[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Notices]
[Pages 49009-49014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23463]



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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 95-85; Exemption Application No. D-
09882, et al.]


Grant of Individual Exemptions; Retirement Plan for Employees of 
Automobile Club of New York, Inc.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of Individual Exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, D.C. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR 
47713, October 17, 1978) transferred the authority of the Secretary of 
the Treasury to issue exemptions of the type proposed to the Secretary 
of Labor.

Statutory Findings

    In accordance with section 408(a) of the Act and/or section 
4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon 
the entire record, the Department makes the following findings:
    (a) The exemptions are administratively feasible;
    (b) They are in the interests of the plans and their participants 
and beneficiaries; and
    (c) They are protective of the rights of the participants and 
beneficiaries of the plans.

Retirement Plan for Employees of Automobile Club of New York, Inc. (the 
Plan) Located in Garden City, New York

[Prohibited Transaction Exemption 95-85; Exemption Application No. 
D-9882]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code, 
shall not apply to the: (1) The purchase (the Purchase) by the Plan of 
a certain office building (the Building) from Automobile Club of New 
York, Inc. (the Club), a sponsor of the Plan and a party in interest 
with respect to the Plan; (2) a subsequent leaseback (the Lease) of the 
Building by the Plan to the Club; and (3) the potential future exercise 
of (a) a repurchase option (the Repurchase Option) between the Club and 
the Plan; and (b) a make whole obligation (the Make Whole Obligation) 
whereby the Club will pay the Plan the difference between the original 
acquisition price paid by the Plan for the Building, and the price 
received by the Plan upon the sale of a Building to a purchaser other 
than the Club; provided that the following conditions are satisfied:
    (1) All terms and conditions of the Purchase, the Lease, the 
Repurchase Option, and the Make Whole Obligation are and will be at 
least as favorable to the Plan as those the Plan could obtain in an 
arm's-length transaction with an unrelated party;
    (2) the Lease will have an initial term of fifteen years with three 
five year renewal options, and will be a triple net lease under which 
the Club as the tenant is obligated for all operating expenses, 
including real estate taxes, insurance, repairs, maintenance, 
electricity and other utilities;
    (3) the fair market value of the Building has been determined by an 
independent qualified appraiser, and will be updated as of the date of 
purchase by the Plan;
    (4) with respect to the Lease, the fair market rental amount has 
been and will be determined by an independent qualified appraiser, 
which amount will never be below the initial fair market annual rental 
amount of $470,000;
    (5) with respect to the Lease, appraisals of the Building will be 
performed at three year intervals during the initial fifteen year term 
of the Lease, and at five year intervals with respect to the three 
renewal periods for purposes of updating the fair market rental amount 
to be received by the Plan;
    (6) the fair market value of the Building will not exceed 25% of 
the Plan's total assets. Notwithstanding this condition, if the 25% 
limitation is ever exceeded the Club will have 60 days to comply with 
the 25% limit. In the event the 25% limit cannot be met within the 60 
days, the Plan will undertake an orderly disposition of its interests 
in the Building in such manner as to cure the violation within nine (9) 
months of the date when the 25% limit was initially exceeded. If at any 
time during the 9 month disposition period, the Building exceeds 30% of 
the Plan's total assets, the exemption will no longer be available;
    (7) an independent fiduciary will be appointed to review, approve 
and monitor the transactions described herein, and the fees received by 
the independent fiduciary for serving in such capacity, combined with 
any other fees derived from the Club or related parties, will not 
exceed 1% of its annual income for each fiscal year that it continues 
to serve in the independent fiduciary capacity with respect to these 
transactions;
    (8) U.S. Trust, as the independent fiduciary, will evaluate the 
transactions described herein and deemed them to be administratively 
feasible, protective and in the interest of the Plan;
    (9) U.S. Trust, as the independent fiduciary, will monitor the 
terms and the conditions of the exemption and the Lease throughout its 
initial term plus the three renewal periods, and will take whatever 
action is necessary to protect the Plan's rights;
    (10) U.S. Trust, as the independent fiduciary, will monitor the net 
subleasing amount received by the Club during any annual period under 
the Lease. If such subleasing amount results in a profit to the Club, 
the Club will contribute this profit to the Plan; and
    (11) the Plan will bear no costs or expenses with respect to the 
transactions described herein.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the notice of proposed exemption published on July 31, 1995 at 60 FR 
39016/39020.

