
investor (not the major U.S. institutional investor), and accompany the 
foreign associated person on certain visits with both U.S. 
institutional and major U.S. institutional investors. The Applicants 
represent that, under certain circumstances, the foreign associated 
person may have direct communications and contact with the U.S. 
Institutional Investor. \16\ (See April 9, 1997 No-Action Letter.)
---------------------------------------------------------------------------

    \16\ The term ``foreign associated person'' as defined in Rule 
15a-6(b)(2) means any natural person domiciled outside the United 
States who is an associated person, as defined in section 3(a)(18) 
of the 1934 Act, of the foreign broker or dealer, and who 
participates in the solicitation of a U.S. institutional investor or 
a major U.S. institutional investor under Rule 15a-6(a)(3)
---------------------------------------------------------------------------

    6. An institutional investor, such as a pension fund, lends 
securities in its portfolio to a broker-dealer or bank in order to earn 
a fee while continuing to enjoy the benefits of owning the securities 
(e.g., from the receipt of any interest, dividends, or other 
distributions due on those securities and from any appreciation in the 
value of the securities). The lender generally requires that the 
securities loan be fully collateralized, and the collateral usually is 
in the form of cash or high quality liquid securities, such as U.S. 
Government or Federal Agency obligations or irrevocable bank letters of 
credit. If the borrower deposits cash collateral, the lender invests 
the collateral, and the borrowing agreement may provide that the lender 
pay the borrower a previously-agreed upon amount or rebate fee and keep 
the earnings on the collateral. If the borrower deposits government 
securities, the borrower is entitled to the earnings on its deposited 
securities and may pay the lender a lending fee. If the borrower 
deposits irrevocable bank letters of credit as collateral, the borrower 
pays the lender a fee as compensation for the loan of its securities. 
These fees, defined below as the Transaction Lending Fee, may be 
determined in advance or pursuant to an objective formula, and may be 
different for different securities or

[[Page 34480]]

different groups of securities subject to the Borrowing Agreement.
    7. The Borrowers request an exemption for the lending of 
securities, under certain exclusive borrowing arrangements, by Plans 
with respect to which Barclays or any of its affiliates is a party in 
interest (including a fiduciary) solely by reason of providing services 
to the Plan, or solely by reason of a relationship to a service 
provider described in section 3(14)(F), (G), (H) or (I) of the Act. For 
each Plan, neither the Borrowers nor any of its affiliates will have 
discretionary authority or control over the Plan's investment in the 
securities available for loan, nor will they render investment advice 
(within the meaning of 29 CFR 2510.3-21(c)) with respect to those 
assets. The Applicants represent that because the Borrowers, by 
exercising their contractual rights under the proposed exclusive 
borrowing arrangements, will have discretion with respect to whether 
there is a loan of particular Plan securities to the Borrowers, the 
lending of securities to the Borrowers may be outside the scope of 
relief provided by PTE 81-6.\17\
---------------------------------------------------------------------------

    \17\ PTE 81-6 requires in part that neither the borrower nor an 
affiliate of the borrower may have discretionary authority or 
control over the investment of the plan assets involved in the 
transaction.
---------------------------------------------------------------------------

