32686 Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 

1The Department has considered exemption 

applications received prior to December 27, 2011 

under the exemption procedures set forth in 29 CFR 

Part 2570, Subpart B (55 FR 32836, 32847, August 

10, 1990). 

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) This exemption is supplemental to 

and not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transactional 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 

(3) The availability of this exemption 

is subject to the express condition that 

the material facts and representations 

contained in the application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 25th day of 

May 2012. 

Lyssa E. Hall, 

Acting Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–13263 Filed 5–31–12; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

Proposed Exemptions From Certain 

Prohibited Transaction Restrictions 

AGENCY: Employee Benefits Security 

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 (ERISA or the Act) and/or 

the Internal Revenue Code of 1986 (the 

Code). This notice includes the 

following proposed exemptions: D– 

11649, Meridian Medical Associates, 

S.C, Employees’ Retirement Plan and 

Trust (the Plan); D–11710, El Paso 

Corporation Retirement Savings Plan 

(the Plan); and D–11714, Ed Laur 

Defined Benefit Plan (the Plan). 

DATES: All interested persons are invited 

to submit written comments or requests 

for a hearing on the pending 

exemptions, unless otherwise stated in 

the Notice of Proposed Exemption, 

within 45 days from the date of 

publication of this Federal Register 

Notice. 

ADDRESSES: 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. All written 

comments and requests for a hearing (at 

least three copies) should be sent to the 

Employee Benefits Security 

Administration (EBSA), Office of 

Exemption Determinations, Room N– 

5700, U.S. Department of Labor, 200 

Constitution Avenue NW., Washington, 

DC 20210. Attention: Application No. 

lll, stated in each Notice of 

Proposed Exemption. Interested persons 

are also invited to submit comments 

and/or hearing requests to EBSA via 

email or FAX. Any such comments or 

requests should be sent either by email 

to: moffitt.betty@dol.gov, or by FAX to 

(202) 219–0204 by the end of the 

scheduled comment period. The 

applications for exemption and the 

comments received will be available for 

public inspection in the Public 

Documents Room of the Employee 

Benefits Security Administration, U.S. 

Department of Labor, Room N–1513, 

200 Constitution Avenue NW., 

Washington, DC 20210. 

Warning: If you submit written 

comments or hearing requests, do not 

include any personally-identifiable or 

confidential business information that 

you do not want to be publiclydisclosed. All comments and hearing 

requests are posted on the Internet 

exactly as they are received, and they 

can be retrieved by most Internet search 

engines. The Department will make no 

deletions, modifications or redactions to 

the comments or hearing requests 

received, as they are public records. 

SUPPLEMENTARY INFORMATION: 

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). 

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 (76 FR 

66637, 66644, October 27, 2011).1

Effective December 31, 1978, section 

102 of Reorganization Plan No. 4 of 

1978, 5 U.S.C. App. 1 (1996), 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. 

Meridian Medical Associates, S.C., 

Employees’ Retirement Plan and Trust 

(the Plan), Located in Joliet, Illinois 

[Exemption Application No. D–11649] 

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). 

I—Transactions 

If the exemption is granted, the 

restrictions of sections 406(a)(1)(A), 

406(a)(1)(D), 406(b)(1), and 406(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), 

4975(c)(1)(D), and 4975(c)(1)(E) of the 

Code, will not apply to: 

(a) The cash purchase (the Purchase) 

by the Plan (formerly, the Will County 

Medical Associates, S.C. Employees’ 

Retirement Plan & Trust) of a 52 percent 

(52%) beneficial ownership interest in a 

parcel of improved real property (the 

Annex) located in Joliet, Illinois, from 

the JMG Property, LLC (the LLC), a party 

in interest with respect to the Plan; 

(b) The entry by the Plan through a 

land trust (no. 6722), into a lease (the 

Annex Lease) with Meridian Medical 

Associates, S.C. (the Employer) 

(formerly, the Will County Medical 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 32687 

Associates, S.C.), as lessee, of a 52 

percent (52%) beneficial ownership 

interest in the Annex; and 

(c) The personal guarantees, jointly 

and severally, by each of the 

shareholders of the Employer of the 

obligations of such Employer under the 

terms of the Annex Lease; provided that 

the conditions set forth, below, in 

Section II are satisfied. 

II—Conditions 

(a) With respect to the Purchase by 

the Plan of a 52 percent (52%) beneficial 

ownership interest in the Annex from 

the LLC: 

(1) The Purchase is a one-time 

transaction for cash; 

(2) The terms and conditions of the 

Purchase are no less favorable to the 

Plan than those obtainable by the Plan 

under similar circumstances when 

negotiated at arm’s length with 

unrelated third parties; 

(3) Prior to entering into the Purchase, 

an independent, qualified fiduciary (the 

I/F) determines that the Purchase is in 

the interest of, and protective of the 

Plan and of its participants and 

beneficiaries; 

(4) The I/F negotiates, reviews, and 

approves the terms of the Purchase prior 

to the consummation of such Purchase; 

(5) The acquisition price paid by the 

Plan for a 52 percent (52%) beneficial 

ownership interest in the Annex is not 

more than the fair market value of such 

interest, as determined by an 

independent, qualified appraiser, as of 

the date of the Purchase; 

(6) An independent, qualified 

appraiser determines, as of the date of 

the Purchase, the fair market value of a 

parcel of improved real property (the 

Original Facility), which is adjacent to 

the Annex, and in which the Plan holds 

a 100 percent (100%) beneficial 

ownership interest through a land trust 

(no. 2024); 

(7) Immediately following the 

Purchase, the combined fair market 

value of the Plan’s 52 percent (52%) 

beneficial ownership interest in the 

Annex and the fair market value of the 

Plan’s 100 percent (100%) beneficial 

ownership interest in the Original 

Facility when added together (the 

Combined Facility) does not exceed 20 

percent (20%) of the fair market value 

of the total assets of the Plan; 

(8) In the event of any actual or 

potential divergence of interests 

between the Plan and the LLC, that 

results as a consequence of their shared 

ownership interest in the Annex, the 

I/F takes appropriate steps to resolve 

such conflicts of interest and in all 

events acts prudently and solely in the 

interest of the Plan with respect to all 

decisions pertaining to the acquisition, 

holding, management, and disposition 

of the Plan’s interest in the Annex. To 

the extent that a conflict occurs, the 

I/F has, by its written agreement, the 

sole authority acting on behalf of the 

Plan to determine the resolution of any 

conflict that arises from the shared 

beneficial ownership of the Annex by 

the Plan and the LLC and that such 

determination shall be binding on the 

LLC; and 

(9) The Plan does not incur any fees, 

costs, commissions, or other charges as 

a result of engaging in the Purchase, 

other than the necessary and reasonable 

fees payable to the I/F and to the 

independent, qualified appraiser, 

respectively. 

(b) With respect to the Annex Lease: 

(1) The terms and conditions of the 

Annex Lease are no less favorable to the 

Plan than those obtainable by the Plan 

under similar circumstances when 

negotiated at arm’s length with 

unrelated third parties; 

(2) Prior to entering into the Annex 

Lease, the I/F, acting on behalf of the 

Plan, negotiates, reviews, and approves 

the terms and conditions of the Annex 

Lease, and determines that the Annex 

Lease is in the interest of, and protective 

of the Plan and its participants and 

beneficiaries; 

(3) The I/F monitors and enforces 

compliance with the conditions of this 

exemption and monitors and enforces 

compliance with all of the terms of the 

Annex Lease throughout the initial term 

of such lease and throughout the 

duration of each renewal of such lease, 

and is also responsible for legally 

enforcing the payment of rent and the 

proper performance of all other 

obligations of the Employer under the 

terms of such lease; 

(4) The rent paid to the Plan by the 

Employer under the initial term of the 

Annex Lease, and the rent paid to the 

Plan by the Employer during each 

renewal of such lease, is based upon the 

fair market value of the Annex, as 

established by an independent, 

qualified appraiser at the time of such 

initial term and at the time of each 

renewal of such lease; 

(5) The rent under the Annex Lease is 

adjusted at the commencement of the 

second year of the term of such lease 

and is adjusted every second year 

thereafter by the I/F, based on an 

appraisal of the fair market value of the 

Annex, as established by an 

independent, qualified appraiser at the 

time of each such adjustment of rent. If 

twelve percent (12%) of the fair market 

value of the Annex, established by such 

appraisal at the time of any such 

adjustment, is greater than the then 

current base rent under the Annex 

Lease, then the base rent is revised by 

the I/F to reflect the increase in fair 

market value of the Annex, as 

established by such appraisal. If twelve 

percent (12%) of the fair market value 

of the Annex, established by such 

appraisal at the time of any such 

adjustment, is less than or equal to the 

then current base rent, then the base 

rent remains unchanged by the I/F; 

(6) The terms of the Annex Lease are 

triple net, such that the Employer, as 

lessee, is responsible for paying, in 

addition to monthly rent, all costs for 

maintenance, taxes, utilities, and 

insurance on the Annex; 

(7) Prior to entering into any renewal 

of the Annex Lease, the I/F, acting on 

behalf of the Plan, approves such 

renewal beyond the initial term of such 

lease; and 

(8) The Plan does not incur any fees, 

any costs, any commissions, and any 

other charges and expenses as a result 

of entering into the Annex Lease, other 

than the necessary and reasonable fees 

payable to the I/F and payable to the 

independent, qualified appraiser, 

respectively. 

