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Secretary of Labor Thomas E. Perez
Proposed Exemptions; MONY Life Insurance Company [Notices] [12/16/1998]

EBSA (Formerly PWBA) Federal Register Notice

Proposed Exemptions; MONY Life Insurance Company [12/16/1998]

[PDF Version]

Volume 63, Number 241, Page 69314-69325

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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10661, et al.]

 
Proposed Exemptions; MONY Life Insurance Company

AGENCY: Pension and Welfare Benefits Administration, Labor

ACTION: Notice of Proposed Exemptions.

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

Written Comments and Hearing Requests

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

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

Notice to Interested Persons

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

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

MONY Life Insurance Company (MONY), Located in New York, NY

[Application No. D-10661]

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 and in accordance with the 
procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 
32847, August 10, 1990).<SUP>1</SUP>
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    \1\ For purposes of this exemption, reference to provisions of 
Title I of the Act, unless otherwise specified, refer also to the 
corresponding provisions of the Code.
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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, effective November 16, 1998, to the (1) receipt 
of common stock of the MONY Group, Inc. (the Holding Company), a 
subsidiary of MONY, or (2) the receipt of cash or policy credits, by or 
on behalf of any eligible policyholder (the Eligible Policyholder) of 
MONY which is an employee benefit plan (the Plan), other than an 
Eligible Policyholder which is a Plan maintained by MONY or an 
affiliate for its employees, in exchange for such Eligible 
Policyholder's membership interest in MONY, in accordance with the 
terms of a plan of reorganization (the Plan of Reorganization) adopted 
by MONY and implemented pursuant to section 7312 of the New York 
Insurance Law.
    This proposed exemption is subject to the conditions set forth 
below in Section II.

Section II. General Conditions

    (a) The Plan of Reorganization is implemented in accordance with 
procedural and substantive safeguards that are imposed under New York 
Insurance Law and is subject to review and supervision by the 
Superintendent of Insurance of the State of New York (the 
Superintendent).
    (b) The Superintendent reviews the terms of the options that are 
provided to Eligible Policyholders of MONY as part of such 
Superintendent's review of the Plan of Reorganization, and the 
Superintendent only approves the Plan of Reorganization following a 
determination that such Plan of Reorganization is fair and equitable to 
all Eligible Policyholders and is not detrimental to the public.

[[Page 69315]]

    (c) Each Eligible Policyholder has an opportunity to vote to 
approve the Plan of Reorganization after full written disclosure is 
given to the Eligible Policyholder by MONY.
    (d) Any election by an Eligible Policyholder that is a Plan to 
receive Holding Company stock, cash or policy credits, pursuant to the 
terms of the Plan of Reorganization is made by one or more independent 
fiduciaries of such Plan and neither MONY nor any of its affiliates 
exercises any discretion or provides investment advice with respect to 
such election.
    (e) After each Eligible Policyholder entitled to receive stock is 
allocated at least 7 shares of Holding Company stock, additional 
consideration is allocated to Eligible Policyholders who own 
participating policies based on actuarial formulas that take into 
account each participating policy's contribution to the surplus of MONY 
which formulas have been approved by the Superintendent.
    (f) All Eligible Policyholders that are Plans participate in the 
transactions on the same basis within their class groupings as other 
Eligible Policyholders that are not Plans.
    (g) No Eligible Policyholder pays any brokerage commissions or fees 
in connection with their receipt of Holding Company stock or in 
connection with the implementation of the commission-free sales and 
purchase programs.
    (h) All of MONY's policyholder obligations remain in force and are 
not affected by the Plan of Reorganization.

Section III. Definitions

    For purposes of this proposed exemption:
    (a) The term ``MONY'' means ``MONY Life Insurance Company'' and any 
affiliate of MONY as defined in paragraph (b) of this Section III.
    (b) An ``affiliate'' of MONY includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with MONY. (For purposes of this paragraph, the term ``control'' means 
the power to exercise a controlling influence over the management or 
policies of a person other than an individual.)
    (2) Any officer, director or partner in such person, and
    (3) Any corporation or partnership of which such person is an 
officer, director or a 5 percent partner or owner.
    (c) The term ``Eligible Policyholder'' means a policyholder who is 
eligible to vote and to receive consideration under MONY's Plan of 
Reorganization. Such Eligible Policyholder is a policyholder of the 
mutual insurer on the date the Plan of Reorganization is adopted by the 
Board of Trustees of MONY and on the effective date of the 
reorganization.
    (d) The term ``policy credit'' means an increase in the 
accumulation account value <SUP>2</SUP> (to which no surrender or 
similar charges are applied) in the general account or an increase in a 
dividend accumulation on a policy.
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    \2\ In general, a policy's accumulation account value is 
expressed in dollar terms and reflects contributions and interest 
credited under the policy, less expenses and withdrawals. 
Accumulation values may be applied for the purchase of annuity 
benefits, or depending on the provisions of the contract, withdrawn 
by the policyholder in a lump sum or installments. Under MONY's Plan 
of Demutualization, where a policy eligible for distributions under 
such Plan has an accumulation value, the policy's accumulation value 
will be increased by an amount equal to the distribution the 
policyholder is entitled to under the Plan.

    Effective date: If granted, this proposed exemption will be 
effective as of November 16, 1998, the date of MONY's Plan of 
Reorganization.

Summary of Facts and Representations

    1. MONY, which was formerly structured under the laws of the State 
of New York as a mutual life insurance company called ``The Mutual Life 
Insurance Company of New York,'' is one of the oldest insurance 
companies in the United States, having been organized in 1842. In 1867, 
MONY became the first mutual company to declare annual policyholder 
dividends. Its principal place of business is located at 1740 Broadway, 
New York, New York.
    MONY is licensed to conduct insurance business in all 50 states 
including the District of Columbia. As of December 31, 1997, MONY had 
total assets of $16.6 billion, total liabilities of $15.7 billion 
(including liabilities for policyholder benefits of $9.3 billion) and 
surplus of about $835 million.
    MONY's principal products include life insurance, annuities 
(including tax deferred annuities described in section 403(b) of the 
Code (TDAs) and individual retirement annuities (IRAs) described in 
section 408(b) of the Code) and pension products. With its affiliates 
and subsidiaries, MONY provides fiduciary and other services to Plan 
policyholders which are covered under the Act and the Code. Such 
services may include plan administration, investment management, 
securities brokerage and related services. As a result of providing 
these services to Plan policyholders, MONY and its affiliates would 
become parties in interest with respect to the Plans.
    2. Because it was formerly organized as a mutual life insurance 
company, MONY had no authorized, issued or outstanding stock. Instead, 
policyholders were both customers and owners of the company. 
Specifically, the life insurance, endowment, annuity and certain other 
insurance and pension contracts issued by MONY combined both insurance 
coverage and proprietary rights, i.e., membership rights. In this 
regard, MONY policyholders were entitled to vote on the conversion of 
the company from a mutual life insurance company to a stock company. In 
addition, some owners of MONY insurance contracts had rights to the 
equity or surplus of the company in certain circumstances and some 
policyholders had rights to share in the divisible surplus as annually 
determined by MONY (policyholder dividends). MONY's Board of Trustees 
annually determined the divisible surplus of the company that would be 
distributed as policyholder dividends.
    3. MONY represents that stock life companies have many advantages 
over mutual companies. Unlike stock life companies, mutual life 
insurance companies do not have ready access to outside capital 
resources because they may not enhance their capital base by issuing 
equity securities to the public or institutional investors. Therefore, 
access to equity, or for that matter, debt capital markets is 
significantly limited. In addition, MONY notes that since mutual life 
insurance companies may not use stock for acquisitions or for executive 
compensation, they have less flexibility in corporate structure. 
Because these restrictions have hampered the growth of mutual life 
insurance companies, MONY explains that the total market share of 
mutual life insurance companies has declined significantly in the past 
twenty years.
    For these reasons, MONY proposed to reorganize into a stock life 
insurance company to enhance its long-term strength and allow it to 
obtain the equity and debt capital it would need in the competitive 
markets in which it and its subsidiaries operate. As part of its Plan 
of Reorganization, MONY will distribute to Eligible Policyholders 100 
percent of the value of the company in the form of stock, cash or 
policy credits in exchange for their membership interests. It is 
anticipated that all of MONY's policyholders will benefit from a 
stronger balance sheet and the likelihood of a higher credit rating.
    Therefore, MONY requests an individual exemption from the 
Department that would cover the receipt of Holding Company stock, cash 
or policy credits by Eligible Policyholders that are Plans in exchange 
for their existing membership interests in

[[Page 69316]]