    8. For each Plan, the Borrowers will directly negotiate a Borrowing 
Agreement with a Plan fiduciary which is independent of the Borrowers. 
Under the Borrowing Agreement, the Borrowers will have exclusive access 
for a specified period of time to borrow certain securities of the Plan 
pursuant to certain conditions. The Borrowing Agreement will specify 
all material terms of the agreement, including the basis for 
compensation to the Plan under each category of securities available 
for loan. The Borrowing Agreement will also contain a requirement that 
the Borrowers pay all transfer fees and transfer taxes relating to the 
securities loans. The terms of each loan of securities by a Plan to a 
Borrower will be at least as favorable to such Plan as those of a 
comparable arm's-length transaction between unrelated parties, taking 
into account the exclusive arrangement.
    9. The Borrowers may, but shall not be required to, agree to 
maintain a minimum balance of borrowed securities subject to the 
Borrowing Agreement. Such minimum balance may be a fixed U.S. dollar 
amount, a flat percentage or other percentage determined pursuant to an 
objective formula.
    10. In exchange for granting the Borrower the exclusive right to 
borrow certain securities, the Borrower will pay the Plan either (i) a 
flat fee (which may be equal to a percentage of the value of the total 
securities subject to the Borrowing Agreement), (ii) a periodic payment 
that is equal to a percentage of the value of the total balance 
outstanding borrowed securities, or (iii) any combination of (i) and 
(ii) (i.e., the Exclusive Fee).
    If the Borrower deposits cash collateral, all the earnings 
generated by such cash collateral shall be returned to the Borrower; 
provided that the Borrower may, but shall not be obligated to, agree 
with the independent fiduciary of the Plan that a percentage of the 
earnings on the collateral may be retained by the Plan or the Plan may 
agree to pay the Borrower a rebate fee and retain the remaining 
earnings on the collateral (the Shared Earnings Compensation). If the 
Borrower deposits non-cash collateral, all earnings on the non-cash 
collateral shall be returned to the Borrower; provided that the 
Borrower may, but shall not be obligated to, agree to pay the Plan a 
lending fee. The Lending Fee, together with the Shared Earnings 
Compensation, is referred to as the Transaction Lending Fee.
    The Transaction Lending Fee, if any, may be in addition to the 
Exclusive Fee or an offset against such Exclusive Fee. The Exclusive 
Fee and the Transaction Lending Fee may be determined in advance or 
pursuant to an objective formula, and may be different for different 
securities or different groups of securities subject to the Borrowing 
Agreement. For example, in addition to the Borrower paying different 
fees to different Plans, the Borrower may pay different fees for 
different portfolios of securities (i.e., the fee for a domestic 
securities portfolio may be different than the fee for a foreign 
securities portfolio). The Borrower may also pay different fees for 
securities of issuers in different foreign countries; for example, 
there may be a different fee for German securities than for French 
securities. In addition, with respect to, for example, the French 
securities, there may be different fees for liquid securities than for 
illiquid securities.
    Any change in the Exclusive Fee or the Transaction Lending Fee that 
the Borrower pays to the Plan with respect to any securities loan 
requires the prior written consent of the independent fiduciary of the 
Plan, except that consent is presumed where the Exclusive Fee or the 
Transaction Lending Fee changes pursuant to an objective formula. Where 
the Exclusive Fee or the Transaction Lending Fee changes pursuant to an 
objective formula, the independent fiduciary of the Plan must be 
notified at least 24 hours in advance of such change and such 
independent Plan fiduciary must not object in writing to such change, 
prior to the effective time of such change.
    The Plan will be entitled to the equivalent of all distributions 
made to holders of the borrowed securities during the loan period, 
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 tax 
withholdings in the case of foreign securities), had it remained the 
record owner of the securities.
    11. By the close of business on or before the day the loaned 
securities are delivered to the Borrower, the Plan will receive from 
the Borrower (by physical delivery, book entry in a securities 
depository located in the United States, wire transfer, or similar 
means) collateral consisting of U.S. currency, securities issued or 
guaranteed by the U.S. Government or its agencies or instrumentalities, 
irrevocable bank letters of credit issued by U.S. banks other than 
Barclays or its affiliates, or other collateral permitted under PTE 81-
6 (as amended or superseded). Such collateral will be deposited and 
maintained in an account on behalf of a Plan which is separate from the 
Borrower's accounts and will be maintained with an institution other 
than the Borrower. For this purpose, the collateral may be held on 
behalf of the Plan by an affiliate of the Borrower that is the trustee 
or custodian of the Plan. The market value (or in the case of a letter 
of credit, a stated amount) of the collateral on the close of business 
on the day preceding the day of the loan will be at least 102 percent 
of the market value of the loaned securities. The Plan, its independent 
fiduciary or its designee, which may be Barclays or any of its 
affiliates which provides custodial or directed trustee services in 
respect of the securities covered by the Borrowing Agreement for the 
Plan, will monitor the level of the collateral daily and, if the market 
value of the collateral on the close of a business day falls below 100 
percent (or such higher percentage as the Borrower and the independent 
fiduciary of the Plan may agree upon) of the market value of the loaned 
securities at the close of business on such day, the Borrower will 
deliver additional collateral by the close of business on the following 
day to bring the level of the collateral back to at least 102 percent.

