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Employee Benefits Security Administration

EBSA Federal Register Notice

Grant of Individual Exemptions; Harris Nesbitt Corporation (Harris Nesbitt) [06/02/2006]

[PDF Version]

Volume 71, Number 106, Page 32134-32142

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2006-07; [Exemption Application No. 
D-11281] et al.]

 
Grant of Individual Exemptions; Harris Nesbitt Corporation 
(Harris Nesbitt)

AGENCY: Employee Benefits Security 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).
    A notice was published in the Federal Register of the pendency 
before the Department of a proposal to grant such exemption. The notice 
set forth a summary of facts and representations contained in the 
application for exemption and referred interested persons to the 
application for a complete statement of the facts and representations. 
The application has been available for public inspection at the 
Department in Washington, DC. The notice also invited interested 
persons to submit comments on the requested exemption to the 
Department. In addition the notice stated that any interested person 
might submit a written request that a public hearing be held (where 
appropriate). The applicant has represented that it has complied with 
the requirements of the notification to interested persons. No requests 
for a hearing were received by the Department. Public comments were 
received by the Department as described in the granted exemption.
    The notice of proposed exemption was issued and the exemption is 
being granted solely by the Department because, 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 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 exemption is administratively feasible;

[[Page 32135]]

    (b) The exemption is in the interests of the plan and its 
participants and beneficiaries; and
    (c) The exemption is protective of the rights of the participants 
and beneficiaries of the plan.

Harris Nesbitt Corporation (Harris Nesbitt) and Its Affiliates (the 
Affiliates) Located in New York, NY

[Prohibited Transaction Exemption 2006-07; Exemption Application No. D-
11281]

Exemption

Section I. Covered Transactions
    A. Effective for transactions occurring on or after October 15, 
2004, 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 
section 4975(c)(1)(A) through (D) of the Code, shall not apply to the 
following transactions involving Issuers and Securities evidencing 
interests therein:
    (1) The direct or indirect sale, exchange or transfer of Securities 
in the initial issuance of Securities between the Sponsor or 
Underwriter and an employee benefit plan when the Sponsor, Servicer, 
Trustee or Insurer of an Issuer, the Underwriter of the Securities 
representing an interest in the Issuer, or an Obligor is a party in 
interest with respect to such plan.
    (2) The direct or indirect acquisition or disposition of Securities 
by a plan in the secondary market for such Securities; and
    (3) The continued holding of Securities 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 of the Act for the acquisition or holding of a Security 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.\1\
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    \1\ Section I.A. provides no relief from sections 406(a)(1)(E), 
406(a)(2) and 407 of the Act for any person rendering investment 
advice to an Excluded Plan within the meaning of section 
3(21)(A)(ii) of the Act and regulation 29 CFR 2510.3-21(c).
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    B. Effective for transactions occurring on or after, October 15, 
2004, the restrictions of section 406(b)(1) and 406(b)(2) of the Act 
and the taxes imposed by sections 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 Securities 
in the initial issuance of Securities 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 Securities is (a) an Obligor with respect to 5 percent or 
less of the fair market value of obligations or receivables contained 
in the Issuer, 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 Securities in 
connection with the initial issuance of the Securities, at least 50 
percent of each class of Securities 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 Issuer is 
acquired by persons independent of the Restricted Group;
    (iii) A plan's investment in each class of Security does not exceed 
25 percent of all of the Securities of that class outstanding at the 
time of the acquisition; and
    (iv) Immediately after the acquisition of the Securities, 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 Securities representing an interest in an Issuer containing 
assets sold or serviced by the same entity.\2\ For purposes of this 
paragraph B.(1)(iv) only, an entity will not be considered to service 
assets contained in an Issuer if it is merely a Subservicer of that 
Issuer;
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    \2\ 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 Securities 
by a plan in the secondary market for such Securities, provided that 
conditions set forth in paragraphs (i), (iii) and (iv) of subsection 
I.B.(1) are met; and
    (3) The continued holding of Securities acquired by a plan pursuant 
to subsection I.B.(1) or (2).
    C. Effective for transactions occurring on or after October 15, 
2004, the restrictions of sections 406(a), 406(b), and 407(a) of the 
Act and the taxes imposed by sections 4975(a) and (b) of the Code by 
reason of Code section 4975(c), shall not apply to the transactions in 
connection with the servicing, management and operation of an Issuer, 
including the use of the any eligible swap transaction; or the 
defeasance of a mortgage obligation held as an asset of the Issuer 
through the substitution of a new mortgage obligation in a commercial 
mortgage-backed designated transaction (the Designated Transaction), 
provided:
    (1) Such transactions are carried out in accordance with the terms 
of a binding Pooling and Servicing Agreement;
    (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 
Securities issued by the Issuer; \3\ and
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    \3\ 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 securities 
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. For purposes of this exemption, 
references to ``prospectus'' include any related prospectus 
supplement thereto, pursuant to which Securities are offered to 
investors.
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    (3) The defeasance of a mortgage obligation and the substitution of 
a new mortgage obligation in a commercial mortgage-backed Designated 
Transaction meet the terms and conditions for such defeasance and 
substitution as are described in the prospectus or private placement 
memorandum for such Securities, which terms and conditions have been 
approved by a Rating Agency and does not result in the Securities 
receiving a lower credit rating from the Rating Agency than the current 
rating of the Securities.
    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 Issuer from a person other than 
the Trustee or Sponsor, unless such fee constitutes a Qualified 
Administrative Fee.
    D. Effective for transactions occurring after October 15, 2004, 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 Code 
section 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 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),

[[Page 32136]]