MONY.<SUP>3</SUP> MONY is not requesting an exemption for distributions 
of Holding Company stock for the Plans it and its affiliates maintain 
for their own employees because it believes such stock would constitute 
``qualifying employer securities'' within the meaning of section 
407(d)(5) of the Act and that section 408(e) of the Act would apply to 
such distributions.<SUP>4</SUP> If granted, the exemption will be 
effective as of November 16, 1998, which is the date of MONY's Plan of 
Reorganization.
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    \3\ MONY estimates that approximately 30,000 of its 
policyholders are Plans whose contracts are supported by several 
hundred million dollars in assets.
    \4\ The Department expresses no opinion herein on whether the 
Holding Company stock will constitute qualifying employer securities 
and whether such distributions will satisfy the terms and conditions 
of section 408(e) of the Act.
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    4. To become a stock insurance company, MONY proposed to reorganize 
under section 7312 of the New York Insurance Law. In this regard, 
MONY's Board of Trustees adopted a Plan of Reorganization on August 14, 
1998 under which MONY would, subject to the approval of its 
policyholders and the Superintendent, be organized as a stock life 
insurance company subsidiary of a holding company (i.e., the Holding 
Company). The stock of the Holding Company would then be distributed to 
the policyholders.
    Section 7312 establishes a rigorous approval process for the 
reorganization of a life insurance company. The demutualization must be 
initiated by the board of trustees of the insurance company which must 
approve the reorganization plan by a vote of at least three-fourths of 
the entire board. The board of trustees must also make an express 
finding that the plan is ``fair and equitable'' to all affected 
policyholders.
    Once approved by the board of trustees, the reorganization plan 
must be submitted to the Superintendent for review and approval. To 
become effective, the Superintendent must determine that the 
reorganization plan meets the requirements imposed by section 7312, 
including the requirements that the plan be fair and equitable to the 
policyholders, not be detrimental to the public and following the 
reorganization, the insurer must have an amount of surplus which the 
Superintendent deems to be reasonably necessary for its future 
solvency.
    To assist the Superintendent in performing his or her duties, 
section 7312(h)(1) permits the Superintendent to appoint independent 
consultants. Specifically, section 7312(h)(2) requires the 
Superintendent to appoint an independent actuary to advise him or her 
on matters relating to the reorganization. The actuary will provide a 
memorandum describing his review. In the case of its Plan of 
Reorganization, MONY has hired the actuarial firm of Tilinghast Towers-
Perrin (TT-P) to conduct an actuarial review and the investment banking 
firm of Chase Securities, Inc. as investment banking consultant.
    Under New York Insurance Law, the Superintendent is also required 
to hold a public hearing on the plan of reorganization at which time 
policyholders and other interested persons are invited to express their 
views on the plan. The purpose of the public hearing is to determine 
whether the reorganization plan is fair and equitable to policyholders 
and is not detrimental to the public. During the hearing, interested 
persons may comment on the fairness of the terms of the plan. Notice of 
the hearing, a copy of the plan, a summary of the plan and other 
materials approved by the Superintendent must be provided to each 
policyholder of the insurance company whose policy or contract is in 
force on the date of adoption of the plan of reorganization. The notice 
must also be published in three newspapers of general circulation.
    Once the reorganization plan has been approved by the insurer's 
board of trustees and after the public hearing, the Superintendent is 
required to approve such plan if he or she finds that (a) the plan does 
not violate New York Insurance Law; (b) the plan is fair and equitable 
to all policyholders and is not detrimental to the public; and (c) 
after giving effect to the reorganization, the reorganized insurer will 
have an amount of capital and surplus the Superintendent deems to be 
reasonably necessary for its future solvency. The Superintendent must 
also determine that the reorganization plan does not fail to meet the 
following requirements of section 7312(c). In other words, (a) the plan 
must demonstrate a purpose and specific reasons for the proposed 
reorganization; (b) the plan must be fair and equitable to the 
policyholders; (c) the plan must provide for the enhancement of the 
operations of the reorganized insurer; and (d) the plan must not 
substantially lessen competition in any line of insurance business. A 
decision by the Superintendent to approve a plan of reorganization is 
subject to judicial review in the New York courts.
    The policyholders of the mutual life insurance company must also 
approve the plan of reorganization. Each policyholder is entitled to 
one vote and the plan must be approved by a vote of at least two-thirds 
of all votes cast by policyholders entitled to vote.
    5. MONY completed the development of its Plan of Reorganization and 
received approval from its Board of Trustees of the proposed conversion 
on August 14, 1998. On October 19, 1998, the New York State Insurance 
Department (the New York Insurance Department) held a public hearing 
with respect to MONY's Plan of Reorganization. On November 2, 1998, the 
vote by MONY policyholders approving the Plan was completed. Formal 
approval of the Plan by the New York Insurance Department occurred on 
November 10, 1998.
    6. MONY has established a subsidiary (i.e., the Holding Company) 
whose stock it exclusively owns. On November 16, 1998, the effective 
date of the Plan of Reorganization, MONY, itself, issued common stock 
to the Holding Company. In addition, MONY surrendered to the Holding 
Company and the Holding Company cancelled all of the Holding Company 
common stock held by MONY. MONY then became a subsidiary of the Holding 
Company.
    As a result of the reorganization, MONY became, by operation of New 
York Insurance Law, a stock life insurance company. MONY's charter and 
by-laws were extinguished in accordance with New York Insurance Law. 
Further, MONY's name was changed from ``The Mutual Life Insurance 
Company of New York'' to ``MONY Life Insurance Company.'' However, all 
of MONY's insurance policies would remain in force and all 
policyholders would be entitled to receive all of the benefits under 
their policies and contracts to which they would have been entitled if 
the Plan of Reorganization had not been adopted.
    7. MONY's Plan of Reorganization provides for Eligible 
Policyholders to receive consideration in exchange for the surrender of 
their membership interests as soon as practicable after the 
reorganization date. Eligible Policyholders are those policyholders 
whose MONY policies were both in force on the date of adoption of the 
Plan of Reorganization by MONY's Board of Trustees and were still in 
force on the effective date of the Plan.
    Under the Plan of Reorganization, certain Eligible Policyholders 
will receive common stock of the Holding Company as consideration for 
their membership interest in the mutual insurance company. Said 
interest will be extinguished as a result of the reorganization (Stock 
Eligible Policyholders).

[[Page 69317]]

