Federal Register, Volume 64 Issue 226 (Wednesday, November 24, 1999)

[Federal Register Volume 64, Number 226 (Wednesday, November 24, 1999)]
[Notices]
[Pages 66201-66211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30560]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application No. D-10721, et al.]

Proposed Exemptions; Metropolitan Life Insurance Company

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Notice of proposed exemptions.

-----------------------------------------------------------------------

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

Written Comments and Hearing Requests

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

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

Notice to Interested Persons

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

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

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

[Application No. D-10721]

Proposed Exemption

Based on the facts and representations set forth in the
application, the Department is considering granting an exemption under
the authority of section 408(a) of the Act (or ERISA) and section
4975(c)(2) of the Code and in accordance with the procedures set forth
in 29 CFR part 2570, subpart B (55 FR 32836, 32847, August 10,
1990).¹
---------------------------------------------------------------------------

\1\ For purposes of this proposed exemption, references to
provisions of Title I of the Act, unless otherwise specified, refer
also to corresponding provisions of the Code.
---------------------------------------------------------------------------

Section I. Proposed Exemptions Involving the Demutualization of METLIFE
and the Excess Holding of Consideration By Plans Sponsored By METLIFE
and its Affiliates (the MetLife Plans)
If the exemption is granted, the restrictions of section 406(a) of
the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1)(A) through (D) of the
Code, shall not apply to the receipt, by any eligible policyholder (the
Eligible Policyholder) of MetLife that is an employee benefit plan (the
Plan), subject to applicable provisions of the Act and/or the Code,
including any Eligible Policyholder that is a Plan covering employees
of MetLife or its affiliates, of an interest (the Interest) in a trust
(the Trust), whose corpus consists of common stock (the Common Stock)
issued by MetLife, Inc., (the Holding Company), the parent of MetLife;
or (2) the receipt of cash or policy credits by such Plans,²
in exchange for such Eligible Policyholder's membership interest in
MetLife, pursuant to a plan of conversion (the Plan of Reorganization)
adopted by MetLife and implemented in accordance with section 7312 of
the New York Insurance Law.
---------------------------------------------------------------------------

\2\ Unless otherwise noted, the terms ``Plan'' and ``MetLife
Plan'' are referred to collectively as the ``Plans.''
---------------------------------------------------------------------------

In addition, the restrictions of section 406(a)(1)(E) and (a)(2)
and section 407(a)(2) of the Act shall not apply to the receipt and
holding, by a MetLife Plan, of Trust Interests, whose fair market value
exceeds 10 percent of the value of the total assets held by such Plan.
The proposed exemptions that are described above are subject to the
following conditions:
(a) The Plan of Reorganization is implemented in accordance with
procedural and substantive safeguards that are imposed under New York
Insurance Law and is subject to review and approval by the New York
Superintendent of Insurance (the Superintendent). The Superintendent
reviews the terms of the options that are provided to Eligible
Policyholders of MetLife as part of such Superintendent's review of the
Plan of Reorganization, and the Superintendent only approves the Plan
of Reorganization following a determination that the Plan is fair and
equitable to all Eligible Policyholders and is not detrimental to the
public.
(b) Each Eligible Policyholder has an opportunity to vote at a
special meeting to approve the Plan of Reorganization after receiving
full written disclosure from MetLife.
(c) One or more independent fiduciaries of a Plan (the Independent
Fiduciary) that is an Eligible Policyholder receives Trust Interests,
cash or policy credits pursuant to the terms of the Plan of
Reorganization and neither MetLife nor any of its affiliates

[[Page 66202]]

exercises any discretion or provides ``investment advice,'' within the
meaning of 29 CFR 2510.3-21(c) with respect to such acquisition.
(d) In the case of a MetLife Plan, the Independent Fiduciary--
(1) Votes at the special meeting of Eligible Policyholders to
approve the Plan of Reorganization;
(2) Makes any election, to the extent available under the Plan of
Reorganization, to receive Trust Interests or cash on behalf of the
MetLife Plan;
(3) Monitors, on behalf of the MetLife Plan, the acquisition and
holding of any Trust Interests received;
(4) Makes determinations on behalf of the MetLife Plan with respect
to the voting and the continued holding of Trust Interests by such
Plan.
(5) Withdraws shares of Holding Company Common Stock that are held
in Trust which are equivalent to Trust Interests allocated to a MetLife
Plan and disposes of such Trust Interests.
(i) Not exceeding the limits of section 407(a) of the Act in a
prudent manner.
(ii) Exceeding the limits of section 407(a) of the Act within six
months of the initial public offering (the IPO); and
(6) Provides the Department with a complete and detailed final
report as it relates to the MetLife Plans prior to the effective date
of the demutualization.
(e) After each Eligible Policyholder entitled to receive Trust
Interests is allocated at least ten shares of Holding Company Common
Stock, additional consideration is allocated to Eligible Policyholders
who own participating policies based on actuarial formulas that take
into account each participating policy's contribution to the surplus of
MetLife, which formulas have been reviewed by the Superintendent.
(f) All Eligible Policyholders that are Plans participate in the
demutualization transaction on the same basis within their class
groupings as other Eligible Policyholders that are not Plans.
(g) No Eligible Policyholder pays any brokerage commissions or fees
in connection with the receipt of consideration.
(h) All of MetLife's policyholder obligations remain in force and
are not affected by the Plan of Reorganization.
(i) The terms of the transactions are at least as favorable to the
Plans as an arm's length transaction with an unrelated party.
Section II. Proposed Exemptions Involving Sales or Withdrawals
Occurring in Connection With the Operation or Termination of the Trust
If the exemption is granted, the restrictions of section 406(a) of
the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1)(A) through (D) of the
Code, shall not apply to the proposed (1) sale by a Plan to the Holding
Company of Holding Company Common Stock, which is held in the Trust for
the benefit of such participating Plan and is evidenced by Trust
Interests, following the effective date of the demutualization or upon
the termination of the Trust; and (2) the withdrawal by a Plan of
Holding Company Common Stock, as evidenced by Trust Interests,
beginning on the first anniversary of the effective date of the
demutualization until the termination of the Trust.
The proposed exemptions are subject to the following conditions:
(a) The decision by a Plan to arrange for the sale of Holding
Company Common Stock to the Holding Company or to withdraw Holding
Company Common Stock is made by a Plan fiduciary which is independent
of MetLife and its affiliates.
(b) No Plan pays any fees or commissions in connection with either
transaction.
(c) The terms of the transactions are at least as favorable to the
Plan as those obtainable in an arm's length transaction with an
unrelated party.
(d) Any sale of shares of Holding Company Common Stock held in the
Trust for the benefit of a Plan to the Holding Company is at a price
reflecting the fair market value of the Common Stock as determined by
averaging the high and low trading prices as reported on the New York
Stock Exchange on the day of sale, except that if such sale is pursuant
to the termination of the Trust, such fair market value is determined
as the average of the closing price for a share of such Holding Company
Common Stock for the twenty consecutive trading days ending on the
third calendar day immediately prior to the date of the sale.
Section III. Definitions
For purposes of this proposed exemption:
(a) The term ``MetLife'' means The Metropolitan Life Insurance
Company and any affiliate of MetLife as defined in paragraph (b) of
this Section III.
(b) An ``affiliate'' of MetLife includes--
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with MetLife. (For purposes of this paragraph, the term ``control''
means the power to exercise a controlling influence over the management
or policies of a person other than an individual.)
(2) Any officer, director or partner in such person, and
(3) Any corporation or partnership of which such person is an
officer, director or a 5 percent partner or owner.
(c) The term ``Eligible Policyholder'' means a policyholder whose
name appears on MetLife's records as the owner of a policy on the
adoption date of MetLife's Plan of Reorganization by MetLife's Board of
Directors and, which is in full force for its full basic benefits and
has not matured by death or otherwise been surrendered or terminated
and which remains in force on the effective date of MetLife's
demutualization.
(d) The term ``policy credit'' means (1) a dividend deposit or
dividend addition; (2) an increase in accumulation value (to which no
sales or surrender or similar charges shall be applied); (3) additional
coverage or benefits; (d) an extension of the expiry date; or (4) a
reduction in premium payments.

