Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 13519 

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 16th day of 

March, 2007. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E7–5209 Filed 3–21–07; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

[Application No. D–11345] 

Notice of Proposed Individual 

Exemption To Amend and Replace 

Prohibited Transaction Exemption 

(PTE) 2000–34, Involving the Fidelity 

Mutual Life Insurance Company (FML), 

Located in Pittsburgh, PA 

AGENCY: Employee Benefits Security 

Administration, U.S. Department of 

Labor. 

ACTION: Notice of proposed individual 

exemption to amend and replace PTE 

2000–34. 

This document contains a notice of 

pendency before the Department of 

Labor (the Department) of a proposed 

individual exemption which, if granted, 

would amend and replace PTE 2000–34 

(65 FR 41732, July 6, 2000), an 

exemption granted to FML. PTE 2000–

34, relates to (1) the receipt of certain 

stock (Plan Stock) issued by Fidelity 

Insurance Group, Inc. (Group), a wholly 

owned subsidiary of FML, or (2) the 

receipt of plan credits (Plan Credits), by 

or on behalf of a FML mutual member 

(the Mutual Member), which is an 

employee benefit plan (the Plan), other 

than the Employee Pension Plan of 

Fidelity Mutual Life Insurance 

Company, in exchange for such Mutual 

Member’s membership interest (the 

Membership Interest) in FML, in 

accordance with the terms of a plan of 

rehabilitation (the Third Amended 

Plan), approved by the Pennsylvania 

Commonwealth Court (the Court) and 

supervised by both the Court and a 

rehabilitator (the Rehabilitator) 

appointed by the Pennsylvania 

Insurance Commissioner (the 

Commissioner). These transactions are 

described in a notice of proposed 

exemption (65 FR 18359, April 7, 2000), 

which underlies PTE 2000–34. 

If granted, this proposed exemption 

would incorporate by reference many of 

the conditions contained in PTE 2000–

34. The proposed exemption would also 

revise and update certain facts and 

representations set forth in PTE 2000–34 

to include the terms of the Fourth 

Amended Plan of Rehabilitation (the 

Fourth Amended Plan) which 

supersedes the Third Amended Plan 

upon which PTE 2000–34 is based. 

DATES: Effective Date: If granted, this 

proposed exemption would be effective 

as of the date the grant notice is 

published in the Federal Register. 

DATES: Written comments should be 

received by the Department by April 24, 

2007. 

ADDRESSES: All written comments 

should be sent to the Office of 

Exemption Determinations, Employee 

Benefits Security Administration, Room 

N–5700, U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210, Attention: Application No. 

D–11345. Interested persons are also 

invited to submit comments to the 

Department by e-mail to 

uzlyan.katie@dol.gov or by facsimile at 

(202) 219–0204. 

The application pertaining to the 

proposed exemption and the comments 

will be available for public inspection in 

the Public Disclosure Room of the 

Employee Benefits Security 

Administration, U.S. Department of 

Labor, Room N–1513, 200 Constitution 

Avenue, NW., Washington, DC 20210. 

FOR FURTHER INFORMATION CONTACT: 

Ekaterina A. Uzlyan, Office of 

Exemptions Determinations, Employee 

Benefits Security Administration, U.S. 

Department of Labor, telephone (202) 

693–8552. (This is not a toll-free 

number.) 

SUPPLEMENTARY INFORMATION: Notice is 

hereby given of the pendency before the 

Department of a proposed exemption 

that would amend and replace PTE 

2000–34. PTE 2000–34 provides an 

exemption from the prohibited 

transaction restrictions of section 406(a) 

of the Employee Retirement Income 

Security Act of 1974 (the Act) and from 

the sanctions resulting from the 

application of section 4975 of the 

Internal Revenue Code of 1986 (the 

Code), as amended, by reason of section 

4975(c)(1)(A) through (D) of the Code. 

The proposed exemption has been 

requested in an application filed on 

behalf of FML pursuant to 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, 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. Accordingly, this 

proposed exemption is being issued 

solely by the Department. 

I. FML and Its Affiliates 

As noted in the proposed exemption 

underlying PTE 2000–34, FML is a 

mutual life insurance company 

maintaining its principal place of 

business at 250 King of Prussia Road, 

Radnor, Pennsylvania. Prior to certain 

rehabilitation proceedings, FML was 

licensed to issue life insurance policies 

in 47 states and the District of 

Columbia. Because FML has been 

organized as a mutual form of life 

insurance company, it has no 

stockholders. Instead, the owners of its 

contracts (i.e., the Mutual Members) are 

vested with the right to vote and to 

receive an allocable portion of the 

divisible surplus. In addition, the 

Mutual Members have contractual rights 

under their contracts with FML. 

FML owns all of the stock of Group, 

a Pennsylvania-domiciled stock 

corporation. Group, in turn, owns all of 

the stock of Fidelity Life Insurance 

Company (FLIC), a Pennsylvania stock 

life insurance company. 


rwilkins on PROD1PC63 with NOTICES
13520 Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 

1 Group Common Stock and Group Preferred 

Stock are also collectively referred to as ‘‘Plan 

Stock.’’

II. Description of FML and the Earlier 

Plans of Rehabilitation 

During late 1990, the Pennsylvania 

Insurance Department began monitoring 

FML’s operations because of concern 

over FML’s real estate holdings, its 

decline in surplus and unrealized 

capital losses. In response to an increase 

in surrenders of FML insurance 

contracts (the Contracts), and loan 

requests for the period October 26 to 

November 5, 1992, the Pennsylvania 

Insurance Department and FML’s Board 

of Directors petitioned the Court for an 

Order of Rehabilitation. As a result, 

FML was placed in rehabilitation on 

November 6, 1992. Under the Order of 

Rehabilitation, a moratorium was 

imposed on cash distributions, Contract 

surrenders, withdrawals and policy 

loans, except in certain hardship 

situations. The moratorium was 

intended to stop the outflow of cash and 

to afford the Rehabilitator time to 

stabilize FML’s assets. 

FML filed the Original Plan of 

Rehabilitation (the Original Plan), with 

the Court on June 30, 1994. The Original 

Plan and the successor amended plans 

of rehabilitation (i.e., the First Amended 

Plan of Rehabilitation (the First 

Amended Plan) and the Second 

Amended Plan of Rehabilitation (the 

Second Amended Plan)) are described 

in detail in PTE 2000–34 at 18361–

18362. 

III. The Third Amended Plan 

Because the First Amended Plan and 

the Second Amended Plan were never 

implemented due to objections raised by 

a number of parties, FML filed the Third 

Amended Plan with the Court on June 

30, 1998. According to PTE 2000–34, 

the Third Amended Plan provided that 

on the reorganization closing date (the 

Closing Date), FML would transfer its 

insurance operations (including assets 

and insurance-contract obligations) to 

FLIC pursuant to assumption 

reinsurance and transfer agreements. 

FLIC would then continue as a wholly 

owned subsidiary of Group and a 

successor to FML. Prior to the transfer 

to and assumption by FLIC, FML would 

modify the terms of its insurance 

contracts by endorsement. These 

contractual obligations (as modified by 

such endorsements) would remain in 

force after such transfer, with FLIC 

being the obligated insurer. 

