Proposed Exemptions; Metropolitan Life Insurance Company

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10721, et al.]

Proposed Exemptions; Metropolitan Life Insurance Company

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 restrictions 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

Unless otherwise stated in the Notice of Proposed Exemption, all

interested persons are invited to submit written comments, and with

respect to exemptions involving the fiduciary prohibitions of section

406(b) of the Act, requests for hearing within 45 days from the date of

publication of this Federal Register Notice. Comments and requests 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.

ADDRESS: 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, NW, Washington, DC 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, NW, Washington, DC 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.

Metropolitan Life Insurance Company (MetLife) Located in New York,

NY

[Application No. D-10721]

Proposed Exemption

Based on the facts and representations set forth in the

application, the Department is considering granting an exemption under

the authority of section 408(a) of the Act (or ERISA) 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).1

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\1\ For purposes of this proposed exemption, references to

provisions of Title I of the Act, unless otherwise specified, refer

also to corresponding provisions of the Code.

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Section I. Proposed Exemptions Involving the Demutualization of METLIFE

and the Excess Holding of Consideration By Plans Sponsored By METLIFE

and its Affiliates (the MetLife Plans)

If the exemption is granted, 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 to the receipt, by any eligible policyholder (the

Eligible Policyholder) of MetLife that is an employee benefit plan (the

Plan), subject to applicable provisions of the Act and/or the Code,

including any Eligible Policyholder that is a Plan covering employees

of MetLife or its affiliates, of an interest (the Interest) in a trust

(the Trust), whose corpus consists of common stock (the Common Stock)

issued by MetLife, Inc., (the Holding Company), the parent of MetLife;

or (2) the receipt of cash or policy credits by such Plans,2

in exchange for such Eligible Policyholder's membership interest in

MetLife, pursuant to a plan of conversion (the Plan of Reorganization)

adopted by MetLife and implemented in accordance with section 7312 of

the New York Insurance Law.

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\2\ Unless otherwise noted, the terms ``Plan'' and ``MetLife

Plan'' are referred to collectively as the ``Plans.''

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In addition, the restrictions of section 406(a)(1)(E) and (a)(2)

and section 407(a)(2) of the Act shall not apply to the receipt and

holding, by a MetLife Plan, of Trust Interests, whose fair market value

exceeds 10 percent of the value of the total assets held by such Plan.

The proposed exemptions that are described above are subject to the

following conditions:

(a) The Plan of Reorganization is implemented in accordance with

procedural and substantive safeguards that are imposed under New York

Insurance Law and is subject to review and approval by the New York

Superintendent of Insurance (the Superintendent). The Superintendent

reviews the terms of the options that are provided to Eligible

Policyholders of MetLife as part of such Superintendent's review of the

Plan of Reorganization, and the Superintendent only approves the Plan

of Reorganization following a determination that the Plan is fair and

equitable to all Eligible Policyholders and is not detrimental to the

public.

(b) Each Eligible Policyholder has an opportunity to vote at a

special meeting to approve the Plan of Reorganization after receiving

full written disclosure from MetLife.

(c) One or more independent fiduciaries of a Plan (the Independent

Fiduciary) that is an Eligible Policyholder receives Trust Interests,

cash or policy credits pursuant to the terms of the Plan of

Reorganization and neither MetLife nor any of its affiliates

[[Page 66202]]

exercises any discretion or provides ``investment advice,'' within the

meaning of 29 CFR 2510.3-21(c) with respect to such acquisition.

(d) In the case of a MetLife Plan, the Independent Fiduciary--

(1) Votes at the special meeting of Eligible Policyholders to

approve the Plan of Reorganization;

(2) Makes any election, to the extent available under the Plan of

Reorganization, to receive Trust Interests or cash on behalf of the

MetLife Plan;

(3) Monitors, on behalf of the MetLife Plan, the acquisition and

holding of any Trust Interests received;

(4) Makes determinations on behalf of the MetLife Plan with respect

to the voting and the continued holding of Trust Interests by such

Plan.

(5) Withdraws shares of Holding Company Common Stock that are held

in Trust which are equivalent to Trust Interests allocated to a MetLife

Plan and disposes of such Trust Interests.

(i) Not exceeding the limits of section 407(a) of the Act in a

prudent manner.

(ii) Exceeding the limits of section 407(a) of the Act within six

months of the initial public offering (the IPO); and

(6) Provides the Department with a complete and detailed final

report as it relates to the MetLife Plans prior to the effective date

of the demutualization.

(e) After each Eligible Policyholder entitled to receive Trust

Interests is allocated at least ten shares of Holding Company Common

Stock, additional consideration is allocated to Eligible Policyholders

who own participating policies based on actuarial formulas that take

into account each participating policy's contribution to the surplus of

MetLife, which formulas have been reviewed by the Superintendent.

(f) All Eligible Policyholders that are Plans participate in the

demutualization transaction on the same basis within their class

groupings as other Eligible Policyholders that are not Plans.

(g) No Eligible Policyholder pays any brokerage commissions or fees

in connection with the receipt of consideration.

(h) All of MetLife's policyholder obligations remain in force and

are not affected by the Plan of Reorganization.

(i) The terms of the transactions are at least as favorable to the

Plans as an arm's length transaction with an unrelated party.

Section II. Proposed Exemptions Involving Sales or Withdrawals

Occurring in Connection With the Operation or Termination of the Trust

If the exemption is granted, 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 to the proposed (1) sale by a Plan to the Holding

Company of Holding Company Common Stock, which is held in the Trust for

the benefit of such participating Plan and is evidenced by Trust

Interests, following the effective date of the demutualization or upon

the termination of the Trust; and (2) the withdrawal by a Plan of

Holding Company Common Stock, as evidenced by Trust Interests,

beginning on the first anniversary of the effective date of the

demutualization until the termination of the Trust.

The proposed exemptions are subject to the following conditions:

(a) The decision by a Plan to arrange for the sale of Holding

Company Common Stock to the Holding Company or to withdraw Holding

Company Common Stock is made by a Plan fiduciary which is independent

of MetLife and its affiliates.

(b) No Plan pays any fees or commissions in connection with either

transaction.

(c) The terms of the transactions are at least as favorable to the

Plan as those obtainable in an arm's length transaction with an

unrelated party.

(d) Any sale of shares of Holding Company Common Stock held in the

Trust for the benefit of a Plan to the Holding Company is at a price

reflecting the fair market value of the Common Stock as determined by

averaging the high and low trading prices as reported on the New York

Stock Exchange on the day of sale, except that if such sale is pursuant

to the termination of the Trust, such fair market value is determined

as the average of the closing price for a share of such Holding Company

Common Stock for the twenty consecutive trading days ending on the

third calendar day immediately prior to the date of the sale.

Section III. Definitions

For purposes of this proposed exemption:

(a) The term ``MetLife'' means The Metropolitan Life Insurance

Company and any affiliate of MetLife as defined in paragraph (b) of

this Section III.

(b) An ``affiliate'' of MetLife includes--

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

intermediaries, controlling, controlled by, or under common control

with MetLife. (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.)

(2) Any officer, director or partner in such person, and

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

officer, director or a 5 percent partner or owner.

(c) The term ``Eligible Policyholder'' means a policyholder whose

name appears on MetLife's records as the owner of a policy on the

adoption date of MetLife's Plan of Reorganization by MetLife's Board of

Directors and, which is in full force for its full basic benefits and

has not matured by death or otherwise been surrendered or terminated

and which remains in force on the effective date of MetLife's

demutualization.

(d) The term ``policy credit'' means (1) a dividend deposit or

dividend addition; (2) an increase in accumulation value (to which no

sales or surrender or similar charges shall be applied); (3) additional

coverage or benefits; (d) an extension of the expiry date; or (4) a

reduction in premium payments.

