[Federal Register Volume 59, Number 218 (Monday, November 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28059]


[[Page Unknown]]

[Federal Register: November 14, 1994]


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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-9742, et al.]

 

Proposed Exemptions; Allied Old English, Inc. Employees' Profit 
Sharing Plan (the Plan) et al.

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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

Written Comments and Hearing Requests

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

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

Notice to Interested Persons

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

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

Allied Old English, Inc. Employees' Profit Sharing Plan (the Plan)

Located in Port Reading, New Jersey [Application No. D-9742]

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 loan (the Loan) of $600,000 by 
the Plan to the Harold Ross Trust (the Ross Trust), a party in interest 
with respect to the Plan.
    This proposed exemption is conditioned upon the following 
requirements: (a) The terms of the Loan are at least as favorable to 
the Plan as those obtainable in an arm's length transaction with an 
unrelated party; (b) the Loan will not exceed twenty-five percent of 
the assets of the Plan at any time during the duration of the Loan; (c) 
the Loan is secured by a first deed of trust on certain real property 
(the Property) which has been appraised by an independent, qualified 
appraiser to ensure that the fair market value of the Property is at 
least 150 percent of the amount of the Loan; (d) the fair market value 
of the Property remains at least equal to 150 percent of the 
outstanding balance of the Loan throughout the duration of the Loan; 
(e) the independent, qualified fiduciary determines on behalf of the 
Plan that the Loan is in the best interests of the Plan and protective 
of the Plan's participants and beneficiaries; and (f) the independent, 
qualified fiduciary monitors compliance with the terms of the Loan and 
conditions of the exemption throughout the duration of the transaction, 
taking any action necessary to safeguard the Plan's interest, including 
foreclosure on the Property in the event of default.

Summary of Facts and Representations

    1. Allied Old English (Allied), the Plan sponsor, is a New Jersey 
corporation with its principal place of business located in Port 
Reading, New Jersey. Allied engages in the business of food 
manufacturing and distributing.
    The Plan is a profit sharing plan with assets totaling $2,489,603 
as of December 31, 1993. Thirty individuals participate in the Plan. 
The Plan trustees, Frederick Ross, Harold Ross and Richard Owens (the 
Trustees), possess the sole investment discretion with regard to the 
Plan's assets. Frederick Ross and Harold Ross both serve as directors 
as well as President and Treasurer, respectively, of Allied.
    2. On May 9, 1980, Harold Ross and Lucille Ross (the Grantors) 
established the Ross Trust, which is an irrevocable investment trust. 
As of October 5, 1994, the Ross Trust had $1,925,000 in total assets, 
with the Ross Trust's only asset being the Property. Frederick Ross is 
the trustee of the Ross Trust. The Grantors, the Grantors' son, 
Frederick Ross, and the trustee of the Ross Trust on behalf of the 
Grantors' daughter, Elyse Ames, hold the beneficial interests of the 
Ross Trust. The Trustees represent that because at least fifty percent 
of the beneficial interests of the Ross Trust are held by two of the 
Plan's trustees, the Ross Trust appears to be a party in interest with 
respect to the Plan under section 3(14)(G) of the Act.
    3. The Trustees request an administrative exemption from the 
Department to permit the Loan to the Ross Trust under the terms and 
conditions described herein. The Ross Trust proposes to use the Loan 
proceeds towards retiring an outstanding first mortgage on the Property 
in the amount of $760,572 which becomes due and payable on January 1, 
1995.
    4. The Loan will be in a principal amount of $600,000. The 
applicant states that at no time will the amount of the Loan represent 
more than twenty-five percent of the Plan's total assets. The Loan will 
be secured by a first deed of trust on the Property, which consists of 
a 60,000 square foot, one-story manufacturing warehouse distribution 
facility situated on 4.25 acres located at 100 Markley Street, Port 
Reading, New Jersey. As of June 15, 1994, Allied leased the Property 
pursuant to a lease scheduled to expire on October 31, 2007. Allied has 
the option to renew such lease for five additional five-year periods 
with a maximum term ending on October 31, 2032. The deed of trust will 
be duly recorded in Middlesex County to reflect the Plan's security 
interest in the Property. In addition, the Ross Trust will insure the 
Property against casualty loss and designate the Plan as the loss payee 
of such insurance.
    5. The Loan will have a ten-year term and will be evidenced by a 
promissory note (the Note). The Note will require the Ross Trust to 
make monthly payments of principal and interest which will be fully 
amortized over the ten-year term. The interest rate on the Loan will be 
the greater of: (a) The prime rate of CoreStates Bank, N.A. 
(CoreStates) of Philadelphia, Pennsylvania, an unrelated entity, plus 
three quarters of a percentage point; or (b) 9.65 percent. The Plan 
will not be required to pay any commissions, fees or other expenses in 
connection with the Loan.
    As a condition of the proposed exemption, the terms and conditions 
of the Loan must be at least as favorable to the Plan as those which 
the Plan could obtain in dealing at arm's length with an unrelated 
party. In this regard, CoreStates states in a letter dated July 12, 
1994 that CoreStates would make a secured loan of $600,000 to the Ross 
Trust with interest accruing at either: (1) A daily floating rate equal 
to its prime rate plus three quarters of a percentage point; or (2) a 
fixed rate equal to 9.65 percent. In addition, CoreStates states that 
it would charge the Ross Trust a facility fee equal to one percent of 
the principal amount of such loan or $6000. Accordingly, the applicants 
represent that the Ross Trust will pay a facility fee of $6000 to the 
Plan at the inception of the Loan.
    6. Dale R. Kilpatrick, MAI and Robert Appaluccio (the Appraisers) 
of National Valuation Services, Inc. (National Valuation), a valuation 
firm located in Florham Park, New Jersey, appraised the Property. Mr. 
Kilpatrick is the Vice President of National Valuation and Mr. 
Appaluccio has been actively engaged in appraising real estate since 
1986. The Appraisers represent that both they and National Valuation 
are independent of, and unrelated to, both the Ross Trust and Allied.
    The Appraisers placed the fair market value of the Property at 
$1,925,000 as of June 2, 1994. The Appraisers utilized the sales 
comparison and income approaches of valuation by using recent sales and 
current leases from comparable properties in the Woodbridge area. 
Primary emphasis was given to the sale comparison approach.
    Mr. Appaluccio, in a letter dated October 14, 1994, stated that the 
fact that the Property is subject to a long term lease does not warrant 
a discount on the Property's fair market value because several types of 
investors would be willing to purchase the Property at its full fair 
market value. By letter dated October 21, 1994, Mr. Kilpatrick 
concurred with Mr. Appaluccio's position regarding such discount.
    7. Milgrom, Galuskin, Rosner & Company (MGR&C), an accounting firm 
located in Edison, New Jersey, will serve as the independent, qualified 
fiduciary for the Plan with respect to the Loan. Paul D. Milgrom of 
MGR&C represents that MGR&C has extensive experience in business and 
loan transactions. Mr. Milgrom represents that both he and MGR&C are 
independent of, and unrelated to, both the Ross Trust and Allied. Mr. 
Milgrom states that MGR&C understands and acknowledges their duties, 
responsibilities, and liabilities in acting as a fiduciary with respect 
to the Plan based upon consultation with counsel experienced with the 
fiduciary responsibility provisions of the Act.
    Mr. Milgrom represents that MGR&C has reviewed the terms of the 
Loan and all of the documents and relevant information in connection 
with the Loan, including the appraisal. Mr. Milgrom states that the 
terms of the Loan compare favorably with the terms of similar 
transactions between unrelated parties and would be an arm's length 
transaction as evidenced by the terms offered by CoreStates (see Item 
#5 above). Mr. Milgrom represents that MGR&C believes that the Loan is 
in the best interests of the Plan and its participants and 
beneficiaries as an investment for the Plan's portfolio. Mr. Milgrom 
states that MGR&C believes that the Loan would be an appropriate and 
desirable investment for the Plan, based on the Loan's rate of return, 
the collateral securing the Loan, the character and diversification of 
the Plan's other assets and the projected liquidity needs of the Plan.
    MGR&C has reviewed the financial condition of the Ross Trust in 
order to establish its ability to repay the Loan. In this regard, MGR&C 
has reviewed the Ross Trust's financial statements as well as Allied's 
financial statements. MGR&C concludes that the Ross Trust is credit 
worthy and, based upon its available monthly cash flow, the Ross Trust 
is financially capable of making the monthly Loan payments without such 
payments having an adverse impact on its cash flow.
    Mr. Milgrom represents that MGR&C will monitor the Loan throughout 
its entire duration and will take any appropriate action necessary to 
protect the interests of the Plan and its participants and 
beneficiaries, including a foreclosure on the Property in the event of 
default. MGR&C will monitor the Property to ensure that the Loan 
remains secured by collateral worth at least 150 percent of the Loan at 
all times. Finally, MGR&C will monitor the conditions of the exemption 
and will ensure that such conditions are met.
    8. In summary, the applicant represents that the proposed 
transaction will satisfy the statutory criteria for an exemption under 
section 408(a) of the Act because: (a) The terms of the Loan will be at 
least as favorable to the Plan as those obtainable in an arm's length 
transaction with an unrelated party; (b) the Loan will not exceed 
twenty-five percent of the assets of the Plan at any time during the 
duration of the Loan; (c) the Loan will be secured by a first deed of 
trust on certain real property (the Property) which has been appraised 
by an independent, qualified appraiser to ensure that the fair market 
value of the Property is at least 150 percent of the amount of the 
Loan; (d) the fair market value of the Property will remain at least 
equal to 150 percent of the outstanding balance of the Loan throughout 
the duration of the Loan; (e) MGR&C, as the Plan's independent, 
qualified fiduciary, determined on behalf of the Plan that the Loan is 
in the best interest of the Plan and protective of the Plan's 
participants and beneficiaries; and (f) MGR&C will monitor compliance 
with the terms of the Loan and the conditions of the exemption 
throughout the duration of the transaction, taking any action necessary 
to safeguard the Plan's interest, including foreclosure on the Property 
in the event of default.

FOR FURTHER INFORMATION CONTACT: Kathryn Parr of the Department, 
telephone (202) 219-8971. (This is not a toll-free number.

Westinghouse Pension Plan (The Plan)

Located in Pittsburgh, Pennsylvania [Application No. D-9519]

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 2570, 
Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption is 
granted, the restrictions of sections 406(a)(1)(A) through (D), 
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 
contribution of certain securities (the Securities) to the Plan on 
September 14, 1993 and October 29, 1993 by Westinghouse Electric 
Corporation (WEC), the Plan's sponsor and as such a party in interest 
with respect to the Plan, provided the following conditions are met:
    (a) The Securities were valued at an amount which was no greater 
than their fair market value at the time of contribution, as 
established by an independent, qualified appraiser;
    (b) The terms and conditions of the contributions were at least as 
favorable to the Plan as terms and conditions which the Plan could have 
obtained in a purchase of similar securities from an unrelated party;
    (c) The Plan did not pay any commissions or other expenses with 
respect to the contributions;
    (d) The fair market value of the Securities represents at all times 
an amount of the Plan's total assets which is consistent with the 
Plan's investment guidelines and objectives;
    (e) Mellon Bank N.A. (Mellon), as an independent, qualified 
fiduciary for the Plan, determined that each contribution of the 
Securities to the Plan was in the best interests and protective of the 
Plan and its participants and beneficiaries at the time of the 
transactions;
    (f) Mellon monitored each contribution made to the Plan and took 
all appropriate actions necessary to protect the interests of the Plan 
and its participants and beneficiaries;
    (g) Mellon monitors the performance of the Securities as an 
investment for the Plan and takes whatever action is necessary to 
protect the interests of the Plan and its participants and 
beneficiaries;
    (h) On the third anniversary of the date of the first contribution 
made to the Plan (i.e. September 14, 1996), WEC shall contribute to the 
Plan the difference between the sum of:
    (1) The sales proceeds received by the Plan on the disposition of 
any of the Securities, plus
    (2) The current fair market value of the Securities remaining in 
the Plan, plus
    (3) Interest accrued and interest and dividends received on the 
Securities, and the aggregate value of the Securities on the date that 
they were originally contributed to the Plan (i.e. $188,882,694), plus 
any adjustments to such aggregate value requested by Mellon to reflect 
changes in the Consumer Price Index (CPI) during the period that the 
Securities were held by the Plan, upon demand by Mellon as the Plan's 
independent fiduciary under the terms of a ``makewhole agreement'' with 
the Plan (the Makewhole Agreement). Mellon shall have sole authority to 
determine the current fair market value of the Securities remaining in 
the Plan under the Makewhole Agreement through either appointment of 
one or more independent appraisers or by its own appraisal of the 
Securities at the time of the transaction;
    (i) No later than December 31, 1994, WEC makes a cash contribution 
to the Plan in the amount of $25 million to support any amounts that 
may become due under the Makewhole Agreement, provided that this cash 
contribution is held as a separate credit balance in the Plan's funding 
standard account until September 14, 1996 (the termination date of the 
Makewhole Agreement) and is not used to offset any other funding 
obligation owed by WEC to the Plan until such date. Mellon, as the 
Plan's independent fiduciary, shall be responsible for investing the 
$25 million and ensuring that the Plan receives all interest and other 
income earned on the $25 million; and
    (j) Mellon monitors the compliance by all parties with the terms 
and conditions of the exemption.

EFFECTIVE DATE: If the proposed exemption is granted, the exemption 
will be effective for each contribution as of September 14 and October 
29, 1993, respectively.