A. Sale of Group Stock 

The Third Amended Plan further 

provided for FML to sell approximately 

51% of the outstanding common stock 

of Group (Group Common Stock) to an 

investor (i.e., the Investor) in a private 

placement in exchange for cash. The 

Investor would be an independent 

foreign or domestic entity which 

satisfied certain securities law and 

certain minimum rating or 

capitalization criteria. The Investor 

would be selected according to bid 

procedures drawn up by the 

Commissioner and adopted by the 

Court, and would be subject to Court 

approval. Immediately after the Closing 

Date, the Investor would own slightly 

more than 50% of the Group Common 

Stock. Part of the cash received by FML 

from the sale of Group Common Stock 

to the Investor would be used by FML 

to pay the claims of its creditors. The 

remaining cash would be contributed by 

FML to the capital of FLIC in order to 

fund FLIC’s future operations. 

B. Classes of Claims 

The Third Amended Plan set up 

classes of claims against FML and 

specified the priorities of each class of 

claims, in conformity with the 

Pennsylvania laws applicable to 

insurance company rehabilitations. For 

example, Class 3 covered the claims 

which holders of Contracts had in their 

capacities as Contractholders (and not 

in their capacities as Mutual Members). 

These claims included claims for death 

or annuity proceeds or other payments 

for insured losses under FML insurance 

policies. Contractholders would be 

permitted to surrender their Contracts 

for the full cash surrender value. The 

Contracts of Contractholders not 

exercising this surrender option would 

continue in effect, as modified by 

endorsement by FML, and then assumed 

and reinsured by FLIC. Class 10, the last 

and residual category, covered claims of 

FML’s Mutual Members with respect to 

their Membership Interests. 

C. Mutual Members 

Under the Third Amended Plan, the 

claims of FML’s Mutual Members would 

generally be satisfied on the Closing 

Date by distributing Group Common 

Stock and Group preferred stock (Group 

Preferred Stock) 1 to these Mutual 

Members in exchange for the 

relinquishment of their Membership 

Interests in FML. Group Common Stock 

would have voting rights of one vote per 

share. Group Preferred Stock would 

have a liquidation preference and 

redemption value of $25 per share. The 

holders of Group Preferred Stock would 

be entitled to receive cumulative annual 

dividends, payable quarterly, at the rate 

of 7% per annum of the liquidation 

preference (i.e., $1.75 per share 

annually). Group Preferred Stock would 

generally be non-voting. 

Upon the liquidation of Group, a 

share of Group Preferred Stock would be 

entitled to a distribution preference of 

$25 per share, plus the amount of any 

accrued but unpaid dividends. Group 

could elect to redeem shares of Group 

Preferred Stock at any time after 20 

years from the Closing Date (or the issue 

date, if later) at a redemption price of 

$25 per share plus the amount of any 

accrued but unpaid dividends. Group 

Preferred Stock would be convertible 

into shares of Group Common Stock at 

any time at the option of the holder. 

Of the Plan Stock that would be 

allocated to Mutual Members for Class 

10 claims, 20% would be allocated 

based on voting rights, and 80% would 

be based on the Contract’s contribution 

to FML’s surplus. Each Mutual Member 

receiving Plan Stock would receive 

Group Common Stock and Group 

Preferred Stock in the ratio of 3 common 

shares to 2.8 preferred shares. 

Under the Third Amended Plan, a 

special distribution rule would apply to 

Mutual Members who held insurance 

contracts in connection with (a) 

retirement plans or arrangements 

described in sections 403(a) or 408 of 

the Code or (b) non-trusteed retirement 

plans described in Code section 401(a) 

(Non-Trusteed Tax-Qualified Retirement 

Funding Contracts). Mutual Members 

holding Non-Trusteed Tax-Qualified 

Retirement Funding Contracts would 

not receive Plan Stock in exchange for 

the relinquishment of their Membership 

Interests. These Mutual Members would 

instead be entitled to receive Plan 

Credits having a value equal in value to 

the Plan Stock they would otherwise 

have received. This special rule was 

adopted to take into account the legal 

impediments which frequently exist on 

the ability of holders of Non-Trusteed 

Tax-Qualified Retirement Funding 

Contracts to hold corporate stock. 

The Investor would be required to 

purchase Plan Stock which would 

otherwise have been allocated to NonTrusteed Tax-Qualified Retirement 

Funding Contracts. The proceeds of 

such sale would be contributed to the 

capital of FLIC. Mutual Members 

holding Non-Trusteed Tax-Qualified 

Retirement Funding Contracts would 

have the right to disclaim the Plan 

Credits which they would otherwise 

receive in exchange for their 

Membership Interests. Any Mutual 

Member which is a Plan or other 

member would have the right to 

disclaim its interest in the Plan Stock 

which it would otherwise receive in 

exchange for its Membership Interest. 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 13521 

2For purposes of this proposed exemption, the 

Asset Acquisition Alternative and the Stock 

Acquisition Alternative are together referred to as 

‘‘the Alternatives.’’

D. Liquidation of FML; Continuation of 

Group and FLIC 

Under the Third Amended Plan, FML 

would liquidate and dissolve shortly 

after the Closing Date. Any Group 

Common Stock and Group Preferred 

Stock which FML would continue to 

hold after the Closing Date would be 

returned to Group for cancellation. FLIC 

would then continue in existence as a 

wholly owned subsidiary of Group, and 

would continue FML’s business in a 

substantially unchanged manner by 

receiving premiums, paying claims, and 

generally administering the FML 

contracts which FLIC had assumed. 

E. Sale of Plan Stock; Commission-Free 

Purchase and Sales Program 

Under the Third Amended Plan, 

Mutual Members would not be 

restricted from selling or transferring the 

Plan Stock received, including 

converting the Group Preferred Stock to 

Group Common Stock, although Group, 

its affiliates and the Investor would be 

subject to restrictions on purchasing or 

redeeming such Stock. Additionally, 

Group would not be precluded from 

establishing a commission-free purchase 

or sales program to allow Mutual 

Members who received a small number 

of shares of Plan Stock the opportunity 

to round-up those shares or sell such 

shares for a temporary period without 

the payment or sales commission. The 

Plan Stock would be publicly-traded 

and listed on the Nasdaq, or the New 

York or American Stock Exchange. 

F. Protections for Plan Mutual Members 

PTE 2000–34 provided certain 

protections for Mutual Members that are 

Plans. In this regard: 

• The Third Amended Plan would be 

approved by the Court and implemented 

in accordance with procedural and 

substantive safeguards that are imposed 

under Pennsylvania law and would be 

subject to review and/or supervision by 

the Commissioner and the Rehabilitator. 

• The Court would determine 

whether the Third Amended Plan 

properly conserved and equitably 

administered the assets of FML in the 

interests of investors, the public and 

others in accordance with the 

legislatively-stated purpose of 

protecting the interests of the insured, 

creditors and the public; and (2) 

equitably apportioned any unavoidable 

loss through improved methods for 

rehabilitating FML. 