    Aside from requiring the Holding Company to issue shares of Holding 
Company stock to Stock Eligible Policyholders, the Holding Company was 
permitted to sell shares of such stock, for cash, in an initial public 
offering (the IPO) on the date of the reorganization. The Holding 
Company also arranged for listing the Holding Company stock on the New 
York Stock Exchange (NYSE). Such stock is currently traded on the NYSE.
    Also under MONY's Plan of Reorganization, certain Eligible 
Policyholders will receive cash or policy credits in lieu of Holding 
Company stock. In this regard, if there were an IPO, Eligible 
Policyholders who affirmatively indicated a preference to receive cash 
instead of Holding Company stock, and who were allocated 75 shares or 
less, as determined by MONY's Board of Trustees and approved by the 
Superintendent prior to the reorganization, would receive cash instead 
of Holding Company stock.<SUP>5</SUP> Assuming there were no IPO, such 
Eligible Policyholders would receive Holding Company stock, regardless 
of having expressed an interest for cash.
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    \5\ With respect to these policyholders, MONY represents that it 
will not provide ``investment advice'' on the form of consideration 
elected.
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    In addition, Eligible Policyholders whose mailing address is 
outside the United States or Canada will receive cash unless the Plan 
of Reorganization requires them to receive policy credits. Eligible 
Policyholders who hold TDA or IRA contracts will receive policy credits 
in the form of enhanced policy values in exchange for their membership 
interests.<SUP>6</SUP> Such Eligible Policyholders are generally not 
able to hold stock under applicable tax laws. Further, individuals, who 
are covered by Plans that are qualified under sections 401(a) or 403(a) 
of the Code, and who hold life insurance or annuity contracts will 
receive policy credits. All other Eligible Policyholders, who are not 
entitled to receive Holding Company stock, will receive cash in 
exchange for their membership interests.<SUP>7</SUP>
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    \6\ However, TDA or IRA policyholders who are in ``payout 
status'' will receive shares of Holding Company Stock instead of 
policy credits.
    \7\ Consistent with sections 7312(a)(2), 7312(e) and 4210 of New 
York Insurance Law, the Plan of Reorganization generally provides 
that the policyholder eligible to participate in the distribution of 
stock, cash or policy credits resulting from the Plan of 
Reorganization is ``the person whose name appears * * * on the 
insurer's records as owner'' of the policy. MONY further represents 
that an insurance or annuity policy that provides benefits under an 
employee benefit plan, typically designates the employer that 
sponsors the plan, or a trustee acting on behalf of the plan, as the 
owner of the policy. In regard to insurance or annuity policies that 
designate the employer or trustee as owner of the policy, MONY 
represents that it is required under the foregoing provisions of New 
York Insurance Law and the Plan of Reorganization to make 
distributions resulting from such Plan to the employer or trustee as 
owner of the policy, except as provided below.
    Notwithstanding the foregoing, MONY's Plan of Reorganization 
provides a special rule applicable to an insurance policy issued to 
a trust established by MONY. This rule applies whether or not the 
trust, or any arrangement established by any employer participating 
in the trust, constitutes an employee benefit plan subject to the 
Act. Under this special rule, the holder of each individual 
``certificate'' issued in connection with the insurance policy is 
treated as the policyholder and owner for all purposes under the 
Plan of Reorganization, including voting rights and the distribution 
of consideration. The trustee of any such trust established by MONY 
will not be considered a policyholder or owner and will not be 
eligible to vote or receive consideration.
    In general, it is the Department's view that, if an insurance 
policy (including an annuity contract) is purchased with assets of 
an employee benefit plan, including participant contributions, and 
if there exist any participants covered under the plan (as defined 
at 29 CFR 2510.3-3) at the time when MONY incurs the obligation to 
distribute Holding Company 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 
provisions of the Act.
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    The cash or policy credits distributed to Eligible Policyholders, 
who are not entitled to receive Holding Company stock, will have a 
value equal to the stock such policyholders would otherwise have 
received based on the price per share of the Holding Company stock in 
the IPO or, if there were no IPO, a number equal to a percentage of the 
book value of the Holding Company stock on November 16, 1998, the 
effective date of the Plan of Reorganization as determined by MONY's 
actuarial consultant, PricewaterhouseCoopers, LLP, (PwC) and approved 
by the Superintendent, in consultation with its actuary, TT-
P.<SUP>8</SUP> In total, MONY expects to distribute approximately $1 
billion in value to Eligible Policyholders. Said amount represents the 
entire value of MONY's enterprise. MONY proposes to distribute the 
consideration to Eligible Policyholders on December 24, 1998.
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    \8\ MONY wishes to clarify that the Superintendent was empowered 
to approve the Plan of Reorganization and, in connection with such 
Plan, the methodology utilized to determine the book value of the 
Holding Company. However, the Superintendent is not specifically 
authorized to review and approve the actual calculation of the book 
value of the Holding Company at the time the distribution occurs.
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    8. The Holding Company stock will be allocated to Stock Eligible 
Policyholders as follows: (a) each Stock Eligible Policyholder will 
receive at least 7 shares; and (b) the remainder of the shares will be 
allocated to Stock Eligible Policyholders who own participating 
policies based on the estimated contributions to surplus made by each 
Eligible Policyholder. <SUP>9</SUP> As stated above, the allocation 
methodology must be fair and equitable. Therefore, MONY has retained 
PwC to assist it in developing an equitable allocation methodology, and 
the Superintendent has retained TT-P to evaluate the allocation 
methodology. Further, no Stock Eligible Policyholder will pay any 
brokerage commissions or other transaction costs in connection with 
such policyholder's receipt of stock.
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    \9\ MONY notes that both the fixed and variable components of an 
insurance policy will be provided in exchange for the policyholder's 
membership interests.
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    9. The Plan of Reorganization states that amounts to be distributed 
to Eligible Policyholders that are Plans will be held in an escrow or 
similar arrangement in the event that the Department does not provide 
exemptive relief prior to the date of the reorganization. Under the 
escrow arrangement, Plan policyholders will not receive their 
distribution until such time as the exemption is granted, but no later 
than the third anniversary of the effective date of the reorganization. 
The escrow arrangement is subject to the terms and conditions of the 
New York Insurance Department. Although it is currently contemplated 
that the New York Insurance Department may require MONY to adopt the 
escrow arrangement, MONY notes that this arrangement may be determined 
to be unnecessary if the proposed exemption specifies the date of 
reorganization as the effective date of the exemption.
    10. In addition, the Plan of Reorganization provides for the 
establishment of a commission-free sales program whereby Stock Eligible 
Policyholders who receive between 25 and 99 shares of Holding Company 
stock will be given the opportunity to sell their Holding Company stock 
on the open market at least 60 days prior to the commencement date of 
the program. Further, the Plan of Reorganization provides for a 
commission-free purchase program whereby Stock Eligible Policyholders 
who receive 99 or fewer shares of Holding Eligible Company stock will 
be permitted to purchase the number of shares necessary to bring their 
respective total number of shares up to 100. Stock Eligible 
Policyholders who participate in the commission-free sales and purchase 
programs will do so without the payment of any brokerage commissions or 
similar fees. Moreover, MONY and its affiliates will not provide 
``investment advice'' as described in section 3(21) of the Act with 
regard to

[[Page 69318]]

the program. The commission-free sales and purchase programs will 
commence on the first business day after the nine month anniversary of 
the effective date of the reorganization and will continue for three 
months. The programs may be extended with the approval of the 
Superintendent if the Board of Directors of MONY determines such 
extension would be appropriate and in the best interest of MONY and its 
stockholders.
    11. Although policyholder membership interests in MONY were 
extinguished as a result of the reorganization, MONY's insurance 
policies will remain in force. Eligible Policyholders will be entitled 
to receive all benefits under their policies to which they would have 
been entitled if the Plan of Reorganization had not been adopted. In 
effect, no actual exchange of contracts will take place. The 
contractural terms and benefits of MONY's life insurance, endowment, 
annuity, pension plan, and other insurance contracts, including the 
face values, insurance in force, borrowing terms, amount or pattern of 
death benefit, premium pattern, interest rate or rates guaranteed on 
issuance of the contract, and the guaranteed mortality and expense 
charges, will remain unchanged.
    12. As part of its long-term strategic plan to convert to a stock 
life insurance company, MONY, the Holding Company and a group of 
investment funds (the Investors) \10\ affiliated with Goldman, Sachs & 
Co. (Goldman Sachs) have entered into an investment agreement (the 
Investment Agreement). Under the Investment Agreement, MONY issued $115 
million of 15 year, 9.5 percent surplus notes (the Surplus Notes) to 
the Investors on December 30, 1997. The Surplus Notes are direct and 
unsecured obligations of MONY. In accordance with section 1307 of the 
New York Insurance Law, each payment of principal and interest on the 
Surplus Notes may only be made with the prior approval of the New York 
Insurance Department. The Surplus Notes are subordinate to all existing 
and future indebtedness, policy claims and other creditors of MONY. 
Proceeds from the Surplus Notes issuance are being added to MONY's 
capital base.
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    \10\ The Investors consist of GS Mezzanine Partners, L.P.; GS 
Mezzanine Partners Offshore, L.P.; Stone Street Fund 1997, L.P.; and 
Bridge Street Fund 1997, L.P. At the time of the investment, it is 
represented that one member of MONY's Board of Trustees was a 
limited partner in Goldman Sachs. However, no other affiliation 
between MONY and the other Investors existed at the time of the 
Investment Agreement.
    In addition, the Investors have specifically represented to MONY 
that their investment in the aforementioned limited partnerships 
will either not involve plan assets or will not constitute a 
prohibited transaction. In this regard, section 3.2(d) of the 
Investment Agreement provides that--
    Each Investor represents that either (a) it is not (i) an 
employee benefit plan (as defined in section 3(3) of ERISA) which is 
subject to the provisions of Title I of ERISA, (ii) a plan described 
in section 4975(e)(1) of the Code or, (iii) an entity whose 
underlying assets are deemed to be assets of a plan described in (i) 
or (ii) above by reason of such plan's investment in the entity, or 
(b) the Investor's purchase and holding of [the Surplus] Notes will 
be exempt under a prohibited transaction class exemption issued by 
the U.S. Department of Labor.
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    Also under the Investment Agreement, MONY sold warrants (the 
Warrants) providing the Investors with the opportunity to purchase a 
minority interest of 7 percent or less of the Holding Company stock 
upon MONY's conversion to a stock company. The Warrants were sold to 
the Investors on December 30, 1997 at an aggregate purchase price of 
$10 million. The exercise price for the Warrants will be the IPO share 
price.
    Further, the Investment Agreement provides that following the 
reorganization, MONY has an option to draw upon an additional $100 
million from the Investors through the issuance of non-voting 
convertible preferred stock. Although MONY does not currently expect 
that it will exercise the option, the contingent capital commitment 
would allow it to have additional capital access, particularly in the 
event it does not complete the IPO.
    Finally, under the Investment Agreement, the Investors have been 
granted board representation rights. Under the Agreement, MONY and the 
Holding Company have agreed to use their best efforts to cause one of 
the persons proposed by the Investors to be elected to its board. The 
Investors' right to board representation will terminate when the 
Investors no longer own Holding Company stock and/or the right to 
acquire such stock (through the ownership of Warrants and/or 
convertible preferred stock) equal to 5 percent of the voting power of 
the Holding Company stock.
    It is represented that Goldman Sachs's investment will add 
significantly to MONY's financial strength and in no way affect MONY's 
policy commitments or other obligations.
    13. In summary, it is represented that the transactions have 
satisfied or will satisfy the statutory criteria for an exemption under 
section 408(a) of the Act because:
    (a) The Plan of Reorganization, which is being implemented pursuant 
to stringent procedural and substantive safeguards imposed under New 
York law and supervised by the Superintendent, will not require any 
ongoing involvement by the Department.
    (b) One or more independent Plan fiduciaries had an opportunity to 
determine whether to vote to approve the terms of the Plan of 
Reorganization and was solely responsible for all such decisions.
    (c) The proposed exemption will allow Eligible Policyholders that 
are Plans to acquire Holding Company stock, cash or policy credits in 
exchange for their membership interests in MONY and neither MONY nor 
its affiliates will exercise any discretion or provide investment 
advice with respect to such acquisition.
    (d) No Eligible Policyholder will pay any brokerage commissions or 
fees in connection with such Eligible Policyholder's receipt of Holding 
Company stock or with respect to the implementation of the commission-
free sales and purchase programs.
    (e) As a result of the Plan of Reorganization, all Eligible 
Policyholders will receive approximately $1 billion from MONY which 
represents MONY's full equity value and have the opportunity to 
participate in MONY's future earnings.
    (f) Each Eligible Policyholder that is a Plan had an opportunity to 
comment on the Plan of Reorganization and to vote to approve such Plan 
of Reorganization after receiving full and complete disclosure of its 
terms.
    (g) The Superintendent made an independent determination that the 
Plan of Reorganization was in the interest of all MONY policyholders 
including Plans.
    (h) All of MONY's policyholder obligations will remain in force and 
will not be affected by the Plan of Reorganization.