Summary of Facts and Representations 

1. The Plan is a defined contribution 

plan with a cash or deferred 

compensation arrangement. The Plan 

was established on January 20, 1972, 

and has been amended and restated on 

several occasions since that date, the 

latest being March 10, 2010. The Plan 

had, as of December 31, 2011, total 

assets valued at approximately 

$31,197,086. It is represented that the 

most recent update of the number of 

participants in the Plan is dated 

December 31, 2010, as reflected on the 

Plan’s Form 5500. As of December 31, 

2010, the Plan had 277 participants, 

including former employees with 

deferred benefits. The Plan maintains an 

individual account for each such 

participant. Some of the participants in 

the Plan are also shareholders of the 

Employer. Some of the shareholders of 

the Employer also serve as the trustees 

of the Plan (the Trustees). The Trustees 

are parties in interest and fiduciaries 

with respect to the Plan, pursuant to 

section 3(14)(A) of the Act. The Trustees 

are elected by the Board of Directors of 

the Employer (the Board). It is 

represented that the Trustees have the 

exclusive right to decide on investments 

for the Plan without a recommendation 

from the Board. 

2. The sponsor of the Plan is the 

Employer, an Illinois medical 

corporation which was incorporated on 

November 29, 1971. As the sponsor of 

the Plan, the Employer is a party in 

mstockstill on DSK4VPTVN1PROD with NOTICES

32688 Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 

2 46 FR 53816, October 30, 1981. 

3 66 FR 40734, August 3, 2001. 

4At the time that the Department issued PTE 81– 

96 and at the time the Department issued PTE 

2001–25, the Employer was known as the ‘‘Joliet 

Medical Group, Ltd.,’’ and the Plan was known as 

the ‘‘Joliet Medical Group, Ltd. Employee 

Retirement Plan and Trust.’’ 

5 It is represented that in 1983 First Midwest 

Bancorp, Inc., a bank holding company, purchased 

UNB, and the name of UNB was subsequently 

changed to First Midwest Bank and Trust. It is 

represented that First Midwest Bank and Trust, 

First Midwest Trust Company, and First Midwest 

Bank whenever referred to in the application all 

represent the same entity and will be referred to 

herein as FMB. 

6 It is represented that FMB agreed in 2004 and 

again in 2009 to the exercise of each of the five (5) 

year term extensions permitted under the 1999 

Lease. Accordingly, the exemptive relief provided 

by PTE 2001–25 with respect to the leasing by the 

Plan of the Original Facility to the Employer shall 

cease, as of October 31, 2014, upon the expiration 

of the second five (5) year term extension of the 

1999 Lease. The Department notes that, should the 

transactions which are the subject of this proposed 

exemption be granted, such final exemption does 

not alter the terms and conditions of PTE 2001–25 

with respect to the leasing by the Plan of the 

Original Facility to the Employer and will not 

extend the relief provided under PTE 2001–25 to 

such lease beyond October 31, 2014. 

interest with respect to the Plan, 

pursuant to section 3(14)(C) of the Act. 

The Employer is engaged in the general 

practice of medicine. The Employer 

conducts its operations in both the 

Original Facility and in the Annex. The 

Employer employs 45 physicians and 

more than 200 staff and administrative 

personnel. Some of the employees are 

also shareholders of the Employer. 

3. The LLC is a limited liability 

company established on June 24, 2004, 

for the purpose of purchasing the Annex 

and leasing it to the Employer. In July 

2011, there were twenty-two (22) 

members of the LLC. All of the members 

of the LLC are current or former 

shareholders of the Employer. The 

Trustees of the Plan are also members of 

the LLC. It is represented that the LLC 

is a party in interest with respect to the 

Plan, pursuant to section 3(14)(G) of the 

Act. 

4. In 1981, the Department granted an 

individual exemption, Prohibited 

Transaction Exemption 81–96 (PTE 81– 

96),2 which permitted the Plan to 

purchase the Original Facility from the 

Employer. The Original Facility consists 

of approximately 2.28 acres of real 

property improved by a two-story 

medical office building, completed in 

1969, including a parking lot with 90 

spaces. The Original Facility contains 

approximately 10,583 square feet on 

each floor for a total (above ground) of 

approximately 21,166 square feet. In 

addition, the Original Facility has a 

fully finished basement containing 

approximately 10,583 square feet of 

additional space. Further, PTE 81–96 

permitted the Employer to extend credit 

at an interest rate of 6 percent (6%) per 

annum to the Plan in connection with 

the purchase by the Plan of the Original 

Facility. Currently, however, it is 

represented that there are no mortgages, 

no liens, and no other encumbrances of 

title on the Original Facility. In 

addition, PTE 81–96 permitted the Plan 

to lease the Original Facility (the 1981 

Lease) to the Employer under triple net 

terms for a minimum guaranteed rent of 

$263,000 for a period of 18 years ending 

on November 1, 1999. Union National 

Bank and Trust Co. (UNB) of Joliet, 

Illinois, an independent party, 

represented at the time the 1981 Lease 

was entered that the transactions which 

were the subject of PTE 81–96 were in 

the interest of the Plan and that the 

terms of such transactions were arm’s 

length. UNB also was responsible for 

monitoring the transactions which were 

the subject of PTE 81–96 and exercising 

the rights of the Plan with respect to 

such transactions. 

5. In 2001, the Department issued 

another Prohibited Transaction 

Exemption 2001–25 (PTE 2001–25),3 to 

the same applicants 4 which provided 

retroactive and prospective relief for a 

lease (the 1999 Lease) to the Employer 

of the Original Facility by First Midwest 

Trust Company of Joliet, Illinois (FMB),5

as the holder of legal title under the 

terms of a land trust (no. 2024), and by 

the Plan, as beneficial owner of the 

Original Facility. The term of the 1999 

Lease was for a period of five (5) years 

(1999–2004), with an option to renew 

and extend such lease for two (2) 

additional successive terms of five (5) 

years each, subject to the approval of 

FMB, acting as the independent, 

qualified fiduciary under PTE 2001–25.6

Accordingly, it is represented that, since 

1981 FMB or a predecessor has served 

as the I/F with respect to the Plan in 

connection with PTE 81–96 and PTE 

2001–25. 

Under the terms of the 1999 Lease, the 

Employer leased the Original Facility 

for a ‘‘floating’’ monthly rental rate of 

one percent (1%) of the then appraised 

value ($3,200,000) of the Original 

Facility ($3,200,000 times .01 equals 

$32,000), or twelve percent (12%) of the 

fair market value of the Original Facility 

on an annualized basis ($3,200,000 

times .12 equals $384,000). The terms of 

PTE 2001–25 require that an 

independent, qualified appraiser update 

the rent every other year, but that the 

minimum guaranteed monthly rent 

(regardless of any possible decrease in 

the appraised value of the Original 

Facility) would remain $32,000 

monthly. It is represented that, with 

respect to both the 1981 Lease and the 

1999 Lease of the Original Facility, the 

Employer has always paid the rent on 

time and has otherwise complied with 

the terms and conditions of such leases 

and the terms and conditions of PTE 

81–96 and PTE 2001–25. 

6. The Annex which is the subject of 

this proposed exemption is physically 

connected to the Original Facility by 

means of a single-story entrance foyer 

and reception area that is a part of the 

Annex structure. Although the Annex 

and the Original Facility occupy 

adjacent parcels, both properties share 

the same street address, 2100 Glenwood 

Avenue in Joliet, Illinois. 

The Employer purchased the Annex 

on July 13, 2001, from Blue Cross and 

Blue Shield of Illinois, an unrelated 

third party, for a purchase price of 

$3,757,731.15. The Annex consists of 

approximately 1.93 acres of real 

property improved by a single-story 

medical office building completed in 

1996, including a parking lot with 117 

spaces. The medical office building 

contains approximately 13,600 square 

feet of space at the ground level and 

another 11,128 square feet at the 

basement level, for a total of 

approximately 24,728 square feet of 

space. 

On June 28, 2004, the Employer 

transferred full legal ownership of the 

Annex to a land trust (no. 6722) 

controlled by FMB, as trustee. In this 

regard, it is represented that in Illinois 

a land trust exists only to hold title and 

to facilitate easy transfer of property 

without expense and administrative 

process of re-recording instruments of 

transfer with the county. As discussed 

above, FMB also serves as the trustee of 

the land trust (no. 2024) with respect to 

the legal ownership of the Original 

Facility. As such, FMB currently holds 

100 percent (100%) legal title to both 

the Original Facility and the Annex. It 

is represented that FMB, as trustee for 

the land trusts (nos. 6722 and 2024), has 

no discretionary authority and serves 

only as a directed trustee with respect 

to such land trusts. It is represented that 

legal ownership held by FMB of the 

Original Facility and the Annex will not 

be affected by the proposed Purchase 

transaction. Further, it is represented 

that the Plan’s current 100 percent 

(100%) beneficial ownership interest in 

the Original Facility will not be affected 

by the proposed Purchase transaction. 

On June 30, 2004, acting as the legal 

owner of the Annex through the land 

trust (no. 6722), FMB executed a written 

assignment of 100 percent (100%) of the 

beneficial ownership interest in the 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 32689 

Annex to the LLC. It is represented that 

on July 1, 2004, the Employer entered 

into a triple net lease of the Annex with 

FMB, as legal owner, and the LLC, as 

the beneficial owner, for a term of five 

(5) years with successive one (1) year 

renewal options, unless either party 

provides a written notice of termination 

or written notice of intent not to renew. 

The base rent for the Annex for each 

lease year under the terms of this lease 

was $271,200, payable in equal monthly 

installments of $22,600. It is represented 

that pursuant to this lease of the Annex, 

the Employer, as lessee, has paid 

monthly rent for the use of the Annex 

to FMB, acting as the lessor. FMB, in 

turn, has transmitted all rental 

payments received from the Employer to 

the LLC, as the current 100 percent 

(100%) beneficial owner of the Annex. 