[[Page 34481]]

The applicable Borrowing Agreement will give the Plan a continuing 
security interest in and lien on the collateral.
    If the Borrower deposits cash collateral, the Plan invests the 
collateral, and all earnings on such cash collateral shall be returned 
to the Borrower; provided that the Borrowing Agreement may provide that 
the Plan receive Shared Earnings Compensation, which, as discussed 
above, may be a percentage of the earnings on the collateral which may 
be retained by the Plan or the Plan may agree to pay the Borrower a 
rebate fee and retain the remaining earnings on the collateral. The 
terms of the rebate fee for each loan will be at least as favorable to 
the Plan as those of comparable arm's length transactions between 
unrelated parties taking into account the exclusive arrangement, and 
will be based upon an objective methodology which takes into account 
several factors, including potential demand for the loaned securities, 
the applicable benchmark cost of fund indices (typically, the U.S. 
Federal Funds rate established by the U.S. Federal Reserve System (the 
Federal Funds), the overnight REPO \18\ rate, or the like) and 
anticipated investment return on overnight investments permitted by the 
independent fiduciary of the Plan. If the Borrower deposits non-cash 
collateral, such as government securities or irrevocable bank letters 
of credit, the Borrower shall be entitled to the earnings on its non-
cash collateral; provided that the Borrower may, but shall not be 
obligated to, agree to pay the Plan a Lending Fee. The Exclusive Fee 
and the Transaction Lending Fee may be determined in advance or 
pursuant to an objective formula, and may be different for different 
securities or different groups of securities subject to the Borrowing 
Agreement.
---------------------------------------------------------------------------

    \18\ An overnight REPO is an overnight repurchase agreement that 
is an arrangement whereby securities dealers and banks finance their 
inventories of Treasury bills, notes and bonds. The dealer or bank 
sells securities to an investor with a temporary surplus of cash, 
agreeing to buy them back the next day. Such transactions are 
settled in immediately available Federal Funds, usually at a rate 
below the Federal Funds rate (the rate charged by the banks lending 
funds to each other).
---------------------------------------------------------------------------