• Each Mutual Member would have 

an opportunity to comment on the Third 

Amended Plan at hearings held by the 

Court after full written disclosure of the 

terms of the Third Amended Plan is 

given to such Mutual Member by FML. 

• Participation by all Mutual 

Members in the Third Amended Plan, if 

approved by the Court, would be 

mandatory, although Mutual Members 

could disclaim Plan Stock. 

• The decision by a Mutual Member, 

which was a Plan, to receive or disclaim 

Plan Stock or Plan Credits allocated to 

such Mutual Member would be made by 

one or more independent fiduciaries of 

such plan and not by FML, Group or 

FLIC. Consequently, neither FML nor 

any of its affiliates could exercise 

investment discretion nor render 

‘‘investment advice’’ within the 

meaning of 29 CFR 2510.3–21(c) with 

respect to an independent plan 

fiduciary’s decision to receive or 

disclaim Plan Stock or Plan Credits. 

• Twenty percent (20%) of the Plan 

Stock would be allocated to a Mutual 

Member based upon voting rights and 

eighty percent (80%) would be allocated 

to a Mutual Member on the basis of the 

contribution of the Mutual Member’s 

insurance or annuity Contract to the 

surplus of FML. The contribution to 

FML’s surplus is the actuarial 

calculation of both the historical and 

expected future profit contribution of 

the Contracts that have contributed to 

the surplus (i.e., the net earnings) of 

FML. The actuarial formulas would be 

approved by the Court and the 

Commissioner. 

• The value of Plan Stock or Plan 

Credits that would be received by a 

Mutual Member would reflect the 

aggregate price paid by the Investor 

Group for Group Common Stock and for 

Plan Credits. 

• All Mutual Members that were 

Plans would participate in the 

transactions on the same basis as all 

other Mutual Members that are not 

Plans. 

• No Mutual Member would pay any 

brokerage commissions or fees in 

connection with the receipt of Plan 

Stock or Plan Credits. 

• The Third Amended Plan would 

not affect the rights of a Contractholder, 

which is a Mutual Member. In this 

regard, FML’s obligations to a 

Contractholder would be discharged 

and terminated upon their endorsement 

and assumption by FLIC, thereby 

making FLIC liable for the obligations 

under such Contract. 

IV. The Fourth Amended Plan 

Subsequent to the granting of PTE 

2000–34, FML informed the Department 

of certain modifications to the Summary 

of Facts and Representations set forth in 

PTE 2000–34. Specifically, on 

November 23, 2005, the Fourth 

Amended Plan was submitted to the 

Court. The Fourth Amended Plan 

supersedes the Third Amended Plan. 

FML represents that it was not possible 

to implement the Third Amended Plan 

because a qualified bidder could not be 

obtained. Consequently, FML explains 

that in November 2005, the Fourth 

Amended Plan was introduced and 

submitted to the Court. 

The Fourth Amended Plan calls for 

the Commissioner to adopt one of the 

following reorganization alternatives for 

FML: (a) Cause FML to sell its insurance 

operations, assets, and insurancecontract obligations to an Investor who 

is an asset purchaser (the Asset 

Purchaser) in exchange for cash (the 

Asset Acquisition Alternative); or (b) 

convert FML from a mutual company to 

a stock company, and cause FML to sell 

its stock to an Investor who is a stock 

purchaser (the Stock Purchaser) in 

exchange for Investor Stock and/or cash 

(the Stock Acquisition Alternative).2

The Rehabilitator will conduct a 

competitive bidding process in 

accordance with the bid procedures set 

forth in the Fourth Amended Plan. The 

Rehabilitator will have the right to reject 

any and all bids, and will have no 

authority to accept a bid without the 

prior approval of the proposed 

transaction by the Pennsylvania 

Insurance Department and by the Court 

after petition, notice, and hearing. 

Bidders may bid for either the 

purchase of all of the stock of FML or 

the assumption of all of FML’s 

insurance contracts. If an assuming 

insurer is the successful bidder, selected 

assets of FML will be transferred to the 

Asset Purchaser in exchange for its 

assumption and reinsurance of FML’s 

obligations under all of FML’s insurance 

Contracts. If a purchaser of FML’s stock 

is the successful bidder, FML will be 

demutualized and converted into a 

stock corporation, and FML’s stock will 

be sold to such Stock Purchaser. 

As under the Third Amended Plan, 

cash obtained by FML will be used to 

pay the claims of FML’s creditors. In 

addition, FML’s Mutual Members will 

receive cash or a combination of cash 

and Investor Stock (or, in some cases, 

Plan Credits). 

A. The Asset Acquisition Alternative 

Under the Asset Acquisition 

Alternative, the Asset Purchaser will 

assume all of FML’s insurance contracts 

on the Closing Date. These contractual 

obligations (as modified) will remain in 

force after such transfer, with the Asset 

Purchaser being the obligated insurer. 


rwilkins on PROD1PC63 with NOTICES
13522 Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 

3The applicant represents that neither Group nor 

FLIC has any preferred stock outstanding. The 

Fourth Amended Plan also does not propose to use 

any preferred stock. 

In addition, before the Closing Date, 

each FML Contract in force will be 

modified by endorsement to remove 

provisions for voting rights, 

participation in divisible surplus 

through dividends, and to provide for 

continued compliance with various tax 

provisions. Moreover, each Contract 

having a cash value will be modified to 

provide that the Contract will be eligible 

annually, in lieu of dividends, for 

certain contractual charges, payments 

and credits which are not guaranteed by 

the terms of the contract (the NonGuaranteed Elements). The 

Contractholder may elect to apply these 

Non-Guaranteed Elements in 

accordance with the same options as 

were available for the application of 

dividends before the contract was 

modified. No Contract modifications 

will reduce any benefits and guarantees. 

The cash value, the Non-Guaranteed 

Element accumulation account, and 

policy loan accounts of each Contract 

will be the same after the Closing Date 

as they were before the Closing Date. 

Additionally, the initial post-closing 

Non-Guaranteed Elements will be 

determined by the Rehabilitator and 

will be subject to notice, hearing, and 

Court approval. 

Further, the Asset Purchaser will pay 

FML a ceding commission determined 

by competitive bidding in accordance 

with the bidding procedures. The 

bidding procedure will be subject to 

approval by the Court. 

Also under the Asset Acquisition 

Alternative, FML will transfer to the 

Asset Purchaser the assets of its 

insurance operations and other assets 

having a total value equal to the net 

FML liabilities assumed by the Asset 

Purchaser (i.e., statutory reserves), less 

the agreed-upon purchase price as 

determined through the bidding 

procedures (i.e., the ceding 

commission). The transferred assets will 

be free and clear of all liens and claims 

arising from pre-closing to claims 

against FML, but will be subject to the 

obligations imposed by the assumed 

Contracts and ‘‘the Assumption 

Reinsurance Agreement.’’ Additionally, 

FML will transfer all of the outstanding 

common stock of FLIC to the Asset 

Purchaser in the event such assuming 

insurer submits a bid to purchase the 

stock of FLIC that is selected by the 

Rehabilitator and approved by the 

Court. 

