# Proposed Exemptions; World Omni Financial Corporation

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## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** November 28, 1995
- **Citation:** 60 FR 58651

## Text

DEPARTMENT OF LABOR
[Application No. D-09840, et al.]

Proposed Exemptions; World Omni Financial Corporation

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restriction of the Employee
Retirement Income Security Act of 1974 (the Act) and/or the Internal
Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

All interested persons are invited to submit written comments or
request for a hearing on the pending exemptions, unless otherwise
stated in the Notice of Proposed Exemption, within 45 days from the
date of publication of this Federal Register Notice. Comments and
request for a hearing should state: (1) The name, address, and
telephone number of the person making the comment or request, and (2)
the nature of the person's interest in the exemption and the manner in
which the person would be adversely affected by the exemption. A
request for a hearing must also state the issues to be addressed and
include a general description of the evidence to be presented at the
hearing. A request for a hearing must also state the issues to be
addressed and include a general description of the evidence to be
presented at the hearing.

ADDRESSES: All written comments and request for a hearing (at least
three copies) should be sent to the Pension and Welfare Benefits
Administration, Office of Exemption Determinations, Room N-5649, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.
20210. Attention: Application No. stated in each Notice of Proposed
Exemption. The applications for exemption and the comments received
will be available for public inspection in the Public Documents Room of
Pension and Welfare Benefits Administration, U.S. Department of Labor,
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.

Notice To Interested Persons

Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code, and in accordance with procedures set forth in
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978 (43 FR 47713, October 17, 1978) transferred the authority of
the Secretary of the Treasury to issue exemptions of the type requested
to the Secretary of Labor. Therefore, these notices of proposed
exemption are issued solely by the Department.
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.

[[Page 58652]]

World Omni Financial Corporation and its Affiliates, Located in
Deerfield Beach, Florida

[Application No. D-09840]

Proposed Exemption

The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR part
2570, subpart B (55 FR 32836, 32847, August 10, 1990).

Section I--Transactions

A. Effective June 27, 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 Section 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, as defined in Section III.K. below, by any person who
has discretionary authority or renders investment advice with respect
to the assets of that Excluded Plan.1

\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 27, 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,
as defined in Section III.L., 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 shall not be considered to service
assets contained in a trust if it is merely a subservicer of that
trust;

\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 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 Section I.B.(1) or (2).
C. Effective June 27, 1994, the restrictions of sections 406(a),
(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

\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 the 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. below.
D. Effective June 27, 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 transaction 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 as described in section
3(14)(F), (G), (H) or (I) of the Act or section 4975(e)(2)(F), (G), (H)
or (I) of the Code), solely because of the plan's ownership of
certificates.

Section II--General Conditions

A. The relief provided under Section I is available only if the
following conditions are met:
(1) The acquisition of certificates by a plan is on terms
(including the certificate price) that are at least as favorable to the
plan as such terms 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 & Poors Corporation,
Moody's Investor Service,

[[Page 58653]]
Inc., Duff & Phelps Inc., or Fitch Investors Service, Inc.
(collectively, the Rating Agencies);
(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 or retained by the sponsor pursuant to the assignment of obligations
(or interest therein) to the trust represents not more than the fair
market value of such obligation (or interest); 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;
(7) To the extent that the pool of leases used to create a
portfolio for a trust is not closed at the time of the issuance of
certificates by the trust, additional leases may be added to the
portfolio for a period of no more than 15 consecutive months from the
cut-off date used for the initial allocation of leases that was made to
create such portfolio, provided that:
(a) all such additional leases meet the same terms and conditions
for eligibility as the original leases used to create the portfolio (as
described in the prospectus or private placement memorandum for such
certificates), which terms and conditions have been approved by the
Rating Agencies. Notwithstanding the foregoing, the terms and
conditions for an ``eligible lease'' (as defined in Section III.X
below) may be changed if such changes receive prior approval either by
a majority vote of the outstanding certificateholders or by the Rating
Agencies; and
(b) such additional leases do not result in the certificates
receiving a lower credit rating from the Rating Agencies, upon
termination of the period during which additional leases may be added
to the portfolio, than the rating that was obtained at the time of the
initial issuance of the certificates by the trust;
(8) Any additional period described in Section II.A.(7) shall be
described in the prospectus or private placement memorandum provided to
investing plans;
(9) The average annual percentage lease rate (the Average Lease
Rate) for the pool of leases in the portfolio for the trust, after the
additional period described in Section II.A.(7), shall not be more than
200 basis points greater than the Average Lease Rate for the original
pool of leases that was used to create such portfolio for the trust;
(10) For the duration of the additional period described in Section
II.A.(7), principal collections that are reinvested in additional
leases are first reinvested in the ``eligible lease contract'' (as
defined in Section III.X. below) with the earliest origination date,
then in the ``eligible lease contract'' with the next earliest
origination date, and so forth, beginning with any lease contracts that
have been reserved specifically for such purposes at the time of the
initial allocation of leases to the pool of leases used to create the
particular trust, but excluding those specific lease contracts reserved
for allocation to or allocated to other pools of leases used to create
other trusts; and
(11) The trustee of the trust is a substantial financial
institution or trust company experienced in trust activities and is
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, enforces 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, or
any obligor, unless it or any of its affiliates has discretionary
authority or renders investment advice with respect to the plan assets
used by a plan to acquire certificates, shall be denied the relief
provided under Section I, if the provision in Section II.A.(6) above is
not satisfied for the 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 shall be required to
make a written representation regarding compliance with the condition
set forth in Section II.A.(6).
C. World Omni and its Affiliates abide by all securities and other
laws applicable to any offering of interests in securitized assets,
such as certificates in a trust as described herein, including those
laws relating to disclosure of material litigation, investigations and
contingent liabilities.

Section III--Definitions

For purposes of this proposed 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
(except during the period described in Section II.A.(7), if any),
interest, and/or other payments made in connection with the assets of
such trust; or
(2) A certificate denominated as a debt instrument that is issued
by and is an obligation of a trust;
With respect to certificates defined in Section III.A. (1) and (2)
above, the underwriter shall be an entity which has received from the
Department an individual prohibited transaction exemption relating to
certificates which is substantially similar to this proposed exemption
(as noted below in Section III.C.) and shall be 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 proposed 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) Qualified motor vehicle leases (as defined in Section III.T.);
or
(b) Fractional undivided interests in a trust containing assets
described in paragraph (a) of this Section III.B.(1), where such
fractional interest is not subordinated to any other interest in the
same pool of qualified motor vehicle leases held by such trust; 4

\4\ It is the Department's view that the definition of
``Trust'' contained in Section III.B. includes a two-tier trust
structure under which certificates issued by the first trust, which
contains a pool of receivables described above, are transferred to a
second trust which issues certificates that are sold to plans.
However, the Department is of the further view that, since the
exemption provides relief for the direct or indirect acquisition or
disposition of certificates that are not subordinated, no relief
would be available if the certificates held by the second trust were
subordinated to the rights and interests evidenced by other
certificates issued by the first trust.

[[Page 58654]]

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(2) Property which has secured any of the obligations described in
Section III.B.(1);
(3) Undistributed cash or temporary investments made therewith
maturing no later than the next date on which distributions are to be
made to certificateholders, except during the period described in
Section II.A.(7) above when temporary investments are made until such
cash can be reinvested in additional leases described in paragraph (a)
of this Section III.B.(1); and
(4) Rights of the trustee under the pooling and servicing
agreement, and rights under motor vehicle dealer agreements, any
insurance policies, third-party guarantees, contracts of suretyship and
other credit support arrangements for any obligations described in
Section 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 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 categories by the Rating
Agencies 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 any investment banking firm that has
received an individual prohibited transaction exemption from the
Department that provides relief for so-called ``asset-backed''
securities that is substantially similar in format and structure to
this proposed exemption (the Underwriter Exemptions); 5 or any
person directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with such investment
banking firm; and any member of an underwriting syndicate or selling
group of which such firm or person described above is a manager or co-
manager with respect to the certificates.

\5\ For a current listing of the Underwriter Exemptions, see
Section V(h) of Prohibited Transaction Exemption (PTE) 95-60 (60 FR
35925, July 12, 1995).
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D. ``Sponsor'' means an entity, independent of World Omni or
affiliated with World Omni, that organizes a trust by depositing
obligations therein in exchange for certificates provided that, if such
entity is independent of World Omni, the servicer of the trust is an
affiliate of World Omni.
E. ``Master Servicer'' means World Omni or an entity affiliated
with World Omni 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 World Omni or an entity affiliated with
World Omni which, under the supervision of and on behalf of the master
servicer, services leases contained in the trust, but is not a party to
the pooling and servicing agreement.
G. ``Servicer'' means World Omni or an entity affiliated with World
Omni which services leases contained in the trust, including the master
servicer and any subservicer.
H. ``Trustee'' means an entity that is independent of World Omni
and its affiliates which is the trustee of the trust. In the case of
certificates which are denominated as debt instruments, ``trustee''
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. In
addition, a person is not an insurer if such person merely provides:
(1) Property damage or liability insurance to an Obligor with respect
to a lease or leased vehicle; or (2) property damage, excess liability
or contingent liability insurance to any lessor, sponsor or servicer,
if such entities are included in the same insurance policy, with
respect to a lease or leased vehicle.
J. ``Obligor'' means any person, other than the insurer, that is
obligated to make payments for a lease in the trust. For any qualified
motor vehicle leases contained in a trust as described herein,
``obligor'' shall include any owner of property subject to a lease
included in the trust, or subject to a lease securing an obligation 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 and at
the end of the period described in Section II.A.(7); 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 shall 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.
P. ``Sale'' includes the entrance into a forward delivery
commitment (as defined in Section III.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 proposed
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

[[Page 58655]]
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 for 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 shall not be reduced
by the amount of any such fee waived by the servicer.
T. ``Qualified Motor Vehicle Lease'' means a lease of a motor
vehicle where:
(1) The trust holds a security interest in the lease;
(2) The trust holds a security interest in the leased motor
vehicle; and
(3) The trust's security interest in the leased motor vehicle is at
least as protective of the trust's rights as the trust would receive
under a motor vehicle installment loan contract.
U. ``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.
V. ``Lease Rate'' means an implicit rate in each lease calculated
as an annual percentage rate on a constant yield basis, based on the
capitalized cost of the leased vehicle as determined under the
particular lease contract for the vehicle. With respect to the
determination of a ``Lease Rate'', each lease will provide for equal
monthly payments such that at the end of the lease contract term the
capitalized cost will have been amortized to an amount equal to the
residual value of the leased vehicle established at the time of
origination of such contract. The amount to which the capitalized cost
has been amortized at any point in time will be the outstanding
principal balance for the lease.
W. ``Average Lease Rate'' means the average annual percentage lease
rate, as defined in Section III.V. above, for all leases included at
any particular time in a portfolio used to create a trust from which
certificates are issued.
X. ``Eligible Lease'' or ``Eligible Lease Contract'' means a
Qualified Motor Vehicle Lease, as defined in Section III.T. above,
which meets the eligibility criteria established for, among other
things, the term of the lease, place of origination, date of
origination, and provisions for default, as described in the particular
prospectus or private placement memorandum for the certificates
provided to investors, if such terms and conditions have been approved
by the Rating Agencies prior to the issuance of such certificates.
The Department notes that this proposed exemption, if granted, will
be included within the meaning of the term ``Underwriter Exemption'' as
it is defined in Section V(h) of the Grant of the Class Exemption for
Certain Transactions Involving Insurance Company General Accounts,
which was published in the Federal Register on July 12, 1995 (see PTE
95-60, 60 FR 35925).