7. Relief is requested for the proposed 

Purchase by the Plan from the LLC of a 

52 percent (52%) beneficial ownership 

interest in the Annex. Specifically, the 

applicant requests relief from sections 

406(a)(1)(A), 406(a)(1)(D), 406(b)(1), and 

406(b)(2) of the Act, because the LLC is 

a party in interest with respect to the 

Plan. As a result of the proposed 

Purchase, the LLC, which currently 

holds a 100 percent (100%) beneficial 

ownership interest in the Annex, will 

retain only a 48 percent (48%) 

beneficial ownership interest in the 

Annex. 

8. The proposed Purchase transaction 

is feasible in that it will be a one-time 

transaction for cash. Further, it is 

represented that the proposed Purchase 

transaction is protective of the Plan and 

its participants and beneficiaries. In this 

regard, as discussed more fully, below, 

Private Bank and Trust Company 

(PBTC) has represented that it will act 

as the I/F on behalf of the Plan with 

regard to the transactions which are the 

subject of this proposed exemption. 

9. It is represented that FMB, as 

mortgagee, currently holds a mortgage 

on the Annex in the amount of 

approximately $3,100,000 with the LLC, 

as the mortgagor. However, it is 

represented that the Purchase 

transaction will be protective of the Plan 

in that the Plan’s 52 percent (52%) 

beneficial ownership interest in the 

Annex will be free and clear of any 

liens, notes, or encumbrances on such 

Annex. 

10. It is further represented that the 

proposed Purchase is protective of the 

Plan and its participants and 

beneficiaries, in that the purchase price 

to be paid by the Plan for a 52 percent 

(52%) beneficial ownership interest in 

the Annex will be determined by an 

independent, qualified appraiser. 

Further, it is represented that the fair 

market value of a 52 percent (52%) 

beneficial ownership interest in the 

Annex and the fair market value of the 

Original Facility will be updated as of 

the date of the purchase by the Plan. 

The Plan retained Mr. Joseph E. Batis, 

(Mr. Batis), an accredited appraiser with 

Edward J. Batis & Associates, Inc. of 

Joliet, Illinois, to inspect the Annex and 

the Original Facility, and to render an 

opinion as to the fair market value of 

each of these properties. Mr. Batis is 

qualified in that he has actively engaged 

since 1983 in the practice of real estate 

analysis and valuation counseling, and 

has acquired extensive experience in the 

valuation of partial interests in property. 

In addition, Mr. Batis has been a 

member of the MAI Appraisal Institute 

since 1994, and is also certified by the 

State of Illinois as a general real estate 

appraiser. 

Mr. Batis represents that both he and 

his firm are independent of the 

Employer, and the LLC. It is represented 

that any fees received from the 

Employer, as well as any fees received 

from the LLC, have never equaled or 

exceeded one percent (1%) of the 

annual gross billings of Edward J. Batis 

and Associates, Inc. 

As of February 15, 2012, Mr. Batis 

issued separate appraisal reports 

addressing the fair market value of the 

Annex and the fair market value of the 

Original Facility. In conducting his 

valuations of the Annex and the 

Original Facility, Mr. Batis considered 

the three valuation methodologies 

commonly utilized in arriving at a value 

estimate: (i) The cost approach, (ii) the 

direct sales comparison approach, and 

(iii) the income approach. In this regard, 

Mr. Batis concluded that the direct sales 

comparison approach and the income 

approach were suitable for the valuation 

of the Annex and for the valuation of 

the Original Facility. Mr. Batis 

represents that the cost approach was 

excluded, because there has not been 

sufficient new construction in the local 

market to support such an approach. In 

the final appraisal reconciliation of the 

fair market value of the Annex and the 

fair market value of the Original 

Facility, Mr. Batis placed more weight 

on the results of the direct sales 

comparison approach, because the 

primary appeal of the Annex and the 

Original Facility is to an owneroccupant. After physically inspecting 

both properties, analyzing all relevant 

data, and reconciling the applicable 

valuation methodologies, Mr. Batis 

determined that the fair market value of 

the Annex was $4,600,000, as of 

February 15, 2012, and that the fair 

market value of the Original Facility 

was $3,800,000, as of the same date. Mr. 

Batis has also represented that the 

foregoing valuations do not require 

adjustment for the assemblage value of 

the Combined Facility, because the 

Annex and the Original Facility can be 

marketed as separate and independent 

properties based upon the fact that the 

entrance foyer connecting these two 

buildings can easily be removed. 

11. In addition to the Purchase 

transaction, the Employer also seeks an 

exemption to enter into the Annex 

Lease, under which FMB, as legal 

owner, and the Plan, as beneficial 

owner, will lease a 52 percent (52%) 

beneficial ownership interest in the 

Annex to the Employer. 

The proposed entry into the Annex 

Lease is feasible in that the terms of 

such lease will be evidenced by a 

written document. Pursuant to the terms 

of the Annex lease, the Plan will receive 

52 percent (52%) of all rental payments 

made by the Employer under such 

Lease. In addition, the terms of the 

Annex Lease provide for an initial term 

of ten (10) years, with an option to 

renew and extend such lease for two (2) 

additional successive terms of five (5) 

years, each of which is subject to the 

approval of PBTC, acting as the I/F on 

behalf of the Plan, as discussed below. 

The annual lease payments payable by 

the LLC to the Plan under the terms of 

the Annex Lease will be twelve percent 

(12%) of the fair market value (currently 

$4,600,000) of the Annex ($4,600,000 

times .12 equals $552,000 a year), or the 

equivalent of $22.32 per square foot. 

The minimum guaranteed monthly base 

rent under the Annex Lease (regardless 

of any possible decrease in the 

appraised fair market value of the 

Annex) shall be $46,000 or one percent 

(1%) of the fair market value (currently 

$4,600,000) of such Annex ($4,600,000 

times .01 equals $46,000). 

12. It is represented that the proposed 

Annex Lease is in the interest of the 

Plan and the participants and 

beneficiaries of the Plan in that the rent 

payments under the Annex Lease will 

provide a fixed return to the account 

balances of participants in the Plan and 

will represent an opportunity to 

generate a guaranteed cash flow for the 

Plan. 

13. It is represented that the entry into 

the Annex Lease is protective of the 

Plan, because the terms of the Annex 

Lease are no less favorable to the Plan 

than those obtainable by the Plan under 

similar circumstances when negotiated 

at arm’s length with unrelated third 

parties. In this regard, Mr. Batis, in a 

letter dated, March 16, 2012, 

determined the fair market monthly 

rental value of the Annex. In making 

this determination, Mr. Batis considered 

mstockstill on DSK4VPTVN1PROD with NOTICES

32690 Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 

7The Department notes that, in the event the 

proposed exemption is granted, the Purchase by the 

Plan of a partial beneficial ownership interest in the 

Annex from the LLC would result in a co-investing 

the commercial rents charged per square 

foot at six (6) comparable medical office 

buildings in the local area, and 

ascertained that the market rents for 

properties similar to the Annex ranged 

from $10.00 to $22.50 per square foot. 

Based on this information, Mr. Batis 

concluded that the fair market monthly 

rental value of the Annex should reflect 

$22.32 per square foot applicable to the 

total area of the Annex which includes 

13,600 square feet of area on the main 

level and 11,128 square feet of finished 

area on the lower level. 

Under the terms of the Annex Lease, 

Schedule A provides for an annual rent 

equal to 12 percent (12%) of the fair 

market value of the Annex; provided 

that any decrease in the value of the 

Annex shall not be considered in 

determining the annual rent amount for 

the Annex. Accordingly, the annual 

lease payments payable by the Employer 

for the Annex should reflect twelve 

percent (12%) of the fair market value 

($4,600,000) of the Annex or the 

equivalent of $46,000 monthly rent and 

annual rental of $552,000. In his letter 

dated March 16, 2012, Mr. Batis 

concluded that based on comparable 

rental properties, the Annex rents 

(determined at 12 percent (12%) of fair 

market value of the Annex) are within 

the range of fair market rents in the local 

market. It is represented that Mr. Batis 

will update the fair market monthly 

rental value the Annex, as of the date of 

the entry into the Annex Lease. It is 

further represented that a new appraisal 

by an independent, qualified appraiser 

will be performed every 24 months to 

update the rent under the Annex Lease. 

14. In addition to the Purchase 

transaction, the applicant also seeks an 

exemption for the personal guarantees, 

jointly and severally, by each of the 

shareholders of the Employer of the 

obligations of such Employer under the 

terms of the Annex Lease between the 

Plan and the Employer. It is represented 

that each of these guarantors under the 

Annex Lease, as an employee of the 

Employer, is a party in interest with 

respect to the Plan, pursuant to section 

3(14)(H) of the Act. 

It is represented that the proposed 

personal guarantees are in the interest of 

and protective of the Plan and the 

participants and beneficiaries of the 

Plan, because in the event of a default 

by the Employer, the Plan has recourse 

to the shareholders of the Employer for 

satisfaction of the Employer’s 

obligations under the terms of the 

Annex Lease, including but not limited 

to the payment of rent for the initial ten 

(10) year term. The proposed personal 

guarantees are feasible in that these 

guarantors have a net worth in the 

aggregate in excess of $10,000,000, 

which is well in excess of the 

obligations of the Employer under the 

terms of the Annex Lease, including but 

not limited to the payment of rent for 

the initial ten (10) year term. 

15. PBTC has been retained by the 

Plan to serve as the I/F for purposes of 

the transactions described in this 

proposed exemption. PBTC 

acknowledges and accepts its 

responsibilities as the I/F with respect 

to the proposed exemption. It is 

represented that PBTC will take 

whatever actions are necessary to 

protect the interests of the Plan. 

In a letter dated November 8, 2011, 

Ms. Kelly C. White, Trust Officer for 

PBTC, represents that PBTC is 

independent and qualified to serve as 

the I/F for the Plan. PBTC is 

independent of the Employer and the 

LLC. It is represented that any fees for 

services rendered by PBTC in the past 

twelve (12) months to the Employer, to 

the LLC, and to the Plan, including 

services rendered as the I/F, will not 

exceed one percent (1%) of the revenue 

generated by PBTC in the past year. 

