[Federal Register Volume 65, Number 219 (Monday, November 13, 2000)]
[Notices]
[Pages 67774-67781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28856]


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Prohibited Transaction Exemption 2000-55; Exemption Application No. D-
10863, et al.]


Grant of Individual Exemptions; Country Securities Corporation 
(Countrywide)

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

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SUMMARY: This document contains exemptions issued by the Department of 
Labor (the Department) from certain of the prohibited transaction 
restrictions of the Employee Retirement Income Security Act of 1974 
(the Act) and/or the Internal Revenue Code of 1986 (the Code).
    Notices were published in the Federal Register of the pendency 
before the Department of proposals to grant such exemptions. The 
notices set forth a summary of facts and representations contained in 
each application for exemption and referred interested persons to the 
respective applications for a complete statement of the facts and 
representations. The applications have been available for public 
inspection at the Department in Washington, DC. The notices also 
invited interested persons to submit comments on the requested 
exemptions to the Department. In addition the notices stated that any 
interested person might submit a written request that a public hearing 
be held (where appropriate). The applicants have represented that they 
have complied with the requirements of the notification to interested 
persons. No public comments and no requests for a hearing, unless 
otherwise stated, were received by the Department.
    The notices of proposed exemption were issued and the exemptions 
are being granted solely by the Department because, effective December 
31, 1978, section 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. 
App. 1 (1996), transferred the authority of the Secretary of the 
Treasury to issue exemptions of the type proposed to the Secretary of 
Labor.

Statutory Findings

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

Countrywide Securities Corporation (Countrywide) Located in 
Calabasas, California

[Prohibited Transaction Exemption 2000-55; Exemption Application No. D-
10863]

Exemption

I. Transactions

    A. Effective January 28, 2000, the restrictions of sections 406(a) 
and 407(a) of the Act, and the taxes imposed by

[[Page 67775]]

section 4975(a) and (b) of the Code by reason of section 4975(c)(1)(A) 
through (D) of the Code, shall not apply to the following transactions 
involving trusts and certificates evidencing interests therein:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and an employee benefit plan when the sponsor, 
servicer, trustee or insurer of a trust, the underwriter of the 
certificates representing an interest in the trust, or an obligor is a 
party in interest with respect to such plan;
    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates; 
and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.A.(1) or (2). Notwithstanding the foregoing, 
section I.A. does not provide an exemption from the restrictions of 
sections 406(a)(1)(E), 406(a)(2) and 407 for the acquisition or holding 
of a certificate on behalf of an Excluded Plan by any person who has 
discretionary authority or renders investment advice with respect to 
the assets of that Excluded Plan.\1\
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    \1\ Section I.A. provides no relief from sections 406(a)(1)(E), 
406(a)(2) and 407 for any person rendering investment advice to an 
Excluded Plan within the meaning of section 3(21)(A)(ii) and 
regulation 29 CFR 2510.3-21(c).
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    B. Effective January 28, 2000, the restrictions of sections 
406(b)(1) and 406(b)(2) of the Act, and the taxes imposed by section 
4975(a) and (b) of the Code by reason of section 4975(c)(1)(E) of the 
Code, shall not apply to:
    (1) The direct or indirect sale, exchange or transfer of 
certificates in the initial issuance of certificates between the 
sponsor or underwriter and a plan when the person who has discretionary 
authority or renders investment advice with respect to the investment 
of plan assets in the certificates is (a) an obligor with respect to 5 
percent or less of the fair market value of obligations or receivables 
contained in the trust, or (b) an affiliate of a person described in 
(a); if:
    (i) The plan is not an Excluded Plan;
    (ii) Solely in the case of an acquisition of certificates in 
connection with the initial issuance of the certificates, at least 50 
percent of each class of certificates in which plans have invested is 
acquired by persons independent of the members of the Restricted Group 
and at least 50 percent of the aggregate interest in the trust is 
acquired by persons independent of the Restricted Group;
    (iii) A plan's investment in each class of certificates does not 
exceed 25 percent of all of the certificates of that class outstanding 
at the time of the acquisition; and
    (iv) Immediately after the acquisition of the certificates, no more 
than 25 percent of the assets of a plan with respect to which the 
person has discretionary authority or renders investment advice are 
invested in certificates representing an interest in a trust containing 
assets sold or serviced by the same entity.\2\ For purposes of this 
paragraph B.(1)(iv) only, an entity will not be considered to service 
assets contained in a trust if it is merely a subservicer of that 
trust;
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    \2\ For purposes of this exemption, each plan participating in a 
commingled fund (such as a bank collective trust fund or insurance 
company pooled separate account) shall be considered to own the same 
proportionate undivided interest in each asset of the commingled 
fund as its proportionate interest in the total assets of the 
commingled fund as calculated on the most recent preceding valuation 
date of the fund.
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    (2) The direct or indirect acquisition or disposition of 
certificates by a plan in the secondary market for such certificates, 
provided that the conditions set forth in paragraphs B.(1)(i), (iii) 
and (iv) are met; and
    (3) The continued holding of certificates acquired by a plan 
pursuant to subsection I.B.(1) or (2).
    C. Effective January 28, 2000, the restrictions of sections 406(a), 
406(b) and 407(a) of the Act, and the taxes imposed by section 4975(a) 
and (b) of the Code by reason of section 4975(c) of the Code, shall not 
apply to transactions in connection with the servicing, management and 
operation of a trust, provided:
    (1) Such transactions are carried out in accordance with the terms 
of a binding pooling and servicing agreement; and
    (2) The pooling and servicing agreement is provided to, or 
described in all material respects in, the prospectus or private 
placement memorandum provided to investing plans before they purchase 
certificates issued by the trust.\3\
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    \3\ In the case of a private placement memorandum, such 
memorandum must contain substantially the same information that 
would be disclosed in a prospectus if the offering of the 
certificates were made in a registered public offering under the 
Securities Act of 1933. In the Department's view, the private 
placement memorandum must contain sufficient information to permit 
plan fiduciaries to make informed investment decisions. For purposes 
of this exemption, references to ``prospectus'' include any related 
prospectus supplement thereto, pursuant to which certificates are 
offered to investors.
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    Notwithstanding the foregoing, section I.C. does not provide an 
exemption from the restrictions of section 406(b) of the Act, or from 
the taxes imposed by reason of section 4975(c) of the Code, for the 
receipt of a fee by a servicer of the trust from a person other than 
the trustee or sponsor, unless such fee constitutes a ``qualified 
administrative fee'' as defined in section III.S.
    D. Effective January 28, 2000, the restrictions of sections 406(a) 
and 407(a) of the Act, and the taxes imposed by sections 4975(a) and 
(b) of the Code by reason of sections 4975(c)(1)(A) through (D) of the 
Code, shall not apply to any transactions to which those restrictions 
or taxes would otherwise apply merely because a person is deemed to be 
a party in interest or disqualified person (including a fiduciary) with 
respect to a plan by virtue of providing services to the plan (or by 
virtue of having a relationship to such service provider described in 
section 3(14)(F), (G), (H) or (I) of the Act or section 4975(e)(2)(F), 
(G), (H) or (I) of the Code), solely because of the plan's ownership of 
certificates.