    The Borrower will provide a monthly report to the independent 
fiduciary of the Plan which includes the following information. The 
monthly report will list for a specified period all outstanding or 
closed securities lending transactions. The report will identify for 
each open loan position, the securities involved, the value of the 
security for collateralization purposes, the current value of the 
collateral, the rebate or premium (if applicable) at which the security 
is loaned, and the number of days the security has been on loan. At the 
request of the Plan, such a report will be provided on a daily or 
weekly basis, rather than a monthly basis. Also, upon request of the 
Plan, the Borrower will provide the Plan with daily confirmations of 
securities lending transactions.
    12. Before entering into a Borrowing Agreement, the Borrower will 
furnish to the Plan the most recent publicly available audited and 
unaudited statements of its financial condition, as well as any 
publicly available information which it believes is necessary for the 
independent fiduciary to determine whether the Plan should enter into 
or renew the Borrowing Agreement. Further, the Borrowing Agreement will 
contain a representation by the Borrower that as of each time it 
borrows securities, there has been no material adverse change in its 
financial condition since the date of the most recently furnished 
financial statements.
    13. Prior to any Plan's approval of the lending of its securities 
to the Borrowers, a copy of this exemption, if granted, (and the notice 
of pendency) is provided to the Plan, and the Borrower informs the 
independent fiduciary that the Borrower is not acting as a fiduciary of 
the Plan in connection with its borrowing securities from the Plan.
    14. With regard to those Plans for which Barclays or any of its 
affiliates provides custodial, directed trustee, clearing and/or 
reporting functions relative to securities loans, Barclays and a Plan 
fiduciary independent of Barclays and its affiliates will agree in 
advance and in writing to any fee that Barclays or any of its 
affiliates is to receive for such custodial, directed trustee, clearing 
and/or reporting services. Such fees, if any, would be fixed fees 
(e.g., Barclays or any of its affiliates might negotiate to receive a 
fixed percentage of the value of the assets with respect to which it 
performs these services, or to receive a stated dollar amount) and any 
such fee would be in addition to any fee Barclays or any of its 
affiliates has negotiated to receive from any such Plan for standard 
custodial or other services unrelated to the securities lending 
activity. The arrangement for Barclays or any of its affiliates to 
provide such functions relative to securities loans to the Borrowers 
will be terminable by the Plan within five (5) business days of the 
receipt of written notice without penalty to the Plan, except for the 
return to the Borrowers of a pro-rata portion of the Exclusive Fee paid 
by the Borrowers to the Plan, if the Plan has also terminated its 
exclusive borrowing arrangement with the Borrowers.
    15. The Borrowing Agreement and/or any securities loan outstanding 
may be terminated by either party at any time without penalty. Upon 
termination of any securities loan, the Borrower will deliver 
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 the lesser of 
five business days of written notice of termination or the customary 
settlement period for such securities.
    16. In the event that the Borrower fails to return securities in 
accordance with the Borrowing Agreement, the Plan will have the right 
under the Borrowing Agreement to purchase securities identical to the 
borrowed securities and apply the collateral to payment of the purchase 
price. If the collateral is insufficient to satisfy the Borrower's 
obligation to return the Plan's securities, the Borrower will indemnify 
the Plan in the U.S. with respect to the difference between the 
replacement cost of securities and the market value of the collateral 
on the date the loan is declared in default, together with expenses 
incurred by the Plan plus applicable interest at a reasonable rate, 
including reasonable attorneys' fees incurred by the Plan for legal 
action arising out of default on the loans, or failure by the Borrower 
to properly indemnify the Plan.
    17. Except as provided herein, all the procedures under the 
Borrowing Agreement will, at a minimum, conform to the applicable 
provisions of PTE 81-6 (as amended or superseded), as well as to 
applicable securities laws of the U.S. and/or the U.K., as appropriate. 
In addition, in order to ensure that the independent fiduciary 
representing a Plan has the experience, sophistication, and resources 
necessary to adequately review the Borrowing Agreement and the fee 
arrangements thereunder, only Plans with total assets having an 
aggregate market value of at least $50 million are permitted to lend 
securities to the Borrowers; provided, however, that--
    (a) In the case of two or more Plans which are maintained by the 
same employer, controlled group of corporations or employee 
organization (the Related Plans), whose assets are commingled for 
investment purposes in a single master trust or any other entity the 
assets of which are ``plan assets'' under 29 CFR 2510.3-101 (the Plan 
Asset Regulation), which entity is engaged in securities lending 
arrangements with the Borrowers, the foregoing $50 million requirement 
shall be deemed satisfied if such trust or