(G), (H) or (I) of the Code), solely because of the plan's ownership of 
Securities.
Section II. General Conditions
    A. The relief provided under Section I. is available only if the 
following conditions are met:
    (1) The acquisition of Securities by a plan is on terms (including 
the Security price) that are at least as favorable to the plan as such 
terms would be in an arm's length transaction with an unrelated party;
    (2) The rights and interests evidenced by the Securities are not 
subordinated to the rights and interests evidenced by other Securities 
of the same Issuer unless the Securities are issued in a Designated 
Transaction;
    (3) The Securities acquired by the plan have received a rating from 
Rating Agency at the time of such acquisition that is in one of the 
three (or in the case of Designated Transactions, four) highest generic 
rating categories.
    (4) The Trustee is not an Affiliate of any member of the Restricted 
Group, other than an Underwriter. For purposes of this requirement:
    (a) 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; and
    (b) Subsection II.A.(4) will be deemed satisfied notwithstanding a 
Servicer becoming an Affiliate of the Trustee as a result of a merger 
or acquisition involving the Trustee, such Servicer and/or their 
Affiliates which occurs after the initial issuance of the Securities 
provided that:
    (i) Such Servicer ceases to be an Affiliate of the Trustee no later 
than six months after the date such Servicer became an Affiliate of the 
Trustee; and
    (ii) Such Servicer did not breach any of its obligations under the 
Pooling and Servicing Agreement, unless such breach was immaterial and 
timely cured in accordance with the terms of such agreement, during the 
period from the Closing Date of such merger or acquisition transaction 
through the date the Servicer ceased to be an Affiliate of the Trustee;
    (5) The sum of all payments made to and retained by the 
Underwriters in connection with the distribution or placement of 
Securities represents not more than Reasonable Compensation for 
underwriting or placing the Securities; the sum of all payments made to 
and retained by the Sponsor pursuant to the assignment of obligations 
(or interests therein) to the Issuer 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;
    (6) The plan investing in such Securities 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; 
and
    (7) In the event that the obligations used to fund an Issuer have 
not all been transferred to the Issuer on the Closing Date, additional 
obligations as specified in subsection III.B.(1) may be transferred to 
the Issuer during the Pre-Funding Period in exchange for amounts 
credited to the Pre-Funding Account, provided that:
    (a) The Pre-Funding Limit is not exceeded;
    (b) All such additional obligations meet the same terms and 
conditions for eligibility as the original obligations used to create 
the Issuer (as described in the prospectus or private placement 
memorandum and/or Pooling and Servicing Agreement for such Securities), 
which terms and conditions have been approved by a Rating Agency. 
Notwithstanding the foregoing, the terms and conditions for determining 
the eligibility of an obligation may be changed if such changes receive 
prior approval either by a majority vote of the outstanding 
securityholders (the Securityholders) or by a Rating Agency;
    (c) The transfer of such additional obligations to the Issuer 
during the Pre-Funding Period does not result in the Securities 
receiving a lower credit rating from a Rating Agency, upon termination 
of the Pre-Funding Period than the rating that was obtained at the time 
of the initial issuance of the Securities by the Issuer;
    (d) The weighted average annual percentage interest rate (the 
average interest rate) for all of the obligations in the Issuer at the 
end of the Pre-Funding Period will not be more than 100 basis points 
lower than the average interest rate for the obligations which were 
transferred to the Issuer on the Closing Date;
    (e) In order to ensure that the characteristics of the receivables 
actually acquired during the Pre-Funding Period are substantially 
similar to those which were acquired as of the Closing Date, the 
characteristics of the additional obligations will either be monitored 
by a credit support provider or other insurance provider which is 
independent of the Sponsor or an independent accountant retained by the 
Sponsor will provide the Sponsor with a letter (with copies provided to 
the Rating Agency, the Underwriter and the Trustee) stating whether or 
not the characteristics of the additional obligations conform to the 
characteristics of such obligations described in the prospectus, 
private placement memorandum and/or Pooling and Servicing Agreement. In 
preparing such letter, the independent accountant will use the same 
type of procedures as were applicable to the obligations which were 
transferred on the Closing Date;
    (f) The Pre-Funding Period shall be described in the prospectus or 
private placement memorandum provided to investing plans; and
    (g) The Trustee of the Trust (or any agent with which the Trustee 
contracts to provide Trust services) will be a substantial financial 
institution or trust company experienced in trust activities and 
familiar with its duties, responsibilities, and liabilities as a 
fiduciary under the Act. The Trustee, as the legal owner of the 
obligations in the Trust, will enforce all the rights created in favor 
of Securityholders of the Issuer, including employee benefit plans 
subject to the Act.
    (8) In order to ensure that the assets of the Issuer may not be 
reached by creditors of the Sponsor in the event of bankruptcy or other 
insolvency of the Sponsor:
    (a) The legal documents establishing the Issuer will contain:
    (i) Restrictions on the Issuer's ability to borrow money or issue 
debt other than in connection with the securitization;
    (ii) Restrictions on the Issuer merging with another entity, 
reorganizing, liquidating or selling assets (other than in connection 
with the securitization);
    (iii) Restrictions limiting the authorized activities of the Issuer 
to activities relating to the securitization;
    (iv) If the Issuer is not a Trust, provisions for the election of 
at least one independent director/partner/member whose affirmative 
consent is required before a voluntary bankruptcy petition can be filed 
by the Issuer; and
    (v) If the Issuer is not a Trust, requirements that each 
independent director/partner/member must be an individual that does not 
have a significant interest in, or other relationships with, the 
Sponsor or any of its Affiliates; and