Notice to Interested Persons

    MONY will provide notice of the proposed exemption to Eligible 
Policyholders which are Plans within 30 days of the publication of the 
notice of pendency in the Federal Register. Such notice will be 
provided to interested persons by first class mail and will include a 
copy of the notice of proposed exemption as published in the Federal 
Register as well as a supplemental statement, as required pursuant to 
20 CFR 2570.43(b)(2) which shall inform interested persons of their 
right to comment on the proposed exemption. Comments with respect to 
the notice of proposed exemption are due within 60 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 69319]]

Individual Retirement Accounts (the IRAs) for Sharilyn Brune, 
Richard C. Glowacki, Carl B. Mockensturm, Arthur T. Parrish, W. 
Alan Robertson, David A. Snavely and Duane Stranahan, Jr. 
(collectively, the IRA Participants); Located in Holland, OH

[Application Nos. D-10636-D-10642, respectively)

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of 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 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, 
effective December 1, 1998 to (1) the cash sale by the IRAs \11\ to TTC 
Holdings, Inc. (TTC), the parent of The Trust Company of Toledo, N.A. 
(TTCOT), the trustee of the IRAs and a disqualified person, of certain 
preferred stock (the Preferred Stock) issued by TTC; and (2) the 
arrangement for the subsequent purchase by the IRA Participants in 
their individual capacities, from TTC, pursuant to an agreement with 
TTC, of an equal number of shares of common stock (the Common Stock) 
issued by TTC, provided the following conditions are met:
---------------------------------------------------------------------------

    \11\ Pursuant to 29 CFR 2510.3-2(d), the IRAs are not within the 
jurisdiction of Title I of the Employee Retirement Income Security 
Act of 1974 (the Act). However, there is jurisdiction under Title II 
of the Act pursuant to section 4975 of the Code.
---------------------------------------------------------------------------

    (a) The terms and conditions of the sale and purchase transactions 
were at least as favorable to each IRA as the terms obtainable in an 
arm's length transaction with an unrelated party.
    (b) The sale by the IRAs of the Preferred Stock and the purchase by 
the IRA Participants of the Common Stock, in their individual 
capacities, were one-time transactions for cash which occurred on the 
same business day;
    (c) Each IRA received from TTC, as the sales price for the 
Preferred Stock, cash consideration reflecting the fair market value of 
such stock as determined by a qualified, independent appraiser;
    (d) Each IRA Participant purchased, in his or her individual 
capacity, shares of the Common Stock which were equal in number to the 
shares of Preferred Stock sold by TTC;
    (e) No IRA was required to pay any commissions, fees or other 
expenses in connection with each sale transaction; and
    (f) An independent fiduciary (the Independent Fiduciary) determined 
that the transactions described herein were in the best interest and 
protective of the IRAs at the time of the transactions; supervised and 
monitored such transactions on their behalf; assured that the 
conditions of the proposed exemption were met; and took whatever 
actions were necessary and proper to protect the interests of the IRAs, 
including reviewing amounts paid by TTC for the Preferred Stock.
    Effective date: If granted, this proposed exemption will be 
effective as of December 1, 1998.

Summary of Facts and Representations

    1. TTC of 6135 Trust Drive, Holland, Ohio was incorporated in April 
1990 as an Ohio ``for profit'' corporation. TTC is the holding company 
of TTCOT, a nondeposit trust company. TTCOT, also located in Holland, 
Ohio, is a wholly owned subsidiary of TTC.
    2. TTCOT is a bank as that term is defined in section 202(a)(2) of 
the Investment Advisers Act of 1940, as amended (the Advisers Act).\12\ 
TTCOT has been approved by the Office of the Comptroller of the 
Currency to operate as a trust company. For the past 8 years, it has 
engaged in the business of a freestanding trust-only business. TTCOT 
provides a range of trust, investment management and custodial services 
for employee benefit trusts and various personal trusts throughout 
northwestern Ohio and southwestern Michigan. However, TTCOT does not 
have the power to accept deposits, make loans or provide other services 
characteristic of a commercial bank. TTCOT is regulated by the Office 
of the Comptroller of the Currency. As a member of the Federal Reserve 
System, TTCOT is also subject to the regulations of the Federal Reserve 
Board. The trust powers of TTCOT are limited to the laws of the State 
of Ohio.
---------------------------------------------------------------------------

    \12\ The Advisers Act defines the term ``bank'' to include ``(A) 
a banking institution organized under the laws of the United States, 
(B) a member bank of the Federal Reserve System, (C) any other 
banking institution or trust company, whether incorporated or not, 
doing business under the laws of any State or of the United States, 
a substantial portion of the business of which consists of receiving 
deposits or exercising fiduciary powers similar to those permitted 
to national banks under the authority of the Comptroller of the 
Currency, and which is supervised and examined by State or Federal 
authority having supervision over banks, and which is not operated 
for the purpose of evading the provisions of this subchapter, and 
(D) a receiver, conservator, or other liquidating agent of any 
institution or firm included in clauses (A), (B), or (C) of this 
paragraph.''
---------------------------------------------------------------------------

    3. The IRAs are individual retirement accounts established under 
section 408(a) of the Code.\13\ At present, TTCOT serves as a directed 
trustee for the IRAs which are further described as follows:
---------------------------------------------------------------------------

    \13\ Section 408(a) of the Code defines the term ``individual 
retirement account'' as a trust created or organized in the United 
States for the exclusive benefit of an individual or his 
beneficiaries but only if the written governing instrument creating 
the trust meets the following requirements: (a) except in the case 
of a rollover contribution described in subsection (d)(3) in Code 
sections 402(c), 403(a)(4) or 403(b)(8), no contribution will be 
accepted unless it is in cash and contribution will be accepted 
unless it is in cash and contributions will not be accepted for the 
taxable year in excess of $2,000 on behalf of the individual; (b) 
the trustee is a bank or such other person who demonstrates to the 
satisfaction of the Secretary [of the Treasury] that the manner in 
which such other person will administer the trust will be consistent 
with the requirements of this section; (c) no part of the trust 
funds will be invested in life insurance contracts; (d) the interest 
of an individual in the balance in his account is nonforfeitable; 
(e) the assets of the trust will not be commingled with other 
property except in a common trust fund or common investment fund; 
and (f) under regulations prescribed by the Secretary, rules similar 
to the rules of section 401(a)(9) and the incidental death benefit 
requirements of section 401(a) shall apply to the distribution of 
the entire interest of an individual for whose benefit the trust is 
maintained.
---------------------------------------------------------------------------

    (a) The Sharilyn Brune IRA. This IRA was originally established by 
Sharilyn Z. Brune with The Ohio Company. However, on October 30, 1997, 
TTCOT was appointed as the successor, directed trustee of the IRA. Ms. 
Brune, the only participant in the IRA, is not an officer, director, 
principal or employee of either TTC or TTCOT. As of August 26, 1998, 
Ms. Brune's IRA had total assets having a fair market value of 
$112,808.
    (b) The Richard Glowacki IRA. This IRA was originally established 
by Richard C. Glowacki with the former Society Bank and Trust (Society 
Bank), which is currently known as KeyBank. However, on June 29, 1992, 
TTCOT was appointed as the successor, directed trustee of the IRA. Mr. 
Glowacki, the only participant in the IRA, is not an officer, director, 
principal or employee of either TTC or TTCOT. As of July 31, 1998, Mr. 
Glowacki's IRA had total assets having a fair market value of 
$1,274,017.
    (c) The Carl B. Mockensturm IRA. This IRA was originally created by 
Carl B. Mockensturm with the former Shearson Lehman Bros., which is 
currently known as Lehman Bros. However, on April 1, 1997, TTCOT was 
appointed as the successor, directed trustee of the IRA. Mr. 
Mockensturm, the only participant in the IRA, is not an officer, 
director, principal or employee of either TTC or TTCOT. As of July 31, 
1998, Mr. Mockensturm's IRA had total assets having a fair market value 
of $535,766.
    (d) The Arthur T. Parrish IRA. This IRA was originally established 
by Arthur T. Parrish and Scudder Investment. However, on January 3, 
1991, TTCOT was appointed as the