Written Comments

    The Department received two written comments on the proposed 
exemption 

[[Page 49010]]
and no requests for a hearing. The Automobile Club of New York, Inc., 
the applicant, suggested certain modifications to the language of the 
proposed exemption as it appears in the Federal Register to clarify and 
more accurately reflect the conditions and representations surrounding 
the transactions. U.S. Trust, as the independent fiduciary with respect 
to the transactions described herein, concurs with these suggested 
modifications. Specifically, the applicant suggests that:
    1. The words ``its interests in'' should be inserted in condition 
6, line 9 of the proposed exemption as it appears in the Federal 
Register, such that condition 6 should read, in relevant part, ``* * 
*the Plan will undertake an orderly disposition of its interests in the 
Building* * *''.
    2. The words ``for no more than'' should have been inserted in the 
Summary of Facts and Representations (the Summary), paragraph 2, line 
4, such that it would have read, ``First, the Plan will purchase the 
Building from the Club for no more than fair market value* * *'', and 
the words `` for no less than'' should have been inserted in paragraph 
2, line 11, such that it would have read, ``* * *the Club will lease 
the Building from the Plan for no less than fair market rental* * *''.
    3. The words ``the Plan'' should have been substituted for ``U.S. 
Trust'' in the Summary, paragraph 6, line 14, such that it would have 
read, ``* * *with three renewable options of five years each at the 
discretion of the Plan.''
    4. The words ``the Plan'' should have been substituted for ``U.S. 
Trust as the independent fiduciary'' in the Summary, paragraph 9, line 
8, such that it would have read, ``the Repurchase Option can be 
exercised under certain circumstances under the discretion of the Plan* 
* *''.
    5. The words ``its interests in'' should have been inserted in the 
Summary, paragraph 17, line 26, such that it would have read, ``* * 
*the Plan will undertake an orderly disposition of its interests in the 
Building* * *''. The Department concurs with these modifications.
    One former employee of the applicant asserted in a comment that the 
fair market value of the Building, and subsequent evaluations thereof, 
should be determined by at least two qualified appraisers, not one as 
currently proposed, to assure a fair and accurate finding. Also, the 
commentor asserted that the appraisers should be certified as 
completely independent of, and receiving no other business from, the 
Automobile Club of New York, its Board of Directors, the Retirement 
Committee, the American Automobile Association, as well as independent 
of any of the individuals (and their relatives) associated with any of 
the above bodies.
    In response to this comment the applicant asserted that the 
retention of a second appraiser is unnecessary. The appraiser(s) for 
the initial and all subsequent appraisals of the Building is being 
selected by U.S. Trust, as the independent fiduciary, not the 
Automobile Club of New York, Inc. The integrity of the appraisal is 
ensured through the use of an independent fiduciary to retain and 
evaluate the appraiser. Also, the applicant asserted that this 
requirement is substantially satisfied by the Certificate of Appraisal 
contained in the limited scope appraisal dated January 10, 1995, which 
was submitted to the Department by the applicant as part of the 
exemption application.
    After giving full consideration to the record, the comments 
submitted to the Department, and the response of the applicant, the 
Department has determined to grant the exemption, as described herein.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan, U.S. Department 
of Labor, telephone (202) 219-8883. (This is not a toll-free number).