PBTC is qualified to serve as the I/F 

for the Plan, because it has been 

providing private trust services since 

the 1991. Not only does PBTC provide 

a wide range of trust services, PBTC also 

has expertise with respect to qualified 

retirement plans and directed 

individual retirement accounts. As of 

June 30, 2011, PBTC had $12.5 billion 

in assets. 

In agreeing to serve as the I/F for 

purposes of this proposed exemption, 

PBTC has enumerated a variety of duties 

that it has discharged or will discharge 

acting on behalf of the Plan. Among 

other things, the responsibilities of 

PBTC include: (a) Negotiating, 

reviewing, and approving the terms and 

conditions of the Purchase, and 

determining whether the Purchase in 

the interests of, and protective of, the 

Plan and its participants and 

beneficiaries; (b) negotiating, reviewing, 

and approving the terms and conditions 

of the Annex Lease, and determining 

whether such lease is in the interests of, 

and protective of, the Plan and its 

participants and beneficiaries; (c) 

determining that the terms and 

conditions of the Purchase are no less 

favorable to the Plan than those 

obtainable by the Plan under similar 

circumstances when negotiated at arm’s 

length with unrelated third parties; (d) 

determining that the terms and 

conditions of the Annex Lease are no 

less favorable to the Plan than those 

obtainable by the Plan under similar 

circumstances when negotiated at arm’s 

length with unrelated third parties; (e) 

verifying the appraised value of the 

Annex on the date of the Purchase and 

ascertaining that no fees are paid by the 

Plan in consummating the Purchase 

through the transfer of beneficial 

interests; (f) analyzing the terms of the 

Annex Lease to determine whether such 

lease provisions are reasonable and 

whether the rental rate is at, or better 

than, market value; (g) monitoring the 

collection of monthly rent and the 

transmittal of such rent to the Plan; (h) 

monitoring that the monthly rent is 

twelve percent (12%) of the appraised 

value of the Annex; (i) monitoring 

compliance by the Employer with the 

conditions of the exemption and with 

the terms and conditions of the Annex 

Lease, throughout the duration of such 

lease and each renewal of such lease, 

and assuming responsibility for legally 

enforcing payment of the rent and the 

proper performance of all other 

obligations of the Employer under the 

Annex Lease; (j) verifying that the 

aggregated fair market value of the 

Original Facility and the Annex does 

not exceed 20 percent (20%) of the total 

assets of the Plan at the time of the 

Purchase; (k) certifying annually that all 

rents for the year have been collected 

and all distributions made; and (l) 

providing quarterly statements. 

In addition to the foregoing duties, 

PBTC, acting as the I/F, has reviewed 

the appraisal reports for both the Annex 

and the Original Facility that were 

prepared by Mr. Batis. In particular, 

PBTC has reviewed the appraisal 

methodologies utilized by Mr. Batis, the 

independent, qualified appraiser, and 

has determined that Mr. Batis’ 

methodology and his conclusions 

concerning the fair market value of the 

Annex and the Original Facility are 

persuasive and sound. PBTC will also 

be responsible for reviewing the 

appraisal reports for the Annex, as 

submitted every 24 months to determine 

that the correct amount of rent is 

charged to the Employer. 

In connection with its duties as the 

I/F acting on behalf of the Plan with 

respect to the transactions described in 

this proposed exemption, PBTC has the 

responsibility of resolving all other 

issues that might arise associated with 

the Plan’s beneficial ownership of and 

leasing of the Annex in the best interests 

of the Plans participants and 

beneficiaries. Further, PBTC is 

responsible for any issues that may arise 

in connection with the co-ownership of 

the Annex by the Plan and the LLC.7 In 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 32691 

arrangement between the Plan and the LLC, which 

in turn could give rise to conflicts of interest 

between these parties. In this regard, section 

406(b)(1) of the Act prohibits the fiduciary of a plan 

from dealing with plan assets in his or her own 

interests or for his or her own account. In addition, 

section 406(b)(2) of the Act specifically prohibits 

plan fiduciaries in their individual or in any other 

capacity from acting in any transaction involving 

the plan on behalf of a party (or representing a 

party) whose interests are adverse to the interests 

of the plan or the interests of its participants or 

beneficiaries. Accordingly, the Department notes 

that if, over time, the shared ownership of the 

Annex results in a divergence of interests between 

the Plan and the LLC, violations of section 406(b) 

of the Act could occur. In the event that such a 

divergence of interests develops between the 

parties, PBTC, acting as the I/F, would be required 

to take steps to eliminate the conflict of interest in 

order to avoid engaging in a prohibited transaction. 

See ERISA Advisory Opinion Letter 2000–10A (July 

27, 2000). The Department further notes that it is 

not providing relief, herein, for any violations of the 

Act that may arise in connection with this coinvesting arrangement. In addition, the Department 

notes that the general standards of fiduciary 

conduct under the Act would apply to the purchase 

by the Plan of a beneficial ownership interest in the 

Annex. Section 404(a)(1) of the Act requires, among 

other things, that a fiduciary discharge his or her 

duties with respect to a plan solely in the interest 

of the participants and beneficiaries, and with the 

care, skill, prudence and diligence under the 

circumstances then prevailing that a prudent person 

acting in a like capacity and familiar with such 

matters would use in the conduct of an enterprise 

of like character and with like aims. Accordingly, 

PBTC, the I/F acting on behalf of the Plan, must act 

prudently and solely in the interest of the Plan and 

its participants and beneficiaries with respect to all 

decisions pertaining to the acquisition, holding, 

management, and disposition of the beneficial 

ownership interest in the Annex by the Plan. 

this regard, PBTC represents that in the 

event of any actual or potential 

divergence of interests between the Plan 

and the LLC, as a consequence of their 

shared beneficial ownership interest in 

the Annex, PBTC in all events will act 

prudently and solely in the interest of 

the Plan with respect to all decisions 

pertaining to the acquisition, holding, 

management, and disposition of the 

Plan’s beneficial ownership interest in 

the Annex. Further, to the extent that a 

conflict occurs, the I/F has, by its 

written agreement, the sole authority 

acting on behalf of the Plan to determine 

the resolution of any conflict that arises 

from the shared beneficial ownership of 

the Annex by the Plan and the LLC and 

that such determination shall be binding 

on the LLC. 

In a letter, dated November 8, 2011, 

PBTC made additional representations 

concerning how it proposes to respond 

to potential issues that may emerge as 

a consequence of the shared beneficial 

co-ownership of the Annex between the 

Plan and the LLC in the following 

situations: (a) Issues associated with late 

payment or non-payment of rents, (b) 

issues associated with the possible sale 

of the Annex to third parties, (c) issues 

associated with the necessity of major 

repairs and the cost of repairs, (d) issues 

associated with any government action 

or eminent domain, and (e) other issues 

associated with joint ownership of the 

Annex and rental of the properties. 

Specifically, it is represented that in 

the event of late payment or nonpayment of rent by the Employer, PBTC 

will pursue its remedies under the 

Annex Lease to ensure payment, 

including the option of bringing a 

lawsuit against the Employer. In this 

regard, given that rent has been timely 

paid in the past, PBTC does not 

anticipate any issue arising in the near 

future. 

If an opportunity arises to sell the 

Annex to an unrelated third party, PBTC 

will ensure that the Plan will receive the 

greater of the fair market value of the 

Plan’s beneficial ownership interest in 

the Annex at the time of the sale or the 

original purchase price paid by the Plan 

to acquire such interest, so that the Plan 

will not lose principal. It is further 

represented that PBTC will undertake to 

obtain for the Plan the best price 

possible for the sale of the Plan’s 

beneficial ownership interest in the 

Annex (provided that it would be in the 

interest of the Plan to sell such interest). 

In the event that repairs to the medical 

office building located on the Annex are 

required during the term of the Annex 

Lease, PBTC notes that the Employer, as 

lessee, would be responsible for the 

costs associated with such repairs, and 

that in the event of major repairs which 

are caused by fire or weather, the 

damage to the building would be 

covered by insurance. If the Employer is 

unable to bear the costs of repairs, or in 

the rare event some emergency threatens 

the integrity of the Annex, PBTC will 

take appropriate steps to protect the 

building. Depending on the 

circumstances, PBTC represents that it 

would first look to the principals of the 

Employer to pay their proportionate cost 

of such repairs. 

In the event of an eminent domain 

taking of the Annex by a governmental 

entity, PBTC represents that it will take 

whatever actions are appropriate to 

protect the Plan and its participants and 

beneficiaries, including resisting the 

eminent domain action, if that course is 

reasonable. 

As a condition of this exemption, 

immediately following the Purchase, the 

aggregate fair market value of the Plan’s 

interest in the Combined Facility shall 

not exceed 20 percent (20%) of the fair 

market value of the total assets of the 

Plan. PBTC has concluded that this 

proposed limitation on the percentage of 

the Plan’s assets that will be invested in 

the Combined Facility is protective of 

the Plan, because such a restriction will 

prevent an undue concentration of the 

Plan’s assets in any particular 

investment. 

With respect to the percentage of the 

Plan’s assets involved in the proposed 

transaction, Mr. Batis, in his appraisal 

report, dated February 15, 2012, 

determined that the fair market value of 

the Annex was $4,600,000. A 52 percent 

(52%) beneficial ownership interest in 

the Annex would equal $2,392,000 

($4,600,000 times .52 equals 

$2,392,000). Accordingly, the fair 

market value of the Plan’s 52 percent 

(52%) beneficial ownership interest in 

the Annex ($2,392,000) would 

constitute approximately 7.667 percent 

(7.667%) of the Plan’s total assets of 

$31,197,086, as of December 31, 2011. 