[[Page 69320]]

successor, directed trustee of the IRA. Mr. Parrish, the only 
participant in the IRA, is not an officer, director, principal or 
employee of either TTC or TTCOT. As of July 31, 1998, Mr. Parrish's IRA 
had total assets having a fair market value of $438,924.
    (e) The W. Alan Robertson IRA. This IRA was originally created by 
W. Alan Robertson and the former Society Bank. However, on October 4, 
1997, TTCOT was appointed as the successor, directed trustee of the 
IRA. Mr. Robertson, the only participant in the IRA, is not an officer, 
director, principal or employee of either TTC or TTCOT. As of July 31, 
1998, Mr. Robertson's IRA had total assets having a fair market value 
of $383,997.
    (f) The David A. Snavely IRA. This IRA was originally created by 
David A. Snavely and The Ohio Company. However, on October 4, 1997, 
TTCOT was appointed as the successor, directed trustee of the IRA. Mr. 
Snavely, the only participant in the IRA, is not an officer, director, 
principal or employee of either TTC or TTCOT. As of July 31, 1998, Mr. 
Snavely's IRA had total assets having a fair market value of $244,229.
    (g) The Duane Stranahan, Jr. IRA. This IRA was originally created 
by Duane Stranahan, Jr. and the former Society Bank. However, on 
January 25, 1991, TTCOT was appointed as the successor, directed 
trustee of the IRA. Mr. Stranahan, the only participant in the IRA, is 
the Chairman of the Board and a director TTCOT. As of July 31, 1998, 
Mr. Stranahan's IRA had total assets having a fair market value of 
$412,661.
    4. TTC was formerly capitalized with two classes of stock--one 
class of common stock (i.e., the Common Stock) and one class of 
preferred stock (i.e., the Preferred Stock). Both classes of stock had 
equal voting rights and were without par value. There were 3,531 shares 
of Common Stock outstanding which were divided evenly among Theodore T. 
Hahn, Julie B. Higgins and David Snavely, the founders, principals and 
partners of TTC.
    The Preferred Stock was initially issued in units of 200 shares, 
each in combination with a $10,000, 9 percent debenture (the Debenture) 
subordinated to the secured debt of TTC. The Debenture has a maturity 
date of December 31, 2000.<SUP>14</SUP> The Preferred Stock and the 
Debentures were both constituent parts of a single offering unit which 
could not be severed by the purchaser. The price for each unit was 
$30,000. Of this amount, $20,000 was allocated to the Preferred Stock 
and $10,000 to the Debenture. Thus, the total subscription price was $3 
million.
---------------------------------------------------------------------------

    \14\ The original Debenture debt represents a ten year note 
totaling $1 million that was issued in October 1990. Interest has 
accrued on the unpaid principal amount of the note from the date of 
issuance at the rate of 9 percent per annum based upon the actual 
number of days elapsed. Interest was initially paid commencing 
January 1, 1991 and semiannually on each July 1 and January 1, 
thereafter.
    The principal amount of the Debentures has been payable in five, 
equal, consecutive, annual installments (20 percent of the original 
principal amount of each Debenture), each due on December 31, 1996 
through 2000, unless prepaid. In other words, the terms of the 
Debentures have provided for installment repayments of debt of 
$200,000 each, beginning on December 31, 1996. As noted, the 
scheduled $200,000 installment was made in December 1996. A 
scheduled $200,000 installment and a $200,000 prepayment were made 
in December 1997 and a scheduled $200,000 installment and a final 
prepayment will be paid by December 31, 1998.
    The terms of the Debentures also permit any portion of the 
unpaid principal balance to be prepaid at any time, provided, 
however, that the prepayments are concurrently made on a pro rata 
basis to all holders. Prepayments credited to the unpaid principal 
amount of the Debentures will be used to reduce the amount thereof 
due and payable at the next succeeding payment date.
---------------------------------------------------------------------------

    There were 20,000 shares of Preferred Stock that were issued and 
outstanding. These shares were held by approximately 65 shareholders. 
Among the shareholders were 19 employee benefit plans and IRAs holding 
a total of 4,400 shares of Preferred Stock or 18.7 percent of the 
23,531 aggregate shares of Preferred and Common Stock that were issued 
and outstanding.
    The Preferred Stock gave each shareholder a $100 per share 
liquidation preference but it did not pay any dividends. Each share of 
Preferred Stock was convertible into one share of Common Stock at the 
option of the shareholder. In addition, the Preferred Stock entitled 
the holder to voting privileges that were identical to those given to 
shareholders of the Common Stock.
    5. Through a Confidential Offering Memorandum dated May 31, 1990 
(the principal terms of which are described above in Representation 4), 
each IRA Participant was given the opportunity, by the founders of TTC, 
to acquire shares of Preferred Stock and Debentures in a direct, 
limited private placement at the time of the initial offering. In this 
regard, each IRA Participant could direct their respective IRA to 
purchase shares of Preferred Stock and a Debenture. Based on the 
financial projections provided in the Confidential Offering Memorandum, 
it was TTCOT's belief that the investors might recognize the 
opportunity for equity appreciation through such an investment.
    Therefore, on October 8, 1990, each IRA acquired shares of the 
Preferred Stock from TTC along with the Debentures. The IRAs paid cash 
for the Preferred Stock and the attendant Debentures in the following 
amounts:

----------------------------------------------------------------------------------------------------------------
                                                                                                   Percentage of
                                                                                                   IRA's assets
                                                     Shares of      Amount paid                   represented by
                       IRA                           preferred     for preferred    Amount paid      preferred
                                                  stock acquired       stock      for debentures     stock and
                                                                                                    debentures
                                                                                                     (percent)
----------------------------------------------------------------------------------------------------------------
Brune...........................................             200         $20,000         $10,000              75
Glowacki........................................             200          20,000          10,000               9
Mockensturm.....................................             200          20,000          10,000              15
Parrish.........................................             200          20,000          10,000              17
Robertson.......................................             200          20,000          10,000              30
Snavely.........................................             200          20,000          10,000              45
Stranahan.......................................             800          80,000          40,000              90
----------------------------------------------------------------------------------------------------------------


[[Page 69321]]

    The IRAs incurred no fees or commissions in connection with the 
acquisition transaction. However, at the time of the acquisition, Mr. 
David Snavely was the President of TTCOT and Mr. Duane Stranahan was a 
director of TTC.<SUP>15</SUP>
---------------------------------------------------------------------------

    \15\ The Department notes that the Internal Revenue Service has 
taken the position that a lack of diversification of investments may 
raise questions with respect to the exclusive benefit rule under 
section 401(a) of the Code. (See Rev. Rul. 73-532, 1973-2 C.B. 128.) 
The Department further notes that section 408(a) of the Code, which 
describes the tax qualification provisions for IRAs, mandates that 
the trust be created for the exclusive benefit of an individual or 
his or her beneficiaries. However, the Department is not expressing 
an opinion herein on whether violations of section 408(a) have taken 
place with respect to the purchase and retention of TTC Preferred 
Stock and the Debentures by certain of the IRA Participants.
    Further, the Department notes that although TTC owns 100 percent 
of the outstanding stock of TTCOT, under section 4975(e)(2)(H) of 
the Code, TTC would not be considered a disqualified person with 
respect to the IRAs because TTCOT, a fiduciary as well as a service 
provider to the IRAs, is not a ``person'' described in subparagraph 
(C), (D), (E) or (G) of that section. To the extent that TTC is not 
a disqualified person with respect to the IRAs, the purchase of the 
Preferred Stock and the Debentures at the direction of the IRA 
Participants would not involve a transaction described in section 
4975(c)(1)(A) or (B) of the Code. While TTC may not be a 
disqualified person with respect to the IRAs, the purchase and 
holding of the Preferred Stock and the Debentures by certain IRA 
Participants may raise questions under section 4975(c)(1)(D) and (E) 
of the Code depending on the degree (if any) of the IRA 
Participant's interest in the transaction. Section 4975(c)(1)(D) and 
(E) of the Code prohibits the use by or for the benefit of a 
disqualified person of the assets of a plan and prohibits a 
fiduciary from dealing with the assets of a plan in his own interest 
or for his own account. Mr. Snavely, as an officer of TTCOT, and Mr. 
Stranahan, as a director of TTC, may have had interests in the 
acquisition transaction which affected their best judgment as 
fiduciaries of their IRAs. In such circumstances, the transactions 
may have violated section 4975 (c)(1)(D) and (E) of the Code. See 
ERISA Advisory Opinion 90-20A (June 15, 1990). Accordingly, to the 
extent there were violations of section 4975(c)(1)(D) and (E) of the 
Code with respect to the purchase and holding of the Preferred Stock 
and the Debentures by the IRAs of Messrs. Snavely and Stranahan, the 
Department is not extending exemptive relief with respect to such 
transactions.
---------------------------------------------------------------------------

