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Secretary of Labor Thomas E. Perez
Proposed Exemptions; Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis Professional Association Section 401(k) Profit Sharing Plan (the Plan) [Notices] [01/25/2001]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis Professional Association Section 401(k) Profit Sharing Plan (the Plan) [01/25/2001]

[PDF Version]

Volume 66, Number 17, Page 7800-7814


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

[Application No. D-10856, et al.]

 
Proposed Exemptions; Trenam, Kemker, Scharf, Barkin, Frye, 
O'Neill & Mullis Professional Association Section 401(k) Profit Sharing 
Plan (the Plan)

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

    All interested persons are invited to submit written comments or 
request for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
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

[[Page 7801]]

include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and request for a hearing (at least 
three copies) should be sent to the Pension and Welfare Benefits 
Administration, Office of Exemption Determinations, Room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 
20210. Attention: Application No. ____, stated in each Notice of 
Proposed Exemption. The applications for exemption and the comments 
received will be available for public inspection in the Public 
Documents Room of the Pension and Welfare Benefits Administration, U.S. 
Department of Labor, Room N-5638, 200 Constitution Avenue, N.W., 
Washington, D.C. 20210.

Notice to Interested Persons

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

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), 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.

Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis Professional 
Association Section 401(k) Profit Sharing Plan (the Plan) Located 
in Tampa, Florida

[Application No. D-10856]

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 sales by the individually 
directed accounts of certain participants (the Participants) in the 
Plan of certain limited partnership units (the Units) to the 
Participants, provided the following conditions are satisfied: (a) Each 
sale is a one-time transaction for cash; (b) no commissions are charged 
in connection with the sales; (c) the Plan receives not less than the 
fair market value of the Units at the time of the transactions; and (d) 
the fair market value of the Units is determined by a qualified entity 
independent of the Plan and the Participants.

Summary of Facts and Representations

    1. The Plan is a 401(k) profit sharing plan which is sponsored by 
Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis Professional 
Association (Trenam), a law firm in Tampa, Florida. The Plan has 183 
participants and had total assets of $10,688,388 as of September 30, 
1999. Until June 18, 1999, the date of the most recent Plan amendment, 
the Plan was designed to allow for almost unlimited flexibility and 
choice by its participants to direct the Plan's trustee to invest the 
vested portion of their accounts in various investments, in which case 
the Plan provided for separate individual accounting of the 
participants' accounts. Therefore, each participant bore the sole risk 
of loss attributable to his or her investment decision. As of June 30, 
1999, approximately one-third of the Plan's participants were choosing 
to self-direct at least some of their individual accounts.
    2. Recently, SouthTrust Asset Management Company of Florida, N.A., 
the Plan's custodian and directed trustee (the Trustee) advised Trenam 
that it was no longer willing to perform its current function, unless 
the Plan provisions allowing unlimited flexibility and choice of self-
directed investment options for Plan participants were modified. The 
Trustee felt that the administration and record-keeping of the Plan had 
become far too complex. Trenam accordingly amended the self-directed 
investment provision of the Plan so that participants will still be 
able to direct their investments, but among a more limited universe of 
investment options. This change was also intended to alleviate the 
difficulty that certain of the investments cause in fully complying 
with the Department's reporting requirements.
    3. In order to accomplish this necessary change in Plan design, all 
participants must liquidate their directed investments that they have 
``earmarked'' to their accounts. This Plan change created no problems 
in relation to those participants that held marketable investments in 
their ``earmarked'' accounts; however, it does present a problem for 
the Participants, who hold non-marketable or worthless investments. 
Thus, the applicant has requested an exemption to permit these 
Participants to buy these investments from their accounts in the Plan 
for cash at an amount equal to their independently determined fair 
market value on the date of sale.
    4. The limited partnerships involved in the proposed transactions 
are as follows: (a) Fishhawk Investment Fund, Ltd. Real Estate Florida 
Limited Partnership (Fishhawk); (b) Florida Crossroads, Ltd., Real 
Estate Florida Limited Partnership (Crossroad); and (c) Williams Road 
Investment Fund, Ltd., Real Estate Florida Limited Partnership 
(Williams). The Units were acquired from each limited partnership in 
connection with the original syndication thereof. The arrangement 
usually called for payments of the cost of the Units to be provided in 
installments on a specified payment schedule. The terms were the same 
for all investors, and the Participants were only a few of the 
investors. In some instances, additional funds were requested at a 
later date as a result of a capital call to all partners, and in some 
instances the Participant's account provided the extra funds, but in 
other cases the Participant's account's ownership was diluted for 
failure to respond to the capital call (as permitted under the 
Partnership Agreement). The following chart describes the Participants 
involved in the subject transactions and provides information 
concerning the Units:

[[Page 7802]]



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                                                                     Directed                       Percent of
          Participant              Partnership     No. of units    account value   Total account   participants
                                                                     (9/30/99)         value       total account
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Marvin Barkin.................  Fishhawk........           1.357          53,407         548,468            13.4
                                Crossroad.......            .951          19,972
William Frye..................  Fishhawk........            .905          35,618         659,303             8.4
                                Crossroad.......            .952          19,993
Harold Mullis, Jr.............  Fishhawk........            .587          17,238         570,708            12.0
                                Crossroad.......            .453           9,513
                                Williams........             1.0          42,000
K. Rounsaville................  Fishhawk........            .360          14,168          95,123            14.9
Richard Sollner...............  Fishhawk........            .307           6,415         132,958             4.8
William Zewadski..............  Fishhawk........            .145           5,707          96,625             5.9
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    5. The specific terms of the transaction are as follows: (a) Marvin 
E. Barkin, a shareholder in and Vice President of Trenam, will purchase 
1.357 Units of Fishhawk for $53,407 and 0.951 Units of Crossroad for 
$19,972 from his individual account in the Plan. Mr. Barkin's account 
has had a cost for the Units of Fishhawk of $225,000, and a cost of 
$34,191 for the Units of Crossroad;
    (b) William C. Frye, a shareholder in and Treasurer of Trenam, will 
purchase 0.905 Units of Fishhawk for $35,618, and 0.952 Units of 
Crossroad for $19,993 from his individual account in the Plan. Mr. 
Frye's account has had a cost for the Units of Fishhawk of $150,000, 
and a cost of $34,191 for the Units of Crossroad;
    (c) Harold W. Mullis, Jr., a shareholder in and President of 
Trenam, will purchase 0.587 Units of Fishhawk for $17,238, 0.453 Units 
of Crossroad for $9,513, and 1.0 Unit of Williams for $42,000 from his 
individual account in the Plan. Mr. Mullis's account has had a cost for 
the Units of Fishhawk of $97,143, a cost of $42,000 for the Unit of 
Williams, and a cost of $16,281 for the Units of Crossroad;
    (d) Keith E. Rounsaville, a former shareholder in Trenam, will 
purchase 0.360 Units of Fishhawk for $14,168 from his individual 
account in the Plan. Mr. Rounsaville's account has had a cost for the 
Units of Fishhawk of $60,000;
    (e) Richard H. Sollner, a shareholder in Trenam who heads up the 
Real Estate Department, will purchase 0.307 units of Fishhawk for 
$12,082 from his individual account in the Plan. Mr. Sollner's account 
has had a cost for the Units of Fishhawk of $60,000; and
    (f) William K. Zewadski, a shareholder in Trenam who works in the 
Litigation Department, will purchase 0.145 units of Fishhawk for $5,707 
from his individual account in the Plan. Mr. Zewadski's account has had 
a cost for the Units of Fishhawk of $24,286.
    6. The proposed sales prices for the Units were determined by the 
general partners (the GPs) of each of the partnerships involved. The 
GPs will update their appraisals as of the dates of the sales so that 
the Plan will receive not less than the fair market value of the Units 
as of the dates of the sales.
    Mr. Glen E. Cross (Mr. Cross) is the GP of both Fishhawk and 
Crossroad. Mr. Cross represents that as of September 9, 1999, a one (1) 
percent interest in Fishhawk would have a fair market value of $35,000. 
Mr. Cross also represents that as of September 9, 1999, a one (1) 
percent interest in Crossroad would have a fair market value of 
$21,000. Mr. Cross, who serves as a general partner in other Florida 
limited partnerships involved in the ownership and development of land, 
has been in the real estate development business since 1965.
    Mr. David A. Kennedy (Mr. Kennedy) is the GP of Williams. Mr. 
Kennedy represents that as of June 30, 1999, a one Unit interest in 
Williams would have a fair market value of $42,000. Mr. Kennedy, who 
serves as a general partner in other limited partnerships involved in 
the ownership and development of land, has been in the real estate 
development business since 1970. The applicant represents that Mr. 
Cross and Mr. Kennedy (and/or their respective business enterprises) 
are clients of Trenam, but the combined fees paid by the two of them 
together, and all business interests of either, constitute less than 1% 
of Trenam's total gross fee income for any fiscal year. The applicant 
further represents that neither has any relationship to Trenam, the 
Plan or the Participants, other than as GP for the partnerships and 
clients as described above.
    7. The applicant represents that the proposed transactions are in 
the best interests of the Plan and the affected participants and 
beneficiaries. Each of the Participants' individual accounts in the 
Plan (the Accounts) will receive an amount in cash equal to the fair 
market value of the Units which it owns, as determined by an 
independent, qualified appraiser at the time of the transaction. The 
Accounts will be able to sell the Units without having to pay any 
commissions or other expenses for the transactions. The proposed 
transactions will enable the plan to effectively modify the current 
self-directed investment options of the Plan in order to simplify the 
Plan's administrative and record-keeping requirements. Thus, the 
proposed transactions will help reduce the Plan's expenses and enable 
the Plan to continue to utilize the services of the Trustee.\1\
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    \1\ The Department is providing no opinion in this proposed 
exemption as to whether the current arrangement by the Plan with the 
Trustee, or the proposed new arrangement for more limited investment 
options for Plan participants, is appropriate for the Plan at this 
time.
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    8. In summary, the applicant represents that the proposed 
transactions will satisfy the criteria contained in section 408(a) of 
the Act because: (a) the sales are one-time transactions for cash; (b) 
no commissions or other fees will be charged in connection with the 
transactions; (c) the sales prices for the Units will be at fair market 
value at the time of the sale based on the appraisals of the Units 
performed by the GPs of the respective partnerships.