II. General Conditions

    A. The relief provided under Part I is available only if the 
following conditions are met:
    (1) The acquisition of certificates by a plan is on terms 
(including the certificate price) that are at least as favorable to the 
plan as they would be in an arm's-length transaction with an unrelated 
party;
    (2) The rights and interests evidenced by the certificates are not 
subordinated to the rights and interests evidenced by other 
certificates of the same trust;
    (3) The certificates acquired by the plan have received a rating 
from a Rating Agency (as defined in section III.W.) at the time of such 
acquisition that is in one of the three highest generic rating 
categories;
    (4) The trustee is not an affiliate of any other member of the 
Restricted Group. However, the trustee shall not be considered to be an 
affiliate of a servicer solely because the trustee has succeeded to the 
rights and responsibilities of the servicer pursuant to the terms of a 
pooling and servicing agreement providing for such succession upon the 
occurrence of one or more events of default by the servicer;
    (5) The sum of all payments made to and retained by the 
underwriters in connection with the distribution or placement of 
certificates represents not more than reasonable compensation for 
underwriting or placing the certificates; the sum of all payments made 
to and retained by the sponsor pursuant to the assignment of 
obligations (or interests therein) to the trust represents not more

[[Page 67776]]

than the fair market value of such obligations (or interests); and the 
sum of all payments made to and retained by the servicer represents not 
more than reasonable compensation for the servicer's services under the 
pooling and servicing agreement and reimbursement of the servicer's 
reasonable expenses in connection therewith;
    (6) The plan investing in such certificates is an ``accredited 
investor'' as defined in Rule 501(a)(1) of Regulation D of the 
Securities and Exchange Commission under the Securities Act of 1933; 
and
    (7) In the event that the obligations used to fund a trust have not 
all been transferred to the trust on the closing date, additional 
obligations as specified in subsection III.B.(1) may be transferred to 
the trust during the pre-funding period (as defined in section III.BB.) 
in exchange for amounts credited to the pre-funding account (as defined 
in section III.Z.), provided that:
    (a) The pre-funding limit (as defined in section III.AA.) is not 
exceeded;
    (b) All such additional obligations meet the same terms and 
conditions for eligibility as those of the original obligations used to 
create the trust corpus (as described in the prospectus or private 
placement memorandum and/or pooling and servicing agreement for such 
certificates), which terms and conditions have been approved by a 
Rating Agency. Notwithstanding the foregoing, the terms and conditions 
for determining the eligibility of an obligation may be changed if such 
changes receive prior approval either by a majority of the outstanding 
certificateholders or by a Rating Agency;
    (c) The transfer of such additional obligations to the trust during 
the pre-funding period does not result in the certificates receiving a 
lower credit rating from a rating agency upon termination of the pre-
funding period than the rating that was obtained at the time of the 
initial issuance of the certificates by the trust;
    (d) The weighted average annual percentage interest rate (the 
average interest rate) for all of the obligations in the trust at the 
end of the pre-funding period will not be more than 100 basis points 
lower than the average interest rate for the obligations which were 
transferred to the trust on the closing date;
    (e) In order to ensure that the characteristics of the receivables 
actually acquired during the pre-funding period are substantially 
similar to those which were acquired as of the closing date, the 
characteristics of the additional obligations will be either monitored 
by a credit support provider or other insurance provider which is 
independent of the sponsor, or an independent accountant retained by 
the sponsor will provide the sponsor with a letter (with copies 
provided to the Rating Agency, the underwriter and the trustees) 
stating whether or not the characteristics of the additional 
obligations conform to the characteristics of such obligations 
described in the prospectus, private placement memorandum and/or 