Adel E. Zaki Money Purchase Pension Plan (the Plan) Located in Los 
Angeles, California

[Prohibited Transaction Exemption 95-86; Exemption Application No. 
D-9883]

Exemption

    The restrictions of sections 406(a), 406(b)(1), and 406(b)(2) of 
the Act and the sanctions resulting from the application of section 
4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the 
Code shall not apply to the cash sale of a parcel of improved real 
property (the Property) by the Plan to Adel E. Zaki, M.D. (Dr. Zaki), a 
party in interest with respect to the Plan; provided that (1) the sale 
will be a one-time transaction for cash; (2) as a result of the sale, 
the Plan receives in cash the greater of $710,000 or the fair market 
value of the Property, as determined by an independent, qualified 
appraiser, as of the date of the sale; (3) the Plan pays no 
commissions, fees, or other expenses as a result of the transaction; 
and (4) the terms of the sale are no less favorable to the Plan than 
those it would have received in similar circumstances when negotiated 
at arm's length with unrelated third parties.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice of Proposed Exemption published on July 12, 1995 at 60 FR 
35943.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the 
Department, telephone (202) 219-8883 (This is not a toll-free number.)

John L. Rust Co. Profit Sharing Plan (the Plan) Located in Albuquerque, 
New Mexico

[Prohibited Transaction Exemption 95-87; Exemption Application No. 
D-09943]

Exemption

    The restrictions of sections 406(a), 406(b)(1) and (b)(2) of the 
Act and the sanctions resulting from the application of section 4975 of 
the Code, by reason of section 4975(c)(1)(A) through (E) of the Code 
shall not apply to (1) the past and proposed purchases by the Plan of 
certain leases of equipment (the Leases) from John L. Rust Co. (Rust), 
the Plan sponsor and a party in interest with respect to the Plan, and 
(2) the agreement by Rust to indemnify the Plan against any loss 
relating to the Leases and also to repurchase any Leases that are in 
default in accordance with paragraph (E) below, provided that the 
following conditions are met:
    A. Any sale of Leases to the Plan will be on terms at least as 
favorable to the Plan as an arm's length transaction with an unrelated 
third party would be.
    B. Subsequent to the date of publication of the proposed exemption 
(July 21, 1995), the acquisition of a Lease from Rust shall not cause 
the Plan to hold immediately following the acquisition (i) more than 
25% of the current value (as that term is defined in section 3(26) of 
the Act) of Plan assets in customer notes and Leases sold by Rust or 
(ii) more than 10% of Plan assets in the aggregate of Leases with and 
customer notes of any one entity.
    C. Prior to the purchase of each Lease, an independent, qualified 
fiduciary must determine that the purchase is appropriate and suitable 
for the Plan and that any Lease purchase is a fair market value 
transaction.
    D. The independent fiduciary, on behalf of the Plan, will monitor 
the terms of the Leases and the exemption and take whatever action is 
necessary to enforce the rights of the Plan.
    E. Upon default by the lessee on any payment due under a Lease, 
Rust has agreed to repurchase the Lease from the Plan at the payout 
value as of the date of the default, without discount, and to indemnify 
the Plan for any loss suffered. The occurrence of any of the following 
events shall be considered events of default for purposes of this 
section: The lessee's failure to pay any amounts due 

[[Page 49011]]
hereunder within five days after receipt of written notice from the 
Plan's independent fiduciary, or the lessee's failure to pay any 
amounts due hereunder within 30 days after payment becomes past due, if 
earlier; the lessee's failure to perform any other obligation under 
this agreement within ten days of receipt of written notice from the 
Plan's independent fiduciary; abandonment of the equipment by the 
lessee; the lessee's cessation of business; the commencement of any 
proceeding in bankruptcy, receivership or insolvency or assignment for 
the benefit of creditors by the lessee; false representation by the 
lessee as to its credit or financial standing; attachment or execution 
levied on lessee's property; or use of the equipment by third parties 
without lessor's prior written consent.
    F. The Plan receives adequate security for the Lease. For purposes 
of this exemption, the term adequate security means that the Lease is 
secured by a perfected security interest in the leased property which 
will name the Plan as the secured party.
    G. Insurance against loss or damage to the leased property from 
fire or other hazards will be procured and maintained by the lessee and 
the proceeds from such insurance will be assigned to the Plan.
    H. The Plan shall maintain for the duration of any Lease which is 
sold to the Plan pursuant to this exemption, records necessary to 
determine whether the conditions of this exemption have been met. The 
Plan will continue to maintain the records for a period of six years 
following the expiration of the Lease or the disposition by the Plan of 
the Lease. The records referred to above must be unconditionally 
available at their customary location for examination, for purposes 
reasonably related to protecting rights under the Plan, during normal 
business hours by the Internal Revenue Service, the Department of 
Labor, Plan participants, any employee organization any of whose 
members are covered by the Plan, or any duly authorized employee or 
representative of the above described persons.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on July 21, 1995 at 60 FR 
37685.