Summary of Facts and Representations

1. MetLife is a mutual life insurance company organized under the

laws of the State of New York and subject to supervision and

examination by the Superintendent. It is the second largest insurance

company in the United States. As of December 31, 1998, MetLife and its

subsidiaries had total assets under management of approximately $357.7

billion and approximately $1.7 trillion of life insurance in force.

MetLife and its subsidiaries and affiliates provide funding, asset

management and other services for approximately 59,700 employee pension

and welfare benefit plans that are subject to the provisions of Title I

of the Act as well as applicable provisions of the Code. In addition,

MetLife maintains pooled and single plan separate accounts in which

Title I pension, profit sharing and thrift plans invest, and MetLife or

its affiliates manage assets in such separate accounts. Moreover,

MetLife has a number of subsidiaries and affiliates that provide a

variety of financial services, including investment management and

brokerage services.

MetLife represents that it is not a ``party in interest'' with

respect to any of its Plan policyholders merely because it has issued

an insurance policy to the Plan. However, because of the variety of

fiduciary and other services it and its affiliates provide to Plans

that are also policyholders, MetLife believes that it is a party in

interest with respect to such Plans under sections 3(14)(A) and (B) of

[[Page 66203]]

the Act or the other related ``derivative'' provisions of section 3(14)

of the Act.

As a mutual life insurance company, MetLife has no stockholders.

Instead, policyholders of MetLife are ``members'' of the company, and

in that capacity, they are entitled to vote to elect directors of

MetLife. If MetLife is liquidated, the policyholders will be entitled

to share in any assets of MetLife which remain after all claims against

MetLife have been satisfied in full.

2. MetLife and its affiliates sponsor several pension and welfare

plans for the benefit of their employees. The MetLife Plans, their

asset and participant totals as of December 31, 1998, the

decisionmakers with respect to MetLife Plan investments, and the

employees covered by the MetLife Plans are set forth in the following

tables:

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Participants

Plan name Assets $1M 12/ or number of Investment decision Employees covered

98 lives makers

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MetLife Retirement Plan for U.S. $3,974 81,000 Investment Advisory Sal. and comm.

Employees. Committee. employees.

VRSA................. 86 3,900

401(h)............... 24

Savings & Investments Plan for 2,559 36,000 MetLife.............. Sal. and comm.

Employees of MetLife and Part. employees.

Affils.

MetLife Options and MetLife (\1\)

Choices Plan.

Welfare (Post-Ret.)............... .............. 27,500 MetLife.............. Sal. and comm.

employees.

Life Ins. & Survivor. 406 .............. MetLife.............. Sal. and comm.

employees.

Health (VEBA TOLI)... 179 .............. VEBA Trustees........ Sal. and comm.

employees.

Health (HIFA)........ 500 .............. MetLife.............. Sal. and comm.

employees.

Welfare (Active).................. 388 29,400 MetLife.............. Sal. and comm.

employees.

Welfare Plan for Employees of \2\ 0 56,900 MetLife.............. Sal. and comm.

MetLife and Particip. Affils. employees.

Benefit Services Corp. Pre-Tax 0 30 MetLife.............. Active.

Premium Plan.

Cross & Brown Co. Your Group Ins. 0 11 MetLife.............. Active and Retired.

Plan.

Farmers National Company Ins. 0 135 MetLife.............. Active.

Programs.

Farmers National Co. Travel 0 135 MetLife.............. Active.

Accident Ins. Plan.

Hyatt Legal Benefit Plans......... 0 44 MetLife.............. Active.

SSR Realty Advisors, Inc. Life 0 532 MetLife.............. Active.

Benefits, Long-Term Dis.

State Street Res. & Mgt. Co. Life, 0 465 MetLife.............. Active.

Dental & Long Term Dis. Plan.

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\1\ Reserves $M.

\2\ Benefits provided through insurance contracts.

3. On November 24, 1998, Metlife's Board of Directors authorized

the company's management to develop a plan of demutualization pursuant

to which MetLife would be converted from a mutual life insurance

company to a stock life insurance company. The principal purpose of the

Plan of Reorganization is to create a corporate structure that will

allow MetLife to position itself for long-term growth and increased

financial strength. MetLife believes that as a result of the

flexibility offered by the stock company structure and the access to

capital markets, it will be in a position to enhance its market

leadership, financial strength and strategic position and aggressively

pursue opportunities for growth, thereby providing greater protection

to policyholders. In addition, MetLife believes that the change in

business structure will enable it to remain a leader in helping people

become financially secure.

4. As a result of the Plan of Reorganization, MetLife will become a

stock insurer that is a subsidiary of MetLife, Inc., a newly-formed

holding company incorporated under the laws of the State of Delaware.

Consequently, MetLife and the Holding Company will have greater ability

to make acquisitions and the ability to raise investor capital in a

more efficient manner. The reorganization will provide economic value

to Eligible Policyholders in the form of shares of Holding Company

Common Stock, cash or policy credits, in exchange for such Eligible

Policyholders' respective membership interests in MetLife.

5. In addition to the formation of the Holding Company, MetLife

will establish the Trust to hold shares of Holding Company Common Stock

that are received by millions of policyholders under its Plan of

Reorganization. It is not anticipated that the Trust will be a ``plan

assets'' investment vehicle because 25 percent or more of the value of

the Trust Interests will not be held by Plans. MetLife notes that the

primary purpose of the Trust is to assist the Holding Company in the

administration of beneficiary accounts and the costs associated with

managing such a large number of policyholders. In addition, MetLife

states that a secondary purpose of the Trust is to promote a more

orderly market for Holding Company Common Stock. It is anticipated that

the trustee of the Trust (the Trustee) will be Wilmington Trust

Company, an entity which is independent of MetLife and one of the

nation's leading wealth management companies.

6. Thus, to resolve potential issues for Plans that may arise in

connection with its Plan of Reorganization, MetLife requests an

individual exemption from the Department that will cover the receipt of

Trust Interests,3 cash or policy credits by Eligible

Policyholders that are

[[Page 66204]]

Plans, including the MetLife Plans identified above, in exchange for

such Plans' existing membership interests in MetLife.

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\3\ Although Holding Company Common Stock will not be issued

directly to an Eligible Policyholder, MetLife represents that it

wishes to ensure that the exemption will cover the indirect

acquisition by a Plan of an interest in the Holding Company Common

Stock owned by the Trust.

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MetLife is also requesting an exemption for the receipt and holding

of Trust Interests by the MetLife Plans for their own employees with

respect to transactions that may violate sections 406(a)(1)(E), (a)(2),

and 407(a)(2) of the Act. These sections of the Act prohibit the

acquisition by a plan of any employer securities that are not

qualifying employer securities if immediately after the acquisition,

the aggregate fair market value of employer securities held by the plan

exceeds 10 percent of the fair market value of the assets of the

plan.4 MetLife represents that the Trust Interests may be

considered ``employer securities'' for purposes of the foregoing

restrictions. Because some of the MetLife Plans may receive a

substantial number of Trust Interests exceeding 10 percent of the fair

market value of the assets of such Plans, MetLife believes there will

be a violation of section 407(a)(2) of the Act. To safeguard the

interests of the MetLife Plans under these circumstances, MetLife and

each of its affiliates have appointed State Street Bank and Trust

Company (State Street), to serve as an Independent Fiduciary.

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\4\ Specifically, section 406(a)(1)(E) of the Act prohibits the

acquisition by a plan of any employer security which would be in

violation section 407(a) of the Act. Section 406(a)(2) of the Act

states that no fiduciary who has authority or discretion to control

the assets of a plan shall permit the plan to hold any employer

security if he [or she] knows that holding such security would

violate section 407(a) of the Act. Section 407(a)(1) of the Act

prohibits the acquisition by a plan of any employer security which

is not a qualifying employer security. Section 407(a)(2) of the Act

provides that a plan may not acquire any qualifying employer

security, if immediately after such acquisition, the aggregate fair

market value of such securities exceeds 10 percent of the fair

market value of the plan's assets.