Further, in his appraisal report, dated 

February 15, 2012, Mr. Batis also 

determined that the fair market value of 

the Plan’s 100 percent (100%) beneficial 

ownership interest in the Original 

Facility was $3,800,000. So, the fair 

market value of the Plan’s 100 percent 

(100%) beneficial ownership in the 

Original Facility ($3,800,000) comprises 

an additional 12.180 percent (12.180%) 

of the value of the Plan’s total assets 

$31,197,086, as of December 31, 2011. 

Accordingly, as a result of the proposed 

Purchase transaction, the Plan’s 

aggregate beneficial ownership interest 

in the Combined Facility (7.667% and 

12.180%) attributable to the Plan’s 

interest in the Annex and the Original 

Facility, respectively) constitutes 

approximately 19.847 percent 

(19.847%) of the Plan’s total assets, as 

of December 31, 2011. 

After analyzing the terms and 

conditions of the proposed Purchase 

and the proposed Annex Lease, and 

based upon all of the financial and 

empirical data at its disposal, PBTC 

concluded, for the reasons discussed 

above, that the Purchase transaction and 

the Annex Lease transaction which are 

the subjects of this proposed exemption 

are in the interest of the Plan and its 

participants and beneficiaries, and 

protective of the rights of the 

participants and beneficiaries. 

16. In summary, the applicant 

represents that the transactions, as 

described herein, satisfy the 

requirements of section 408(a) of the Act 

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

because: (a) The Annex Lease represents 

an opportunity to generate a guaranteed 

cash flow to the Plan of twelve percent 

(12%) per annum, thereby providing a 

fixed rate of return to the individual 

accounts of participants and 

beneficiaries of the Plan and providing 

a more predictable method for 

ascertaining the retirement income 

available to such persons; (b) prior to 

mstockstill on DSK4VPTVN1PROD with NOTICES

32692 Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 

8For purposes of this proposed exemption, 

references to specific provisions of Title I of the 

Act, unless otherwise specified, refer also to the 

corresponding provisions of the Code. 

entering into the subject transactions, 

PBTC, acting as I/F on behalf of the 

Plan, will negotiate, review, and 

approve the terms of the Purchase of the 

Annex by the Plan, as well as the terms 

of the Annex Lease; (c) PBTC will take 

appropriate steps to resolve such 

conflicts of interest and in all events 

acts prudently and solely in the interest 

of the Plan with respect to all decisions 

pertaining to the acquisition, holding, 

management, and disposition of the 

Plan’s interest in the Annex; (d) to the 

extent that a conflict occurs, PBTC has, 

by its written agreement, the sole 

authority acting on behalf of the Plan to 

determine the resolution of any conflict 

that arises from the shared beneficial 

ownership of the Annex by the Plan and 

the LLC and that such determination 

shall be binding on the LLC; (e) the 

Purchase will be a one-time transaction 

for cash; (f) the terms and conditions of 

the Purchase and the Annex Lease will 

be no less favorable to the Plan than 

those obtainable by the Plan under 

similar circumstances when negotiated 

at arm’s length with unrelated third 

parties; (g) prior to entering into the 

subject transactions, PBTC will 

determine that the Purchase and the 

Annex Lease are in the interest of, and 

protective of the Plan and of its 

participants and beneficiaries; (h) the 

acquisition price paid by the Plan for 

the 52 percent (52%) beneficial 

ownership interest in the Annex will 

not be more than the fair market value 

of such interest, as determined by an 

independent, qualified appraiser on the 

date of the Purchase; (i) as of the date 

of the Purchase, an independent, 

qualified appraiser will determine the 

fair market value of the Original 

Facility; (j) immediately following the 

Purchase, the fair market value of the 

Combined Facility will not exceed 20 

percent (20%) of the Plan’s total assets 

at the time of the Purchase; (k) the Plan 

will not incur any fees, any costs, any 

commissions, and will not incur any 

other charges and expenses as a result 

of engaging in the Purchase and as a 

result of engaging in the Annex Lease, 

other than the necessary and reasonable 

fees payable to the I/F and to the 

independent, qualified appraiser, 

respectively; (l) PBTC will monitor and 

enforce compliance with the conditions 

of this proposed exemption and will 

monitor and enforce compliance with 

the terms of the Annex Lease, 

throughout the initial term of such lease 

and any renewal of such lease, and is 

responsible for legally enforcing the 

payment of rent and the proper 

performance of all other obligations of 

the Employer under the terms of such 

lease; (m) the rent paid to the Plan by 

the Employer under the initial term of 

the Annex Lease, and the rent paid to 

the Plan by the Employer during each 

renewal of such lease, will be based 

upon twelve percent (12%) of the fair 

market value of the Annex, as 

established by an independent, 

qualified appraiser at the time of such 

initial term and at the time of each 

renewal; (n) the rent under the Annex 

Lease will be adjusted at the 

commencement of the second year of 

the term of such lease and adjusted 

every second year thereafter, based on 

twelve percent (12%) of the fair market 

value of the Annex, as established by an 

independent, qualified appraiser at the 

time of each such adjustment of rent; (o) 

if twelve percent (12%) of the fair 

market value of the Annex, established 

by such appraisal at the time of any 

such adjustment, is greater than the then 

current base rent under the Annex 

Lease, then the base rent will be revised 

to reflect the increase in fair market 

value of the Annex, as established by 

such appraisal; (p) if twelve percent 

(12%) of the fair market value of the 

Annex, established by such appraisal at 

the time of any such adjustment, is less 

than or equal to the then current base 

rent, then the base rent will remain 

unchanged; (q) the terms of the Annex 

Lease will be triple net; (r) prior to 

entering into any renewal of the Annex 

Lease, PBTC, acting as the I/F on behalf 

of the Plan, will be responsible for 

approving any renewal of the Annex 

Lease beyond the initial term of such 

lease; (s) PBTC will review the 

appraisals as submitted periodically to 

determine the correct rental amount is 

paid to the Plan; and (t) the guarantors 

have a net worth in the aggregate in 

excess of $10,000,000, which is well in 

excess of the obligations of the 

Employer under the terms of the Annex 

Lease, including but not limited to the 

payment of rent for the initial ten (10) 

year term. 

Notice to Interested Persons 

Those persons who may be interested 

in the publication in the Federal 

Register of the Notice of Proposed 

Exemption (the Notice) include 

participants of the Plan and former 

participants of the Plan with account 

balances. 

It is represented that notification will 

be provided to each of these interested 

persons by first class mail, within 

fifteen (15) calendar days of the date of 

the publication of the Notice in the 

Federal Register. Such mailing will 

contain a copy of the Notice, as it 

appears in the Federal Register on the 

date of publication, plus a copy of the 

Supplemental Statement, as required, 

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

will advise such interested persons of 

their right to comment and to request a 

hearing. 

The Department must receive all 

written comments and requests for a 

hearing no later than forty-five (45) days 

from the date of the publication of the 

Notice in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: 

Angelena C. Le Blanc of the Department 

at (202) 693–8551. (This is not a toll-free 

number). 

El Paso Corporation Retirement Savings 

Plan (the Plan) Located in Houston, 

Texas 

[Application No. D–11710] 

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). 

Section I: Transactions 

If the proposed exemption is granted 

the restrictions of sections 406(a)(1)(A), 

406(a)(1)(E), 406(a)(2), 406(b)(1), 

406(b)(2), and 407(a)(1)(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) and 

4975(c)(1)(E) of the Code,8 shall not 

apply, in connection with a merger 

transaction (the Merger) between El 

Paso Corporation (El Paso) and Kinder 

Morgan, Inc. (KMI): 

(a) To the acquisition by the 

individually directed accounts of the 

participants of the Plan (the Invested 

Participants) of certain publicly traded 

warrant(s) (the Warrant(s)) issued by 

KMI, which will become a party in 

interest with respect to the Plan after the 

Merger; and 

(b) to the holding of the Warrants by 

the accounts in the Plan of the Invested 

Participants; provided that the 

conditions, as set forth in Section II of 

this proposed exemption, are satisfied at 

the time of the acquisition of the 

Warrants by the accounts in the Plan of 

such Invested Participants and 

throughout the duration of the holding 

of the Warrants in the accounts of such 

Invested Participants. 

Section II: Conditions 

The relief provided in this exemption 

is conditioned upon adherence to the 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 32693 

material facts and representations 

described, herein, and as set forth in the 

application file and upon compliance 

with the conditions, as set forth in this 

proposed exemption. 

(a) The Warrants will be acquired by 

the individually-directed accounts of 

the Invested Participants, all or a 

portion of whose accounts in the Plan 

hold the common stock of El Paso (the 

EP Stock); 

(b) The exchange by the shareholders, 

including the Invested Participants, of 

the EP Stock for Warrants will result 

from an independent act of El Paso and 

KMI, as corporate entities in connection 

with the Merger, and will occur 

automatically without any action or 

control on the part of such shareholders, 

including the Invested Participants; 

(c) The acquisition of the Warrants by 

the Invested Participants will occur in 

connection with the Merger, and such 

Warrants will be made available on the 

same terms to all shareholders of the EP 

Stock, including the Invested 

Participants; 

(d) The decisions with regard to the 

holding and disposition of the Warrants 

will be made by each of the Invested 

Participants in accordance with the 

provisions under the Plan for 

individually-directed accounts; 

(e) The Warrants allocated to the 

accounts of the Invested Participants in 

the Plan may be exercised or sold at any 

time by such Invested Participants 

giving investment directions in 

accordance with the provisions of the 

Plan; 

(f) The Invested Participants will not 

pay any fees or commissions in 

connection with the acquisition and 

holding of the Warrants, nor will the 

Invested Participants pay any fees on 

the exercise of the Warrants; and 

(g) Prior to entering into the Merger, 

El Paso will obtain all necessary 

approvals from any relevant state 

agencies and federal agencies, 

including, but not limited to the U.S. 