pooling and servicing agreement. In preparing such letter, the 
independent accountant will use the same type of procedures as were 
applicable to the obligations which were transferred as of the closing 
date;
    (f) The pre-funding period shall be described in the prospectus or 
private placement memorandum provided to investing plans; and
    (g) The trustee of the trust (or any agent with which the trustee 
contracts to provide trust services) will be a substantial financial 
institution or trust company experienced in trust activities and 
familiar with its duties, responsibilities and liabilities as a 
fiduciary under the Act. The trustee, as the legal owner of the 
obligations in the trust, will enforce all the rights created in favor 
of certificateholders of such trust, including employee benefit plans 
subject to the Act.
    B. Neither any underwriter, sponsor, trustee, servicer, insurer, 
nor any obligor, unless it or any of its affiliates has discretionary 
authority or renders investment advice with respect to the plan assets 
used by a plan to acquire certificates, shall be denied the relief 
provided under Part I, if the provision of subsection II.A.(6) above is 
not satisfied with respect to acquisition or holding by a plan of such 
certificates, provided that (1) such condition is disclosed in the 
prospectus or private placement memorandum; and (2) in the case of a 
private placement of certificates, the trustee obtains a representation 
from each initial purchaser which is a plan that it is in compliance 
with such condition, and obtains a covenant from each initial purchaser 
to the effect that, so long as such initial purchaser (or any 
transferee of such initial purchaser's certificates) is required to 
obtain from its transferee a representation regarding compliance with 
the Securities Act of 1933, any such transferees will be required to 
make a written representation regarding compliance with the condition 
set forth in subsection II.A.(6) above.

III. Definitions

    For purposes of this exemption:
    A. ``Certificate'' means:
    (1) A certificate--
    (a) That represents a beneficial ownership interest in the assets 
of a trust; and
    (b) That entitles the holder to pass-through payments of principal, 
interest, and/or other payments made with respect to the assets of such 
trust; or
    (2) A certificate denominated as a debt instrument--
    (a) That represents an interest in a Real Estate Mortgage 
Investment Conduit (REMIC) or a Financial Asset Securitization 
Investment Trust (FASIT) within the meaning of section 860D(a) or 
section 860L, respectively, of the Code; and
    (b) That is issued by, and is an obligation of, a trust;

with respect to certificates defined in (1) and (2) above for which 
Countrywide or any of its affiliates is either (i) the sole underwriter 
or the manager or co-manager of the underwriting syndicate, or (ii) a 
selling or placement agent.
    For purposes of this exemption, references to ``certificates 
representing an interest in a trust'' include certificates denominated 
as debt which are issued by a trust.
    B. ``Trust'' means an investment pool, the corpus of which is held 
in trust and consists solely of:
    (1) (a) Secured consumer receivables that bear interest or are 
purchased at a discount (including, but not limited to, home equity 
loans and obligations secured by shares issued by a cooperative housing 
association); and/or
    (b) Secured credit instruments that bear interest or are purchased 
at a discount in transactions by or between business entities 
(including, but not limited to, qualified equipment notes secured by 
leases, as defined in section III.T); and/or
    (c) Obligations that bear interest or are purchased at a discount 
and which are secured by single-family residential, multi-family 
residential and commercial real property (including obligations secured 
by leasehold interests on commercial real property); and/or
    (d) Obligations that bear interest or are purchased at a discount 
and which are secured by motor vehicles or equipment, or qualified 
motor vehicle leases (as defined in section III.U); and/or
    (e) ``Guaranteed governmental mortgage pool certificates,'' as 
defined in 29 CFR 2510.3-101(i)(2); and/or
    (f) Fractional undivided interests in any of the obligations 
described in clauses (a)-(e) of this section B.(1);
    (2) Property which had secured any of the obligations described in 
subsection B.(1);