EFFECTIVE DATE: This proposed exemption, if granted, will be effective
for all transactions described herein which occurred on or after June
27, 1994.

Summary of Facts and Representations

1. World Omni Financial Corporation (World Omni) is a Florida
corporation which is a wholly-owned subsidiary of J.M. Family
Enterprises, Inc. (JMFE). JMFE also owns Southeast Toyota Distributors,
Inc., which is the exclusive distributor of Toyota cars and light duty
trucks in Alabama, Florida, Georgia, North Carolina and South Carolina
(the Five-State Area). World Omni provides consumer lease and
installment contract financing to retail customers of, and floorplan
financing to, automobile and light-duty truck dealers located primarily
in the Five-State Area.
World Omni Lease Securitization L.P. is a Delaware limited
partnership, the sole general partner of which is World Omni Lease
Securitization, Inc., a Delaware corporation that is a wholly-owned
subsidiary of World Omni, and the sole limited partner of which is
World Omni.
Auto Lease Finance L.P. is a Delaware limited partnership, the sole
general partner of which is Auto Lease Finance, Inc., a Delaware
corporation that is a wholly-owned subsidiary of World Omni, and the
sole limited partner of which is World Omni.
2. World Omni and its Affiliates, including World Omni Lease
Securitization, L.P., and Auto Lease Finance L.P., seek an exemption to
permit employee benefit plans to invest in certificates indirectly
representing undivided interests in a trust which contains motor
vehicle leases and the motor vehicles related to those leases. The
exemption World Omni seeks is substantially similar to the Underwriter
Exemptions granted by the Department to various broker-dealers and
banks to permit investments in, among other things, motor vehicle
receivable investment trusts. In the exemption sought by World Omni,
the primary asset of the trust in which investors have beneficial
interests (i.e. the Securitization Trust) is a special unit of
beneficial interest (SUBI) in a separate trust that actually holds the
motor vehicle leases and related motor vehicles (i.e. the Origination
Trust). The Underwriter Exemptions may also include such a two-tier
trust structure (as noted above in Footnote 5). However, unlike the
trusts described in the Underwriter Exemptions, the Origination Trusts
established by World Omni do not contain fixed pools of assets (i.e.
qualified motor vehicle leases and related motor vehicles) for at least
a year, as discussed further below. World Omni states that the
Securitization Trusts meet all other requirements of the Underwriter
Exemptions. Such requirements include: (i) That investor certificates
covered by the exemption have one of the three highest ratings from the
Rating Agencies; (ii) that there be no subordination of investor
certificates purchased by employee benefit plans to the rights and
interests evidenced by other certificates of the same trust; and (iii)
that there be a pass-through of principal, interest and other payments
received by the trust relating to the receivables beneficially owned by
the trust, less certain specified servicing fees which are disclosed
and approved by the investors prior to the acquisition of any trust
certificates.
3. The Origination Trust is formed pursuant to a trust agreement
between the sponsor of the Origination Trust and its trustee (the
Origination Trustee). The sponsor of the Origination Trust is generally
a wholly-owned subsidiary of World Omni (or a limited partnership in
which such a wholly-owned subsidiary is the sole general partner), but
could be an entity independent of World Omni and its affiliates. The
Origination Trustee is a wholly-owned subsidiary of an independent
entity qualified to provide trust services, and in fact

[[Page 58656]]
provides such services to the Origination Trust under contract with its
subsidiary (i.e. the Trust Agent). Currently, the Trust Agent is Bank
of America Illinois (Bank of America). Bank of America is not
affiliated in any way with World Omni, other than as a service
provider. World Omni or an affiliate acts as servicer (the Servicer)
for all of the leases and leased vehicles owned by the Origination
Trust, pursuant to a servicing agreement with the Origination Trustee
(the Servicing Agreement).
4. The assets of the Origination Trust include retail closed-end
automobile and light-duty truck lease contracts assigned to the
Origination Trust by dealers in the World Omni family, the automobiles
and light duty trucks relating thereto, all proceeds thereof (including
any sale of such vehicles), and payments made under certain insurance
policies relating to such leases or the related lessees or leased
vehicles. World Omni is the initial holder of a sole beneficial
interest (i.e. the ``Undivided Trust Interest'' or ``UTI'') in the
Origination Trust.
The Origination Trusts are open-ended; that is, as leases are
originated, they and the related vehicles are assigned to the
Origination Trust by World Omni. When the aggregate dollar amount of
leases and leased vehicles in the Origination Trust grows large enough
to justify a securitization, World Omni, as holder of the UTI, may
direct the trustee of the Origination Trust to segregate from among all
the leases and leased vehicles within the Origination Trust a specified
portfolio of leases and related leased vehicles. The trustee then
issues to World Omni a separate certificate representing a ``Separate
Unit of Beneficial Interest'' or ``SUBI'' in that segregated portfolio.
It is this SUBI that becomes the basis for a securitization and the
creation of a separate Securitization Trust.
Any leases and leased vehicles held by the Origination Trust that
are not included in a SUBI portfolio at the time of such segregation,
as well as any new leases and related vehicles acquired subsequent to
the ``cut-off date'' on which the new SUBI portfolio is identified,
remain part of the UTI portfolio, and the original UTI continues to
represent a beneficial interest therein.
New leases and related leased vehicles are added to the SUBI's
segregated portfolio by World Omni in an aggregate amount approximately
equal to principal collections on the leases and leased vehicles
already allocated to the SUBI,6 for a fixed period (which will be
no more than fifteen consecutive months) after the cut-off date used
for the initial allocation of leases made to create the SUBI. (This
period is referred to hereafter as the ``revolving period''). The
applicant represents that this fixed ``revolving period'' for principal
collections on the leases and leased vehicles is established so that
the investor certificates issued by the Securitization Trust are
treated as debt for Federal and state income tax purposes, but does not
affect the characterization of those certificates as beneficial
interests in the Securitization Trust property for accounting and other
state law purposes.

\6\ World Omni represents that the aggregate amount of new
leases added to a SUBI portfolio is approximately equal, rather than
exactly equal, to principal collections on the existing leases
because, when additional leases are added, the outstanding principal
balance of the new leases is not always equal to the principal
collections available for reinvestment. The uninvested principal
amounts are held by the Securitization Trust in a cash account and
temporarily invested in short-term investments, with interest
thereon accruing to the Securitization Trust, until such amounts can
be reinvested in additional leases for the SUBI portfolio. World
Omni states that any uninvested principal amounts, and interest on
such amounts, held by the Securitization Trust are distributed to
the certificateholders once principal payments on the leases in the
SUBI portfolio are passed-through to investors.
---------------------------------------------------------------------------

After the ``revolving period'', the pool of leases and leased
vehicles allocated to the SUBI (i.e. the SUBI portfolio) remains fixed.
Any leases which are added to the SUBI portfolio during the ``revolving
period'' must meet the same terms and conditions for eligibility as the
original leases in the portfolio, as described in the prospectus or
private placement memorandum, which terms and conditions have been
approved by the Rating Agencies prior to the ``revolving period''.
However, World Omni states that the terms and conditions for an
``eligible lease'' (as defined in Section III.X above) may be changed
if such changes receive prior approval either by a majority vote of the
outstanding certificateholders or by the Rating Agencies. Further,
under the conditions of the proposed exemption, World Omni must ensure
that the additional leases added to the SUBI portfolio do not result in
the certificates receiving a lower credit rating from the Rating
Agencies at the end of the ``revolving period'' than the rating that
was obtained at the time of the initial issuance of the certificates by
the trust (see Section II.A.(7)(b) above).
World Omni states that for the duration of the ``revolving
period'', principal collections that are reinvested in additional
leases are first reinvested in the ``eligible lease contract'' (as
defined in Section III.X. above) with the earliest origination date,
then in the ``eligible lease contract'' with the next earliest
origination date, and so forth (i.e. on a ``FIFO basis), beginning with
any lease contracts that have been reserved by World Omni specifically
for such purposes at the time of the initial allocation of leases to
the particular SUBI portfolio. However, those lease contracts reserved
for allocation to, or actually allocated to, other pools of leases
(i.e. other SUBI portfolios used to create different trusts) will be
excluded from the available additional leases to be added to the
particular SUBI portfolio. World Omni states that no adverse selection
procedures may be employed in selecting leases during the ``revolving
period''. Thus, World Omni represents that it will not be able to
manipulate the order in which leases are added to a particular SUBI
portfolio during the ``revolving period'' in order to improve its
economic position with respect to the assets held in a particular SUBI
portfolio. World Omni states further that at all times there will be a
clear identification within the Origination Trust of which leases and
leased vehicles belong in each SUBI portfolio and which belong in the
UTI or ``residual'' portfolio. The holders of beneficial interests in
each SUBI have also agreed in writing to rely solely upon the assets
contained within their respective portfolios to satisfy any payment
obligations.
This ``revolving period'' arrangement differs from the Underwriter
Exemptions wherein each trust contains a ``fixed pool'' of assets and
substitution of receivables by the trust sponsor is permitted only in
the event of defects in documentation discovered within a limited time
after the issuance of trust certificates. The applicant states that in
the present case, during the ``revolving period'', the outstanding
principal balance of the SUBI's portfolio of leases remains unchanged
and the certificateholders receive only interest payments with respect
to their certificates. Once the ``revolving period'' ends, principal
payments are no longer reinvested but rather are paid out to
certificateholders.
To the extent that leases added to the SUBI portfolio during the
``revolving period'' have a higher Lease Rate (as defined in Section
III.V. above) than do the original leases in the SUBI portfolio at the
time of the initial offering of the certificates to investors, total
returns on the ultimate lease pool in excess of that promised to
investors on the trust certificates may inure to affiliates of the
Servicer. However, the applicant states