Department of Justice Antitrust 

Division, the Federal Energy Regulatory 

Commission, the Securities and 

Exchange Commission (SEC), and the 

Federal Trade Commission. 

Summary of Facts and Representations 

1. The Plan and the trust maintained 

as a part thereof are intended to qualify 

under sections 401(a) and 501(a) of the 

Code. The Plan is a defined contribution 

plan. The Plan is designated as a profit 

sharing plan under section 401(a)(27) of 

the Code; however, contributions are 

not dependent on whether any 

participating employer has current or 

accumulated profits. The Plan includes 

participant elective deferrals under 

section 401(k) of the Code and matching 

contribution under section 401(m) of the 

Code. The fair market value of the total 

assets of the Plan, as of October 31, 

2011, was $973,420,169. 

As of October 31, 2011 there were 

9,646 participants and beneficiaries in 

the Plan. The Plan provides that a 

participant may direct the investment of 

the assets in his account. The Plan is 

intended to be a plan as described in 

section 404(c) of the Act. 

2. The El Paso Corporation Retirement 

Saving Plan Committee and its members 

(the Committee) have discretion with 

respect to selecting the investment 

alternatives under the terms of the Plan. 

Further, the Committee has the 

responsibility and authority with 

respect to the management, acquisition, 

disposition, or investment of the assets 

of the Plan to the extent that such 

responsibility and authority is not 

delegated to participants, investment 

managers, or the trustee of the Plan. The 

Committee is the named fiduciary for 

the Plan and has general responsibility 

for the administration of the Plan and 

for reviewing the trustee. As such, the 

Committee is a party in interest with 

respect to the Plan, pursuant to section 

3(14)(A) of the Act. 

JPMorgan Chase Bank, National 

Association is the trustee of the Plan, 

and as such is a party in interest with 

respect to the Plan, pursuant to section 

3(14)(A) of the Act. JPMorgan 

Retirement Plan Services LLC is the 

recordkeeper for the Plan, and as such 

is a party in interest as a service 

provider with respect to the Plan, 

pursuant to section 3(14)(B) of the Act. 

3. El Paso, a Delaware corporation, 

owns a North American interstate 

natural gas pipeline system, exploration 

and production companies, and an 

emerging midstream business. El Paso is 

the sponsor of the Plan in which its 

employees and the employees of its 

subsidiaries participate. As an employer 

any of whose employees are covered by 

the Plan, El Paso is a party in interest 

to the Plan, pursuant to section 3(14)(C) 

of the Act. The authorized capital stock 

of El Paso consists of 1,500,000,000 

shares of EP Stock and 50,000,000 

shares of preferred stock, par value $.01 

per share. 

4. El Paso, in its capacity as the 

sponsor of the Plan, has amended the 

terms of the Plan to provide the EP 

Stock as an investment option under the 

Plan. The Plan provides that a 

participant may elect to invest assets 

held in his or her account in this 

investment option. All assets invested 

in this investment option are allocated 

to such individual participant’s account. 

The EP Stock is available under the EP 

Stock investment option, subject to 

certain limits on the percentage of new 

contributions and the percentage of the 

existing account balances which may be 

invested in the EP Stock. It is 

represented that the Plan held in the 

aggregate approximately 9,905,558 

shares of EP Stock, as of December 31, 

2010, which had a fair market value of 

$136,102,369, based on a price per share 

of $13.74, as of December 31, 2010. It is 

represented that the Plan held in the 

aggregate approximately 9,239,616 

shares of EP Stock, as of October 31, 

2011, which had a fair market value of 

$230,990,400, based on a price per share 

of $25.00, as of October 31, 2011. The 

fair market value of the EP Stock held 

in the accounts of Invested Participants 

in the Plan in the aggregate constitutes 

approximately 15 percent (15%), as of 

December 31, 2010, and approximately 

23.74 percent (23.74%), as of October 

31, 2011, of the fair market value of the 

total assets of the Plan. It is represented 

that the percentage of each participant’s 

account invested in the EP Stock varies 

according to participant investment 

elections and changes in the value of the 

EP Stock relative to other investment 

options. 

5. It is represented that the EP Stock 

is a ‘‘qualifying employer security,’’ as 

defined under section 407(d)(5) of the 

Act and 4975(e) of the Code. The Stock 

is listed for quotation on the New York 

Stock Exchange under the symbol ‘‘EP.’’ 

6. The application for exemption was 

filed on behalf of El Paso and its 

employees, officers, directors and 10 

percent (10%) or more shareholders, the 

Committee, and the Plan (collectively, 

the Applicants). The Applicants have 

requested an exemption with respect to 

the transactions which are the subject of 

this proposed exemption. In this regard, 

relief has been requested: (a) For the 

acquisition of the Warrants by accounts 

of the Invested Participants in the Plan 

in connection with the Merger; and (b) 

for the holding of the Warrants by the 

accounts of the Invested Participants in 

the Plan. 

It is represented that the subject 

transactions have not yet been 

consummated. It is represented that 

KMI and El Paso are merging for 

business reasons. It is represented that 

the combined enterprise will represent 

the largest natural gas pipeline network 

in the United States, the largest 

independent transporter of petroleum 

products in the United States, the 

largest transporter of carbon dioxide in 

the United States, and the largest 

independent terminal owner/operator in 

the United States. 

The Merger has been approved by the 

Board of Directors of El Paso and KMI. 

mstockstill on DSK4VPTVN1PROD with NOTICES

32694 Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 

9The Department, herein, is not providing any 

relief with respect to the acquisition and holding by 

the Invested Participants of the Class P Stock. 

In this regard, an Agreement and Plan 

of Merger, dated as of October 16, 2011, 

was entered into among KMI, Sherpa 

Merger Sub, Inc., Sherpa Acquisition 

LLC, Sirius Holdings Merger 

Corporation, Sirius Merger Corporation, 

and El Paso. 

KMI has filed a Registration Statement 

with the SEC on Form S–4 in 

connection with the proposed 

transactions contemplated by the 

Merger, including a definitive 

Information Statement/Prospectus of 

KMI and a definitive Proxy Statement of 

El Paso. The Registration Statement was 

declared effective by the SEC on January 

30, 2012. Post-effective amendments to 

the Registration Statement were filed on 

February 27, 2012, and on March 1, 

2012. KMI and El Paso mailed the 

definitive Information Statement/ 

Prospectus of KMI and the definitive 

Proxy Statement of El Paso to their 

respective shareholders on or about 

January 31, 2012. Shareholders of both 

KMI and El Paso have now approved the 

transaction. In this regard, KMI’s 

stockholder meeting was held on March 

2, 2012, and El Paso’s stockholder 

meeting was held on March 9, 2012. On 

March 9, 2011, the shareholders of El 

Paso overwhelmingly approved the 

Merger. Approximately 79 percent 

(79%) of all the shares of EP Stock were 

voted and more than 95 percent (95%) 

of those shares were voted in favor of 

the Merger. The Merger is expected to 

close in the second quarter of 2012, 

subject to the parties to the Merger 

obtaining the customary regulatory 

approvals. 

7. It is represented that the Warrants 

to be acquired by the Plan in connection 

with the Merger will satisfy the 

definition of ‘‘employer securities,’’ 

pursuant to section 407(d)(1) of the Act, 

because such Warrants will be securities 

issued by KMI, which, as a result of the 

Merger, will become the parent 

company of El Paso. However, as the 

Warrants are not shares of stock or 

marketable obligations, or interests in a 

publicly-traded partnership, such 

Warrants do not meet the definition of 

‘‘qualifying employer securities,’’ as set 

forth in section 407(d)(5) of the Act. In 

this regard, the subject transactions will 

constitute an acquisition and holding on 

behalf of the Plan of Warrants which are 

‘‘employer securities,’’ but which are 

not ‘‘qualifying employer securities,’’ in 

violation of section 407(a) of the Act. 

Accordingly, the Applicants have 

requested relief from sections 

406(a)(1)(A), 406(a)(1)(E), 406(a)(2), and 

407(a)(1)(A) of the Act. 

The Applicants also seek exemptive 

relief from section 406(b)(1) and 

406(b)(2) of the Act with regard to 

conflicts of interest which could arise 

under the facts and circumstances, as 

set forth, herein and in the application 

file. 

8. It is represented that the decision 

to enter into the Merger will be made by 

El Paso and KMI in their corporate 

capacities. Under the terms of the 

Merger, El Paso will become a whollyowned subsidiary of KMI. According to 

representations in KMI’s Form 10–Q, 

the total purchase price to be paid by 

KMI for the acquisition of El Paso is 

expected to be approximately $38 

billion. 

9. KMI will issue to each shareholder 

of EP Stock, including the Invested 

Participants, for each share of EP Stock 

held by each such shareholder either: (a) 

$25.91 in cash without interest; or (b) 

0.9635 of a share of the Class P common 

stock of KMI (the Class P Stock)(which, 

fractional share had a rounded value of 

$31.20, based on the closing price of the 

Class P Stock at $32.38, as of January 27, 

2012); or (c) $14.65 in cash without 

interest, plus 0.4187 of a share of the 

Class P Stock (which, fractional share 

had a rounded value of $13.56, based on 

the closing price of the Class P Stock at 

$32.38, as of January 27, 2012). The 

closing price of the EP Stock, as of 

January 27, 2012 was $26.54. 

Whichever option each of the 

shareholders of the EP Stock, including 

the Invested Participants, elect, is 

subject to certain conditions applicable 

to all such shareholders. If any of the 

shareholders of the EP Stock, including 

any of the Invested Participants, make 

no election, such shareholders will be 

deemed to have elected to receive 

option (c), as described above, the Class 

P Stock and cash. All elections will be 

subject to proration. 