[[Page 67777]]

    (3)(a) Undistributed cash or temporary investments made therewith 
maturing no later than the next date on which distributions are to be 
made to certificateholders; and/or
    (b) Cash or investments made therewith which are credited to an 
account to provide payments to certificateholders pursuant to any yield 
supplement agreement or similar yield maintenance arrangement to 
supplement the interest rates otherwise payable on obligations 
described in subsection III.B.(1) held in the trust, provided that such 
arrangements do not involve swap agreements or other notional principal 
contracts; and/or
    (c) Cash transferred to the trust on the closing date and permitted 
investments made therewith which:
    (i) are credited to a pre-funding account established to purchase 
additional obligations with respect to which the conditions set forth 
in clauses (a)-(g) of subsection II.A.(7) are met and/or;
    (ii) are credited to a capitalized interest account (as defined in 
section III.X.); and
    (iii) are held in the trust for a period ending no later than the 
first distribution date to certificateholders occurring after the end 
of the pre-funding period.
    For purposes of this clause (c) of subsection III.B.(3), the term 
``permitted investments'' means investments which are either: (i) 
Direct obligations of, or obligations fully guaranteed as to timely 
payment of principal and interest by the United States, or any agency 
or instrumentality thereof, provided that such obligations are backed 
by the full faith and credit of the United States or (ii) have been 
rated (or the obligor has been rated) in one of the three highest 
generic rating categories by a rating agency; are described in the 
pooling and servicing agreement; and are permitted by the rating 
agency; and
    (4) Rights of the trustee under the pooling and servicing 
agreement, and rights under any insurance policies, third-party 
guarantees, contracts of suretyship, yield supplement agreements 
described in clause (b) of subsection III.B.(3) and other credit 
support arrangements with respect to any obligations described in 
subsection III.B.(1).
    Notwithstanding the foregoing, the term ``trust'' does not include 
any investment pool unless: (i) The investment pool consists only of 
assets of the type described in clauses (a) through (f) of subsection 
III.B.(1) which have been included in other investment pools, (ii) 
certificates evidencing interests in such other investment pools have 
been rated in one of the three highest generic rating categories by a 
Rating Agency for at least one year prior to the plan's acquisition of 
certificates pursuant to this exemption, and (iii) certificates 
evidencing interests in such other investment pools have been purchased 
by investors other than plans for at least one year prior to the plan's 
acquisition of certificates pursuant to this exemption.
    C. ``Underwriter'' means:
    (1) Countrywide;
    (2) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by or under common control with 
Countrywide; or
    (3) Any member of an underwriting syndicate or selling group of 
which Countrywide or a person described in (2) is a manager or co-
manager with respect to the certificates.
    D. ``Sponsor'' means the entity that organizes a trust by 
depositing obligations therein in exchange for certificates.
    E. ``Master Servicer'' means the entity that is a party to the 
pooling and servicing agreement relating to trust assets and is fully 
responsible for servicing, directly or through subservicers, the assets 
of the trust.
    F. ``Subservicer'' means an entity which, under the supervision of 
and on behalf of the master servicer, services obligations contained in 
the trust, but is not a party to the pooling and servicing agreement.
    G. ``Servicer'' means any entity which services obligations 
contained in the trust, including the master servicer and any 
subservicer.
    H. ``Trustee'' means the trustee of the trust, and in the case of 
certificates which are denominated as debt instruments, also means the 
trustee of the indenture trust.
    I. ``Insurer'' means the insurer or guarantor of, or provider of 
other credit support for, a trust. Notwithstanding the foregoing, a 
person is not an insurer solely because it holds securities 
representing an interest in a trust which are of a class subordinated 
to certificates representing an interest in the same trust.
    J. ``Obligor'' means any person, other than the insurer, that is 
obligated to make payments with respect to any obligation or receivable 
included in the trust. Where a trust contains qualified motor vehicle 
leases or qualified equipment notes secured by leases, ``obligor'' 
shall also include any owner of property subject to any lease included 
in the trust, or subject to any lease securing an obligation included 
in the trust.
    K. ``Excluded Plan'' means any plan with respect to which any 
member of the Restricted Group is a ``plan sponsor'' within the meaning 
of section 3(16)(B) of the Act.
    L. ``Restricted Group'' with respect to a class of certificates 
means:
    (1) Each underwriter;
    (2) Each insurer;
    (3) The sponsor;
    (4) The trustee;
    (5) Each servicer;
    (6) Any obligor with respect to obligations or receivables included 
in the trust constituting more than 5 percent of the aggregate 
unamortized principal balance of the assets in the trust, determined on 
the date of the initial issuance of certificates by the trust; or
    (7) any affiliate of a person described in (1)-(6) above.
    M. ``Affiliate'' of another person includes:
    (1) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (2) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), a brother, a sister, or a spouse of a 
brother or sister of such other person; and
    (3) Any corporation or partnership of which such other person is an 
officer, director or partner.
    N. ``Control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.
    O. A person will be ``independent'' of another person only if:
    (1) Such person is not an affiliate of that other person; and
    (2) The other person, or an affiliate thereof, is not a fiduciary 
who has investment management authority or renders investment advice 
with respect to any assets of such person.
    P. ``Sale'' includes the entrance into a forward delivery 
commitment (as defined in section Q below), provided:
    (1) The terms of the forward delivery commitment (including any fee 
paid to the investing plan) are no less favorable to the plan than they 
would be in an arm's-length transaction with an unrelated party;
    (2) The prospectus or private placement memorandum is provided to 
an investing plan prior to the time the plan enters into the forward 
delivery commitment; and
    (3) At the time of the delivery, all conditions of this exemption 
applicable to sales are met.
    Q. ``Forward delivery commitment'' means a contract for the 
purchase or