Summary of Facts and Representations

1. MetLife is a mutual life insurance company organized under the
laws of the State of New York and subject to supervision and
examination by the Superintendent. It is the second largest insurance
company in the United States. As of December 31, 1998, MetLife and its
subsidiaries had total assets under management of approximately $357.7
billion and approximately $1.7 trillion of life insurance in force.
MetLife and its subsidiaries and affiliates provide funding, asset
management and other services for approximately 59,700 employee pension
and welfare benefit plans that are subject to the provisions of Title I
of the Act as well as applicable provisions of the Code. In addition,
MetLife maintains pooled and single plan separate accounts in which
Title I pension, profit sharing and thrift plans invest, and MetLife or
its affiliates manage assets in such separate accounts. Moreover,
MetLife has a number of subsidiaries and affiliates that provide a
variety of financial services, including investment management and
brokerage services.
MetLife represents that it is not a ``party in interest'' with
respect to any of its Plan policyholders merely because it has issued
an insurance policy to the Plan. However, because of the variety of
fiduciary and other services it and its affiliates provide to Plans
that are also policyholders, MetLife believes that it is a party in
interest with respect to such Plans under sections 3(14)(A) and (B) of

[[Page 66203]]

the Act or the other related ``derivative'' provisions of section 3(14)
of the Act.
As a mutual life insurance company, MetLife has no stockholders.
Instead, policyholders of MetLife are ``members'' of the company, and
in that capacity, they are entitled to vote to elect directors of
MetLife. If MetLife is liquidated, the policyholders will be entitled
to share in any assets of MetLife which remain after all claims against
MetLife have been satisfied in full.
2. MetLife and its affiliates sponsor several pension and welfare
plans for the benefit of their employees. The MetLife Plans, their
asset and participant totals as of December 31, 1998, the
decisionmakers with respect to MetLife Plan investments, and the
employees covered by the MetLife Plans are set forth in the following
tables:

----------------------------------------------------------------------------------------------------------------
Participants
Plan name Assets $1M 12/ or number of Investment decision Employees covered
98 lives makers
----------------------------------------------------------------------------------------------------------------
MetLife Retirement Plan for U.S. $3,974 81,000 Investment Advisory Sal. and comm.
Employees. Committee. employees.
VRSA................. 86 3,900
401(h)............... 24
Savings & Investments Plan for 2,559 36,000 MetLife.............. Sal. and comm.
Employees of MetLife and Part. employees.
Affils.
MetLife Options and MetLife (\1\)
Choices Plan.
Welfare (Post-Ret.)............... .............. 27,500 MetLife.............. Sal. and comm.
employees.
Life Ins. & Survivor. 406 .............. MetLife.............. Sal. and comm.
employees.
Health (VEBA TOLI)... 179 .............. VEBA Trustees........ Sal. and comm.
employees.
Health (HIFA)........ 500 .............. MetLife.............. Sal. and comm.
employees.
Welfare (Active).................. 388 29,400 MetLife.............. Sal. and comm.
employees.
Welfare Plan for Employees of \2\ 0 56,900 MetLife.............. Sal. and comm.
MetLife and Particip. Affils. employees.
Benefit Services Corp. Pre-Tax 0 30 MetLife.............. Active.
Premium Plan.
Cross & Brown Co. Your Group Ins. 0 11 MetLife.............. Active and Retired.
Plan.
Farmers National Company Ins. 0 135 MetLife.............. Active.
Programs.
Farmers National Co. Travel 0 135 MetLife.............. Active.
Accident Ins. Plan.
Hyatt Legal Benefit Plans......... 0 44 MetLife.............. Active.
SSR Realty Advisors, Inc. Life 0 532 MetLife.............. Active.
Benefits, Long-Term Dis.
State Street Res. & Mgt. Co. Life, 0 465 MetLife.............. Active.
Dental & Long Term Dis. Plan.
----------------------------------------------------------------------------------------------------------------
\1\ Reserves $M.
\2\ Benefits provided through insurance contracts.

3. On November 24, 1998, Metlife's Board of Directors authorized
the company's management to develop a plan of demutualization pursuant
to which MetLife would be converted from a mutual life insurance
company to a stock life insurance company. The principal purpose of the
Plan of Reorganization is to create a corporate structure that will
allow MetLife to position itself for long-term growth and increased
financial strength. MetLife believes that as a result of the
flexibility offered by the stock company structure and the access to
capital markets, it will be in a position to enhance its market
leadership, financial strength and strategic position and aggressively
pursue opportunities for growth, thereby providing greater protection
to policyholders. In addition, MetLife believes that the change in
business structure will enable it to remain a leader in helping people
become financially secure.
4. As a result of the Plan of Reorganization, MetLife will become a
stock insurer that is a subsidiary of MetLife, Inc., a newly-formed
holding company incorporated under the laws of the State of Delaware.
Consequently, MetLife and the Holding Company will have greater ability
to make acquisitions and the ability to raise investor capital in a
more efficient manner. The reorganization will provide economic value
to Eligible Policyholders in the form of shares of Holding Company
Common Stock, cash or policy credits, in exchange for such Eligible
Policyholders' respective membership interests in MetLife.
5. In addition to the formation of the Holding Company, MetLife
will establish the Trust to hold shares of Holding Company Common Stock
that are received by millions of policyholders under its Plan of
Reorganization. It is not anticipated that the Trust will be a ``plan
assets'' investment vehicle because 25 percent or more of the value of
the Trust Interests will not be held by Plans. MetLife notes that the
primary purpose of the Trust is to assist the Holding Company in the
administration of beneficiary accounts and the costs associated with
managing such a large number of policyholders. In addition, MetLife
states that a secondary purpose of the Trust is to promote a more
orderly market for Holding Company Common Stock. It is anticipated that
the trustee of the Trust (the Trustee) will be Wilmington Trust
Company, an entity which is independent of MetLife and one of the
nation's leading wealth management companies.
6. Thus, to resolve potential issues for Plans that may arise in
connection with its Plan of Reorganization, MetLife requests an
individual exemption from the Department that will cover the receipt of
Trust Interests,³ cash or policy credits by Eligible
Policyholders that are

[[Page 66204]]

Plans, including the MetLife Plans identified above, in exchange for
such Plans' existing membership interests in MetLife.
---------------------------------------------------------------------------

\3\ Although Holding Company Common Stock will not be issued
directly to an Eligible Policyholder, MetLife represents that it
wishes to ensure that the exemption will cover the indirect
acquisition by a Plan of an interest in the Holding Company Common
Stock owned by the Trust.
---------------------------------------------------------------------------

MetLife is also requesting an exemption for the receipt and holding
of Trust Interests by the MetLife Plans for their own employees with
respect to transactions that may violate sections 406(a)(1)(E), (a)(2),
and 407(a)(2) of the Act. These sections of the Act prohibit the
acquisition by a plan of any employer securities that are not
qualifying employer securities if immediately after the acquisition,
the aggregate fair market value of employer securities held by the plan
exceeds 10 percent of the fair market value of the assets of the
plan.⁴ MetLife represents that the Trust Interests may be
considered ``employer securities'' for purposes of the foregoing
restrictions. Because some of the MetLife Plans may receive a
substantial number of Trust Interests exceeding 10 percent of the fair
market value of the assets of such Plans, MetLife believes there will
be a violation of section 407(a)(2) of the Act. To safeguard the
interests of the MetLife Plans under these circumstances, MetLife and
each of its affiliates have appointed State Street Bank and Trust
Company (State Street), to serve as an Independent Fiduciary.
---------------------------------------------------------------------------