Further, holders of FML Contracts 

will have the right to reject the transfer 

of their Contracts to the Asset 

Purchaser. Each rejected contract will be 

cancelled by FML before the Closing 

Date, and the Contractholder will 

receive the cash surrender value of the 

Contract (if any). The Asset Purchaser 

will have no liability with respect to any 

rejected contract. The rights of 

Contractholders in their capacities as 

Mutual Members of FML will not be 

affected by any such Contract rejection. 

As noted below, as soon as practicable 

after the Closing Date, FML will transfer 

to Mutual Members (including Mutual 

Members that are Plans), consideration 

in the form of cash or Plan Credits, in 

exchange for such Mutual Member’s 

Membership Interest in FML. 

B. The Stock Acquisition Alternative 

Under the Stock Acquisition 

Alternative, FML will demutualize and 

convert to a stock corporation effective 

as of the Closing Date. All of FML’s 

assets will vest in the stock corporation, 

and the Stock Purchaser will assume all 

of FML’s liabilities which are not 

released, discharged, or otherwise 

retained under the Fourth Amended 

Plan. Moreover, FML’s Contracts will be 

endorsed as under the Asset Acquisition 

Alternative. 

Also under the Stock Acquisition 

Alternative, all of FML’s postconversion (Post-Conversion) issued 

and outstanding common stock 3 will be 

transferred to the Stock Purchaser on 

the Closing Date, in exchange for the 

consideration determined by 

competitive bidding, in accordance with 

the bidding procedures, and subject to 

approval by the Court. Such 

consideration may consist of (a) cash or 

(b) a combination of cash and common 

stock issued by the Stock Purchaser or 

the parent of the Stock Purchaser 

(Investor Stock), or a combination of 

both. Alternatively, the Stock Purchaser 

may acquire all of FML’s stock pursuant 

to a merger for (a) cash or (b) a 

combination of cash and Investor Stock. 

Investor Stock forming part of the 

consideration for FML’s stock will be 

listed on either the Nasdaq or the New 

York Stock Exchange. The Investor 

Stock will also be registered under the 

Securities Exchange Act of 1934, and it 

will not be subject to transfer 

restrictions (except as may otherwise be 

required under relevant securities laws). 

As another option, pursuant to a 

registration exemption under the 

Securities Exchange Act of 1933, the 

Stock Purchaser may use as 

consideration, its shares of unregistered 

common stock if such Stock Purchaser 

obtains an SEC ‘‘no action’’ letter or a 

legal opinion as to the applicability of 

such SEC exemption. 

If Investor Stock forms part of the 

consideration for FML’s shares, the 

Stock Purchaser will be required to 

establish a ‘‘round lot’’ program under 

which each FML Mutual Member who 

receives fewer than 100 shares of 

Investor Stock under the Fourth 

Amended Plan may either (a) purchase 

additional shares of Investor Stock to 

increase his holdings to a ‘‘round lot’’

consisting of 100 shares, or (b) sell all 

of his or her shares of Investor Stock, 

without paying brokerage commissions 

or administrative or similar expenses. 

At or before Closing, the Rehabilitator 

and the Stock Purchaser will determine 

how many shares of Investor Stock are 

allocable to Mutual Members which are 

entitled to receive Plan Credits instead 

of Investor Stock. Instead of transferring 

these shares as part of the consideration, 

the Stock Purchaser will pay to FML the 

market value of such shares as of the 

Closing Date, and FML will apply this 

amount as Plan Credits. 

C. FML Creditors 

Part of the cash received by FML from 

either the Asset Purchaser or the Stock 

Purchaser will be used to pay the claims 

of FML’s creditors in full, together with 

interest at the rate of 6%. In addition, 

the Fourth Amended Plan sets up ten 

classes of claims against FML and 

specifies the priorities of each class of 

claims, in conformity with the 

Pennsylvania laws applicable to 

insurance company rehabilitations. 

These classes, priorities, and payment 

provisions are substantially identical to 

those included in the Third Amended 

Plan. In this regard, Mutual Members’

claims for their Mutual Membership 

Interests in FML comprise class 10 

claims. 

D. Mutual Members 

The Fourth Amended Plan provides 

that in exchange for the mandatory 

relinquishment of their Mutual 

Membership Interests, Mutual Members 

of FML will be entitled to receive FML’s 

net assets (including cash or a 

combination of cash and Investor Stock) 

remaining after the satisfaction of all 

claims in Classes 1 through 9. Of the 

FML net assets allocated to Mutual 

Members for Class 10 claims, 20% will 

be allocated based on voting rights, and 

80% will be based on the Contract’s 

contribution to FML’s surplus. 

As under the Third Amended Plan, 

the Fourth Amended Plan provides for 

a special distribution rule. This special 

distribution rule will apply to Mutual 

Members, under both Alternatives, who 

hold Contracts in connection with NonTrusteed Tax-Qualified Retirement 

Funding Contracts. These Mutual 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 13523 

Members will not receive any cash or 

Investor Stock in exchange for the 

relinquishment of their Membership 

Interests with respect to such Contracts, 

but will instead receive Plan Credits 

having a value equal to the cash or 

combination of cash and Investor Stock 

they would otherwise have received. 

Under the Stock Acquisition 

Alternative, the Stock Purchaser will be 

required to pay cash to this group of 

Mutual Members in lieu of Investor 

Stock, which will be replaced by Plan 

Credits. 

Each Mutual Member will have the 

right to disclaim its interest in the cash 

or combination of cash and Investor 

Stock which such Mutual Member 

would otherwise receive in exchange for 

its Membership Interest. 

E. Liquidation or Continuation of FML 

Effective as of the Closing Date, FML 

will generally be discharged from any 

liability with respect to any and all of 

its liabilities claims and, obligations. 

Under the Asset Acquisition 

Alternative, FML will be liquidated and 

dissolved after all endorsed insurance 

contracts are assumed by the Asset 

Purchaser. Under the Stock Purchase 

Alternative, FML will continue in 

existence as an operating stock 

insurance company owned by the Stock 

Purchaser. 

F. Protections for Plan Mutual Members 

Under the Fourth Amended Plan, all 

Mutual Members that are Plans will be 

subject to the similar protections as 

those provided under the Third 

Amended Plan. In this regard: 

• The Fourth Amended Plan will be 

approved by the Court, implemented in 

accordance with procedural and 

substantive safeguards that are imposed 

under Pennsylvania law and be subject 

to review and/or supervision by the 

Commissioner (both in her own capacity 

and in her capacity as Rehabilitator of 

FML). The Court will determine 

whether the Fourth Amended Plan (1) 

properly conserves and equitably 

administers the assets of FML, in the 

interests of investors, the public, and 

others in accordance with the 

legislatively-stated purpose of 

protecting the interests of the insured, 

creditors, and the public; and (2) 

equitably apportions any unavoidable 

loss through imposed methods for 

rehabilitating FML. The Court will also 

retain exclusive jurisdiction over the 

implementation, interpretation, and 

enforcement of the Fourth Amended 

Plan. 