[[Page 58657]]
that the Average Lease Rate (as defined in Section III.W. above) for
the pool of leases allocated to a SUBI portfolio owned by a particular
Securitization Trust, after accounting for all the leases added to the
SUBI portfolio during the ``revolving period'', shall not be more than
200 basis points (i.e. 2 percent) greater than the Average Lease Rate
for the leases in the SUBI portfolio on the cut-off date used for the
initial allocation of leases to the SUBI portfolio owned by the
Securitization Trust.
The Average Lease Rate for the leases in the trust at the time of
the initial offering of the certificates is described in the prospectus
or offering memorandum provided to investors. The applicant represents
that changes to the Average Lease Rate based on new leases added to a
trust during the ``revolving period'' depend on current interest rates
and market conditions as well as the amount of lessee prepayments and
repossessions on the leased vehicles. Thus, potential plan investors at
the time of the initial offering of trust certificates know the total
dollar amount of leases in the trust, the Average Lease Rate on those
leases, the fact that principal received by the trust during the
``revolving period'' is used to invest in additional leases, and the
length of the ``revolving period''. Under the terms of the proposed
exemption, potential plan investors shall also be provided with a
statement disclosing the fact that the relief provided by the exemption
shall be available to the Servicer and its affiliates only if the
additional leases do not cause the Average Lease Rate for the leases in
the pool after the ``revolving period'' to increase by more than 200
basis points.
5. Pursuant to a supplement to the Origination Trust Agreement and
a supplement to the Servicing Agreement, World Omni, acting as Servicer
on behalf of the Origination Trustee, selects the assets to be
represented by each SUBI (as discussed above). Certificates
representing the entire beneficial interest in each SUBI are issued to
the sponsor of the Securitization Trust. The sponsor is usually a
wholly-owned subsidiary of World Omni (or a partnership in which such a
subsidiary is the sole general partner), but in some cases could be an
entity that is independent of World Omni and its affiliates provided
that World Omni or an affiliate acts as the Servicer of the trust. The
sponsor creates the Securitization Trust and transfers a certificate
representing approximately a 99.8 percent beneficial interest in the
SUBI to the Securitization Trust, pursuant to a trust agreement between
the sponsor and the trustee of the Securitization Trust (the
Securitization Trustee).7 The Securitization Trustee is an
unrelated commercial institution with trust powers, meeting certain
specified requirements. Currently, the trustee of the Securitization
Trusts is the Bank of America. In addition, pursuant to the
Securitization Trust agreement, the Securitization Trust issues to its
sponsor investor certificates representing fractional undivided
interests in the assets of the Securitization Trust (i.e. the 99.8
percent interest in the SUBI, which itself represents a beneficial
interest in a portfolio of motor vehicle leases and related leased
motor vehicles held by the Origination Trust).

\7\ World Omni or an affiliate retains a de minimis interest in
each SUBI portfolio which represents a subordinated interest in the
portfolio, under requirements established by the Rating Agencies, in
order to meet certain Federal tax code objectives.
---------------------------------------------------------------------------

6. The sponsor of the Securitization Trust sells approximately 96
percent of the certificates to various outside investors, including
employee benefit plans subject to the Act. World Omni retains a
subordinated interest in the Securitization Trust of approximately 4
percent, as required by the Rating Agencies, so that unanticipated
losses with the SUBI portfolio will first by borne by World Omni. With
respect to the certificates sold to outside investors, there may be two
or more classes of securities. The investor certificates are either
publicly or privately offered. In the public lease securitizations
completed by World Omni thus far, approximately 92.5 percent of the
certificates were sold to investors publicly and approximately 3.5
percent of the certificates were sold to investors privately. The
public investor certificates had a AAA/Aaa rating from the Rating
Agencies. The private investor certificates had a single ``A'' rating
from the Rating Agencies because such certificates were subordinated to
the public investor certificates.8 Except under rare
circumstances, physical certificates are not issued to investors in a
public senior class of certificates. Instead, the Securitization Trust
uses a book entry registration system through the Depository Trust
Company (DTC), a limited-purpose trust company organized under New York
law, which is a member of the Federal Reserve system, and a clearing
agency under Section 17A of the Securities Exchange Act of 1934.

\8\ The applicant is not requesting an exemption for the
purchase of any subordinated class of certificates by employee
benefit plans. However, the applicant is requesting relief for
prohibited transactions that may occur as a result of the
investments in a trust made by an insurance company's general
account which are considered to be ``plan assets'' under the recent
U.S. Supreme Court decision in John Hancock Mutual Life Insurance
Co. v. Harris Trust & Savings Bank, 114 S.Ct. 517 (1993) (Harris
Trust). As a result of the decision in Harris Trust and the
Department's plan assets regulation (see 29 CFR 2510.3-101), an
insurance company investing general account assets could be viewed
as a ``benefit plan investor'' for purposes of calculating the 25
percent significant participation test in section 2510.3- 101(f)(1)
of the regulation.
The Department notes that Section III of the Class Exemption for
Certain Transactions Involving Insurance Company General Accounts
(PTE 95-60, 60 FR 35925, July 12, 1995) provides an exemption for
transactions in connection with the operation of asset pool
investment trusts notwithstanding that the certificates acquired by
the general account are subordinated to the rights and interests
evidenced by other certificates of the same trust. In this regard,
the Department has included a paragraph at the end of the operative
language of the proposed exemption which states that this exemption,
if granted, will be included within the definition of the term
``Underwriter Exemption'' under Section V(h) of PTE 95-60.
Therefore, the exemptive relief provided by PTE 95-60 will be
available for subordinated investments in a trust described herein
by insurance company general accounts.
---------------------------------------------------------------------------

Investors are entitled to receive monthly payments of interest at a
fixed certificate rate, and after the ``revolving period'' described
above, payments of principal. Principal payments are based on the
decline in the value of the pool of leases and vehicles allocated to
each SUBI, based on certain standard depreciation schedules for the
related motor vehicles. All net collections collected for the assets
underlying each SUBI, including all net proceeds from the sale of a
vehicle upon repossession, early lease termination or maturity of the
related lease, are available to make payments on the investor
certificates.
The price of the investor certificates, both in the initial
offering and in the secondary market, is affected by market forces
including investor demand and the Average Lease Rate for the leases
allocated to the particular SUBI. The applicant states that the Average
Lease Rate generally is determined by the same market forces that
determine the price of the investor certificates. Certificate interest
rates are set at the time of the pricing of each securitization. While
the Average Lease Rate for the particular lease portfolio is a factor
in the interest rates a Securitization Trust will be able to pay, the
actual interest rate set for the certificates issued is determined by a
combination of additional factors. Specifically, these factors include:
(a) the then-current yields on U.S. Treasury Notes with a remaining
term equivalent to the anticipated average life of the particular
Securitization Trust, and (b) the then-current ``spreads'' on
similarly-rated competitive investments available in the marketplace,
as determined by

[[Page 58658]]
the Rating Agencies. Once the certificate rate is set for the
certificates issued by the Securitization Trust, that rate remains
fixed for its duration, regardless of any changes to the Average Lease
Rate of the SUBI portfolio occurring during the ``revolving period''.
The price of an investor certificate and the certificate rate together
determine the yield to investors. If an investor purchases a
certificate at less than par, that discount augments the certificate
rate; conversely, a certificate purchased at a premium yields less than
the stated coupon.
7. The origination of the leases held by the Origination Trust
begins with World Omni, which enters into arrangements with its network
of dealers allowing it to cause the assignment of leases and related
vehicles originated by those dealers either directly to World Omni or
to any other specified entity, including the Origination Trust. Once
assigned to the Origination Trust for ultimate inclusion in a portfolio
of SUBI assets for securitization as described above, this mechanism
enables World Omni to go to the capital markets directly for financing
and thereby enhance its leasing capacity without outside financing.
World Omni and/or one or more wholly-owned subsidiaries of World
Omni, or partnerships in which such a wholly-owned subsidiary is the
sole general partner, are responsible for creating each SUBI, creating
the Origination Trust and each Securitization Trust, and designating
the Trust Agent and the Securitization Trustee.
The Trust Agent, its subsidiary the Origination Trustee, and the
Securitization Trustee, are each independent entities, unrelated to
World Omni, the underwriter or placement agent. The Origination Trustee
is the legal owner of the motor vehicle leases and related leased motor
vehicles allocated to a SUBI. The Securitization Trustee is the legal
owner of the obligations in the Securitization Trust and is responsible
for enforcing all the rights created thereby in favor of
certificateholders, whether independently or through the Origination
Trustee. The applicant represents that each Securitization Trustee and
Trust Agent are substantial financial institutions or trust companies
experienced in trust activities. The Trust Agent and Securitization
Trustee receive a fee for their services, which is paid out of assets
of the Origination Trust or the Securitization Trust, as applicable.
The method of compensating each for its service related to a SUBI is
specified in the Origination Trust Agreement or Securitization Trust
Agreement, as applicable, and disclosed in the prospectus or private
placement memorandum relating to the offering of the investor
certificates.
8. The Servicer administers the leases on behalf of the beneficial
owners of the Origination Trust, including the holders of SUBI
certificates and, indirectly, the holders of the investor certificates.
The Servicer's functions involve monitoring of leases, maintenance of
records, institution of proceedings in the event of default, and sale
of vehicles after lease maturity, as well as certain functions relating
to the qualifications and permits required to be obtained by the
Origination Trustee.9 The Servicer, the sponsor of the Origination
Trust, and the sponsor of the Securitization Trust are unrelated to the
underwriter and to DTC. DTC has public senior investor certificates
registered in its name (or that of its nominee) and maintains
procedures for the distribution of notices, reports, distributions and
statements to certificateholders.