\4\ Specifically, section 406(a)(1)(E) of the Act prohibits the
acquisition by a plan of any employer security which would be in
violation section 407(a) of the Act. Section 406(a)(2) of the Act
states that no fiduciary who has authority or discretion to control
the assets of a plan shall permit the plan to hold any employer
security if he [or she] knows that holding such security would
violate section 407(a) of the Act. Section 407(a)(1) of the Act
prohibits the acquisition by a plan of any employer security which
is not a qualifying employer security. Section 407(a)(2) of the Act
provides that a plan may not acquire any qualifying employer
security, if immediately after such acquisition, the aggregate fair
market value of such securities exceeds 10 percent of the fair
market value of the plan's assets.
In addition to the above, section 407(f) of the Act, which is
applicable to the holding of a qualifying employer security by a
plan other than an eligible individual account plan, requires that
(a) immediately following its acquisition by a plan, no more than 25
percent of the aggregate amount of stock of the same class issued
and outstanding at the time of acquisition is held by the plan; and
(b) at least 50 percent of the stock be held by persons who are
independent of the issuer. MetLife notes, however, that the holding
of Holding Company Common Stock by the MetLife Plans will not
violate the provisions of section 407(f) of the Act.
---------------------------------------------------------------------------

Finally, the proposed exemption is intended to cover transactions
that will occur subsequent to the initial demutualization event, i.e.,
during the operation or termination of the Trust described herein.
These transactions include (a) the sale to the Holding Company by a
Plan of Holding Company Common Stock that is held in the Trust for the
benefit of such participating Plan and which is evidenced by Trust
Interests; and (b) the withdrawal by a Plan of Holding Company Common
Stock that is held in Trust and which is evidenced by Trust Interests.
The proposed exemption is conditioned on a number of requirements.
Specifically, distributions that are made to Plans under the Plan of
Reorganization must be on terms that are no less favorable to such
Plans than an arm's length transaction between unrelated parties. In
this regard, Plans to which MetLife is a party in interest will not by
reason of that relationship be treated differently from policyholders
as to which MetLife is not a party interest.
7. Section 7312 of the New York Insurance Law establishes an
approval process for the demutualization of a life insurance company.
Under Section 7312, the conversion of a mutual life insurance company
to a stock company is initiated by the board of directors of the mutual
company. A plan of demutualization may be approved by a vote of at
least 75 percent of the entire board of directors. The approval process
must include a finding that the plan is fair and equitable to
policyholders.
After approval by the mutual insurance company's board of
directors, a plan of demutualization is then required to be submitted
to the Superintendent for his or her review.
In order for a plan of demutualization to become effective, the
Superintendent must determine that the plan of demutualization does not
violate the requirements imposed by Section 7312, including the
requirement that the plan is fair and equitable to the policyholders,
that it is not detrimental to the public, and that, following the
demutualization, the insurer will have an amount of capital and surplus
which the Superintendent deems to be reasonably necessary for its
future solvency.
In order to assist the Superintendent in discharging his or her
duties, Section 7312 permits the Superintendent to appoint an actuary
to review actuarial aspects of the plan. In addition, Section 7312
permits the Superintendent to appoint other qualified disinterested
persons or institutions to act as consultants to the Superintendent. In
the case of the MetLife demutualization, the Superintendent has hired
the law firm of Fried, Frank, Harris, Shriver & Jacobson as legal
adviser; the actuarial firm of Miliman & Robertson to conduct the
required actuarial review; and The Blackstone Group as the investment
banking consultant.
8. Section 7312 also requires the Superintendent to hold a public
hearing on a plan of demutualization at which policyholders and other
interested persons may express views on the plan. Notice of the public
hearing must be provided to each policyholder of the insurance company
whose policy or contract is in force on the date of adoption of the
plan of demutualization, and must be published in three newspapers of
general circulation. The purpose of the public hearing is to allow
interested persons the right to comment on the fairness of the terms
and conditions of the demutualization and the reasons and purposes for
the demutualization of the insurer, and to consider whether the
demutualization is in the interest of the insurer and its policyholders
and is not detrimental to the public.
After the public hearing, the Superintendent must determine whether
or not to approve the demutualization plan. Under Section 7312, the
Superintendent approves the plan if he or she finds that it does not
violate the insurance law, that it is fair and equitable to
policyholders, that it is not detrimental to the public, and that,
after giving effect to the demutualization, the insurer will have an
amount of capital and surplus that the Superintendent deems to be
reasonably necessary for MetLife's future solvency.
The Superintendent must also determine that the plan does not fail
to meet the requirements of Section 7312(c). In other words, the plan
must (a) demonstrate a purpose and specific reasons for the proposed
demutualization; (b) be in the best interest of the mutual insurer and
its policyholders; (c) be fair and equitable to the policyholders; (d)
provide for the enhancement of the operations of the reorganized
insurer; and (e) not substantially lessen competition in any line of
insurance business.
The policyholders of the mutual insurance company must also be
provided with notice of the plan and an opportunity to vote whether to
approve the plan. Each policyholder (approximately 16 million in the
case of MetLife) is entitled to one vote, regardless of the number of
policies that are actually owned. In addition, the plan must be
approved by a vote of at least two-thirds of all votes cast by
policyholders entitled to vote.
A decision by the Superintendent to approve a demutualization plan
pursuant to Section 7312 of the New York Insurance Law is subject to
judicial review in the New York courts.

[[Page 66205]]

9. Although the Board of Directors of MetLife has not yet adopted
the Plan of Reorganization,⁵ MetLife anticipates that the
Plan will provide for the formation of the Holding Company under the
laws of the State of Delaware and the creation of the Trust which will
be governed by New York law. It is presently anticipated that, under
the Plan of Reorganization, the following steps will occur on the
effective date:
---------------------------------------------------------------------------

\5\ On September 28, 1999, MetLife's Board of Directors approved
the Plan of Reorganization whose effective date is projected for
early February 2000. In early January 2000, MetLife anticipates that
the hearing will be convened. Moreover, at sometime before the end
of the first quarter of 2000, MetLife expects that the
Superintendent will approve the Plan of Reorganization.
---------------------------------------------------------------------------

(a) Issuance of MetLife Common Stock. MetLife will issue 100
percent of its Common Stock to the Trust, on behalf of the Trust
Eligible Policyholders, to be held for the benefit of the Trust
Eligible Policyholders (who will be issued Trust Interests reflecting
their ownership of the shares held in the Trust).
(b) Exchange by Trust of MetLife Common Stock. Immediately after
receipt, the Trust will exchange its shares of MetLife Common Stock for
shares of Holding Company Common Stock. The Holding Company Common
Stock will be held in Trust for the exclusive benefit of the Trust
Eligible Policyholders.
(c) Surrender and Cancellation of Holding Company Common Stock.
MetLife will surrender to the Holding Company, and the Holding Company
will cancel, all of the remaining shares of Holding Company Common
Stock held by MetLife prior to the effective date.
(d) Calculation of Policyholder Consideration. MetLife will
establish an amount reflecting the aggregate amount that the Board
anticipates will be credited to policyholders who are required to
receive Trust Interests, cash or policy credits as compensation under
the terms of the Plan. In other words, for purposes of calculating the
amount of consideration that will be received, an Eligible Policyholder
will be allocated shares of MetLife Common Stock consisting of (1) a
fixed component of consideration equal to ten shares of MetLife Common
Stock, which may be subject to proportional adjustment, plus (2) a
variable component of consideration reflecting the contributions to the
surplus made by each such policyholder's in force participating policy.
10. Under the terms of MetLife's Plan of Reorganization, the
Holding Company will sell shares of Holding Company Common Stock to the
public through an IPO on the same day as the effective date of the Plan
of Reorganization. (Subsequent to the effective date, MetLife
anticipates that the Holding Company Common Stock will be actively
traded on the New York Stock Exchange.) The proceeds of the IPO will be
used to fund cash payments and policy credits to policyholders which
are required to receive cash or policy credits under the terms of the
Plan.
In general, an Eligible Policyholder is entitled to receive
consideration in the form of cash if (a) the policyholder's mailing
address is located outside of the United States; or (b) the
policyholder is the owner of a policy transferred to the Metropolitan
Life Insurance Company of Canada, regardless of the mailing address; or
(c) MetLife determines in good faith and to the satisfaction of the
Superintendent that it is not reasonably feasible or appropriate to
provide consideration in the form such Eligible Policyholder or class
of Eligible Policyholders would otherwise receive. In addition, an
Eligible Policyholder who holds an individual retirement annuity, an
individual annuity contract, an individual life insurance policy or a
long-term health care insurance product will be entitled to receive
policy credits from MetLife.
The amount of cash that will be paid,⁶ or the value of
the policy credits to each policyholder required to receive cash or
policy credits will be determined at the time of the IPO and will be
based (a) on the number of shares of Holding Company Common Stock that
the policyholder would have received on the effective date if the
policyholder had been entitled to receive compensation in the form of
Holding Company Common Stock and (b) the IPO price per share.
---------------------------------------------------------------------------