• The Fourth Amended Plan will 

provide for either: (1) the transfer of 

FML’s assets to an independent Asset 

Purchaser in exchange for cash; or (2) 

the conversion of FML from a mutual 

life insurance company into a stock life 

insurance company and either (A) the 

transfer of the stock of Post-Conversion 

FML to the independent Stock 

Purchaser or (B) the merger of PostConversion FML into the Stock 

Purchaser or an affiliate of the Stock 

Purchaser. 

• Each Mutual Member will have an 

opportunity to comment on the Fourth 

Amended Plan at hearings held by the 

Court after full written disclosure of the 

terms of the Plan will be given to such 

Mutual Member by FML. 

• Participation by all Mutual 

Members in the Fourth Amended Plan, 

if approved by the Court, will be 

mandatory, although Mutual Members 

may disclaim the Investor Stock, cash, 

and/or Plan Credits which they would 

otherwise receive. 

• The decision by a Mutual Member 

which is a Plan to receive or disclaim 

Investor Stock, cash, and/or Plan Credits 

allocated to such Mutual Member will 

be made by one or more independent 

fiduciaries of such Plan, and not by 

FML or any affiliate of FML. 

Consequently, neither FML nor any of 

its affiliates will exercise discretion nor 

render ‘‘investment advice’’ within the 

meaning of 29 CFR 2510.3–21(c) with 

respect to an independent Plan 

fiduciary’s decision to receive or 

disclaim Investor Stock, cash, and/or 

Plan Credits. 

• Twenty percent (20%) of the net 

assets which will be available for 

distribution to the Mutual Members 

would be allocated among the Mutual 

Members based upon voting rights, and 

eighty percent (80%) of such net assets 

will be allocated among the Mutual 

Members on the basis of the 

contribution of the Mutual Members’

respective insurance or annuity 

contracts to the surplus of FML. The 

contribution to FML’s surplus will be 

based on the actuarial calculation of 

both the historical and expected future 

profit contribution of the Contracts that 

have contributed to the surplus (i.e., the 

net earnings) of FML. The actuarial 

formulas will be approved by the Court 

and the Commissioner. 

• The amount and value of the 

Investor Stock, cash, and/or Plan Credits 

received by a Mutual Member will 

reflect the aggregate consideration paid 

by the Investor. 

• All Mutual Members that are Plans 

will participate in the transactions on 

the same basis as all other Mutual 

Members that are not Plans, except that 

Mutual Members which hold NonTrusteed Tax-Qualified Retirement 

Funding Contracts will receive Plan 

Credits in exchange for their 

membership interests, rather than cash 

or cash and Investor Stock. 

• No Mutual Member will pay any 

brokerage commissions or fees in 

connection with the receipt of Investor 

Stock, cash, and/or Plan Credits. 

• Mutual Members will not be 

restricted from selling or otherwise 

transferring any Investor Stock which 

they receive. If Investor Stock comprises 

part of the consideration paid by the 

Investor, the Investor will be required to 

establish a commission-free purchase or 

sales program which would allow 

Mutual Members who receive a small 

number of shares of Investor Stock to 

‘‘round up’’ such shares or sell such 

shares free of sales commissions. 

• The Fourth Amended Plan will not 

adversely affect the rights of a 

Contractholder of the company which is 

a Mutual Member. In this regard, (1) if 

Post-Conversion FML is acquired by the 

Stock Purchaser, the obligations of FML 

to a Contractholder are retained by PostConversion FML, and (2) if FML’s assets 

are purchased by the Asset Purchaser, 

FML’s obligations to a Contractholder 

will be discharged and terminated upon 

their endorsement, and assumed by the 

Asset Purchaser, thereby making the 

Asset Purchaser liable for the 

obligations under the Contract. 

G. Status of the Fourth Amended Plan 

FML represents that the Fourth 

Amended Plan has been submitted to 

the Court. Written objections to the 

Fourth Amended Plan were due in April 

2006 and no objections were received. 

By order dated August 29, 2006, the 

Court gave its preliminary approval to 

the Fourth Amended Plan which would 

allow the Rehabilitator to sell FML 

through a competitive bid process, with 

final approval to follow the selection of 

the winning bidder. 

The competitive bid process has been 

initiated and the bidding was closed in 

February 2007. FML states that it is now 

very likely that its proposed acquisition 

under the Fourth Amended Plan will 

take the form of the Asset Acquisition 

Alternative. In addition, FML 

anticipates the successful bidder will be 

selected before the end of March 2007. 

V. Request for Individual Exemptive 

Relief 

FML requests an individual 

exemption from the Department that 

would apply to both Alternatives under 

the Fourth Amended Plan. Because FML 

is a service provider to Mutual Members 

that are Plans, FML is also a party in 

interest with respect to such plans 

under section 3(14)(B) of the Act. In 

addition, the successful bidder under 


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13524 Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 

4Although the Asset Purchaser will have an 

opportunity to purchase the common stock of FLIC, 

the Asset Purchaser will not become a direct or 

indirect owner of FML or a party in interest with 

respect to Mutual Members of FML that are Plans. 

the Stock Acquisition Alternative would 

become a party in interest with respect 

to Mutual Members that are Plans under 

section 3(14)(H) of the Act. This is 

because the Stock Purchaser would own 

directly 100% of the common stock of 

FML.4 Thus, in tendering cash, or a 

combination of cash and Investor Stock, 

or Plan Credits to Mutual Members that 

are Plans in exchange for their Mutual 

Membership Interests, FML and/or the 

Stock Purchaser would be engaging in a 

prohibited transaction in violation of 

section 406(a) of the Act. In this respect, 

the proposed transactions under the 

Fourth Amended Plan constitute 

material changes from the Third 

Amended Plan and necessitate an 

amendment to PTE 2000–34. 

Accordingly, the Department is 

amending and replacing PTE 2000–34 to 

reflect the implementation of the 

Alternatives under the Fourth Amended 

Plan. All references to the Third 

Amended Plan in the operative language 

of PTE 2000–34 have been replaced 

with references to the Fourth Amended 

Plan. 

If granted, the amendment would be 

effective on the date the final 

amendment is published in the Federal 

Register. The revised operative language 

and definitions, with emphasis added to 

show the modifications, appear as 

follows: 

SECTION I. COVERED TRANSACTIONS 

If the exemption is granted, the restrictions 

of section 406(a) of the Act and the sanctions 

resulting from the application of section 4975 

of the Code, by reason of section 

4975(c)(1)(A) through (D) of the Code, shall 

not apply to (1) the receipt of certain stock 

(the Investor Stock) issued by the corporation 

(the Stock Purchaser) which acquires PostConversion Fidelity Mutual Life Insurance 

Company (Post-Conversion FML) by stock 

purchase or by merger, (2) the receipt of plan 

credits (the Plan Credits), or (3) the receipt 

of cash, by or on behalf of a mutual member 

(the Mutual Member) of FML which is an 

employee benefit plan (a Plan), other than an 

in house Plan sponsored by FML and/or its 

affiliates, in exchange for such Mutual 

Member’s membership interest (the 

Membership Interest) in FML, in accordance 

with the terms of a plan of rehabilitation of 

FML (the Fourth Amended Plan) approved 

by the Pennsylvania Commonwealth Court 

(the Court) and supervised by both the Court 

and the Pennsylvania Insurance 

Commissioner (the Commissioner), who is 

acting as the rehabilitator of FML (the 

Rehabilitator). 