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

Indianapolis Life Insurance Company (Indianapolis Life) Located in 
Indianapolis, IN

[Application No. D-10930]

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 in accordance 
with the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 
32836, 32847, August 10, 1990).\2\
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    \2\ 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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[[Page 7803]]

Section I. Covered Transactions
    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 (1) the receipt of common stock (Common Stock) 
issued by AmerUs Group Co. (AmerUs Group), the parent of Indianapolis 
Life, or (2) the receipt of cash (Cash) or policy credits (Policy 
Credits), by or on behalf of a policyowner of Indianapolis Life (the 
Eligible Member), which is an employee benefit Plan, including an 
employee benefit plan that is sponsored by Indianapolis Life and its 
affiliates for their own employees (the Indianapolis Life Plans; 
collectively, the Plans), in exchange for such Eligible Member's 
membership interest in Indianapolis Life, in accordance with the terms 
of a plan of conversion (the Plan of Conversion), implemented under 
Indiana law.
    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 or 
holding, by the Indianapolis Life Insurance Company Group Term Life 
Insurance Plan for Employees, Plan No. 505 (the IL Group Term Life 
Insurance Plan), of employer securities in the form of excess AmerUs 
Group Common Stock, in accordance with the terms of the Plan of 
Conversion.
    This proposed exemption is subject to the following conditions set 
forth below in Section II.
Section II. General Conditions
    (a) The Plan of Conversion is subject to approval, review and 
supervision by the Commissioner of Insurance of the Indiana Department 
of Insurance (the Commissioner) and is implemented in accordance with 
procedural and substantive safeguards imposed under Indiana law.
    (b) The Commissioner reviews the terms and options that are 
provided to Eligible Members as part of such Commissioner's review of 
the Plan of Conversion, and the Commissioner approves the Plan of 
Conversion following a determination that such Plan is fair and 
equitable to Eligible Members.
    (c) Each Eligible Member has an opportunity to vote to approve the 
Plan of Conversion after full written disclosure is given to the 
Eligible Member by Indianapolis Life.
    (d) Any determination to receive Common Stock, Cash or Policy 
Credits by an Eligible Member which is a Plan, pursuant to the terms of 
the Plan of Conversion, is made by one or more Plan fiduciaries which 
are independent of Indianapolis Life and its affiliates and neither 
Indianapolis Life nor any of its affiliates exercises any discretion or 
provides ``investment advice'' within the meaning of 29 CFR 2510.3-
21(c), with respect to such decisions.
    (e) After each Eligible Member entitled to receive shares of AmerUs 
Group Common Stock is allocated at least 12 shares, additional 
consideration is allocated to Eligible Members who own participating 
policies based on actuarial formulas that take into account each 
participating policy's contribution to the surplus and asset valuation 
reserve of Indianapolis Life, which formulas have been approved by the 
Commissioner.
    (f) In the case of the Indianapolis Life Plans, the independent 
fiduciary--
    (1) Votes on whether to approve or not to approve the proposed 
restructuring process (the Restructuring);
    (2) Elects between consideration in the form of AmerUs Group Common 
Stock or Cash;
    (3) Determines how to apply the Cash or AmerUs Group Common Stock 
received for the benefit of the participants and beneficiaries of the 
Indianapolis Life Plans;
    (4) Votes shares of AmerUs Group Common Stock held by the IL Group 
Term Life Insurance Plan and disposes of such stock exceeding the 
limitation of section 407(a)(2) of the Act as reasonably as 
practicable, but in no event later than six months after the effective 
date of the Plan of Conversion.
    (5) Provides the Department with a complete and detailed final 
report as it relates to the Indianapolis Life Plans prior to the 
effective date of the Restructuring; and
    (6) Takes all actions that are necessary and appropriate to 
safeguard the interests of the Indianapolis Life Plans and their 
participants and beneficiaries.
    (g) All Eligible Members that are Plans participate in the 
transactions on the same basis as all Eligible Members that are not 
Plans.
    (h) No Eligible Member pays any brokerage commissions or fees in 
connection with their receipt of AmerUs Group Common Stock or Policy 
Credits or in connection with the implementation of the commission-free 
purchase and sale program.
    (i) All of Indianapolis Life's policyholder obligations remain in 
force and are not affected by the Plan of Conversion.
Section III. Definitions
    (a) The term ``Indianapolis Life'' means the Indianapolis Life 
Insurance Company and any affiliate of Indianapolis Life, as defined in 
paragraph (b) of this Section III.
    (b) An ``affiliate'' of Indianapolis Life includes --
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with Indianapolis 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.)
    (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) A ``policy'' is defined as (1) any contract of insurance, 
annuity contract, or supplemental contract in each case, that has been 
issued by Indianapolis Life; (2) each certificate issued under any of 
Indianapolis Life's group annuity contracts as part of a custodial 
403(b) or IRA arrangement, or as part of a non-ERISA 403(b) arrangement 
(the custodian or employer-sponsor holding such group annuity contracts 
shall not be considered the Eligible Member or owner); and (3) each 
certificate issued under the group plan established as a convenience by 
Indianapolis Life to provide life insurance to self-employed agents and 
under which all premiums were paid by such agents. The following 
policies and contracts are deemed not to be policies for purposes of 
the Plan of Conversion: (1) A certificate issued to an individual 
pursuant to a group life insurance policy (except as set forth in the 
preceding sentence); (2) a certificate issued under a group annuity 
contract (except as set forth in the preceding sentence); and (3) any 
reinsurance assumed on an indemnity basis (but certificates of 
assumption constitute policies).
    (d) The term ``Eligible Member'' means a policyholder whose name 
appears on Indianapolis Life's records as the owner of one or more 
policies issued by Indianapolis Life on both the date the Board of 
Directors adopts the Plan of Conversion and the effective date of the 
Plan of Conversion.
    (e) A ``supplemental contract'' is a policy or contract that has 
been issued pursuant to a Plan participant.
    (f) ``Policy Credits'' will consist of an increase in the dividend 
accumulation on an Indianapolis Life policy or

[[Page 7804]]

contract (to which no sales, surrender, or similar charges will be 
applied), an increase in the accumulation account value of the 
Indianapolis Life policy or contract (to which no sales, surrender, or 
similar charge will be applied), an increase in the premium deposit 
fund under the Indianapolis Life policy or contract, an increase in the 
amount of the payments distributed under an Indianapolis Life policy or 
contract that is a supplemental contract, or an extension of the expiry 
date on an Indianapolis Life policy or contract that is in force as 
extended term life insurance pursuant to a non-forfeiture provision of 
a life insurance policy.

Summary of Facts and Representations

    1. Indianapolis Life, which maintains its principal place of 
business in Indianapolis, Indiana, is a mutual life insurance company 
that was organized in 1905 under the laws of the State of Indiana. 
Indianapolis Life owns a majority interest in Indianapolis Life Group 
of Companies, a stock holding company, which wholly owns four operating 
subsidiaries--IL Annuity and Insurance Company, Bankers Life Insurance 
Company of New York, Western Security Life Insurance Company, and IL 
Securities, Inc. All of the operating subsidiaries are involved in the 
business of providing life insurance or in related financial services. 
Indianapolis Life and its affiliates are licensed to transact business 
in all 50 states and the District of Columbia. As of June 30, 2000, 
Indianapolis Life had approximately $1.8 billion in assets. Currently, 
Indianapolis Life has the following ``financial-strength'' ratings: 
A.M. Best Company ``A''; Fitch ``AA''; Moody's Baa1; and Standard & 
Poor's ``A''.
    2. As a mutual insurance company, Indianapolis Life does not have 
stockholders. Instead, it has mutual members who are owners of 
insurance policies and contracts it has issued. As mutual members, 
Indianapolis Life's policyholders have the right to vote in the 
election of its Board of Directors and to vote on any proposition that 
the Board submits to a vote of the members in accordance with Indiana 
law, including the right to vote on the conversion of Indianapolis Life 
from a mutual life insurance company to a stock company. The voting 
rights of members are equal, with each member having only one vote 
regardless of the number or size of policies owned by that member. 
Indianapolis Life's policyholders also have the right to participate in 
the voluntary dissolution or liquidation of the insurer and to receive 
consideration in the event of such insurer's demutualization.
    3. Indianapolis Life's principal products include life insurance 
and annuity contracts. Some of these contracts are sold to Plans 
subject to ERISA and to other Plans described in section 4975(e)(1) of 
the Code. The Plans include defined benefit pension plans, defined 
contribution pension and profit sharing plans (including 401(k) plans 
and Keogh plans); individual retirement accounts (IRAs) described in 
section 408 of the Code (including simplified employee pensions); Roth 
IRAs described in section 408A of the Code; tax-sheltered annuities 
described in section 403(b) of the Code; and welfare benefit plans.
    Indianapolis Life currently has approximately 5,500 outstanding 
contracts held in connection with Plans. As Indianapolis Life 
policyholders, the Plans have membership interests in Indianapolis 
Life. In certain cases, Indianapolis Life or one of its affiliates may 
provide limited administrative or recordkeeping services to the Plans. 
These services include the preparation of tax forms (e.g., IRS Forms 
1099-R and 5498), the tracking of regular contributions made to IRAs or 
Roth IRAs, and, in prior years, the provision of prototype plan 
documents.
    In general, neither Indianapolis Life nor any of its affiliates is 
in the business of providing administrative, recordkeeping, or 
fiduciary services to Plans, other than serving as a fiduciary for four 
Indianapolis Life Plans. However, as a service provider, Indianapolis 
Life may still be considered a party in interest with respect to one or 
more Plans that are its policyholders.
    4. The Plans maintained by Indianapolis Life and its affiliate, 
Bankers Life Insurance Company of New York, for their own employees are 
all policyholders of Indianapolis Life. These Plans include the--
    (a) Indianapolis Life Insurance Company Salary Reduction Plan, Plan 
No. 007 (the IL Salary Reduction Plan). The IL Salary Reduction Plan is 
a defined contribution plan. As of June 20, 2000, the IL Salary 
Reduction Plan had total assets of approximately $18 million and 457 
participants. The trustees make investment decisions for this Plan.
    (b) Indianapolis Life Insurance Company Employees Pension Plan, 
Plan No. 001 (the IL Employees Pension Plan). The IL Employees Pension 
Plan is a defined benefit plan. As of January 1, 2000, the IL Employees 
Pension Plan had total assets of approximately $27.8 million and 774 
participants. Indianapolis Life, acting through the Investment 
Committee of its Board of Directors, makes investment decisions on 
behalf of this Plan.
    (c) IL Group Term Life Insurance Plan. The IL Group Term Life 
Insurance Plan is a welfare plan that is fully insured. As of September 
12, 2000, the IL Group Term Life Insurance Plan had 381 participants.
    (d) Bankers Life Insurance Company of New York Profit Sharing and 
Salary Deferral Plan, Plan No. 001 (the BL Profit Sharing/Salary 
Deferral Plan). The BL Profit Sharing/Salary Deferral Plan is a defined 
contribution plan. As of June 30, 2000, the BL Profit Sharing/Salary 
Deferral Plan had total assets of approximately $3.3 million and 105 
participants. The trustees make investment decisions for this Plan.
    5. AmerUs Group is a corporation that resulted from the recent 
conversion of American Mutual Holding Company (AMHC), an Iowa mutual 
insurance holding company, into an Iowa stock business corporation.\3\ 
Upon its conversion, AMHC changed its name to ``AmerUs Group Co.'' 
AmerUs Group is a publicly-held company, with its common capital stock 
registered under the Securities Exchange Act of 1934, as amended. As 
described herein below, Indianapolis Life and its affiliates will 
become wholly owned subsidiaries of AmerUs Group upon Indianapolis 
Life's conversion.
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    \3\ For a discussion of AMHC's demutualization, see Prohibited 
Transaction Exemption 2000-53 (65 FR 65332, November 1, 2000).
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The Indianapolis Life Restructuring
    6. On September 18, 2000, Indianapolis Life's Board of Directors 
adopted a Plan of Conversion under which Indianapolis Life will convert 
to a stock life insurance company. The Plan of Conversion is part of a 
larger transaction involving the combination of Indianapolis Life with 
AmerUs Group in a ``sponsored demutualization.'' The steps involved in 
this process are collectively referred to as the ``Restructuring.''
    The principal purpose of the Restructuring is to enhance 
Indianapolis Life's financial strength and access to capital through an 
affiliation with AmerUs Group that will result in a larger combined 
organization. Indianapolis Life represents that access to capital 
markets will enable it to invest in new technology, improve customer 
service, and develop new products and new channels of distribution.
    In addition, Indianapolis Life asserts that the Restructuring will 
allow it to