Temporary Nature of Exemption

EFFECTIVE DATE: This exemption is effective December 30, 1985. However, 
the exemption is temporary and will expire five years from the date the 
exemption is granted with respect to the Plan's future purchases of 
Leases. The Plan may hold the Leases pursuant to the terms of the 
exemption subsequent to the end of the five year period.

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

Donald D. Busker Individual Retirement Account (the IRA) Located in 
Detroit Lakes, Minnesota

[Prohibited Transaction Exemption 95-88; Application No. D-10005]

Exemption

    The sanctions resulting from the application of section 4975 of the 
Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall 
not apply to the proposed cash sale of two parcels of unimproved real 
property (the Properties) by the IRA to Donald D. Busker, a 
disqualified person with respect to the IRA,1 provided the 
following conditions are met:

    \1\ Pursuant to 29 CFR 2510.3-2(d), there is no jurisdiction 
with respect to the IRA under Title I of the Act. However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.
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    (a) The sale is a one-time transaction for cash;
    (b) The terms and conditions of the sale are at least as favorable 
to the IRA as those obtainable in an arm's-length transaction with an 
unrelated party;
    (c) The IRA receives the fair market value of the Properties as 
established at the time of the sale by an independent qualified 
appraiser; and
    (d) The IRA is not required to pay any commissions, costs or other 
expenses in connection with the sale.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the notice of proposed exemption Notice published on August 11, 1995, 
60 FR 41125.

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

Banc One Capital Corporation (Banc One) Located in Columbus, OH

[Prohibited Transaction Exemption 95-89; Exemption Application No. 
D-10046]

Exemption

Section I. Transactions
    A. Effective June 2, 1995, the restrictions of sections 406(a) and 
407(a) of the Act and the taxes imposed by section 4975(a) and (b) of 
the Code by reason of section 4975(c)(1)(A) through (D) of the Code 
shall not apply to the following transactions involving trusts and 
certificates evidencing interests therein:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and an employee benefit plan when the sponsor, 
servicer, trustee or insurer of a trust, the underwriter of the 
certificates representing an interest in the trust, or an obligor is a 
party in interest with respect to such plan;
    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates; 
and
    (3) The continued holding of certificates acquired by a plan 
pursuant to Subsection I.A.(1) or (2).
    Notwithstanding the foregoing, Section I.A. does not provide an 
exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and 
407 for the acquisition or holding of a certificate on behalf of an 
Excluded Plan by any person who has discretionary authority or renders 
investment advice with respect to the assets of that Excluded 
Plan.2

    \2\Section I.A. provides no relief from sections 406(a)(1)(E), 
406(a)(2) and 407 for any person rendering investment advice to an 
Excluded Plan within the meaning of section 3(21)(a)(ii) and 
regulation 29 CFR 2510.3-21(c).
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    B. Effective June 2, 1995, the restrictions of sections 406(b)(1) 
and 406(b)(2) of the Act and the taxes imposed by section 4975(a) and 
(b) of the Code by reason of section 4975(c)(1)(E) of the Code shall 
not apply to:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and a plan when the person who has discretionary 
authority or renders investment advice with respect to the investment 
of plan assets in the certificates is (a) an obligor with respect to 5 
percent or less of the fair market value of obligations or receivables 
contained in the trust, or (b) an affiliate of a person described in 
(a); if:
    (i) The plan is not an Excluded Plan;
    (ii) Solely in the case of an acquisition of certificates in 
connection with the initial issuance of the certificates, at least 50 
percent of each class of certificates in which plans have invested is 
acquired by persons independent of the members of the Restricted Group 
and at least 50 percent of the aggregate interest in the trust is 
acquired by persons independent of the Restricted Group;
    (iii) A plan's investment in each class of certificates does not 
exceed 25 percent of all of the certificates of that 