[[Page 67778]]

sale of one or more certificates to be delivered at an agreed future 
settlement date. The term includes both mandatory contracts (which 
contemplate obligatory delivery and acceptance of the certificates) and 
optional contracts (which give one party the right but not the 
obligation to deliver certificates to, or demand delivery of 
certificates from, the other party).
    R. ``Reasonable compensation'' has the same meaning as that term is 
defined in 29 CFR 2550.408c-2.
    S. ``Qualified Administrative Fee'' means a fee which meets the 
following criteria:
    (1) The fee is triggered by an act or failure to act by the obligor 
other than the normal timely payment of amounts owing in respect of the 
obligations;
    (2) The servicer may not charge the fee absent the act or failure 
to act referred to in (1);
    (3) The ability to charge the fee, the circumstances in which the 
fee may be charged, and an explanation of how the fee is calculated are 
set forth in the pooling and servicing agreement; and
    (4) the amount paid to investors in the trust will not be reduced 
by the amount of any such fee waived by the servicer.
    T. ``Qualified Equipment Note Secured By A Lease'' means an 
equipment note:
    (1) Which is secured by equipment which is leased;
    (2) Which is secured by the obligation of the lessee to pay rent 
under the equipment lease; and
    (3) With respect to which the trust's security interest in the 
equipment is at least as protective of the rights of the trust as would 
be the case if the equipment note were secured only by the equipment 
and not the lease.
    U. ``Qualified Motor Vehicle Lease'' means a lease of a motor 
vehicle where:
    (1) The trust owns or holds a security interest in the lease;
    (2) The trust owns or holds a security interest in the leased motor 
vehicle; and
    (3) The trust's security interest in the leased motor vehicle is at 
least as protective of the trust's rights as would be the case if the 
trust consisted of motor vehicle installment loan contracts.
    V. ``Pooling and Servicing Agreement'' means the agreement or 
agreements among a sponsor, a servicer and the trustee establishing a 
trust. In the case of certificates which are denominated as debt 
instruments, ``Pooling and Servicing Agreement'' also includes the 
indenture entered into by the trustee of the trust issuing such 
certificates and the indenture trustee.
    W. ``Rating Agency'' means Standard & Poor's Structured Rating 
Group, Moody's Investors Service, Inc., Duff & Phelps Credit Rating 
Co., Fitch IBCA, Inc., or their successors;
    X. ``Capitalized Interest Account'' means a trust account: (i) 
Which is established to compensate certificateholders for shortfalls, 
if any, between investment earnings on the pre-funding account and the 
pass-through rate payable under the certificates; and (ii) which meets 
the requirements of clause (c) of subsection III.B.(3).
    Y. ``Closing Date'' means the date the trust is formed, the 
certificates are first issued and the trust's assets (other than those 
additional obligations which are to be funded from the pre-funding 
account pursuant to subsection II.A.(7)) are transferred to the trust.
    Z. ``Pre-Funding Account'' means a trust account: (i) Which is 
established to purchase additional obligations, which obligations meet 
the conditions set forth in clauses (a)-(g) of subsection II.A.(7); and 
(ii) which meets the requirements of clause (c) of subsection 
III.B.(3).
    AA. ``Pre-Funding Limit'' means a percentage or ratio of the amount 
allocated to the pre-funding account, as compared to the total 
principal amount of the certificates being offered which is less than 
or equal to 25 percent.
    BB. ``Pre-Funding Period'' means the period commencing on the 
closing date and ending no later than the earliest to occur of: (i) The 
date the amount on deposit in the pre-funding account is less than the 
minimum dollar amount specified in the pooling and servicing agreement; 
(ii) the date on which an event of default occurs under the pooling and 
servicing agreement; or (iii) the date which is the later of three 
months or 90 days after the closing date.
    CC. ``Countrywide'' means Countrywide Securities Corporation and 
its affiliates.
    The Department notes that this exemption is included within the 
meaning of the term ``Underwriter Exemption'' as it is defined in 
section V(h) of Prohibited Transaction Exemption 95-60 (60 FR 35925, 
July 12, 1995), the Class Exemption for Certain Transactions Involving 
Insurance Company General Accounts at (see 60 FR 35932).
    For a more complete statement of the fact and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption published on September 19, 2000 at 65 
FR 56720.