[[Page 7805]]

obtain more financial flexibility with which to maintain its ratings 
and financial stability. In this regard, Indianapolis Life anticipates 
that the flexibility to pay compensation in the form of stock options, 
in the same manner as do other publicly-held companies, will enhance 
the insurer's ability to attract and retain qualified officers and 
directors. Further, Indianapolis Life explains that its combination 
with AmerUs Group will create an opportunity to leverage its corporate 
capacity and strength and to reduce expenses through economics of 
scale.
    7. The Restructuring will provide Eligible Members with shares of 
AmerUs Group Common Stock (which will be traded on the New York Stock 
Exchange \4\, Cash, or Policy Credits in exchange for their otherwise 
illiquid policyholders' membership interests. Thus, Eligible Members 
will realize economic value from their membership interests that is not 
currently available to them as long as Indianapolis Life remains a 
mutual company. The demutualization, however, will not in any way 
reduce the benefits, values, guarantees, or dividend eligibility of 
existing policies or contracts issued by Indianapolis Life.
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    \4\ On December 11, 2000, the closing price for AmerUs Group 
Common Stock was $30.88 per share.
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    As part of the Restructuring, Indianapolis Life and its affiliates 
will become subsidiaries of AmerUs Group. In exchange, AmerUs Group has 
agreed that upon Indianapolis Life's conversion to a stock company, it 
will pay policyholders, in exchange for their mutual membership 
interests in Indianapolis Life, the equivalent of 9.3 million shares of 
AmerUs Group Common Stock. Such consideration will be in the form of 
AmerUs Group Common Stock, Cash or Policy Credits. Following the 
Restructuring, Indianapolis Life's base of operations will remain in 
Indianapolis.
    The Restructuring and the terms of the Plan of Conversion are 
subject to the approval of the Commissioner and the members of 
Indianapolis Life who are entitled to vote on such Plan.\5\ However, 
market conditions, regulatory requirements, and business considerations 
may also influence the final sequence of events.
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    \5\ According to the Plan of Conversion, those members eligible 
to vote are members of Indianapolis Life both (a) as of the date 
Indianapolis Life's Board of Directors adopts the Plan of Conversion 
and (b) the record date of the special members' meeting will be 
held.
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    8. Accordingly, Indianapolis Life requests, on behalf of itself, 
its subsidiaries, and its future parent company, AmerUs Group, an 
administrative exemption from the Department that will permit certain 
of its Plan policyholders to engage in certain transactions relating to 
its proposed conversion. Specifically, Indianapolis Life requests an 
exemption that will cover the receipt of AmerUs Group Common Stock, 
Cash or Policy Credits by Eligible Members that are Plans, including 
the aforementioned Indianapolis Life Plans, in exchange for such 
Eligible Member's membership interest in Indianapolis Life.\6\ 
Indianapolis Life represents that the receipt of AmerUs Group Common 
Stock, Cash, or Policy Credits by a Plan can be viewed as a prohibited 
sale or exchange of property between it (or AmerUs Group) and a Plan, 
or as a transfer or use of plan assets by or for the benefit of a party 
in interest in violation of section 406(a)(1)(A) and (D) of the Act.
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    \6\ With respect to the Indianapolis Life Plans, Indianapolis 
Life represents that no Policy Credits will be paid to such Plans as 
a result of the Restructuring. Instead, as described in 
Representation 23, the Indianapolis Life Plans will receive 
consideration in the form of either Cash or shares of AmerUs Group 
Common Stock. Indianapolis Life is of the view that the AmerUs Group 
Common Stock that will be issued to certain of the Indianapolis Life 
Plans would constitute ``qualifying employer securities'' within the 
meaning of sections 407(d)(5) of the Act and that section 408(e) of 
the Act would apply to such distributions. (The Department however, 
expresses no opinion herein on whether such stock would constitute 
qualifying employer securities and whether such distributions would 
satisfy the terms and conditions of section 408(e) of the Act.) 
Nevertheless, Indianapolis Life has requested that the Department 
expand the scope of the exemption to include the distribution of 
both forms of consideration to the Indianapolis Life Plans.
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    In addition, Indianapolis Life has requested that the exemption 
apply to distributions of AmerUs Group Common Stock to the IL Group 
Term Life Insurance Plan. Indianapolis Life recognizes that there may 
be an ``excess'' holding problem with respect employer stock that is 
received and held by this Plan which would be in violation of section 
406(a)(1)(E) and (a)(2) of the Act and section 407(a)(2) of the Act, in 
addition to section 406(a)(1)(A) and (D) of the Act.\7\ Although the IL 
Group Life Insurance Plan is fully-insured and its sole asset is an 
insurance policy through which it is funded, Indianapolis Life states 
that if this Plan were to accept AmerUs Group Common Stock as 
demutualization consideration, the fair market value of such stock 
would cause the aforementioned violations of the Act. To avoid this 
problem, Indianapolis Life represents that U.S. Trust Company, N.A. 
(U.S. Trust), the independent fiduciary for the Indianapolis Life 
Plans, fully expects to elect Cash consideration for the IL Group Term 
Life Insurance Plan. However, to the extent the IL Group Term Life 
Insurance Plan is required to accept AmerUs Group Common Stock, 
Indianapolis Life requests that the exemption be expanded to cover this 
acquisition.
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    \7\ Section 406(a)(2)(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.
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    Finally, Indianapolis Life has confirmed that the shares of AmerUs 
Group Common Stock that are issued to the Indianapolis Life Plans will 
not violate the provisions of section 407(f) of the Act.\8\ Therefore, 
no further exemptive relief is required.
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    \8\ 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.
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    The requested exemption is based on a number of procedural and 
substantive protections that Indiana state insurance law provides to 
all policyholders of a mutual life insurance company that is converting 
to a stock life insurance company. At present, the Indianapolis Life's 
conversion is scheduled to become effective in the first quarter of 
2001, thereby making the time frame for distributing policyholder 
consideration as early as August 31, 2001. In the event the Department 
is unable to grant the final exemption by the statutory deadline 
described in Representation 16, Indianapolis Life requests that the 
Department issue the exemption retroactively and that the exemption be 
made effective as of the effective date of the Plan of Conversion.
Indiana Insurance Law
    9. Indianapolis Life anticipates that the following steps of the 
Restructuring will occur pursuant to the Plan of Conversion:
     AmerUs Group will form a new Indiana corporation under 
Indiana's business corporation laws, as a wholly-owned subsidiary. The 
new corporation