Summary of Facts and Representations

    1. The Plan is a defined benefit plan which had 135,969 
participants and total assets of approximately $3.7 billion, as of 
December 31, 1992. The Plan is maintained by WEC, a diversified, global 
technology-based corporation with its headquarters in Pittsburgh, 
Pennsylvania. The trustee of the Plan is Mellon. As of September 15, 
1993, the Plan was funded above the required minimum funding level and 
WEC had no minimum funding obligation.
    2. The named fiduciary of the Plan is the WEC Pension Plan 
Administration Committee (the Committee). The Committee has the general 
authority to control and manage the operation and administration of the 
Plan, including the authority to appoint, direct, and monitor the 
trustee and investment managers. The Committee also has the authority 
to employ attorneys, consultants and other advisers in furtherance of 
its duties.
    The Committee retained The Frank Russell Company (Russell) in 1990 
as a consultant to review the Plan's asset allocation guidelines. The 
purpose of these guidelines is to establish percentage goals for the 
allocation of Plan assets among various categories of investments to 
enable the Plan to meet targeted returns, achieve diversification, and 
satisfy projected liquidity needs.
    Pursuant to this review, Russell concluded that a target of 
approximately 5.2 percent of total Plan assets would be an appropriate 
asset allocation goal for so-called ``alternative investments'' that 
would be consistent with the Plan's investment needs and objectives. 
Alternative investments generally are relatively illiquid investments 
in an asset class other than traditional classes of cash, stock, fixed 
income securities and real estate. Alternative investments typically 
include venture capital, buyout funds, distressed companies, mezzanine 
financing, oil and gas programs, timberland or farmland, and 
economically targeted investments addressing certain social policies. 
Russell states that allocation of a small portion of assets to 
alternative investments is common among large corporate pension plans, 
such as the Plan.
    3. As the result of a corporate reorganization in 1992, WEC held 
the investments of its former subsidiary, Westinghouse Credit 
Corporation (WCC). These assets included a portfolio of corporate 
securities which contained numerous alternative investments of the type 
described above. These assets had a value of approximately $1 billion. 
WEC had determined to liquidate all assets of WCC pursuant to the 
corporate restructuring. However, upon internal review of these assets, 
WEC concluded that some of the assets were high quality alternative 
investments possessing a significant potential for strong investment 
returns. In view of the fact that the Plan had an unsatisfied asset 
allocation target for such alternative investments, WEC began 
considering the possibility of contributing some of these assets to the 
Plan.
    4. The process leading to the subject contribution of the 
Securities involved a number of steps. First, Westinghouse Pension 
Investment Corporation (WPIC), a wholly-owned subsidiary of WEC that 
managed the Plan's existing alternative investment portfolio, examined 
the entire $1 billion portfolio of available securities and identified 
$300 million in securities that were suitable for contribution to the 
Plan. Second, once WPIC had completed its initial review, the Plan 
retained Mellon to act as its independent fiduciary to examine the 
remaining securities for purposes of the proposed contribution of some 
of these securities to the Plan. Mellon was vested with full authority 
to act on behalf of the Plan and to determine whether accepting the 
contribution of any of the securities identified by WPIC would be in 
the best interests of the Plan and its participants and beneficiaries. 
As a result, Mellon had the authority either to refuse to accept any 
contribution, to accept the entire contribution identified by WPIC, or 
to further choose among the $1 billion portfolio of offered securities.
    Mellon reviewed the $300 million of securities identified by WPIC 
and concluded that the contribution of four specific securities (i.e. 
the Securities) valued at approximately $188 million would be in the 
best interests of the Plan.
    5. The Securities, all of which were issued by entities unrelated 
to WEC and its affiliates as well as Mellon, represent equity and debt 
interests that are within the asset category of alternative investments 
because the Securities are fairly illiquid and high risk investments. 
KPMG Peat Marwick (Peat Marwick) of Chicago, Illinois, and Stern 
Brothers & Company (Stern Brothers) of Kansas City, Missouri, were 
engaged as qualified, independent appraisers to value the Securities 
for purposes of the contribution.
    The Securities are described as follows: (i) 35.1% of the 
outstanding shares of common stock of Topps Appliance City Inc. (the 
Topps Securities), appraised by Peat Marwick as having a fair market 
value of approximately $32,804,694; (ii) a senior revolving loan, 
subordinated notes, and 100% of the class A cumulative preferred stock 
of Tele-Media Company of Western Connecticut (the Tele-Media 
Securities), appraised by Peat Marwick as having a fair market value of 
approximately $62,000,000; (iii) 12% of the outstanding shares of class 
B common stock of Federated Investors (the Federated Securities), 
appraised by Stern Brothers as having a fair market value of 
approximately $20,100,000;1 and (iv) 2% of the senior debt, 37.4% 
of the subordinated debt, 37.9% of the preferred stock and 31.6% of the 
common stock of First Britannia Mezzanine N.V. (the First Britannia 
Securities), appraised by Peat Marwick as having a fair market value of 
approximately $73,978,000.
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    \1\The applicant states that Mellon agreed to have the 
Securities valued by Peat Marwick because of its expertise in the 
field of valuing alternative investment securities. However, Peat 
Marwick determined that as a result of a pre-existing relationship 
with Federated Investors, it would be unable to evaluate the 
Federated Securities. Therefore, at Peat Marwick's suggestion with 
the approval of Mellon, Stern Brothers was chosen to value these 
Securities.
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    The total fair market value of the Securities established by Peat 
Marwick and Stern Brothers (together, the Appraisers) was approximately 
$188,882,694. The Appraisers' reports state that certain discount rates 
were used to value each of the Securities to reflect their lack of 
marketability and the rate of return which investors would require to 
compensate for the risks involved.
    The Topps Securities, the Tele-Media Securities, and the Federated 
Securities were contributed by WEC to the Plan on September 14, 1993. 
The First Britannia Securities were contributed by WEC to the Plan on 
October 29, 1993 (for reasons discussed in Item 6 below). The 
Securities represented approximately 5.1% of the Plan's total assets as 
of the date of the last contribution.
    6. Mellon represents that it thoroughly reviewed, prior to the 
subject contributions, both the Appraisers' reports and the Securities 
themselves in order to determine whether and at what amount to accept 
the Securities on behalf of the Plan. Mellon had access to all 
information relating to the Securities in the possession of WEC, WCC 
and WPIC, including legal documentation of the Securities, various 
financial statements, and annual reports on the issuers of the 
Securities. Mellon reviewed and approved the valuation methodologies 
contained in the Appraisers' reports, which utilized both independent, 
market-based data as well as information provided by the issuers of the 
Securities. Mellon concluded that the Appraisers used accepted 
valuation methods and relied on information that was reliable and 
consistent with the information developed by Mellon during its review 
of the contribution of the Securities.
    With respect to the Topps Securities, the investment consists of 
2,523,438 shares of common stock of Topps Appliance City Inc. (Topps), 
a NASDAQ listed retailer of home appliances and consumer electronics in 
the New York City area. Mellon states that the shares, although 
publicly traded, are unregistered and subject to certain sale 
restrictions under Rule 144 of the Securities and Exchange Commission 
(SEC). Thus, Mellon notes that the Topps Securities can be disposed of 
only in a private placement or in the public market over a period of 
approximately 8-10 years under the timing and volume restrictions of 
SEC Rule 144. However, Mellon states that the valuation of the Topps 
Securities by Peat Marwick analyzed the price volatility and trading 
volume of the common stock of Topps as well as the discounts at which 
private placements of such stock occur in the market. Peat Marwick's 
valuation of the Topps Securities reflected a 20% discount off the 
traded share price of $16.25 as of September 13, 1993, to account for 
the lack of liquidity. Mellon believed that this discount and the 
potential for significant returns over a long term made the Topps 
Securities an appropriate alternative investment for the Plan.
    With respect to the Tele-Media Securities, the investment consists 
of a senior revolving loan, subordinated debt and 100% of the 
cumulative preferred stock of Tele-Media Company of Western Connecticut 
(Tele-Media), a cable television and video production studio operator 
in Naugatuck Valley, Connecticut. Tele-Media is a privately-held 
company. WEC was the sole lender under the senior revolving loan, sole 
holder of Tele-Media's subordinated debt, and sole owner of the Tele-
Media preferred stock prior to the subject contribution to the Plan. 
Peat Marwick's valuation of the Tele-Media Securities utilized in part 
a discounted cash flow analysis of the company. The discounted cash 
flow method attempts to measure what a buyer is willing to pay 
currently for the future cash generating potential of an entity. The 
estimate of the present value of future cash flows of Tele-Media, using 
an average of management's best and worst case scenarios for a five-
year earnings forecast and a discount rate of 14.5%, suggested a value 
for Tele-Media's total capital of approximately $70 million. However, 
Peat Marwick's valuation also utilized a market approach analysis 
involving trades of similar securities by companies within the 
industry. This approach was given more weight because of uncertainty 
regarding the potential impact of new cable regulations on Tele-Media's 
future cash flow. Under this approach, the fair market value of senior 
and subordinated debt was determined by computing the present value of 
the expected principal and interest payments at rates which reflected 
current market rates for similar debt instruments. Peat Marwick 
concluded that the value of the Tele-Media Securities under the market 
approach was $62 million.\2\ Mellon states that Peat Marwick's 
valuation of the Tele-Media Securities appropriately reflected the risk 
of holding such a position in a private company. Mellon believed that 
the potential for significant returns over the long term made the Tele-
Media Securities an appropriate alternative investment for the Plan.
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    \2\In this regard, a current market rate of 9% per annum was 
assumed for Tele-Media's $51 million senior debt outstanding and a 
current market rate of 20% per annum was assumed for Tele-Media's 
$12 million subordinated debt outstanding as of June 30, 1993. Thus, 
the estimated present value of the senior and subordinated debt 
totalled approximately $59 million as of such date. Peat Marwick 
states that, based on a total invested capital value for Tele-Media 
of $62 million, $3 million was allocated to Tele-Media's preferred 
stock. Peat Marwick made no further adjustments to its valuation of 
the Tele-Media Securities at the time of the contribution (i.e. 
September 14, 1993).
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    The applicant states that on June 16, 1994, the Tele-Media 
Securities were sold by the Plan to Tele-Media for $66,050,000. Thus, 
based on Peat Marwick's determination that the Tele-Media Securities 
had a fair market value of $62 million as of September 14, 1993, the 
applicant represents that the Plan has realized a net gain of 
$4,050,000 as a result of the contribution and sale of these 
securities.
    With respect to the Federated Securities, the investment consists 
of 1,200,000 shares of class B common stock of Federated Investors 
(Federated), a nationwide mutual fund sponsor and service-provider 
based in Pittsburgh, Pennsylvania. The Federated Securities represent a 
minority interest (i.e. approximately 12%) in a privately-held company. 
Stern Brothers' valuation of the Federated Securities utilized a 
capitalization of earnings approach, which considered the market value 
of Federated's invested capital as a multiple of projected earnings, 
and a discounted cash flow approach. Stern Brothers used these 
approaches to arrive at a $20.87 per share value, on a publicly traded 
equivalent basis, for the Federated Securities. In addition, Stern 
Brothers applied a 20% discount to this amount to account for the lack 
of marketability of the Federated Securities. Mellon believed that this 
discount and the potential for significant returns over the long term 
made the Federated Securities an appropriate alternative investment for 
the Plan. With respect to the First Britannia Securities, the 
investment consists of 2% of the outstanding senior debt, 37.39% of the 
subordinated debt, 37.96% of the preferred stock (i.e. 873,140 shares) 
and 31.61% of the common stock (i.e. 4,425,322 shares) of First 
Britannia Mezzanine N.V. (First Britannia), an investment fund based in 
London, England, whose purpose is to invest in high yield, subordinated 
debt with associated equity securities focusing primarily on companies 
in the United Kingdom. First Britannia's portfolio consisted of 
investments in 16 diversified operating companies at the time of Peat 
Marwick's valuation. Peat Marwick selected the adjusted net asset value 
approach to determine the fair market value of First Britannia's equity 
interests. In this regard, Peat Marwick relied on a current valuation 
of the equity investments in First Britannia's portfolio by Coopers & 
Lybrand, an independent qualified appraiser. Peat Marwick assumed that 
the fair market value of First Britannia's debt interests was equal to 
book value since all portfolio loans were current and had adjustable 
interest rates based on the London Interbank Offered Rate (LIBOR). 
Mellon states that the valuation of the First Britannia Securities 
reflected appropriate investment company, minority ownership and 
marketability discounts. Mellon believed that these discounts and the 
potential for significant returns over the long term made the First 
Britannia Securities an appropriate alternative investment for the 
Plan. However, Mellon withheld final approval of the Plan accepting the 
First Britannia Securities on September 14, 1993, the contribution date 
for the other Securities, because First Britannia was in the process at 
that time of refinancing its senior debt. The refinancing was completed 
on October 25, 1993, with terms which were more favorable to senior 
debtholders, including an increase in the interest rate.\3\ Mellon, 
upon review of the terms of First Britannia's new senior debt, 
determined that the contribution of the First Britannia Securities was 
in the best interest of the Plan and accepted those Securities on 
October 29, 1993. Peat Marwick established the fair market value of the 
First Britannia Securities to be 49,733,000 pounds sterling on the date 
of contribution, which equated to $73,978,000 based on exchange rates 
as of close of business on October 28, 1993.
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    \3\First Britannia's new senior debt has interest payable semi-
annually at a rate equal to LIBOR plus 200 basis points, an increase 
of 35 basis points over the original senior debt which paid semi-
annual interest equal to LIBOR plus 165 basis points. First 
Britannia's subordinated debt pays interest semi-annually at a rate 
equal to LIBOR plus 300 basis points.
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    7. As the Plan's independent fiduciary, Mellon represents that it 
also: (i) Reviewed the Plan's investment allocation policy and 
guidelines relating to alternative investments; (ii) confirmed that 
such investment guidelines were independently reviewed by Russell who 
had worked with WPIC to assure that the guidelines were designed to 
meet appropriate investment return and diversification needs of the 
Plan; (iii) determined that it was proper to rely on the investment 
guidelines with respect to the need for alternative investments and the 
percentage to be committed to such investments; (iv) determined the 
value of Plan assets currently committed to alternative investments; 
and (v) determined that the Plan could accept the Securities without 
exceeding the guidelines relating to alternative investments. Mellon 
concluded, prior to each contribution of the Securities to the Plan, 
that the Plan's allocation policy and investment guidelines relating to 
alternative investments were appropriate and that acceptance of the 
Securities would be within these guidelines and would not adversely 
affect the Plan's liquidity needs. Accordingly, Mellon represents that 
the contribution of the Securities was in the best interests and 
protective of the Plan and its participants and beneficiaries at the 
time of the subject transactions.\4\
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    \4\The Department expresses no opinion in this proposed 
exemption as to whether the contribution and subsequent holding of 
the Securities by the Plan would violate section 404(a) of the Act. 
Section 404(a) of the Act requires, among other things, that a 
fiduciary of a plan act prudently, solely in the interest of the 
plan's participants and beneficiaries, and for the exclusive purpose 
of providing benefits to participants and beneficiaries when making 
investment decisions on behalf of a plan.
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    8. Mellon states that it monitored the contributions of the 
Securities on behalf of the Plan and took all appropriate actions 
necessary to protect the interests of the Plan and its participants and 
beneficiaries. Mellon represented the Plan in the preparation and 
review of all documentation necessary to effect the transfer of the 
Securities from WEC to the Plan. In addition to reviewing and approving 
the valuation methodologies utilized by the Appraisers, Mellon ensured 
that the valuation of each of the Securities was adjusted to reflect 
the current fair market value on the date of contribution to the Plan. 
In this regard, Mellon requested that the Appraisers provide updated 
valuations of the Securities as of the date of the contributions. Where 
market forces resulted in changes in the valuations of the Securities, 
Mellon states that it reviewed the stated causes for these changes and 
was satisfied that the changes were accurately reflected in the 
valuations.
    9. Mellon agreed to act as the Plan's independent investment 
manager for the holding of the Securities. Mellon has full authority 
for decisions relating to whether to hold or dispose of the Securities 
on behalf of the Plan. Mellon states that it has and will continue to 
monitor the performance of the Securities as an investment for the Plan 
and will take whatever action is necessary to protect the interests of 
the Plan and its participants and beneficiaries.
    10. WEC has entered into the Makewhole Agreement with the Plan for 
the Securities in order to provide additional protections to the Plan. 
Under the Makewhole Agreement, the parties agree that on the third 
anniversary of the date of the first contribution made to the Plan (the 
Exercise Date), WEC shall contribute to the Plan the difference between 
the sum of:
    (i) The sales proceeds received by the Plan on the disposition of 
any of the Securities, plus
    (ii) The current fair market value of the Securities remaining in 
the Plan, plus
    (iii) Interest accrued and interest and dividends received on the 
Securities, and the aggregate value of the Securities on the date that 
they were originally contributed to the Plan (i.e. $188,882,694), if 
such amount is greater, plus any adjustments to such aggregate value 
requested by Mellon to reflect changes in the CPI during the period 
that the Securities were held by the Plan (referred to below as ``the 
Makewhole Amount''), upon demand by Mellon as the Plan's independent 
fiduciary. Mellon will exercise the rights under the Makewhole 
Agreement on behalf of the Plan by delivery of a notice (the Notice of 
Exercise) to WEC no later than the sixtieth (60th) day after the 
Exercise Date. Mellon represents that it has full authority regarding 
whether and when to deliver the Notice of Exercise. In the event Mellon 
determines to exercise the rights under the Makewhole Agreement, it 
will have sole authority to determine the current fair market value of 
the Securities remaining in the Plan, for purposes of establishing the 
Makewhole Amount, through either appointment of one or more independent 
appraisers or by its own appraisal of the Securities at the time of the 
transaction.
    Mellon states that the terms of the Makewhole Agreement are in the 
best interests of the Plan. The Makewhole Agreement is designed to 
guarantee the full value of the Securities as a contribution to the 
Plan, based on their fair market value at the time of each 
contribution, even though WEC was under no legal obligation to make a 
cash contribution at the time of the transactions. Under the Makewhole 
Agreement, WEC will guarantee the value of the Securities as an 
investment for the Plan during a three-year time period in order to 
ensure that the Plan will be protected from any losses that may result 
from holding the Securities during this period. Thus, the Makewhole 
Agreement ensures that the Plan will be in at least as favorable a 
position at the end of this period as it would have been had it 
received a cash contribution of the amount given in-kind through the 
contribution of the Securities and used the cash to purchase similar 
alternative investments. WEC states that the Plan incurred significant 
transaction cost savings in acquiring the Securities from WEC because 
no commissions or other expenses were paid by the Plan for the 
Securities.
    11. WEC states that it will adhere to all minimum funding 
obligations that will otherwise accrue to the Plan during the three 
year period covered by the Makewhole Agreement.\5\ In addition, as 
support for the Makewhole Amount, the applicant has agreed to the 
following arrangement:
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    \5\The applicant represents that the Securities became plan 
assets upon contribution to the Plan, and the value of the 
Securities was included in the Plan's funding standard account. 
However, WEC states that it has no minimum funding payments that 
must be made to the Plan until 1995. The value of the Securities 
(including the proceeds from the sale of any of the Securities and 
the dividends, interest and other income generated by the 
Securities), along with certain other contributions made by WEC, 
will be included in the basis for the calculation of the amount of 
minimum funding payments due to the Plan in 1995. In this regard, 
WEC made a cash contribution of $75 million to the Plan on June 30, 
1994. WEC states that, as in the case of the contribution of the 
Securities, this cash contribution was not a required minimum 
funding payment but was made as part of WEC's ongoing efforts to 
improve the funding status of the Plan.
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    (a) WEC will make a cash contribution to the Plan in the amount of 
$25 million. This amount represents at least 20 percent of the 
difference between the original value of the Securities at the time of 
contribution and the proceeds of the sale of the Tele-Media Securities 
($188,882,694-$66,050,000 = $122,832,694).
    (b) This $25 million contribution will not alter the terms of the 
Makewhole Agreement or any obligation WEC may have as a result of the 
operation of the Makewhole Agreement.
    (c) This contribution will be made no later than December 31, 1994.
    (d) WEC will make this contribution solely as the result of and in 
connection with the requested exemption. WEC has no currently 
outstanding annual minimum funding obligation that would otherwise be 
satisfied by this contribution.
    (e) This $25 million contribution will be held as a separate credit 
balance in the Plan's funding standard account until September 14, 1996 
(the termination date of the Makewhole Agreement). Until that date, 
this $25 million credit balance will not be used to offset any other 
funding obligation owed by WEC to the Plan, and will not be used in 
calculating the amount of any other funding payment or contribution 
made by WEC to the Plan.
    (f) This $25 million will be managed by Mellon (as investment 
manager for the Plan) and all interest and other income produced by 
this contribution will be credited to the Plan.
    12. In summary, the applicant represents that the contributions of 
the Securities met the statutory criteria of section 408(a) of the Act 
and section 4975(c)(2) of the Code because: (a) The Securities were 
valued at an amount which was no greater than their fair market value 
at the time of the transactions, as established by independent, 
qualified appraisers; (b) Mellon analyzed the Securities as an 
investment for the Plan, prior to the contributions, and concluded that 
the acquisition of the Securities would be in the best interests of the 
Plan and its participants and beneficiaries; (c) the Securities were 
contributed under terms and conditions which were at least as favorable 
to the Plan as a purchase of similar securities on the open market; (d) 
the fair market value of the Securities represented an amount of the 
Plan's total assets which was consistent with the Plan's investment 
guidelines and objectives, as reviewed and approved by Russell and 
Mellon; (e) WEC will contribute, on the third anniversary of the date 
of the first contribution made to the Plan, the difference between the 
sum of (i) the sales proceeds received by the Plan on the disposition 
of any of the Securities, plus (ii) the current fair market value of 
the Securities remaining in the Plan, plus (iii) interest accrued and 
interest and dividends received on the Securities, and the aggregate 
value of the Securities on the date that they were originally 
contributed to the Plan (plus any adjustments to such aggregate value 
requested by Mellon to reflect changes in the CPI during the period 
that the Securities were held by the Plan), upon demand by Mellon as 
the Plan's independent fiduciary under the terms of the Makewhole 
Agreement; (f) WEC will make an additional cash contribution to the 
Plan in the amount of $25 million as support for the Makewhole Amount; 
and (g) Mellon will monitor the holding of the Securities by the Plan, 
as well as the conditions of the exemption, and will take whatever 
action is necessary to protect the interests of the Plan and its 
participants and beneficiaries.