[[Page 49012]]
class outstanding at the time of the acquisition; and
    (iv) Immediately after the acquisition of the certificates, no more 
than 25 percent of the assets of a plan with respect to which the 
person has discretionary authority or renders investment advice are 
invested in certificates representing an interest in a trust containing 
assets sold or serviced by the same entity.3 For purposes of this 
paragraph B.(1)(iv) only, an entity will not be considered to service 
assets contained in a trust if it is merely a subservicer of that 
trust;

    \3\For purposes of this exemption, each plan participating in a 
commingled fund (such as a bank collective trust fund or insurance 
company pooled separate account) shall be considered to own the same 
proportionate undivided interest in each asset of the commingled 
fund as its proportionate interest in the total assets of the 
commingled fund as calculated on the most recent preceding valuation 
date of the fund.
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    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates, 
provided that the conditions set forth in paragraphs B.(1)(i), (iii) 
and (iv) are met; and
    (3) The continued holding of certificates acquired by a plan 
pursuant to Subsection I.B. (1) or (2).
    C. Effective June 2, 1995, the restrictions of sections 406(a), 
406(b), and 407(a) of the Act, and the taxes imposed by section 4975(a) 
and (b) of the Code by reason of section 4975(c) of the Code, shall not 
apply to transactions in connection with the servicing, management and 
operation of a trust, provided:
    (1) Such transactions are carried out in accordance with the terms 
of a binding pooling and servicing arrangement; and
    (2) The pooling and servicing agreement is provided to or described 
in all material respects in the prospectus or private placement 
memorandum provided to investing plans before they purchase 
certificates issued by the trust.4