    6. While owning the Preferred Stock, each IRA Participant became a 
minority shareholder of TTC. However, no IRA Participant owned shares 
of Preferred Stock in an individual capacity. In addition, none of the 
IRAs acquired additional shares of Preferred Stock or Debentures nor 
did they incur any servicing fees in connection with their holding of 
these investments.
    Also during its time of ownership by the IRAs, the value of the 
Preferred Stock increased from $100 per share in 1990 to $291.70 per 
share as of December 31, 1997. As for the Debentures, which are being 
redeemed in annual installments of $200,000, the outstanding principal 
amount was $400,000 as of March 31, 1998.
    7. TTC recently obtained authority from its shareholders to amend, 
by total restatement, its Amended and Restated Articles of 
Incorporation. The primary purpose for the adoption of the Amended and 
Restated Articles of Incorporation is to enable TTC to change its 
corporate tax status, in accordance with section 1362 of the 
Code,<SUP>16</SUP> from a ``Subchapter-C corporation'' to a 
``Subchapter-S corporation'' for the taxable years commencing January 
1, 1999. The amendment would also provide for the full conversion of 
the Preferred Stock into Common Stock. In addition, the Board of 
Directors of TTC has determined that it would be valid to assume that 
TTC would continue to generate significant pre-tax income and that by 
eliminating its ``Subchapter-C corporation'' tax status, TTC could 
substantially increase its return to its shareholders.
---------------------------------------------------------------------------

    \16\ Section 1362 of the Code contains provisions which allow a 
small business corporation to elect and terminate Subchapter-S 
corporate status.
---------------------------------------------------------------------------

    8. As a result of TTC's proposal to change its corporate tax 
status, an entity such as an employee pension benefit plan would be 
considered an ``eligible shareholder'' (i.e., an entity identified in 
the Code as being eligible to own and hold shares in a Subchapter-S 
corporation). However, an entity such as an IRA would be considered an 
ineligible shareholder (i.e., an entity identified in the Code as being 
ineligible to own and hold shares in a Subchapter-S corporation). 
Therefore, on or about May 4, 1998, TTC sent documentation to all of 
its shareholders including the IRA Participants of the above referenced 
IRAs. Specifically, TTCOT indicated that it wished to redeem, by 
cancellation and at the current market value,<SUP>17</SUP> all shares 
of the Preferred Stock currently held by the ineligible shareholders, 
including the IRAs, as well as eligible shareholders who might suffer 
adverse tax consequences from continued ownership of shares in a 
Subchapter-S corporation. The Board of Directors and the management of 
TTC believed that the shares of stock would continue to appreciate in 
value as well as allow each shareholder to receive a distributable 
share of the income of TTC.
---------------------------------------------------------------------------

    \17\ These shareholders would include the following employee 
benefit plans for which exemptive relief has also been requested 
from the Department: (D-10630) Genito-Urinary Surgeons, Inc. Profit 
Sharing Plan; (D-10631) Michael J. Rosenberg Money Purchase Pension 
Plan; (D-10632) Robert Savage Qualified Retirement Plan; (D-10633) 
Toledo Clinic Inc. Employees 401(k) Profit Sharing Plan; (D-10634) 
Hart Associates, Inc. Profit Sharing Plan; and (D-10635) Midwest 
Fluid Power Company Savings & Profit Sharing Plan.
---------------------------------------------------------------------------

    In addition to the sale transaction, TTC provided a mechanism 
whereby each ineligible shareholder could designate a related party who 
would purchase, simultaneously with or immediately after the sale, the 
number of shares of Common Stock equal to the number of shares of 
Preferred Stock sold by the designating former shareholder. The 
purchase transaction would be a cash transaction at the same price per 
share as that paid by TTC to the IRA as the sales price for the 
Preferred Stock.
    Accordingly, TTCOT requests an administrative exemption from the 
Department to permit, effective December 1, 1998, the sale by the 
subject IRAs of their respective shares of Preferred Stock to TTC for a 
cash price that was based upon the fair market value of such stock. The 
proposed exemption would also permit, effective December 1, 1998, the 
purchase, by the IRA Participants, in their individual capacities, of 
shares of Common Stock from TTC. Neither the IRAs nor the IRA 
Participants were required to pay any commissions, fees or incur any 
other expenses in connection with the sale and purchase transactions. 
As noted above, the Debentures will be repaid in full before December 
31, 1998 and, therefore, are not subject to this exemption.
    9. The sales price for the Preferred Stock was determined based 
upon a written valuation of the shares dated May 6, 1998 and prepared 
by Austin Financial Services, Inc. (AFSI), a qualified, independent 
consulting firm with substantial experience in the financial services 
industry. AFSI, a Toledo, Ohio-based investment banking firm, was 
retained by TTC to value TTC and determine the fair market value of the 
outstanding shares of Common Stock from a fully-diluted standpoint. The 
valuation, which was performed by Dr. Douglas V. Austin, President and 
CEO of AFSI and Mr. Steven A. Bires, Vice President of AFSI, also 
included an appraisal of the Preferred Stock.
    In conducting its valuation of TTC, AFSI reviewed relevant 
financial information of TTC in order to derive its opinion of the fair 
market value of the Common and Preferred Stock. In its evaluation, AFSI 
considered a number of valuation methodologies for valuing closely-held 
companies but it ultimately selected the discounted cash flow and 
capitalization of earnings approaches. After an appropriate weighting 
of these approaches, AFSI placed the fair market value of TTC at 
$7,263,035 or 324.82 percent of TTC's total equity. This equated to a 
fair market value of $308.66

[[Page 69322]]

per share on the total 23,351 shares of outstanding Preferred and 
Common Stock as of March 31, 1998 (or an aggregate value of $61,732 
each for the Brune, Glowacki, Mockensturm, Parrish, Robertson and 
Snavely IRAs and $246,928 for the Stranahan IRA).<SUP>18</SUP> The 
appraisal was updated prior to the consummation of the sale and 
purchase transactions.
---------------------------------------------------------------------------

    \18\ AFSI notes that a minority discount could have been applied 
to the sales price for the Preferred Stock since the proposed 
transactions do not involve controlling interests in such stock. 
However, based on instructions from TTC, the sales price has been 
computed without taking into consideration a minority discount to 
ensure that each IRA will receive a higher fair market value for the 
Preferred Stock.
---------------------------------------------------------------------------

    10. Each of the IRA Participants made a determination that the 
subject transactions would be in the interests of their IRAs. Upon 
arriving at this conclusion, TTC made a decision to retain, at the 
expense of TTCOT, the law firm of Callister Nebeker & McCullough (CNM) 
of Salt Lake City, Utah, to serve as the Independent Fiduciary with 
respect to the sale and purchase transactions. Specifically, the 
Independent Fiduciary was appointed to review and opine on the prudence 
and terms of the subject transactions, supervise and monitor such 
transactions on behalf of the IRAs, assure that the conditions of the 
proposed exemption were met, and take whatever actions were necessary 
and proper to enforce and protect the interests of the IRAs, including 
reviewing amounts paid by TTC for the Preferred Stock. The duties of 
the Independent Fiduciary were to be performed by Messrs. Jeffrey N. 
Clayton and W. Waldan Lloyd, both of whom are attorneys with the CNM.
    The Independent Fiduciary represented that CNM has, from time to 
time, acted as an independent fiduciary for employee benefit plans 
subject to the provisions of the Act. The Independent Fiduciary noted 
that CNM has an employee benefits section which routinely advises plan 
fiduciaries regarding compliance with fiduciary standards under the Act 
and that members of CNM have substantial experience in this area. The 
Independent Fiduciary also represented that neither CNM, nor Messrs. 
Clayton and Lloyd had any relationship with any of the IRAs, TTC or 
TTCOT. Further, the Independent Fiduciary stated that it understood and 
accepted the duties, responsibilities and liabilities in acting as a 
fiduciary with respect to the subject IRAs.
    The Independent Fiduciary was authorized to approve the disposal of 
the Preferred Stock, including the authority to determine whether or 
not the IRAs should be permitted to enter into the transactions and to 
negotiate the terms of such transactions on behalf of the IRAs. When 
rendering services to the subject IRAs, the Independent Fiduciary 
stated that it would rely on data supplied by TTCOT and the IRAs. 
However, the Independent Fiduciary was permitted to hire experts, 
consultants and other advisors and assistants.
    Based upon its assumptions, a review of listed documents and 
certain limitations, the Independent Fiduciary believed that the sale 
and purchase transactions were in the best interest of the IRAs and the 
IRA Participants because (a) the Preferred Stock lacked liquidity since 
it was not traded on the open market; (b) the sales price for the 
Preferred Stock would give the IRAs cash that could be reinvested in 
more liquid investments; and (c) the subject IRAs would be compelled to 
liquidate their shares of Preferred Stock in order to comply with the 
prohibitions on Subchapter-S corporation stock ownership if TTC and 
TTCOT change their corporate tax status. Therefore, the Independent 
Fiduciary believed the price to be received by the IRAs for their 
shares of TTC Preferred Stock would constitute ``adequate 
consideration'' within the meaning of section 3(18) of the Act.
    12. The Independent Fiduciary appointed Houlihan Valuation Advisors 
(HVA), an independent appraisal firm maintaining offices in Salt Lake 
City, Utah, to provide an opinion as to the fairness (the Fairness 
Opinion) of the sale transaction from a financial point of view. 
Because the IRAs were to receive ``adequate consideration'' for their 
shares of Preferred Stock, the sole purpose of the Fairness Opinion was 
to determine whether the proposed acquisition price would constitute 
adequate consideration for the IRAs. HVA's Fairness Opinion, which was 
dated June 16, 1998, was prepared by Mr. David Dorton, CFA, ASA. Mr. 
Dorton is a member of HVA.
    While noting that the Preferred Stock had a $100 per share 
liquidation preference, HVA stated that the fair market value of TTC 
was significantly higher than its liquidation value. Therefore, HVA 
believed the liquidation preference was virtually meaningless. Thus, 
for purposes of its analysis, HVA deemed the Preferred Stock to be 
equivalent to the Common Stock due to its convertibility features, 
identical voting privileges and non-payment of dividends.
    In preparing the Fairness Opinion, HVA stated that it reviewed a 
number of documents, including but not limited to, (a) TTC's audited 
financial statements for the years ended December 31, 1992 through 
1997; (b) AFSI's appraisal report; (c) various information furnished by 
TTC pertaining to the company, its operational structure, shareholder 
listings, compensation paid to key personnel, etc.; (d) a summary of 
transactions involving the Preferred Stock; and (e) operating 
projections for TTC. After reviewing these documents, HVA represented 
that it undertook generally recognized financial analysis and valuation 
procedures to ascertain the financial condition of TTC as well as to 
estimate the fair market value of the Preferred Stock to be sold to 
TTC. To this end, HVA explained that it utilized four valuation 
methodologies: (a) book value (including liquidation value), (b) 
transaction value, (c) market value (derived from market value ratios 
of publicly-traded ``comparable'' firms); and (d) income value (based 
on the present value of future benefits.
    Based upon its analysis, HVA concluded that the proposed sale 
transaction would be fair to the IRAs and that the IRAs would be 
receiving adequate consideration for the Preferred Stock. HVA also 
reserved the right to supplement or withdraw the Fairness Opinion prior 
to the closing of the sale transaction if material changes occurred 
which might impact on the value of TTC or the value of the Preferred 
Stock. Further, HVA proposed to update the Fairness Opinion prior to 
the sale and purchase transactions.
    13. In summary, it is represented that the transactions satisfied 
the statutory criteria for an exemption under section 4975(c)(2) of the 
Code because: (a) the terms and conditions of the sale and purchase 
transactions were at least as favorable to each IRA as the terms 
obtainable in an arm's length transaction with an unrelated party; (b) 
the sale by the IRAs of the Preferred Stock and the purchase by the IRA 
Participants of the Common Stock were one-time transactions for cash 
which occurred on the same business day; (c) each IRA received from 
TTC, as the sale price for the Preferred Stock, cash consideration 
reflecting the fair market value of such stock as determined by a 
qualified, independent appraiser; (d) each IRA Participant purchased, 
in his or her individual capacity, shares of the Common Stock which 
were equal in number to the shares of Preferred Stock sold by TTC; (e) 
no IRA was required to pay any commissions, fees or other expenses in 
connection with each sale transaction; and (f) the transactions 
described herein were approved by an

