Grant of Individual Exemptions; New Standard Corporation Pension Plan, et al.

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 94-72; Exemption Application No. D-

9698, et al.]

Grant of Individual Exemptions; New Standard Corporation Pension

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 the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, D.C. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR

47713, October 17, 1978) transferred the authority of the Secretary of

the Treasury to issue exemptions of the type proposed to the Secretary

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their

participants and beneficiaries; and

(c) They are protective of the rights of the participants and

beneficiaries of the plans.

New Standard Corporation Pension Plan (the Plan)

Located in Mt. Joy, Pennsylvania

[Prohibited Transaction Exemption 94-72; Application No. D-9698]

Exemption

The restrictions of sections 406(a) and 406(b) (1) and (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 of a certain parcel of real property (the

Property) from the Plan to New Standard Corporation (the Employer), a

party in interest with respect to the Plan, provided that the following

conditions are met:

1. The fair market value of the Property is established by a real

estate appraiser independent of the Plan and the Employer;

2. The Employer pays the greater of $115,000 or the current fair

market value of the Property (excluding site improvements) with the

enhancement value for an adjoining owner as of the date of sale;

3. The sale is a one-time transaction for cash;

4. The Plan pays no fees or commissions in regard to the sale; and

5. The Employer pays any applicable excise taxes to the Internal

Revenue Service under section 4975(a) of the Code resulting from its

use of the Property since October 1993.

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption refer to

the notice of proposed exemption published on August 17, 1994 at 59 FR

42308.

FOR FURTHER INFORMATION CONTACT: Paul Kelty of the Department,

telephone (202) 219-8883. (This is not a toll-free number.)

GE Capital Mortgage Services, Inc. (GECMSI) Located in Cherry Hill, New

Jersey; and GECC Capital Markets Group, Inc. (Capital Markets;

Together, the Applicants)

Located in Stamford, Connecticut

[Prohibited Transaction Exemption 94-73; Application Nos. D-9748 and D-

9749]

Exemption

I. Transactions

A. Effective June 28, 1994, 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. Effective June 28, 1994, the restrictions of sections 406(b)(1)

and 406(b)(2) of the Act and the taxes imposed by section 4975 (a) and

(b) of the Code by reason of section 4975(c)(1)(E) of the Code shall

not apply to:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between the

sponsor or underwriter and a plan when the person who has discretionary

authority or renders investment advice with respect to the investment

of plan assets in the certificates is (a) an obligor with respect to 5

percent or less of the fair market value of obligations or receivables

contained in the trust, or (b) an affiliate of a person described in

(a); if:

(i) The plan is not an Excluded Plan;

(ii) Solely in the case of an acquisition of certificates in

connection with the initial issuance of the certificates, at least 50

percent of each class of certificates in which plans have invested is

acquired by persons independent of the members of the Restricted Group

and at least 50 percent of the aggregate interest in the trust is

acquired by persons independent of the Restricted Group;

(iii) A plan's investment in each class of certificates does not

exceed 25 percent of all of the certificates of that 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. Effective June 28, 1994, 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. Effective June 28, 1994, 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 at

the time of such acquisition that is in one of the three highest

generic rating categories from either Standard & Poor's Corporation

(S&P's), Moody's Investors Service, Inc. (Moody's), Duff & Phelps Inc.

(D&P) or Fitch Investors Service, Inc. (Fitch);

(4) The trustee is not an affiliate of any member of the Restricted

Group. However, the trustee shall not be considered to be an affiliate

of a servicer solely because the trustee has succeeded to the rights

and responsibilities of the servicer pursuant to the terms of a pooling

and servicing agreement providing for such succession upon the

occurrence of one or more events of default by the servicer;

(5) The sum of all payments made to and retained by the

underwriters in connection with the distribution or placement of

certificates represents not more than reasonable compensation for

underwriting or placing the certificates; the sum of all payments made

to and retained by the sponsor pursuant to the assignment of

obligations (or interests therein) to the trust represents not more

than the fair market value of such obligations (or interests); and the

sum of all payments made to and retained by the servicer represents not

more than reasonable compensation for the servicer's services under the

pooling and servicing agreement and reimbursement of the servicer's

reasonable expenses in connection therewith; and

(6) The plan investing in such certificates is an ``accredited

investor'' as defined in Rule 501(a)(1) of Regulation D of the

Securities and Exchange Commission under the Securities Act of 1933.

B. Neither any underwriter, sponsor, trustee, servicer, insurer, or

any obligor, unless it or any of its affiliates has discretionary

authority or renders investment advice with respect to the plan assets

used by a plan to acquire certificates, shall be denied the relief

provided under 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; and

(c) With respect to which (i) one of the Applicants or any of their

affiliates is the sponsor, and an entity which has received from the

Department an individual prohibited transaction exemption relating to

certificates which is similar to this exemption is the sole underwriter

or the manager or co-manager of the underwriting syndicate or a selling

or placement agent; or (ii) one of the Applicants or any of their

affiliates is the sole underwriter or the manager or co-manager of the

underwriting syndicate or a selling or placement agent; or

(2) A certificate denominated as a debt instrument--

(a) That represents an interest in a Real Estate Mortgage

Investment Conduit (REMIC) within the meaning of section 860D(a) of the

Internal Revenue Code of 1986; and

(b) That is issued by and is an obligation of a trust with respect

to which (i) one of the Applicants or any of their affiliates is the

sponsor, and an entity which has received from the Department an

individual prohibited transaction exemption relating to certificates

which is similar to this exemption is the sole underwriter or the

manager or co-manager of the underwriting syndicate or a selling or

placement agent; or manager or co-manager of the underwriting

syndicate, or (ii) one of the Applicants is the sole underwriter or the

manager or co-manager of the underwriting syndicate, or a selling or

placement agent.

