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Secretary of Labor Thomas E. Perez
Grant of Individual Exemptions; Genito-Urinary Surgeons, Inc. Profit Sharing Plan (GUS Plan) Michael J. Rosenberg Money Purchase Pension Plan (Rosenberg Plan); Robert Savage Qualified Retirement Plan (Savage Plan), et al. [Notices] [03/08/1999]

EBSA (Formerly PWBA) Federal Register Notice

Grant of Individual Exemptions; Genito-Urinary Surgeons, Inc. Profit Sharing Plan (GUS Plan) Michael J. Rosenberg Money Purchase Pension Plan (Rosenberg Plan); Robert Savage Qualified Retirement Plan (Savage Plan), et al. [03/08/1999]

[PDF Version]

Volume 64, Number 44, Page 11045-11051

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Prohibited Transaction Exemption 99-10; Exemption Application No. D-
10630, et al.]

 
Grant of Individual Exemptions; Genito-Urinary Surgeons, Inc. 
Profit Sharing Plan (GUS Plan) Michael J. Rosenberg Money Purchase 
Pension Plan (Rosenberg Plan); Robert Savage Qualified Retirement Plan 
(Savage Plan), et al.

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

[[Page 11046]]

the prohibited transaction restrictions of the Employee Retirement 
Income Security Act of 1974 (the Act) and/or the Internal Revenue Code 
of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, DC. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (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.

Genito-Urinary Surgeons, Inc. Profit Sharing Plan (GUS Plan); 
Michael J. Rosenberg Money Purchase Pension Plan (Rosenberg Plan); 
Robert Savage Qualified Retirement Plan (Savage Plan); Located in 
Toledo, Ohio

[Prohibited Transaction Exemption Number 99-10; Application Numbers D-
10630, D-10631 and D-10632, respectively]

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, 
do not apply to: (1) the cash sale of certain shares of preferred stock 
(the Preferred Stock) issued by TTC Holdings Inc. (TTC) to TTC, by the 
individually-directed account of Dr. Gregor Emmert in the GUS Plan, by 
the individually-directed account of Mr. Michael J. Rosenberg in the 
Rosenberg Plan, and by the individually-directed account of Mr. Robert 
Savage in the Savage Plan (collectively, the Accounts); and (2) the 
subsequent purchase of certain shares of common stock (the Common 
Stock) issued by TTC by Messrs. Emmert, Rosenberg and Savage 
(collectively; the Participants), in their own name, from TTC pursuant 
to an agreement with TTC that the purchase of the Common Stock was to 
occur immediately after the sale of the Preferred Stock by the Plans; 
provided that the following conditions were met:
    (a) The sale of the Preferred Stock to TTC by the Accounts and the 
purchase of the Common Stock from TTC by the Participants, acting in 
their individual capacity, were one-time transactions for cash;
    (b) The transactions described in (a) above took place on the same 
business day;
    (c) The amount paid to the Accounts by TTC was the fair market 
value of the Preferred Stock, as determined by a qualified independent 
appraiser at the time of the sale;
    (d) The Participants, in their individual capacity, purchased from 
TTC shares of the Common Stock which were equal in number and value to 
the shares of Preferred Stock sold by the Accounts to TTC;
    (e) A qualified independent fiduciary (the Independent Fiduciary) 
determined that the transactions described herein were in the best 
interests and protective of the Accounts at the time of the 
transactions; and
    (f) The Independent Fiduciary supervised the transactions; assured 
that the conditions of this proposed exemption were met; and took 
whatever actions necessary to protect the interests of the Accounts, 
including reviewing amounts paid by TTC for the Preferred Stock.

EFFECTIVE DATE: The effective date of this exemption is December 1, 
1998.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, please 
refer to the notice of proposed exemption published on January 21, 
1999, at 64 FR 3342.

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

Mellon Financial Markets, Inc. (Mellon); Located in Pittsburgh, 
Pennsylvania

[Prohibited Transaction Exemption 99-11; Exemption Application No. D-
10695]

Exemption

I. Transactions

    A. 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.\1\
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    \1\ 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. 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

[[Page 11047]]

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 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.\2\ 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;
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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 
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. 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.\3\
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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 
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. 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.