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    (b) The Pooling and Servicing Agreement and/or other agreements 
establishing the contractual relationships between the parties to the 
securitization transaction will contain covenants prohibiting all 
parties thereto from filing an involuntary bankruptcy petition against 
the Issuer or initiating any other form of insolvency proceeding until 
after the Securities have been paid; and
    (c) Prior to the issuance by the Issuer of any Securities, a legal 
opinion is received which states that either:
    (i) A ``true sale'' of the assets being transferred to the Issuer 
by the Sponsor has occurred and that such transfer is not being made 
pursuant to a financing of the assets by the Sponsor; or
    (ii) In the event of insolvency or receivership of the Sponsor, the 
assets transferred to the Issuer will not be part of the estate of the 
Sponsor;
    (9) If a particular class of Securities held by any plan involves a 
Ratings Dependent Swap or a Non-Ratings Dependent Swap entered into by 
the Issuer, then each particular swap transaction relating to such 
Security:
    (a) Shall be an Eligible Swap;
    (b) Shall be with an Eligible Swap Counterparty;
    (c) In the case of a Ratings Dependent Swap, shall provide that if 
the credit rating of the counterparty is withdrawn or reduced by any 
Rating Agency below a level specified by the Rating Agency, the 
Servicer (as agent for the Trustee) shall, within the period specified 
under the Pooling and Servicing Agreement:
    (i) Obtain a replacement swap agreement with an Eligible Swap 
Counterparty which is acceptable to the Rating Agency and the terms of 
which are substantially the same as the current swap agreement (at 
which time the earlier swap agreement shall terminate); or
    (ii) Cause the swap counterparty to establish any collateralization 
or other arrangement satisfactory to the Rating Agency such that the 
then current rating by the Rating Agency of the particular class of 
Securities will not be withdrawn or reduced.
    In the event that the Servicer fails to meet its obligations under 
this subsection II.A.(9)(c), plan Securityholders will be notified in 
the immediately following Trustee's periodic report which is provided 
to Securityholders, and sixty days after the receipt of such report, 
the exemptive relief provided under section I.C. will prospectively 
cease to be applicable to any class of Securities held by a plan which 
involves such Ratings Dependent Swap; provided that in no event will 
such plan Securityholders be notified any later than the end of the 
second month that begins after the date on which such failure occurs.
    (d) In the case of a Non-Ratings Dependent Swap, shall provide 
that, if the credit rating of the counterparty is withdrawn or reduced 
below the lowest level specified in Section III.GG., the Servicer (as 
agent for the Trustee) shall within a specified period after such 
rating withdrawal or reduction:
    (i) Obtain a replacement swap agreement with an Eligible Swap 
Counterparty, the terms of which are substantially the same as the 
current swap agreement (at which time the earlier swap agreement shall 
terminate); or
    (ii) Cause the swap counterparty to post collateral with the 
Trustee in an amount equal to all payments owed by the counterparty if 
the swap transaction were terminated; or
    (iii) Terminate the swap agreement in accordance with its terms; 
and
    (e) Shall not require the Issuer to make any termination payments 
to the counterparty (other than a currently scheduled payment under the 
swap agreement) except from Excess Spread or other amounts that would 
otherwise be payable to the Servicer or the Sponsor;
    (10) Any class of Securities, to which one or more swap agreements 
entered into by the Issuer applies, may be acquired or held in reliance 
upon the underwriter exemptions (the Underwriter Exemptions) only by 
Qualified Plan Investors; and
    (11) Prior to the issuance of any debt securities, a legal opinion 
is received which states that the debt holders have a perfected 
security interest in the Issuer's assets.
    B. Neither any Underwriter, Sponsor, Trustee, Servicer, Insurer, 
nor 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 Securities, shall be denied the relief 
provided under Section I., if the provision in subsection II.A.(6) is 
not satisfied with respect to acquisition or holding by a plan of such 
Securities, provided that (1) such condition is disclosed in the 
prospectus or private placement memorandum; and (2) in the case of a 
private placement of Securities, the Trustee obtains a representation 
of 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 Securities) 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 
Section II.A.(6).
Section III. Definitions
    For purposes of this exemption:
    A. ``Security'' means:
    (1) A pass-through certificate or trust certificate that represents 
a beneficial ownership interest in the assets of an Issuer which is a 
Trust and which entitles the holder to payments of principal, interest 
and/or other payments made with respect to the assets of such Trust; or
    A security which is denominated as a debt instrument that is issued 
by, and is an obligation of, an Issuer; with respect to which the 
Underwriter is either (i) the sole underwriter or the manager or co-
manager of the underwriting syndicate, or (ii) a selling or placement 
agent; or
    (2) A Certificate denominated as a debt instrument that represents 
an interest in either a Real Estate Mortgage Investment Conduit (REMIC) 
or a Financial Asset Securitization Investment Trust (FASIT) within the 
meaning of the section 860D(a) or section 860L of the Code; and that is 
issued by and is an obligation of a Trust, with respect to Certificates 
defined in Section III.A. (1) and (2) above, for which the Underwriter 
is either (i) the sole Underwriter or the manager or co-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. ``Issuer'' means an investment pool, the corpus or assets of 
which are held in trust (including a grantor or owner Trust) or whose 
assets are held by a partnership, special purpose corporation or 
limited liability company (which Issuer may be a REMIC or a FASIT 
within the meaning of section 860D(a) or section 860L, respectively, of 
the Code); and the corpus or assets of which consists solely of:
    (1)(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); and/or
    (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); and/or