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

Journal Company, Inc. 401(k) Savings Plan (the Plan) Located in 
Trenton, New Jersey

[Prohibited Transaction Exemption 2000-56; Exemption Application No. D-
10781]

Exemption

    The restrictions of 406(a) and 406(b)(1), 406(b)(2), and 406(b)(3) 
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 (F) of the 
Code, shall not apply to: (a) The receipt by certain affiliates and 
predecessors of Journal Register East, Inc. (JRE), by Bank of America 
NA. (the successor in interest to Boatmen's Trust Company) (the Bank), 
and by certain individuals alleged in a complaint to have been or to be 
fiduciaries of the Plan (collectively, the Defendants) of releases 
signed by participants in the Plan, in which such participants waive 
their rights to sue in connection with the acquisition and retention in 
such participants' accounts in the Plan of interests in certain 
guaranteed investment contracts (GICs) issued by Confederation Life 
Insurance Company (CLI); and (b) the payment by the corporate 
Defendants of a settlement amount to be allocated to the accounts of 
participants in the Plan in exchange for release from liability 
obtained from such participants; provided that the following conditions 
are satisfied:
    (a) The payment of the settlement amount is a one-time cash 
transaction;
    (b) Each participant whose account in the Plan has an interest in 
the GICs decides whether, in exchange for the settlement amount, to 
waive his or her right to sue in connection with the acquisition and 
retention in such participant's account in the Plan of interests in 
such GICs; or to opt out of such settlement and retain all such rights 
and causes of action;
    (c) Pursuant to the terms of the settlement, the account of each 
participant in the Plan who waives his or her right to sue receives an 
amount of the settlement proceeds in proportion to the interest each 
such account has in the GICs;
    (d) Pursuant to the terms of the settlement, the corporate 
Defendants are responsible for paying the attorneys' fees to the law 
firm representing the plaintiffs (the Plaintiffs);
    (e) A portion of the fees that would have been due and payable to 
the Plaintiffs' attorneys will be withheld from the settlement proceeds 
by JRE, an employer of employees covered by the Plan, and paid to the 
Plaintiffs' in cash based on each Plaintiff's share of the amount of 
the settlement proceeds allocated to all of the Plaintiffs;

[[Page 67779]]

    (f) Notwithstanding the waiver by any participant of his or her 
right to sue, the Plan does not release any claims, demands, and/or 
causes of action which it may have in connection with the acquisition 
and retention in participants' accounts in the Plan of interests in the 
GICs;
    (g) No expenses are incurred by the Plan as a result of the 
settlement;
    (h) The Plaintiffs' attorneys and each participant who signs the 
release and waives his or her right to sue will monitor the payment of 
the settlement proceeds by the corporate Defendants and the allocation 
of the proper amounts into such participants' accounts in the Plan, in 
order to ensure compliance with the terms of the settlement agreement; 
and
    (i) All terms and conditions of the transaction are no less 
favorable than those obtainable at arm's length with unrelated third 
parties.

EFFECTIVE DATE: This exemption is effective upon the date that the 
Defendants enter into a settlement of the lawsuit with the Plaintiffs.