II. General Conditions

    A. The relief provided under Part 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 
from a rating agency (as defined in section III.W.) at the time of such 
acquisition that is in one of the three highest generic rating 
categories;
    (4) The trustee is not an affiliate of any other 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;
    (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; 
and
    (7) In the event that the obligations used to fund a trust have not 
all been transferred to the trust on the closing date, additional 
obligations as specified in subsection III.B.(1) may be transferred to 
the trust during the pre-funding period (as defined in section III.BB.) 
in exchange for amounts credited to the pre-funding account (as defined 
in section III.Z.), provided that:
    (a) The pre-funding limit (as defined in section III.AA.) is not 
exceeded;
    (b) All such additional obligations meet the same terms and 
conditions for eligibility as those of the original obligations used to 
create the trust corpus (as described in the prospectus or private 
placement memorandum and/or pooling and servicing agreement for such 
certificates), 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 of the outstanding 
certificateholders or by a rating agency;

[[Page 11048]]

    (c) The transfer of such additional obligations to the trust during 
the pre-funding period does not result in the certificates 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 certificates by the trust;
    (d) The weighted average annual percentage interest rate (the 
average interest rate) for all of the obligations in the trust 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 trust 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 trustees) 
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 as of 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 certificateholders of such trust, including employee benefit plans 
subject to the Act.
    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 certificates, shall be denied the relief 
provided under Part 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.

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) or a Financial Asset Securitization 
Investment Trust (FASIT) within the meaning of section 860D(a) or 
section 860L, respectively, 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 Mellon 
or any of its affiliates 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. Trust means an investment pool, the corpus of which is held in 
trust and 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, as defined in section III.T); and/or
    (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); 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 (as defined in section III.U); and/or
    (e) ``Guaranteed governmental mortgage pool certificates,'' as 
defined in 29 CFR 2510.3-101(i)(2); and/or
    (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)(a) Undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are to be 
made to certificateholders; and/or
    (b) Cash or investments made therewith which are credited to an 
account to provide payments to certificateholders pursuant to any yield 
supplement agreement or similar yield maintenance arrangement to 
supplement the interest rates otherwise payable on obligations 
described in subsection III.B.(1) held in the trust, provided that such 
arrangements do not involve swap agreements or other notional principal 
contracts; and/or
    (c) Cash transferred to the trust 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 clauses (a)-(g) of subsection II.A.(7) are met and/or;
    (ii) Are credited to a capitalized interest account (as defined in 
section III.X.); and
    (iii) Are held in the trust for a period ending no later than the 
first distribution date to certificateholders 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 are either: (i) 
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 (ii) have been 
rated (or the obligor has

[[Page 11049]]

been rated) in one of the three highest generic rating categories by a 
rating agency; are described in the pooling and servicing agreement; 
and are permitted by the rating agency; and
    (4) Rights of the trustee under the pooling and servicing 
agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship, yield supplement agreements 
described in clause (b) of subsection III.B.(3) and other credit 
support arrangements with respect to any obligations described in 
subsection III.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 described in clauses (a) through (f) of subsection 
III.B.(1) 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 a 
rating agency 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) Mellon;
    (2) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
Mellon; or
    (3) Any member of an underwriting syndicate or selling group of 
which Mellon 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 obligations contained in the 
trust, but is not a party to the pooling and servicing agreement.
    G. Servicer means any entity which services obligations 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 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 would 
be the case 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:

[[Page 11050]]

    (1) the trust owns or holds a security interest in the lease;
    (2) the trust owns or 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 would be the case if the 
trust consisted of motor vehicle installment loan contracts.
    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. Rating Agency means Standard & Poor's Structured Rating Group 
(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps 
Credit Rating Co. (D & P) or Fitch IBCA, Inc. (Fitch), or their 
successors.
    X. Capitalized Interest Account means a trust account: (i) which is 
established to compensate certificateholders for shortfalls, if any, 
between investment earnings on the pre-funding account and the pass-
through rate payable under the certificates; and (ii) which meets the 
requirements of clause (c) of subsection III.B.(3).
    Y. Closing Date means the date the trust is formed, the 
certificates are first issued and the trust'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 trust.
    Z. Pre-Funding Account means a trust 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).
    AA. 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 certificates being offered which is less than 
or equal to 25 percent.
    BB. 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.
    CC. Mellon means Mellon Financial Markets, Inc. 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 95-60 (60 FR 35925, 
July 12, 1995), the Class Exemption for Certain Transactions Involving 
Insurance Company General Accounts (see 60 FR 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 January 21, 1999 at 64 FR 
3344.