\6\ MetLife represents that there may be a limit on the amount
of funds available to pay cash compensation to Eligible
Policyholders that elect to receive cash. In this regard, the Plan
of Reorganization provides that the IPO and any other capital
raising transactions that are completed on the effective date must
raise proceeds, net of underwriting commissions and related
expenses, in an amount at least equal to the amount paid by MetLife
to fund mandatory cash payments pursuant to the Plan of
Reorganization and to pay fees and expenses incurred by MetLife
related to the demutualization, as well as to reimburse MetLife for
amounts to be paid by MetLife's Canadian branch to certain former
Canadian policyholders. If the IPO and any other capital raising
transactions are not sufficient to fund the payment of cash to all
Eligible Policyholders entitled to receive cash, MetLife explains
that although the Plan of Reorganization will become effective, the
cash will not be paid to all Eligible Policyholders electing to
receive cash. If this event occurs, MetLife states that cash will be
paid as follows:
Each individual Eligible Policyholder that elects to
receive cash will receive compensation in the form of cash;
Each group Eligible Policyholder that elects to receive
cash and is allocated not more than 250,000 shares will receive
compensation in the form of--
Cash, with respect to the first 25,000 shares allocated
to the Eligible Policyholder, and
Either shares of Holding Company Common Stock (which is
to be held in the Trust) or a combination of cash and shares of
Holding Company Common Stock (which also will be held in the Trust),
with respect to the remaining shares allocated to the Eligible
Policyholder. Such cash will be allocated to each Eligible
Policyholder pro rata basis in the proportion that the total number
of shares in excess of 25,000 shares allocated to such Eligible
Policyholder bears to the total number of shares in excess of 25,000
shares allocated to all such Eligible Policyholders allocated more
than 25,000 shares that have elected to receive cash.
---------------------------------------------------------------------------

In addition, prior to the effective date, policyholders who are
entitled to receive compensation in the form of Holding Company Common
Stock will be asked to elect whether they would like their allocable
portion of the shares held in Trust to be purchased by the Holding
Company, at the IPO price. Based on these elections, the Holding
Company will purchase shares of Holding Company Common Stock from the
Trust at the IPO offering price, and the cash will be distributed to
the Trust beneficiaries who have elected to be cashed out, in
cancellation of their interests.
In the case of an Eligible Policyholder that is a Plan, the
decision to receive consideration in the form of Trust Interests, cash
or policy credits will be made by one or more fiduciaries of such Plan
which is independent of MetLife. In addition, neither MetLife nor any
of its affiliates will exercise any discretion or provide ``investment
advice,'' within the meaning of 29 CFR 2510.3-21(c), with respect to
each such acquisition.⁷

[[Page 66206]]

Further, no Eligible Policyholder will pay any brokerage commissions or
fees in connection with their receipt of any form of consideration.
Finally, all of MetLife's insurance policies will remain in force, and
all policyholders will be entitled to receive all benefits under their
policies and contracts to which they would have been entitled if the
Plan of Reorganization had not been adopted.
---------------------------------------------------------------------------

\7\ Consistent with sections 7312(a)(2), 7312(e) and 4210 of New
York Insurance Law, the Plan of Reorganization generally provides
that the policyholder eligible to participate in the distribution of
Trust Interests, cash or policy credits resulting from the Plan of
Reorganization is ``the person whose name appears * * * on the
insurer's records as owner'' of the policy. MetLife further
represents that an insurance or annuity policy that provides
benefits under an employee benefit plan, typically designates the
employer that sponsors the plan, or a trustee acting on behalf of
the plan, as the owner of the policy. In regard to insurance or
annuity policies that designate the employer or trustee as owner of
the policy, MetLife represents that it is normally required under
the foregoing provisions of New York Law and the Plan of
Reorganization to make distributions resulting from such Plan to the
employer or trustee as owner of the policy, except as provided in a
plan of reorganization approved by the Superintendent.
Notwithstanding the foregoing, MetLife's Plan of Reorganization
provides a special rule applicable to an insurance policy issued to
a trust established by MetLife. This rule applies whether or not the
trust, or any arrangement established by any employer participating
in the trust, constitutes an employee benefit plan subject to the
Act. Under this special rule, the holder of each individual
``certificate'' issued in connection with the insurance policy is
treated as the policyholder and owner for all purposes under the
Plan of Reorganization, including voting rights and the distribution
of consideration. The trustee of any such trust established by
MetLife for the benefit of Eligible Policyholders that are Plans
will be ignored, and the Plan will be considered a policyholder or
owner and will be eligible to vote or receive consideration.
In general, it is the Department's view that, if an insurance
policy (including an annuity contract) is purchased with assets of
an employee benefit plan, including participant contributions, and
if there exist any participants covered under the plan (as defined
at 29 CFR 2510.3-3) at the time when MetLife incurs the obligation
to distribute Trust Interests, cash or policy credits, then such
consideration would constitute an asset of such plan. Under these
circumstances, the appropriate plan fiduciaries must take all
necessary steps to safeguard the assets of the plan in order to
avoid engaging in a violation of the fiduciary responsibility
provisions of the Act.
---------------------------------------------------------------------------

11. As noted above, all of the shares of MetLife Common Stock will
be issued to the Trust on the effective date and immediately exchanged
by the Trust for Holding Company Stock to be held for the benefit of a
policyholder that is a beneficiary of the Trust (the Trust
Beneficiary). Each Trust Beneficiary will be issued a number of Trust
Interests equal to the number of shares of Holding Company Common Stock
initially allocated to such Trust Beneficiary under the terms of the
Plan.
All Trust Interests will be held in the name of ChaseMellon
Shareholder Services, L.L.C. (ChaseMellon), the custodian, which has
been appointed by the Trustee under the Trust Agreement and which is
unrelated to MetLife and its affiliates. ChaseMellon will keep records
of all beneficiaries' Trust Interests. The Trust Beneficiaries will be
permitted to assign, pledge or dispose of their Trust Interests only in
certain limited circumstances.⁸ Even if the policy of a
Trust Beneficiary lapses, terminates or matures after the effective
date, shares allocated to the Trust Beneficiary will continue to be
held in the Trust until such Trust Beneficiary decides to withdraw
allocable shares of Holding Company Common Stock for sale. All Trust-
related fees and expenses will be paid by the Holding Company.
---------------------------------------------------------------------------

\8\ For example, Section 3.4(b) of the Trust Agreement provides
that a Trust Beneficiary may transfer Trust Interests (a) from the
estate of a deceased beneficiary to one or more heirs; (b) to the
spouse, children or grandchildren of the beneficiary; (c) in the
event the beneficiary is not a natural person, to the surviving
entity upon a merger or consolidation of such beneficiary into
another entity; (d) as a consequence of the bankruptcy of the
beneficiary; or (e) from a trust holding a policy on behalf of the
insured person under such policy.
---------------------------------------------------------------------------