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

General Motors Hourly-Rate Employes Pension Plan (The Plan)

Located in Detroit, Michigan
[Application No. D-9734]

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR Part 
2570, Subpart B (55 FR 32836, 32847, August 10, 1990.) If the exemption 
is granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2), 
and 407(a) of the Act and the sanctions resulting from the application 
of section 4975 of the Code, by reason of section 4975(c)(1) (A) 
through (E) of the Code6 shall not apply to:
---------------------------------------------------------------------------

    \6\For purposes of this exemption, references to specific 
provisions of Title I of the Act, unless otherwise specified, refer 
also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (1) The transfer of shares of Class E common stock (the Class E 
stock) of General Motors Corporation (GM) to the Plan through the in-
kind contribution of such shares by GM, a party in interest with 
respect to such Plan;
    (2) The holding of the Class E stock by the Plan;
    (3) The sale for cash of shares of Class E stock by the Plan to GM 
or its affiliates or to certain defined contribution plans sponsored by 
GM or its affiliates;
    (4) The exchange of shares of Class E stock for publicly-traded 
securities between the Plan and GM or its affiliates under the same 
terms and conditions as are made available to all shareholders of Class 
E stock; and
    (5) The acquisition, holding, and exercise by the Plan of a put 
option granted by GM which permits the Plan to sell the Class E stock 
or a successor security for which the Class E stock has been exchanged 
to GM.
    This exemption is conditioned upon adherence to the material facts 
and representations described herein and upon the satisfaction of the 
following requirements:
    (a) GM contributes to the Plan at least 177 million shares of Class 
E stock but no more than 186 million shares plus $4 billion in cash, 
with at least $2 billion contributed in conjunction with or prior to 
the contribution of the Class E stock, and the remaining $2 billion 
contributed no later than September 30, 1995;
    (b) If less than 177 million shares of Class E stock are 
contributed, GM will contribute additional cash in an amount equal to 
the difference between 177 million and the number of shares of Class E 
stock contributed times the per-share value of such stock at the time 
of contribution, or a weighted average price if such stock is not 
contributed on a single date;
    (c) United States Trust (UST), an independent qualified fiduciary, 
or a successor independent fiduciary acceptable to the Pension Benefit 
Guaranty Corporation (PBGC) represents the Plan's interests for all 
purposes with respect to the Class E stock and determines, prior to 
entering into any of the transactions described herein, that each such 
transaction, including the contribution of the Class E stock, is in the 
interest of the Plan;
    (d) UST negotiates and approves the terms of any of the 
transactions between the Plan and GM or its affiliates or certain 
defined contribution plans sponsored by GM or its affiliates;
    (e) UST manages the holding and disposition of the Class E stock 
and takes whatever action it deems necessary to protect the rights of 
the Plan;
    (f) The terms of any of the transactions between the Plan and 
parties in interest are no less favorable to such Plan than terms 
negotiated at arm's length under similar circumstances with unrelated 
third parties;
    (g) A credit balance reserve is maintained in the Plan consisting 
of the cash credit balance or cash generated from stock that has been 
sold in an amount equal to at least 25 percent (25%) of the contributed 
value7 of the Class E stock which remains unsold in the Plan, for 
so long as such stock or any securities received in exchange exceeds 
the percentage limitations described in sections 407(a) and 407(f) of 
the Act (the ERISA Limits);
---------------------------------------------------------------------------

    \7\Contributed value means the value of the Class E stock when 
contributed to the Plan, as determined by Duff & Phelps Capital 
Markets Co. (formerly Duff & Phelps Financial Consulting Co.) (Duff 
& Phelps).
---------------------------------------------------------------------------

    (h) An independent qualified appraiser determines the fair market 
value of the Class E stock contributed to the Plan as of the date of 
such contribution, and determines the fair market value of the Class E 
stock at various other times as required under the agreement between GM 
and the PBGC (the PBGC agreement);
    (i) With respect to any sale or exchange of Class E stock by the 
Plan to GM or its affiliates or to any defined contribution plans 
sponsored by GM or its affiliates, no commission will be charged to or 
paid by the Plan;
    (j) Any sale or exchange of Class E stock between the Plan and GM 
or its affiliates will be for no less than ``adequate consideration'' 
within the meaning set forth in section 3(18) of the Act, and any sale 
of Class E stock by the Plan to a defined contribution plan sponsored 
by GM or its affiliates will be at the prevailing price for such stock 
on the New York Stock Exchange (NYSE); and
    (k) The Plan incurs no fees, costs, or other charges or expenses as 
a result of its participation in any of the transactions.

EFFECTIVE DATE: If this proposed exemption is granted, it will be 
effective on the later of the date on which the final exemption appears 
in the Federal Register or the date on which the PBGC Agreement is 
executed.

Summary of Facts and Representations

    1. GM, the applicant, is a Delaware corporation, headquartered at 
3044 West Grand Boulevard, Detroit, Michigan. GM is best known as a 
full-line vehicle manufacturer and supplier of automotive components 
and systems to other major manufacturers. In this regard, GM makes and 
sells cars, trucks, locomotives, and automotive components worldwide. 
It is represented that, as of December 31, 1993, GM had net sales and 
revenues of $138.2 billion and employed an average of 448,000 
individuals. GM's other substantial business interests include three 
wholly-owned subsidiaries: (1) GM Hughes Electronics Corporation 
(GMHE); (2) General Motors Acceptance Corporation (GMAC); and (3) 
Electronic Data Systems Corporation (EDS). GMHE was organized in 1985 
as a holding company for Hughes Aircraft Company and Delco Electronics 
Corporation and is involved in telecommunications systems, satellite 
systems, automotive electronic components, and other electronic 
products for commercial, aviation, and defense applications. GMAC and 
its affiliates provide financing and insurance to GM customers and 
dealers. EDS, acquired by GM in 1984, and operated as an independent 
and autonomous unit of GM, provides customers worldwide with 
information systems management and development, telecommunications, 
data processing, and other technological consulting services.
    2. The Plan is a non-contributory defined benefit pension plan 
covering substantially all of the hourly employees of GM in the United 
States. The Plan uses an October 1-September 30 plan year. For the 1992 
Plan year which ended September 30, 1993, the Plan covered a total of 
599,262 participants and beneficiaries. Of these, 274,257 were fully 
vested active participants, 280,633 were retirees or their 
beneficiaries in pay status, and 44,372 were terminated vested 
participants. The GM hourly employees are represented by eleven 
different unions. In this regard, more than 500,000 of the participants 
of the Plan are members of the International Union, United Automobile, 
Aerospace, and Agricultural Implement Workers of America.
    The named fiduciary of the Plan is the Finance Committee of the 
Board of Directors of GM (the Board). A majority of the members of the 
Finance Committee are outside directors. Acting in its fiduciary 
capacity, GM appointed a wholly-owned subsidiary, the General Motors 
Investment Management Corporation (GMIMCO), to serve as the primary 
investment manager for the Plan. GMIMCO is a registered investment 
advisor under the Investment Advisers Act of 1940 and has acknowledged 
that it is a fiduciary with respect to the Plan. It is represented that 
EDS began providing administrative services in January 1994 to the Plan 
and to another plan sponsored by GM, after being chosen in competitive 
bidding to do so. In this regard, it is represented that the Plan pays 
only direct costs for the provision of such services.8
---------------------------------------------------------------------------

    \8\The Department expresses no opinion, herein, as to whether 
the provision of services by EDS to the Plan and the compensation 
received therefor satisfy the terms and conditions as set forth in 
section 408(b)(2) of the Act.
---------------------------------------------------------------------------