This proposed exemption is subject to the 

following conditions set forth below in 

Section II. 

SECTION II. GENERAL CONDITIONS 

(a) The Fourth Amended Plan is approved 

by the Court, implemented in accordance 

with procedural and substantive safeguards 

that are imposed under Pennsylvania law 

and is subject to review and/or supervision 

by the Commissioner (both in her own 

capacity and in her capacity as Rehabilitator 

of FML). The Court determines whether the 

Fourth Amended Plan—

(1) Properly conserves and equitably 

administers the assets of FML, in the 

interests of investors, the public, and others 

in accordance with the legislatively-stated 

purpose of protecting the interests of the 

insured, creditors, and the public; and 

(2) Equitably apportions any unavoidable 

loss through imposed methods for 

rehabilitating FML.The Court retains 

exclusive jurisdiction over the 

implementation, interpretation, and 

enforcement of the Fourth Amended Plan. 

(b) The Fourth Amended Plan provides for 

either: 

(1) The transfer of FML’s assets to an 

independent purchaser (the Asset Purchaser) 

in exchange for cash; or 

(2) The conversion of FML from a mutual 

life insurance company into a stock life 

insurance company and either (A) the 

transfer of the stock of Post-Conversion FML 

to the independent Stock Purchaser or (B) the 

merger of Post-Conversion FML into the 

independent Stock Purchaser or an affiliate 

of the Stock Purchaser. 

(c) Each Mutual Member has an 

opportunity to comment on the Fourth 

Amended Plan hearings held by the Court 

after full written disclosure of the terms of 

the Plan is given to such Mutual Member by 

FML. 

(d) Participation by all Mutual Members in 

the Fourth Amended Plan, if approved by the 

Court, is mandatory, although Mutual 

Members may disclaim the Investor Stock, 

cash, and/or Plan Credits which they would 

otherwise receive. 

(e) The decision by a Mutual Member 

which is a Plan to receive or disclaim 

Investor Stock, cash, and/or Plan Credits 

allocated to such Mutual Member is made by 

one or more independent fiduciaries of such 

Plan, and not by FML or any affiliate of FML. 

Consequently, neither FML nor any of its 

affiliates will exercise discretion nor render 

‘‘investment advice’’ within the meaning of 

29 CFR 2510.3–21(c) with respect to an 

independent Plan fiduciary’s decision to 

receive or disclaim Investor Stock, cash, and/ 

or Plan Credits. 

(f) Twenty percent (20%) of the net assets 

which are available for distribution to the 

Mutual Members is allocated among the 

Mutual Members based upon voting rights, 

and eighty percent (80%) of such net assets 

is allocated among the Mutual Members on 

the basis of the contribution of the Mutual 

Members’ respective insurance or annuity 

contracts (the Contracts) to the surplus of 

FML. The contribution to FML’s surplus is 

the actuarial calculation of both the historical 

and expected future profit contribution of the 

Contracts that have contributed to the 

surplus (i.e., the net earnings) of FML. The 

actuarial formulas are approved by the Court 

and the Commissioner. 

(g) The amount and value of the Investor 

Stock, cash, and/or Plan Credits received by 

a Mutual Member reflect the aggregate 

consideration paid by the Stock Purchaser or 

Asset Purchaser, which is independent of 

FML. 

(h) All Mutual Members that are Plans 

participate in the transactions on the same 

basis as all other Mutual Members that are 

not Plans, except that Mutual Members 

which hold Non-Trusteed Tax-Qualified 

Retirement Funding Contracts receive Plan 

Credits in exchange for their membership 

interests, rather than cash and/or Investor 

Stock. 

(i) No Mutual Member pays any brokerage 

commissions or fees in connection with the 

receipt of Investor Stock, cash, and/or Plan 

Credits. 

(j) Mutual Members are not restricted from 

selling or otherwise transferring any Investor 

Stock which they receive. If Investor Stock 

comprises part of the consideration paid by 

the Stock Purchaser, the Stock Purchaser is 

required to establish a commission-free 

purchase or sales program which will allow 

Mutual Members who receive a small number 

of shares of Investor Stock to ‘‘round up’’

such shares or sell such shares free of sales 

commissions. 

(k) The Fourth Amended Plan does not 

adversely affect the rights of a contractholder 

of the company (the Contractholder) which is 

a Mutual Member. In this regard, 

(1) If Post-Conversion FML is acquired by 

the Stock Purchaser, the obligations of FML 

to a Contractholder are retained by PostConversion FML; and 

(2) If FML’s assets are purchased by the 

Asset Purchaser, FML’s obligations to a 

Contractholder are discharged and 

terminated upon their endorsement and 

assumption by the Asset Purchaser, thereby 

making the Asset Purchaser liable for the 

obligations under the Contract. 

SECTION III. DEFINITIONS 

For purposes of this proposed exemption: 

(a) An ‘‘affiliate’’ of FML, Post-Conversion 

FML, the Stock Purchaser, or the Asset 

Purchaser includes—

(1) Any person directly or indirectly 

through one or more intermediaries, 

controlling, controlled by, or under common 

control with such entity. (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.) or 

(2) Any officer, director or partner in such 

person. 

(b) The term ‘‘Asset Purchaser’’ means the 

person (e.g., individual, corporation, 

partnership, joint venture, etc.) selected by 

the Rehabilitator and approved by the Court 

to purchase FML’s assets under an 

assumption reinsurance agreement. 

(c) The term ‘‘FML’’ means the Fidelity 

Mutual Life Insurance Company (In 

Rehabilitation) and any affiliate of FML, as 

defined in paragraph (a) of this Section III, 

as they exist before FML is converted from a 

mutual life insurance company into a stock 

life insurance company. 

(d) The term ‘‘Investor Stock’’ means the 

common stock of the Stock Purchaser that 

will be allocated to Mutual Members if PostVerDate Aug<31>2005 16:11 Mar 21, 2007 Jkt 211001 PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 E:\FR\FM\22MRN1.SGM 22MRN1

rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 13525 

Conversion FML is acquired by the Stock 

Purchaser in exchange for consideration that 

includes common stock of the Stock 

Purchaser. 

(e) The term ‘‘Mutual Member’’ means a 

Contractholder whose name appears on 

FML’s records as an owner of an FML 

Contract on the Record Date of the Fourth 

Amended Plan. 

(f) The term ‘‘Non-Trusteed Tax-Qualified 

Retirement Funding Contracts’’ means FML 

insurance contracts which are held in 

connection with retirement plans or 

arrangements described in section 403(a) or 

408 of the Code or non-trusteed retirement 

plans described in section 401(a) of the Code. 