[[Page 34482]]

other entity has aggregate assets which are in excess of $50 million; 
provided that if the fiduciary responsible for making the investment 
decision on behalf of such master trust or other entity is not the 
employer or an affiliate of the employer, such fiduciary has total 
assets under its management and control, exclusive of the $50 million 
threshold amount attributable to plan investment in the commingled 
entity, which are in excess of $100 million.
    (b) In the case of two or more Plans which are not maintained by 
the same employer, controlled group of corporations or employee 
organization (the Unrelated Plans), whose assets are commingled for 
investment purposes in a group trust or any other form of entity the 
assets of which are ``plan assets'' under the Plan Asset Regulation, 
which entity is engaged in securities lending arrangements with the 
Borrowers, the foregoing $50 million requirement is satisfied if such 
trust or other entity has aggregate assets which are in excess of $50 
million (excluding the assets of any Plan with respect to which the 
fiduciary responsible for making the investment decision on behalf of 
such group trust or other entity or any member of the controlled group 
of corporations including such fiduciary is the employer maintaining 
such Plan or an employee organization whose members are covered by such 
Plan). However, the fiduciary responsible for making the investment 
decision on behalf of such group trust or other entity--
    (i) Has full investment responsibility with respect to plan assets 
invested therein; and
    (ii) Has total assets under its management and control, exclusive 
of the $50 million threshold amount attributable to plan investment in 
the commingled entity, which are in excess of $100 million. (In 
addition, none of the entities described above are formed for the sole 
purpose of making loans of securities.)
    The Applicants represent that the opportunity for the Plans to 
enter into exclusive borrowing arrangements with the Borrowers under 
the flexible fee structures described herein is in the interests of the 
Plans because the Plans will then be able to choose among an expanded 
number of competing exclusive borrowers, as well as maximizing the 
volume of securities lent and the return on such securities.
    18. In addition to the above conditions, all loans involving 
Foreign Borrowers must satisfy the following supplemental requirements:
    (i) Such Foreign Borrower is a bank which is subject to regulation 
by the Bank of England or is a registered broker-dealer subject to 
regulation by the UK SFA;
    (ii) Such Foreign Borrower is in compliance with all applicable 
provisions of Rule 15a-6 (17 C.F.R. 240.15a-6) under the 1934 Act which 
provides foreign broker-dealers a limited exception from United States 
registration requirements;
    (iii) All collateral is maintained in United States dollars or in 
U.S. dollar-denominated securities or letters of credit;
    (iv) All collateral is held in the United States and the situs of 
the Borrowing Agreement is maintained in the United States under an 
arrangement that complies with the indicia of ownership requirements 
under Section 404(b) of the Act and the regulations promulgated under 
29 C.F.R. 2550.404(b)-1; and
    (v) Prior to entering into a transaction involving a Foreign 
Borrower, Barclays or the Foreign Borrower must:
    (1) Agree to submit to the jurisdiction of the United States;
    (2) Agree to appoint an agent for service of process in the United 
States, which may be an affiliate (the Process Agent);
    (3) Consent to the service of process on the Process Agent; and
    (4) Agree that enforcement by a Plan of the indemnity provided by 
Barclays or the Foreign Borrower will occur in the United States 
courts.
    19. In addition to the protections cited above, Barclays or the 
Borrower will maintain, or cause to be maintained, within the United 
States for a period of six years from the date of a transaction, such 
records as are necessary to enable the Department and other persons (as 
specified herein in Section II(t)(1)) to determine whether the 
conditions of the exemption have been met.
    20. In summary, the Applicants represent that the described 
transactions satisfy the statutory criteria of section 408(a) of the 
Act because:
    (a) The Borrower will directly negotiate a Borrowing Agreement with 
an independent fiduciary of each Plan;
    (b) The Plans will be permitted to lend to the Borrower, a major 
securities borrower who will be added to an expanded list of competing 
exclusive borrowers, enabling the Plans to earn additional income from 
the loaned securities on a secured basis, while continuing to enjoy the 
benefits of owning the securities;
    (c) In exchange for granting the Borrower the exclusive right to 
borrow certain securities, the Borrower will pay the Plan the Exclusive 
Fee, which as discussed above may be either (i) a flat fee (which may 
be a percentage of the value of the total securities subject to the 
Borrowing Agreement), (ii) a percentage of the value of the total 
balance of outstanding borrowed securities, or (iii) any combination of 
(i) and (ii);
    (d) Any change in the Exclusive Fee or Shared Earnings Compensation 
that the Borrower pays to the Plan with respect to any securities loan 
will require the prior written consent of the independent fiduciary, 
except that consent will be presumed where the Exclusive Fee or Shared 
Earnings Compensation changes pursuant to an objective formula 
specified in the Borrowing Agreement and the independent fiduciary is 
notified at least 24 hours in advance of such change and does not 
object in writing thereto, prior to the effective time of such change;
    (e) The Borrower will provide sufficient information concerning its 
financial condition to a Plan before a Plan lends any securities to the 
Borrower;
    (f) The collateral posted with respect to each loan of securities 
to the Borrower initially will be at least 102 percent of the market 
value of the loaned securities and will be monitored daily by the 
independent fiduciary;
    (g) The Borrowing Agreement and/or any securities loan outstanding 
may be terminated by either party at any time without penalty, except 
for the return to the Borrower of a pro-rata portion of the Exclusive 
Fee paid by the Borrower to the Plan, and whereupon the Borrower will 
return any 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 the lesser of five business 
days of written notice of termination or the customary settlement 
period for such securities;
    (h) Neither the Borrower nor any of its affiliates will have 
discretionary authority or control over the Plan's investment in the 
securities available for loan;
    (i) The minimum Plan size requirement (as specified in Section 
II(o) above) will ensure that the Plans will have the resources 
necessary to adequately review and negotiate all aspects of the 
exclusive borrowing arrangements; and
    (j) All the procedures will, at a minimum, conform to the 
applicable provisions of PTE 81-6 (as amended or superseded), as well 
as applicable securities laws of the United States and/or the United 
Kingdom, as appropriate.