\9\ World Omni states that these functions are necessary since,
as noted in Paragraph 4 above, the Origination Trust is the owner
of, and holds title to, the vehicle unless the lessee chooses to
purchase such vehicle under the terms of the lease.
---------------------------------------------------------------------------

As compensation for performing its servicing duties for the
Origination Trust, the Servicer is paid a fee equal to a specified
percentage (usually no more than one percent) of the balance of the
leases it services, including those leases allocated to the SUBI. The
Servicer may receive additional compensation related to the SUBI in the
form of interest on various accounts of the Origination Trust and/or
the Securitization Trust containing proceeds of the leases and related
leased motor vehicles allocated to each SUBI as well as interest on
certain cash deposits. The Servicer is required to pay the
administrative expenses of servicing the Origination Trust out of its
servicing compensation.
The Servicer is also compensated to the extent it may provide
credit enhancement to the Securitization Trust or otherwise arranges to
obtain credit support from another party. This ``credit support fee''
may be aggregated with other servicing fees, and may be either paid out
of the income received on the leases in excess of the certificate rate
or paid in a lump sum at the time the Securitization Trust is
established. The Servicer may be entitled to retain certain
administrative fees paid by a third party, usually the obligor under a
lease, provided that such fees are ``qualified administrative fees'' as
defined under Section III.S. These administrative fees fall into three
categories: (a) prepayment processing fees; (b) late payment fees; and
(c) fees and charges associated with the purchase of a leased vehicle
by an obligor as well as any repossession of such vehicle, or other
conversion of a secured position into cash proceeds, upon default of an
obligation.
Payments on leases may be made by lessees to the Servicer at
various times during the period preceding any date on which payments to
the Origination Trust are due. In some cases, the Servicing Agreement
may permit the Servicer to place these payments in non-interest bearing
accounts in itself or to commingle such payments with its own funds
prior to the distribution dates. In these cases, the Servicer would be
entitled to the benefit derived from the use of the funds between the
date of payment on a lease and the date payment is due to the
Origination Trust. Commingled payments may not be protected from the
creditors of the Servicer in the event of the Servicer's bankruptcy or
receivership. In those instances when payments on leases are held in
non-interest bearing accounts or are commingled with the Servicer's own
funds, the Servicer is required to deposit these payments into an
Origination Trust account by a date specified in the Servicing
Agreement.
All compensation payable to the Servicer with regard to the leases
allocated to a SUBI is set forth or referred to in the Servicing
Agreement, and described in reasonable detail in the prospectus or
private placement memorandum relating to the investor certificates.
9. Participating underwriters or placement agents receive a fee in
connection with the securities underwriting or private placement of
investor certificates. In a firm commitment underwriting, this fee
would consist of the difference between what such underwriter receives
for the certificates that it distributes and what it pays the sponsor
of the Securitization Trust for those certificates.10 In a private
placement, the fee normally takes the form of an agency commission paid
by the sponsor of the Securitization Trust.

\10\ World Omni represents that a ``best efforts'' underwriting
would not ordinarily be used for the investor certificates because
of their high credit ratings.
---------------------------------------------------------------------------

The arrangements among underwriters typically are set forth in an
``Agreement Among Underwriters'', which gives the managing underwriter,
as lead manager of the offer, the authority to act on behalf of all the
underwriters. This agreement also

[[Page 58659]]
imposes customary restrictions on the underwriters' dealings in the
offered securities as are necessary to comply with securities laws and
to ensure the orderly distribution of the offered securities.
10. The applicant represents that as the principal amount of the
leases allocated to a SUBI is reduced by payments thereon and
recoveries on the disposition of leased vehicles, the cost of
separately administering the assets allocated to that SUBI generally
increases, making the servicing of those assets prohibitively expensive
at some point. Consequently, the Securitization Trust Agreement
generally provides that the sponsor of the Securitization Trust may
repurchase the 99 percent interest in the SUBI when the aggregate
principal balance of the investor certificates is reduced to a
specified percentage (usually between 5 and 10 percent) of the initial
aggregate investor certificate balance. The terms of such repurchase
are specified therein and are at least equal to the unpaid principal
balance on the investor certificates plus accrued interest. The
supplement to the Origination Trust Agreement generally provides that
upon such a repurchase of the Securitization Trust's interest in the
SUBI by its sponsor, the Origination Trust may repurchase the entire
SUBI from the sponsor and thereby terminate the SUBI. The terms of such
repurchase are specified therein and generally are at least equal to
the value of the pool of leases and leased vehicles allocated to the
SUBI.
11. The senior class of investor certificates must receive one of
the three highest ratings available from the Rating Agencies. Insurance
or other credit support is obtained by the sponsor of the
Securitization Trust or the Origination Trust to the extent necessary
for the certificates to attain the desired rating. The amount of this
credit support is set by the Rating Agencies at a level expected to be
a multiple of the worst historical net credit loss experience for
leases of automobiles and light-duty trucks such as those allocated to
the SUBI.
World Omni states that the Rating Agencies, before granting AAA/Aaa
ratings for the publicly issued securitization certificates, review the
underlying portfolio of assets securing payment to the investors to
determine, among other things, if (a) The principal value of the assets
is sufficiently greater than the aggregate face amount of the investor
certificates as to provide protection against defaults or losses, and
(b) there is a sufficient ``spread'' between the overall yield, based
on the Average Lease Rate, being earned on the portfolio and the
certificate rate to cover servicing costs, expenses and losses. In the
case of World Omni's current public securitizations of leases, the
Rating Agencies have required that (i) The face value of public
investor senior certificates not exceed 92.5 percent of the principal
value of the underlying assets, and (ii) the ``spread'' (after the
discounting procedure described below) between the overall yield, based
on the Average Lease Rate, of the SUBI portfolio and the certificate
rate be approximately 200 basis points. Thus, for example, a SUBI
portfolio with a principal value of $100,000,000 would support the
issuance of certificates with a face value of only $92,500,000, and a
certificate rate of 6 percent per annum would require an overall yield,
based on the Average Lease Rate, for that SUBI portfolio of
approximately 8 percent per annum. World Omni states that the Rating
Agencies will always require a specific ``spread'' between the
certificate rate and the overall yield for leases in the particular
SUBI portfolio before providing their initial credit ratings for the
certificates. World Omni must maintain this ``spread'' when leases are
added to the SUBI portfolio during the ``revolving period'' or risk a
lower credit rating for the certificates (see Section II.A.(7)(b)
above).
For purposes of the securitization described above, World Omni
represents that each individual lease should yield a rate of return,
based on the Lease Rate (as defined in Section III.V. above), which is
at least equal to the certificate rate plus approximately 200 basis
points. However, where the spread required by the Rating Agencies is
not met as to any lease based solely on the Lease Rate, the Rating
Agencies require that World Omni ``discount'' the principal value of
that lease so that such lease is treated as having a ``net investment
value'' less than its actual outstanding principal balance. In such
instances, the lease is discounted to a level at which the actual lease
charges to be collected under the lease (including expected principal
payments) would yield, on a percentage basis, an overall rate of return
which exceeds the certificate rate by the amount specified by the
Rating Agencies. Thus, for each individual lease included in a
securitization, its principal value is either: (a) Its outstanding
principal balance, if its Lease Rate is equal to or greater than the
``spread'' required by the Rating Agencies; or (b) its discounted net
investment value, if its Lease Rate is less than the ``spread'' so
required.11 World Omni states that the use of discounted aggregate
net investment values in measuring the ratio of certificate face values
to the discounted principal balance of the SUBI portfolio can only
further assure that investors are paid interest and principal on their
certificates on a timely basis.

\11\ For example, if the certificate rate for a transaction were
8 percent, then, in determining the aggregate face value amount of
certificates that could be issued with respect to a given SUBI
portfolio, World Omni could include each lease with a Lease Rate of
10 percent or more at its current outstanding principal balance
without any discounting. However, if the portfolio included
individual leases each with outstanding principal balances of
$20,000 and Lease Rates of only 5 percent, then World Omni would
have to ``discount'' the value of each such lease for purposes of
the securitization to a low enough net investment value
(approximately $18,000) so that the same overall monthly lease
payment for each lease would now yield a Lease Rate of 10 percent.
World Omni notes that any ``discounting'' of leases added to the
SUBI portfolio during the ``revolving period'' will result in more
leases being added to the portfolio in order to maintain a constant
outstanding principal balance during such period. Thus, when
interest rates used to determine the Lease Rate for leases added to
a SUBI portfolio are declining, the ``discounting'' of leases adds
more ``collateral'' to secure payments of the certificate rate.
---------------------------------------------------------------------------

12. In some cases, the Servicer may provide temporary or permanent
credit support to the trust (i.e. act as an insurer). As a temporary
provider of credit support, the Servicer typically would advance funds
to the full extent that it determines that such advances are
recoverable (a) Out of late payments by the lessees, (b) from a
permanent credit support provider (which may be itself) or, (c) in the
case of a trust that issues subordinated certificates, from amounts
otherwise distributable to holders of subordinated certificates. The
Servicer would advance such funds in a timely manner. When the Servicer
temporarily advances funds, the amount so advanced is recoverable by
the Servicer out of future payments on or for leases or leased vehicles
allocated to the SUBI to the extent that such amounts are not covered
by the other sources described above, including payments from a
permanent credit support provider.
In some cases, the Servicer may be called upon to provide permanent
credit support in the form of funds to cover defaulted payments to the
full extent of its obligations as insurer. When the Servicer is the
provider of permanent credit support and provides its own funds to
cover defaulted payments, it does so either on the initiative of the
Origination Trustee or Securitization Trustee, or on its own initiative
on behalf of such trustees. The applicant states that in either event
the Servicer