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    (c) Obligations that bear interest or are purchased at a discount 
and which are secured by single-family residential and commercial real 
property (including obligations secured by leasehold interest on 
residential or commercial real property); and/or
    (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; and/or
    (e) Guaranteed governmental mortgage pool certificates, as defined 
in 29 CFR 2510.3-101(1)(2) \4\; and/or
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    \4\ In ERISA Advisory Opinion 99-05A (February 22, 1999), the 
Department expressed its view that mortgage pool certificates 
guaranteed and issued by the Federal Agricultural Mortgage 
Corporation meet the definition of a guaranteed governmental 
mortgage pool certificate as defined in 29 CFR 2510.3-101(i)(2).
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    (f) Fractional undivided interests in any of the obligations 
described in clauses (a)-(e) of this subsection B.(1); \5\
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    \5\ It is the Department's view that the definition of 
``Issuer'' contained in Section III.B. includes a two-tier structure 
under which Securities issued by the first Issuer, which contains a 
pool of receivables described above, are transferred to a second 
Issuer which issues Securities that are sold to plans. However, the 
Department is of the further view that, since the Underwriter 
Exemptions generally provide relief for the direct or indirect 
acquisition or disposition of Securities that are not subordinated, 
no relief would be available if the Securities held by the second 
Issuer were subordinated to the rights and interests evidenced by 
other Securities issued by the first Issuer, unless such Securities 
were issued in a Designated Transaction.
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    Notwithstanding the foregoing, residential and home equity loan 
receivables issued in Designated Transactions may be less than fully 
secured, provided that (i) the rights and interests evidenced by 
Securities issued in such Designated Transactions (as defined in 
Section III.DD.) are not subordinated to the rights and interests 
evidenced by Securities of the same Issuer; (ii) such Securities 
acquired by the plan have received a rating from a Rating Agency at the 
time of such acquisition that is in one of the two highest generic 
rating categories; and (iii) any obligation included in the corpus or 
assets of the Issuer must be secured by collateral whose fair market 
value on the Closing Date of the Designated Transaction is at least 
equal to 80% of the sum of: (I) The outstanding principal balance due 
under the obligation which is held by the Trust and (II) the 
outstanding principal balance(s) of any other obligation(s) of higher 
priority (whether or not held by the Issuer) which are secured by the 
same collateral.
    (2) Property which had secured any of the obligations described in 
subsection III.B.(1);
    (3)(a) Undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are to be 
made to Securityholders; and/or
    (b) Cash or investments made therewith which are credited to an 
account to provide payments to Securityholders pursuant to any Eligible 
Swap Agreement meeting the conditions of subsection II.A.(9) or 
pursuant to any Eligible Yield Supplement Agreement, and/or
    (c) Cash transferred to the Issuer on the Closing Date and 
permitted investments made therewith which:
    (i) Are credited to a Pre-Funding Account established to purchase 
additional obligations with respect to which the conditions set forth 
in paragraph (a)-(g) of subsection II.A.(7) are met; and/or
    (ii) Are credited to a Capitalized Interest Account; and
    (iii) Are held by the Issuer for a period ending no later than the 
first distribution date to Securityholders occurring after the end of 
the Pre-Funding Period.
    For purposes of this clause (c) of subsection III.B.(3), the term 
``permitted investments'' means investments which: (i) Are either (x) 
direct obligations of, or obligations fully guaranteed as to timely 
payment of principal and interest by, the United States or any agency 
or instrumentality thereof, provided that such obligations are backed 
by the full faith and credit of the United States, or (y) have been 
rated (or the Obligor has been rated) in one of the three highest 
generic rating categories by a Rating Agency; (ii) are described in the 
Pooling and Servicing Agreement; and are permitted by the Rating 
Agency.
    (4) Rights of the Trustee under the Pooling and Servicing 
Agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship, Eligible Yield Supplement 
Agreements, Eligible Swap Agreements meeting the conditions of 
subsection II.A.(9) or other credit support arrangements with respect 
to any obligations described in section III.B.(1).
    Notwithstanding the foregoing, the term ``Issuer'' does not include 
any investment pool unless: (i) The investment pool consists only of 
assets of the type described in paragraph (a)-(f) of subsection 
III.B.(1) which have been included in other investment pools, (ii) 
Securities evidencing interests in such other investment pools have 
been rated in one of the three (or in the case of Designated 
Transactions, four) highest generic rating categories by a Rating 
Agency for at least one year prior to the plan's acquisition of 
Securities pursuant to this exemption, and (iii) Securities 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 Securities pursuant to the Underwriter Exemptions.
    C. ``Underwriter'' means:
    (1) Harris Nesbitt;
    (2) Any U.S.-domiciled person directly or indirectly, through one 
or more intermediaries, controlling, controlled by or under common 
control with such investment banking firm; and
    (3) Any member of an underwriting syndicate or selling group of 
which such firm or person described in subsections III.C.(1) or (2) 
above is a manager or co-manager with respect to the Securities.
    D. ``Sponsor'' means the entity that organizes as an Issuer by 
depositing obligations therein in exchange for Securities.
    E. ``Master Servicer'' means the entity that is a party to the 
Pooling and Servicing Agreement relating to assets of the Issuer and is 
fully responsible for servicing, directly or through Subservicers, the 
assets of the Issuer.
    F. ``Subservicer'' means an entity which, under the supervision of 
and on behalf of the Master Servicer, services loans contained in the 
Issuer, but is not a party to the Pooling and Servicing Agreement.
    G. ``Servicer'' means any entity which services loans contained in 
the Issuer, including the Master Servicer and any Subservicer.
    H. ``Trust'' means an Issuer, which is a trust (including an owner 
trust, grantor trust or a REMIC or FASIT which is organized as a 
Trust).
    I. ``Trustee'' means the Trustee of any Trust, which issues 
Securities, and in the case of Securities which are denominated as debt 
instruments, also means the Trustee of an Indenture Trust. ``Indenture 
Trustee'' means the Trustee appointed under the indenture pursuant to 
which the subject Securities are issued, the rights of holders of the 
Securities are set forth and a security interest in the Trust assets in 
favor of the holders of the Securities is created. The Trustee or the 
Indenture Trustee is also a party to or beneficiary of all the 
documents and instruments transferred to the Trust, and as such, has 
both the authority to, and the responsibility for, enforcing all the 
rights created thereby in favor of holders of the Securities, including 
those rights arising in the event of default by the Servicer.
    J. ``Insurer'' means the insurer or guarantor of, or provider of 
other credit support for, an Issuer. Notwithstanding the foregoing, a 
person is not an Insurer solely because it holds Securities