In addition to the above, section 407(f) of the Act, which is

applicable to the holding of a qualifying employer security by a

plan other than an eligible individual account plan, requires that

(a) immediately following its acquisition by a plan, no more than 25

percent of the aggregate amount of stock of the same class issued

and outstanding at the time of acquisition is held by the plan; and

(b) at least 50 percent of the stock be held by persons who are

independent of the issuer. MetLife notes, however, that the holding

of Holding Company Common Stock by the MetLife Plans will not

violate the provisions of section 407(f) of the Act.

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Finally, the proposed exemption is intended to cover transactions

that will occur subsequent to the initial demutualization event, i.e.,

during the operation or termination of the Trust described herein.

These transactions include (a) the sale to the Holding Company by a

Plan of Holding Company Common Stock that is held in the Trust for the

benefit of such participating Plan and which is evidenced by Trust

Interests; and (b) the withdrawal by a Plan of Holding Company Common

Stock that is held in Trust and which is evidenced by Trust Interests.

The proposed exemption is conditioned on a number of requirements.

Specifically, distributions that are made to Plans under the Plan of

Reorganization must be on terms that are no less favorable to such

Plans than an arm's length transaction between unrelated parties. In

this regard, Plans to which MetLife is a party in interest will not by

reason of that relationship be treated differently from policyholders

as to which MetLife is not a party interest.

7. Section 7312 of the New York Insurance Law establishes an

approval process for the demutualization of a life insurance company.

Under Section 7312, the conversion of a mutual life insurance company

to a stock company is initiated by the board of directors of the mutual

company. A plan of demutualization may be approved by a vote of at

least 75 percent of the entire board of directors. The approval process

must include a finding that the plan is fair and equitable to

policyholders.

After approval by the mutual insurance company's board of

directors, a plan of demutualization is then required to be submitted

to the Superintendent for his or her review.

In order for a plan of demutualization to become effective, the

Superintendent must determine that the plan of demutualization does not

violate the requirements imposed by Section 7312, including the

requirement that the plan is fair and equitable to the policyholders,

that it is not detrimental to the public, and that, following the

demutualization, the insurer will have an amount of capital and surplus

which the Superintendent deems to be reasonably necessary for its

future solvency.

In order to assist the Superintendent in discharging his or her

duties, Section 7312 permits the Superintendent to appoint an actuary

to review actuarial aspects of the plan. In addition, Section 7312

permits the Superintendent to appoint other qualified disinterested

persons or institutions to act as consultants to the Superintendent. In

the case of the MetLife demutualization, the Superintendent has hired

the law firm of Fried, Frank, Harris, Shriver & Jacobson as legal

adviser; the actuarial firm of Miliman & Robertson to conduct the

required actuarial review; and The Blackstone Group as the investment

banking consultant.

8. Section 7312 also requires the Superintendent to hold a public

hearing on a plan of demutualization at which policyholders and other

interested persons may express views on the plan. Notice of the public

hearing must be provided to each policyholder of the insurance company

whose policy or contract is in force on the date of adoption of the

plan of demutualization, and must be published in three newspapers of

general circulation. The purpose of the public hearing is to allow

interested persons the right to comment on the fairness of the terms

and conditions of the demutualization and the reasons and purposes for

the demutualization of the insurer, and to consider whether the

demutualization is in the interest of the insurer and its policyholders

and is not detrimental to the public.

After the public hearing, the Superintendent must determine whether

or not to approve the demutualization plan. Under Section 7312, the

Superintendent approves the plan if he or she finds that it does not

violate the insurance law, that it is fair and equitable to

policyholders, that it is not detrimental to the public, and that,

after giving effect to the demutualization, the insurer will have an

amount of capital and surplus that the Superintendent deems to be

reasonably necessary for MetLife's future solvency.

The Superintendent must also determine that the plan does not fail

to meet the requirements of Section 7312(c). In other words, the plan

must (a) demonstrate a purpose and specific reasons for the proposed

demutualization; (b) be in the best interest of the mutual insurer and

its policyholders; (c) be fair and equitable to the policyholders; (d)

provide for the enhancement of the operations of the reorganized

insurer; and (e) not substantially lessen competition in any line of

insurance business.

The policyholders of the mutual insurance company must also be

provided with notice of the plan and an opportunity to vote whether to

approve the plan. Each policyholder (approximately 16 million in the

case of MetLife) is entitled to one vote, regardless of the number of

policies that are actually owned. In addition, the plan must be

approved by a vote of at least two-thirds of all votes cast by

policyholders entitled to vote.

A decision by the Superintendent to approve a demutualization plan

pursuant to Section 7312 of the New York Insurance Law is subject to

judicial review in the New York courts.

[[Page 66205]]

9. Although the Board of Directors of MetLife has not yet adopted

the Plan of Reorganization,5 MetLife anticipates that the

Plan will provide for the formation of the Holding Company under the

laws of the State of Delaware and the creation of the Trust which will

be governed by New York law. It is presently anticipated that, under

the Plan of Reorganization, the following steps will occur on the

effective date:

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\5\ On September 28, 1999, MetLife's Board of Directors approved

the Plan of Reorganization whose effective date is projected for

early February 2000. In early January 2000, MetLife anticipates that

the hearing will be convened. Moreover, at sometime before the end

of the first quarter of 2000, MetLife expects that the

Superintendent will approve the Plan of Reorganization.

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(a) Issuance of MetLife Common Stock. MetLife will issue 100

percent of its Common Stock to the Trust, on behalf of the Trust

Eligible Policyholders, to be held for the benefit of the Trust

Eligible Policyholders (who will be issued Trust Interests reflecting

their ownership of the shares held in the Trust).

(b) Exchange by Trust of MetLife Common Stock. Immediately after

receipt, the Trust will exchange its shares of MetLife Common Stock for

shares of Holding Company Common Stock. The Holding Company Common

Stock will be held in Trust for the exclusive benefit of the Trust

Eligible Policyholders.

(c) Surrender and Cancellation of Holding Company Common Stock.

MetLife will surrender to the Holding Company, and the Holding Company

will cancel, all of the remaining shares of Holding Company Common

Stock held by MetLife prior to the effective date.

(d) Calculation of Policyholder Consideration. MetLife will

establish an amount reflecting the aggregate amount that the Board

anticipates will be credited to policyholders who are required to

receive Trust Interests, cash or policy credits as compensation under

the terms of the Plan. In other words, for purposes of calculating the

amount of consideration that will be received, an Eligible Policyholder

will be allocated shares of MetLife Common Stock consisting of (1) a

fixed component of consideration equal to ten shares of MetLife Common

Stock, which may be subject to proportional adjustment, plus (2) a

variable component of consideration reflecting the contributions to the

surplus made by each such policyholder's in force participating policy.

10. Under the terms of MetLife's Plan of Reorganization, the

Holding Company will sell shares of Holding Company Common Stock to the

public through an IPO on the same day as the effective date of the Plan

of Reorganization. (Subsequent to the effective date, MetLife

anticipates that the Holding Company Common Stock will be actively

traded on the New York Stock Exchange.) The proceeds of the IPO will be

used to fund cash payments and policy credits to policyholders which

are required to receive cash or policy credits under the terms of the

Plan.

In general, an Eligible Policyholder is entitled to receive

consideration in the form of cash if (a) the policyholder's mailing

address is located outside of the United States; or (b) the

policyholder is the owner of a policy transferred to the Metropolitan

Life Insurance Company of Canada, regardless of the mailing address; or

(c) MetLife determines in good faith and to the satisfaction of the

Superintendent that it is not reasonably feasible or appropriate to

provide consideration in the form such Eligible Policyholder or class

of Eligible Policyholders would otherwise receive. In addition, an

Eligible Policyholder who holds an individual retirement annuity, an

individual annuity contract, an individual life insurance policy or a

long-term health care insurance product will be entitled to receive

policy credits from MetLife.