12. Trust Beneficiaries will be able to sell shares of Holding
Company Common Stock, as evidenced by Trust Interests, at prevailing
market prices through a purchase and sale program (the Purchase and
Sale Program) which will be established by the Holding Company
following the completion of the IPO. The Purchase and Sale Program will
continue for the term of the Trust and will be effected through an
independent agent selected by the Holding Company. The Purchase and
Sale Program will be subject to certain volume and timing limitations
on Trust Beneficiaries. For example,
If a Trust Beneficiary holds 199 or fewer Trust Interests,
all of such Trust Beneficiary's Trust Interests must be withdrawn for
sale. The Trust Beneficiary will not be permitted to make a partial
withdrawal for sale.
If a Trust Beneficiary holds more than 199 Trust
Interests, such Trust Beneficiary may make a full or partial withdrawal
for sale. However, partial withdrawals for sale may only be in 100
share increments. (In this regard, the Trust Beneficiary may have 200
shares withdrawn for sale but not 250.) Following any partial
withdrawal for sale, the Trust Beneficiary may still hold at least 100
Trust Interests. If the Trust Beneficiary holds fewer than 100 Trust
Interests after the partial withdrawal for sale, such Trust Beneficiary
must make a full withdrawal for sale.
For the first 300 days following the effective date of the
Plan of Reorganization, if a Trust Beneficiary holds more than 25,000
Trust Interests, such Trust Beneficiary may make a full or partial
withdrawal for sale, subject to the volume limitations set forth in the
Purchase and Sale Program procedures. These volume restrictions are
designed to limit daily sales to a number of shares which is the lessor
of (a) \1/20\ of 1 percent of the number of shares outstanding or (b)
25 percent of the average daily trading volume for the 20 trading days
preceding the trade date. Sales in excess of those amounts will either
be made on the same day, in a block trade or through an investment bank
acting as agent, or deferred to the next trading day. After the first
300 days, these limitations will no longer apply and withdrawals for
sale may be made as otherwise permitted by these rules.
Until the second year after the effective date of the Plan
of Reorganization, if there is an underwritten public offering of
Holding Company Common Stock, the Holding Company will offer each Trust
Beneficiary holding at the time more than 25,000 Trust Interests and
whose cash election has not been fully satisfied, the opportunity to
include a number of Trust Shares equal to all of the Trust
Beneficiary's Trust Interests in the offering.
Holding Company Common Stock that is held in Trust will be sold
through the Purchase and Sale Program on the open market or it may be
purchased for cash directly from the Trust at market prices as of the
date of the sale. If sold to the Holding Company, the fair market value
of Holding Company Common Stock allocated to the Trust Beneficiary will
be determined by averaging the high and low trading prices of the
shares of Holding Company Common Stock as reported on the New York
Stock Exchange on the date of the sale. (Accordingly, the Trust
Beneficiary will receive the same consideration for its shares whether
they are purchased by the Holding Company or by an unrelated party on
the open market.) However, if the sale is being made pursuant to the
termination of the Trust, the fair market value will be determined as
the average of the closing price for a share of Holding Company Common
Stock for the twenty consecutive trading days ending on the third
calendar day immediately prior to the sale.⁹
---------------------------------------------------------------------------

\9\ MetLife represents that the twenty day average formula has
been designed to eliminate any possibility of manipulation and to
prevent single day trading anomalies that might influence a Trust
Beneficiary's proceeds.
---------------------------------------------------------------------------

The Holding Company will pay the commissions and related charges of
all beneficiaries, including Plans, which sell shares of allocable
Holding Company Common Stock through the Purchase and Sale Program.
Further, if the Trust Beneficiary is a Plan, a Plan fiduciary which is
independent of MetLife and its affiliates will determine whether it is
appropriate to sell shares of allocable Holding Company Common Stock to
MetLife or on the open market through the Purchase and Sale Program.
13. The Purchase and Sale Program will also include a ``round-up''
feature. In general, each Trust Beneficiary holding less than 1,000
Trust Interests, which are not equal to a multiple of 100, may instruct
the Trustee to arrange for the purchase of additional shares of Holding
Company Common Stock. Such Stock will be deposited in the Trust and
allocated to the Trust Beneficiary so that the Trust Beneficiary's
Trust Interests will be increased to the next nearest multiple of 100.
Further, each Trust Beneficiary which is allocated a number of Trust
Interests that is equal to a multiple of 100 and less than 1,000 may

[[Page 66207]]

instruct the Trustee to arrange for the purchase of additional shares
of Holding Company Common Stock in lots of 100. The Stock will be
deposited in the Trust and allocated to the Trust Beneficiary so that
the Trust Beneficiary's Trust Interests will be increased to any
multiple of 100 that is less than or equal to 1,000.
A Trust Beneficiary desiring to utilize the round-up feature of the
Purchase and Sale Program, will acquire additional shares of Holding
Company Common Stock for the fair market value of such Stock as
determined on the open market on the date of the acquisition.
14. In addition to the Purchase and Sale Program, beginning on the
first anniversary of the effective date of the demutualization and
lasting until the termination of the Trust, each Trust Beneficiary will
have the right to withdraw shares of Holding Company Common Stock being
held for such Trust Beneficiary under the Trust.\10\ A Trust
Beneficiary will not pay any fees or commissions in connection with the
withdrawal of shares of allocable Holding Company Common Stock. In the
case of a Trust Beneficiary that is a Plan, the decision to withdraw
shares of Holding Company Common Stock from the Trust will be made by a
Plan fiduciary which is independent of MetLife.
---------------------------------------------------------------------------

\10\ MetLife projects that the initial number of shareholders of
the Holding Company may exceed 10 million. Because of this factor,
MetLife has restricted withdrawals of Holding Company Stock by Trust
Beneficiaries during the first year of the Trust's existence in
order to facilitate the efficient and orderly conduct of shareholder
accounts and costs associated with serving a large number of
shareholders. If Trust Beneficiaries were permitted to withdraw
their shares during the first year of the Trust's existence, MetLife
does not believe that these goals would be achieved.
---------------------------------------------------------------------------