    As of September 30, 1993, the Plan had assets of $19.6 billion. In 
this regard, the Plan's investments were held in two master trusts (the 
Master Trusts), the General Motors Hourly-Rate Employes Pension Trust 
(the Hourly Trust) and the General Motors Global Pension Trust (the 
Global Trust). The Master Trusts permit commingling of the assets of 
one or more GM employee benefit plans for investment and administrative 
purposes. The Plan has an undivided interest in the net assets of the 
Master Trusts, and allocations are made monthly.
    The Global Trust invests primarily in foreign equities, and for 
reporting purposes its investments are translated into U.S. dollar 
equivalents. The Hourly Trust invests principally in U.S. equity and 
fixed income securities, real estate mortgages, and commingled pension 
trust funds. As of September 30, 1992, the Hourly Trust and the Global 
Trust had net assets of $13,791,304,000 and $6,881,072,000, 
respectively. Banker's Trust Company (Banker's Trust), Mellon Bank, 
N.A. (Mellon Bank), and Chase Manhattan Bank, N.A. (Chase Bank) 
administer the Hourly Trust, and Chase Bank administers the Global 
Trust. Effective December 31, 1991, the Hourly Trust became a master 
trust by amendment of the provisions of existing trust agreements 
between GM and Banker's Trust, Mellon Bank, and Chase Bank.
    It is represented that the Plan owns land and buildings in sixteen 
(16) separate sites dispersed throughout the United States that are 
leased to GM and on which are located GM training centers (the Training 
Centers). As of March 31, 1994, the aggregate fair market value of the 
Training Centers was $2,266,000 which represented a small fraction 
(approximately one one-hundredth of one percent) of the total assets of 
the Plan, as of that date. It is represented that each of the Training 
Centers constitutes ``qualifying employer real property,'' as defined 
in section 407(d)(4) of the Act, such that the acquisition by the Plan 
of such centers and the leaseback to GM were exempt from the prohibited 
transaction provisions under section 408(e) of the Act.9
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    \9\The Department, herein, expresses no opinion as to whether 
the Training Centers constitute ``qualifying employer real 
property,'' as defined in section 407(d)(4) of the Act or whether 
the acquisition and leaseback of the Training Centers satisfy the 
conditions, as set forth under section 408(e) of the Act.
---------------------------------------------------------------------------

    As of March 31, 1994,11 the Plan also held the following securities 
issued by GM: (1) 17,306,532 million shares of Class E stock with a 
market value of $592.7 million; (2) 516,425 shares of GM $1\2/3\ common 
stock with a market value of $27.8 million; (3) GM Corp Series C 
Depositary Shares with a market value of $6.2 million, and (4) debt 
securities of GMAC with a market value of $3,798,000. It is further 
represented that these securities constitute ``qualifying employer 
securities,'' as defined in section 407(d)(5) of the Act, such that the 
acquisition and holding by the Plan of such securities were exempt from 
the prohibited transaction provisions under section 408(e) of the 
Act.10
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    \1\0The Department, herein, expresses no opinion as to whether 
these securities constitute ``qualifying employer securities,'' as 
defined in section 407(d)(5) of the Act, or whether the acquisition 
and holding by the Plan of such securities satisfy the conditions, 
as set forth under section 408(e) of the Act.
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    3. The Plan was established October 1, 1950, to provide normal 
retirement, early retirement, disability retirement, death and survivor 
benefits, and other benefits to participants and beneficiaries. 
Effective October 1, 1990, the Plan was amended to provide for 
increases in basic, temporary, and certain supplemental benefit rates 
for retirees. It is represented that the Plan, as amended in October 
1990, meets the Code requirements for a qualified pension plan. 
Subsequent to September 30, 1992, the Plan was amended to provide 
unreduced retirement benefits for certain employees who elected 
voluntary early retirement.
    Benefits provided under the Plan are based generally on an 
employee's credited service and vest generally after five years. 
Contributions by GM to the Plan are determined on the basis of 
actuarial cost methods and include amortization of prior service cost. 
It is represented that such contributions are made periodically by GM 
within the limits set by the Act. As of September 30, 1991 and 1992, 
the net assets of the Plan available for benefits totaled 
$17,953,494,000 and $18,399,015,000 respectively.
    4. With regard to the net assets of the Plan available to pay 
benefits, it is represented that the Plan is significantly underfunded, 
even though GM has never failed to make any funding payment required by 
the Act. For purposes of financial accounting, GM reports the 
liabilities of the Plan in accordance with the Statement of Financial 
Accounting Standards No. 87 (SFAS No. 87) issued by the Financial 
Accounting Standards Board. Although the Plan was overfunded on an SFAS 
No. 87 basis as recently as 1987, it is represented that the 
liabilities of the Plan have doubled over the last six (6) years. As of 
December 31, 1993, the Plan was underfunded by $18.3 billion. It is 
represented that the unfunded liabilities of the Plan rose 60 percent 
(60%) from year end 1992 to year end 1993, from $11.4 billion to $18.3 
billion.11 It is represented that the major factors contributing 
to this increase were: (1) The decline in interest rates which resulted 
in lower discount rates that GM uses to calculate the actuarial present 
value of the liabilities of the Plan; (2) pension benefit increases as 
a result of labor negotiations; and (3) the cost of a 1993 early 
retirement program for certain GM employees.
---------------------------------------------------------------------------

    \1\1It is represented that the SFAS No. 87 calculations use the 
same dates as those for plan years, but serve as proxy for calendar 
year reporting purposes, as permitted under the accounting standard. 
GM's liability shortfall on an SFAS No. 87 basis for its pension 
plans worldwide was $22.3 billion at year-end 1993. GM maintains 
that the Plan's $18.3 billion in underfunding accounts for the vast 
bulk (82%) of GM's pension underfunding. The remaining underfunded 
liabilities are primarily attributable to two non-U.S. pension 
programs. It is represented that GM's other domestic qualified 
defined benefit plans are each fully or nearly fully funded on an 
SFAS No. 87 basis.
---------------------------------------------------------------------------

    5. It is represented that reducing the underfunding of the Plan is 
a key objective of GM. In this regard, GM believes that it is 
imperative to accelerate the pace at which this goal will be 
accomplished before the next cyclical downturn in the automobile 
industry anticipated for 1997. In the opinion of GM, a significant 
reduction in the underfunding of the Plan will improve the security of 
pension benefits for the participants and beneficiaries. In addition, 
GM believes that such action would strengthen its long-term financial 
soundness, its credit ratings, and decrease the cost of debt and 
improve access to equity capital both for GM and GMAC.12
---------------------------------------------------------------------------

    \1\2GM believes that accelerating the funding of the Plan will 
also help reduce the exposure of the PBGC to liability for certain 
benefits of the Plan which are guaranteed.
---------------------------------------------------------------------------

    Generally, in order to correct the unfunded liability of its main 
U.S. plans, GM has revised the mortality assumptions in such plans to 
more closely reflect recent actual experience. Further, effective for 
1993, GM has lowered the asset earnings rate assumption for its main 
U.S. plans. With regard to funding, GM's Board decided in 1992 to 
substantially improve the funded status of GM's pension plans by the 
end of the decade. In this regard, during 1992 and 1993, GM contributed 
more to such plans than was required by law and will continue to 
contribute additional amounts above those required in 1994 and future 
years. Specifically, given current estimates GM anticipates that 
contributions of over $20 billion will be required to sufficiently fund 
the Plan which is the subject of this exemption request. GM maintains 
that it has significant competing cash needs and that not all cash 
generated by its operations can be used to fund the Plan.

Contributions of Cash and Class E Stock

    6. In order to help correct the Plan's unfunded liability, GM 
proposes to contribute in kind to the Plan shares of Class E stock and 
$4 billion dollars in cash. In this regard, it is proposed that the 
Plan receive all of the remaining 222 million unissued shares of Class 
E stock, less approximately 45 million shares reserved for conversion 
of GM's Series C Preference Stock, or approximately 177 million 
shares.13 If the number of shares available for contribution to 
the Plan falls below 177 million, GM has agreed to increase the cash 
contributed by an amount equal to the shortfall (the difference between 
177 million and the number of shares actually contributed times the per 
share value of the contributed stock at the time of contribution or a 
weighted average price if the stock is not contributed on a single 
date)14. GM estimates that, based on the per share market price as 
of June 9, 1994, the value of the cash and Class E stock proposed to be 
contributed is approximately $10 billion. It is represented that the 
contribution of cash and the Class E stock will in the aggregate 
immediately reduce the underfunding of the Plan by over 40 percent 
(40%) on the basis of SFAS No. 87.
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    \1\3It is represented that GM regularly issues Class E stock to 
certain 401(k) and stock option plans maintained for employees of GM 
and its affiliates. As a result, it is possible that at the time of 
the contribution the remaining number of unissued nonreserved shares 
of Class E stock will be less than the 177 million shares 
specifically referenced in the PBGC Agreement, discussed below. GM 
or EDS contemplates purchase of approximately 9 million shares of 
Class E stock currently held by the General Motors Retirement 
Program for Salaried Employes. In the event such sale is 
consummated, GM may use some or all such shares to bring the number 
of shares contributed to the Plan up to 177 million. Any remaining 
shares may then be added to the stock portion of the contribution up 
to a total of 186 million. It is represented that the additional 
contributed shares of Class E stock will be treated in the same 
manner as the 177 million shares under the PBGC Agreement.
    \1\4The weighted average price will be determined by Duff & 
Phelps which has been engaged by UST, independent fiduciary.
---------------------------------------------------------------------------

    7. GM has issued three classes of publicly-held common stock with 
the following number of shares issued and outstanding, as of December 
31, 1993: (a) 718,652,709 shares of $1\2/3\ par value common stock; (b) 
89,930,845 shares of Class H common stock; and (c) 255,763,512 shares 
of Class E stock. Each class of common stock has dividend, voting, and 
liquidation rights, as provided in GM's Restated Certificate of 
Incorporation, as amended. No class has any rights to preferential or 
cumulative dividends, nor is the amount of dividends payable with 
respect to any class limited by either contract law or to any 
predetermined amount. The Certificate of Incorporation authorizes the 
Board under certain terms to exchange every outstanding share of Class 
E stock for shares of GM $1\2/3\ par value stock in a specified ratio 
if various circumstances arise.
    8. While the Class E stock which will be contributed to the Plan 
will be unregistered, Class E stock which is registered and issued has 
been widely-held and actively traded on the NYSE for nearly ten (10) 
years under the symbol GME. Holders of GM Class E common stock have no 
direct equity interest in EDS nor a priority claim on the assets of 
EDS, but rather have liquidation rights in the aggregate equity and 
assets of GM, which include 100 percent (100%) of the common stock of 
EDS. In the event of the liquidation, dissolution, or winding up of the 
business of GM, assets remaining after payments to creditors or to 
preferred or preference stockholders, if any, will be distributed to 
holders of Class E stock, as well as to holders of $1\2/3\ par value 
common stock, and Class H common stock, on a per share basis in 
proportion to the respective per share liquidation units of such 
classes of stock.
    9. For almost thirty (30) years, EDS has provided, both in the 
United States and in thirty (30) other countries, applications of 
information technology to small business, governments, and large 
corporations, including GM and the Plan. EDS is headquartered in 
Dallas, Texas and employs approximately 70,500 individuals to provide 
information technology at customer sites or at one of EDS' nineteen 
(19) information processing centers worldwide.
    As of December 31, 1993, EDS had revenues totaling $8.6 billion, 
and a net income of $724 million. It is represented that EDS has 
experienced rapid and consistent growth. In this regard, since 1988, 
total revenues have increased by 12 percent (12%) annually, and net 
income has averaged 14 percent (14%) annual growth. Although 39 percent 
(39%) of the revenues of EDS in 1993 were attributable to business with 
GM and its affiliates, it is represented that increasingly EDS' 
business has become independent of GM. In this regard, during the last 
five (5) years, EDS' revenues from non-GM sources have increased from 
40 percent (40%) to 61 percent (61%) of all revenues.
    10. Dividends on Class E stock are linked to the earnings 
performance of EDS. In this regard, under GM's Certificate of 
Incorporation, dividends on Class E stock may be declared and paid out 
of assets of GM only to the extent of the paid-in surplus attributable 
to Class E stock, plus the ``Available Separate Consolidated Net Income 
of EDS'' earned since the date GM acquired EDS.15 Under the 
dividend policy in effect since 1989, but subject to alteration by the 
Board, the aggregate annual dividend on a share of Class E stock is 
equal to approximately 30 percent (30%) of the prior year's Available 
Separate Consolidated Net Income of EDS. It is represented that 
stockholders' equity with respect to Class E stock has climbed from 
$1.4 billion in 1988 to $3.6 billion in 1993, while dividends have 
increased from $.17 per share to $.40 per share over the same six-year 
period. Further, the earnings per share attributable to GM Class E 
stock increased by a compound 14 percent (14%) per annum from 1988 to 
1993 when earnings per share equaled $1.51, as of December 31, 
1993.16
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    \1\5The Available Separate Consolidated Net Income of EDS is 
defined so as to require GM to make quarterly allocations of the 
portion of its consolidated net income earned during that quarter 
that is attributable to EDS. Such allocations are made between (a) 
amounts that are available for the payment of dividends on Class E 
stock and (b) amounts that are available for the payment of 
dividends on $1\2/3\ par value common stock. For each quarterly 
accounting period, the proportion of GM's net income attributable to 
EDS allocated to amounts available for the payment of dividends on 
Class E stock is equal to that proportion of such earnings that can 
be derived by multiplying those earnings by a fraction--the 
numerator of which is the weighted average number of shares of GM 
Class E stock outstanding during the period, and the denominator of 
which is a number initially established by the GM Certificate of 
Incorporation. At the discretion of the Board, as appropriate, the 
number in the denominator from time to time decreases as shares of 
Class E stock are purchased and increases as shares are needed in 
order to meet certain requirements of GM's employee benefit plans. 
As of December 1991, 1992, and 1993, the denominator was 478 
million, 479.3 million, and 480.9 million shares.
    \1\6It is represented that the acquisition by the Plan of the 
177 million shares of Class E stock will not have any dilutive 
effect on the dividends paid on or the earnings per share reported 
for Class E stock, because the increase in the number of shares of 
Class E stock outstanding that occurs in the numerator of the 
fraction discussed in footnote 10 without an adjustment to the 
denominator of such fraction will simply reallocate among existing 
GM common shareholder groups the amounts of GM earnings available 
for payment of dividends.
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    11. With respect to the stock portion of the contribution, GM 
requests exemptive relief from the prohibitions of sections 406 and 407 
of the Act because of its belief, more fully discussed below, that the 
contribution would not meet the requirements for the acquisition of 
``employer securities'' under section 408(e) of the Act. In this 
regard, section 408(e) provides, in part, that sections 406 and 407 of 
the Act shall not apply to the acquisition or sale by a plan of 
``qualifying employer securities,'' as defined in section 407(d)(5) of 
the Act, if such acquisition or sale is for adequate consideration, no 
commission is charged, and, in the case of a plan other than an 
eligible individual account plan, such as a defined benefit plan, such 
acquisition does not exceed 10 percent (10%) of the fair market value 
of the assets of such plan. Under section 407(d)(5) stock is a 
``qualifying employer security,'' if such stock is issued by an 
employer of employees covered by the plan or by an affiliate of such 
employer. Section 407(d)(5) further provides that in the case of a plan 
other than an eligible individual account plan, such as a defined 
benefit plan, an employer security shall be considered a ``qualifying 
employer security,'' only if such employer security satisfies the 
requirements of section 407(f)(1). Section 407(f)(1) provides that 
stock satisfies the requirements of this paragraph if no more than 25 
percent (25%) of the aggregate issued and outstanding shares of stock 
of the same class is held by the plan and at least 50 percent (50%) of 
the aggregate amount of such shares is held by persons independent of 
the issuer.
    GM believes that some portion of the Class E Stock to be 
contributed to the Plan may be viewed as ``qualifying employer 
securities'' under the Act because, up to a certain level, the 
contribution would not violate the ERISA Limits. GM represents that the 
Plan already owns 17 million shares of Class E stock. Assuming receipt 
of the cash portion of the contribution, GM maintains that the Plan 
could acquire additional shares of Class E stock without violating the 
10 percent (10%) limitation under section 407(a) of the Act. However, 
GM desires to contribute a far larger amount of Class E stock to the 
Plan, with the result that immediately after the transaction the Class 
E stock held by the Plan would exceed the 10 percent (10%) limitation.
    In this regard, the fair market value of the total assets of the 
Plan, as of March 31, 1994, was approximately $20.7 billion. The fair 
market value of the ``employer securities'' and ``employer real 
property'' held by the Plan, as of that date, including the Class E 
stock the Plan already owns, constitutes approximately 3.1 percent 
(3.1%) of the fair market value of the assets of the Plan. GM estimates 
that, assuming the Plan receives the cash portion of the contribution 
and a discount on the Class E stock as a result of certain restrictions 
applicable to such stock, the aggregate value of ``employer 
securities'' and ``employer real property'' held by the Plan 
immediately after the contribution will constitute approximately 21 
percent (21%) of the value of the total assets of the Plan.
    The applicant further notes that the number of shares of Class E 
stock which GM intends to contribute to the Plan may violate the 25 
percent (25%) limitation under section 407(f) of the Act. It is 
represented that there were 255,763,512 shares of Class E stock issued 
and outstanding, as of December 31, 1993. If GM contributes 177 million 
shares of Class E stock, those shares plus the 17 million shares the 
Plan already owns would boost the Plan's holding to approximately 194 
million shares. Accordingly, it is anticipated that immediately after 
the transaction, the Plan would hold approximately 45 percent (45%) of 
all the then issued and outstanding shares of Class E stock.
    Further, it is represented that several other plans sponsored by GM 
or its affiliates held, as of January 31, 1994, in the aggregate, some 
47.1 million shares of Class E stock. If the contribution was made 
pursuant to an exemption granted by the Department, it is estimated 
that the shares of Class E stock held by other GM plans would equal 
approximately 11 percent (11%) of the then issued and outstanding 
shares. GM believes an issue exists as to whether such plans are 
independent of the issuer, within the meaning of section 407(f)(1)(B) 
of the Act. If the other plans are not independent of the issuer, the 
Plan's acquisition of Class E stock would violate the 50 percent (50%) 
limitation under section 407(f).
    Following the contribution of the Class E stock, the Plan will hold 
such stock for some period of time in amounts exceeding the ERISA 
Limits discussed above. Accordingly, GM requests exemptive relief from 
sections 406(a)(2) and 407 of the Act for the continued holding of the 
Class E stock until UST determines that it is appropriate to dispose of 
such stock on behalf of the Plan.