Regardless of which election is made 

by the shareholders of the EP Stock, 

including the Invested Participants, and 

even if no election is made by such 

shareholders, 0.640 of a Warrant will be 

issued with respect to each share of EP 

Stock held by such shareholders, 

including the Invested Participants, on 

the closing date of the Merger. It is 

represented that each such fraction of a 

Warrant has an assumed value of $0.96. 

Warrants will be allocated to the 

accounts of the Invested Participants 

whose accounts held EP Stock on the 

closing date of the Merger. 

10. It is represented that the Class P 

Stock is publicly traded on the New 

York Stock Exchange. The authorized 

capital stock of KMI consists of 

2,819,462,927 shares of which 

10,000,000 shares are preferred stock 

(par value $0.01 per share) and 

2,809,462,927 shares are common stock 

(par value $0.01 per share). At the close 

of business on October 13, 2011, 

110,898,898 shares of Class P Stock 

were issued and outstanding, and no 

shares of Class P Stock were held by 

KMI in its treasury. 

It is represented that any Class P 

Stock acquired as a result of the Merger 

by the Invested Participants will become 

a ‘‘qualifying employer security,’’ as 

defined under section 407(d)(5) of the 

Act and section 4975(e) of the Code, 

because the Class P Stock, will after the 

Merger, be a security issued by KMI, the 

parent company of El Paso.9

11. It is represented that the 

shareholders, including the Invested 

Participants, will receive the Warrants 

and other consideration automatically 

upon the closing date of the Merger. In 

this regard, it is represented that the 

Invested Participants and the Committee 

have no control over the receipt of the 

Warrants. However, prior to the closing 

date of the Merger, each of the Invested 

Participants has the right to transfer the 

assets in his or her account in the Plan 

which is invested in the EP Stock to any 

other investment option offered under 

the Plan and thereby, avoid receiving 

the Warrants. 

12. It is represented that the Warrants 

will be issued pursuant to a certain 

warrant agreement (the Warrant 

Agreement) between KMI and a warrant 

agent (the Warrant Agent). It is 

represented that the Warrant Agent is 

Computershare Trust Company, N.A. 

and is an unrelated party to El Paso and 

KMI. The Warrant Agreement provides 

that the Warrants will be registered 

under the Securities Act of 1933, as 

amended, and the rules and regulations 

promulgated thereunder, and will be 

registered under the Securities 

Exchange Act of 1934, and the rules and 

regulations promulgated thereunder. 

It is represented that the Warrants 

will be issued to the Invested 

Participants on the same basis that such 

Warrants will be issued to all other 

shareholders of the EP Stock. Pursuant 

to the terms of the Warrant Agreement, 

each of the shareholders of the EP Stock, 

including each of the Invested 

Participants, for each Warrant held will 

be able to purchase one share of Class 

P Stock (par value $0.01 per share) at 

the exercise price of $40 per share (the 

Exercise Price) during the period 

beginning on the date of the Warrant 

Agreement and ending on the five-year 

anniversary of the date of the Warrant 

Agreement (the Five Year Term). 

13. The Warrants may be exercised in 

whole or in part by presentation of a 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 32695 

10With regard to the exercise of the Warrants, it 

is represented that the Invested Participants will 

rely on the relief provided by the statutory 

exemption, pursuant to section 408(e) of the Act. 

The Department is offering no view, as to whether 

the requirements of the statutory exemption 

provided in section 408(e) of the Act will be 

satisfied. Further, the Department, herein, is not 

providing any relief with respect to the exercise of 

the Warrants. 

11Pursuant to section 1.21 of the Warrant 

Agreement, KMI has the right, except as limited by 

law, or other agreements to purchase or otherwise 

acquire Warrants at such times, in such manner, 

and for such consideration as it and the applicable 

holder may deem appropriate. The Department, 

herein, is not providing any exemptive relief with 

respect to the purchase nor with respect to the 

acquisition by KMI of any Warrants from the 

Invested Participants in the Plan, as holders of such 

Warrants. 

12The Applicants have not requested exemptive 

relief with respect to the provision of brokerage 

services by CISC to the Plan. In this regard, the 

Applicants rely on the relief provided by section 

408(b)(2) of the Act for services rendered to a plan, 

if the services are necessary, the contract or 

arrangement for such services is reasonable, and 

only reasonable compensation is paid for such 

services. The Department is offering no relief, 

herein, for the provision of brokerage services by 

CISC to the Plan and is providing no view, as to 

whether the requirements of the statutory 

exemption provided in section 408(b)(2) of the Act 

will be satisfied with respect to the provision of 

brokerage services by CISC to the Plan. 

13The Applicants have not requested exemptive 

relief with respect to the sweep account. In this 

regard, the Applicants maintain that the sweep 

services are provided to the Plan by CISC pursuant 

to a service agreement which satisfies section 

408(b)(2) of the Act. The Applicants represent that 

neither Plan fiduciaries nor CISC exercise 

discretion with respect to such sweep services. The 

Department is offering no view, as to whether the 

requirements of the statutory exemption provided 

in section 408(b)(2) of the Act will be satisfied. 

Further, the Department, herein, is not providing 

any relief with respect to the provision of sweep 

services by CISC to the Plan. 

14The Applicants have not requested exemptive 

relief with respect to the receipt of a fee by CISC 

for the provision of brokerage services to the Plan. 

In this regard, the Applicants rely on the relief 

provided by section 408(b)(2) of the Act for 

payment by a plan to a party in interest for services 

rendered to such plan, if the services are necessary, 

the contract or arrangement for such services is 

Continued 

Warrant along with a Notice of Exercise 

to the Warrant Agent.10 No fractional 

shares of Class P Stock will be issued 

upon the exercise of any Warrant, but 

KMI will pay the cash value of such 

fractional shares equal to the market 

price of the Class P Stock on the trading 

day on which such Warrants are 

exercised. Payment of the Exercise Price 

can be made at the option of the holder 

of the Warrants either: (a) In cash; (b) by 

delivering a certified or official bank 

check payable to the Warrant Agent; or 

(c) by delivering a written direction to 

the Warrant Agent that the holder 

desires to exercise Warrants, pursuant to 

a ‘‘cashless exercise.’’ 

14. In addition to the right to exercise 

the Warrants, the Warrants may be sold, 

assigned, transferred, pledged, 

encumbered, or in any other manner 

transferred or disposed of, in whole or 

in part in accordance with the terms of 

the Warrant Agreement and all 

applicable laws. In this regard, Invested 

Participants will have the right to sell 

the Warrants allocated to their accounts 

in the Plan at any time and from time 

to time during the Five Year Term, in 

the same manner as other holders of the 

Warrants.11 It is represented that the 

Warrants will be listed on the New York 

Stock Exchange, the NASDAQ Stock 

Exchange, or another stock exchange 

reasonably agreed to by KMI and El 

Paso. Proceeds from the sale of the 

Warrants by Invested Participants may 

be directed into any other investment 

option under the Plan. 

15. It is represented that the 

Committee will not take any action to 

cause the Invested Participants to 

exercise or sell the Warrants. If an 

Invested Participant takes no action 

either to exercise or sell the Warrants, 

then such Warrants will expire at the 

end of the Five Year Term. 

16. It is represented that one of the 

available investment options under the 

Plan will be a newly established limited 

brokerage window. The limited 

brokerage window will be a selfdirected brokerage account that will 

allow Invested Participants to sell or 

exercise Warrants and direct any cash 

proceeds into another investment option 

under the Plan. The Warrants and the 

Class P Stock will be the only securities 

traded through the limited brokerage 

window. 

Brokerage services to the limited 

brokerage window are offered by Chase 

Investment Services Corp. (CISC). It is 

represented that CISC is a member of 

Financial Industry Regulatory 

Authority. The clearing and custody 

services are provided by J.P. Morgan 

Clearing Corp. (JPMCC). Both CISC and 

JPMCC are members of the Securities 

Investor Protection Corporation. Both 

CISC and JPMCC are separately 

registered broker dealers. Both CISC and 

JPMCC are affiliates of JPMorgan Chase 

and Company. CISC and JPMCC, are 

parties in interest, as service providers 

to the Plan, pursuant to section 3(14)(B) 

of the Act. It is represented that CISC, 

and JPMCC are unrelated to KMI and to 

El Paso. 

The brokerage arrangement is a 

prohibited transaction under section 

406(a) of the Act, because it involves the 

furnishing of services between a party in 

interest (i.e., CISC), and the Plan and the 

use of Plan assets to pay for those 

services. The Applicants represent that 

the brokerage arrangement does not give 

rise to a prohibited transaction under 

section 406(b) of the Act, because the 

Plan fiduciaries have contracted for the 

brokerage service to be provided to the 

Plan and do not exercise discretion with 

respect to the brokerage service or the 

fee.12 Further, the Applicants represent 

that CISC has no discretion with respect 

to the sale or exercise of the Warrants, 

and thus, will not be a fiduciary with 

respect to the Plan, in that Warrants 

held in the limited brokerage account 

will be exercised or sold only at the 

direction of the Invested Participants. 

When an Invested Participant elects to 

sell or exercise a Warrant through the 

limited brokerage window, it is 

represented that CISC will be acting as 

an agent and will not engage in any 

principal transactions. In this regard, 

CISC will send the order to JP Morgan 

Securities, LLC (JPMS). JPMS is a party 

in interest, as a service provider to the 

Plan, pursuant to section 3(14)(B) of the 

Act. It is represented that JPMS is 

unrelated to KMI and to El Paso. 