[[Page 58660]]
provides such funds to cover payments to the full extent of its
obligations under the credit support mechanism. If the Servicer fails
to advance funds, fails to call upon a credit support mechanism to
provide funds to cover defaulted payments, or otherwise fails in its
duties, the Securitization Trustee would be required to enforce the
investor certificateholders' rights, in its capacity as a third-party
beneficiary of the Servicing Agreement, as owner of the estate of the
Securitization Trust, and as an indirect beneficial owner of the
Origination Trust assets allocated to a SUBI (including rights under
any credit support mechanism). Therefore, the Securitization Trustee,
who is independent of the Servicer, ultimately has the right to enforce
any credit support arrangement.
13. The applicant represents that there are protections in place to
guard against a delay in calling upon the credit support to take
advantage of the fact that the credit support declines proportionally
with the decrease in the principal amount of the leases allocated to a
SUBI as payments for these leases and the related vehicles are used to
make payments to the Securitization Trust, as holder of an interest in
the SUBI, and then to investors. These safeguards include the
following:
(a) There is a disincentive to postponing credit losses because the
sooner repossession or sale activities are commenced, the more value
generally will be realized on the leased vehicle.
(b) The Servicer has servicing guidelines which include a general
policy as to the allowable delinquency period after which a lessee's
obligations ordinarily are deemed uncollectible. The Servicing
Agreement requires the Servicer to follow its normal servicing
guidelines. In addition, a supplement to the Servicing Agreement sets
forth the Servicer's general policy as to the period of time after
which delinquent obligations ordinarily will be considered
uncollectible.
(c) As frequently as payments are due on the investor certificates
(monthly, quarterly or semi-annually, as set forth in the
Securitization Trust Agreement), the Servicer is required to report to
the Securitization Trustee the amount of all past-due payments and the
amount of all Servicer advances, along with other current information
as to collections on the leases, recoveries on the related leased
vehicles, and draws upon the credit support. Further, the Servicer is
required to deliver to the trustee annually a certificate from an
executive officer of the Servicer stating that a review of the
servicing activities has been made under such officer's supervision,
and either stating that the Servicer has fulfilled all of its
obligations under the Servicing Agreement or, if the Servicer has
defaulted under any of its obligations, specifying any such default.
The Servicer's reports are reviewed at least annually by independent
accountants to ensure that the Servicer is following its normal
servicing standards and that the reports conform to the Servicer's
internal account records. The results of the independent accountants'
review are delivered to the Securitization Trustee.
(d) In cases where the Servicer and an insurer providing credit
support are affiliated or are the same entity, the credit support has a
``floor'' dollar amount that protects investors against the possibility
that a large number of credit losses might occur towards the end of the
life of the SUBI, whether due to Servicer advances or any other cause.
The floor amount may be a fixed dollar amount or a multiple of the
balance of one or more of the largest obligations outstanding. Once the
floor amount has been reached, the Servicer lacks an incentive to
postpone the recognition of credit losses because the credit support
amount becomes a fixed dollar amount, subject to reduction only for
actual draws on such amount. From the time that the floor amount is
effective until the end of the life of the trust, there are no
proportionate reductions in the credit support amount caused by
reductions in the principal balance of the leases allocated to the
SUBI. The applicant states that where the floor is a fixed dollar
amount, the amount of credit support ordinarily would increase as a
percentage of the principal balance during the period that the floor is
in effect.
14. In connection with the original issuance of investor
certificates, a prospectus or private placement memorandum is furnished
to investing plans. The prospectus or private placement memorandum
contains information material to a plan fiduciary's decision to invest
in the certificates, including:
(a) Information concerning the payment terms of the certificates,
the rating of the certificates, and any material risk factors with
respect to the certificates;
(b) A description of the Origination Trust and Securitization Trust
as legal entities and a description of how they were formed by their
respective sponsors;
(c) Identification of the Trust Agent, Origination Trustee and
Securitization Trustee;
(d) A description of the leases and related leased vehicles
allocated to each SUBI, including the diversification of the leases and
vehicles, the principal terms of the leases, and their material legal
aspects;
(e) A description of the sponsors of the Origination Trust and the
Securitization Trust, and of the Servicer;
(f) A description of the servicing arrangements set forth in the
Servicing Agreement, and the agreements governing the Origination Trust
and the Securitization Trust, including a description of the Servicer's
principal representations and warranties as to the leases and leased
vehicles allocated to each SUBI and the remedies for any breach
thereof;
(g) A description of the procedures for collection of payments on
or for leases and related leased vehicles and for making distributions
to the Securitization Trust, as holder of an interest in the SUBI, and
then to investor certificateholders, and a description of the accounts
into which such payments are deposited and from which such
distributions are made;
(h) Identification of the servicing compensation and any fees for
credit support that are deducted from payments on or for leases or
related leased vehicles before distributions are made to investors;
(i) A description of periodic statements provided to the
Securitization Trustee, and such statements that are provided or made
available to investors by the Securitization Trustee;
(j) A description of the events that constitute events of default
under the Servicing Agreement and a description of the Securitization
Trustee's and the investors' remedies;
(k) A description of any credit support;
(l) A general discussion of the principal Federal income tax
consequences of the purchase, ownership and disposition of the investor
certificates by a typical investor;
(m) A description of the underwriters' plan for distributing the
certificates to investors; and
(n) Information about the scope and nature of the secondary market
for the certificates.
Reports indicating the amount of payments of principal and interest
are provided to investors at least as frequently as distributions are
made to investors. Investors are also provided with periodic
information statements setting forth material information concerning
the leases and related vehicles allocated to each SUBI, including
information as to the amount

[[Page 58661]]
and number of delinquent and defaulted leases.
15. In the case of the offer and sale of investor certificates in a
registered public offering, the Securitization Trustee, the Servicer or
the sponsor of the Securitization Trust will file periodic reports as
required by the Securities Exchange Act of 1934 (the 1934 Act).
Although some trusts that offer certificates in a public offering file
quarterly reports on Form 10-Q and Annual Reports on Form 10-K, many
trusts obtain, by application to the Securities and Exchange Commission
(SEC), a complete exemption from the requirement to file quarterly
reports on Form 10-Q and a modification of the disclosure requirements
for annual reports on Form 10-K. If such an exemption is obtained or
available for the Securitization Trust, it normally would continue to
have the obligation to file current reports on Form 8-K to report
material developments concerning the Securitization Trust and the
investor certificates. World Omni states that while the SEC's
interpretation of the periodic reporting requirements is subject to
change, periodic reports concerning the Securitization Trust shall be
filed to the extent required under the 1934 Act.
At the time distributions are made to certificateholders, a report
is delivered to the trustee as to the status of the Securitization
Trust and each SUBI, including the assets allocated to the SUBI. Such
report contains information regarding, among other things, the leases
and related vehicles allocated to the SUBI, payments received or
collected by the Servicer, the amount of prepayments, delinquencies,
Servicer advances, defaults and foreclosures, the amount of any
payments made pursuant to any credit support, and the amount of
compensation payable to the Servicer. Such report is also delivered to
or made available to the Rating Agency or Agencies that have rated the
investor certificates. A statement based on this report is also
provided to certificateholders either by the Securitization Trustee,
the Servicer, or DTC as depository of the investor certificates,
including a summary statement regarding the Securitization Trust and
the assets allocated to the SUBI. The statement contains information
regarding payments and prepayments, delinquencies, the remaining amount
of credit support, a breakdown of payments between principal and
interest and other information concerning the leases and leased
vehicles allocated to the SUBI.
With respect to payments on the certificates, World Omni states
that such payments are legally obligated to be made by the
Securitization Trustee to DTC, the record owner of the certificates.
World Omni represents that DTC makes payments to the beneficial owners
of the certificates as required by New York Stock Exchange Regulations,
SEC Regulations and the rules of the U.S. Federal Reserve Board.
16. In general, it is the policy of many underwriters to make a
market for securities for which they are the lead or co-managing
underwriter. It is also the policy of many placement agents to
facilitate sales by investors who purchase certificates if the
placement agent has acted as a principal or agent in the original
private placement of the certificates and if the investors request the
placement agent's assistance. In this regard, the applicant states that
many underwriters have made a secondary market in certificates
sponsored by World Omni and its Affiliates and that the wide range of
investors involved have made such certificates fairly liquid
investments.\12\

\12\ The Department notes that on April 3, 1995, World Omni and
a number of respondents involving some 55 Toyota dealers (the Toyota
Dealers) entered into an agreement with the State of Florida (the
Agreement) following an investigation by the State. The
investigation apparently resulted from allegations by Florida
consumers of unfair trade practices by various Florida dealers,
including but not limited to certain Toyota Dealers. Under the terms
of the Agreement, a restitution fund of up to $4.5 million (the
Restitution Fund) was created for consumers in connection with
certain leases originated by the Toyota Dealers from January 1, 1989
through December 31, 1994. Initial ``advance'' payments into the
Restitution Fund were made by an affiliate of World Omni. However,
the Toyota Dealers ultimately will be responsible for most of the
restitution payments made to consumers.
World Omni and its Affiliates represent that they will abide by
all securities and other laws applicable to any offering of
interests in securitized assets, such as certificates in a trust as
described herein, including those laws relating to disclosure of
material litigation, investigations and contingent liabilities.
World Omni represents that the Agreement did not require any
payment from or adjustment to any assets of a Securitization Trust
and, according to the applicant, is not material to World Omni as
Servicer or to any such trust.
---------------------------------------------------------------------------

17. World Omni has requested that the relief proposed herein be
made retroactive to June 27, 1994, which is the date upon which World
Omni states that the conditions of this proposed exemption were
satisfied. World Omni does not believe that it has engaged in any
prohibited transactions that would be covered by the requested
exemption. However, since June 27, 1994, it is possible that some
transactions may have occurred that would be prohibited. For example,
because many certificates are held in street or nominee name, the
applicant states that it is not always possible to identify whether the
percentage interest of plans in a trust is or is not ``significant''
for purposes of the Department's ``plan asset'' regulation (see 29 CFR
2510.3-101(f)). These problems are compounded as transactions occur in
the secondary market. In addition, with respect to the ``publicly-
offered security'' exception contained in that regulation (29 CFR
2510.3-101(b)), the applicant states that it is difficult to determine
whether each purchaser of a certificate is independent of all other
purchasers. Thus, World Omni requests an exemption which would provide
the relief described herein as of June 27, 1994.
18. In summary, the applicant represents that the transactions for
which exemptive relief is requested satisfy the statutory criteria of
section 408(a) of the Act because:
(a) The Securitization Trust holds an interest in a SUBI, which
generally represents a ``fixed pool'' of leases and related leased
vehicles, other than the obligation to reinvest principal collections
on the leases and leased vehicles in additional qualifying leases and
leased vehicles during a fixed ``revolving period'' of no more than 15
months.
(b) The Average Lease Rate for the leases in the portfolio used to
create a trust, after accounting for all leases added to such portfolio
during the ``revolving period'', will not exceed by more than 200 basis
points the Average Lease Rate for the original portfolio of leases used
to create the trust.
(c) Certificates in which employee benefit plans invest have been
rated in one of the three highest rating categories by the Rating
Agencies. Credit support is obtained to the extent necessary to attain
the desired rating. In addition, leases added to a trust portfolio
during the ``revolving period'' will not result in the certificates
receiving a lower credit rating from the Rating Agencies, at the end of
the ``revolving period'', than the rating that was obtained at the time
of the initial issuance of the certificates by the trust.
(d) All transactions for which the applicant seeks exemptive relief
are governed by the Origination Trust Agreement, the Servicing
Agreement and any applicable supplements thereto, and the
Securitization Trust Agreement. These agreements as well as the
prospectus or private placement memorandum are made available to plan
fiduciaries for their review prior to the plan's investment in the
certificates.
(e) Exemptive relief from sections 406(b) and 407(a) of the Act for
sales to employee benefit plans is substantially limited.