WRITTEN COMMENTS: The only written comments received by the Department 
were submitted by the applicant.
    The applicant's first comment relates to Sections III.F. and III.G. 
of the proposed exemption, which contain the definition of the terms 
``Subservicer'' and ``Servicer'', respectively. Mellon's application, 
which was based on prior exemption applications requesting similar 
relief for other entities, had used the term ``obligations'' in place 
of ``loans'' in these definitions. The applicant's comment states that 
the term ``obligations'', which is broader than the term ``loans'', is 
more consistent with the framework of the requested exemption. In this 
regard, the definition of the term ``Trust'' in Section III.B. of the 
exemption, which lists the assets that may be held in a trust of the 
type described in the exemption, refers to ``receivables'' and 
``obligations'', among other things, but uses the term ``loans'' only 
in subparagraph (1)(a) therein as an example of a type of secured 
consumer receivable. Therefore, to avoid any implication that the terms 
``Subservicer'' and ``Servicer'', as defined in Sections III.F. and 
III.G. of the proposed exemption, relate only to a narrow class of loan 
assets included within a Trust, the applicant requests that the term 
``loans'' in those definitions be replaced by the term ``obligations'' 
in order to make clearer that the definitions cover a servicer with 
respect to any serviced assets held in the trust.
    The applicant's second comment related to Section III.U. of the 
proposed exemption, which defines the term ``Qualified Motor Vehicle 
Lease''. In listing the requirements for such a lease, Subparagraph (1) 
of Section III.U. of the proposed exemption requires that the trust 
``owns or holds'' the security interest in the lease, whereas 
Subparagraph (2) therein requires that the trust only ``hold'' a 
security interest in the leased motor vehicle. The applicant's comment 
states that the phrase ``owns or holds'' should also be used in 
Subparagraph (2) of Section III.U. The applicant notes that this usage 
would avoid any implication that the exemption intends to draw a 
distinction between the trust's rights in the security interest in the 
lease versus the trust's rights in the security interest in the motor 
vehicle. Therefore, the applicant requests that the phrase ``owns or 
holds'' replace the word ``holds'' in Subparagraph (2) of Section 
III.U.
    The Department has considered the entire record, including the 
comments filed by the applicant, and has determined to grant the 
exemption as proposed, with the two modifications requested in the 
applicant's comment letter.

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

State Street Bank and Trust Company (State Street) Located in 
Boston, Massachusetts

[Prohibited Transaction Exemption 99-12; Exemption Application Number 
D-10701]

Exemption

Section I. Transactions
    The restrictions of section 406(a)(1)(A) through (D) and section 
406(b)(1) and (b)(2) of the Act and the sanctions resulting from the 
application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) of the Code, shall not apply to the sale (the 
Sale) of fractional amounts of certain fixed-income instruments 
(Fractional Amounts) to State Street and its affiliates by plans for 
which State Street or its affiliates provide fiduciary or other 
services (Client Plans), as well as employee benefit plans established 
and maintained by State Street or its affiliates (State Street Plans; 
collectively, the Plans), provided that the following conditions are 
met:
    (a) Each Sale involves a one time transaction for cash;
    (b) The terms of each Sale are at least as favorable to the Plan as 
those terms which would be available in an arm's-length transaction 
with an unrelated party;
    (c) The Plans receive an amount which is not less than the par 
value for each of the Fractional Amounts;
    (d) In the case of single Client Plans,
    (1) each Sale is subject to the prior consent of an independent 
plan fiduciary;
    (2) the independent fiduciary of each Plan is furnished with notice 
within 90 days of the proposed Sale, providing information necessary 
for the