    \4\In the case of a private placement memorandum, such 
memorandum must contain substantially the same information that 
would be disclosed in a prospectus if the offering of the 
certificates were made in a registered public offering under the 
Securities Act of 1933. In the Department's view, the private 
placement memorandum must contain sufficient information to permit 
plan fiduciaries to make informed investment decisions.
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    Notwithstanding the foregoing, Section I.C. does not provide an 
exemption from the restrictions of section 406(b) of the Act or from 
the taxes imposed by reason of section 4975(c) of the Code for the 
receipt of a fee by a servicer of the trust from a person other than 
the trustee or sponsor, unless such fee constitutes a ``qualified 
administrative fee'' as defined in Section III.S.
    D. Effective June 2, 1995, the restrictions of sections 406(a) and 
407(a) of the Act, and the taxes imposed by sections 4975(a) and (b) of 
the Code by reason of sections 4975(c)(1)(A) through (D) of the Code, 
shall not apply to any transactions to which those restrictions or 
taxes would otherwise apply merely because a person is deemed to be a 
party in interest or disqualified person (including a fiduciary) with 
respect to a plan by virtue of providing services to the plan (or by 
virtue of having a relationship to such service provider described in 
section 3(14)(F), (G), (H) or (I) of the Act or section 4975(e)(2)(F), 
(G), (H) or (I) of the Code), solely because of the plan's ownership of 
certificates.
Section II. General Conditions
    A. The relief provided under Section I is available only if the 
following conditions are met:
    (1) The acquisition of certificates by a plan is on terms 
(including the certificate price) that are at least as favorable to the 
plan as they would be in an arm's length transaction with an unrelated 
party;
    (2) The rights and interests evidenced by the certificates are not 
subordinated to the rights and interests evidenced by other 
certificates of the same trust;
    (3) The certificates acquired by the plan have received a rating at 
the time of such acquisition that is in one of the three highest 
generic rating categories from either Standard & Poor's Corporation 
(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps Inc. 
(D&P) or Fitch Investors Service, Inc. (Fitch);
    (4) The trustee is not an affiliate of any member of the Restricted 
Group. However, the trustee shall not be considered to be an affiliate 
of a servicer solely because the trustee has succeeded to the rights 
and responsibilities of the servicer pursuant to the terms of a pooling 
and servicing agreement providing for such succession upon the 
occurrence of one or more events of default by the servicer;
    (5) The sum of all payments made to and retained by the 
underwriters in connection with the distribution or placement of 
certificates represents not more than reasonable compensation for 
underwriting or placing the certificates; the sum of all payments made 
to and retained by the sponsor pursuant to the assignment of 
obligations (or interests therein) to the trust represents not more 
than the fair market value of such obligations (or interests); and the 
sum of all payments made to and retained by the servicer represents not 
more than reasonable compensation for the servicer's services under the 
pooling and servicing agreement and reimbursement of the servicer's 
reasonable expenses in connection therewith; and
    (6) The plan investing in such certificates is an ``accredited 
investor'' as defined in Rule 501(a)(1) of Regulation D of the 
Securities and Exchange Commission under the Securities Act of 1933.
    B. Neither any underwriter, sponsor, trustee, servicer, insurer, or 
any obligor, unless it or any of its affiliates has discretionary 
authority or renders investment advice with respect to the plan assets 
used by a plan to acquire certificates, shall be denied the relief 
provided under Section I, if the provision of Subsection II.A.(6) above 
is not satisfied with respect to acquisition or holding by a plan of 
such certificates, provided that (1) such condition is disclosed in the 
prospectus or private placement memorandum; and (2) in the case of a 
private placement of certificates, the trustee obtains a representation 
from each initial purchaser which is a plan that it is in compliance 
with such condition, and obtains a covenant from each initial purchaser 
to the effect that, so long as such initial purchaser (or any 
transferee of such initial purchaser's certificates) is required to 
obtain from its transferee a representation regarding compliance with 
the Securities Act of 1933, any such transferees will be required to 
make a written representation regarding compliance with the condition 
set forth in Subsection II.A.(6) above.
Section III. Definitions
    For purposes of this exemption:
    A. Certificate means:
    (1) A certificate--
    (a) that represents a beneficial ownership interest in the assets 
of a trust; and
    (b) that entitles the holder to pass-through payments of principal, 
interest, and/or other payments made with respect to the assets of such 
trust; or
    (2) A certificate denominated as a debt instrument--
    (a) that represents an interest in a Real Estate Mortgage 
Investment Conduit (REMIC) within the meaning of section 860D(a) of the 
Internal Revenue Code of 1986; and
    (b) that is issued by and is an obligation of a trust; with respect 
to certificates defined in (1) and (2) above for which Banc One or any 
of its affiliates is either (i) the sole underwriter or the manager or 
co-