[[Page 58662]]

(f) Many underwriters have made, and the applicant anticipates that
such underwriters will continue to make, a secondary market in investor
certificates sponsored by World Omni and its Affiliates.

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

General Motors Hourly-Rate Employes Pension Plan (the Hourly Plan),
General Motors Retirement Program for Salaried Employes, Saturn
Individual Retirement Plan for Represented Team Members and Saturn

Personal Choices Retirement Plan for Non-Represented Team Members (the
Saturn Plans), and Employees' Retirement Plan for GMAC Mortgage
Corporation (the GMAC Plan; collectively, the Plans) Located in New
York, New York

[Application Nos. D-09930 & D-09931]

Proposed Exemption

(a) General Exemption. The restrictions of section 406(a)(1)(A)
through (D) of the Act and the sanctions resulting from the application
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through
(D) of the Code, shall not apply to any transaction arising in
connection with the acquisition, ownership, management, development,
leasing, financing, or sale of real property (including the
acquisition, ownership or sale of any joint venture or partnership
interest in such property) or the borrowing or lending of money in
connection therewith, between a party in interest and the Plans,
provided that the following conditions are satisfied:
(1) The terms of the transaction are negotiated on behalf of the
Plans by, or under the authority and general direction of, General
Motors Investment Management Corporation (GMIMCo), as described in the
summary of facts in the notice of proposed exemption, and GMIMCo makes
the decision to invest the assets of the Plans in such transaction.
Notwithstanding the foregoing, a transaction involving an amount of $20
million or more, which has been negotiated on behalf of a Plan by
GMIMCo will not fail to meet the requirements of this section (a)(1)
solely because General Motors Corporation or its designee retains the
right to veto or approve such transaction;
(2) Any such party in interest is not--
(i) GMIMCo or any person directly or indirectly controlling,
controlled by, or under common control with GMIMCo, any officer,
director or employee of GMIMCo or any of its subsidiaries, or any
partnership in which GMIMCo is a 10 percent or more (directly or
indirectly in capital or profits) partner;
(ii) General Motors Corporation (GM) or any of its subsidiaries,
any officer or director of GM or any of its subsidiaries;
(iii) any named fiduciary of any Plan, or any person who has
discretionary authority in the selection, supervision or operation of
GMIMCo or any of its officers, directors or employees;
(iv) a sponsor of any of the Plans (Plan Sponsor) or any subsidiary
of a Plan Sponsor, or a ten percent or more shareholder, partner, or
joint venturer of a Plan Sponsor, or any officer or director of any of
them;
(v) any person who exercises discretionary authority,
responsibility or control, or who provides investment advice [within
the meaning of 29 CFR 2510.3-21(c)], with respect to the investment of
Plan assets involved in the transaction;
(3) The transaction is not part of an agreement, arrangement or
understanding designed to benefit a party in interest;
(4) At the time the transaction is entered into, and at the time of
any subsequent renewal or modification thereof that requires the
consent of GMIMCo, the terms of the transaction are at least as
favorable to the Plans as the terms generally available in arm's-length
transactions between unrelated parties;
(4) GM or GMIMCo shall maintain for a period of six years from the
date of each transaction mentioned above the records necessary to
enable the persons described in subparagraph (5) of this section (a) to
determine whether the conditions of this exemption have been met,
except that: (i) A prohibited transaction will not be deemed to have
occurred if, due to circumstances beyond the control of GM and GMIMCo,
the records are lost or destroyed prior to the end of the six-year
period, and (ii) no party in interest except GM and GMIMCo shall be
subject to the civil penalty which may be assessed under section 502(i)
of the Act, or to the taxes imposed by section 4975(a) and (b) of the
Code, if the records are not maintained, or are not available for
examination as required by subparagraph (5) below;
(5)(i) Except as provided in subsection (ii) of this subparagraph
(5) and notwithstanding any provisions of subsections (a)(2) and (b) of
section 504 of the Act, the records referred to in subparagraph (4) of
this section (a) are unconditionally available at GM's headquarter
offices, or, upon prior arrangement with GM, at any other customary
location for the maintenance and/or retention of such records, for
examination during normal business hours by:
(A) Any duly authorized employee or representative of the
Department of Labor or the Internal Revenue Service,
(B) Any fiduciary of a Plan or any duly authorized employee or
representative of such fiduciary, and
(C) Any participant or beneficiary of any Plan or any duly
authorized representative of such participant or beneficiary.
(ii) None of the persons described in subdivisions (i)(B) and
(i)(C) of this subparagraph (5) shall be authorized to examine GM's
trade secrets or commercial or financial information which is
privileged, confidential or of a proprietary nature.
(b) Specific exemption. The restrictions of sections 406(a)(1) (A)
through (D) and sections 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 furnishing of services, facilities, and any goods
incidental thereto by a place of public accommodation which is or may
be considered an asset of a Plan if the services, facilities or
incidental goods are furnished on a comparable basis to the general
public, and if the requirements of subparagraphs (a) (4) and (5) of
this exemption are met.

EFFECTIVE DATE: This exemption, if granted, will be effective as of
July 1, 1994.

TEMPORARY NATURE OF THE EXEMPTION: The exemption proposed herein, if
granted, will be temporary in nature and will expire on the date of
publication by the Department of the final class exemption for plan
asset transactions determined by in-house asset managers, which was
proposed by the Department on March 24, 1995 at 60 FR 15597
(application no. D-09602).

Summary of Facts and Representations

1. The Plans are defined benefit plans sponsored by the General
Motors Corporation (GM) and subsidiaries of GM. As of December 31,
1994, there were approximately 835,700 active participants in the
Plans, and the Plans held assets totaling approximately $44.2 billion.
Approximately 5.6 percent of the Plans' total assets is currently
invested, or committed for specific investment, in real estate or real
estate related investments.
2. The Plans are administered by the Finance Committee of GM's
board of directors (the Finance Committee) as the

[[Page 58663]]
named fiduciary with respect to each of the Plans, except for the
Employee's Retirement Plan for GMAC Mortgage Corporation (the GMAC
Plan), discussed below. The Finance Committee, among other functions,
is responsible for the direction and oversight of each Plan's
investment policy, monitors each Plan's performance, and adopts broad
investment policy guidelines. The Finance Committee receives assistance
from an Investment Policy Committee (IPC), which periodically reviews
and makes recommendations on investment policy guidelines. The IPC is
comprised of officers of GM and officers of the General Motors
Investment Management Corporation (GMIMCo), a wholly-owned subsidiary
of GM. Further, the Finance Committee has authorized the IPC to approve
all investment commitments involving more than one percent of the
assets of any Plan's trust. The Finance Committee has also appointed
GMIMCo to act as an investment manager with respect to the Plans. In
that regard, GMIMCo is actively involved in real estate transactions
undertaken by the Plans, including transactions under the direct
management of third party investment managers.
The named fiduciary of the GMAC Plan is the GMAC Mortgage
Corporation Pension Committee (GMAC Committee). The assets of the GMAC
Plan have been commingled with the assets of the Hourly Plan and Saturn
Plans for investment purposes. As a result, GMIMCo acts also as an
investment manager with respect to the GMAC Plan.
Real estate transactions involving the Plans' assets may be
undertaken directly by GMIMCo's real estate portfolio group (the R.E.
Group) or indirectly through a third party asset manager with the R.E.
Group's involvement. The R.E. Group's functions include the
identification and analysis of real estate investments. The R.E. Group
is comprised of six investment professionals, four attorneys and
administrative personnel.
3. GM requests an exemption to allow the Plans to engage in real
estate transactions which may otherwise be prohibited under the Act, as
described herein. GM represents that all prospective transactions will
be effected on behalf of the Plans by GMIMCo and will not involve
parties in interest who have fiduciary authority over the particular
investments of the Plans. GM represents that due to its size and
complexity, the normal operation of the Plans with respect to their
real estate investments may involve party in interest transactions. The
Department recognizes this situation and, to date, has proposed and
granted various individual exemptions on behalf of large plans for real
estate transactions involving parties in interest who maintain no
authority over the investments involved. GM is requesting similar
exemptive relief.
4. GM represents that the Plans' investments in real estate are
made in various forms. Such forms involve real estate partnerships,
joint ventures, leases, and mortgages. As a result of such real
property investment arrangements, prohibited transactions by and
between a Plan and party in interest lenders, lessees, joint venturers,
partnership partners, and service providers may occur. Such parties
would maintain no authority with respect to the Plan assets involved in
such transactions.
5. GM represents that the Plans' investments in real estate take on
various forms, including limited partnerships, joint ventures, leases,
mortgages, sale-leasebacks, and convertible mortgage arrangements. With
respect to each investment structure, the projects in question are
typically office buildings, shopping centers, hotels and other
commercial or multi-family residential projects. GM represents that the
owners/operators/developers with whom the Plan invests are carefully
chosen and are experienced in the evaluation, ownership, management,
financing and, in the case of new projects, development of real estate.
Parties in interest with respect to the Plans which may become involved
in these various types of real estate transactions include bank
lenders, lessees, joint venturers, and partnership partners. The
proposed exemption would not include transactions involving any parties
in interest with any authority with respect to the Plans' investment in
the subject transaction.
6. The applicant states that it is possible that the investment by
the Plans in places of public accommodation may result in the use of
such facilities by parties in interest. Therefore, such transactions
involving these places of public accommodation may constitute
prohibited transactions as described in the Act.
7. GM represents that regardless of the structure involved, each
potential real estate investment on behalf of the Plans receives
thorough and careful analysis by GMIMCo and by its professional staff.
The investment process operates as follows: potential real estate
investments are generally brought to the attention of one or more
members of GMIMCo's professional staff by real estate professionals,
brokers, or advisers. A staff of real estate professionals under the
direction of GMIMCo's managing director then inspects and appraises
prospective properties, considers existing and prospective tenants, and
evaluates numerous other financial and non-financial aspects such as
size, location, actual and potential use, financing, taxes, insurance,
title requirements and compliance with zoning and other applicable
laws. Sophisticated computer models are utilized as a tool to assist
the real estate professionals and to evaluate risk and reward
potential.
Upon completion of this analysis, the potential real estate
investment is either rejected or approved by a manager. If the manager
approves the proposed transaction, it is then presented to GMIMCo's
Pension Investment Review Team (PIRT). Approval by the PIRT is final as
to transactions involving $30 million or less. Transactions involving
more than $30 million are referred for further consideration by the
Chief Investment Funds Officer of GM, who retains the right to approve
or veto such transaction. Transactions involving more than 1% of the
assets of a Plan's trust are referred for further consideration to the
IPC, which retains approval and veto authority with respect to such
transactions. GMIMCo's investment professionals are aided in the review
process by GMIMCo's in-house legal staff.
8. GM represents that by means of the arrangements described above,
rigorous financial standards and procedures have been established to
ensure sound real estate investments with appropriate rates of return.
GM represents that any covered transactions will be on terms not less
favorable to the Plans than those available between the Plan and
unrelated parties. GM represents that given the size and scope of the
Plans and their investment, and GM's relationship to numerous financial
institutions, denial of the requested exemption would substantially
inhibit the Plans from investing in many prime quality real estate
projects of substantial size.
9. In summary, the applicant represents that the requested
exemption will satisfy the criteria of section 408(a) of the Act for
the following reasons: (a) All investments will be subject to the
discretion and control of GMIMCo and its professional staff, which have
extensive experience in real property investments and which will
conduct complete analyses with respect to potential Plan investments;
(b) The Plans will be able to enter into transactions which, although
prohibited, are necessary for the prudent conduct of the Plans'
operation;