For purposes of this exemption, references to ``certificates

representing an interest in a trust'' include certificates denominated

as debt which are issued by a trust.

B. ``Trust'' means an investment pool, the corpus of which is held

in trust and consists solely of:

(1) Either

(a) Secured consumer receivables that bear interest or are

purchased at a discount (including, but not limited to, home equity

loans and obligations secured by shares issued by a cooperative housing

association);

(b) Secured credit instruments that bear interest or are purchased

at a discount in transactions by or between business entities

(including, but not limited to, qualified equipment notes secured by

leases, as defined in section III.T);

(c) Obligations that bear interest or are purchased at a discount

and which are secured by single-family residential, multi-family

residential and commercial real property (including obligations secured

by leasehold interests on commercial real property);

(d) Obligations that bear interest or are purchased at a discount

and which are secured by motor vehicles or equipment, or qualified

motor vehicle leases (as defined in section III.U);

(e) ``Guaranteed governmental mortgage pool certificates,'' as

defined in 29 CFR 2510.3-101(i)(2);

(f) Fractional undivided interests in any of the obligations

described in clauses (a)-(e) of this section B.(1);

(2) Property which had secured any of the obligations described in

subsection B.(1);

(3) Undistributed cash or temporary investments made therewith

maturing no later than the next date on which distributions are to made

to certificateholders; and

(4) Rights of the trustee under the pooling and servicing

agreement, and rights under any insurance policies, third-party

guarantees, contracts of suretyship and other credit support

arrangements with respect to any obligations described in subsection

B.(1).

Notwithstanding the foregoing, the term ``trust'' does not include

any investment pool unless: (i) The investment pool consists only of

assets of the type which have been included in other investment pools,

(ii) certificates evidencing interests in such other investment pools

have been rated in one of the three highest generic rating categories

by S&P's, Moody's, D & P, or Fitch for at least one year prior to the

plan's acquisition of certificates pursuant to this exemption, and

(iii) certificates evidencing interests in such other investment pools

have been purchased by investors other than plans for at least one year

prior to the plan's acquisition of certificates pursuant to this

exemption.

C. ``Underwriter'' means:

(1) Any of the Applicants;

(2) Any person directly or indirectly, through one or more

intermediaries, controlling, controlled by or under common control with

any of the Applicants; or

(3) Any member of an underwriting syndicate or selling group of

which any of the Applicants or a person described in (2) is a manager

or co-manager with respect to the certificates; or

(4) An entity which has received from the Department an individual

prohibited transaction exemption relating to certificates which is

similar to this exemption.

D. ``Sponsor'' means the entity that organizes a trust by

depositing obligations therein in exchange for certificates.

E. ``Master Servicer'' means the entity that is a party to the

pooling and servicing agreement relating to trust assets and is fully

responsible for servicing, directly or through subservicers, the assets

of the trust.

F. ``Subservicer'' means an entity which, under the supervision of

and on behalf of the master servicer, services loans contained in the

trust, but is not a party to the pooling and servicing agreement.

G. ``Servicer'' means any entity which services loans contained in

the trust, including the master servicer and any subservicer.

H. ``Trustee'' means the trustee of the trust, and in the case of

certificates which are denominated as debt instruments, also means the

trustee of the indenture trust.

I. ``Insurer'' means the insurer or guarantor of, or provider of

other credit support for, a trust. Notwithstanding the foregoing, a

person is not an insurer solely because it holds securities

representing an interest in a trust which are of a class subordinated

to certificates representing an interest in the same trust.

J. ``Obligor'' means any person, other than the insurer, that is

obligated to make payments with respect to any obligation or receivable

included in the trust. Where a trust contains qualified motor vehicle

leases or qualified equipment notes secured by leases, ``obligor''

shall also include any owner of property subject to any lease included

in the trust, or subject to any lease securing an obligation included

in the trust.

K. ``Excluded Plan'' means any plan with respect to which any

member of the Restricted Group is a ``plan sponsor'' within the meaning

of section 3(16)(B) of the Act.

L. ``Restricted Group'' with respect to a class of certificates

means:

(1) Each underwriter;

(2) Each insurer;

(3) The sponsor;

(4) The trustee;

(5) Each servicer;

(6) Any obligor with respect to obligations or receivables included

in the trust constituting more than 5 percent of the aggregate

unamortized principal balance of the assets in the trust, determined on

the date of the initial issuance of certificates by the trust; or

(7) Any affiliate of a person described in (1)-(6) above.