FOR FURTHER INFORMATION CONTACT: Karen Lloyd of the Department, 
telephone (202) 219-8194. (This is not a toll-free number.)

[[Page 34483]]

Gooch Enterprises, Inc. Money Purchase Pension Plan (the Plan) 
Located in Thomasville, North Carolina

[Application No. D-10969]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR part 
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption 
is granted, 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 proposed sale of two tracts of land (the 
Property) by the Plan to Harold L. Gooch, Jr. and Susan M. Gooch 
(collectively; the Gooches), who are shareholders of the Plan sponsor, 
the trustees of the Plan and, therefore, parties in interest with 
respect to the Plan; provided that the following conditions are 
satisfied:
    (a) the proposed sale is a one-time cash transaction;
    (b) the Plan receives the current fair market value for the 
Property, as established by an independent qualified appraiser at the 
time of the sale; and
    (c) the Plan pays no commissions or other expenses associated with 
the sale.

Summary of Facts and Representations

    1. The Plan was established on February 1, 1983, and is a defined 
contribution plan. As of February, 2001, the Plan had 15 participants 
and beneficiaries. As of December 31, 1999, the Plan had $1,198,714 in 
total assets. Gooch Enterprises Inc. (the Company) is the sponsor of 
the Plan. The Plan's trustees are Harold L. Gooch, Jr. and Susan M. 
Gooch (i.e., the Gooches). The Company was incorporated on November 24, 
1982, and is a subchapter ``C'' North Carolina corporation which is in 
the business of coordinating trade shows.
    2. In 1984, the Plan purchased the Property from Austin T. and 
Leena Batten, who were unrelated third parties, for the amount of 
$25,000, of which $22,500 was financed by a loan, as evidenced by a 
note and deed of trust, from North Carolina National Bank (now Bank of 
America). The applicant represents that the note on the Property was 
paid and cancelled as of November 1, 1988. It is represented that the 
Gooches, as the Plan's trustees, made the decision to purchase the 
Property as a investment for the Plan. The Gooches believed that the 
Property would be a good investment for the Plan and would appreciate 
in value. At the time of purchase, the Property represented 
approximately 30% of the Plan's total assets. However, the applicant 
states that as of the end of 1999, the Property represented 
approximately 6.4% of the total value of the Plan's assets.
    3. The applicant represents that the Property has not been used or 
leased by anyone, including the parties in interest to the Plan 
described herein. Since it was originally acquired by the Plan in 1984, 
the Property has not been an income-producing asset. The Property is 
undeveloped land that is adjacent to property owned by the Gooches.\19\ 
The applicant represents that the Plan paid no expenses or taxes during 
the period of time the Property has been a Plan asset. All real estate 
and related taxes and assessments were paid by the Gooches personally.
---------------------------------------------------------------------------