Agreement With PBGC and Use of Credit Balance

    12. Pursuant to an agreement in principle executed on May 9, 1994, 
GM and the PBGC agreed upon terms respecting both the timing and use of 
credit balances in the Plan's funding standard account that will result 
from the contribution. Under the general terms of this agreement, the 
contribution of the approximately $10 billion combined value of cash 
and Class E stock will be credited to the Plan's funding standard 
account. A cash and stock credit balance would be established for the 
Plan representing the value of such cash and Class E stock. It is 
represented that the actual contribution of the cash and Class E stock 
may not occur all at one time but will be completed by September 30, 
1995. In this regard, GM contributed on July 27, 1994, $2.5 billion in 
cash to the Plan and on September 19, 1994, GM contributed an 
additional $750 million. It is anticipated that before the end of 1994, 
GM, at its election, may contribute another $750 million to the Plan. 
If this exemption is granted, GM has the option to consider such cash 
contributions as part of the proposed $4 billion contribution in cash 
to the Plan required under the PBGC Agreement, or, at its discretion, 
GM may elect to make an additional payment of $4 billion in cash to the 
Plan.
    This contribution will be in excess of the minimum funding 
requirements of the Act and the Code. Under the normal operation of the 
minimum funding account, the credited value of such contribution would 
reduce in the year contributed the amount that GM is otherwise required 
to contribute to the Plan. Further, if the credits were not utilized in 
any given year, GM ordinarily would be able to use the resulting credit 
balance, with interest thereon, in succeeding years because the 
contribution had not previously been applied to meet its minimum 
funding obligations.
    However, pursuant to the agreement between GM and the PBGC, GM has 
agreed to defer for two (2) years the use of the credit balance arising 
from the contribution and, thereafter, to phase in full access by GM to 
the credit balance in the Plan's funding standard account. This 
approach is designed to assure that the Plan will continue to receive 
contributions substantially in excess of those to which it would 
otherwise be entitled.
    The terms of the PBGC Agreement contemplate that the contribution 
of cash and shares of the Class E stock to be made in 1994\17\ and 1995 
would be in addition to the satisfaction by GM of its statutory funding 
requirements to the Plan. For 1994, GM could not credit any of the 
amounts contributed pursuant to the PBGC Agreement towards satisfying 
its statutory funding requirements. Before 1997, GM could use only the 
interest generated by the cash portion of the contribution to offset 
its funding requirements. Starting in 1997 and continuing forward, GM 
could use all of this cash credit balance subject to one limitation. A 
credit balance reserve is maintained in the Plan consisting of the cash 
credit balance or cash generated from stock that has been sold in an 
amount equal to at least 25 percent (25%) of the contributed value of 
any remaining unsold, contributed Class E stock for so long as the then 
current value of Class E stock or other shares (``employer securities'' 
or non-employer securities exchanged for Class E stock) exceeds the 
ERISA Limits. This restriction will expire on October 1, 2003, if the 
Class E stock has been exchanged for non-employer securities. The 
balance of available credits without regard to this limitation could be 
used by GM without restriction starting in 2004 and continuing in later 
years.
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    \1\7Because the reporting year for the Plan runs from October 
1st through the following September 30th, reference to year (e.g.) 
1994 means Plan year 1993; 1995 means Plan year 1994, etc.
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    Beginning in 1999 and continuing until 2004, GM will have access 
annually to an amount of up to $1.5 billion of the stock credit balance 
generated by the stock which has been sold. Any unused portion of this 
$1.5 billion can be carried forward with interest to future years and 
could be used in addition to amounts otherwise allowed.
    There are two exceptional circumstances which if they arise will 
permit GM access to greater amounts of the cash and stock credit 
balances than the amounts described above. First, if a new law is 
passed which increases GM's funding obligations, then GM will have 
access to an additional amount of the cash and stock credit balances 
each year to satisfy such increase generated by the legislation. From 
1996 through 2000, the additional amounts from the cash and stock 
balances available would be the lesser of $750 million per year or the 
amount of the legislative increase in the minimum funding account. 
Thereafter, GM would have access to the lesser of $950 million per year 
or the amount of the legislative increase in the minimum funding 
account.
    Second, starting in 1997, if GM experiences a ``bad'' year in which 
losses from its North American Operations exceed $1.5 billion and its 
cash18 falls below $3 billion, GM can access up to an additional 
$1 billion of the credit balances that year; subject to a cap of no 
more than $2 billion in any five (5) year period. In any subsequent 
``good'' year in which GM's profits from its North American Operations 
exceeds $1 billion, the available credit balances would be reduced by 
the additional amount used in the prior ``bad'' year. In effect, GM 
would be able to access the available credit balances from a future 
``good'' year to use in a ``bad'' year. In addition, within five (5) 
years after GM takes any credits in a ``bad'' year, the remaining 
credit balances will be reduced by a corresponding amount.
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    \1\8``Cash'' is defined as U.S. Automotive cash and marketable 
securities (excluding EDS and GMHE) as currently defined by U.S. 
GAAP as measured on December 31 of that year.
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    Subject to these annual caps, the actual amount of the stock credit 
balance available to GM will depend on whether the Plan continues to 
hold contributed Class E stock (or other ``employer securities'' 
exchanged for such stock) above the ERISA Limits. For purposes of this 
determination, the contributed Class E stock (or other ``employer 
securities'' exchanged for such stock) would be valued at the lesser of 
the contributed value (plus interest)19 or the then current fair 
market value of such stock.
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    \1\9It is represented that interest will be computed at the 
Plan's funding standard account rate, currently 9%.
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    In this regard, for as long as the value of the Class E stock in 
the Plan (or other ``employer securities'' exchanged for such stock) 
exceeds the ERISA Limits, GM's access to the stock credit balance will 
be limited to an amount equal to the value of the contributed Class E 
stock that has been sold. For purposes of this provision, the value of 
Class E stock that has been sold is defined to mean the lesser of the 
contributed value of the sold Class E stock (plus interest) or the 
actual proceeds received upon sale of such stock.
    When the lesser of the contributed value (plus interest) or the 
then current fair market value of the ``employer securities'' held by 
the Plan constitutes less than the ERISA Limits, the maximum amount of 
the stock credit balance GM will have access to would be the value of 
the Class E stock that has been sold, plus 75 percent (75%) of the 
value of the Class E stock (or ``employer securities'' exchanged for 
such Class E stock) still held in the Plan.
    In the event the Class E stock contributed to the Plan has been 
exchanged for non-employer securities, the amount of the stock credit 
balance available to GM will be 75 percent (75%) of the value of the 
unsold shares plus the value of the stock sold with a further 
limitation that the total amount of the credit balance related to 
unsold securities that can be used by GM may not exceed 10 percent 
(10%) of the then fair market value of the assets of the Plan.
    When Class E stock (or any shares exchanged for Class E stock) are 
sold, the amount of the stock credit balance related to such shares 
shall be adjusted to the value actually received for such shares if the 
value received is less than the contributed value of the shares plus 
interest. If the Class E stock (or any shares exchanged for Class E 
stock) are sold for more than the contributed value plus interest, any 
excess proceeds will be amortized as actuarial gain. If GM uses any 
amount of the stock credit balance related to unsold shares, such 
amount shall be adjusted to reflect the lower of (i) contributed value 
plus interest thereon or (ii) the then current fair market value as of 
the date GM accessed the stock credit balance. If the value ultimately 
received for the shares with respect to which the related portion of 
the credit balance has previously been used is less than the credit 
balance utilized, then the amount of the remaining credit balance 
related to the contribution of Class E stock shall be reduced by the 
amount of any loss (offset by unamortized gains) which has not been 
previously amortized.
    Under the terms of the PBGC Agreement, PBGC will have 
responsibility for monitoring GM's compliance with the terms of such 
agreement. The enrolled actuary for the Plan will calculate GM's 
statutory funding requirements and certify GM's use of the contribution 
credit balances. GM will also provide the PBGC with a copy of the 
actuarial valuation reports for the Plan and information concerning 
GM's use of the contribution credit balances, including the 
distribution of the stock credit balance between sold and unsold Class 
E stock. GM's independent auditor will provide a statement to PBGC once 
GM utilizes the financial flexibility provisions described above.
    UST has engaged Duff & Phelps to determine the fair market value of 
the shares of Class E stock as of the date of the contribution of such 
shares to the Plan. As requested by UST, Duff & Phelps will also 
determine the fair market value of the Class E stock at various times 
required under the PBGC Agreement.