(g) The term ‘‘Plan Credit’’ means either—

(1) Additional paid up insurance for a 

traditional life policy; or 

(2) Credits to the account values for 

Contracts that are not traditional (such as a 

flexible premium policy). 

Under FML’s Fourth Amended Plan, Plan 

Credits are to be allocated to Mutual 

Members who hold Non-Trusteed TaxQualified Retirement Funding Contracts, in 

lieu of Investor Stock and/or cash. 

(h) The term ‘‘Post-Conversion FML’’

means the Fidelity Mutual Life Insurance 

Company (In Rehabilitation) and any affiliate 

of FML, as defined in paragraph (a) of this 

Section III, as they exist after FML is 

converted from a mutual life insurance 

company into a stock life insurance 

company. 

(i) The term ‘‘Stock Purchaser’’ means the 

person (e.g., individual, corporation, 

partnership, joint venture, etc.) selected by 

the Rehabilitator and approved by the Court 

to purchase the Post-Conversion FML, or to 

acquire Post-Conversion FML by merger, 

under a stock purchase agreement or merger 

agreement. 

Notice to Interested Persons 

Notice of the proposed exemption 

will be provided by FML to Mutual 

Members which are Plans within 3 days 

of the publication of the notice of the 

proposed exemption in the Federal 

Register. Such notice will be provided 

to interested persons by first class mail 

and will include a copy of the notice of 

proposed exemption, as published in 

the Federal Register, as well as a 

supplemental statement, as required 

pursuant to 29 CFR 2570.43(b)(2), which 

shall inform interested persons of their 

right to comment on the proposed 

exemption. Comments with respect to 

the notice of proposed exemption are 

due within 33 days after the date of 

publication of this pendency notice in 

the Federal Register. 

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 section 4975(c)(2) 

of the Code does not relieve a fiduciary 

or other party in interest or disqualified 

person from certain other provisions of 

the Act and 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 require, among other things, a 

fiduciary to discharge his or her 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 

requirements of section 401(a) of the 

Code that the plan operate for the 

exclusive benefit of the employees of 

the employer maintaining the plan and 

their beneficiaries; 

(2) The proposed exemption, if 

granted, will not extend to transactions 

prohibited under section 406(b) of the 

Act and section 4975(c)(1)(E)–(F) of the 

Code; 

(3) Before an exemption can be 

granted under section 408(a) of the Act 

and section 4975(c)(2) of the Code, the 

Department must find that the 

exemption is administratively feasible, 

in the interest of the plan and of its 

participants and beneficiaries and 

protective of the rights of participants 

and beneficiaries of the plan; 

(4) This proposed exemption, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and the Code, 

including statutory or administrative 

exemptions. 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 

(5) This proposed exemption, if 

granted, is subject to the express 

condition that the facts and 

representations set forth in the notice of 

proposed exemption relating to PTE 

2000–34 and this notice, accurately 

describe, where relevant, the material 

terms of the transactions to be 

consummated pursuant to this 

exemption. 

Written Comments 

All interested persons are invited to 

submit written comments on the 

pending exemption to the address 

above, within the time frame set forth 

above, after the publication of this 

proposed exemption in the Federal 

Register. All comments will be made a 

part of the record. Comments received 

will be available for public inspection 

with the referenced applications at the 

address set forth above. 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting the 

requested exemption under the 

authority of section 408(a) of the Act 

and section 4975(c) of the Code and in 

accordance with the procedures set 

forth in 29 CFR part 2570, subpart B (55 

FR 32836, August 10, 1990), the 

Department proposes to amend and 

replace PTE 2000–34 as follows: 

SECTION I. COVERED TRANSACTIONS 

If the exemption is granted, the restrictions 

of section 406(a) of the Act and the sanctions 

resulting from the application of section 4975 

of the Code, by reason of section 

4975(c)(1)(A) through (D) of the Code, shall 

not apply to (1) the receipt of certain stock 

(the Investor Stock) issued by the corporation 

(the Stock Purchaser) which acquires PostConversion Fidelity Mutual Life Insurance 

Company (Post-Conversion FML) by stock 

purchase or by merger, (2) the receipt of plan 

credits (the Plan Credits), or (3) the receipt 

of cash, by or on behalf of a mutual member 

(the Mutual Member) of FML which is an 

employee benefit plan (a Plan), in exchange 

for such Mutual Member’s membership 

interest (the Membership Interest) in FML, in 

accordance with the terms of a plan of 

rehabilitation of FML (the Fourth Amended 

Plan) approved by the Pennsylvania 

Commonwealth Court (the Court) and 

supervised by both the Court and the 

Pennsylvania Insurance Commissioner (the 

Commissioner), who is acting as the 

rehabilitator of FML (the Rehabilitator). This 

proposed exemption is subject to the 

following conditions set forth below in 

Section II. 

SECTION II. GENERAL CONDITIONS 

(a) The Fourth Amended Plan is approved 

by the Court, implemented in accordance 

with procedural and substantive safeguards 

that are imposed under Pennsylvania law 

and is subject to review and/or supervision 

by the Commissioner (both in her own 

capacity and in her capacity as Rehabilitator 

of FML). The Court determines whether the 

Fourth Plan—

(1) Properly conserves and equitably 

administers the assets of FML, in the 

interests of investors, the public, and others 

in accordance with the legislatively-stated 

purpose of protecting the interests of the 

insured, creditors, and the public; and 

(2) Equitably apportions any unavoidable 

loss through imposed methods for 

rehabilitating FML. 

(The Court will retain exclusive 

jurisdiction over the implementation, 

interpretation, and enforcement of the Fourth 

Amended Plan of Reorganization.) 

(b) The Fourth Amended Plan provides for 

either: 

(1) The transfer of FML’s assets to an 

independent purchaser (the Asset Purchaser) 

in exchange for cash; or 

(2) The conversion of FML from a mutual 

life insurance company into a stock life 

insurance company and either (A) the 

transfer of the stock of Post-Conversion FML 

to the independent Stock Purchaser or (B) the 

merger of Post-Conversion FML into the 

independent Stock Purchaser or an affiliate 

of the Stock Purchaser. 

(c) Each Mutual Member has an 

opportunity to comment on the Fourth 


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13526 Federal Register / Vol. 72, No. 55 / Thursday, March 22, 2007 / Notices 

Amended Plan at hearings held by the Court 

after full written disclosure of the terms of 

the Plan is given to such Mutual Member by 

FML. 

(d) Participation by all Mutual Members in 

the Fourth Amended Plan, if approved by the 

Court, is mandatory, although Mutual 

Members may disclaim the Investor Stock, 

cash, and/or Plan Credits which they would 

otherwise receive. 

(e) The decision by a Mutual Member 

which is a Plan to receive or disclaim 

Investor Stock, cash, and/or Plan Credits 

allocated to such Mutual Member is made by 

one or more independent fiduciaries of such 

Plan, and not by FML or any affiliate of FML. 