    \19\ The Department is not providing any opinion in this 
proposed exemption as to whether the acquisition and holding of the 
Property by the Plan violated any of the provisions of Part 4 of 
Title I of the Act.
---------------------------------------------------------------------------

    4. The Property, which consists of Lots 2 and 3, is located on 
Curtis Court in Thomasville, North Carolina. The Property is part of a 
semi-developed residential area. The Property was appraised on March 
14, 2001 (the Appraisal). The Appraisal was prepared by Gerry C. 
Crowder, SRA (Mr. Crowder), who is an independent qualified appraiser. 
Mr. Crowder is with Hylton-Crowder & Associates, Inc., located at 132 
East Parris Avenue, P.O. Box 5174, in High Point, North Carolina. After 
inspecting the Property and using a direct sales comparison analysis of 
recent sales of similar properties (i.e., undeveloped land), Mr. 
Crowder determined that the aggregate fair market value of the Property 
was $77,000 (i.e., $38,500 for each Lot) as of March 7, 2001. Because 
the Property is adjacent to property owned by the Gooches, Mr. Crowder 
also considered whether the adjacency factor merits a premium above 
fair market value for any sale of the Property to the Gooches. However, 
Mr. Crowder determined that no adjustments are necessary because of the 
adjacency issue.
    The applicant represents that the Appraisal will be updated at the 
time of the proposed transaction (the Update), in order to ensure that 
the Plan receives no less than the current fair market value of the 
Property on the date of the sale. The Update will take into 
consideration any recent sales of similar properties in the local real 
estate area which may affect the Appraisal's conclusion regarding the 
fair market value of the Property.
    5. The applicant proposes that the Gooches purchase the Property 
from the Plan in a one-time cash transaction. The applicant represents 
that the proposed transaction would be in the best interest and 
protective of the Plan because, among other things, the Plan will pay 
no expenses or commissions associated with the sale. The Gooches will 
pay the Plan an amount equal to the current fair market value of the 
Property, as established by an independent, qualified appraiser. The 
sale of the Property to the Gooches will enable the Plan to sell an 
illiquid, non-income producing asset and reinvest the sale proceeds in 
other assets that may yield greater returns. Thus, the sale will 
enhance the liquidity of the Plan's investment portfolio and allow the 
trustees to further diversify the Plan's assets.
    6. In summary, the applicant represents that the transaction 
satisfies the statutory criteria of section 408(a) of the Act and 
section 4975(c)(2) of the Code because:
    (a) The proposed sale will be a one-time cash transaction;
    (b) The Plan will receive the current fair market value for each 
Property, as established by an independent qualified appraiser at the 
time of the sale;
    (c) The Plan will pay no commissions or other expenses associated 
with the sale; and
    (d) The sale will enable the Plan to sell an illiquid, non-income 
producing asset and reinvest the sale proceeds in other assets that may 
yield greater returns.

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 of the Act and/or the Code, 
including any prohibited transaction 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

[[Page 34484]]

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) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries, and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
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
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 25th day of June, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 01-16235 Filed 6-27-01; 8:45 am]
BILLING CODE 4510-29-P