Future Transfers and Other Dispositions of Class E Stock

    13. UST, the independent fiduciary acting on behalf of the Plan, 
has negotiated registration and other rights attendant to the Plan's 
ownership of the Class E stock. These rights are reflected in the terms 
and conditions as set forth in two agreements--the Registration Rights 
Agreement and the Transfer Agreement (the RRA and the Transfer 
Agreement) and give the Plan the ability to sell its Class E stock at 
such times and in such amounts so as to balance the objectives of 
diversification and maximization of the value of such stock to the 
Plan, including maintenance of an orderly market.
    It is proposed that these registration and transfer rights20 
will apply to all Class E stock held by the Plan whether acquired 
pursuant to the proposed contribution in-kind or otherwise held by the 
Plan at the time the exemption is granted. In this regard, the 17 
million shares of Class E stock held by the Plan prior to the 
contribution will be surrendered to GM so that restrictions may be 
placed on such shares. At the same time, a registration rights 
agreement to which the 17 million shares of Class E stock held by the 
Plan are now subject will be cancelled. UST represents that the 
substitution of the RRA for the current registration rights agreement 
to which the 17 million shares are subject will not devalue such 
shares.
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    \2\0For purposes of the RRA and the Transfer Agreement, the 
term, ``transfer'' means any offer, sale, transfer, or other 
disposition of the Class E stock held by the Plan.
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    The RRA contains various provisions regarding registration 
procedures, including selection of underwriters, GM and Plan holdbacks 
in connection with securities offerings effected by each other, payment 
of registration expenses and indemnification for disclosure-related 
liability. If the Class E stock is converted or exchanged into 
securities of any issuer other than GM in connection with a transaction 
to which GM is a party, GM will cause the issuer of such securities to 
be bound by all the provisions of the RRA, and such issuer will succeed 
to the rights and obligations of GM, other than those relating solely 
to GM's contribution of the shares to the Plan. Upon reduction of the 
Plan's ownership to less than 2 percent (2%) of the outstanding Class E 
stock the registration rights will terminate. Under the RRA, as long as 
the Plan owns more than 2 percent (2%) of the outstanding Class E 
stock, the Plan may transfer such stock only under certain terms and 
conditions summarized in the paragraphs below.
    Pursuant to the RRA, the Plan may make two ``demand'' transfers in 
any twelve (12) month period. Such transfers may, at UST's discretion, 
be effected pursuant to either underwritten public offerings registered 
under the Securities Act of 1933 or negotiated transactions, whether 
registered or not. The RRA requires GM to prepare and file the 
appropriate registration statements with the Securities and Exchange 
Commission (SEC) upon the Plan's ``demand'' registration and to 
cooperate with the Plan and the underwriters in the registration and 
selling process.
    It is represented that there will be no limit, except for market 
considerations, on the amount of Class E stock that can be sold 
pursuant to a ``demand'' transfer by the Plan. However, in any public 
offering the lead underwriters must agree to use their best efforts to 
assure that no more than 2 percent (2%) of the outstanding Class E 
stock is transferred to any person or related group. In addition, in a 
negotiated transaction, the Plan may not transfer more than 2 percent 
(2%) of the outstanding Class E stock to any person or related group or 
may not transfer at all to any person or related group required to file 
a Schedule 13D under the Securities Exchange Act of 1934.
    The RRA permits GM to postpone any ``demand'' transfer by the Plan 
in order that such transfer not interfere with certain corporate 
transactions or if such transfer would require disclosure of previously 
non-public information. The Plan has also agreed not to make any 
transfer of Class E stock until ninety (90) days after the completion 
of any underwritten public offering of such stock or any securities 
convertible into or exchangeable or exercisable for such stock. If, as 
a result of such postponements or such market holdbacks, the Plan is 
not able to effect a ``demand'' transfer for a period of thirteen (13) 
months, GM must terminate the postponement within sixty (60) days of 
the Plan's notification to GM of such fact and take all reasonable 
actions necessary to effect such transfer.
    The RRA contains provisions for coordinating the registration 
rights of the Plan with the registration rights granted by GM to other 
investors, including a strategic partner (the Strategic Partner). A 
Strategic Partner is an investor acting in concert with respect to an 
investment in GM and designated by the Board of GM, that acquires more 
than 10 percent (10%) of the outstanding Class E stock in a transaction 
intended to achieve a strategic objective. In this regard, until the 
earlier of the date the Plan reduces its holdings to less than 100 
million shares of Class E stock or the fifth anniversary of the 
contribution of such stock to the Plan by GM, the Plan's right to a 
``demand'' transfer will take priority over any ``demand'' registration 
rights granted to the Strategic Partner. In addition, until the Plan 
reduces its holdings to less than 25 million shares of Class E stock, 
the Plan may elect to participate in any ``demand'' registration 
requested by the Strategic Partner on an equal basis. After the Plan 
has reduced its holdings of Class E stock to less than 25 million 
shares, it may participate in any Strategic Partner ``demand'' 
registration. However, if there is a limit on the number shares of 
Class E stock included in such registration, those of the Strategic 
Partner will be included first, but the Plan's shares will have 
priority over all other holders of registration rights from GM.
    The Plan may participate in ``piggyback'' registrations in 
connection with underwritten public offerings initiated by GM or any 
other holder of Class E stock with registration rights, subject to 
customary cutback provisions and coordination with such other holders. 
In a ``piggyback'' registration, if the Plan expects to include at 
least 25 percent (25%) of the total number of shares of Class E stock 
in the offering, the Plan may select a co-manager reasonably acceptable 
to GM. The number of shares that the Plan may include in a 
``piggyback'' registration may be limited, if the lead underwriter or 
co-managers determine that the total number of shares of Class E stock 
proposed to be sold will adversely affect the marketability of the 
offering. In this regard, the shares that GM proposes to sell will take 
priority. Until the earlier of the date the Plan reduces its holdings 
of Class E stock to less than 100 million shares or the seventh 
anniversary date of the initial contribution, the Plan's shares will 
take priority over those of any other holder of registration rights, 
including the Strategic Partner. Until the Plan reduces its holdings of 
Class E stock to less than 25 million shares, the Plan's shares and 
those held by the Strategic Partner (who owns at least 25 million 
shares) will be included in the offering on a pro rata basis after the 
shares of GM and before the shares proposed to be sold by other holders 
of registration rights.
    If the Plan has reduced its ownership of Class E stock to below 7.5 
percent (7.5%) on a fully diluted basis, excluding employee stock 
options and similar rights, the Plan may tender into third-party tender 
offers for such stock. However, at any time while the Plan holds more 
than 7.5 percent (7.5%) of the Class E stock, it may tender or ``put'' 
such stock only under certain conditions. Those conditions center 
around whether GM has in effect a stockholders rights plan. If a 
stockholders rights plan has not been adopted the Plan may tender its 
shares of Class E stock. Generally, however, if a stockholder's rights 
plan has been adopted and remains in effect during the offering 
(assuming the rights have not been redeemed or revoked), the Plan may 
not tender into the offer unless other conditions are met, including 
GM's consent to the tender.
    In the event GM withholds its consent and prevents the Plan from 
tendering into a third-party tender offer and the tender results in the 
purchase of more than 50% of the total combined voting power of all 
outstanding securities of GM, the Plan will have the option to put to 
GM the same number of shares that would have been tendered for a 
purchase price in cash equal to the price per share offered in the 
tender. In the event the consideration offered in the tender was 
payable in a form other than cash, the RRA provides procedures for 
valuing such consideration for purposes of the Plan's put option.
    In addition to the transfers described in the paragraphs above, the 
Plan under the RRA is also permitted to transfer Class E stock: (1) 
Pursuant to Rule 144 under the Securities Act of 1933 after the Plan 
has reduced its ownership to less than 50 million shares of such stock, 
subject to certain volume limitations; (2) pursuant to Rule 144 of the 
Securities Act of 1933 after the Plan has reduced its holdings of Class 
E stock to less than 25 million shares, subject to certain volume 
limitations only if the Plan is then an affiliate of GM; (3) to GM or 
any of its subsidiaries or to any employee benefit plan sponsored by GM 
or its affiliates;21 and (4) pursuant to mergers or consolidations 
in which GM or a subsidiary is a constituent corporation.
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    \2\1GM represents that only defined contribution plans 
maintained by GM or its affiliates will be involved in such 
transfers and that the purchase price paid will be at the prevailing 
price for such stock on the NYSE. In this regard, the Department 
notes that no relief is proposed herein for the acquisition of Class 
E stock by defined contribution plans maintained by GM. However, 
relief for such transactions may be provided by section 408(e) of 
the Act.
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    14. Certain additional restrictions will be imposed on the Plan's 
ability to transfer the Class E stock under the terms of the Transfer 
Agreement. Unlike the RRA, restrictions on transfer contained in the 
Transfer Agreement are only effective between GM and the Plan. These 
restrictions will be modified or terminated at various times depending 
on the occurrence of certain events.
    In this regard, until the Class E stock is converted into or 
exchanged for shares of capital stock of EDS in a transaction that 
results in GM no longer controlling EDS (the Split-Off), the Plan will 
not be permitted to transfer more than 5 percent (5%) of the total 
value of Class E stock then outstanding to any foreign person, as 
defined in the Code. Further, until 185 days after the effective date 
of the Split-Off, the Plan may not transfer Class E stock to any person 
or related group that would, as a result of such transfer, own 40 
percent (40%) or more of the outstanding Class E stock. Under certain 
circumstances after the Split-Off, the Plan may not transfer any Class 
E stock if, as a result, the Plan would own less than 50 percent (50%) 
of the Class E stock that it owned immediately after it received notice 
from GM of the Split-Off. From the date of the initial contribution 
until the second anniversary of the Split-Off, unless EDS announces a 
merger with one or more corporations, the Plan may not transfer Class E 
stock to any person or related group, if, as a result, such person or 
group would own 5 percent (5%) or more of the Class E stock then 
outstanding.
    15. In managing the Class E stock, UST anticipates liquidating such 
shares over time in a prudent and orderly fashion in accordance with 
the terms of the RRA and the Transfer Rights Agreement. Such 
dispositions may result from sales or exchanges of the Class E stock 
between the Plan and GM or its affiliates, or certain defined 
contributions plans sponsored by GM or its affiliates, or the exercise 
of the put option held by the Plan pursuant to the terms of the RRA. It 
is represented that the amount received by the Plan upon any sale or 
exchange of Class E stock with GM or its affiliates will be for no less 
than ``adequate consideration'' within the meaning set forth in section 
3(18) of the Act, and the amount received by the Plan upon any sale of 
Class E stock to a defined contribution plan maintained by GM or its 
affiliates will be the prevailing price for such stock on the NYSE. GM 
requests relief under section 406 of the Act in connection with such 
transactions.
    In the case of dispositions to defined contribution plans 
maintained by GM, it is represented that the trustee of such plan will 
acquire Class E stock only for the purposes of satisfying demand 
created by the plan's participants. Any Class E stock so acquired by 
the defined contribution plan will be allocated to participants 
accounts. The transactions in which plan participants acquire Class E 
stock will be registered under SEC form S-8 and, thus, the ability to 
resell such shares will not be restricted in any way.
    16. The Class E stock to be contributed by GM will be acquired and 
managed on behalf of the Plan by UST. UST has been appointed to serve 
as independent fiduciary on behalf of the Plan with respect to the 
acquisition of the Class E stock and will also serve as trustee of the 
Plan with sole discretion respecting the management and disposition of 
the Class E stock after the acquisition.
    It is represented that neither GM nor any of its subsidiaries has 
any ownership interest in UST or in any of its affiliates. Further, it 
is represented that UST is independent of GM in that neither UST nor 
any of its affiliates performed any services for GM, as of the date the 
application was filed.
    UST represents that it is qualified to serve as independent 
fiduciary and trustee on behalf of the Plan with respect to the 
proposed transactions. In this regard, UST represents that it has 
provided investment management and trust services to plans, 
institutions, endowments, foundations, and individuals for the past 150 
years. In addition to its investment management expertise, UST has 
extensive experience in providing asset allocation, trading strategy, 
investment advisory, and broker-dealer services. In this regard, UST 
represents that it currently has under discretionary management more 
than $30.5 billion in assets and more than $241 billion in assets under 
non-discretionary custodianship. It is represented that UST has 
extensive experience with the prudent acquisition and management of 
``employer securities,'' pursuant to the provisions of Act. It is 
further represented that UST employs a staff of professionals who have 
actually managed ``employer securities'' for plans in diverse 
situations, including ESOP-financed leveraged buy-outs, proxy voting, 
and other matters.
    Under the terms of its engagement, UST has sole and exclusive 
authority and responsibility to act on behalf of the Plan to: (1) 
Negotiate with GM the terms and conditions, including registration 
rights, under which the Class E stock may be acquired and held by the 
Plan; (2) determine whether the Plan should acquire the Class E stock 
on such terms and conditions; (3) prepare and issue to the Plan a 
report containing its reasoning and conclusions as to the propriety 
under the Act of acquiring and holding the Class E stock; and (4) 
determine, with the assistance of Duff & Phelps, the fair market value 
of the Class E stock contributed to the Plan and determine the fair 
market value of such stock at various times pursuant to the terms of 
the PBGC Agreement.
    It is represented that, after the contribution of the Class E stock 
by GM to the Plan, such contributed stock together with any other 
shares of Class E stock owned by the Plan, will be held in a separate 
trust for which UST has agreed to serve as trustee. As trustee, it is 
represented that UST will have sole discretionary control respecting 
the management and disposition of all the Class E stock in such trust 
and will exercise all voting and other rights attendant to ownership of 
the shares. With regard to disposition of the Class E stock, UST may 
need to retain a broker or other service provider. It is represented 
that such service provider will not be an affiliate of UST or GM or its 
affiliates.\22\
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    \22\The applicant represents that it will rely in this regard on 
section 408(b)(2) of the Act.
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    UST is authorized to engage outside advisors to assist in the 
performance of its duties. In this regard, UST has engaged the law firm 
of Jones, Day, Reavis & Pogue to advise it and to serve as legal 
counsel. UST has engaged the services of Goldman, Sachs & Company 
(Goldman) as its financial advisor to aid in: (1) Evaluating market-
related issues with respect to the Class E stock; (2) assisting UST in 
negotiating the terms and conditions of the acquisition of the Class E 
stock; and (3) providing background information to UST to facilitate 
the determination of the value of Class E stock at the time of the 
initial acquisition by the Plan. UST has also retained Duff & Phelps to 
furnish at the time of each contribution of shares of Class E stock its 
opinion as to the value of such shares which will reflect an 
appropriate discount from the trading price in light of: (a) The number 
of shares being contributed, (b) the Class E stock already owned by the 
Plan, and (c) the terms and conditions in certain agreements with GM, 
relating to the transfer of such shares. The dollar amount of the 25 
percent (25%) credit balance reserve maintained in the Plan will be 
based on the value of the Class E stock as determined by Duff & Phelps 
at the request of UST at the time of the contribution. UST also 
represents that it will engage a financial advisor to assist it in 
planning for and timing the disposition of Class E stock held by the 
Plan. It is further represented that GM and its affiliates have no 
ownership interest in Goldman or Duff & Phelps, and neither party 
currently serves in any capacity for GM.
    Because the marketability and dividends of Class E stock are based 
on the earnings and financial performance of EDS, UST has reviewed the 
business of EDS, as well as that of GM. In this regard, UST has 
reviewed historical financial information, equity research views, and 
rating agency views with respect to both GM and EDS.
    In evaluating the proposed transaction, UST along with its 
financial advisor and legal counsel, have reviewed those documents 
which it deemed relevant to the proposed contribution of cash and Class 
E stock, including but not limited to: (a) the Certificate of 
Incorporation of GM and of EDS; (b) the RRA currently in effect between 
GM and the Plan; (c) the prior acquisitions of GM securities by other 
plans; (d) the trust agreements pursuant to the Master Trusts; (e) the 
audited financial statements of the Plan for 1991 and 1992; (f) the 
Plan's annual reports on Forms 5500 for 1991 and 1992; (g) other 
information provided by GMIMCO regarding the Plan's assets held at 
various times in 1993 and 1994; (h) an analysis of the liquidity needs 
to pay benefits and administrative expenses over the next five (5) 
years prepared by the actuaries of the Plan; and (i) the sources of 
funds, other than the Class E stock, available to meet such liquidity 
needs. In addition, UST attended meetings and participated in numerous 
telephone conversations with officers and other representatives of GM 
and EDS and has also met with representatives of the PBGC and the 
Department.
    With respect to securities issued by GM, UST has reviewed the 
price, trading volume history, and trading patterns of both the Class E 
stock and GM's $1\2/3\ par value common stock. Specifically with regard 
to the Class E stock, it is represented that UST has analyzed the 
voting, liquidity, and conversion rights features of such stock and has 
considered possible scenarios which could result in alternative 
securities being substituted for the Class E stock. Further, UST 
represents that it has considered the impact on the Plan and has 
analyzed various holding, disposition, and risk management strategies, 
under each of these scenarios.
    It is represented that UST has on several occasions met with the 
named fiduciary of the Plan to consider the impact of the contribution 
of cash and Class E stock on the Plan's diversification and to address 
strategies to assure prudent diversification of the Plan's entire asset 
holding, including making adjustments to the asset allocation 
guidelines of the Plan that are appropriate in light of the acquisition 
of the shares.
    17. It is the opinion of UST that it is prudent to accept the 
contribution of cash and shares of Class E stock and that such shares 
can be prudently managed consistent with the diversification 
requirements of the Act. Further, for the reasons set forth below, UST 
has concluded that the proposed contribution of cash and shares is not 
only in the interest of the Plan and its participants and beneficiaries 
but is also protective of such interests. In this regard, (a) the 
contribution of cash and shares of Class E stock will cause an 
immediate and significant reduction in the amount of the Plan's 
underfunded liabilities and will enhance the Plan's long term ability 
to pay benefits to participants and beneficiaries; (b) under the terms 
of the PBGC agreement, GM will continue to make regular cash 
contributions to the Plan during the next several years; (c) as EDS has 
demonstrated consistent growth in revenue, income, and shareholder 
value and has potential to continue such success, the Plan's holding of 
the Class E stock over the long term will add to the value of the 
assets of the Plan; (d) UST has determined that the acquisition by the 
Plan of the Class E stock will not violate the diversification 
requirements of section 404(a)(1) of the Act, even though such stock 
will represent more than 20 percent (20%) of the total value of the 
assets of the Plan and will constitute approximately 40 percent (40%) 
of the outstanding Class E stock; (e) UST has determined that the 
Plan's ability to pay benefits and expenses when due will not be 
impaired by the receipt of the Class E stock; (f) the Class E stock is 
widely held and actively traded on an established securities market; 
(g) UST has negotiated various transfer rights which will give the Plan 
sufficient access to the capital markets to permit UST to prudently 
manage the Plan's holdings of the Class E stock consistent with the 
maintenance of an orderly market, so as to minimize the risk of the 
Plan's continued holding of the Class E stock, diversify the Plan's 
assets by decreasing its investment in such stock, and maximize the 
value such investment; and (h) to the extent the Plan's receipt of the 
Class E stock improves GM's financial strength, the proposed 
contribution of stock will also improve GM's long term ability to 
reduce the Plan's remaining underfunding over a reasonable period of 
time.
    18. In summary, GM represents that the proposed transactions meet 
the statutory criteria of section 408(a) of the Act because:
    (a) GM will contribute to the Plan at least 177 million shares of 
Class E stock but no more than 186 million shares plus $4 billion in 
cash, with at least $2 billion contributed in conjunction with or prior 
to the contribution of the Class E stock, and the remaining $2 billion 
contributed no later than September 30, 1995;
    (b) If less than 177 million shares of Class E stock are 
contributed, GM will contribute additional cash in an amount equal to 
the difference between 177 million and the number of shares of Class E 
stock contributed times the per-share value of such stock at the time 
of contribution, or a weighted average price if such stock is not 
contributed on a single date;
    (c) UST, an independent qualified fiduciary, or a successor 
independent fiduciary acceptable to the PBGC represents the Plan's 
interests for all purposes with respect to the Class E stock and will 
determine prior to entering into any of the transactions, that each 
such transaction, including the contribution of the Class E stock, is 
in the interest of the Plan;
    (d) UST will negotiate and approve the terms of any of the 
transactions between the Plan and GM or its affiliates or certain 
defined contribution plans sponsored by GM or its affiliates;
    (e) UST will manage the holding and disposition of the Class E 
stock and will take whatever action it deems necessary to protect the 
rights of the Plan;
    (f) The terms of any of the transactions between the Plan and 
parties in interest will be no less favorable to such Plan than terms 
negotiated at arm's length under similar circumstances with unrelated 
third parties;
    (g) A credit balance reserve is maintained in the Plan consisting 
of the cash credit balance or cash generated from stock that has been 
sold in an amount equal to at least 25 percent (25%) of the contributed 
value of the Class E stock which remains unsold in the Plan, for so 
long as such stock or any securities received in exchange exceeds the 
percentage limitations described in section 407(a) and 407(f) of the 
Act;
    (h) An independent qualified appraiser will determine the fair 
market value of the Class E stock contributed to the Plan, as of the 
date such shares are contributed, and will determine the fair market 
value of the Class E stock at various times as required under the PBGC 
agreement;
    (i) With respect to any sale or exchange of Class E stock by the 
Plan to GM or its affiliates or to any defined contribution plans 
sponsored by GM or its affiliates, no commission or fee will be charged 
to or paid by the Plan;
    (j) Any sale or exchange of Class E stock between the Plan and GM 
or its affiliates will be for no less than ``adequate consideration'' 
within the meaning set forth in section 3(18) of the Act, and any sale 
of Class E stock by the Plan to a defined contribution plan sponsored 
by GM or its affiliates will be at the prevailing price for such stock 
on the NYSE;
    (k) The Plan will incur no fees, costs, or other charges or 
expenses as a result of its participation in any of the transactions;
    (l) In the opinion of UST, the contribution of cash and shares of 
Class E stock will cause an immediate and significant reduction in the 
amount of the Plan's underfunded liabilities and will enhance the 
Plan's long term ability to pay benefits to participants and 
beneficiaries;
    (m) The Plan's holding of the Class E stock over the long term will 
add to the value of the assets of the Plan;
    (n) UST has determined that the acquisition by the Plan of the 
Class E stock will not violate the diversification requirements of the 
Act, and the Plan's ability to pay benefits and expenses when due will 
not be impaired by the receipt of the Class E stock;
    (o) The Class E stock is widely held and actively traded on an 
established securities market; and
    (p) The Plan will have sufficient access to the capital markets to 
permit UST to prudently manage the Plan's holdings of the Class E stock 
in order to maximize the value of such investment.