The amount of cash that will be paid,6 or the value of

the policy credits to each policyholder required to receive cash or

policy credits will be determined at the time of the IPO and will be

based (a) on the number of shares of Holding Company Common Stock that

the policyholder would have received on the effective date if the

policyholder had been entitled to receive compensation in the form of

Holding Company Common Stock and (b) the IPO price per share.

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\6\ MetLife represents that there may be a limit on the amount

of funds available to pay cash compensation to Eligible

Policyholders that elect to receive cash. In this regard, the Plan

of Reorganization provides that the IPO and any other capital

raising transactions that are completed on the effective date must

raise proceeds, net of underwriting commissions and related

expenses, in an amount at least equal to the amount paid by MetLife

to fund mandatory cash payments pursuant to the Plan of

Reorganization and to pay fees and expenses incurred by MetLife

related to the demutualization, as well as to reimburse MetLife for

amounts to be paid by MetLife's Canadian branch to certain former

Canadian policyholders. If the IPO and any other capital raising

transactions are not sufficient to fund the payment of cash to all

Eligible Policyholders entitled to receive cash, MetLife explains

that although the Plan of Reorganization will become effective, the

cash will not be paid to all Eligible Policyholders electing to

receive cash. If this event occurs, MetLife states that cash will be

paid as follows:

Each individual Eligible Policyholder that elects to

receive cash will receive compensation in the form of cash;

Each group Eligible Policyholder that elects to receive

cash and is allocated not more than 250,000 shares will receive

compensation in the form of--

Cash, with respect to the first 25,000 shares allocated

to the Eligible Policyholder, and

Either shares of Holding Company Common Stock (which is

to be held in the Trust) or a combination of cash and shares of

Holding Company Common Stock (which also will be held in the Trust),

with respect to the remaining shares allocated to the Eligible

Policyholder. Such cash will be allocated to each Eligible

Policyholder pro rata basis in the proportion that the total number

of shares in excess of 25,000 shares allocated to such Eligible

Policyholder bears to the total number of shares in excess of 25,000

shares allocated to all such Eligible Policyholders allocated more

than 25,000 shares that have elected to receive cash.

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In addition, prior to the effective date, policyholders who are

entitled to receive compensation in the form of Holding Company Common

Stock will be asked to elect whether they would like their allocable

portion of the shares held in Trust to be purchased by the Holding

Company, at the IPO price. Based on these elections, the Holding

Company will purchase shares of Holding Company Common Stock from the

Trust at the IPO offering price, and the cash will be distributed to

the Trust beneficiaries who have elected to be cashed out, in

cancellation of their interests.

In the case of an Eligible Policyholder that is a Plan, the

decision to receive consideration in the form of Trust Interests, cash

or policy credits will be made by one or more fiduciaries of such Plan

which is independent of MetLife. In addition, neither MetLife nor any

of its affiliates will exercise any discretion or provide ``investment

advice,'' within the meaning of 29 CFR 2510.3-21(c), with respect to

each such acquisition.7

[[Page 66206]]

Further, no Eligible Policyholder will pay any brokerage commissions or

fees in connection with their receipt of any form of consideration.

Finally, all of MetLife's insurance policies will remain in force, and

all policyholders will be entitled to receive all benefits under their

policies and contracts to which they would have been entitled if the

Plan of Reorganization had not been adopted.

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\7\ Consistent with sections 7312(a)(2), 7312(e) and 4210 of New

York Insurance Law, the Plan of Reorganization generally provides

that the policyholder eligible to participate in the distribution of

Trust Interests, cash or policy credits resulting from the Plan of

Reorganization is ``the person whose name appears * * * on the

insurer's records as owner'' of the policy. MetLife further

represents that an insurance or annuity policy that provides

benefits under an employee benefit plan, typically designates the

employer that sponsors the plan, or a trustee acting on behalf of

the plan, as the owner of the policy. In regard to insurance or

annuity policies that designate the employer or trustee as owner of

the policy, MetLife represents that it is normally required under

the foregoing provisions of New York Law and the Plan of

Reorganization to make distributions resulting from such Plan to the

employer or trustee as owner of the policy, except as provided in a

plan of reorganization approved by the Superintendent.

Notwithstanding the foregoing, MetLife's Plan of Reorganization

provides a special rule applicable to an insurance policy issued to

a trust established by MetLife. This rule applies whether or not the

trust, or any arrangement established by any employer participating

in the trust, constitutes an employee benefit plan subject to the

Act. Under this special rule, the holder of each individual

``certificate'' issued in connection with the insurance policy is

treated as the policyholder and owner for all purposes under the

Plan of Reorganization, including voting rights and the distribution

of consideration. The trustee of any such trust established by

MetLife for the benefit of Eligible Policyholders that are Plans

will be ignored, and the Plan will be considered a policyholder or

owner and will be eligible to vote or receive consideration.

In general, it is the Department's view that, if an insurance

policy (including an annuity contract) is purchased with assets of

an employee benefit plan, including participant contributions, and

if there exist any participants covered under the plan (as defined

at 29 CFR 2510.3-3) at the time when MetLife incurs the obligation

to distribute Trust Interests, cash or policy credits, then such

consideration would constitute an asset of such plan. Under these

circumstances, the appropriate plan fiduciaries must take all

necessary steps to safeguard the assets of the plan in order to

avoid engaging in a violation of the fiduciary responsibility

provisions of the Act.

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11. As noted above, all of the shares of MetLife Common Stock will

be issued to the Trust on the effective date and immediately exchanged

by the Trust for Holding Company Stock to be held for the benefit of a

policyholder that is a beneficiary of the Trust (the Trust

Beneficiary). Each Trust Beneficiary will be issued a number of Trust

Interests equal to the number of shares of Holding Company Common Stock

initially allocated to such Trust Beneficiary under the terms of the

Plan.

All Trust Interests will be held in the name of ChaseMellon

Shareholder Services, L.L.C. (ChaseMellon), the custodian, which has

been appointed by the Trustee under the Trust Agreement and which is

unrelated to MetLife and its affiliates. ChaseMellon will keep records

of all beneficiaries' Trust Interests. The Trust Beneficiaries will be

permitted to assign, pledge or dispose of their Trust Interests only in

certain limited circumstances.8 Even if the policy of a

Trust Beneficiary lapses, terminates or matures after the effective

date, shares allocated to the Trust Beneficiary will continue to be

held in the Trust until such Trust Beneficiary decides to withdraw

allocable shares of Holding Company Common Stock for sale. All Trust-

related fees and expenses will be paid by the Holding Company.

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\8\ For example, Section 3.4(b) of the Trust Agreement provides

that a Trust Beneficiary may transfer Trust Interests (a) from the

estate of a deceased beneficiary to one or more heirs; (b) to the

spouse, children or grandchildren of the beneficiary; (c) in the

event the beneficiary is not a natural person, to the surviving

entity upon a merger or consolidation of such beneficiary into

another entity; (d) as a consequence of the bankruptcy of the

beneficiary; or (e) from a trust holding a policy on behalf of the

insured person under such policy.

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12. Trust Beneficiaries will be able to sell shares of Holding

Company Common Stock, as evidenced by Trust Interests, at prevailing

market prices through a purchase and sale program (the Purchase and

Sale Program) which will be established by the Holding Company

following the completion of the IPO. The Purchase and Sale Program will

continue for the term of the Trust and will be effected through an

independent agent selected by the Holding Company. The Purchase and

Sale Program will be subject to certain volume and timing limitations

on Trust Beneficiaries. For example,

If a Trust Beneficiary holds 199 or fewer Trust Interests,

all of such Trust Beneficiary's Trust Interests must be withdrawn for

sale. The Trust Beneficiary will not be permitted to make a partial

withdrawal for sale.