[[Page 7806]]

will serve as the ``Indiana parent corporation'' of Indianapolis Life 
upon its conversion to a stock company for purposes of Indiana law.
     Indianapolis Life will convert from a mutual company to a 
stock company under Indiana law. Under the Plan of Conversion, and as 
provided by Indiana law, the policyholder's membership interests in 
Indianapolis Life will be extinguished, and Eligible Members will 
receive shares of AmerUs Group Common Stock, Cash, or Policy Credits as 
compensation for termination of their membership interests.
     Concurrently with Indianapolis Life's conversion, CLA 
Assurance Company (CLA Assurance), a wholly owned subsidiary of AmerUs 
Group, will merge with and into Indianapolis Life. Indianapolis Life 
will be the surviving company and will continue its existence as an 
Indiana-domiciled insurer. By operation of law, all of the stock of CLA 
Assurance will be converted into all of the stock of Indianapolis Life, 
thereby making Indianapolis Life a wholly owned stock subsidiary of 
AmerUs Group.
     To satisfy Indiana law, immediately upon Indianapolis 
Life's conversion, AmerUs Group will transfer all of the stock of 
Indianapolis Life to the Indiana parent corporation as a capital 
contribution.
Procedural Requirements Under Indiana Demutualization Law
    10. Indiana Code 27-15 et seq. (the Indiana Demutualization Law), 
establishes an approval process for the demutualization of domestic 
mutual insurance companies. In this regard, the conversion of a mutual 
insurance company to a stock company must be initiated by the board of 
directors of the mutual insurance company. The board of directors may 
adopt a plan of conversion only upon a finding that the proposed 
conversion is in the best interests of the converting mutual insurance 
company, the Eligible Members, and the other policyholders of the 
company. Once the plan of conversion is adopted by the company's board 
of directors, the company must submit an application for the approval 
of the plan of conversion with the Commissioner. The application must 
include the following information:
     The plan of conversion and a certificate of the secretary 
of the converting mutual insurance company certifying the adoption of 
the plan by the company's board of directors.
     A statement of the reasons for the proposed conversion and 
why the conversion is in the best interests of the converting mutual 
insurance company, the eligible members, and the other policyholders. 
The statement must include an analysis of the risks and benefits to the 
converting mutual insurance company and its members of the proposed 
conversion and a comparison of the risks and benefits of the conversion 
with the risks and benefits of reasonable alternatives to a conversion.
     A five year business plan and at least two years of 
financial projections of the former mutual insurance company and any 
parent company.
     Any plans that the former mutual insurance company or 
parent company may have to--
     Raise additional capital through the issuance of stock or 
otherwise;
     Sell or issue stock to any person, including any 
compensation or benefit plan for directors, officers, or employees 
under which stock may be issued;
     Liquidate or dissolve any company or sell any material 
assets;
     Merge or consolidate or pursue any other form of 
reorganization with any person; or
     Make any other material change in investment policy, 
business, corporate structure, or management.
     A plan of operation for a closed block, if a closed block 
is used for the preservation of the reasonable dividend expectations of 
eligible members and other policyholders with policies that provide for 
the distribution of policy dividends.
     Copies of the amendment to the articles of incorporation 
proposed by the board of directors and the proposed bylaws of the 
former mutual insurance company and copies of the existing and any 
proposed articles of incorporation and bylaws of any parent company.
     A list of all individuals who are or have been selected to 
become directors or officers of the former mutual insurance company and 
any parent company, or the individuals who perform or will perform 
duties customarily performed by a director or officer, as well as 
specific biographical information about those individuals.
     An actuarial opinion as to the following:
     The reasonableness and appropriateness of the methodology 
or formulas used to allocate consideration among eligible members, 
consistent with the statute.
     The reasonableness of the plan of operation and the 
sufficiency of the assets allocated to the closed block, if a closed 
block is used for the preservation of the reasonable dividend 
expectations of eligible members and other policyholders with policies 
that provide for the distribution of policy dividends.
     A copy of the form of trust agreement to be used in 
connection with a trust to be established to hold assets that are the 
subject of a claim described in Ind. Code 27-15-12-1 until that claim 
has been resolved. (In the present case, to the extent that such a 
claim is filed, the trust would hold consideration payable to Plan 
policyholders until the Department issues the requested exemption. See 
also Representation 16.)
     Any additional information, documents, or materials that 
the converting mutual insurance company determines to be necessary.
     Any other additional information, documents, or materials 
that the Commissioner requests in writing.
    11. Upon determining that the application is complete, the 
Commissioner must conduct a public hearing on the plan of conversion. 
The purpose of the hearing is to receive comments and information to 
aid the Commissioner in considering and approving or disapproving the 
application for approval of the plan of conversion. The converting 
mutual insurance company must provide at least 30 days prior written 
notice of the hearing to its members and policyholders. Persons wishing 
to make comments and submit information may submit written statements 
before or at the public hearing and may also appear and be heard at the 
public hearing.
    12. The converting mutual insurance company must also cause notice 
of the public hearing to be published in a newspaper of general 
circulation in the city where the principal office of the converting 
mutual insurance company is located and in any other city specified by 
the Commissioner. Both the written notice and the form and content of 
the published notice must be pre-approved by the Commissioner.
    The Commissioner must fully consider any comments received at the 
public hearing consistent with Indiana's Administrative Rules and 
Procedures Act before making a determination on the Plan of Conversion. 
After the public hearing, the Commissioner must approve the application 
and permit the conversion under the plan of conversion if the 
Commissioner finds the following:
     That the amount and form of consideration are fair in the 
aggregate and to each member class;
     That the Plan of Conversion and the amendment to the 
articles of incorporation:
     Comply with the Indiana Demutualization Law and other 
applicable laws;
     Are fair, reasonable, and equitable to the eligible 
members; and

[[Page 7807]]

     Will not prejudice the interests of the other 
policyholders of the converting mutual insurance company; and
     That the total consideration provided to eligible members 
upon the extinguishing of the converting mutual's membership interests 
is equal to or greater than the surplus of the converting mutual.
    A person who is aggrieved by an agency action of the Commissioner 
under the Indiana Demutualization Law may petition for judicial review 
of the action.
    13. The Indiana Demutualization Law permits the Commissioner to 
employ accountants, actuaries, attorneys, financial advisers, 
investment bankers and other experts that are necessary to assist the 
Commissioner in reviewing all matters under the Indiana Demutualization 
Law. In the case of Indianapolis Life's proposed demutualization, the 
Commissioner has retained an actuarial firm, legal advisers and an 
investment banking firm as consultants.
    14. In addition to being approved by the Commissioner, the plan of 
conversion must be approved by the converting mutual insurance 
company's policyholders. The policyholders must be provided with notice 
of the meeting called for the purpose of voting on the Plan of 
Conversion.
    The converting mutual insurance company must also provide 
explanatory information about the conversion to policyholders. The form 
of the meeting notice, explanatory information, and any proxy 
solicitation materials must be approved in advance by the Commissioner. 
Further, the Plan of Conversion must be approved by at least two-thirds 
of the policyholders voting at the meeting.
    15. As noted in Representation 6, the Indianapolis Life Board of 
Directors adopted Indianapolis Life's Plan of Conversion on September 
18, 2000 following review and the receipt of comments by the 
Commissioner. In addition, on September 21, 2000, Indianapolis Life 
filed an application for approval of such Plan and amendments to its 
Articles of Incorporation with the Commissioner. On November 2, 2000, 
Indianapolis Life filed a revised version of the Plan of Conversion 
with the Commissioner to reflect changes requested by the Commissioner.
    As for the policyholder meeting, Indianapolis Life indicates that 
the notice of the meeting was tentatively scheduled to be mailed on or 
about December 18, 2000. However, Indianapolis Life explains that the 
mailing did not occur due to delay in the regulatory process. 
Indianapolis Life also points out that the regulatory delay has moved 
back the date of the policyholder meeting, which was originally 
scheduled to occur on February 16, 2001. Once approval is obtained, 
Indianapolis Life states that the mailing and the meeting will be 
rescheduled.
    Whenever the policyholder meeting occurs, approximately 152,000 
Indianapolis Life policyholders (including 5,500 Plan policyholders) 
which are Eligible Members will be eligible to vote on the Plan of 
Conversion. Each Eligible Member will be entitled to only one vote 
regardless of the number of policies or certificates held by such 
Eligible Member.
    Indianapolis Life expects that the Commissioner will approve the 
Plan of Conversion by mid-February 2001 and that the demutualization 
will become effective between March 15 and March 31, 2001. However, 
delays in the regulatory process could push these dates back further.
Trust Requirement
    16. Indianapolis Life explains that Indiana Demutualization Law 
imposes unique and stringent time constraints on the distribution of 
consideration to policyholders in connection with a demutualization. In 
this regard, unless a special, very narrow exception applies, all 
consideration must be distributed within six months after the effective 
date of the insurer's conversion to a stock life insurance company. The 
exception applies in the event that, prior to the effective date of the 
demutualization, a claim is filed that meets certain requirements. In 
this event, a trust (the Trust) will be established to hold disputed or 
affected assets until the claim is resolved, even if the resolution 
occurs after the six month deadline.
    According to Indianapolis Life, the Commissioner has indicated that 
the Trust exception will apply in the present exemption request to the 
extent that a claim is filed by or on behalf of one or more 
policyholders. The claim must assert, to the satisfaction of the 
Commissioner, that (a) irreparable harm will result if distribution 
occurs before the Department issues the requested exemption, and (b) a 
Trust should be established to hold consideration payable to Plan 
policyholders until the exemption is granted by the Department.
    None of the trustees (the Trustees) of the Trust will be related to 
Indianapolis Life or its affiliates. Indianapolis Life will pay for all 
costs and expenses of the Trust and the Trustees. All consideration 
held in the Trust for the benefit of Plan policyholders will be placed 
in interest-bearing accounts. The interest generated from these 
investments will also be held in the Trust for the benefit of the Plan 
policyholders. Any earnings on the AmerUs Group Common Stock that is 
held in the Trust, which is in the form of cash or stock dividends, 
will similarly be held in the Trust.
    The Trust will terminate when all claims with respect to the Trust 
assets have been resolved and all of the Trust assets have been 
distributed. If a claim remains unresolved three years after the 
effective date of the Trust, the Trust will contain a mechanism for (a) 
distributing the remaining Trust assets to a court of competent 
jurisdiction to make all decisions regarding the distribution; or (b) 
to the beneficiary, as long as the beneficiary agrees to accept any 
liability associated with the distribution. At that point, the Trustee 
will be discharged from all responsibility under the Trust, and the 
Trust will be terminated.\9\
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    \9\ If the exemption requested herein is granted before the 
effective date of the demutualization, Indianapolis Life states that 
the Trust requirement will be moot.
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Distributions to Indianapolis Life's Policyholders
    17. Indianapolis Life's Plan of Conversion provides for Eligible 
Members to receive AmerUs Group Common Stock, Cash, or Policy Credits 
as consideration for giving up their membership interest in the mutual 
insurance company, which interests will be extinguished as a result of 
the demutualization.\10\ For this purpose, an