Written Comments

    In the Notice of Proposed Exemption (the Notice), the Department of 
Labor (the Department) invited all interested persons to submit written 
comments and requests for a hearing on the proposed exemption. As set 
forth in the Notice, interested persons consisted of all participants 
and beneficiaries in the Plan who have an interest in the GICs. The 
deadline for submission of such comments was within forty-five (45) 
days of the date of the publication of the Notice in the Federal 
Register on September 7, 2000. All comments and requests for a hearing 
were due on October 23, 2000.
    On September 25, 2000, the applicant informed the Department in 
writing that, with the exception of seven (7) former participants in 
the Plan, notification had been sent to all interested persons by first 
class mail to the last known address. In a letter dated September 29, 
2000, the applicant notified the Department that, as of September 27, 
2000, a copy of the Notice had been sent to all former participants in 
the Plan who had not received the earlier mailing. In order to allow 
all interested parties to have the full comment period after receiving 
the Notice, the Department required, and the applicants agreed to, an 
extension of the deadline when comments would be due on the proposed 
exemption. Accordingly, all comments and requests for a hearing were 
due on October 30, 2000.
    During the comment period, the Department received no requests for 
a hearing. However, the Department received two (2) comment letters in 
which interested persons informed the Department of factual changes to 
the Summary of Facts and Representations (SFR) in the Notice. In this 
regard, in a letter, dated September 12, 2000, the attorney for 
Boatman's Trust Company informed the Department that, effective March 
13, 1998, Boatman's Trust Company had merged with Bank of America NA 
(formerly known as NationsBank, NA). The attorney advised the 
Department that Bank of America NA at the time of the merger assumed 
all of the obligations of Boatman's Trust Company, including those 
obligations under the terms of the settlement agreement. The Department 
acknowledges the merger of Boatman's Trust Company with Bank of America 
NA. and has amended the operant language of this exemption to reflect 
such change.
    In a letter dated October 30, 2000, the attorney for the Plaintiffs 
informed that Department that the correct name of the labor 
organization mentioned in the SFR on page 54304, column 3, lines 35-36 
of the Notice is the Woonsocket Newspaper Guild CWA/TNG Local 31182, 
AFL-CIO. The Department acknowledges the correct name of the labor 
organization and has included such information in the record of the 
exemption application.
    After giving full consideration to the entire record, including the 
written comments, the Department has decided to grant the exemption. In 
this regard, the comment letters submitted to the Department have been 
included as part of the public record of the exemption application. The 
complete application file, including all supplemental submissions 
received by the Department, is made available for public inspection in 
the Public Documents Room of the Pension Welfare Benefits 
Administration, Room N-5638, U.S. Department of Labor, 200 Constitution 
Avenue, NW., Washington, DC 20210.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption refer to 
the Notice of Proposed Exemption published on September 7, 2000, at 65 
FR 54303.

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

Sun Life Assurance Company of Canada (Sun Life) Located in Toronto, 
Ontario, Canada

[Prohibited Transaction Exemption 2000-57; Exemption Application No. D-
10814]

Exemption

Section I. Covered Transactions

    The restrictions of section 406(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 (D) of the Code, shall not apply, 
effective March 22, 2000, to the (1) receipt of common stock (Common 
Shares) issued by Sun Life Financial Services of Canada, Inc., the 
holding company for Sun Life; or (2) the receipt of cash (Cash) or 
policy credits (Policy Credits), by or on behalf of any eligible 
policyholder (the Eligible Policyholder) of Sun Life which is an 
employee benefit plan (the Plan), subject to applicable provisions of 
the Act and/or the Code, including any Eligible Policyholder which is a 
Plan established by Sun Life or an affiliate for their own employees 
(the Sun Life Plans), in exchange for such Eligible Policyholder's 
membership interest in Sun Life, in accordance with the terms of a plan 
of conversion (the Conversion Plan) adopted by Sun Life and implemented 
under the insurance laws of Canada and the State of Michigan.
    This exemption is subject to the conditions set forth below in 
Section II.

Section II. General Conditions

    (a) The Conversion Plan was implemented in accordance with 
procedural and substantive safeguards that were imposed under the 
insurance laws of Canada and the State of Michigan and was subject to 
review and/or approval in Canada by the Office of the Superintendent of 
Financial Institutions (OSFI) and the Minister of Finance (the Canadian 
Finance Minister) and, in the State of Michigan, by the Commissioner of 
Insurance (the Michigan Insurance Commissioner).
    (b) OSFI, the Canadian Finance Minister and the Michigan Insurance 
Commissioner reviewed the terms of the options that were provided to 
Eligible Policyholders of Sun Life as part of their separate reviews of 
the Conversion Plan. In this regard,
    (1) OFSI (i) authorized the release of the Conversion Plan and all 
information to be sent to Eligible Policyholders; (ii) oversaw each 
step of the conversion process (the Conversion); and (iii) made a final 
recommendation to the Canadian Finance Minister on the Conversion Plan.