Consequently, neither FML nor any of its 

affiliates will exercise discretion nor render 

‘‘investment advice’’ within the meaning of 

29 CFR 2510.3–21(c) with respect to an 

independent Plan fiduciary’s decision to 

receive or disclaim Investor Stock, cash, and/ 

or Plan Credits. 

(f) Twenty percent (20%) of the net assets 

which are available for distribution to the 

Mutual Members is allocated among the 

Mutual Members based upon voting rights, 

and eighty percent (80%) of such net assets 

is allocated among the Mutual Members on 

the basis of the contribution of the Mutual 

Members’ respective insurance or annuity 

contracts (the Contracts) to the surplus of 

FML. The contribution to FML’s surplus is 

the actuarial calculation of both the historical 

and expected future profit contribution of the 

Contracts that have contributed to the 

surplus (i.e., the net earnings) of FML. The 

actuarial formulas are approved by the Court 

and the Commissioner. 

(g) The amount and value of the Investor 

Stock, cash, and/or Plan Credits received by 

a Mutual Member reflect the aggregate 

consideration paid by the Stock Purchaser or 

Asset Purchaser, which is independent of 

FML. 

(h) All Mutual Members that are Plans 

participate in the transactions on the same 

basis as all other Mutual Members that are 

not Plans, except that Mutual Members 

which hold Non-Trusteed Tax-Qualified 

Retirement Funding Contracts receive Plan 

Credits in exchange for their membership 

interests, rather than cash and/or Investor 

Stock. 

(i) No Mutual Member pays any brokerage 

commissions or fees in connection with the 

receipt of Investor Stock, cash, and/or Plan 

Credits. 

(j) Mutual Members are not restricted from 

selling or otherwise transferring any Investor 

Stock which they receive. If Investor Stock 

comprises part of the consideration paid by 

the Stock Purchaser, the Stock Purchaser is 

required to establish a commission-free 

purchase or sales program which will allow 

Mutual Members who receive a small 

number of shares of Investor Stock to ‘‘round 

up’’ such shares or sell such shares free of 

sales commissions. 

(k) The Fourth Amended Plan does not 

adversely affect the rights of a contractholder 

of the company (the Contractholder) which is 

a Mutual Member. In this regard, 

(1) If Post-Conversion FML is acquired by 

the Stock Purchaser, the obligations of FML 

to a Contractholder are retained by PostConversion FML; and 

(2) If FML’s assets are purchased by the 

Asset Purchaser, FML’s obligations to a 

Contractholder are discharged and 

terminated upon their endorsement and 

assumption by the Asset Purchaser, thereby 

making the Asset Purchaser liable for the 

obligations under the Contract. 

SECTION III. DEFINITIONS 

For purposes of this proposed exemption: 

(a) An ‘‘affiliate’’ of FML, Post-Conversion 

FML, the Stock Purchaser, or the Asset 

Purchaser includes—

(1) Any person directly or indirectly 

through one or more intermediaries, 

controlling, controlled by, or under common 

control with such entity. (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.); or 

(2) Any officer, director or partner in such 

person. 

(b) The term ‘‘Asset Purchaser’’ means the 

person (e.g., individual, corporation, 

partnership, joint venture, etc.) selected by 

the Rehabilitator and approved by the Court 

to purchase FML’s assets under an 

assumption reinsurance agreement. 

(c) The term ‘‘FML’’ means the Fidelity 

Mutual Life Insurance Company (In 

Rehabilitation) and any affiliate of FML, as 

defined in paragraph (a) of this Section III, 

as they exist before FML is converted from 

a mutual life insurance company into a stock 

life insurance company. 

(d) The term ‘‘Investor Stock’’ means the 

common stock of the Stock Purchaser that 

will be allocated to Mutual Members if PostConversion FML is acquired by the Stock 

Purchaser in exchange for consideration that 

includes common stock of the Stock 

Purchaser. 

(e) The term ‘‘Mutual Member’’ means a 

Contractholder whose name appears on 

FML’s records as an owner of an FML 

Contract on the Record Date of the Fourth 

Amended Plan. 

(f) The term ‘‘Non-Trusteed Tax-Qualified 

Retirement Funding Contracts’’ means FML 

insurance contracts which are held in 

connection with retirement plans or 

arrangements described in section 403(a) or 

408 of the Internal Revenue Code or nontrusteed retirement plans described in 

Section 401(a) of the Internal Revenue Code. 

(g) The term ‘‘Plan’’ means an employee 

benefit plan. 

(h) The term ‘‘Plan Credit’’ means either (1) 

additional paid up insurance for a traditional 

life policy or (2) credits to the account values 

for Contracts that are not traditional (such as 

a flexible premium policy). Under FML’s 

Fourth Amended Plan, Plan Credits are to be 

allocated to Mutual Members who hold NonTrusteed Tax-Qualified Retirement Funding 

Contracts, in lieu of Investor Stock and/or 

cash. 

(i) The term ‘‘Post-Conversion FML’’ means 

the Fidelity Mutual Life Insurance Company 

(In Rehabilitation) and any affiliate of FML, 

as defined in paragraph (a) of this Section III, 

as they exist after FML is converted from a 

mutual life insurance company into a stock 

life insurance company. 

(j) The term ‘‘Stock Purchaser’’ means the 

person (e.g., individual, corporation, 

partnership, joint venture, etc.) selected by 

the Rehabilitator and approved by the Court 

to purchase the stock of Post-Conversion 

FML, or to acquire Post-Conversion FML by 

merger, under a stock purchase agreement or 

merger agreement. 

This exemption is available to a 

Mutual Member of FML that is a Plan 

if the terms and conditions of the 

exemption are satisfied with respect to 

such Plan. 

For a more complete statement of the 

facts and representations supporting the 

Department’s decision to grant PTE 

2000-34, refer to the proposed 

exemption and the grant notice which 

are cited above. 

Signed at Washington, DC, this 16th day of 

March, 2007. 

Ivan L. Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. E7–5208 Filed 3–21–07; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

[TA–W–60,753] 

Cerf Brothers Bag Co., Inc., Earth City, 

MO; Notice of Affirmative 

Determination Regarding Application 

for Reconsideration 

By application dated January 13, 

2007, a state representative requested 

administrative reconsideration of the 

Department of Labor’s Notice of 

Negative Determination Regarding 

Eligibility to Apply for Worker 

Adjustment Assistance, applicable to 

workers and former workers of the 

subject firm. The determination was 

issued on February 16, 2007 and 

published in the Federal Register on 

February 27, 2007 (72 FR 8795). 

The negative determination was based 

on the Department’s findings that that 

the petitioning workers of this firm or 

subdivision do not produce an article 

within the meaning of Section 222 of 

the Act. 

The Department reviewed the request 

for reconsideration and has determined 

that the petitioner has provided 

additional information. Therefore, the 

Department will conduct further 

investigation to determine if the workers 

meet the eligibility requirements of the 

Trade Act of 1974. 

Conclusion 

After careful review of the 

application, I conclude that the claim is 

of sufficient weight to justify 


rwilkins on PROD1PC63 with NOTICES