[[Page 32139]]

representing an interest in an Issuer, which are of a class 
subordinated to Securities representing an interest in the same Issuer.
    K. ``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 an Issuer 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 Issuer, or subject to any lease securing an obligation included 
in the Issuer.
    L. ``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.
    M. ``Restricted Group'' with respect to a class of Securities 
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 Issuer constituting more than 5 percent of the aggregate 
unamortized principal balance of the assets in the Issuer, determined 
on the date of the initial issuance of Securities by the Issuer; or
    (7) Each counterparty in an Eligible Swap Agreement;
    (8) Any Affiliate of a person described in III.M.(1)-(7) above.
    N. ``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.
    O. ``Control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    P. 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 assets of such person.
    Q. ``Sale'' includes the entrance into a Forward Delivery 
Commitment, 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.
    R. ``Forward Delivery Commitment'' means a contact for the purchase 
or sale of one or more Securities to be delivered at an agreed future 
settlement date. The term includes both mandatory contracts (which 
contemplate obligatory delivery and acceptance of the Securities) and 
optional contracts (which give one party the right but not the 
obligation to deliver Securities to, or demand delivery of Securities 
from, the other party).
    S. ``Reasonable Compensation'' has the same meaning as that term is 
defined in 29 CFR 2550.408c-2.
    T. ``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 subsection III.T.(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 Issuer will not be reduced 
by the amount of any such fee waived by the Servicer.
    U. ``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 Issuer's security interest in the 
equipment is at least as protective of the rights of the Issuer as 
would be the case if the equipment note were secured only by the 
equipment and not the lease.
    V. ``Qualified Motor Vehicle Lease'' means a lease of a motor 
vehicle where:
    (1) The Issuer owns or holds a security interest in the lease;
    (2) The Issuer owns or holds a security interest in the leased 
motor vehicle; and
    (3) The Issuer's interest in the leased motor vehicle is at least 
as protective of the Issuer's rights as the Issuer would receive under 
a motor vehicle installment loan contract.
    W. ``Pooling and Servicing Agreement'' means the agreement or 
agreements among a Sponsor, a Servicer and the Trustee establishing a 
Trust. In the case of Securities which are denominated as debt 
instruments, ``Pooling and Servicing Agreement'' also includes the 
indenture entered into by the Issuer and the Indenture Trustee.
    X. ``Rating Agency'' means Standard & Poor's Ratings Services, a 
division of The McGraw-Hill Companies, Inc., Moody's Investors Service, 
Inc., Fitch, Inc. or any successors thereto.
    Y. ``Capitalized Interest Account'' means an Issuer account: (i) 
Which is established to compensate Securityholders for shortfalls, if 
any, between investment earnings on the Pre-Funding Account and the 
pass-through rate payable under the Securities; and (ii) which meets 
the requirements of clause (c) of subsection III.B.(3).
    Z. ``Closing Date'' means the date the Issuer is formed, the 
Securities are first issued and the Issue's assets (other than those 
additional obligations which are to be funded from the Pre-Funding 
Account pursuant to subsection II.A.(7)) are transferred to the Issuer.
    AA. ``Pre-Funding Account'' means an Issuer account:
    (i) Which is established to purchase additional obligations, which 
obligations meet the conditions set forth in clauses (a)-(g) of 
subsection II.A.(7); and
    (ii) Which meets the requirements of clause (c) of subsection 
III.B.(3).
    BB. ``Pre-Funding Limit'' means a percentage or ratio of the amount 
allocated to the Pre-Funding Account, as compared to the total 
principal amount of the Securities being offered which is less than or 
equal to 25 percent.
    CC. ``Pre-Funding Period'' means the period commencing on the 
Closing Date and ending no later than the earliest to occur of: (i) The 
date the amount on deposit in the Pre-Funding Account is less than the 
minimum dollar amount specified in the Pooling and Servicing Agreement; 
(ii) the date on which an event of default occurs under the Pooling and 
Servicing Agreement; or (iii) the date which is the later of three 
months or 90 days after the Closing Date.
    DD. ``Designated Transaction'' means a securitization transaction 
in which the

[[Page 32140]]