[[Page 69323]]

Independent Fiduciary which determined that the transactions described 
herein were in the best interest and protective of the IRAs at the time 
of the transactions; supervised and monitored such transactions on 
their behalf; assured that the conditions of the proposed exemption 
were met; and took whatever actions were necessary and proper to 
protect the interests of the IRAs, including reviewing amounts paid by 
TTC for the Preferred Stock.

Notice to Interested Persons

    Because Sharilyn Brune, Richard C. Glowacki, Carl B. Mockensturm, 
Arthur T. Parrish, W. Alan Robertson, David A. Snavely and Duane 
Stranahan, Jr. are the sole participants of their respective IRAs, it 
has been determined that there is no need to distribute the notice of 
proposed exemption to interested persons. Therefore, comments and 
request for a public hearing are due 30 days from the date of 
publication of this proposed exemption in the Federal Register.

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

Individual Retirement Accounts (the IRAs) for Robert C. Hummel, 
Garth L. Gibson, Hugh B. Force, Lynn Morgan Ruyle, Robb A. Ruyle, 
Ellen K. Davidson and Michael Davidson (Collectively; the 
Participants); Located respectively in Greeley, Colorado; Montrose, 
Colorado; Fort Collins, Colorado; Montrose, Colorado; Montrose, 
Colorado; Green River, Wyoming; and Green River, Wyoming

[Application Nos. D-10683, D-10684, D-10685, D-10686, D-10687, D-10697 
and D-10698]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of 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). If the exemption is granted, the sanctions 
resulting from the application of section 4975 of the Code, by reason 
of section 4975(c)(1)(A) through (E) of the Code, shall not apply to 
the cash sales (the Sales) of certain shares of closely-held common 
stock of First Mountain Company (the Stock) by the IRAs <SUP>19</SUP> 
to the Participants, disqualified persons with respect to the IRAs, 
provided that the following conditions are met:
---------------------------------------------------------------------------

    \19\ Because each IRA has only one Participant, there is no 
jurisdiction under 29 CFR 2510.3-3(b). However, there is 
jurisdiction under Title II of the Act pursuant to section 4975 of 
the Code.
---------------------------------------------------------------------------

    1. The terms and conditions of the Sales are at least as favorable 
to each IRA as those obtainable in an arm's-length transaction with an 
unrelated party;
    2. The Sale of the Stock by each IRA is a one-time transaction for 
cash;
    3. Each IRA receives the fair market of the Stock, as established 
by a qualified, independent appraiser, at the time of the Sale; and
    4. The IRAs do not pay any commissions, costs or other expenses in 
connection with the Sales.
    Effective date: The proposed exemption, if granted, will be 
effective as of December 15, 1998.

Summary of Facts and Representations

    1. The IRAs are individual retirement accounts, as described in 
Section 408(a) of the Code. The IRAs are self-directed. Among the 
assets of each IRA were shares of the common Stock of First Mountain 
Company (the Company),<SUP>20</SUP> a one-bank holding company 
domiciled in the State of Colorado and registered with the Board of 
Governors of the Federal Reserve System. The only asset of the Company 
is Montrosebank (the Bank), located in Montrose, Colorado. As of 
November 1998, the Company was a Subchapter ``C'' corporation. However, 
the Company plans to change its status and be taxed as a Subchapter 
``S'' corporation under the Code effective January 1, 1999.
---------------------------------------------------------------------------

    \20\ The applicant represents that the Company has only common 
Stock, and no preferred Stock.
---------------------------------------------------------------------------

    The applicant describes the Participants, the IRAs, and their 
former holdings in the Stock as follows:
    (a) The IRA of Robert C. Hummel currently holds assets of 
approximately $624,520, which include 8,000 shares of the Stock. The 
IRA of Robert C. Hummel acquired shares of the Stock on May 24, 1995 at 
a price of $10 per share, for a total investment of $80,000.
    (b) The IRA of Garth L. Gibson, the Secretary and the President of 
the Bank and a member of the Board of Directors of the Company and the 
Bank, currently holds assets of approximately $58,866.60, which include 
3,940 shares of the Stock. The IRA of Garth L. Gibson acquired shares 
of the Stock on May 24, 1995 at a price of $10 per share, for a total 
investment of $39,400.
    (c) The IRA of Hugh B. Force currently holds assets of 
approximately $31,012.44, which include 1,626 shares of the Stock. The 
IRA of Hugh B. Force acquired the shares of the Stock on May 24, 1995 
at a price of $10 per share, for a total investment of $16,260.
    (d) The IRA of Lynn Morgan Ruyle currently holds assets of 
approximately $77,016.11, which include 5,155 shares of the Stock. The 
IRA of Lynn Morgan Ruyle acquired 4,740 shares of the Stock on May 24, 
1995 at a price of $10 per share. Subsequently, this IRA acquired 415 
additional shares of the Stock on May 2, 1997, also at a price of $10 
per share, for a total investment of $51,550.
    (e) The IRA of Robb A. Ruyle, a member of the Board of Directors of 
the Company and the Bank, currently holds assets of approximately 
$57,190.73, which include 3,828 shares of the Stock. The IRA of Robb A. 
Ruyle acquired 3,120 shares of the Stock on May 24, 1995 at a price of 
$10 per share. Subsequently, this IRA acquired 708 additional shares of 
the Stock on May 2, 1997, also at a price of $10 per share, for a total 
investment of $38,280.
    (f) The IRA of Ellen K. Davidson, currently holds assets of 
approximately $19,356.84, which include 1,286 shares of the Stock. The 
IRA of Ellen K. Davidson acquired the shares of the Stock on May 24, 
1995 at a price of $10 per share, for a total investment of $12,860.
    (g) The IRA of Michael Davidson currently holds assets of 
approximately $22,400.36, which include 1,494 shares of the Stock. The 
IRA of Michael Davidson acquired the shares of the Stock on May 24, 
1995 at a price of $10 per share, for a total investment of $14,940.
    The applicant also represents that Union Colony Bank is the 
custodian for all of the IRAs, except for the Robb A. Ruyle and Lynne 
Morgan Ruyle IRAs. The custodian for the Ruyle IRAs is Edward Jones & 
Company, a national brokerage firm.
    2. The applicant requests an exemption for the Sale of the Stock by 
each individual IRA to its respective Participant. As noted above, 
business and income tax considerations have recently caused the Company 
to elect to be taxed as a Subchapter ``S'' corporation pursuant to the 
Code, effective January 1, 1999. However, section 1361 of the Code only 
permits eligible shareholders to hold stock in a Subchapter ``S'' 
corporation. Because the IRAs are not eligible shareholders for 
purposes of the Code, the Participants wish to purchase the Stock from 
their IRAs. It is represented that each IRA acquired shares of the 
Stock for investment purposes and that each IRA made a profit on its 
original investment. The applicant states that the IRAs acquired the 
Stock directly from the issuer (i.e., the Company). The applicant also 
states that the Stock held collectively by the IRAs did not