[[Page 49013]]
manager of the underwriting syndicate, or (ii) a selling or placement 
agent.
    For purposes of this exemption, references to ``certificates 
representing an interest in a trust'' include certificates denominated 
as debt which are issued by a trust.
    B. Trust means an investment pool, the corpus of which is held in 
trust and consists solely of:
    (1) Either--
    (a) secured consumer receivables that bear interest or are 
purchased at a discount (including, but not limited to, home equity 
loans and obligations secured by shares issued by a cooperative housing 
association);
    (b) secured credit instruments that bear interest or are purchased 
at a discount in transactions by or between business entities 
(including, but not limited to, qualified equipment notes secured by 
leases, as defined in Section III.T);
    (c) obligations that bear interest or are purchased at a discount 
and which are secured by single-family residential, multi-family 
residential and commercial real property (including obligations secured 
by leasehold interests on commercial real property);
    (d) obligations that bear interest or are purchased at a discount 
and which are secured by motor vehicles or equipment, or qualified 
motor vehicle leases (as defined in Section III.U);
    (e) ``guaranteed governmental mortgage pool certificates,'' as 
defined in 29 CFR 2510.3-101(i)(2);
    (f) fractional undivided interests in any of the obligations 
described in clauses (a)-(e) of this Section B.(1);
    (2) Property which had secured any of the obligations described in 
Subsection B.(1);
    (3) Undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are made to 
certificateholders; and
    (4) Rights of the trustee under the pooling and servicing 
agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship and other credit support 
arrangements with respect to any obligations described in Subsection 
B.(1).
    Notwithstanding the foregoing, the term ``trust'' does not include 
any investment pool unless: (i) The investment pool consists only of 
assets of the type which have been included in other investment pools, 
(ii) certificates evidencing interests in such other investment pools 
have been rated in one of the three highest generic rating categories 
by S&P's, Moody's, D&P, or Fitch for at least one year prior to the 
plan's acquisition of certificates pursuant to this exemption, and 
(iii) certificates evidencing interests in such other investment pools 
have been purchased by investors other than plans for at least one year 
prior to the plan's acquisition of certificates pursuant to this 
exemption.
    C. Underwriter means:
    (1) Banc One;
    (2) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
Banc One; or
    (3) Any member of an underwriting syndicate or selling group of 
which Banc One or a person described in (2) is a manager or co-manager 
with respect to the certificates.
    D. Sponsor means the entity that organizes a trust by depositing 
obligations therein in exchange for certificates.
    E. Master Servicer means the entity that is a party to the pooling 
and servicing agreement relating to trust assets and is fully 
responsible for servicing, directly or through subservicers, the assets 
of the trust.
    F. Subservicer means an entity which, under the supervision of and 
on behalf of the master servicer, services loans contained in the 
trust, but is not a party to the pooling and servicing agreement.
    G. Servicer means any entity which services loans contained in the 
trust, including the master servicer and any subservicer.
    H. Trustee means the trustee of the trust, and in the case of 
certificates which are denominated as debt instruments, also means the 
trustee of the indenture trust.
    I. Insurer means the insurer or guarantor of, or provider of other 
credit support for, a trust. Notwithstanding the foregoing, a person is 
not an insurer solely because it holds securities representing an 
interest in a trust which are of a class subordinated to certificates 
representing an interest in the same trust.
    J. Obligor means any person, other than the insurer, that is 
obligated to make payments with respect to any obligation or receivable 
included in the trust. Where a trust contains qualified motor vehicle 
leases or qualified equipment notes secured by leases, ``obligor'' 
shall also include any owner of property subject to any lease included 
in the trust, or subject to any lease securing an obligation included 
in the trust.
    K. Excluded Plan means any plan with respect to which any member of 
the Restricted Group is a ``plan sponsor'' within the meaning of 
section 3(16)(B) of the Act.
    L. Restricted Group with respect to a class of certificates means:
    (1) Each underwriter;
    (2) Each insurer;
    (3) The sponsor;
    (4) The trustee;
    (5) Each servicer;
    (6) Any obligor with respect to obligations or receivables included 
in the trust constituting more than 5 percent of the aggregate 
unamortized principal balance of the assets in the trust, determined on 
the date of the initial issuance of certificates by the trust; or
    (7) Any affiliate of a person described in (1)-(6) above.
    M. Affiliate of another person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), a brother, a sister, or a spouse of a 
brother or sister of such other person; and
    (3) Any corporation or partnership of which such other person is an 
officer, director or partner.
    N. Control means the power to exercise a controlling influence over 
the management or policies of a person other than an individual.
    O. A person will be independent of another person only if:
    (1) Such person is not an affiliate of that other person; and
    (2) The other person, or an affiliate thereof, is not a fiduciary 
who has investment management authority or renders investment advice 
with respect to any assets of such person.
    P. Sale includes the entrance into a forward delivery commitment 
(as defined in section Q below), provided:
    (1) The terms of the forward delivery commitment (including any fee 
paid to the investing plan) are no less favorable to the plan than they 
would be in an arm's length transaction with an unrelated party;
    (2) The prospectus or private placement memorandum is provided to 
an investing plan prior to the time the plan enters into the forward 
delivery commitment; and
    (3) At the time of the delivery, all conditions of this exemption 
applicable to sales are met.
    Q. Forward delivery commitment means a contract for the purchase or 
sale of one or more certificates to be delivered at an agreed future 
settlement date. The term includes both mandatory contracts (which 
contemplate obligatory delivery and acceptance of the 