[[Page 67780]]

    (2) The Canadian Finance Minister, in his sole discretion, could 
consider such factors as whether: (i) the Conversion Plan was fair and 
equitable to Eligible Policyholders; (ii) whether the Conversion Plan 
was in the best interests of the financial system in Canada; and (iii) 
sufficient steps had been taken to inform Eligible Policyholders of the 
Conversion Plan and of the special meeting on the Conversion.
    (3) The Michigan Insurance Commissioner made a determination that 
the Conversion Plan was (i) fair and equitable to all Eligible 
Policyholders and (ii) consistent with the requirements of Michigan 
law.
    (4) Both the Canadian Finance Minister and the Michigan Insurance 
Commissioner concurred on the terms of the Conversion Plan.
    (c) Each Eligible Policyholder had an opportunity to vote to 
approve the Conversion Plan after full written disclosure was given to 
the Eligible Policyholder by Sun Life.
    (d) One or more independent fiduciaries of a Plan that was an 
Eligible Policyholder received Common Shares, Cash or Policy Credits 
pursuant to the terms of the Conversion Plan and neither Sun Life nor 
any of its affiliates exercised any discretion or provided ``investment 
advice,'' as that term is defined in 29 CFR 2510.3-21(c), with respect 
to such acquisition.
    (e) After each Eligible Policyholder was allocated 75 Common 
Shares, additional consideration was allocated to an Eligible 
Policyholder who owned an eligible policy based on an actuarial formula 
that took into account such factors as the total cash value, the base 
premium and the duration of such eligible policy. The actuarial formula 
was reviewed by the Canadian Finance Minister and the Michigan 
Insurance Commissioner.
    (f) With respect to a Sun Life Plan, where the consideration was in 
the form of Cash or Common Shares, an independent Plan fiduciary--
    (1) Determined that the Conversion Plan was in the best interest of 
the Sun Life Plans and their participants and beneficiaries;
    (2) Voted for the Conversion Plan on behalf of the Sun Life Plans;
    (3) Received either Common Shares or Cash on behalf of a Sun Life 
Plan;
    (4) Determined that the transactions did not violate the investment 
objectives and policies of the Sun Life Plans;
    (5) Negotiated on behalf of the contributory Sun Life Plans and 
determined a reasonable allocation of proceeds between Sun Life and the 
participants in the Sun Life Plans; and
    (6) Took (and will continue to take until the proposed exemption 
becomes final) all actions that were (or will be) necessary and 
appropriate to safeguard the interests of the Sun Life Plans.
    (g) All Eligible Policyholders that were Plans participated in the 
transactions on the same basis within their class groupings as other 
Eligible Policyholders that were not Plans.
    (h) No Eligible Policyholder paid any brokerage commissions or fees 
to Sun Life or its affiliates in connection with their receipt of 
Common Shares or with respect to the implementation of the initial 
public offering in which an Eligible Policyholder could elect to sell 
such Common Shares for cash.
    (i) All of Sun Life's policyholder obligations will remain in force 
and will not be affected by the Conversion Plan.

Section III. Definitions

    For purposes of this exemption:
    (a) The term ``Sun Life'' means Sun Life Assurance Company of 
Canada and any affiliate of Sun Life as defined in paragraph (b) of 
this Section III.
    (b) An ``affiliate'' of Sun Life includes--
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with Sun Life; (For purposes of this paragraph, the term ``control'' 
means the power to exercise a controlling influence over the management 
or policies of a person other than an individual.) or
    (2) Any officer, director or partner in such person.
    (c) The term ``Eligible Policyholder'' means a policyholder who--
    (i) On January 27, 1998 (the Eligibility Day) was the owner of a 
voting policy;
    (ii) Was the holder of a voting policy issued by Sun Life, if the 
policy was applied for by that person on or before the Eligibility Day 
and the application was received by Sun Life within a period specified 
by Sun Life in the Conversion Plan;
    (iii) Was the holder of a voting policy, issued to the holder by 
Sun Life, that lapsed before Sun Life's Eligibility Day and was 
reinstated during the period beginning on the Eligibility Day and 
ending 90 days before the day on which Sun Life's Special Meeting was 
held; or
    (iv) Was named by Sun Life in its Conversion Plan as an Eligible 
Policyholder under subsection 4(4) of the Conversion Regulations.
    (d) The term ``Policy Credit'' means--
    (1) For an individual or joint ordinary life insurance policy, an 
increase in the paid-up dividend additional cash value or dividend 
accumulation value;
    (2) For a policy that is in force as extended term life insurance 
pursuant to a nonforfeiture provision of a life insurance policy, an 
extension of the coverage expiry date;
    (3) For a policy which is a deferred annuity certificate, an 
increase in the deferred annuity payment; and
    (4) For a policy which is an individual accumulation annuity, an 
increase in the account value.

EFFECTIVE DATE: This exemption is effective as of March 22, 2000.
    For a more complete statement of the facts and representations 
supporting the Department's decision to grant this exemption, refer to 
the notice of proposed exemption that was published on September 7, 
2000 at 65 FR 54307.

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

General Information

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


[[Page 67781]]


    Signed at Washington, DC, this 6th day of November, 2000.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits, 
Administration, U.S. Department of Labor.
[FR Doc. 00-28856 Filed 11-9-00; 8:45 am]
BILLING CODE 4510-29-P