Employer stock certificates exchanged on reincorporation

P/OPINION 75-100



                                                       406
                                                       407✓


                           June 6, 1975


Dear           :

This is in response to your letter of April 1, 1975,
directed to the attention of (Named person) of the (Staff)
on behalf of the (Named Company) Hourly Employees' Pension
Plan and Trust ("Hourly Plan"), the Salaried Employees'
Pension Plan and Trust ("Salaried Plan") and the (Named)
Company (company), presently a (State #1) corporation.

In your letter, you enclosed a memorandum which requested
an opinion as to whether a proposed exchange of certificates
representing [company] stock between [company], on the one
hand, and the Hourly and Salaried Plans on the other, pursuant
to a reincorporation of [company] under the (State #2) law,
would be considered to be an acquisition of employer stock
by the Plans under section 407(a)(2) of the Employee Retire-
ment Security Act of 1974.

In your memorandum, you set forth the following facts
and representations. The proposed reincorporation is designed
to enable [company] to resist more effectively any attempt
by corporate outsiders to obtain control of the company.
The proposed reincorporation will be accomplished by merging
[company] with a (State #2) corporation which is now a wholly
owned subsidiary of [company] and which will be named (Named)
Company after the merger. As is the case with the present
corporation, stock of the new (Named Company) will be listed
on the New York Stock Exchange. In the course of the reincor-
poration, the Hourly Plan and the Salaried Plan will exchange
[company] stock certificates for stock certificates of [company's]
(State #2) subsidiary on a one-for-one basis. As shareholders of
the present [company], the Hourly and Salaried Plans will
be affected by the reincorporation only by differences in
the corporate law of (State #1) and (State #2) and by certain
differences between the Certificates of Incorporation of
[company] and its (State #2) subsidiary relating to election of
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P/OPINION 75-100


directors, cumulative voting, and the percentage of share-
holder approval needed in the event of certain mergers or
consolidations. To the extent that assets of [company] are
used to purchase shares of dissenting shareholders, as required
under (State#1) law, the percentage of outstanding shares
owned by the plan may be altered, but the number of shares
owned will remain essentially the same, as will the underlying
assets of the reincorporated [company].

Based solely on the facts and representations set forth
in your memorandum, and our consultation with the Solicitor
of Labor we have concluded that the proposed exchange of
securities would not be prohibited under section 407(a) of
the Act.

This opinion deals only with the application of sections
406(a)(1)(B) and 407 of the Act to the proposed exchange
of [company] stock described in your memorandum. No
opinion is expressed as to the application of any other
section of the Act to the proposed exchange; in particular,
no opinion is expressed as to the application of sections
404 (relating to fiduciary duties) and 406(b) (relating
to fiduciary self-dealing).

This opinion deals with sections 406(a)(1)(B) and 407
of the Act only as they apply in the specific facts
and to the specific parties described in your memorandum.
Accordingly, the views of the Department of Labor contained
herein should not be deemed to serve as a precedent for
the application of these sections to transactions other
that the transaction described in your memorandum, whether
or not involving the same parties.

Sincerely,