assets of the Issuer consist of secured consumer receivables, secured 
credit instruments or secured obligations that bear interest or are 
purchased at a discount and are: (i) Motor vehicle, home equity and/or 
manufactured housing consumer receivables; and/or (ii) motor vehicle 
credit instruments in transactions by or between business entities; 
and/or (iii) single-family residential, multi-family residential, home 
equity, manufactured housing and/or commercial mortgage obligations 
that are secured by single-family residential, multi-family 
residential, commercial real property or leasehold interests therein. 
For purposes of this Section III.DD., the collateral securing motor 
vehicle consumer receivables or motor vehicle credit instruments may 
include motor vehicles and/or Qualified Motor Vehicle Leases.
    EE. ``Ratings Dependent Swap'' means an interest rate swap, or (if 
purchased by or on behalf of the Issuer) an interest rate cap contract, 
that is part of the structure of a class of Securities where the rating 
assigned by the Rating Agency to any class of Securities held by any 
plan is dependent on the terms and conditions of the swap and the 
rating of the counterparty, and if such Securities rating is not 
dependent on the existence of the swap and rating of the counterparty, 
such swap or cap shall be referred to as a ``Non-Ratings Dependent 
Swap.'' With respect to a Non-Ratings Dependent Swap, each Rating 
Agency rating the Securities must confirm, as of the date of issuance 
of the Securities by the Issuer that entering into an Eligible Swap 
with such counterparty will not affect the rating of the Securities.
    FF. ``Eligible Swap'' means a Ratings Dependent or Non-Ratings 
Dependent Swap:
    (1) Which is denominated in U.S. dollars;
    (2) Pursuant to which the Issuer pays or receives, on or 
immediately prior to the respective payment or distribution date for 
the class of Securities to which the swap relates, a fixed rate of 
interest, or a floating rate of interest based on a publicly available 
index (e.g., LIBOR or the U.S. Federal Reserve's Cost of Funds Index 
(COFI)), with the Issuer receiving such payments on at least a 
quarterly basis and obligated to make separate payments no more 
frequently than the counterparty, with all simultaneous payments being 
netted;
    (3) Which has a notional amount that does not exceed either: (i) 
The principal balance of the class of Securities to which the swap 
relates, or (ii) the portion of the principal balance of such class 
represented solely by those types of corpus or assets of the Issuer 
referred to in subsections III.B.(1), (2) and (3);
    (4) Which is not leveraged (i.e., payments are based on the 
applicable notional amount, the day count fractions, the fixed or 
floating rates designated in subsection III.FF.(2), and the difference 
between the products thereof, calculated on a one to one ratio and not 
on a multiplier of such difference);
    (5) Which has a final termination date that is either the earlier 
of the date on which the Issuer terminates or the related class of 
Securities is fully repaid; and
    (6) Which does not incorporate any provision which could cause a 
unilateral alteration in any provision described in subsections 
III.FF.(1) through (4) without the consent of the Trustee.
    GG. ``Eligible Swap Counterparty'' means a bank or other financial 
institution which has a rating, at the date of issuance of the 
Securities by the Issuer, which is in one of the three highest long-
term credit rating categories, or one of the two highest short-term 
credit rating categories, utilized by at least one of the Rating 
Agencies rating the Securities; provided that, if a swap counterparty 
is relying on its short-term rating to establish eligibility under the 
Underwriter Exemptions, such swap counterparty must either have a long-
term rating in one of the three highest long-term rating categories or 
not have a long-term rating from the applicable Rating Agency, and 
provided further that if the class of Securities with which the swap is 
associated has a final maturity date of more than one year from the 
date of issuance of the Securities, and such swap is a Ratings 
Dependent Swap, the swap counterparty is required by the terms of the 
swap agreement to establish any collateralization or other arrangement 
satisfactory to the Rating Agencies in the event of a ratings downgrade 
of the swap counterparty.
    HH. ``Qualified Plan Investor'' means a plan investor or group of 
plan investors on whose behalf the decision to purchase Securities is 
made by an appropriate independent fiduciary that is qualified to 
analyze and understand the terms and conditions of any swap transaction 
used by the Issuer and the effect such swap would have upon the credit 
ratings of the Securities. For purposes of the Underwriter Exemptions, 
such a fiduciary is either:
    (1) A ``qualified professional asset manager'' (QPAM),\6\ as 
defined under Part V(a) of Prohibited Transaction Exemption (PTE) 84-14 
(49 FR 9494, 9506, March 13, 1984, as amended by 70 FR 49305, August 
23, 2005);
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    \6\ PTE 84-14 provides a class exemption for transactions 
between a party in interest with respect to an employee benefit plan 
and an investment fund (including either a single customer or pooled 
separate account) in which the plan has an interest, and which is 
managed by a QPAM, provided certain conditions are met. QPAMs (e.g., 
banks, insurance companies, registered investment advisers with 
total client assets under management in excess of $85 million) are 
considered to be experienced investment managers for plan investors 
that are aware of their fiduciary duties under ERISA.
---------------------------------------------------------------------------

    (2) An ``in-house asset manager'' (INHAM),\7\ as defined under Part 
IV(a) of PTE 96-23, 61 FR 15975, 15982 (April 10, 1996); or
---------------------------------------------------------------------------

    \7\ PTE 96-23 permits various transactions involving employee 
benefit plans whose assets are managed by an INHAM, an entity which 
is generally a subsidiary of an employer sponsoring the plan which 
is a registered investment adviser with management and control of 
total assets attributable to plans maintained by the employer and 
its affiliates which are in excess of $50 million.
---------------------------------------------------------------------------

    (3) A plan fiduciary with total assets under management of at least 
$100 million at the time of the acquisition of such Securities.
    II. ``Excess Spread'' means, as of any day funds are distributed 
from the Issuer, the amount by which the interest allocated to 
Securities exceeds the amount necessary to pay interest to 
Securityholders, servicing fees and expenses.
    JJ. ``Eligible Yield Supplement Agreement'' means any yield 
supplement agreement, similar yield maintenance arrangement or, if 
purchased by or on behalf of the Issuer, an interest rate cap contract 
to supplement the interest rates otherwise payable on obligations 
described in subsection III.B.(1). Such an agreement or arrangement may 
involve a notional principal contract provided that:
    (1) It is denominated in U.S. dollars;
    (2) The Issuer receives on, or immediately prior to the respective 
payment date for the Securities covered by such agreement or 
arrangement, a fixed rate of interest or a floating rate of interest 
based on a publicly available index (e.g., LIBOR or COFI), with the 
Issuer receiving such payments on at least a quarterly basis;
    (3) It is not ``leveraged'' as described in subsection III.FF.(4);
    (4) It does not incorporate any provision which would cause a 
unilateral alteration in any provision described in subsections 
III.JJ.(1)-(3) without the consent of the Trustee;
    (5) It is entered into by the Issuer with an Eligible Swap 
Counterparty; and
    (6) It has a notional amount that does not exceed either: (i) The 
principal balance of the class of Securities to

[[Page 32141]]

which such agreement or arrangement relates, or (ii) the portion of the 
principal balance of such class represented solely by those types of 
corpus or assets of the Issuer referred to in subsections III.B.(1), 
(2) and (3).
    Effective Date: This exemption is effective October 15, 2004.
    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 (the Notice) published on February 13, 
2006 in the Federal Register at 71 FR 7628.