[[Page 49014]]
certificates) and optional contracts (which give one party the right 
but not the obligation to deliver certificates to, or demand delivery 
of certificates from, the other party).
    R. Reasonable compensation has the same meaning as that term is 
defined in 29 CFR 2550.408c-2.
    S. Qualified Administrative Fee means a fee which meets the 
following criteria:
    (1) The fee is triggered by an act or failure to act by the obligor 
other than the normal timely payment of amounts owing in respect of the 
obligations;
    (2) The servicer may not charge the fee absent the act or failure 
to act referred to in (1);
    (3) The ability to charge the fee, the circumstances in which the 
fee may be charged, and an explanation of how the fee is calculated are 
set forth in the pooling and servicing agreement; and
    (4) The amount paid to investors in the trust will not be reduced 
by the amount of any such fee waived by the servicer.
    T. Qualified Equipment Note Secured By A Lease means an equipment 
note:
    (1) Which is secured by equipment which is leased;
    (2) Which is secured by the obligation of the lessee to pay rent 
under the equipment lease; and
    (3) With respect to which the trust's security interest in the 
equipment is at least as protective of the rights of the trust as the 
trust would have if the equipment note were secured only by the 
equipment and not the lease.
    U. Qualified Motor Vehicle Lease means a lease of a motor vehicle 
where:
    (1) The trust holds a security interest in the lease;
    (2) The trust holds a security interest in the leased motor 
vehicle; and
    (3) The trust's security interest in the leased motor vehicle is at 
least as protective of the trust's rights as the trust would receive 
under a motor vehicle installment loan contract.
    V. Pooling and Servicing Agreement means the agreement or 
agreements among a sponsor, a servicer and the trustee establishing a 
trust. In the case of certificates which are denominated as debt 
instruments, ``Pooling and Servicing Agreement'' also includes the 
indenture entered into by the trustee of the trust issuing such 
certificates and the indenture trustee.
    W. Banc One means Banc One Capital Corporation, an Ohio 
corporation, and its affiliates.
    The Department notes that this exemption is included within the 
meaning of the term ``Underwriter Exemption'' as it is defined in 
Section V(h) of Prohibited Transaction Exemption (PTE) 95-60 (60 FR 
35925, July 12, 1995), the Class Exemption for Certain Transactions 
Involving Insurance Company General Accounts, at 35932.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on August 11, 1995 at 60 FR 
41127.

EFFECTIVE DATE: This exemption is effective for transactions occurring 
on or after June 2, 1995.

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

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act and/or section 4975(c)(2) of the Code 
does not relieve a fiduciary or other party in interest or disqualified 
person from certain other provisions to which the exemptions does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) These exemptions are supplemental to and not in derogation of, 
any other provisions of the Act and/or the Code, including statutory or 
administrative exemptions and transactional rules. Furthermore, the 
fact that a transaction is subject to an administrative or statutory 
exemption is not dispositive of whether the transaction is in fact a 
prohibited transaction; and
    (3) The availability of these exemptions is subject to the express 
condition that the material facts and representations contained in each 
application accurately describes all material terms of the transaction 
which is the subject of the exemption.

    Signed at Washington, DC, this 18th day of September, 1995.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits, 
Administration, U.S. Department of Labor.
[FR Doc. 95-23463 Filed 9-20-95; 8:45 am]
BILLING CODE 4510-29-P