15. Under the Plan of Reorganization, regular cash dividends that
are received by the Trust on shares of Holding Company Common Stock
during any six month period ending on June 30 or December 31 will be
distributed to Trust Beneficiaries, in proportion to their Trust
Interests, on the following June 30 or July 31, respectively. The
Holding Company will set a payment date for the dividends so that they
are distributed to the Trust Beneficiaries within 90 days after the
Trustee has received them. Pending these semiannual distributions,
dividends received by the Trust will be invested by the Trustee in
short-term obligations of, or guaranteed by, the United States or any
agency or instrumentality thereof, and in certificates of deposit of
any bank or trust company having a combined capital and surplus of at
least $500 million. If there is a distribution of shares of Holding
Company Stock (i.e., a stock dividend), the additional shares will be
deposited in the Trust and held under the terms of the Trust Agreement.
Similarly, if the Holding Company Common Stock is exchanged for
common stock of another entity in connection with the merger or
consolidation of the Holding Company with another entity, the new
common stock will continue to be held in the Trust in accordance with
the Trust Agreement. In all other cases, if shares of Holding Company
Common Stock are exchanged for securities or other property of an
entity other than MetLife, the Trust will distribute the property
received to the Trust Beneficiaries based on their respective Trust
Interests.
16. Trust Beneficiaries will be able to instruct the Trustee how to
vote shares of Holding Company Common Stock that are held in Trust for
elections of Holding Company directors with competing candidates, any
merger, consolidation or recapitalization of the Holding Company, or
any other event that could result in an exchange of Holding Company
Common Stock for other property which would require a vote under
applicable Delaware law, exchange or NASDAQ rules. The Trustee will
generally vote all shares of Holding Company Common Stock that is held
in Trust in proportion to the instructions received from Trust
Beneficiaries which give such instructions. However, there is one
exception. If the issue is a choice of competing candidates for
director positions, and Trust Beneficiaries representing 20 percent or
fewer of the Trust Interests provide instructions, the Trustee will
vote only the shares of Holding Company Common Stock that are held in
Trust that are equal in number to the number of Trust Interests held by
Trust Beneficiaries which provide instructions. On all routine matters
other than those described above, the Trustee will vote shares of
Holding Company Common Stock that are held in Trust as recommended or
directed by the Holding Company's Board of Directors.
The Holding Company's Board of Directors may terminate the Trust if
the number of shares of Holding Company Common Stock held in Trust
falls below 25 percent of all outstanding shares of Holding Company
Common Stock. In any event, the Trust will be terminated when all
shares of Holding Company Common Stock held in Trust are withdrawn from
such Trust or the number of such shares is less than 10 percent of the
outstanding Holding Company Common Stock. The Trust can also be
terminated sooner by the Holding Company's Board of Directors because
of changes in the law or changes in facts or circumstances relating to
the Trust.
Upon termination of the Trust, a Trust Beneficiary will have the
option of receiving shares of allocable Holding Company Common Stock
in-kind or receiving cash as the result of the sale of such Stock to
the Holding Company, using the twenty day average formula described
above.
To ensure that the assets of the Trust will not be characterized as
``plan assets'' under the Act, the Holding Company may require certain
Trust Beneficiaries that are Plans to be cashed out during the term of
the Trust. If a Plan investor is ``cashed out'' by MetLife, such Trust
Beneficiary will receive the fair market value of allocable shares of
Holding Company Common Stock at the time of such termination.
Alternatively, MetLife will give the Trust Beneficiary the option of
receiving an in-kind distribution of allocable Holding Company Common
Stock.
17. As stated above, State Street has agreed to serve as the
Independent Fiduciary and investment manager for the MetLife Plans in
connection with certain aspects of the MetLife demutualization,
particularly with respect to the vote and potential receipt of
consideration by such Plans. State Street represents that it is
qualified to serve as the Independent Fiduciary and investment manager
for the MetLife Plans. In support of this representation, State Street
asserts that it is one of the largest trust companies in the United
States with over $525 billion in assets under management, a significant
portion of which consists of the assets of plans covered under the
provisions of the Act. State Street also represents that it served as
the Independent Fiduciary for the State Mutual Life Assurance Company
of America during its demutualization. Further, State Street represents
that it has served as a trustee or an independent fiduciary for
numerous retirement plans that acquire or hold employer securities.
Currently, State Street states that it manages over $72 billion in
employer securities held by various retirement plans. In managing such
investments, State Street explains that it has supervised numerous
transactions involving the acquisition, retention and disposition of
employer securities. On a continuing basis, State Street indicates that
it monitors the performance of the employer securities.
State Street represents that it is independent of MetLife and has
no business relationships with MetLife other than--

[[Page 66208]]

Providing various products and services to MetLife,
including (a) custodial services for all of MetLife's and State Street
Research's (a subsidiary of MetLife) mutual funds; (b) participating in
State Street's securities lending program; (c) global cash management;
(d) managing a sweep account; (e) providing credit facilities for
MetLife's Retained Asset Program; and (e) providing foreign exchange
securities to State Street Research. State Street represents that all
revenues and fees associated with MetLife represents less than one
percent of State Street's total revenues.
Offering MetLife's auto, homeowners and umbrella liability
coverage to employees of State Street.
Providing services as an investment manager for defined
contribution fixed income funds. Currently, State Street states that it
manages approximately $9 billion in fixed income securities.
Approximately $650 million of this amount is invested on behalf of
various clients in guaranteed investment contracts issued by MetLife.
However, State Street explains that it derives no revenue from MetLife
for investment in these contracts.
Providing master trust and custody services to various
pension plans, some of which may invest in MetLife guaranteed
investment contracts. State Street explains that it serves only as a
directed trustee/custodian to these plans and has no discretion related
to plan investments. State Street again asserts that it receives no
revenue from investment in these contracts. However, irrespective of
the investment, State Street receives a trust/custody fee based on the
total value of the plan.
State Street also states that MetLife holds, on behalf certain
MetLife customers, approximately 96,000 shares of State Street stock in
various separate accounts. These shares are currently worth
approximately $7 million and represent approximately .005962 of the
total outstanding shares of State Street stock.
Further, State Street asserts that no officer or director or State
Street is an officer or director of MetLife or vice versa and that
MetLife does not have an ownership interest in State Street nor does
State Street have an ownership interest in MetLife.
18. State Street represents that it understands and acknowledges
its ERISA duties, responsibilities and liabilities as a fiduciary with
respect to the MetLife Plans and agrees to undertake such duties.
Specifically, State Street will (a) vote at the special meeting of
Eligible Policyholders to approve the Plan of Reorganization; (b) make
any election, to the extent available under the Plan of Reorganization,
to receive Trust Interests or cash on behalf of the MetLife Plan; (c)
monitor, on behalf of the MetLife Plan, the acquisition and holding of
any Trust Interests received; (d) make determinations on behalf of the
MetLife Plan with respect to the voting and the continued holding of
Trust Interests by such Plan; (e) withdraw shares of Holding Company
Common Stock that is held in Trust which are equivalent to Trust
Interests allocated to a MetLife Plan and disposes of such Trust
Interests (i) not exceeding the limits of section 407(a) of the Act in
a prudent manner; (ii) exceeding the limits of section 407(a) of the
Act within six months of the IPO; and (f) provide the Department with a
complete and detailed final report as it relates to the MetLife Plans
prior to the effective date of the demutualization. Further, MetLife
represents that it has conducted a preliminary review of the Plan of
Reorganization and it sees nothing in the Plan that would preclude the
Department of Labor from proposing the requested exemption.
19. In summary, it is represented that the proposed transactions
will satisfy the statutory criteria for an exemption under section
408(a) of the Act because:
(a) The Plan of Reorganization, which is being implemented pursuant
to stringent procedural and substantive safeguards imposed under New
York law and supervised by the Superintendent, will not require any
ongoing involvement by the Department.
(b) One or more independent fiduciaries of Plans that are MetLife
policyholders will have an opportunity to determine whether to vote to
approve the Plan of Reorganization and will be solely responsible for
all such decisions after receiving full and complete disclosure of the
terms of such reorganization.
(c) The exemption will allow Eligible Policyholders that are Plans
to acquire Trust Interests, cash or policy credits in exchange for
their membership interests in MetLife and neither MetLife nor its
affiliates will exercise any discretion or provide investment advice
with respect to such acquisition.
(d) No Eligible Policyholder will pay any brokerage commissions or
fees in connection with such Eligible Policyholder's receipt of
consideration from MetLife or with respect to the operation of the
Purchase and Sale Program.
(e) The Superintendent will make an independent determination that
the Plan of Reorganization is in the best interest of all MetLife
policyholders, including Plans.
(f) All of MetLife's policyholder obligations will remain in force
and will not be affected by the Plan of Reorganization.
(g) In the case of the MetLife Plans, an Independent Fiduciary will
(1) vote at the special meeting of Eligible Policyholders to approve
the Plan of Reorganization; (2) make any election, to the extent
available under the Plan of Reorganization, to receive Trust Interests
or cash on behalf of the MetLife Plan; (3) monitor, on behalf of the
MetLife Plan, the acquisition and holding of any Trust Interests
received; (4) make determinations on behalf of the MetLife Plan with
respect to the voting and the continued holding of Trust Interests by
such Plan; and (5) dispose, in a prudent manner, allocable shares of
Holding Company Common Stock in respect of Trust Interests which exceed
the limits of section 407(a) of the Act within six months of the IPO.