Written Comments/Technical Correction to the Notice

    The Department invited all interested persons to submit written 
comments and requests for a hearing with respect to the Notice within 
45 days of the date of its publication in the Federal Register on 
February 13, 2006. Therefore, all comments and requests for a hearing 
were due by March 14, 2006.
    During the comment period, the Department received no comments and 
no requests for a public hearing. However, upon careful review of the 
Notice, the Department observed that Footnote 11, which addresses the 
terms of leasehold interests on residential real property that is 
pledged to secure certain obligations in residential mortgage 
investment trusts, does not fully clarify the Department's position 
with respect to residential leasehold mortgages. In this regard, 
Footnote 11 states the following:

    Trust assets may also include obligations that are secured by 
leasehold interests on residential real property. But see PTE 90-32 
involving Prudential-Bache Securities, Inc., 55 FR 23147, 23150 
(June 6, 1990). The Department received one comment from an 
affiliate of the applicant with respect to the notice of proposed 
exemption for PTE 90-32. The comment requested clarification that 
the definition of trust in section III.B. would include trusts 
containing certain obligations secured by leasehold interests on 
residential real property (Residential Leasehold Mortgages or RLMs). 
The comment noted that RLMs are originated in jurisdictions such as 
Hawaii in which they are a ``necessary alternative to mortgages 
secured by fee simple interests'' and that these RLMs are ``in 
essence, the same as, and provide substantially the same degree of 
security to investors as, mortgages secured by fee simple interests.
    The comment represented that both the Federal Home Loan Mortgage 
Corporation (Freddie Mac) and the Federal National Mortgage 
Association (Fannie Mae) have purchase programs for these RLMs and 
that such RLMs included in pools underlying mortgage pass-through 
certificates would ``generally conform'' with either Freddie Mac or 
Fannie Mae leasehold guidelines. In this regard, the term of the 
leasehold underlying such RLMs would extend for at least five years 
beyond the term of the RLM. The comment noted that the affiliate of 
the applicant would ``comply with the requirement under the Freddie 
Mac and Fannie Mae leasehold guidelines that such mortgages 
constitute obligations secured by real property or an interest in 
real estate.

    The Department notes that the proposed exemption underlying PTE 
2000-58 (65 FR 67765, Nov. 13, 2000), which amended the Underwriter 
Exemptions (62 FR 39021, July 21, 1997), contained a limitation 
concerning leasehold mortgages. Specifically, the Department stated 
that ``[t]he terms of the ground leases pledged to secure leasehold 
mortgages [would] in all cases be at least ten years longer than the 
terms of such mortgages.'' (65 FR 51454, 51455, August 23, 2000). The 
final exemption did not discuss this limitation. Moreover, in later 
exemptions to amend the Underwriter Exemptions or to provide similar 
individual relief, the original PTE 2000-58 preamble language referring 
to residential and commercial mortgage investment trusts is repeated 
without change, except for the omission of the provision concerning 
RLMs.
    The Department wishes to allay any public uncertainty regarding 
whether the RLM requirement continues to apply to the Underwriter 
Exemptions and to subsequent individual exemptions. Thus, the Harris 
Nesbitt exemption presents the first opportunity for the Department to 
affirm its position that with respect to RLMs, the terms of ground 
leases pledged to secure leasehold mortgages should be at least five 
years longer than the terms of such mortgages. The Department also 
wishes to clarify that the leasehold limitation mentioned in Footnote 
11 applies to RLMs that are subject to Fannie Mae and Freddie Mac 
guidelines.
    After giving full consideration to the entire record, the 
Department has decided to grant the exemption subject to the 
clarifications described above. For further information, interested 
persons are encouraged to obtain copies of the exemption application 
file (Exemption Application No. D-11281) the Department is maintaining 
in this case. The complete application file, as well as all 
supplemental submissions received by the Department, are made available 
for public inspection in the Public Disclosure Room of the Employee 
Benefits Security Administration, Room N-1513, U.S. Department Labor, 
200 Constitution Avenue, NW., Washington, DC 20210.

FOR FURTHER INFORMATION CONTACT: Ms. Silvia M. Quezada of the 
Department, telephone (202) 693-8553. (This is not a toll-free number.)