[[Page 58664]]
(c) All transactions will involve parties who are independent from GM
and who have no discretion, authority or control with particular
transactions; and (d) All transactions will be conducted on an arm's-
length basis on terms not less favorable to the Plan than those
available in arm's-length transactions with unrelated parties.

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

Ventura County National Bancorp 401(k) and Employee Stock Ownership
Plan (the Plan) Located in Oxnard, California

[Application No. D-10024]

Proposed Exemption

The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption
is granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2),
and 407(a) of the Act and the sanctions resulting from the application
of section 4975 of the Code, by reason of section 4975(c)(1)(A) through
(E) of the Code, shall not apply for the period from May 12, 1995 until
June 21, 1995 (the Offering Period), to: (1) The receipt of certain
stock rights (the Rights) by the Plan, which is sponsored by Ventura
County National Bancorp (Ventura) and its affiliates, pursuant to a
stock rights offering (the Rights Offering) by Ventura to shareholders
of record of Ventura's common stock (the Employer Stock) as of May 10,
1995; (2) the holding of the Rights by the Plan during the Offering
Period; and (3) the exercise of the Rights by the Plan, provided the
following conditions were met:
(a) The Plan's acquisition and holding of the Rights resulted from
an independent act of Ventura as a corporate entity, and all holders of
the Employer Stock were treated in a like manner, including the Plan;
(b) With respect to the ``401(k) portion'' of the Plan, the Rights
were acquired, held and controlled by individual Plan participant
accounts pursuant to plan provisions for individually directed
investment of such accounts; and
(c) With respect to the ``ESOP portion'' of the Plan, the authority
for all decisions regarding the acquisition, holding and control of the
Rights was exercised by an independent fiduciary which made
determinations as to whether and how the Plan should exercise or sell
the Rights acquired through the Rights Offering.

EFFECTIVE DATE: If the proposed exemption is granted, the exemption
will be effective for the period from May 12, 1995 until June 21, 1995.

Summary of Facts and Representations

1. Ventura is a registered bank holding company conducting business
in Southern California through its wholly-owned subsidiaries, Ventura
County National Bank (VCNB) and Frontier Bank (Frontier; together, the
Banks). The principal executive offices of Ventura are located at 500
Esplanade Drive, Oxnard, California.
2. The Employer Stock is registered under Section 12 of the
Securities Exchange Act of 1934. The Employer Stock is publicly traded
on the National Association of Securities Dealers Automated Quotation
National Market System (NASDAQ). The applicant states that the Employer
Stock is issued by Ventura, an employer of employees covered by the
Plan, and further represents that such stock is a ``qualifying employer
security'' under section 407(d)(5) of the Act and section 4975(e)(8) of
the Code.\13\

\13\ In the case of an employee benefit plan that is an
``eligible individual account plan'' (as defined under section
407(d)(3) of the Act), section 407(d)(5) of the Act states, in
pertinent part, that the term ``qualifying employer security'' means
an employer security which is stock. However, the Department is
providing no opinion in this proposed exemption as to whether the
Employer Stock is a ``qualifying employer security'' under section
407(d)(5) of the Act.
---------------------------------------------------------------------------

3. The applicant represents that due to declining earnings
beginning in 1991, the Banks entered into Formal Agreements with the
Office of the Comptroller of the Currency (OCC) in 1992 and 1993 which
imposed higher minimum regulatory capital requirements than had
previously applied to the Banks. The deadline for reaching this goal
was June 30, 1995.
The applicant represents further that new management personnel
brought in by Ventura's Board of Directors in September 1993 instituted
a plan to restore core profitability to the Banks. Ventura states that
these efforts have been largely successful. However, as of May 1995,
VCNB had not yet reached the capital ratio required under the Formal
Agreement. Therefore, Ventura initiated the Rights Offering as a means
to raise capital necessary for VCNB to attain the requisite capital
ratio levels and reimburse interest in accordance with the Formal
Agreements.
4. The Plan comprises an employee stock ownership plan (the ``ESOP
portion'') with a cash or deferred arrangement (the ``401(k)
portion''). The trustee of the Plan is Dai-Ichi Kangyo Bank of
California (the Trustee). The Trustee is independent of, and does not
have any other business relationship with, Ventura and its
subsidiaries. The Trustee has investment authority over Plan assets
other than participants' individually directed 401(k) accounts in the
Plan.
The Plan is an individual account plan as described in section
3(34) of the Act. Participants' individual accounts are divided into
subaccounts, which include the following: (i) The Deferred Income
Account, which contains a participant's salary deferrals under the
401(k) portion of the Plan; (ii) the Employer Contribution Account,
which contains discretionary employer matching contributions that are
allocated to the participant's account; (iii) the Employer Stock
Account, which contains shares of employer securities allocated to the
participant under the ESOP portion of the Plan; and (iv) the Rollover
Account, containing distributions from other qualified retirement
plans.
As of May 10, 1995, the Plan had 134 participants and total assets
of approximately $1,182,254. On such date, the Plan was the record
holder of 415,854 shares of the Employer Stock, of which 236,860 shares
were allocated to participants' individual accounts, and 178,994
unallocated shares were held in a suspense account under the Plan as
collateral for a loan to the Plan.14

\14\ In this regard, the applicant states that there is a loan
outstanding between Ventura and the Plan which was made by Ventura
to enable the ESOP portion of the Plan to acquire Employer Stock
from Ventura (the ESOP Loan). Ventura represents that the ESOP Loan
met all of the requirements for a statutory exemption under section
408(b)(3) of the Act. However, the Department is providing no
opinion in this proposed exemption as to whether the ESOP Loan met
the conditions necessary for exemptive relief under section
408(b)(3) of the Act.
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Investment of Plan assets is different under the 401(k) and ESOP
portions of the Plan. The 401(k) portion of the Plan permits each Plan
participant to direct the investment of his or her Deferred Income
Account, containing participants' salary deferrals, and Employer
Contribution Account, which contains discretionary employer matching
contributions, by choosing among the different investment funds
available under the Section 401(k) portion of the Plan. Participants
may also invest a portion of these accounts in shares of the Employer
Stock. Participants who have elected to invest a portion of their
Deferred Income Account or Employer Contribution Account in shares of
the Employer

[[Page 58665]]
Stock are referred to herein as ``Invested Participants''.
With respect to the ESOP portion of the Plan, the Trustee exercises
exclusive investment authority over Plan assets, subject to the
requirement that Plan assets be primarily invested in the Employer
Stock. In this regard, the applicant states that the Trustee must take
into consideration its fiduciary duties to act prudently with respect
to Plan investments and to invest Plan assets in the best interests of
Plan participants and their beneficiaries.
5. Effective May 12, 1995, Ventura instituted a Rights Offering in
connection with the Employer Stock. The Rights Offering called for the
issuance to all holders of the Employer Stock as of the close of
business on May 10, 1995 (the Record Date) transferable subscription
rights (i.e. the Rights) in the ratio of one Right for each 3.17 shares
of the Employer Stock held. No fractional rights were issued. The
number of Rights issued to each shareholder was rounded up to the
nearest whole Right.
Each Right conferred upon its holder an entitlement (the Basic
Privilege) to purchase one share of the Employer Stock at $2.25 per
share (the Exercise Price).15 Each Right also conferred upon its
holder a second privilege (the Oversubscription Privilege) allowing
each Right holder exercising the Basic Privilege in full to subscribe
for an additional number of shares of the Employer Stock (Excess
Shares), also at the Exercise Price. Excess Shares were subject to
certain availability, proration and reduction restrictions imposed by
Ventura. The applicant states that where an insufficient number of
Excess Shares was available to satisfy fully all exercises of the
Oversubscription Privilege, the available Excess Shares were prorated
among shareholders who exercised their Oversubscription Privilege based
upon the respective number of shares of the Employer Stock owned as of
the Record Date.