Notice to Interested Persons

MetLife will give notice of the proposed exemption to Eligible
Policyholders that are Plans within 30 days of the date of publication
of the notice of pendency in the Federal Register. Such notice will
include a copy of the notice of proposed exemption, as published in the
Federal Register, as well as a supplemental statement, as required
pursuant to 29 CFR 2570.43(b)(2), which shall inform interested persons
of their right to comment on the proposed exemption. Therefore,
comments with respect to the proposed exemption will be due 60 days
after the date of publication of the proposed exemption in the Federal
Register.

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

Les Olson Company, Inc. Money Purchase Plan (M/P Plan) and Les
Olson Company, Inc. Profit Sharing Plan (P/S Plan, Collectively;
the Plans) Located in Salt Lake City, Utah

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

Proposed Exemption

[[Page 66209]]

resulting from the application of section 4975 of the Code, by reason
of section 4975(c)(1)(A) through (E) of the Code, shall not apply to
the proposed series of loans (the Loans), originated within a five-year
period, by the Plans to Les Olson Company, Inc. (the Employer), a party
in interest with respect to the Plans, provided that the following
conditions are met:
(1) The total amount of the outstanding Loans does not exceed 20
percent (20%) of the Plans' total assets at any time during the
transactions and each of the Plan's allocable portion of such Loans
does not exceed 20 percent (20%) of such Plan's total assets;
(2) Each Loan entered into by the Plans is made pursuant to the
terms and conditions of the Loan Agreement (the Loan Agreement)
executed by the parties and signed on behalf of the Plans by the Plans'
duly appointed independent, qualified fiduciary (the Independent
Fiduciary);
(3) All terms and conditions of the Loans are at least as favorable
to the Plans as those the Plans could obtain in an arms-length
transaction with an unrelated third party;
(4) Each Loan is: (i) For a maximum term of five years pursuant to
terms and conditions of the Loan Agreement; (ii) fully amortized and
payable in equal monthly installments of principal and interest; (iii)
used exclusively by the Employer to purchase office equipment (the
Equipment) which will be leased by the Employer in the ordinary course
of its business to unrelated parties; and (iv) secured by duly
perfected security interests in the new and used Equipment, and by
certain leases of Equipment (Equipment Leases) where such Equipment
Leases are assigned and pledged as collateral for the Loans, which is
at all times equal to 200% of the outstanding principal balance of such
Loan;
(5) New Equipment is valued for collateralization purposes at 80
percent (80%) of the invoice price paid by the Employer to purchase
such Equipment less taxes and transportation expenses. Used Equipment
and any Equipment Lease pledged as collateral for the Loans is valued
by an independent qualified appraiser;
(6) Prior to the approval of each Loan, the Independent Fiduciary
determines, on behalf of the Plans, that each Loan is prudent and in
the best interests of the Plans, and protective of the Plans and its
participants and beneficiaries;
(7) The Independent Fiduciary conducts a review of all terms and
conditions of the exemption, if granted, and the Loans, including the
applicable interest rate; the sufficiency of the collateral pledged for
each Loan; the financial condition of the Employer; and the compliance
with the 20% limitation for the Plans (and each Plan's) maximum total
Loan amount prior to approving each disbursement under the Loan
Agreement; and
(8) The Independent Fiduciary is authorized to take whatever action
is necessary to protect the Plans' interests throughout the duration of
the exemption, if granted, and throughout the duration of any Loan
entered into under this exemption, if granted.

Temporary Nature of Exemption, if Granted

The exemption, if granted, will be temporary and will expire five
(5) years from the date of publication in the Federal Register of the
final grant of this proposed exemption. Subsequent to the expiration of
the exemption, if granted, the Plans may hold any Loans originating
during this five-year period until the Loans are repaid or otherwise
terminated.

Summary of Facts and Representations

1. The Plans are the M/P Plan and the P/S Plan, which were
established in 1978 and 1979, respectively. As of December 31, 1998,
the Plans had 97 participants and total combined assets of $7,147,199.
The Plans are trusteed by R. Scott Olson, Thomas P. Olson, James R.
Olson and L. Ray Olson, all of whom are owners and officers of the
Employer, which is the Plan sponsor. The Employer is a closely-held
corporation organized under the laws of the State of Utah. The Employer
is engaged in the sale, leasing and maintenance of copiers, fax
machines and digital and analog dictation equipment. The shareholders
of the Employer are all members of the Olson family.
The Employer has facilities in the major metropolitan areas of
Utah, which are Salt Lake City, Ogden, Provo and St. George. The
Employer is in the business of purchasing office equipment and leasing
such equipment to its customers. The Employer generally has not used
outside financing in its operations and has supported itself from the
revenues it generates.
2. The applicant desires that the Plans make a series of Loans to
the Employer over a period of 5 years. The proceeds from the Loans will
be used by the Employer to purchase new office equipment (i.e.,
Equipment). Each Loan will be collateralized by a promissory note and a
security agreement, duly perfected and properly recorded under
applicable state law, which will provide that the Plans have a first
lien on the Equipment. In addition, the Loan may be collateralized by
leases of used Equipment (i.e., Equipment Leases) of the Employer if
necessary to adequately secure such Loans. At all times the collateral
for the Loans will be at least equal to 200% of the outstanding balance
of such Loans. New Equipment will be valued at 80% of the invoice price
paid by the Employer upon purchasing the Equipment, less taxes and
transportation expenses. Used Equipment and Equipment Leases pledged as
collateral for the Loans will be valued in each case by an independent
qualified appraiser.
3. Mr. Jack S. Emery (Mr. Emery) will serve as the independent
qualified appraiser for the Loan transactions described herein.
Mr. Emery is a qualified appraiser of office equipment who is
currently a businessman and an investor in various business ventures.
Mr. Emery has over 25 years of experience in the business of leasing
office equipment. In this regard, Mr. Emery was one of the founders of
the Matrix Funding Corporation (Matrix). Matrix was a major office
equipment leasing business from 1978 until 1998. In 1998, Matrix was
sold and consolidated with 12 other leasing companies to form
Unicapital, an office equipment leasing company whose stock is
publicly-traded on the New York Stock Exchange.
Mr. Emery states that he will appraise all of the collateral used
for the Loans on an annual basis. Mr. Emery states further that during
his 25 year career in the office equipment leasing business he has
valued numerous pieces of office equipment of the same type as the
Equipment which will be used as collateral for the Loans. Mr. Emery
further represents that in his career he has used office equipment for
sale, leasing and financing. Mr. Emery states that he is very familiar
with the useful life of this type of equipment, the rate at which it
depreciates, and the market factors that may affect its value. In
conducting appraisals of the Equipment, Mr. Emery will take into
consideration all the relevant factors relating to the valuation of the
Equipment and the market-place for such Equipment.
4. The maximum length of any Loan will be 5 years under the terms
and conditions of the Loan Agreement. The interest rate on the Loans
will be equal to the prime rate as of the date of closing, as quoted
under ``Money Rates'' in the Wall Street Journal (WSJ Prime) plus two
percentage points, and will be adjusted quarterly. Additionally, the
interest rate of any Loan will be set at a higher rate if such higher
rate represents the prevailing market rate for similar loans as
determined by the

[[Page 66210]]