[[Page 7808]]

``Eligible Member'' is a policyholder whose name appears on 
Indianapolis Life's records as the owner of one or more policies issued 
by Indianapolis Life as of both the date the Board of Directors adopts 
the Plan of Conversion and the effective date of the Plan of 
Conversion. Distributions under Indianapolis Life's Plan of Conversion 
will be made to Eligible Members that are Plans on the same basis as 
all Eligible Members which are not Plans.
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    \10\ Indianapolis Life represents that in accordance with 
chapter 15 of the Indiana Insurance Code, the Plan of Conversion 
generally provides that the policyholder eligible to participate in 
the distribution of AmerUs Group Common Stock, Cash or Policy 
Credits resulting from the Plan of Conversion (i.e., the Eligible 
Member) is the person whose name appears on Indianapolis Life's 
records as owner or holder of the policy. Indianapolis Life 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 or holder of the policy. In regard to 
insurance or annuity policies that designate the employer or trustee 
as owner of the policy, Indianapolis Life represents that it is 
required under the Plan of Conversion to make distributions 
resulting from the Plan of Conversion to the employer or trustee as 
owner of the policy.
    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 Indianapolis Life incurs the 
obligation to distribute AmerUs Group Common Stock, 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 provsions of the Act.
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    As stated above, the total consideration to be distributed to 
Eligible Members will be equal in value to 9.3 million shares of AmerUs 
Group Common Stock \11\. Under Indiana law, this value will at least be 
equal to the value of Indianapolis Life's surplus. In this regard, each 
Eligible Member will be allocated a fixed component of consideration 
equal to 12 shares of AmerUs Group Common Stock. The remaining shares 
of AmerUs Group Common Stock will then be allocated to the Eligible 
Members based on the actuarial contribution that each Eligible Member's 
policy has made (and is expected to make) to Indianapolis Life's 
statutory surplus. The Plan of Conversion contains a detailed 
description of how the actuarial contribution of each policy or 
contract will be determined.
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    \11\ if the aggregate value of 9.3 million shares of AmerUs 
Group Common Stock is less than $186 million (with the stock price 
determined by averaging the daily closing price of the AmerUs Group 
Common Stock over the five trading days ending ten business days 
before the effective date of the Plan of Conversion), then 
Indianapolis Life will not be obligated to consummate the Plan of 
Conversion, unless AmerUs Group promptly agrees to increase the 
number of shares of AmerUs Group Common Stock allocable to Eligible 
Members or otherwise provide additional consideration so that the 
aggregate value of the shares is equal to $186 million.
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    18. After shares of AmerUs Group Common Stock have been allocated 
to each Eligible Member, actual consideration will be paid as soon as 
practicable after the conversion date. As noted above, such 
consideration will be in the form of AmerUs Group Common Stock, Cash or 
Policy Credits. For each affected policy, combinations of different 
forms of consideration will not be permitted. The decision as to the 
form of consideration to be received in exchange for Indianapolis Life 
membership interests will be made by one or more independent Plan 
fiduciaries which is independent of Indianapolis Life and its 
affiliates. In this regard, neither Indianapolis Life nor its 
affiliates will provide a Plan with ``investment advice,'' within the 
meaning of 29 CFR 2510.3-21(c) of the Act or exercise discretion with 
respect to such decision.
    19. In general, AmerUs Group Common Stock or Cash will be paid to 
an Eligible Member who affirmatively elects to receive such 
consideration. An Eligible Member electing to receive consideration in 
this form must complete a card, which will be included in the notice of 
the members' meeting, and return such card to Indianapolis Life prior 
to the date specified by Indianapolis Life for the receipt of proxies 
to be used at the members' meeting.
    Some Eligible Members who own specific types of policies may not 
have a choice as to the form of consideration to be received. For 
example, an Eligible Member will receive consideration in the form of 
Policy Credits if such Eligible Member is the owner of a policy that 
is--
     An individual retirement annuity within the meaning of 
section 408 or 408A of the Code or a tax sheltered annuity within the 
meaning of section 403(b) of the Code; or
     An individual annuity contract, individual life insurance 
policy or a supplemental contract that has been issued directly to a 
plan participant pursuant to a plan qualified under section 401(a) or 
403(b) of the Code.
    In addition, each owner of a policy that is identified prior to the 
distribution as part of a tax-qualified plan will receive consideration 
in the form of Policy Credits if the receipt of Cash or AmerUs Common 
Stock would affect the tax-favored status accorded to the policy or 
result in penalties or any other adverse federal income tax 
consequences to the holders of such policies under the Code.
    Further, Indianapolis Life's Plan of Conversion provides that an 
Eligible Member will receive consideration in the form of Cash if (a) 
the receipt of AmeriUs Group Common Stock would, in the judgment of 
Indianapolis Life, fail to comply with the securities registration 
requirements (or applicable exemptions) of the state of domicile of the 
Eligible Member; or (b) the Eligible Member's mailing address, as shown 
on such insurer's records is located outside of the United States.
    The amount of Policy Credits or Cash will be determined by 
multiplying the number of shares of AmerUs Group Common Stock allocated 
to the Eligible Member by the ``stock price'' of such stock. The 
``stock price'' will be the greater of closing price per share of 
AmerUs Group Common Stock on the effective date of the Plan of 
Conversion or the average of the closing price per share of such stock 
for each of the first ten trading days beginning with the effective 
date of the Plan of Conversion.
    20. Cash will also be paid to an Eligible Member who fails to make 
any election as long as certain ``special rules'' in the Plan of 
Conversion for satisfying the Cash and Common Stock preferences of 
Eligible Members are satisfied. In this regard, the Plan of Conversion 
requires that the maximum amount of Cash distributed, together with the 
value of Policy Credits and the costs and expenses to be paid by AmerUs 
Group or Indianapolis Life for the benefit of Eligible Members, allow 
for the merger between CLA Assurance and Indianapolis Life to qualify 
as a tax-free reorganization under section 368(a)(2)(E) of the 
Code.\12\
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    \12\ The distribution by AmerUs Group of its Common Stock to 
former members of Indianapolis Life is intended to be tax-free. 
Accordingly, the transaction must comply with the provisions of 
section 368(a)(2)(E) of the Code. Among other things, these 
requirements limit the extent to which the consideration paid to 
former Indianapolis Life members may be in a form other than AmerUs 
Group Common Stocks.
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    The Plan of Conversion requires that at least 10 percent of all 
Eligible Members receive Cash. Indianapolis Life and AmerUs Group may 
agree to distribute Cash to more than 10 percent of all Eligible 
Members as long as the maximum amount of Cash under section 
368(a)(2)(E) of the Code is not exceeded.
    Further, the Plan of Conversion provides for the payment of Cash to 
those Eligible Members (other than those who are required to receive 
Cash) based on the number of shares of AmerUs Group Common Stock 
allocated to Eligible Members in increasing order until the total 
amount of available Cash has been fully distributed. Eligible Members 
with the least number of allocable shares will be paid in Cash 
first.\13\
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    \13\ If there are two or more Eligible Members having the same 
number of allocable shares of AmerUs Group Common Stock and there is 
insufficient Cash to pay all such Eligible Members, the Plan of 
Conversion provides, in relevant part, that the remaining available 
Cash will be distributed ``first to those Eligible Members with the 
earliest Policy Date.'' Therefore, in the event the allocation of 
Cash among Eligible Members results in a ``tie'' between two or more 
Eligible Members having the same number of allocable shares, Cash 
will be distributed to the Eligible Member with the earliest policy 
date.
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    21. AmerUs Group will issue shares of AmerUs Group Common Stock to 
an Eligible Member entitled to receive such consideration in book-entry 
form as uncertificated shares. AmeriUs Group will also mail a notice to 
the Eligible Member, thereby informing the Eligible Member, that a 
designated number of shares of AmerUs Group Common Stock

[[Page 7809]]