If a Trust Beneficiary holds more than 199 Trust

Interests, such Trust Beneficiary may make a full or partial withdrawal

for sale. However, partial withdrawals for sale may only be in 100

share increments. (In this regard, the Trust Beneficiary may have 200

shares withdrawn for sale but not 250.) Following any partial

withdrawal for sale, the Trust Beneficiary may still hold at least 100

Trust Interests. If the Trust Beneficiary holds fewer than 100 Trust

Interests after the partial withdrawal for sale, such Trust Beneficiary

must make a full withdrawal for sale.

For the first 300 days following the effective date of the

Plan of Reorganization, if a Trust Beneficiary holds more than 25,000

Trust Interests, such Trust Beneficiary may make a full or partial

withdrawal for sale, subject to the volume limitations set forth in the

Purchase and Sale Program procedures. These volume restrictions are

designed to limit daily sales to a number of shares which is the lessor

of (a) \1/20\ of 1 percent of the number of shares outstanding or (b)

25 percent of the average daily trading volume for the 20 trading days

preceding the trade date. Sales in excess of those amounts will either

be made on the same day, in a block trade or through an investment bank

acting as agent, or deferred to the next trading day. After the first

300 days, these limitations will no longer apply and withdrawals for

sale may be made as otherwise permitted by these rules.

Until the second year after the effective date of the Plan

of Reorganization, if there is an underwritten public offering of

Holding Company Common Stock, the Holding Company will offer each Trust

Beneficiary holding at the time more than 25,000 Trust Interests and

whose cash election has not been fully satisfied, the opportunity to

include a number of Trust Shares equal to all of the Trust

Beneficiary's Trust Interests in the offering.

Holding Company Common Stock that is held in Trust will be sold

through the Purchase and Sale Program on the open market or it may be

purchased for cash directly from the Trust at market prices as of the

date of the sale. If sold to the Holding Company, the fair market value

of Holding Company Common Stock allocated to the Trust Beneficiary will

be determined by averaging the high and low trading prices of the

shares of Holding Company Common Stock as reported on the New York

Stock Exchange on the date of the sale. (Accordingly, the Trust

Beneficiary will receive the same consideration for its shares whether

they are purchased by the Holding Company or by an unrelated party on

the open market.) However, if the sale is being made pursuant to the

termination of the Trust, the fair market value will be determined as

the average of the closing price for a share of Holding Company Common

Stock for the twenty consecutive trading days ending on the third

calendar day immediately prior to the sale.9

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\9\ MetLife represents that the twenty day average formula has

been designed to eliminate any possibility of manipulation and to

prevent single day trading anomalies that might influence a Trust

Beneficiary's proceeds.

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The Holding Company will pay the commissions and related charges of

all beneficiaries, including Plans, which sell shares of allocable

Holding Company Common Stock through the Purchase and Sale Program.

Further, if the Trust Beneficiary is a Plan, a Plan fiduciary which is

independent of MetLife and its affiliates will determine whether it is

appropriate to sell shares of allocable Holding Company Common Stock to

MetLife or on the open market through the Purchase and Sale Program.

13. The Purchase and Sale Program will also include a ``round-up''

feature. In general, each Trust Beneficiary holding less than 1,000

Trust Interests, which are not equal to a multiple of 100, may instruct

the Trustee to arrange for the purchase of additional shares of Holding

Company Common Stock. Such Stock will be deposited in the Trust and

allocated to the Trust Beneficiary so that the Trust Beneficiary's

Trust Interests will be increased to the next nearest multiple of 100.

Further, each Trust Beneficiary which is allocated a number of Trust

Interests that is equal to a multiple of 100 and less than 1,000 may

[[Page 66207]]

instruct the Trustee to arrange for the purchase of additional shares

of Holding Company Common Stock in lots of 100. The Stock will be

deposited in the Trust and allocated to the Trust Beneficiary so that

the Trust Beneficiary's Trust Interests will be increased to any

multiple of 100 that is less than or equal to 1,000.

A Trust Beneficiary desiring to utilize the round-up feature of the

Purchase and Sale Program, will acquire additional shares of Holding

Company Common Stock for the fair market value of such Stock as

determined on the open market on the date of the acquisition.

14. In addition to the Purchase and Sale Program, beginning on the

first anniversary of the effective date of the demutualization and

lasting until the termination of the Trust, each Trust Beneficiary will

have the right to withdraw shares of Holding Company Common Stock being

held for such Trust Beneficiary under the Trust.\10\ A Trust

Beneficiary will not pay any fees or commissions in connection with the

withdrawal of shares of allocable Holding Company Common Stock. In the

case of a Trust Beneficiary that is a Plan, the decision to withdraw

shares of Holding Company Common Stock from the Trust will be made by a

Plan fiduciary which is independent of MetLife.

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\10\ MetLife projects that the initial number of shareholders of

the Holding Company may exceed 10 million. Because of this factor,

MetLife has restricted withdrawals of Holding Company Stock by Trust

Beneficiaries during the first year of the Trust's existence in

order to facilitate the efficient and orderly conduct of shareholder

accounts and costs associated with serving a large number of

shareholders. If Trust Beneficiaries were permitted to withdraw

their shares during the first year of the Trust's existence, MetLife

does not believe that these goals would be achieved.

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15. Under the Plan of Reorganization, regular cash dividends that

are received by the Trust on shares of Holding Company Common Stock

during any six month period ending on June 30 or December 31 will be

distributed to Trust Beneficiaries, in proportion to their Trust

Interests, on the following June 30 or July 31, respectively. The

Holding Company will set a payment date for the dividends so that they

are distributed to the Trust Beneficiaries within 90 days after the

Trustee has received them. Pending these semiannual distributions,

dividends received by the Trust will be invested by the Trustee in

short-term obligations of, or guaranteed by, the United States or any

agency or instrumentality thereof, and in certificates of deposit of

any bank or trust company having a combined capital and surplus of at

least $500 million. If there is a distribution of shares of Holding

Company Stock (i.e., a stock dividend), the additional shares will be

deposited in the Trust and held under the terms of the Trust Agreement.

Similarly, if the Holding Company Common Stock is exchanged for

common stock of another entity in connection with the merger or

consolidation of the Holding Company with another entity, the new

common stock will continue to be held in the Trust in accordance with

the Trust Agreement. In all other cases, if shares of Holding Company

Common Stock are exchanged for securities or other property of an

entity other than MetLife, the Trust will distribute the property

received to the Trust Beneficiaries based on their respective Trust

Interests.

16. Trust Beneficiaries will be able to instruct the Trustee how to

vote shares of Holding Company Common Stock that are held in Trust for

elections of Holding Company directors with competing candidates, any

merger, consolidation or recapitalization of the Holding Company, or

any other event that could result in an exchange of Holding Company

Common Stock for other property which would require a vote under

applicable Delaware law, exchange or NASDAQ rules. The Trustee will

generally vote all shares of Holding Company Common Stock that is held

in Trust in proportion to the instructions received from Trust

Beneficiaries which give such instructions. However, there is one

exception. If the issue is a choice of competing candidates for

director positions, and Trust Beneficiaries representing 20 percent or

fewer of the Trust Interests provide instructions, the Trustee will

vote only the shares of Holding Company Common Stock that are held in

Trust that are equal in number to the number of Trust Interests held by

Trust Beneficiaries which provide instructions. On all routine matters

other than those described above, the Trustee will vote shares of

Holding Company Common Stock that are held in Trust as recommended or

directed by the Holding Company's Board of Directors.

The Holding Company's Board of Directors may terminate the Trust if

the number of shares of Holding Company Common Stock held in Trust

falls below 25 percent of all outstanding shares of Holding Company

Common Stock. In any event, the Trust will be terminated when all

shares of Holding Company Common Stock held in Trust are withdrawn from

such Trust or the number of such shares is less than 10 percent of the

outstanding Holding Company Common Stock. The Trust can also be

terminated sooner by the Holding Company's Board of Directors because

of changes in the law or changes in facts or circumstances relating to

the Trust.