Independent Fiduciary, as discussed further below. In no event will any
Loan bear an interest rate lower than the WSJ Prime plus two percentage
points.
The outstanding balance of the Loans will never exceed 20% of the
fair market value of the Plans' aggregate assets (or fair market value
of each of the Plan's assets).
5. Mr. Emery will also serve as the Independent Fiduciary for the
Plans with respect to the proposed Loans pursuant to the terms and
conditions of a written independent fiduciary agreement (the I/F
Agreement). Mr. Emery represents that he is qualified to act as an
independent qualified fiduciary with respect to the Loans, and that he
understands his duties and responsibilities under the Act. In this
regard, Mr. Emery states that he has not previously served as an
independent fiduciary for a pension plan. However, Mr. Emery states
that he has been, and will continue to be, advised by a qualified ERISA
attorney regarding his duties and responsibilities as an independent
fiduciary for the Plans. The income received by Mr. Emery from the
Plans, for functioning as the Independent Fiduciary, will not exceed 1%
of his gross annual income. In addition, Mr. Emery represents that he
has no pre-existing relationship with the Employer or with any of the
shareholders of the Employer.
6. Mr. Emery, as the Independent Fiduciary, represents that he will
determine the appropriateness and suitability of each Loan for the
Plan(s) prior to the consummation of the Loan transaction. Mr. Emery
will review the value of the Equipment and the assets pledged to secure
the Loans and confirm the sufficiency of the value of the collateral
for each Loan.
Mr. Emery represents that he will ensure that the Loans are
appropriate investments for the Plans and are in the best interests of
the Plans' participants and beneficiaries, and protective of their
interests. Mr. Emery states further that the terms of the Loans will be
at least as favorable to the Plans as the terms obtainable by the Plans
in an arm's-length transaction with an unrelated party. Mr. Emery also
states that he will enforce the terms of each Loan including, but not
limited to, making demand for timely payments from the Employer,
bringing suit or other appropriate action against the Employer in the
event of default, and monitoring the performance of each Loan and
taking whatever actions are necessary to protect the interests of the
Plans.
7. Mr. Emery, as the Independent Fiduciary, also reserves the right
under the I/F Agreement to hire independent advisors, as necessary to
perform his duties as the Plans' Independent Fiduciary. For example,
Mr. Emery states that it could become necessary in the event of a
foreclosure on the Equipment, for him to require advice from an
independent, experienced and qualified legal counsel on the mechanics
of such foreclosure.
8. With respect to the terms and conditions of the Loans, Wells
Fargo Bank in Salt Lake City, Utah (the Bank), in a letter dated
October 4, 1999, has stated that it would enter into similar loan
transactions with the Employer, provided it determined at the time of
transaction that the Employer would be a creditworthy borrower. The
Bank has examined the terms of the Loans and concluded that such terms
are at least as favorable to the Plans as those terms which would be
obtainable in an arm's-length transaction with an unrelated party.
9. In summary, the applicant represents that the transactions will
meet the statutory criteria of section 408(a) of the Act and section
4975(c)(2) of the Code because:
(a) The interest rates paid to the Plans on the Loans will be at
least as favorable to the Plans as the current market rate of interest
for similar loans;
(b) The Plans' interests with respect to the Loans will be
represented by Mr. Emery, as the Independent Fiduciary, who will
monitor the Loans and the terms and conditions of the exemption, if
granted, and will take all appropriate actions necessary to safeguard
the interests of the Plans and their participants and beneficiaries;
(c) Mr. Emery will determine that each Loan is in the best
interests of the Plans' participants and beneficiaries at the time of
the transaction;
(d) Mr. Emery will review and approve each Loan prior to making any
disbursements of the Loan amount to the Employer;
(e) The Loans will be secured at all times by the Equipment or
Equipment Leases, which will be valued at not less than 200% of the
outstanding principal balance of each Loan; and (f) the aggregate
balance of the outstanding Loans will not exceed 20% of the aggregate
value of the Plans' assets, or 20% of each of the Plan's total assets.

FOR FURTHER INFORMATION CONTACT: Ekaterina A. Uzlyan of the Department
at (202) 219-8883 (This is not a toll-free number).

TMI Systems Design Corporation 401(k) Profit Sharing Plan (the
Plan) Located in Dickinson, North Dakota

[Application No. D-10821]

Proposed Exemption

The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR part
2570, subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption
is granted, the restrictions of sections 406(a), 406(b)(1) and (b)(2)
of the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1)(A) through (E) of the
Code, shall not apply to the proposed sale by the Plan of certain
limited partnership interests (the Interests) to Northern Capital Trust
Company (Northern), the Plan's trustee and a party in interest with
respect to the Plan, for $185,316 in cash, provided the following
conditions are satisfied: (a) the sale is a one-time transaction for
cash; (b) no commissions are charged in connection with the
transaction; (c) the Plan receives not less than the fair market value
of the Interests at the time of the transaction; and (d) the fair
market value of the Interests is determined by a qualified entity
independent of the Plan and of Northern.

Summary of Facts and Representations

1. The Plan is a 401(k) profit sharing plan which is sponsored by
TMI Systems Design Corporation (the Employer) of Dickinson, North
Dakota. The Plan currently has 292 participants and had assets of
$5,109,439 as of August 31, 1999. The trustee of the Plan is Northern,
a trust company located at 203 10th Street North, Fargo, North Dakota.
Northern has investment discretion for the Plan's assets.
2. In August 1993, the Plan purchased the Interests as an
investment from an unrelated party (as discussed below). The Interests
consist of an 8.4674% interest in the Courtyard Limited Partnership
(the Partnership). The Partnership's sole asset is an apartment
building known as ``Courtyard Apartments'' in St. Louis Park,
Minnesota. The Plan paid $108,467.40 for the Interests in the
Partnership. The investment was presented to Northern, as Plan trustee,
by Regan Wieland Investment Co., whose name was later changed to
Goldmark Investment Company (Goldmark), on behalf of the Partnership.
Goldmark and the Partnership are independent of, and

[[Page 66211]]

unrelated to, the Employer and Northern.
3. The Employer would like to permit employee directed investments
and the use of a 24-hour telephone service to accommodate daily
transfers by Plan participants of assets held in their individual
accounts in the Plan. In order to be able to participate in the new
daily valuation and transfer system, the Plan needs to divest itself of
the Interests to ensure proper liquidity for all of the Plan's assets.
In this regard, the applicant represents that it is necessary to
transfer the Interests out of the Plan because the Interests cannot be
valued on a daily basis.
4. Northern as Plan trustee has contacted Goldmark, the Managing
Partner of the Partnership, to inform them that the Plan wishes to sell
its Interests. Mr. Kenneth P. Regan of Goldmark has represented that
the fair market value of the Plan's Interests would be approximately
$177,815, if all of the partners were to sell their Partnership
interests at the present time. However, in the event only one partner,
such as the Plan, were to dispose its Interests, there would be
discounts from the $177,815 value to reflect the lack of marketability
and minority ownership in addition to sales costs. Goldmark estimates
that these expenses would be approximately $8,000. Thus, Goldmark
states that the value of the Plan's Interests, if it were to sell such
Interests alone, would be approximately $170,000. Goldmark based its
valuation of the Partnership on a September 4, 1998 appraisal of the
Courtyard Apartments that was conducted by Everett D. Strand, MAI,
(Strand) of Kramer, Geisler, Strand & Goff, Inc., an independent real
estate appraiser in Minneapolis, Minnesota.
5. The applicant has requested an exemption that would permit the
Plan to sell the Interests to Northern for cash. No commissions or
other fees would be charged in connection with the sale. Northern has
represented that they are willing to pay the Plan $185,316 for the
Interests, an amount which reflects the book value of the Interests
carried by Northern on the Plan's balance sheet as of August 31, 1999
(based upon the net asset value of the Courtyard Apartments as the
Partnership's only asset). This amount is more than the current fair
market value of the Interests (i.e., $170,000) as determined by
Goldmark.
6. In summary, the applicant represents that the proposed
transaction satisfies the criteria contained in section 408(a) of the
Act because: (a) The sale is a one-time transaction for cash; (b) no
commissions or other fees will be charged in connection with the
transaction; (c) the sales price for the Interests will be an amount,
based on the book value of the Interests, which reflects more than the
fair market value of the Interests as determined by Goldmark, the
Managing Partner for the Partnership; and (d) Goldmark based its
valuation of the Partnership on an appraisal of the Courtyard
Apartments performed by Strand, an independent qualified real estate
appraiser.

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

General Information

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

Signed at Washington, DC, this 18th day of November, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, U.S. Department of Labor.
[FR Doc. 99-30560 Filed 11-23-99; 8:45 am]
BILLING CODE 4510-29-P