has been registered in such Eligible Member's name. If an Eligible 
Member requests, AmerUs Group will mail the Eligible Member a stock 
certificate representing the shares. No Eligible Member will pay a 
brokerage commission or fee in connection with the receipt of AmerUs 
Group Common Stock.
Commission-Free Sales and Purchase Program
    22. AmerUs Group will, within 12 months after the closing date of 
the combination of AmerUs Group with Indianapolis Life, offer a 
commission-free sales and purchase program to shareholders holding less 
than 100 shares of stock. The shareholders may sell their shares (or 
round up to 100 shares by purchase) without paying any brokerage 
commissions. The program will be made available for a minimum of 60 
days.
Role of the Independent Fiduciary for the Indianapolis Life Plans
    23. As noted above, the decision to vote for or against the Plan of 
Conversion and the decision as to the form of consideration to be 
received in exchange for Indianapolis Life membership interests will be 
made by one or more independent Plan fiduciaries. Pursuant to a letter 
agreement dated September 18, 2000, Indianapolis Life has appointed 
U.S. Trust to act as the independent fiduciary on behalf of each of the 
Indianapolis Life Plans with respect to certain aspects of Indianapolis 
Life's Plan of Conversion. Such transactions over which U.S. Trust will 
exercise investment discretion may result in the acquisition, holding 
or disposition of AmerUs Group Common Stock by the Indianapolis Life 
Plans. U.S. Trust has acknowledged and accepted the duties, 
responsibilities and liabilities, required of an independent fiduciary 
and it agrees to act on behalf of the Indianapolis Life Plans. In 
return for services rendered, Indianapolis Life will compensate U.S. 
Trust.
    U.S. Trust is the principal subsidiary of U.S. Trust Corporation, 
which was founded in 1853 and is subject to regulation as a trust 
company by the State of New York. U.S. Trust is a member of the Federal 
Reserve System and the Federal Deposit Insurance Corporation. As of 
December 31, 1999, U.S. Trust had approximately $5 billion in assets 
and over $75 billion in assets under management. Of those assets under 
management, a significant portion consisted of the assets of ERISA-
covered Plans. U.S. Trust has served as an independent fiduciary for a 
number of Plans that have acquired or held employer securities and it 
has managed over $20 billion in employer securities held by such Plans. 
In managing such investments, U.S. Trust has exercised discretionary 
authority over many transactions involving the acquisition, retention 
and disposition of employer securities.
    U.S. Trust represents that it is independent of Indianapolis Life 
and its affiliates. In this regard, U.S. Trust asserts that it has no 
business, ownership or control relationship, nor is it otherwise 
affiliated with Indianapolis Life. Further, U.S. Trust represents that 
it derives less than one percent of its annual income from Indianapolis 
Life.
    As the independent fiduciary for the Indianapolis Life Plans, U.S. 
Trust will be required to (a) vote on whether to approve or not to 
approve the proposed Restructuring; (b) elect between consideration in 
the form of AmerUs Group Common Stock or Cash; (c) determine how to 
apply the Cash or AmerUs Group Common Stock received for the benefit of 
the participants and beneficiaries of the Indianapolis Life Plans; (d) 
vote on shares of AmerUs Group Common Stock that are held by the IL 
Group Term Life Insurance Plan and dispose of such stock exceeding the 
limitation of section 407(a)(2) of the Act as reasonably as 
practicable, but in no event later than six months after the effective 
date of the Plan of Conversion; and (e) take all actions that are 
necessary and appropriate to safeguard the interests of the 
Indianapolis Life Plans and their participants and beneficiaries. In 
addition, U.S. Trust will provide the Department with a complete and 
detailed final report as it relates to the Indianapolis Life Plans 
prior to the effective date of the Restructuring. Finally, U.S. Trust 
states that it has conducted a preliminary review of Indianapolis 
Life's Plan of Conversion and it sees nothing in the Plan that would 
preclude the Department from proposing the requested exemption.
    24. 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 Conversion will be implemented pursuant to 
stringent procedural and substantive safeguards imposed under Indiana 
law and supervised by the Commissioner.
    (b) The Commissioner will only approve the Plan of Conversion 
following a determination that, among other things, such Plan is fair, 
reasonable, and equitable to all Eligible Members.
    (c) One or more independent fiduciaries of each Plan (including the 
Indianapolis Life Plans) will have an opportunity to determine whether 
to vote to approve the terms of the Plan of Conversion and will also be 
solely responsible for any decisions that may be permitted under the 
Plan of Conversion regarding the form of consideration to be received 
in return for their respective membership interests.
    (d) Because of all of the protections afforded the plans under 
Indiana law, no ongoing involvement by the Department will be required 
in order to safeguard the interests of the employee benefit plan 
policyholders.
    (e) The Plan of Conversion will enable Plans to convert their 
illiquid membership interests in Indianapolis Life into AmerUs Group 
Common Stock, Cash, or Policy Credits.
    (f) The insurance and annuity contracts affected by the Plan of 
Conversion will remain in force and there will be no changing of 
premiums or compromising any of the benefits, values, guarantees, or 
other policy obligations of Indianapolis Life to its policyholders and 
contractholders.
    (g) Each Eligible Member that is a Plan policyholder will have an 
opportunity to comment on the Plan of Conversion and, if such Plan is a 
voting member, to vote for or against the Plan of Conversion after full 
disclosure by Indianapolis Life of the terms of the Plan of Conversion.

Notice to Interested Persons

    Indianapolis Life will provide, by first-class mail, notice of the 
proposed exemption to all Plans that would be entitled to receive 
AmerUs Group Common Stock, Cash or Policy Credits under the Plan of 
Conversion, as determined on the basis of Indianapolis Life's review of 
its policyholder records. The notice will be provided to interested 
persons within 14 days after publication of a notice of proposed 
exemption in the Federal Register. The notice will include a copy of 
the proposed exemption, as published in the Federal Register and 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. Comments with respect to the proposed exemption are 
due within 44 days after the date of publication of this pendency 
notice 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.)

[[Page 7810]]

The Amalgamated Cotton Garment & Allied Industries Fund-Retirement 
Fund Located in New York, New York

[Exemption Application No.: D-10947]

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 C.F.R. part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990).\14\ If the 
exemption is granted, the restrictions of sections 406(a)(1)(A), 
406(a)(1)(D), and 406(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 (D) of the Code, shall not apply to the proposed 
purchase by the Amalgamated Cotton Garment & Allied Industries Fund-
Retirement Fund (the Cotton Pension Fund) from the Amalgamated 
Insurance Fund-Insurance Fund (the Clothing Welfare Fund), a party in 
interest with respect to the Cotton Pension Fund, of 100 percent (100%) 
of the outstanding shares of non-publicly traded common stock (the 
Common Stock) of ALICO Services Corporation (ASC), a service provider 
to the Cotton Pension Fund; provided that prior to the proposed 
transaction: (a) an independent fiduciary (the I/F), acting on behalf 
of the Cotton Pension Fund determines that the proposed transaction is 
feasible, in the interest of, and protective of the Cotton Pension Fund 
and its participants and beneficiaries; (b) the I/F determines, on 
behalf of the Cotton Pension Fund, that the ASC Common Stock should be 
purchased by the Cotton Pension Fund; (c) the I/F reviews, negotiates, 
and approves the terms of the purchase of the ASC Common Stock; (d) the 
I/F monitors the terms of the purchase of the ASC Common Stock and 
ensures that the Cotton Pension Fund and the Clothing Welfare Fund 
comply with the approved terms; (e) the I/F determines that the terms 
of the purchase of the ASC Common Stock are no less favorable to the 
Cotton Pension Fund than terms negotiated at arm's length with an 
unrelated third party under similar circumstances; (f) the I/F 
determines, as of the date the transaction is entered, that the 
purchase price for the ASC Common Stock paid by the Cotton Pension Fund 
is the fair market value of such stock, not to exceed $30 million; (g) 
an independent, qualified appraiser issues a fairness opinion as to the 
price of the ASC Common Stock and determines, as of the date the 
transaction is entered, that the Clothing Welfare Fund is receiving 
fair market value for such stock; (h) the Cotton Pension Fund incurs no 
fees, commissions, or other charges or expenses as a result of its 
participation in the proposed transaction other than the following: (1) 
the fees incurred in making this exemption request, (2) the fee payable 
to the I/F, and (3) the fees payable to the parties representing the 
Cotton Pension Fund in the proposed transaction; (i) the proposed 
transaction is a one-time occurrence for cash; and (j) a committee 
composed of members of the Board of Trustees of the Clothing Welfare 
Fund determines that such fund should engage in the proposed 
transaction and, if so, such committee is authorized to set the terms 
and conditions under which the Clothing Welfare Fund will engage in 
such transaction.
---------------------------------------------------------------------------

    \14\ For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
to the corresponding provisions of the Code.

EFFECTIVE DATE: This proposed exemption, if granted, will be effective 
on the date that the subject transaction closes, or March 15, 2001, 
whichever is earlier.

Summary of Facts and Representations

    1. The Clothing Welfare Fund and Cotton Pension Fund are 
interrelated, in that some of the same employers contribute to both the 
Clothing Welfare Fund and the Cotton Pension Fund. In this regard, 
approximately 18% of the active participants in the Clothing Welfare 
Fund are also participants of the Cotton Pension Fund. The Cotton 
Pension Fund is an ``employee pension benefit plan,'' as defined under 
section 3(2) of the Act. The Clothing Welfare Fund is an ``employee 
welfare benefit plan,'' as defined under section 3(1) of the Act. 
Accordingly, the Cotton Pension Fund and the Clothing Welfare Fund are 
``employee benefit plans,'' as defined under section 3(3) of the Act. 
In this regard, there is jurisdiction under Title I of the Act with 
respect to both funds. It is also represented that the Cotton Pension 
Fund offers pension benefits covered under Title II of the Act. 
Accordingly, the Cotton Pension Fund is also subject to section 4975 of 
the Code.
    2. The Cotton Pension Fund is a multiemployer pension plan jointly 
trusteed by individuals selected by the Union of Needletrades, 
Industrial and Textile Employees (UNITE) and by individuals selected by 
various employers who contribute to the Cotton Pension Fund. The Cotton 
Pension Fund provides pension benefits primarily to unionized workers 
in the cotton garment industry. As of December 31, 1999, the estimated 
number of participants and beneficiaries in the Cotton Pension Fund was 
approximately 72,105. The approximate aggregate fair market value of 
the total assets of the Cotton Pension Fund was $682.1 million, as of 
June 30, 2000.
    The trustees of the Cotton Pension Fund have appointed an 
independent committee (the Cotton Committee) comprised of four trustees 
from the total number of trustees. Aside from appointing the Cotton 
Committee, the trustees of the Cotton Pension Fund have no other 
participation in the proposed transaction.
    Two members of the Cotton Committee are UNITE representatives and 
two members are employer representatives. It is represented that the 
members on the Cotton Committee are trustees only of the Cotton Pension 
Fund. The Cotton Committee is prepared to assist the I/F with the 
proposed transaction.
    3. The Clothing Welfare Fund is a multiemployer welfare plan 
jointly trusteed and administered by: (a) individuals selected by 
UNITE, and (b) individuals selected by the Clothing Manufacturing 
Association of the United States of America. The Clothing Welfare Fund 
provides health and life insurance benefits primarily to unionized 
workers of men's suit manufacturers. As of December 31, 1999, the 
estimated number of participants and beneficiaries in the Clothing 
Welfare Fund was approximately 39,910. The approximate aggregate fair 
market value of the total assets of the Clothing Welfare Fund was $31.6 
million, as of June 30, 2000.
    The trustees of the Clothing Welfare Fund have appointed an 
independent committee (the Clothing Committee) comprised of four 
trustees from the total number of trustees. Aside from appointing the 
Clothing Committee, the trustees of the Clothing Welfare Fund have no 
other participation in the proposed transaction.
    Two members of the Clothing Committee are UNITE representatives and 
two members are employer representatives. It is represented that the 
members of the Clothing Committee are trustees only of the Clothing 
Welfare Fund. The Clothing Committee is empowered to determine whether 
the Clothing Welfare Fund should engage in the proposed transaction, 
and if so, the committee is authorized to set the terms and conditions 
under which the Clothing Welfare Fund will engage in such transaction.