\15\ The price per share of the Employer Stock, as quoted on
NASDAQ, was $2.37 as of the end of the day on May 11, 1995, and was
approximately the same price per share at the end of the Offering
Period on June 21, 1995.
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The Basic Privilege was freely transferable. The Oversubscription
Privilege was not transferable. The Rights were traded on NASDAQ under
the symbol ``VCNBR'' through the close of trading on June 20, 1995, the
date prior to the expiration of the Rights Offering on June 21, 1995.
The proceeds of any Rights that were sold were credited to the accounts
of the Invested Participants according to the investments and
percentages which had been specified in such accounts.
6. The applicant states that all Invested Participants received by
mail: (i) a copy of the Prospectus published by Ventura; (ii) a letter
from the Trustee describing the procedures for participant directions
with respect to the Rights Offering; and (iii) a direction form
(Direction Form). The Direction Forms enabled the Invested Participants
to direct the Trustee either to (i) exercise the Rights allocable to
their accounts, or (ii) sell such Rights on the open market. The
Direction Forms also permitted Invested Participants to elect not to
participate in the Rights Offering.
The date that notification of the Rights Offering was mailed to
Invested Participants was May 17, 1995 (the Notification Date), which
was the same date that such information was received by the other
shareholders of record. In addition, Direction Forms necessary to
participate in the Rights Offering were provided to Invested
Participants on May 18, 1995. A postage paid envelope addressed to the
Trustee was provided with each Direction Form. The applicant states
that an informational meeting about the Rights Offering was held for
employees on May 22, 1995.
Invested Participants had to return the Direction Forms to the
Trustee within fourteen (14) days after the Notification Date (i.e. May
31, 1995) because the Trustee needed approximately twenty-one (21) days
to process such forms (as noted in Paragraph 8 below). In order for the
Rights to be exercised, the Subscription Agent had to receive the
Direction Form, together with payment for the shares which were to be
purchased, by 5:00 p.m., Pacific Time, on June 21, 1995 (the Expiration
Time). Rights not exercised prior to the Expiration Time became
worthless.
7. The applicant represents that the Rights Offering was an
independent act of Ventura as a corporate entity, under which all
holders of the Employer Stock, including the Plan, were treated in a
like manner. With respect to the 401(k) portion of the Plan, the Rights
were acquired, held and controlled by Invested Participants' individual
Plan accounts pursuant to Plan provisions for individually-directed
investment of such accounts. With respect to the ESOP portion of the
Plan, the Trustee made all decisions regarding whether to exercise or
sell Rights allocated to shares of the Employer Stock held in the Plan.
8. For each Invested Participant who directed the Trustee to
exercise Rights attributable to his or her Deferred Income or Employer
Contribution Accounts in the 401(k) portion of the Plan, the funds
which were needed to pay the exercise price were obtained by selling
specific investments in the Invested Participant's accounts. The order
of withdrawal was made at the direction of the Invested Participant or,
if no direction was given, specific investments were sold pro-rata from
the funds in the Invested Participant's accounts.
The Plan provided that amounts sold from the investment funds prior
to the last day of the Rights Offering were deposited by the Trustee in
a special short-term investment account pending the Trustee's payment
to the Subscription Agent of the exercise price for the subscribed
shares of the Employer Stock. Rights were exercisable by an Invested
Participant only to the extent of funds available in his or her
accounts in the Plan. If amounts in an Invested Participant's accounts
were insufficient to pay the exercise price for all shares of the
Employer Stock subscribed for, the Plan provided that the Trustee would
sell any Rights not exercised. The proceeds of any Rights that were
sold and any income from the special short-term investment account were
credited to the accounts of the Invested Participants. In the case of
such sale proceeds, credits were made to the accounts of the Invested
Participants whose allocable Rights were sold. In the case of such
income, credits were made to the accounts of the Invested Participants
whose redemption proceeds were deposited in the special short-term
investment account. In either case, the credits were made to each
account according to the investments and percentages that were
currently specified for such account.
The Direction Forms containing the Invested Participants'
instructions for the Rights Offering had to be returned to the Trustee
within twenty-one (21) working days before the date of the Expiration
Time (the Filing Date),16 in order to give the Trustee sufficient
time to perform the administrative procedures required to review
participant Direction Forms and implement directions, including the
liquidation of other Plan investments. With respect to any Invested
Participant who failed to submit a Direction Form to the Trustee by the
Filing Date, or submitted an invalid Direction Form, the Plan provided
that the Trustee had to sell the Rights on the open market.

[[Page 58666]]
These possible consequences were disclosed in the information sent to
shareholders of the Employer Stock prior to the Rights Offering.

\16\ The Filing Date was June 1, 1995. The Filing Date was
supposed to be fourteen (14) days after the Notification Date (i.e.
May 17, 1995, as noted in Paragraph 6), but was extended one day
because May 31st was the Memorial Day holiday. Thus, Invested
Participants had approximately two weeks following notification to
provide their instructions to the Trustee.
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In the event that the market price for the Employer Stock,
including the effect of any applicable brokerage commissions and other
expenses, at the time the Trustee submitted the Rights for exercise,
was less than the exercise price under the Offering, the Plan provided
that the Trustee would not automatically attempt to exercise such
Rights. In such situations, an Invested Participant was permitted to
direct the Trustee to either: (i) use the available funds to purchase
shares of the Employer Stock on the open market; or (ii) reinvest the
available funds pursuant to the investment elections and percentages
specified for the Invested Participant's accounts. In addition, the
Trustee could, at the direction of the Invested Participant, either:
(i) allow the Rights to expire, or (ii) attempt to sell the Rights on
the open market. If the latter option was chosen, the Trustee was
required, as directed by the Invested Participant, to either: (i) apply
the available funds toward the purchase of shares of the Employer Stock
on the open market, or (ii) reinvest the available funds pursuant to
the investment elections and percentages specified for the Investment
Participant's accounts.
9. With respect to the ESOP portion of the Plan, the Trustee had
exclusive authority to exercise or sell the Rights allocable to shares
of the Employer Stock held in the ESOP portion of the Plan. The Trustee
represents that it's decision to exercise or sell the Rights was made
in accordance with the fiduciary duty to act prudently with respect to
Plan investments and to invest Plan assets in the best interests of the
Plan's participants and beneficiaries.
In this regard, the Trustee decided to sell the Rights allocated to
the ESOP portion of the Plan on the open market. The applicant states
that the Trustee did not solicit the views of participants with respect
to this decision because investment decisions are not generally passed-
through under the ESOP portion of the Plan. The proceeds of the sale of
the Rights were allocated to each participant's ESOP Employer Stock
Account in the Plan in the same ratio as that particular Employer Stock
Account bore to all other Employer Stock Accounts in the Plan on the
record date.
Prior to making the decision on behalf of the ESOP portion of the
Plan to sell the Rights, the Trustee consulted with a financial
consulting firm, the Financial Valuation Group (FVG), whose consultants
were acquainted with ESOPs and regional banks such as Ventura. The
Trustee considered, with the assistance of FVG, a variety of factors
that it deemed relevant to whether the Plan should exercise or sell the
Rights. These factors included: (a) any transaction and financing costs
which may be involved in exercising the Rights; (b) future per share
value expectations of market analysts who follow the Employer Stock;
(c) the recent trading history of shares of the Employer Stock, and the
Rights, and how that trading compared to the trading of similar
offerings of comparable financial institutions; (d) the price/earnings
ratio of the Employer Stock; (e) a comparison of the Employer Stock's
price/earnings ratio and pro forma book value to that of other
financial institutions and the relation of such values to the
respective market values of those institutions; (f) the current market
price of the Employer Stock; and (g) the market price of the Rights.
The Trustee represents that it also considered the investment
objectives of the participants in the ESOP portion of the Plan, the
risks of each available alternative for the Rights, and the financial
resources of the ESOP portion of the Plan. After considering all these
factors, the Trustee determined that the sale of the Rights was
appropriate for the ESOP portion of the Plan and in the best interests
of the affected Plan participants.
10. The Trustee received a total of 131,185 Rights, of which 74,718
represented Rights attributable to allocated shares of Employer Stock
in the Plan and 56,467 represented Rights attributable to unallocated
shares. The Rights, as listed on NASDAQ, were initially valued at $.156
per Right on May 24, 1995.17 The Rights were valued at $.125 per
Right at the close of the Offering Period. The approximate volume of
trading in the Rights during the Rights Offering was as follows: (i)
32,127 Rights were traded between May 10 and May 31, 1995, and (ii)
816,417 Rights were traded between June 1 and June 21, 1995.

\17\ In this regard, the applicant states that the Rights were
not traded in sufficient volume prior to May 24, 1995 to be listed
on NASDAQ.
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All of the Rights received by the Trustee in connection with the
Plan's ownership of the Employer Stock in the ESOP portion of the Plan,
as well as the Rights received for the 401(k) portion of the Plan which
Invested Participants elected to sell rather than exercise (as
discussed further below), were sold by the Trustee on the open market.
The Rights were sold in two separate transactions on June 13 and June
14, 1995 for $.093 per Right, which was the market price for the Rights
on the date of the transactions as quoted on NASDAQ. The Trustee states
that the sale of the Rights was executed by an unrelated party.
With respect to the 401(k) portion of the Plan, the applicant
states that there were 134 Invested Participants who collectively
received a total of 6,989 Rights as a result of the Rights Offering. As
noted above in Paragraph 8, Invested Participants who elected to sell
their Rights could make such an election up until the Filing Date (i.e.
June 1, 1995). For those Invested Participants who elected to sell
their Rights, the Trustee sold such Rights (along with the other Rights
received by the ESOP portion of the Plan) as part of the two separate
transactions on June 13 and 14, 1995. The Rights were sold for $.093
per Right, which was the market price on such dates. In this regard,
the Trustee believed that it would be more efficient and fair to all
affected Invested Participants in the Plan for the Rights to be sold at
about the same time, rather than gradually as the Direction Forms were
received. The proceeds from all such sales were allocated to the Plan
accounts of those Invested Participants who elected to sell their
Rights, in direct proportion to the number of Rights they elected to
sell. The applicant states that of the 6,989 Rights received by the
Plan on behalf of Invested Participants, a total of 1,024 Rights (with
rounding) were exercised, a total of 470 Oversubscription Privileges
were exercised, a total of 5,901 Rights were sold, and a total of 64
Rights were allowed to expire.
11. The total number of shares of Employer Stock outstanding prior
to the Rights Offering was 6,333,835, of which approximately 415,854
shares, or 6.56 percent, were held by the Plan. The total number of
shares of the Employer Stock outstanding after the Rights Offering was
9,226,723, an increase of 2,888,888 shares.18 Of these additional
shares, approximately 1,685,652 were sold to shareholders upon exercise
of the Rights, or to investors who purchased the Rights on the open
market, and the other 1,203,236 shares were sold to outside investors
pursuant to certain standby purchase agreements. The applicant
represents that following the Rights Offering, VCNB attained the

[[Page 58667]]
capital ratio required under the OCC Formal Agreements.

\18\ The applicant notes that the number used to show the
increase due to the Rights Offering does not include an additional
4,000 shares which were added to the post-Rights Offering total
following the exercise of a stock option by a former employee of
VCNB.
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12. In summary, the applicant represents that the transactions
satisfied the statutory criteria of

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A95-28910. Public record. Not legal advice.