Upon termination of the Trust, a Trust Beneficiary will have the

option of receiving shares of allocable Holding Company Common Stock

in-kind or receiving cash as the result of the sale of such Stock to

the Holding Company, using the twenty day average formula described

above.

To ensure that the assets of the Trust will not be characterized as

``plan assets'' under the Act, the Holding Company may require certain

Trust Beneficiaries that are Plans to be cashed out during the term of

the Trust. If a Plan investor is ``cashed out'' by MetLife, such Trust

Beneficiary will receive the fair market value of allocable shares of

Holding Company Common Stock at the time of such termination.

Alternatively, MetLife will give the Trust Beneficiary the option of

receiving an in-kind distribution of allocable Holding Company Common

Stock.

17. As stated above, State Street has agreed to serve as the

Independent Fiduciary and investment manager for the MetLife Plans in

connection with certain aspects of the MetLife demutualization,

particularly with respect to the vote and potential receipt of

consideration by such Plans. State Street represents that it is

qualified to serve as the Independent Fiduciary and investment manager

for the MetLife Plans. In support of this representation, State Street

asserts that it is one of the largest trust companies in the United

States with over $525 billion in assets under management, a significant

portion of which consists of the assets of plans covered under the

provisions of the Act. State Street also represents that it served as

the Independent Fiduciary for the State Mutual Life Assurance Company

of America during its demutualization. Further, State Street represents

that it has served as a trustee or an independent fiduciary for

numerous retirement plans that acquire or hold employer securities.

Currently, State Street states that it manages over $72 billion in

employer securities held by various retirement plans. In managing such

investments, State Street explains that it has supervised numerous

transactions involving the acquisition, retention and disposition of

employer securities. On a continuing basis, State Street indicates that

it monitors the performance of the employer securities.

State Street represents that it is independent of MetLife and has

no business relationships with MetLife other than--

[[Page 66208]]

Providing various products and services to MetLife,

including (a) custodial services for all of MetLife's and State Street

Research's (a subsidiary of MetLife) mutual funds; (b) participating in

State Street's securities lending program; (c) global cash management;

(d) managing a sweep account; (e) providing credit facilities for

MetLife's Retained Asset Program; and (e) providing foreign exchange

securities to State Street Research. State Street represents that all

revenues and fees associated with MetLife represents less than one

percent of State Street's total revenues.

Offering MetLife's auto, homeowners and umbrella liability

coverage to employees of State Street.

Providing services as an investment manager for defined

contribution fixed income funds. Currently, State Street states that it

manages approximately $9 billion in fixed income securities.

Approximately $650 million of this amount is invested on behalf of

various clients in guaranteed investment contracts issued by MetLife.

However, State Street explains that it derives no revenue from MetLife

for investment in these contracts.

Providing master trust and custody services to various

pension plans, some of which may invest in MetLife guaranteed

investment contracts. State Street explains that it serves only as a

directed trustee/custodian to these plans and has no discretion related

to plan investments. State Street again asserts that it receives no

revenue from investment in these contracts. However, irrespective of

the investment, State Street receives a trust/custody fee based on the

total value of the plan.

State Street also states that MetLife holds, on behalf certain

MetLife customers, approximately 96,000 shares of State Street stock in

various separate accounts. These shares are currently worth

approximately $7 million and represent approximately .005962 of the

total outstanding shares of State Street stock.

Further, State Street asserts that no officer or director or State

Street is an officer or director of MetLife or vice versa and that

MetLife does not have an ownership interest in State Street nor does

State Street have an ownership interest in MetLife.

18. State Street represents that it understands and acknowledges

its ERISA duties, responsibilities and liabilities as a fiduciary with

respect to the MetLife Plans and agrees to undertake such duties.

Specifically, State Street will (a) vote at the special meeting of

Eligible Policyholders to approve the Plan of Reorganization; (b) make

any election, to the extent available under the Plan of Reorganization,

to receive Trust Interests or cash on behalf of the MetLife Plan; (c)

monitor, on behalf of the MetLife Plan, the acquisition and holding of

any Trust Interests received; (d) make determinations on behalf of the

MetLife Plan with respect to the voting and the continued holding of

Trust Interests by such Plan; (e) withdraw shares of Holding Company

Common Stock that is held in Trust which are equivalent to Trust

Interests allocated to a MetLife Plan and disposes of such Trust

Interests (i) not exceeding the limits of section 407(a) of the Act in

a prudent manner; (ii) exceeding the limits of section 407(a) of the

Act within six months of the IPO; and (f) provide the Department with a

complete and detailed final report as it relates to the MetLife Plans

prior to the effective date of the demutualization. Further, MetLife

represents that it has conducted a preliminary review of the Plan of

Reorganization and it sees nothing in the Plan that would preclude the

Department of Labor from proposing the requested exemption.

19. In summary, it is represented that the proposed transactions

will satisfy the statutory criteria for an exemption under section

408(a) of the Act because:

(a) The Plan of Reorganization, which is being implemented pursuant

to stringent procedural and substantive safeguards imposed under New

York law and supervised by the Superintendent, will not require any

ongoing involvement by the Department.

(b) One or more independent fiduciaries of Plans that are MetLife

policyholders will have an opportunity to determine whether to vote to

approve the Plan of Reorganization and will be solely responsible for

all such decisions after receiving full and complete disclosure of the

terms of such reorganization.

(c) The exemption will allow Eligible Policyholders that are Plans

to acquire Trust Interests, cash or policy credits in exchange for

their membership interests in MetLife and neither MetLife nor its

affiliates will exercise any discretion or provide investment advice

with respect to such acquisition.

(d) No Eligible Policyholder will pay any brokerage commissions or

fees in connection with such Eligible Policyholder's receipt of

consideration from MetLife or with respect to the operation of the

Purchase and Sale Program.

(e) The Superintendent will make an independent determination that

the Plan of Reorganization is in the best interest of all MetLife

policyholders, including Plans.

(f) All of MetLife's policyholder obligations will remain in force

and will not be affected by the Plan of Reorganization.

(g) In the case of the MetLife Plans, an Independent Fiduciary will

(1) vote at the special meeting of Eligible Policyholders to approve

the Plan of Reorganization; (2) make any election, to the extent

available under the Plan of Reorganization, to receive Trust Interests

or cash on behalf of the MetLife Plan; (3) monitor, on behalf of the

MetLife Plan, the acquisition and holding of any Trust Interests

received; (4) make determinations on behalf of the MetLife Plan with

respect to the voting and the continued holding of Trust Interests by

such Plan; and (5) dispose, in a prudent manner, allocable shares of

Holding Company Common Stock in respect of Trust Interests which exceed

the limits of section 407(a) of the Act within six months of the IPO.

Notice to Interested Persons

MetLife will give notice of the proposed exemption to Eligible

Policyholders that are Plans within 30 days of the date of publication

of the notice of pendency in the Federal Register. Such notice will

include a copy of the notice of proposed exemption, as published in the

Federal Register, as well as a supplemental statement, as required

pursuant to 29 CFR 2570.43(b)(2), which shall inform interested persons

of their right to comment on the proposed exemption. Therefore,

comments with respect to the proposed exemption will be due 60 days

after the date of publication of the proposed exemption in the Federal

Register.