[[Page 7811]]

    4. ASC is a holding company that is wholly-owned by the Clothing 
Welfare Fund. As a holding company, ASC wholly owns four (4) 
subsidiaries: (a) Amalgamated Life Insurance Company (ALICO); (b) 
Alicare Inc. (Alicare); (c) Alicare Medical Management, Inc. (AMM); and 
(d) Amalgamated Fund Administrators, Inc. (AFA) (collectively, the ASC 
Subsidiaries). All of the ASC Subsidiaries are operated for profit, 
with the exception of AFA.
    ALICO, a New York life insurance company, was established in 1943 
to serve as the non-profit administrative arm of the Clothing Welfare 
Fund. At the time of ALICO's formation, the Clothing Welfare Fund was a 
self-funded health plan sponsored by the Amalgamated Clothing Workers' 
Union of America (ACWA), a predecessor of UNITE. Over time, ALICO began 
to serve a similar administrative role for other ACWA funds. In 1991, 
the Clothing Welfare Fund formed ASC in order to sell products and 
services on a commercial for-profit basis. Subsequently, the not-for-
profit administrative services were handled by AFA. Currently, ALICO 
provides life and disability insurance primarily to unions and union-
sponsored trust funds. ALICO also provides fully retrospectively rated 
group life insurance to various jointly administered funds, including 
the Clothing Welfare Fund.
    It is represented that the proposed transaction will not close 
until it is approved by the Superintendent of Insurance of the State of 
New York. In this regard, it is represented that the reserves of ALICO 
are adequate to cover all future policy liabilities. Accordingly, no 
additional reserves shall be required as a result of the proposed 
transaction. In addition, it is represented that following the proposed 
transaction, ASC and ALICO are and shall continue to be going concerns.
    Alicare is a full-service third-party fund administrator focusing 
on the Taft-Hartley market. Alicare also provides computer services, 
insurance brokerage, and printing services. Alicare's services are 
delivered through its four (4) divisions: (a) Alicare, (b) Alicomp, (c) 
Aligraphics, and (d) Amalgamated Agency.
    AMM provides medical cost management services, including 
utilization management, comprehensive claims cost containment, and a 24 
Hour Nurse HelpLine to provide health information and education to 
patients.
    AFA is a not-for-profit, tax-exempt enterprise. In this regard, AFA 
provides third-party administration for the Clothing Welfare Fund, the 
Cotton Pension Fund, the Amalgamated Service and Allied Industries 
Fund, the Amalgamated Washable Clothing Sportswear and Allied 
Industries Fund, and the Amalgamated Retail Fund (collectively, the 
Patron Funds), on a cost allocation basis. The specific services 
provided by AFA include claims processing, distribution and preparation 
of plan documents, collections of contributions by employers, record 
retention, and reporting to government authorities.
    5. ASC Subsidiaries provide services to the Cotton Pension Fund. If 
the proposed transaction is granted, certain ASC Subsidiaries also 
intend to continue to provide administrative services to the Clothing 
Welfare Fund. Accordingly, as service providers, the ASC Subsidiaries 
are or will be parties in interest with respect to the Cotton Pension 
Fund and the Clothing Welfare Fund under section 3(14)(B) of the Act. 
In addition, because the Clothing Welfare Fund currently owns all of 
the outstanding ASC Common Stock, the Clothing Welfare Fund is a party 
in interest with respect to the Cotton Pension Fund under section 
3(14)(H) of the Act. The Clothing Welfare Fund may also be a 
disqualified person, pursuant to section 4975(e)(2) of the Code, 
because of its relationships to the Cotton Pension Fund.
    6. The Clothing Welfare Fund has requested an individual exemption 
in order to sell to the Cotton Pension Fund all of the outstanding 
shares of ASC Common Stock. In this regard, the value of the ASC Common 
Stock constitutes a significant portion of the Clothing Welfare Fund's 
otherwise liquid investment portfolio. It is represented that the 
proposed transaction will provide the Clothing Welfare Fund with 
liquidity and allow for further diversification of its assets.
    7. Absent an exemption, the proposed transaction would constitute a 
sale of property between a plan and a party in interest, and a transfer 
of assets from a plan to a party in interest in violation of section 
406(a)(1)(A) and section 406(a)(1)(D) of the Act, respectively. 
Accordingly, the Cotton Pension Fund is seeking relief with respect to 
section 406(a)(1)(A) and 406(a)(1)(D) of the Act. Further, to the 
extent that the Clothing Welfare Fund is a disqualified person under 
the Code, the proposed transaction would also violate sections 
4975(c)(1)(A) and 4975(c)(1)(D) of the Code, for which relief is 
requested.
    The proposed transaction may also violate section 406(b)(2) of the 
Act, because certain trustees of the Clothing Welfare Fund are also 
trustees of the Cotton Pension Fund (the Overlapping Trustees). In this 
regard, the Overlapping Trustees, as fiduciaries of the Clothing 
Welfare Fund, could be viewed as acting on behalf of the Cotton Pension 
Fund, an adverse party to the Clothing Welfare Fund in connection with 
the proposed transaction. The Cotton Pension Fund has represented that 
the Cotton Pension Fund and the Clothing Welfare Fund intended to avoid 
a violation of section 406(b)(2) of the Act by employing the Cotton 
Committee and the Clothing Committee as decision makers for each 
committee's respective fund. However, because of the concerns that may 
be raised as a result of the Overlapping Trustees, the Cotton Pension 
Fund has also requested relief with respect to section 406(b)(2) of the 
Act.
    8. For the purpose of determining the fair market value of Common 
Stock, the Clothing Welfare Fund sought the opinion of Willamette 
Management Associates (WMA), as an independent, qualified appraiser. 
WMA is experienced in that it has prepared valuations of ASC for the 
Clothing Welfare Fund for approximately the past four (4) years. In 
addition, Scott D. Levine (Mr. Levine), a senior manager of WMA who 
signed the appraisal report is a certified public accountant, a member 
of the Maryland Society of Certified Public Accountants, a Chartered 
Financial Analyst of the Association for Investment Management and 
Research, and a candidate for the accredited senior appraiser 
designation in business valuation of the American Society of 
Appraisers. Mr. Levine's primary areas of expertise are the appraisal 
of closely held companies and business interests and the appraisal of 
fractional and nonmarketable security interests in private and public 
corporations.
    WMA is independent in that the average percentage of WMA's annual 
income derived from work for the Clothing Welfare Fund over the past 
four (4) year period is less than one percent (1%). Further, WMA's 
professional fees were not contingent upon the opinion expressed in the 
valuation report, and WMA represents that other than the services 
provided attendant to the valuation, neither it nor any of its 
employees has a present or intended financial interest in ASC.
    At the request of the Clothing Welfare Fund, WMA prepared a 
preliminary valuation report of the fair market value of the shares of 
ASC Common Stock, as of December 31, 2000. In preparing the valuation 
report, WMA was asked to assume that projected results for fiscal year 
2000 are achieved. Since these projected results had not been realized, 
as of October 17, 2000, the date on the

[[Page 7812]]