M. ``Affiliate'' of another person includes:

(1) Any person directly or indirectly, through one or more

intermediaries, controlling, controlled by, or under common control

with such other person;

(2) Any officer, director, partner, employee, relative (as defined

in section 3(15) of the Act), a brother, a sister, or a spouse of a

brother or sister of such other person; and

(3) Any corporation or partnership of which such other person is an

officer, director or partner.

N. ``Control'' means the power to exercise a controlling influence

over the management or policies of a person other than an individual.

O. A person will be ``independent'' of another person only if:

(1) Such person is not an affiliate of that other person; and

(2) The other person, or an affiliate thereof, is not a fiduciary

who has investment management authority or renders investment advice

with respect to any assets of such person.

P. ``Sale'' includes the entrance into a forward delivery

commitment (as defined in section Q below), provided:

(1) The terms of the forward delivery commitment (including any fee

paid to the investing plan) are no less favorable to the plan than they

would be in an arm's length transaction with an unrelated party;

(2) The prospectus or private placement memorandum is provided to

an investing plan prior to the time the plan enters into the forward

delivery commitment; and

(3) At the time of the delivery, all conditions of this exemption

applicable to sales are met.

Q. ``Forward delivery commitment'' means a contract for the

purchase or sale of one or more certificates to be delivered at an

agreed future settlement date. The term includes both mandatory

contracts (which contemplate obligatory delivery and acceptance of the

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:

(a) Which is secured by equipment which is leased;

(b) Which is secured by the obligation of the lessee to pay rent

under the equipment lease; and

(c) With respect to which the trust's security interest in the

equipment is at least as protective of the rights of the trust as the

trust would have if the equipment note were secured only by the

equipment and not the lease.

U. ``Qualified Motor Vehicle Lease'' means a lease of a motor

vehicle where:

(a) The trust holds a security interest in the lease;

(b) The trust holds a security interest in the leased motor

vehicle; and

(c) The trust's security interest in the leased motor vehicle is at

least as protective of the trust's rights as the trust would receive

under a motor vehicle installment loan contract.

V. ``Pooling and Servicing Agreement'' means the agreement or

agreements among a sponsor, a servicer and the trustee establishing a

trust. In the case of certificates which are denominated as debt

instruments, ``Pooling and Servicing Agreement'' also includes the

indenture entered into by the trustee of the trust issuing such

certificates and the indenture trustee.

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 September 2, 1994 at 59

FR 45724.

EFFECTIVE DATE: This exemption is effective for transactions occurring

on or after June 28, 1994.

FOR FURTHER INFORMATION CONTACT: Gary Lefkowitz of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

H. Stephen Cranston Professional Corporation Pension Plan and Trust

Located in San Marino, California

[Prohibited Transaction Exemption 94-74; Exemption Application No. D-

9733]

Exemption

The sanctions resulting from the application of section 4975 of the

Code, by reason of section 4975(c)(1)(A) through (E) of the Code, shall

not apply to the cash sale (the Sale) of certain real property (the

Property) by the Plan to H. Stephen Cranston and Karen Y. Cranston,

husband and wife, and disqualified persons with respect to the Plan;

provided that (1) the Sale is a one-time transaction for cash; (2) the

Plan does not experience any loss nor incur any expenses from the

proposed transaction; and (3) the Plan receives as consideration from

the Sale the greater of either (a) the fair market value of the

Property as determined by a qualified, independent appraiser on the

date of the Sale, or (b) an amount equal to all the funds expended by

the Plan in acquiring and maintaining the Property during its period of

ownership.

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 September 2, 1994, at 59

FR 45723.

FOR FURTHER INFORMATION CONTACT: Mr. C. E. Beaver of the Department,

telephone (202) 219-8881. (This is not a toll-free number.)

General Information

The attention of interested persons is directed to the following:

(1) The fact that a transaction is the subject of an exemption

under section 408(a) of the Act and/or section 4975(c)(2) of the Code

does not relieve a fiduciary or other party in interest or disqualified

person from certain other provisions to which the exemptions does not

apply and the general fiduciary responsibility provisions of section

404 of the Act, which among other things require a fiduciary to

discharge his duties respecting the plan solely in the interest of the

participants and beneficiaries of the plan and in a prudent fashion in

accordance with section 404(a)(1)(B) of the Act; nor does it affect the

requirement of section 401(a) of the Code that the plan must operate

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) These exemptions are supplemental to and not in derogation of,

any other provisions of the Act and/or the Code, including statutory or

administrative exemptions and transactional rules. Furthermore, the

fact that a transaction is subject to an administrative or statutory

exemption is not dispositive of whether the transaction is in fact a

prohibited transaction; and

(3) The availability of these exemptions is subject to the express

condition that the material facts and representations contained in each

application accurately describes all material terms of the transaction

which is the subject of the exemption.

Signed at Washington, D.C., this 4th day of October, 1992.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits,

Administration, U.S. Department of Labor.

[FR Doc. 94-24875 Filed 10-6-94; 8:45 am]

BILLING CODE 4510-29-P