[[Page 69324]]

represent a significant portion of the outstanding shares of the Stock 
(see Table in Paragraph 3 below).
    Four of the seven IRAs (i.e., the IRAs of Garth L. Gibson, Lynn 
Morgan Ruyle, Robb A. Ruyle, and Ellen K. Davidson) have 99.99% of 
their total assets invested in the Stock. <SUP>21</SUP> In addition, 
the IRAs of Michael Davidson and of Hugh B. Force have 99.64% and 
78.33% of their total assets, respectively, invested in the Stock. The 
IRA of Robert C. Hummel has only 19.14% of its total assets invested in 
the Stock.
---------------------------------------------------------------------------

    \ 21\ The Department notes that the Internal Revenue Service has 
taken the position that a lack of diversification of investments may 
raise questions in regard to the exclusive benefit rule under 
section 401(a) of the Code. See, e.g.. Rev. Rul. 73-532, 1973-2 C.B. 
128. The Department further notes that section 408(a) of the Code, 
which describes the tax qualification provisions for the IRAs, 
mandates that the trust be created for the exclusive benefit of an 
individual or his beneficiaries. However, the Department is 
expressing no opinion in this proposed exemption regarding whether 
violations of the Code have taken place with respect to the purchase 
and subsequent holding of the Stock by the IRAs.
    Further, to the extent that the Company (or the other sellers) 
were not disqualified persons with respect to the IRAs under section 
4975(e)(2) of the Code, the purchase of the Stock would not have 
constituted a prohibited transaction under section 4975(c)(1)(A) of 
the Code. However, the purchase and holding of the Stock by the IRAs 
whose Participants are officers and directors of the Company and/or 
the Bank raises questions under section 4975(c)(1)(D) and (E) of the 
Code depending on the degree (if any) of the IRA Participant's 
interest in the transaction. Section 4975(c)(1)(D) and (E) of the 
Code prohibits the use by or for the benefit of a disqualified 
person of the income or assets of a plan and prohibits a fiduciary 
from dealing with the income or assets of a plan in his own interest 
or for his own account. Those IRA Participants who are officers and/
or directors of the Company or the Bank, may have had interests in 
the transactions which affected their best judgement as fiduciaries 
of their IRAs. In such circumstances, the transactions may have 
violated section 4975(c)(1)(D) and (E) of the Code. See Advisory 
Opinion 90-20A (June 15, 1990). Accordingly, to the extent there 
were violations of section 4975(c)(1)(D) and (E) of the Code with 
respect to the purchases and holdings of the Stock by the IRAs, the 
Department is extending no relief for these transactions.
---------------------------------------------------------------------------

    3. The applicant further represents that no IRA held a majority 
interest in the Company at any time. The following table sets forth 
each IRA's percentage ownership in the Company at the time of the Sale.

------------------------------------------------------------------------
                                                            Percent of
                           IRA                              Stock held
------------------------------------------------------------------------
Robert C. Hummel........................................            4.46
Garth L. Gibson.........................................            2.20
Hugh B. Force...........................................            0.91
Lynn Morgan Ruyle.......................................            2.87
Robb A. Ruyle...........................................            2.14
Ellen K. Davidson.......................................            0.70
Michael Davidson........................................            0.83
------------------------------------------------------------------------

    Certain of the Participants hold shares of the Stock in their 
individual capacities. Specifically, Michael Davidson and Ellen K. 
Davidson hold 3,220 shares of the Stock as joint tenants. Hugh B. Force 
holds 3,374 shares of the Stock in his individual capacity. Garth L. 
Gibson and Cynthia A. Gibson hold 6,641 shares of the Stock as joint 
tenants. In addition, Robb A. Ruyle and Lynne Morgan Ruyle hold 3,017 
shares of Company Stock as joint tenants. However, the applicant states 
that purchasing the Stock from their respective IRAs will not make any 
of the Participants a majority shareholder in the Company.
    4. The Stock was appraised on October 9, 1998 by Van Dorn & Bossi 
Certified Public Accountants (the Appraisal), an independent, qualified 
appraiser located in Broomfield and Boulder, Colorado. In determining 
the fair market value of the Stock, the Appraisal relied on information 
regarding the valuation of two other banks in Colorado with closely-
held stocks. The Appraisal valued all outstanding shares of the Stock 
held by the IRAs, considering factors such as the lack of marketability 
for the Stock and the valuation of shares which represented less than a 
controlling interest in the Company. The Company has a total of 179,240 
shares of the Stock outstanding at the time of the Sale. The shares of 
the Stock owned by the Participants through their IRAs represent 
approximately 14.13% of the total outstanding shares of the Company. 
The Appraisal stated that the aggregate shares of the Stock owned by 
the IRAs is so small when compared to the total outstanding shares of 
the Company, that no controlling interest would be gained by any 
potential purchaser of the shares of the Stock. Thus, the Appraisal 
stated that a discount of 35% for the lack of control is appropriate, 
and applied that discount when valuing the shares of Stock involved in 
the subject transactions.
    The Appraisal concluded that the fair market value of the Stock 
would be $14.94 per share at the time of the Sale. Therefore, the 
aggregate value of the shares of the Stock to be sold by the IRAs to 
the Participants was determined to be $378,415. Specifically, each IRA 
will receive the following amount at the Sale:

------------------------------------------------------------------------
                                                 Number of     Rec'd at
                      IRA                          Shares        Sale
------------------------------------------------------------------------
Robert C. Hummel..............................        8,000     $119,520
Garth L. Gibson...............................        3,940    58,863.60
Hugh B. Force.................................        1,626    24,292.44
Lynn Morgan Ruyle.............................        5,155    77,015.70
Robb A. Ruyle.................................        3,828    57,190.32
Ellen K. Davidson.............................        1,286    19,212.84
Michael Davidson..............................        1,494    22,320.36
------------------------------------------------------------------------

    5. The applicant represents that the transactions are 
administratively feasible because each Sale will be a one-time 
transaction for cash. The transactions are also in the best interest of 
the IRAs because each IRA will dispose itself of all of its shares of 
the Stock at a price which equals the Stock's fair market value at the 
time of the Sale. As a result, greater diversification of the IRAs' 
assets will be achieved by reinvesting the proceeds of the Sales in 
other assets. Furthermore, it is represented that the transactions are 
protective of the rights of the Participants and beneficiaries of the 
IRAs because each IRA will receive the fair market value of the Stock 
owned by the IRA, as determined by a qualified, independent appraiser. 
Finally, the IRAs will not incur any commissions, costs, or other 
expenses as a result of each Sale.
    6. In summary, the applicant represents that the transactions will 
satisfy the statutory criteria of section 4975(c)(2) of the Code 
because:
    A. The terms and conditions of the Sales are at least as favorable 
to each IRA as those terms which are obtainable in an arm's-length 
transaction with an unrelated party;
    B. The Sale of the Stock by each IRA will be a one-time transaction 
for cash;
    C. Each IRA will receive the fair market value of the Stock, as 
established by a qualified, independent appraiser; and
    D. The IRAs will not pay any commissions, costs or other expenses 
in connection with the Sales.

Notice to Interested Persons

    Because the Participants are the sole participants of their 
respective IRAs, it has been determined that there is no need to 
distribute the notice of proposed exemption to interested persons. 
Comments and requests for a hearing are due 30 days from the date of 
publication of this notice in the Federal Register.

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

[[Page 69325]]

408(a) of the Act and/or section 4975(c)(2) of the Code does not 
relieve a fiduciary or other party in interest of disqualified person 
from certain other provisions of the Act and/or the Code, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of section 404 of 
the Act, which among other things require a fiduciary to discharge his 
duties respecting the plan solely in the interest of the participants 
and beneficiaries of the plan and in a prudent fashion in accordance 
with section 404(a)(1)(b) of the Act; nor does it affect the 
requirement of section 401(a) of the Code that the plan must operate 
for the exclusive benefit of the employees of the employer maintaining 
the plan and their beneficiaries;
    (2) Before an exemption may be granted under section 408(a) of the 
Act and/or section 4975(c)(2) of the Code, the Department must find 
that the exemption is administratively feasible, in the interests of 
the plan and of its participants and beneficiaries and protective of 
the rights of participants and beneficiaries of the plan;
    (3) The proposed exemptions, if granted, will be supplemental to, 
and not in derogation of, any other provisions of the Act and/or the 
Code, including statutory or administrative exemptions and transitional 
rules. Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemptions, if granted, will be subject to the 
express condition that the material facts and representations contained 
in each application are true and complete, and that each application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

    Signed at Washington, DC, this 11th day of December, 1998.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 98-33261 Filed 12-15-98; 8:45 am]
BILLING CODE 4510-29-P