Notice to Interested Persons

    Included among those persons who may be interested in the pendency 
of the requested exemption are all active GM employees participating in 
the Plan, all retired or separated participants either receiving or 
entitled to receive benefits from the Plan, all beneficiaries of 
deceased participants of the Plan who are receiving or are entitled to 
receive benefits, and all unions representing active GM employees who 
participate in the Plan.
    It is represented that these various classes of interested persons 
will be notified within fifteen (15) calendar days of publication of 
the Notice of Proposed Exemption (the Notice) in the Federal Register, 
either by mailing first class or by posting a photocopy of the Notice, 
plus a copy of the supplemental statement (Supplemental Statement), as 
required, pursuant to 29 CFR 2570.43(b)(2). Notification will be 
provided to all retired or separated participants and to all 
beneficiaries by first-class mail at their last known mailing address. 
Notification will be provided to active participants by posting at all 
GM locations, in areas that are customarily used for notices to 
employees with regard to employee benefits or labor relations matters. 
GM shall also seek to post a copy of the Notice and a copy of the 
Supplemental Statement at the offices of the unions that represent GM 
active employees who participate in the Plan.

FOR FURTHER INFORMATION CONTACT: Angelena C. Le Blanc of the 
Department, telephone (202) 219-8776 (This is not a toll-free number.)

Wilson Sporting Goods Co. 401(k) Savings Plan (The Plan)

Located in Chicago, Illinois
[Application No. D-9803]

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 (1) the past interest-free loan to the Plan 
(the Loan) by Wilson Sporting Goods Co. (the Employer), a party in 
interest with respect to the Plan, and (2) the Plan's potential 
repayment of the Loan upon the receipt by the Plan of payments under 
Guaranteed Investment Contract No. CG01314A3A (the GIC) issued by 
Executive Life Insurance Company (Executive Life); provided the 
following conditions are satisfied:
    (A) No interest or expenses are paid by the Plan in connection with 
the transaction;
    (B) The Loan will be repaid only out of amounts paid to the Plan by 
Executive Life, its successors, or any other responsible third party; 
and
    (C) Repayment of the Loan is waived with respect to the amount by 
which the Loan exceeds GIC proceeds.

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

Summary of Facts and Representations

    1. The Employer, a Delaware Corporation which is headquartered in 
Chicago, Illinois, is a wholly owned subsidiary of Amer Group Ltd., a 
Helsinki, Finland Corporation. The Plan is a defined contribution plan 
which includes a cash or deferred arrangement under section 401(k) of 
the Code. The Plan provides for Employer matching contributions and 
additional Employer discretionary contributions. As of December 31, 
1993, the Plan had total assets of approximately $32,150,000. 
Currently, there are approximately 1700 participants. Participants are 
entitled to direct the investment of their account balances among 
various funds established under the Plan's trust agreement: The Bond 
Fund, the Balanced Fund, the Equity Index Fund, and the Fixed Income 
Fund. In April, 1989, The American National Bank and Trust Company of 
Chicago,\23\ as trustee for the Plan and at the direction of the Plan's 
Employee Benefits Committee, purchased the GIC on behalf of the Plan's 
Fixed Income Fund. The GIC provided a rate of return of 9.93% per annum 
and a maturity date of March 31, 1994.
---------------------------------------------------------------------------

    \23\The Northern Trust Company succeeded The American Bank and 
Trust Company of Chicago as the Plan's trustee in April, 1992.
---------------------------------------------------------------------------

    2. On April 11, 1991, Executive Life was placed into 
conservatorship by the Insurance Commissioner of the State of 
California. The Employer represents that Executive Life was required to 
cease payments on certain of its insurance products, including the GIC, 
upon commencement of the conservatorship. The effect of the 
conservatorship has been to freeze all assets invested in the GIC.\24\ 
This freeze has prevented Plan participants from exercising the rights 
they would normally have to change investments upon the maturity of a 
guaranteed investment contract under the Plan.\25\ The Employer 
represents that the Loan was made in order to preserve the Plan's 
rights with respect to the GIC, and to give participants and 
beneficiaries the ability to exercise their right to request investment 
transfers. Since the Loan was not made for the purpose of enabling the 
Plan to make participant distributions, it is not covered by PTE 80-26. 
The Loan, which was made on April 7, 1994, was in the amount of 
$3,184,792.57, which represents the maturity value\26\ of the GIC, 
adjusted for any amounts previously withdrawn from the GIC by the Plan, 
minus the $1.2 million in periodic advances already made to the Plan. 
The Employer represents that the Loan is non-interest bearing and the 
Plan has not and will not incur any expenses in connection with the 
transaction.
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    \24\The Department notes that the decisions to acquire and hold 
the GIC are governed by the fiduciary responsibility requirements of 
Part 4, Subtitle B, Title I of the Act. In this regard, the 
Department is not herein proposing relief for any violations of Part 
4 which may have arisen as a result of the acquisition and holding 
of the GIC issued by Executive Life.
    \25\Following the cessation of payments by Executive Life with 
respect to the GIC, the Employer made the decision to make periodic 
advances to the Plan as and when necessary to permit the Plan to 
make distributions to participants and beneficiaries entitled to 
distributions as a consequence of termination of employment or the 
hardship distribution provisions of the Plan. The applicant 
represents that, as of February, 1994, the periodic advances to the 
Plan totaled approximately $1.2 million. The applicant also 
represents that the terms of those periodic advances satisfy the 
conditions of PTE 80-26 (45 FR 28545, April 29, 1980). This 
conditional class exemption permits a party in interest to make an 
interest-free loan to an employee benefit plan, and the repayment of 
such loan. Specifically, the exemption states, in relevant part, 
that effective January 1, 1975, the restrictions of section 
406(a)(1)(B) and (D) and section 406(b)(2) of the Act and the taxes 
imposed by section 4975(a) and (b) of the Code by reason of section 
4975(c)(1)(B) and (D) of the Code, shall not apply to the lending of 
money from a party in interest to an employee benefit plan, nor to 
the repayment of such loan in accordance with its terms, if no 
interest or other fee is charged to the plan, the loan is unsecured, 
and the loan proceeds are used only for the payment of ordinary 
operating expenses of the plan, including the payment of benefits in 
accordance with the terms of the plan.
    In this proposed exemption the Department expresses no opinion 
as to whether the periodic advances satisfy the provisions of PTE 
80-26.
    \26\The maturity value is defined as the total amount deposited 
under the GIC, plus interest at the guaranteed interest rate, 
through the date of maturity.
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    3. Repayment of the Loan is limited to payments made to the Plan by 
or on behalf of Executive Life, or its successor, or any other 
responsible third parties. No other assets of the Plan will be 
available for repayment of the Loan. If the payments by or on behalf of 
Executive Life are not sufficient to fully repay the Loan, the Employer 
will have no recourse against the Plan, or against any participants or 
beneficiaries of the Plan, for the unpaid amount.
    4. In summary, the applicant represents that the proposed 
transaction satisfies the criteria of section 408(a) of the Act 
because: (1) The transaction has preserved the Plan's ability to allow 
participant-directed investment re-allocations; (2) The Plan has not 
and will not incur any expenses with respect to the transaction; (3) 
Repayment of the Loan will be made only from amounts paid to the Plan 
by Executive Life, its successor, or any other third party; (4) If the 
payments by or on behalf of Executive Life are not sufficient to fully 
repay the Loan, the Employer will have no recourse against the Plan, or 
against any participants or beneficiaries of the Plan, for the unpaid 
amount; and (5) Repayment of the Loan will be waived with respect to 
the amount by which the Loan exceeds the amount the Plan receives from 
GIC proceeds.

FOR FURTHER INFORMATION CONTACT: Virginia J. Miller of the Department, 
telephone (202) 219-8971. (This is not a toll-free number.)

Peoples Security Life Insurance Company (Peoples)

Located in Durham, North Carolina

Commonwealth Life Insurance Company (Commonwealth)

Located in Louisville, Kentucky
[Application Nos. D-9462 and D-9463]

Proposed Exemption

Section I. Covered Transactions
    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 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 extension of credit by Peoples or Commonwealth (the 
Applicants), the sponsors of an investment product (the Group Annuity 
Contract or GAC) in connection with a plan's investment in the GAC; and 
(2) the reimbursement of Peoples or Commonwealth for benefit payments 
made to investing plans from the cashflow generated by the investments 
in the plans' Custodian Accounts which are set up by a plan pursuant to 
the GAC, or (3) the reimbursement of Peoples or Commonwealth for 
benefit payments made to investing plans from the proceeds generated by 
liquidation of investments in the Custodial Accounts upon termination 
of the Group Annuity Contract.
    The proposed exemption is subject to the following conditions which 
are set forth below in Section II.
Section II. General Conditions
    The relief provided under Section I is available only if the 
following conditions are met:
    1. The decision to enter into the Group Annuity Contract will be 
made by a plan fiduciary who is independent of Peoples and Commonwealth 
and any affiliates of such entities (the Independent Fiduciary).
    2. Prior to a plan's investment in the Group Annuity Contract, the 
Independent Fiduciary for such plan receives full and detailed written 
disclosures of all features of the Group Annuity Contract including all 
applicable premium charges.
    3. Neither Peoples nor Commonwealth or any of their affiliates has 
discretionary authority or control with respect to the decision to 
invest plan assets in the investment product described herein or 
renders investment advice (within the meaning of 29 CFR 2510.3-21(a)) 
with respect to those assets.
    4. Neither Peoples nor Commonwealth or any of their affiliates 
exercises any discretion or renders investment advice on behalf of a 
plan with respect to the ongoing acquisition, management or disposition 
of Custodian Account assets.
    5. Peoples and Commonwealth provide copies of the proposed and 
final exemption as published in the Federal Register to each plan which 
invests in a Group Annuity Contract.
    6. The premiums charged by Peoples and Commonwealth for the GAC 
(including early termination charges assessed in the event of early 
contract termination) will not be in excess of ``reasonable 
compensation'' within the meaning of section 408(b)(2) of the Act and 
will constitute the only fees charged by Peoples or Commonwealth in 
connection with such contract other than accrued interest on 
unreimbursed benefit payments.
    7. Peoples and Commonwealth maintain or cause to be maintained, for 
a period of six years, the records necessary to enable the persons 
described in paragraph (7) of this section to determine whether the 
conditions of this exemption have been met, except that (a) a 
prohibited transaction will not be considered to have occurred if, due 
to circumstances beyond the control of Peoples or Commonwealth or its 
agents, the records are lost or destroyed prior to the end of the six 
year period, and (b) no party in interest other than Peoples or 
Commonwealth shall be subject to the civil penalty that may be assessed 
under section 502(i) of the Act, or to the taxes imposed by section 
4975(a) and (b) of the Code, if the records are not maintained, or are 
not available for examination as required by paragraph (7) below.
    8(a) Except as provided in section (b) of the paragraph and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to in paragraph 6 of this section 
shall be unconditionally available at their customary location during 
normal business hours by:
    (1) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service (the Service);
    (2) Any fiduciary of an investing Plan or any duly authorized 
representative of such fiduciary;
    (3) Any contributing employer to an investing Plan or any duly 
authorized employee or representative of such employee; and
    (4) Any participant or beneficiary of an investing Plan, or any 
duly authorized representative of such participant or beneficiary.
    (b) None of the persons described above in subparagraph (2)-(4) of 
this paragraph 8 shall be authorized to examine the trade secrets of 
Peoples or Commonwealth or its affiliates or commercial or financial 
information which is privileged or confidential.
    For purposes of this exemption, affiliate means:
    (a) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (b) Any officer, director or partner, in such other person; and
    (c) Any corporation or partnership of which such other person is an 
officer, director or partner.
    Control means the power to exercise a controlling influence over 
the management or policies of a person other than an individual.
    The availability of this exemption is subject to the express 
condition that the material facts and representations contained in the 
application are true and complete, and that the application accurately 
describes all material facts which are the subject of this exemption.