Fortunoff Fine Jewelry and Silverware, Inc. Cash Balance Pension Plan 
(the FFJS Cash Balance Plan), M. Fortunoff of Westbury Corp. Cash 
Balance Pension Plan (the MFW Cash Balance Plan), and Fortunoff Fine 
Jewelry and Silverware, Inc. Profit Sharing Plan (the FFJS Profit 
Sharing Plan; Collectively, the Plans) Located in Westbury, NY

[Prohibited Transaction Exemption 2006-08; Exemption Application Nos. 
D-11307, D-11308 and D-11309, respectively]

Exemption

    The restrictions of sections 406(a) and 406(b) of the Act and the 
sanctions resulting from the application of section 4975(a) and (b) of 
the Code,\8\ by reason of section 4975(c)(1)(A) through (E) of the 
Code, shall not apply (1) effective November 26, 2003 until February 
28, 2005, to the leasing of certain improved real property (the 
Property) by the Plans, directly and then through One MH Plaza Realty 
LLC (the Plans' LLC), a special purpose entity designed to hold the 
Plans' interests in the Property, to Fortunoff Fine Jewelry and 
Silverware, Inc. (FFJS), under the provisions of a written lease (the 
Interim Lease); and (2) effective March 1, 2005 through August 31, 
2006, to the 18 month extension of the Interim Lease (the Interim Lease 
Extension) between the Plans,\9\ through the Plans' LLC, and FFJS and 
its successors in interest, Fortunoff Fine Jewelry and Silverware, LLC 
(FFJS LLC) and M. Fortunoff of Westbury, LLC (MFW LLC).
---------------------------------------------------------------------------

    \8\ For purposes of this exemption, references to provisions of 
Title I of the Act, unless otherwise specified, refer also to 
corresponding provisions of the Code.
    \9\ As of January 1, 2006, all references to the Plans shall 
mean the Fortunoff, the Source, Cash Balance Plan (the Merged Cash 
Balance Plan), which resulted from the merger of the FFJS Cash 
Balance Plan and the MFW Cash Balance Plan, and the FFJS Profit 
Sharing Plan.
---------------------------------------------------------------------------

    This exemption is subject to the following conditions:
    (a) Since November 26, 2003, the Plans have been and continue to be 
represented for all purposes under the Interim Lease, by Independent 
Fiduciary Services (IFS), a qualified, independent fiduciary, which 
also represents the interests of the Plans under the Interim Lease 
Extension.
    (b) IFS has (1) reviewed and approved the continued adherence by 
the Plans and the Plans' LLC with the terms and conditions of the 
Interim Lease under the facts and circumstances in existence on and 
after November 26, 2003; (2) negotiated, reviewed, and expressly

[[Page 32142]]

approved the terms and conditions of the Interim Lease Extension on 
behalf of the Plans; and (3) determined that the leasing of the 
Property since November 26, 2003 pursuant to the Interim Lease and, 
since March 1, 2005, pursuant to the Interim Lease Extension, (i) 
complies with the relevant provisions of Prohibited Transaction 
Exemption (PTE) 93-8 (58 FR 7258, February 5, 1993), as amended by PTE 
98-22 (63 FR 27329, May 18, 1998), (except as modified by this 
exemption); (ii) continues to be an appropriate investment for the 
Plans on and after November 26, 2003, consistent with each Plan's 
investment policies and liquidity needs; and (iii) is in the best 
interests of each Plan and its respective participants and 
beneficiaries on and after November 26, 2003.
    (c) The rent paid to the Plans under the Interim Lease and the 
Interim Lease Extension is no less than the fair market rental value of 
the Property, as established by a qualified, independent appraiser. 
Effective March 1, 2006, the rent is adjusted to the greater of the 
current annualized rental of $656,400 or the then-current, fair market 
rental value, as determined by IFS on the basis of an appraisal 
conducted by the independent appraiser selected by IFS.
    (d) The base rent has been adjusted or is adjusted annually by IFS 
based upon an independent appraisal of the Property.
    (e) Under both the Interim Lease and the Interim Lease Extension, 
FFJS pays for property and liability insurance on the Property, 
property taxes, utility costs, other costs for maintaining the Property 
including environmental assessments, engineering inspection reports, as 
well as all other expenses that are incident to such agreements.
    (f) IFS has monitored, and continues to monitor, compliance with 
the terms of the Interim Lease since November 26, 2003 and the terms of 
the Interim Lease Extension throughout the duration of these 
agreements.
    (g) IFS is responsible for legally enforcing the payment of the 
rent and the proper performance of all other obligations of FFJS and 
its successors in interest, FFJS LLC and MFW LLC, under the terms of 
such agreements.
    (h) IFS makes determinations, on behalf of the Plans, with respect 
to any sale or future leasing of the Property.
    (i) IFS has determined that (1) the leasing of the Property 
pursuant to the Interim Lease on and after November 26, 2003 was no 
less favorable to the Plans than similar leasing arrangements between 
unrelated parties; (2) the then-prevailing rent received by the Plans 
under the interim lease was no less favorable to the Plans than the 
rent the Plans would have received under similar circumstances if the 
rent had been negotiated at arm's length with unrelated third parties; 
and (3) the terms and conditions of the Interim Lease Extension have 
been or are no less favorable to the Plans than those obtainable by the 
Plans under similar circumstances when negotiated at arm's length with 
unrelated third parties.
    (j) With respect to the Interim Lease Extension, FFJS (1) has made 
a two-month security deposit pursuant to the agreement; and (2) is 
required to pay an additional four-month security deposit (Additional 
Deposit) after the expiration of the first 12 months of the Interim 
Lease Extension, calculated at the rental amount to be effective March 
1, 2006.
    (k) Over the last six months of the Interim Lease Extension, one-
sixth of the Additional Deposit is applied to the rent each month, so 
long as there is no uncured default.
    Effective Date: This exemption is effective from November 26, 2003 
until February 28, 2005 with respect to the Interim Lease and from 
March 1, 2005 until August 31, 2006 with respect to the Interim Lease 
Extension.
    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 February 13, 2006 at 71 
FR 7647.

FOR FURTHER INFORMATION CONTACT: Ms. Anna Mpras Vaughan of the 
Department, telephone (202) 693-8565. (This is not a toll-free number.)

General Information

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

Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security 
Administration, U.S. Department of Labor.
 [FR Doc. E6-8529 Filed 6-1-06; 8:45 am]

BILLING CODE 4510-29-P