FOR FURTHER INFORMATION CONTACT: Ms. Jan D. Broady of the Department,

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

Les Olson Company, Inc. Money Purchase Plan (M/P Plan) and Les

Olson Company, Inc. Profit Sharing Plan (P/S Plan, Collectively;

the Plans) Located in Salt Lake City, Utah

[Application Nos. D-10810 and D-10811]

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)

of the Act and the sanctions

[[Page 66209]]

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 proposed series of loans (the Loans), originated within a five-year

period, by the Plans to Les Olson Company, Inc. (the Employer), a party

in interest with respect to the Plans, provided that the following

conditions are met:

(1) The total amount of the outstanding Loans does not exceed 20

percent (20%) of the Plans' total assets at any time during the

transactions and each of the Plan's allocable portion of such Loans

does not exceed 20 percent (20%) of such Plan's total assets;

(2) Each Loan entered into by the Plans is made pursuant to the

terms and conditions of the Loan Agreement (the Loan Agreement)

executed by the parties and signed on behalf of the Plans by the Plans'

duly appointed independent, qualified fiduciary (the Independent

Fiduciary);

(3) All terms and conditions of the Loans are at least as favorable

to the Plans as those the Plans could obtain in an arms-length

transaction with an unrelated third party;

(4) Each Loan is: (i) For a maximum term of five years pursuant to

terms and conditions of the Loan Agreement; (ii) fully amortized and

payable in equal monthly installments of principal and interest; (iii)

used exclusively by the Employer to purchase office equipment (the

Equipment) which will be leased by the Employer in the ordinary course

of its business to unrelated parties; and (iv) secured by duly

perfected security interests in the new and used Equipment, and by

certain leases of Equipment (Equipment Leases) where such Equipment

Leases are assigned and pledged as collateral for the Loans, which is

at all times equal to 200% of the outstanding principal balance of such

Loan;

(5) New Equipment is valued for collateralization purposes at 80

percent (80%) of the invoice price paid by the Employer to purchase

such Equipment less taxes and transportation expenses. Used Equipment

and any Equipment Lease pledged as collateral for the Loans is valued

by an independent qualified appraiser;

(6) Prior to the approval of each Loan, the Independent Fiduciary

determines, on behalf of the Plans, that each Loan is prudent and in

the best interests of the Plans, and protective of the Plans and its

participants and beneficiaries;

(7) The Independent Fiduciary conducts a review of all terms and

conditions of the exemption, if granted, and the Loans, including the

applicable interest rate; the sufficiency of the collateral pledged for

each Loan; the financial condition of the Employer; and the compliance

with the 20% limitation for the Plans (and each Plan's) maximum total

Loan amount prior to approving each disbursement under the Loan

Agreement; and

(8) The Independent Fiduciary is authorized to take whatever action

is necessary to protect the Plans' interests throughout the duration of

the exemption, if granted, and throughout the duration of any Loan

entered into under this exemption, if granted.

Temporary Nature of Exemption, if Granted

The exemption, if granted, will be temporary and will expire five

(5) years from the date of publication in the Federal Register of the

final grant of this proposed exemption. Subsequent to the expiration of

the exemption, if granted, the Plans may hold any Loans originating

during this five-year period until the Loans are repaid or otherwise

terminated.

Summary of Facts and Representations

1. The Plans are the M/P Plan and the P/S Plan, which were

established in 1978 and 1979, respectively. As of December 31, 1998,

the Plans had 97 participants and total combined assets of $7,147,199.

The Plans are trusteed by R. Scott Olson, Thomas P. Olson, James R.

Olson and L. Ray Olson, all of whom are owners and officers of the

Employer, which is the Plan sponsor. The Employer is a closely-held

corporation organized under the laws of the State of Utah. The Employer

is engaged in the sale, leasing and maintenance of copiers, fax

machines and digital and analog dictation equipment. The shareholders

of the Employer are all members of the Olson family.

The Employer has facilities in the major metropolitan areas of

Utah, which are Salt Lake City, Ogden, Provo and St. George. The

Employer is in the business of purchasing office equipment and leasing

such equipment to its customers. The Employer generally has not used

outside financing in its operations and has supported itself from the

revenues it generates.

2. The applicant desires that the Plans make a series of Loans to

the Employer over a period of 5 years. The proceeds from the Loans will

be used by the Employer to purchase new office equipment (i.e.,

Equipment). Each Loan will be collateralized by a promissory note and a

security agreement, duly perfected and properly recorded under

applicable state law, which will provide that the Plans have a first

lien on the Equipment. In addition, the Loan may be collateralized by

leases of used Equipment (i.e., Equipment Leases) of the Employer if

necessary to adequately secure such Loans. At all times the collateral

for the Loans will be at least equal to 200% of the outstanding balance

of such Loans. New Equipment will be valued at 80% of the invoice price

paid by the Employer upon purchasing the Equipment, less taxes and

transportation expenses. Used Equipment and Equipment Leases pledged as

collateral for the Loans will be valued in each case by an independent

qualified appraiser.

3. Mr. Jack S. Emery (Mr. Emery) will serve as the independent

qualified appraiser for the Loan transactions described herein.

Mr. Emery is a qualified appraiser of office equipment who is

currently a businessman and an investor in various business ventures.

Mr. Emery has over 25 years of experience in the business of leasing

office equipment. In this regard, Mr. Emery was one of the founders of

the Matrix Funding Corporation (Matrix). Matrix was a major office

equipment leasing business from 1978 until 1998. In 1998, Matrix was

sold and consolidated with 12 other leasing companies to form

Unicapital, an office equipment leasing company whose stock is

publicly-traded on the New York Stock Exchange.

Mr. Emery states that he will appraise all of the collateral used

for the Loans on an annual basis. Mr. Emery states further that during

his 25 year career in the office equipment leasing business he has

valued numerous pieces of office equipment of the same type as the

Equipment which will be used as collateral for the Loans. Mr. Emery

further represents that in his career he has used office equipment for

sale, leasing and financing. Mr. Emery states that he is very familiar

with the useful life of this type of equipment, the rate at which it

depreciates, and the market factors that may affect its value. In

conducting appraisals of the Equipment, Mr. Emery will take into

consideration all the relevant factors relating to the valuation of the

Equipment and the market-place for such Equipment.

4. The maximum length of any Loan will be 5 years under the terms

and conditions of the Loan Agreement. The interest rate on the Loans

will be equal to the prime rate as of the date of closing, as quoted

under ``Money Rates'' in the Wall Street Journal (WSJ Prime) plus two

percentage points, and will be adjusted quarterly. Additionally, the

interest rate of any Loan will be set at a higher rate if such higher

rate represents the prevailing market rate for similar loans as

determined by the

[[Page 66210]]

Independent Fiduciary, as discussed further below. In no event will any

Loan bear an interest rate lower than the WSJ Prime plus two percentage

points.

The outstanding balance of the Loans will never exceed 20% of the

fair market value of the Plans' aggregate assets (or fair market value

of each of the Plan's assets).

5. Mr. Emery will also serve as the Independent Fiduciary for the

Plans with respect to the proposed Loans pursuant to the terms and

conditions of a written independent fiduciary agreement (the I/F

Agreement). Mr. Emery represents that he is qualified to act as an

independent qualified fiduciary with respect to the Loans, and that he

understands his duties and responsibilities under the Act. In this

regard, Mr. Emery states that he has not previously served as an

independent fiduciary for a pension plan. However, Mr. Emery states

that he has been, and will continue to be, advised by a qualified ERISA

attorney regarding his duties and responsibilities as an independent

fiduciary for the Plans. The income received by Mr. Emery from the

Plans, for functioning as the Independent Fiduciary, will not exceed 1%

of his gross annual income. In addition, Mr. Emery represents that he

has no pre-existing relationship with the Employer or with any of the

shareholders of the Employer.

6. Mr. Emery, as the Independent Fiduciary, represents that he will

determine the appropriateness and suitability of each Loan for the

Plan(s) prior to the consummation of the Loan transaction. Mr. Emery

will review the value of the Equipment and the assets pledged to secure

the Loans and confirm the sufficiency of the value of the collateral

for each Loan.

Mr. Emery represents that he will ensure that the Loans are

appropriate investments for the Plans and are in the best interests of

the Plans' participants and beneficiaries, and protective of their

interests. Mr. Emery states further that the terms of the Loans will be

at least as favorable to the Plans as the terms obtainable by the Plans

in an arm's-length transaction with an unrelated party. Mr. Emery also

states that he will enforce the terms of each Loan including, but not

limited to, making demand for timely payments from the Employer,

bringing suit or other appropriate action against the Employer in the

event of default, and monitoring the performance of each Loan and

taking whatever actions are necessary to protect the interests of the

Plans.