valuation report, WMA represents that the conclusions expressed in the 
valuation report were of a hypothetical nature.
    In developing the valuation analysis, WMA conducted interviews with 
officers of ASC, reviewed and analyzed, among other things: (a) The 
audited financial statements of ASC for the fiscal years ended December 
31, 1995-1999; (b) the financial statement projections for ASC for the 
fiscal years ending December 31, 2000-2004; and (c) the company profile 
for ASC completed by management. Further, WMA researched and analyzed, 
among other things: (a) guideline industry data; (b) economic 
information; (c) information related to publicly traded companies 
considered suitable for comparison to ASC; and (d) capital market 
evidence regarding investment rates of return.
    In the opinion of WMA the hypothetical fair market value of ASC 
Common Stock on a controlling ownership interest basis, as of December 
31, 2000, is $25.3 million. WMA represents that this conclusion was 
reached after giving proper consideration to the historical and 
prospective operating characteristics of ASC, as well as the after-tax 
expected cash flows and earnings attributable to ASC, the current and 
forecasted capital structure of ASC, the risk/return relationship 
reflected for comparable companies having securities traded in the 
public market, capital market and related industry macroeconomic 
evidence available as of the date of the report and other relevant 
factors.
    In addition, it is represented that WMA will offer a fairness 
opinion as to the price of the ASC Common Stock and will determine that 
the Clothing Welfare Fund is receiving no less than the fair market 
value for its ASC Common Stock. WMA's fairness opinion will also assess 
whether the proposed transaction is fair and reasonable from a 
financial standpoint.
    9. It is represented that the actual sale price for the Cotton 
Pension Fund's proposed purchase of the ASC Common Stock shall be 
negotiated by the I/F, ASA Fiduciary Counselors, Inc. (ASA Fiduciary), 
which is acting on behalf of the Cotton Pension Fund, and by George 
Cochran, (Mr. Cochran), a principal at Cochran, Caronia & Co. 
(Cochran), who is negotiating on behalf of the Clothing Welfare Fund. 
In this regard, the Clothing Welfare Fund engaged Mr. Cochran, an 
investment banker with significant experience in mergers and 
acquisitions in the insurance industry, to act as an investment 
advisor.
    On behalf of the Clothing Welfare Fund, Cochran has conducted a 
valuation of ASC. On behalf of the Cotton Pension Fund, ASA Fiduciary, 
with the aid of American Express Tax and Business Services (AmEx), a 
party independent of the Cotton Pension Fund, has conducted its own 
valuation of ASC. In this regard, AmEX has been retained by the Cotton 
Committee to assist ASA Fiduciary in evaluating the ASC Subsidiaries 
for the purpose of valuing the ASC Common Stock. Prior to the 
publication of the final exemption, it is represented that ASA 
Fiduciary will provide an oral report to the Department, containing ASA 
Fiduciary's determination of whether the ASC Common Stock should be 
purchased by the Cotton Pension Fund based on the final terms of such 
sale. Such report shall include, among other things, a summary of the 
activities ASA Fiduciary conducted on behalf of the Cotton Pension Fund 
in connection with its determination, as well as an affirmation that 
the purchase price for the ASC Common Stock paid by the Cotton Pension 
Fund is no greater than the fair market value of such stock on the date 
of the purchase. The applicant represents that a final written report 
will be provided to the Department by ASA Fiduciary following the 
completion of the transaction.
    Using the WMA valuation ($25.3 million, as of December 31, 2000) as 
an estimate, the percentage of the fair market value of the total 
assets of the Cotton Pension Fund expected to be involved in the 
proposed transaction will be approximately 3.71 percent (3.71%). The 
percentage of the fair market value of the total assets of the Clothing 
Welfare Fund expected to be involved in the proposed transaction will 
be approximately 70.67 percent (70.67%).
    10. It is represented that the proposed transaction is feasible in 
that the sale of the ASC Common Stock by the Clothing Welfare Fund to 
the Cotton Pension Fund will be a one-time occurrence for cash with no 
ongoing oversight requirements.
    11. It is represented that the proposed transaction is in the 
interest of the Cotton Pension Fund, because the ownership by such fund 
of the ASC Common Stock will ensure the continuity of the unique, 
highly specialized and low cost customized services provided by ASC 
Subsidiaries to the Cotton Pension Fund. In this regard, the allocation 
of overhead to profit making activities will benefit the Cotton Pension 
Fund directly by offsetting user fees and further will ensure that the 
low cost services continue to all of the Patron Funds.
    It is represented that a significant part of the value of ASC is 
its niche in the Taft-Hartley and labor communities. This niche is 
enhanced by ASC being owned by an entity affiliated with the labor 
movement in general and with UNITE in particular. Were ASC to be 
controlled by other than an entity that is affiliated with labor, it is 
represented that the value of ASC might diminish significantly.
    12. The proposed transaction is protective of the participants and 
beneficiaries of the Cotton Pension Fund. In this regard, it is 
represented that the proposed transaction is prudent, will be priced at 
fair market value, not to exceed $30 million, and offers a limited risk 
of capital loss relative to most other equity investments.
    Additional protections are provided to the Cotton Pension Fund by 
the appointment of ASA Fiduciary. In this regard, the Cotton Pension 
Fund has entered into an engagement letter, dated October 26, 2000, as 
amended (the Agreement) with ASA Fiduciary, a registered investment 
advisor, in order to retain ASA Fiduciary to provide independent 
fiduciary services in connection with the purchase of all of the 
outstanding shares of the ASC Common Stock. In this regard, ASA 
Fiduciary has acknowledged and agreed to serve as an I/F to the Cotton 
Pension Fund with respect to such fund's decision to purchase the ASC 
Common Stock. It is represented that the Cotton Pension Funds's 
obligation to pay ASA Fiduciary a fee for its services is not 
contingent upon either the completion of the contract for purchase of 
the ASC Common Stock or the close of the proposed transaction.
    ASA Fiduciary has acknowledged and agreed that it is a fiduciary, 
under section 3(21) of the Act with respect to any actions taken 
pursuant to its Agreement with the Cotton Pension Fund. Further, ASA 
Fiduciary has represented that it is independent and unrelated to the 
parties to the proposed transaction.
    Pursuant to the terms of the Agreement, ASA Fiduciary has 
undertaken the following duties and responsibilities: (a) To determine 
whether the purchase of the ASC Common Stock is a prudent private 
equity investment by the Cotton Pension Fund; (b) to negotiate and 
approve the terms of the purchase of all of the outstanding shares of 
ASC Common Stock; (c) to monitor the terms of the purchase of the ASC 
Common Stock and ensure that the Cotton Pension Fund and the Clothing 
Welfare Fund comply with the approved purchase terms; (d)

[[Page 7813]]

to determine that the purchase price for the ASC Common Stock is no 
less favorable to the Cotton Pension Fund than to any third party under 
similar circumstances; and (e) to affirm that the purchase price for 
the ASC Common Stock paid by the Cotton Pension Fund is no greater than 
the fair market value of such stock on the date of the purchase.
    It is represented that Nell Hennessy, Esq., President of ASA 
Fiduciary, shall be the lead individual from ASA Fiduciary in the 
execution of the duties set forth above. Further, under the terms of 
the Agreement, ASA Fiduciary is responsible for maintaining records 
with respect to the performance of its duties for a period of six (6) 
years from the date on which the proposed transaction closes or ASA 
Fiduciary determines that the Cotton Pension Fund should not purchase 
the ASC Common Stock or the Clothing Welfare Fund will not sell such 
stock.
    13. As an additional protection, the trustees of the Cotton Pension 
Fund will determine based on a written opinion from the Marco 
Consulting Group (Marco) whether the investment in ASC, as negotiated 
and approved by ASA Fiduciary, is consistent with the overall 
investment policies and overall portfolio composition of the Cotton 
Pension Fund and that with such an investment the Cotton Pension Fund 
will be sufficiently diversified to satisfy the requirements of the 
Act. In this regard, Marco, an independent investment consultant, has 
been providing consulting services for the Cotton Pension Fund for 
approximately the past four (4) years. It is represented that Marco 
will issue a written opinion as to whether the purchase of the Common 
Stock by the Cotton Pension Fund is consistent with the overall 
investment policies and portfolio composition of such fund, so that the 
investment portfolio will remain diversified to minimize the risk of 
large losses in accordance with section 404(a)(1)(C) of the Act.
    14. In summary, the applicant represents that the proposed 
transaction meets the statutory criteria of section 408(a) of the Act 
and section 4975(c)(2) of the Code because: (a) the Clothing Committee 
will determine whether the Clothing Welfare Fund will engage in the 
proposed transaction, and, if so, such committee will be authorized to 
determine the terms and conditions under which the Clothing Welfare 
Fund will engage in such transaction; (b) prior to entry into the 
proposed transaction, ASA Fiduciary, the I/F acting on behalf of the 
Cotton Pension Fund, will determine that such transaction is feasible, 
in the interest of, and protective of the Cotton Pension Fund and its 
participants and beneficiaries; (c) ASA Fiduciary will determine, on 
behalf of the Cotton Pension Fund, whether the ASC Common Stock should 
be purchased by the Cotton Pension Fund; (d) the Cotton Committee will 
assist ASA Fiduciary; (e) ASA Fiduciary will review, negotiate, and 
approve the terms of the proposed transaction; (f) ASA Fiduciary will 
monitor the terms of the purchase of the ASC Common Stock and ensure 
that the Cotton Pension Fund and the Clothing Welfare Fund comply with 
the approved terms; (g) ASA Fiduciary will determine that the terms of 
the purchase of the ASC Common Stock are no less favorable to the 
Cotton Pension Fund than terms negotiated at arm's length with an 
unrelated third party under similar circumstances; (h) ASA Fiduciary 
will determine that the purchase price for the ASC Common Stock paid by 
the Cotton Pension Fund is no greater than the fair market value of 
such stock, as of the date the proposed transaction is entered; (i) an 
independent, qualified appraiser will issue a fairness opinion as to 
the price of the ASC Common Stock and will determine, as of the date 
the proposed transaction is entered, that the Clothing Welfare Fund is 
receiving no less than the fair market value for such stock; (j) the 
Cotton Pension Fund will incur no fees, commissions, or other charges 
or expenses as a result of its participation in the proposed 
transaction other than the fees incurred in making this exemption 
request, the fee payable to ASA Fiduciary, and the fees payable to the 
parties representing the Cotton Pension Fund in the proposed 
transaction; and (k) the proposed transaction is a one-time occurrence 
for cash.

Notice to Interested Persons

    Those persons who may be interested in the pendency of the 
requested exemption include the trustees of the Cotton Pension Fund and 
the trustees of the Clothing Welfare Fund, all of the participants and 
beneficiaries of such funds, UNITE, whose members are participants in 
the Funds, all contributing employers of such funds, ASC, and the ASC 
Subsidiaries. These various classes of interested persons will be 
notified as follows. Notice will be provided to all participants and 
beneficiaries of the Cotton Pension Fund and the Clothing Welfare Fund, 
the trustees of the Cotton Pension Fund, the trustees of the Clothing 
Welfare Fund, UNITE, all contributing employers to such funds, and 
members of the board of ASC, and the ASC Subsidiaries by sending a copy 
of the notice of pendency of this proposed exemption (the Notice) plus 
a copy of the supplemental statement (the Supplemental Statement), as 
required, pursuant to 29 CFR 2570.43(b)(2). The Notice and the 
Supplemental Statement will be delivered by first class mail within 
fifteen (15) days of the publication of the Notice in the Federal 
Register. For the purpose of sending the Notice and Supplemental 
Statement by mail, current addresses maintained by the Cotton Pension 
Fund and the Clothing Welfare Fund will be used.
    In addition, the Notice and the Supplemental Statement will be 
provided to all locals, joint boards, and regional offices of UNITE who 
represent members who are participants in either the Cotton Pension 
Fund or the Clothing Welfare Fund and to contributing employers which 
employ members who are participants in either the Cotton Pension Fund 
or the Clothing Welfare Fund. The Cotton Pension Fund shall request 
that such parties post the Notice and Supplemental Statement 
immediately upon receipt at their respective locations.
    All written comments and requests for a hearing must be received by 
the Department no later than forty-five (45) days from the date that 
the Notice and the Supplemental Statement are published in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the 
Department, telephone (202) 219-8883. (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 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

[[Page 7814]]

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 that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 19th day of January, 2001.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 01-2163 Filed 1-24-01; 8:45 am]
BILLING CODE 4510-29-P