Summary of Facts and Representations

    1. Peoples is a North Carolina company which is licensed to conduct 
a life insurance business in 20 states and in the District of Columbia. 
All of its outstanding shares are owned by Providian Corporation, a 
Delaware holding company with its principle place of business in 
Louisville, Kentucky. As of December 31, 1992 Peoples had statutory 
assets of approximately $3.3 billion and statutory and capital surplus 
of approximately $288 million.
    2. Commonwealth is a Kentucky company which is licensed to conduct 
life insurance business in 37 states and the District of Columbia. All 
of its outstanding shares are owned by Providian Corporation. As of 
December 31, 1992, Commonwealth had statutory assets of approximately 
$4.5 billion and statutory and capital surplus of approximately $273 
million.
    3. The Applicants represent that they have developed and designed a 
new group annuity product to respond to plan demand for new product 
alternatives to traditional guaranteed investment contracts (GICs). 
They state that traditional GICs provide for a guarantee of a face 
amount and the crediting of a guaranteed rate of return on contract 
deposits and provide that such deposits may be withdrawn upon request 
at book value to pay participant benefits. With a traditional GIC, a 
plan is exposed to the credit risk that the insurer issuing the GIC may 
be unable to meet its obligations to repay contract deposits and 
credited interest.
    The Applicants represent that their new group annuity product, the 
Group Annuity Contract, allows a plan to retain title to investments 
underlying a plan's obligations to participants and provides assurances 
that benefits can be paid by the Applicant at any time in an amount up 
to the book value of such investments.
    4. The Applicants represent that the Group Annuity Contracts will 
operate as follows:
    The decision to invest in a Group Annuity Contract will be made by 
a plan fiduciary who is independent of Peoples, Commonwealth and any 
affiliate thereof.\27\ The plan will establish a Custodian Account to 
hold title in the name of the plan to a portfolio of assets contributed 
to the Account by the plan. The plan's trustee acting as a custodian, 
or a sub-custodian, appointed by such trustee, will perform custodial 
services in connection with the assets including the safekeeping of 
securities, the settlement of securities transactions, recordkeeping 
and the disbursement of cashflow. Neither Peoples, Commonwealth nor any 
affiliate thereof will perform administrative services in connection 
with a Custodian Account.
---------------------------------------------------------------------------

    \27\The Group Annuity Contracts will be offered to employee 
benefit plans which are subject to Title I of the Act other than any 
plan established by Peoples or Commonwealth or any affiliate thereof 
for their own employees.
---------------------------------------------------------------------------

    Selection and management of the assets held in the Custodian 
Account will be the responsibility of an investing plan subject to 
investment guidelines established by the plan and agreed to by Peoples 
or Commonwealth and incorporated in the Group Annuity Contract.\28\ The 
Applicants represent that they will not provide any investment advice 
to a plan in connection with the composition of the investment 
portfolio held in the Custodian Account. The Applicants further 
represent that they will not exercise any discretion on behalf of a 
plan with respect to the ongoing acquisition, management or disposition 
of Custodian Account assets.
---------------------------------------------------------------------------

    \28\Permissible investments are those which are rated by at 
least one of the following rating agencies: S&P, Moody's or Duff & 
Phelps. At point of purchase of a security, its rating must be at 
least Aa3 or AA-A by all those who rate the security. Portfolios 
will be constructed and maintained as ``buy and hold'' portfolios. 
Upon written mutual consent of the plans and the Applicants 
additional securities may be purchased or substituted by the plans. 
Accounts will invest only in U.S. dollar denominated, fixed-income 
securities.
---------------------------------------------------------------------------

    5. The Applicants represent that the Group Annuity Contract 
obligates Peoples or Commonwealth to make ``benefit payments'' at the 
request of the contracting plan from its general account in an amount 
not to exceed the book value of the investment portfolio owned by the 
plan. The term ``benefit payments'' is defined in the Group Annuity 
Contract to include benefits resulting from a plan participant's 
retirement, death, disability or termination of employment, and 
payments resulting from a participant's election to withdraw, borrow or 
transfer an amount from the participant's account in accordance with 
the terms of the plan. Unless a special contract option is elected, 
``benefit payments'' do not include benefit payments resulting from 
employer initiated events such as mergers, layoffs or early retirement 
programs. Each Contract further provides for Peoples or Commonwealth to 
provide annuities to participants in lieu of such benefit payments at 
the request of the plan. At the plan's option, it may fund benefit 
payments directly from the cashflow\29\ of the Custodian Account or 
from other plan investments in lieu of requesting benefit payments from 
Peoples or Commonwealth, and it is anticipated that the Contract will 
only be used by a plan to fund benefits when the Plan's normal sources 
of funding are insufficient. Benefits payments are made as follows: If 
a Plan participant desires money, he submits a request to the Plan. If 
the benefit payment will be made by Peoples or Commonwealth, the Plan 
sends Peoples or Commonwealth, as applicable, a notice and Peoples or 
Commonwealth makes a payment. The payment from Peoples or Commonwealth 
to the plan is an extension of credit. Cashflows are then used to 
reimburse Peoples or Commonwealth for the extension of credit for 
benefit payments.
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    \29\As used herein and as defined in the Contract, the term 
``cashflow'' means the principal (repayment of the face amount of 
the security by the issuer of the security), interest, dividends, 
and other monies received, other than liquidation proceeds, with 
respect to the securities held in the Custodian Account.
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    The maximum amount of benefit payments that Peoples or Commonwealth 
is obligated to make is an amount equal to the ``book value'' of the 
Custodian Account established by a plan in connection with the Group 
Annuity Contract. The term ``book value'' is generally defined at any 
time as the (i) initial amount of cash and book value of securities 
contributed by the plan to the Custodian Account, plus (ii) additional 
deposits and (iii) interest credited for the period based on the 
crediting rate, less cash-flow from the Account used to pay any 
outstanding benefit payments and additional benefit requests or used to 
pay premiums due either Peoples or Commonwealth.
    In addition, three separate events may trigger adjustments to 
reported book value, including:
    (i) If outstanding benefit payments are excessive (e.g., more than 
20% of the book value balance), then securities in the Account may be 
liquidated with proceeds used in support of Peoples or Commonwealth 
making benefit payments;\30\
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    \30\If outstanding benefit payments are excessive, Peoples or 
Commonwealth has the right to send a Notification to the Custodian 
to liquidate specified securities or a portion thereof pursuant to 
the liquidation method stated in the contract.
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    (ii) If a security becomes an impaired security, it does not 
conform to the Contract's guidelines, and must be sold and substituted 
within a given period, or an adjustment is made to remove the security 
from the account;\31\ and
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    \31\If a security becomes impaired, and no substitution is made, 
the book value will be reduced by the carrying value of the 
security. For an additional premium, Peoples or Commonwealth will 
assume the risk of securities becoming impaired by continuing to 
value such securities at book value for purposes of determining the 
``book value'' of the Custodian Account. It is anticipated that most 
plans which do not elect this option will structure the investment 
portfolio of assets held in the Custodian Account to consist solely 
or primarily of securities having little or no default risk such as 
government and government-guaranteed securities.
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    (iii) If requested payments are not for bona fide benefits at book 
value, then termination payments are requested and an adjustment to 
book value reflects the partial termination amounts.
    6. Prior to termination of a Contract, Peoples and Commonwealth are 
entitled to reimbursement from a plan for any outstanding benefit 
payments. Such reimbursement will come primarily from the cashflow of 
investments in the Custodian Account. The Group Annuity Contract 
provides that cashflow from the assets held in a Custodian Account will 
be first directed to pay Peoples or Commonwealth for the balance of any 
outstanding benefit payments (and outstanding contract premiums) before 
any remaining cashflow may be applied by the plan for other purposes. 
Under certain Group Annuity Contracts, Peoples or Commonwealth may 
require a plan to liquidate securities held in the Custodian Account 
(pursuant to a liquidation methodology set forth in the Contract) to 
reimburse the insurer for outstanding benefit payments if such 
outstanding payments exceed a level specified in the Contract. A plan 
is not obligated to remit cashflow to Peoples or Commonwealth for 
outstanding benefit payments from any source other than the assets held 
in the Custodian Account. Peoples or Commonwealth bear the risk that 
such assets will be sufficient to repay any outstanding benefit 
payments on a timely basis. In some circumstances, as set forth in the 
Group Annuity Contracts, a plan may choose, but is not required, to 
make other sources of cash available in an effort to reduce the amount 
of outstanding benefit payments. If a plan chooses to make other 
sources of cash available, the plan will receive a book value credit.
    Interest accrues on outstanding benefit payments made by Peoples or 
Commonwealth on a pre-determined basis. Interest accrues on a daily 
compounded basis at a rate set forth in the Group Annuity Contract from 
the day that benefit payments are remitted by the insurer to the plan, 
through, but not including, the day of reimbursement of the payments. 
Under certain Group Annuity Contracts, the interest rate is equal to 
the crediting rate used to calculate the ``book value'' of the 
Custodian Account. This rate is based on the expected internal rate of 
return on the securities held in the Custodian Account as that rate may 
be amended (generally, the rate will not be reset more than quarterly), 
based on the then current securities in the Account.\32\ Under other 
Group Annuity Contracts, the interest rate is calculated at the 
beginning of each month and is based on the average of the closing one-
month London Inter-Bank Offering rate (``LIBOR'') for the last five 
business days of the prior calendar month. Plans may select a form of 
the Group Annuity Contract offering the interest rate (i.e., LIBOR or 
internal rate of return) which they prefer at the time the Group 
Annuity Contract is issued.
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    \32\Internal rate of return is based on cashflows of the 
underlying securities. Some securities have cashflows that change 
over time based on market conditions. As a result, they affect the 
internal rate of return. Cashflow information and assumptions are 
provided by independent information sources such as broker-dealers 
who make a market in the securities or systems such as Bloomberg or 
Telerate which carry current information about securities. Peoples 
and Commonwealth do not exercise discretion in amending the internal 
rate of return.
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    7. The Group Annuity Contract automatically terminates on the 
Contract's ``Maturity Date.'' The Maturity Date is specified in the 
Contract and generally coincides with the anticipated point in time 
when all investments initially held in the Custodian Account have 
matured and cashflow paid out. The Group Annuity Contract also can be 
terminated at the election of the contractholder upon advance 
notification (generally 30 days) to the insurer or by the insurer in 
the event that the plan ceases to meet the requirements for 
qualification under the Internal Revenue Code, breaches its material 
obligations under the Contract or any related agreement that affects 
the Contract, or assigns the Contract without the insurer's consent. 
Upon termination of the Group Annuity Contract, Peoples or 
Commonwealth's obligation to pay benefits ceases and the insurer is 
entitled to receive (to the extent that the liquidation value of the 
securities in the Custodian Account are sufficient) the balance of any 
outstanding benefit payments (including accrued interest) and 
premiums.\33\ If the Contract is terminated prior to its maturity by 
the plan or by Peoples or Commonwealth under the circumstances 
described above, either Peoples or Commonwealth is also entitled to an 
early termination charge equal to the estimated amount of any premiums 
that would have been paid from the termination date to the earlier of 
(i) the Maturity Date or (ii) the date two years from the termination 
date. In calculating the early termination charge, Peoples or 
Commonwealth will estimate premiums based on book value at the date of 
termination and where book value would have been two years from the 
effective date of the contract if it has not been terminated. 
Calculation of the early termination charge is exact and Peoples and 
Commonwealth do not exercise discretion in the process.
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    \33\Under certain Group Annuity Contracts, Peoples or 
Commonwealth also may terminate the Contract if the book value of 
the assets in the Custodian Account reach a specified de minimis 
level but only if the liquidation value of the non-impaired 
securities in the Custodian Account exceeds book value. No early 
termination charge is assessed under these circumstances.
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    8. The Applicants charge an annualized premium at a fixed rate set 
forth in the Group Annuity Contract. The rate is a percentage of the 
book value of the securities in a plan's portfolio. The premium and 
interest which accrues on outstanding benefit payments and early 
termination charges, if any, are the only consideration received by the 
Applicant in connection with the Group Annuity Contracts.
    9. In summary, the Applicants represent that the proposed 
transactions will meet the statutory criteria under section 408(a) 
because:
    (a). The decision to enter into the Group Annuity Contract will be 
made by an independent plan fiduciary who is independent of Peoples and 
Commonwealth and any affiliates of such entities.
    (b). Prior to a plan's investment in the Group Annuity Contract, 
the Independent Fiduciary for such plan receives full and detailed 
written disclosures of all features of the Group Annuity Contract 
including all applicable premium charges.
    (c). Neither Peoples nor Commonwealth or any of their affiliates 
has discretionary authority or control with respect to the decision to 
invest plan assets in the investment product described herein or 
renders investment advice (within the meaning of 29 CFR 2510.3-21(a)) 
with respect to those assets.
    (d). Neither Peoples nor Commonwealth or any of their affiliates 
exercises any discretion or renders investment advice on behalf of a 
plan with respect to the ongoing acquisition, management or disposition 
of Custodian Account assets.
    (e). The premiums charged by Peoples and Commonwealth for the GAC 
(including early termination charges assessed in the event of early 
contract termination) will not be in excess of ``reasonable 
compensation'' within the meaning of section 408(b)(2) of the Act and 
will constitute the only fees charged by Peoples or Commonwealth in 
connection with such contract other than accrued interest on 
unreimbursed benefit payments.

For Further Information Contact: Lyssa E. Hall of the Department, 
telephone (202) 219-8971. This is not a toll-free number.

General Information

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

    Signed at Washington, DC, this 8th day of November 1994.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits 
Administration, Department of Labor.
[FR Doc. 94-28059 Filed 11-10-94; 8:45 am]
BILLING CODE 4510-29-P