7. Mr. Emery, as the Independent Fiduciary, also reserves the right

under the I/F Agreement to hire independent advisors, as necessary to

perform his duties as the Plans' Independent Fiduciary. For example,

Mr. Emery states that it could become necessary in the event of a

foreclosure on the Equipment, for him to require advice from an

independent, experienced and qualified legal counsel on the mechanics

of such foreclosure.

8. With respect to the terms and conditions of the Loans, Wells

Fargo Bank in Salt Lake City, Utah (the Bank), in a letter dated

October 4, 1999, has stated that it would enter into similar loan

transactions with the Employer, provided it determined at the time of

transaction that the Employer would be a creditworthy borrower. The

Bank has examined the terms of the Loans and concluded that such terms

are at least as favorable to the Plans as those terms which would be

obtainable in an arm's-length transaction with an unrelated party.

9. In summary, the applicant represents that the transactions will

meet the statutory criteria of section 408(a) of the Act and section

4975(c)(2) of the Code because:

(a) The interest rates paid to the Plans on the Loans will be at

least as favorable to the Plans as the current market rate of interest

for similar loans;

(b) The Plans' interests with respect to the Loans will be

represented by Mr. Emery, as the Independent Fiduciary, who will

monitor the Loans and the terms and conditions of the exemption, if

granted, and will take all appropriate actions necessary to safeguard

the interests of the Plans and their participants and beneficiaries;

(c) Mr. Emery will determine that each Loan is in the best

interests of the Plans' participants and beneficiaries at the time of

the transaction;

(d) Mr. Emery will review and approve each Loan prior to making any

disbursements of the Loan amount to the Employer;

(e) The Loans will be secured at all times by the Equipment or

Equipment Leases, which will be valued at not less than 200% of the

outstanding principal balance of each Loan; and (f) the aggregate

balance of the outstanding Loans will not exceed 20% of the aggregate

value of the Plans' assets, or 20% of each of the Plan's total assets.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department

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

TMI Systems Design Corporation 401(k) Profit Sharing Plan (the

Plan) Located in Dickinson, North Dakota

[Application No. D-10821]

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)

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 proposed sale by the Plan of certain

limited partnership interests (the Interests) to Northern Capital Trust

Company (Northern), the Plan's trustee and a party in interest with

respect to the Plan, for $185,316 in cash, provided the following

conditions are satisfied: (a) the sale is a one-time transaction for

cash; (b) no commissions are charged in connection with the

transaction; (c) the Plan receives not less than the fair market value

of the Interests at the time of the transaction; and (d) the fair

market value of the Interests is determined by a qualified entity

independent of the Plan and of Northern.

Summary of Facts and Representations

1. The Plan is a 401(k) profit sharing plan which is sponsored by

TMI Systems Design Corporation (the Employer) of Dickinson, North

Dakota. The Plan currently has 292 participants and had assets of

$5,109,439 as of August 31, 1999. The trustee of the Plan is Northern,

a trust company located at 203 10th Street North, Fargo, North Dakota.

Northern has investment discretion for the Plan's assets.

2. In August 1993, the Plan purchased the Interests as an

investment from an unrelated party (as discussed below). The Interests

consist of an 8.4674% interest in the Courtyard Limited Partnership

(the Partnership). The Partnership's sole asset is an apartment

building known as ``Courtyard Apartments'' in St. Louis Park,

Minnesota. The Plan paid $108,467.40 for the Interests in the

Partnership. The investment was presented to Northern, as Plan trustee,

by Regan Wieland Investment Co., whose name was later changed to

Goldmark Investment Company (Goldmark), on behalf of the Partnership.

Goldmark and the Partnership are independent of, and

[[Page 66211]]

unrelated to, the Employer and Northern.

3. The Employer would like to permit employee directed investments

and the use of a 24-hour telephone service to accommodate daily

transfers by Plan participants of assets held in their individual

accounts in the Plan. In order to be able to participate in the new

daily valuation and transfer system, the Plan needs to divest itself of

the Interests to ensure proper liquidity for all of the Plan's assets.

In this regard, the applicant represents that it is necessary to

transfer the Interests out of the Plan because the Interests cannot be

valued on a daily basis.

4. Northern as Plan trustee has contacted Goldmark, the Managing

Partner of the Partnership, to inform them that the Plan wishes to sell

its Interests. Mr. Kenneth P. Regan of Goldmark has represented that

the fair market value of the Plan's Interests would be approximately

$177,815, if all of the partners were to sell their Partnership

interests at the present time. However, in the event only one partner,

such as the Plan, were to dispose its Interests, there would be

discounts from the $177,815 value to reflect the lack of marketability

and minority ownership in addition to sales costs. Goldmark estimates

that these expenses would be approximately $8,000. Thus, Goldmark

states that the value of the Plan's Interests, if it were to sell such

Interests alone, would be approximately $170,000. Goldmark based its

valuation of the Partnership on a September 4, 1998 appraisal of the

Courtyard Apartments that was conducted by Everett D. Strand, MAI,

(Strand) of Kramer, Geisler, Strand & Goff, Inc., an independent real

estate appraiser in Minneapolis, Minnesota.

5. The applicant has requested an exemption that would permit the

Plan to sell the Interests to Northern for cash. No commissions or

other fees would be charged in connection with the sale. Northern has

represented that they are willing to pay the Plan $185,316 for the

Interests, an amount which reflects the book value of the Interests

carried by Northern on the Plan's balance sheet as of August 31, 1999

(based upon the net asset value of the Courtyard Apartments as the

Partnership's only asset). This amount is more than the current fair

market value of the Interests (i.e., $170,000) as determined by

Goldmark.

6. In summary, the applicant represents that the proposed

transaction satisfies the criteria contained in section 408(a) of the

Act because: (a) The sale is a one-time transaction for cash; (b) no

commissions or other fees will be charged in connection with the

transaction; (c) the sales price for the Interests will be an amount,

based on the book value of the Interests, which reflects more than the

fair market value of the Interests as determined by Goldmark, the

Managing Partner for the Partnership; and (d) Goldmark based its

valuation of the Partnership on an appraisal of the Courtyard

Apartments performed by Strand, an independent qualified real estate

appraiser.

FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz 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 of disqualified

person from certain other provisions of the Act and/or the Code,

including any prohibited transaction provisions to which the exemption

does not apply and the general fiduciary responsibility provisions of

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

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

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

accordance with section 404(a)(1)(b) of the act; nor does it affect the

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

for the exclusive benefit of the employees of the employer maintaining

the plan and their beneficiaries;

(2) Before an exemption may be granted under section 408(a) of the

Act and/or section 4975(c)(2) of the Code, the Department must find

that the exemption is administratively feasible, in the interests of

the plan and of its participants and beneficiaries and protective of

the rights of participants and beneficiaries of the plan;

(3) The proposed exemptions, if granted, will be supplemental to,

and not in derogation of, any other provisions of the Act and/or the

Code, including statutory or administrative exemptions and transitional

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

(4) The proposed exemptions, if granted, will be subject to the

express condition that the material facts and representations contained

in each application are true and complete and accurately describe all

material terms of the transaction which is the subject of the

exemption. In the case of continuing exemption transactions, if any of

the material facts or representations described in the application

change after the exemption is granted, the exemption will cease to

apply as of the date of such change. In the event of any such change,

application for a new exemption may be made to the Department.

Signed at Washington, DC, this 18th day of November, 1999.

Ivan Strasfeld,

Director of Exemption Determinations, Pension and Welfare Benefits

Administration, U.S. Department of Labor.

[FR Doc. 99-30560 Filed 11-23-99; 8:45 am]

BILLING CODE 4510-29-P