[[Page 11051]]

independent fiduciary to determine whether to approve the Sale 
transaction. If the fixed-income instruments are not redenominated 
within a year of provision of this notice, additional notice will be 
provided to the independent fiduciaries of each Plan each year 
notifying them of their right not to participate in this program of 
Sales; and
    (3) each independent fiduciary who determines to participate in the 
Sale receives written confirmation of the decision to participate and 
written confirmation of the transaction and its terms.
    (e) In the case of Client Plans participating in collective funds 
for which State Street serves as trustee or investment manager,
    (1) each Sale engaged in by the collective fund is subject to the 
prior approval of each independent plan fiduciary of Plans 
participating in the fund;
    (2) the independent fiduciary of each Plan is furnished notice 
within 90 days of the proposed Sale, containing information necessary 
for the independent fiduciary to determine whether to approve the Sale 
transaction or withdraw from the collective fund prior to the Sale. If 
the fixed-income instruments are not redenominated within a year of 
provision of this notice, additional notice will be provided to the 
independent fiduciaries each year notifying them of their right to 
withdraw from the collective fund;
    (3) each independent fiduciary of a plan participating in a 
collective fund who determines to participate in the Sale receives 
written confirmation of the decision to participate and written 
confirmation of the transaction and its terms;
    (f) In the case of the Plans, State Street must engage in the Sale 
within 30 days of the date that the Fractional Amounts are received by 
State Street as custodian or trustee for the Plans from the issuers of 
the fixed-income security;
    (g) The Plans do not incur any commissions or other expenses in 
connection with the Sales; and
    (h) (1) State Street or an affiliate maintains or causes to be 
maintained within the United States, for a period of six years from the 
date of such transaction, the records necessary to enable the persons 
described in this section to determine whether the conditions of this 
exemption have been met; except that a party in interest with respect 
to an employee benefit plan, other than State Street or its affiliates, 
shall not be subject to a civil penalty under section 502(i) of the Act 
or the taxes imposed by section 4975(a) or (b) of the Code, if such 
records are not maintained, or are not available for examination, as 
required by this section, and a prohibited transaction will not be 
deemed to have occurred if, due to circumstances beyond the control of 
State Street or its affiliates, such records are lost or destroyed 
prior to the end of such six year period;
    (2) The records referred to in subsection (1) above are 
unconditionally available for examination during normal business hours 
by duly authorized employees of (a) the Department, (b) the Internal 
Revenue Service, (c) plan participants and beneficiaries, (d) any 
employer of plan participants and beneficiaries, and (e) any employee 
organization whose members are covered by such plan; except that none 
of the persons described in (c) through (e) of this subsection shall be 
authorized to examine trade secrets of State Street or its affiliates 
or any commercial or financial information which is privileged or 
confidential.
Section II. Definitions
    (a) The term affiliate of State Street means any other bank or 
similar financial institution directly or indirectly controlling, 
controlled by, or under common control with State Street.
    (b) The term Euro means the single European currency introduced on 
January 1, 1999 in eleven Member States of the European Union.
    (c) The term Fractional Amount means, with respect to any fixed-
income instrument, an amount less than one Euro.
    (d) The term independent plan fiduciary means a plan fiduciary 
independent of State Street and any of its affiliates.
    (e) The term par value means the face value of the fixed-income 
instrument.
    (f) The term Plan includes all employee benefit plans to which 
State Street or an affiliate acts as a service provider, including a 
fiduciary, and all plans established and maintained by State Street and 
its affiliates, which have net assets of at least $25,000,000.

EFFECTIVE DATE: This exemption is effective for the period beginning on 
January 1, 1999 and ending three years from the date on which each 
country joining the European Economic and Monetary Union converts to 
the Euro.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, please 
refer to the notice of proposed exemption published in the Federal 
Register on January 27, 1999 at 64 FR 4144.

FOR FURTHER INFORMATION: Contact James Scott Frazier of the Department, 
phone number (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 are true and complete and accurately describe all material 
terms of the transaction which is the subject of the exemption. In the 
case of continuing exemption transactions, if any of the material facts 
or representations described in the application change after the 
exemption is granted, the exemption will cease to apply as of the date 
of such change. In the event of any such change, application for a new 
exemption may be made to the Department.

    Signed at Washington, DC, this 3rd day of March, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 99-5573 Filed 3-5-99; 8:45 am]
BILLING CODE 4510-29-P