The Warrants deposited in the 

accounts of Invested Participants in the 

Plan will be allocated to the limited 

brokerage window. The Invested 

Participants will not pay any fees or 

commissions in connection with the 

acquisition or holding of the Warrants. 

The Warrants will be held by the Plan 

from the closing date of the Merger until 

each of the Invested Participants 

disposes of the Warrants allocated to his 

or her account by exercising the 

Warrants or by directing the sale of the 

Warrants through the limited brokerage 

window. 

Upon the sale of Warrants through the 

limited brokerage window, all the cash 

proceeds will be swept automatically 

into a money market account on a daily 

basis; and subsequently, invested in 

another Plan investment option, as 

directed by an Invested Participant. The 

sweep account is maintained by CISC; 

however, CISC will have no discretion 

with respect to the amount or timing of 

any amount swept.13

Upon the sale of a Warrant, a fee will 

be deducted from the proceeds of the 

transaction, in the same manner that a 

fee would be deducted in connection 

with the sale of EP Stock prior to the 

Merger. If an Invested Participant uses 

the self-service options available under 

the Plan for changing the Plan 

investment allocation, the fee for the 

sale of a Warrant will be $9.99 for up 

to 1,000 Warrants and $0.02 per Warrant 

thereafter. If an Invested Participant 

requests a CISC representative to assist 

with the transaction, the fee will be 

$55.00 for the sale of up to 1,000 

Warrants and $0.02 per Warrant 

thereafter.14

mstockstill on DSK4VPTVN1PROD with NOTICES

32696 Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 

reasonable, and only reasonable compensation is 

paid for such services. The Department is offering 

no relief, herein, for the receipt of a fee by CISC for 

the provision of brokerage services to the Plan, nor 

is the Department providing any relief for the 

receipt of compensation for the provision of 

clearing or custody services by JPMCC or for the 

receipt of compensation for the execution of the 

order by JPMS. Further, the Department, herein, is 

offering no view, as to whether the requirements of 

the statutory exemption provided in section 

408(b)(2) of the Act will be satisfied with respect 

to the receipt of fees by CISC, JPMCC, and JPMS. 

Upon exercise of a Warrant, the shares 

of the Class P Stock for which such 

Warrant was exercised will be credited 

to the Invested Participant’s account 

and held in the limited brokerage 

window until such Invested Participant 

makes an investment change election. 

No fees will be charged in connection 

with the exercise of a Warrant. 

It is represented that prior to the 

closing on the Merger, El Paso intends 

to amend the Plan to prohibit any 

participants in the Plan from acquiring 

additional Warrants through the Plan 

after the Merger closes. It is represented 

that the decision to amend the Plan to 

include limitations on the investments 

is a settlor function that does not 

involve Plan fiduciaries. It is 

represented that the decision by El Paso 

to limit the acquisition of additional 

Warrants by the Plan was in part to 

encourage participants to diversify the 

investments in such participants’ 

individually-directed accounts in the 

Plan. 

17. The Applicants represent that the 

proposed exemption is administratively 

feasible. In this regard, the acquisition 

and holding of the Warrants by the 

accounts of the Invested Participants in 

the Plan will be a one-time transaction 

that involves an automatic distribution 

of such Warrants to all such Invested 

Participants. It is represented that it is 

relatively common in stock transactions, 

such as the anticipated transaction 

reflected in the Merger, to include stock 

warrants as part of the consideration for 

the stock of the target corporation. 

18. The Applicants represent that the 

transactions which are the subject of 

this proposed exemption are in the 

interest of the Plan, because the subject 

transactions represent a valuable 

opportunity to the accounts of the 

Invested Participants in the Plan to 

realize the potential value of the Merger. 

If the exemption is not granted, the 

Invested Participants would be deprived 

of investment returns that could be 

realized, if the Warrants were to be 

exercised or sold during the Five Year 

Term. 

19. The Applicants also represent that 

the proposed exemption is in the 

interest of the accounts in the Plan of 

the Invested Participants. In this regard, 

the Invested Participants may select the 

most advantageous time to exercise and/ 

or to liquidate the Warrants. 

20. The Applicants further represent 

that the proposed exemption provides 

sufficient safeguards for the protection 

of the Plan and its participants and 

beneficiaries. In this regard, the 

acquisition and holding of the Warrants 

will occur automatically, as a result of 

the Merger. In addition, as the Warrants 

will be publicly-traded securities, the 

fair market value of the Warrants, if the 

Invested Participants choose to sell such 

Warrants, will be determined by the 

market. 

21. In summary, the Applicants 

represent that the subject transactions 

will satisfy the statutory criteria for an 

exemption under section 408(a) of the 

Act because: 

(a) The Warrants will be acquired by 

the individually-directed accounts of 

the Invested Participants, all or a 

portion of whose accounts in the Plan 

hold the EP Stock; 

(b) The exchange by the shareholders, 

including the Invested Participants, of 

the EP Stock for the Warrants will result 

from an independent act of El Paso and 

KMI, as corporate entities in connection 

with the Merger, and will occur 

automatically without any action or 

control on the part of such shareholders, 

including the Invested Participants; 

(c) The acquisition of the Warrants by 

the Invested Participants will occur in 

connection with the Merger, and such 

Warrants will be made available on the 

same terms to all shareholders of the EP 

Stock, including the Invested 

Participants; 

(d) The decisions with regard to the 

holding and disposition of the Warrants 

will be made by each of the Invested 

Participants in accordance with the 

provisions under the Plan for 

individually-directed accounts; 

(e) The Warrants allocated to the 

accounts of the Invested Participants in 

the Plan may be exercised or sold at any 

time by such Invested Participants 

giving investment directions in 

accordance with the provisions of the 

Plan; 

(f) The Invested Participants will not 

pay any fees or commissions in 

connection with the acquisition and 

holding of the Warrants, nor will the 

Invested Participants pay any fees on 

the exercise of the Warrants; and 

(g) Prior to entering into the Merger, 

El Paso will obtain all necessary 

approvals from any relevant state 

agencies and federal agencies, 

including, but not limited to the U.S. 

Department of Justice Antitrust 

Division, the Federal Energy Regulatory 

Commission, the SEC, and the Federal 

Trade Commission. 

Notice to Interested Persons 

Only those participants and 

beneficiaries whose accounts are 

invested in EP Stock on the closing date 

of the Merger will be affected by the 

subject transactions. Because 

participants may change their 

investment directions daily, it is 

represented that it is not possible to 

determine the exact number of affected 

participants and beneficiaries in 

advance of the closing date of the 

Merger. 

Accordingly, the Applicants represent 

that, if the Merger closes before the 

Notice to Interested Persons is prepared 

and mailed, El Paso will provide 

notification of the publication in the 

Federal Register of the Notice of 

Proposed Exemption (the Notice) to all 

participants, beneficiaries, and alternate 

payees with account balances in the 

Plan, whose account (or portion thereof) 

was invested in the EP Stock on the 

closing date of the Merger. The 

Applicants further represent that if the 

Merger closes after the Notice to 

Interested Persons is prepared and 

mailed, El Paso will provide notification 

of the publication in the Federal 

Register of the Notice to all participants, 

beneficiaries, and alternate payees who 

have an account in the Plan at the time 

the Notice to Interested Persons is 

prepared. 

It is represented that all such 

interested persons will be notified of the 

publication of the Notice by first class 

mail, to each such interested person’s 

most recent address maintained in the 

Plan administrator’s records for each 

such interested person, within thirty 

(30) days of publication of the Notice in 

the Federal Register. Such mailing will 

contain a copy of the Notice, as it 

appears in the Federal Register on the 

date of publication, plus a copy of the 

Supplemental Statement, as required, 

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

will advise all interested persons of 

their right to comment and to request a 

hearing. 

A11 written comments and/or 

requests for a hearing must be received 

by the Department from interested 

persons within 60 days of the 

publication of this proposed exemption 

in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Angelena C. Le Blanc of the Department, 

telephone (202) 693–8540. (This is not 

a toll-free number.) 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 32697 

15Pursuant to 29 CFR 2510.3–3(b) of the 

Department’s regulations, there is no jurisdiction 

with respect to the Plan under Title I of the Act. 

However, there is jurisdiction under Title II of the 

Act, pursuant to section 4975 of the Code. 

16Under special rules applicable to 

‘‘S-Corporations,’’ section 512(e) of the Code states 

that if an organization described in section 

1361(c)(6) holds stock in an ‘‘S-Corporation,’’ such 

interest shall be treated as an interest in an 

unrelated trade or business, and all items of 

income, loss, or deduction and any gain or loss on 

disposition of the stock in the ‘‘S-Corporation’’ shall 

be taken into account in computing the unrelated 

business taxable income of such organization. 

Section 1361(c)(6) of the Code states that an 

organization which is described in section 401(a) or 

501(c)(3), and which is exempt from taxation under 

section 501(a), such as the Plan, may be a 

shareholder in an ‘‘S-Corporation.’’ 

Ed Laur Defined Benefit Plan (the Plan) 

Located in Amarillo, TX 

[Application No. D–11714] 

Proposed Exemption 

The Department is considering 

granting an exemption under the 

authority of section 4975(c)(2) of the 

Code in accordance with the procedures 

set forth in 29 CFR Part 2570, Subpart 

B (76 FR 66637, 66644, October 27, 

2011). If the exemption is granted, the 

sanctions resulting from the application 

of section 4975 of the Code, by reason 

of section 4975(c)(1)(A) through (E) of 

the Code,15 shall not apply to the 

proposed cash sale by the Plan to Ed 

Laur (Mr. Laur) of shares of stock (the 

Stock) of EnergyNet.com (EnergyNet); 

provided that: 

(a) The sale of the Stock by the Plan 

to Mr. Laur is a one-time transaction in 

which the Plan receives cash; 

(b) As the result of the sale, the Plan 

receives the fair market value of the 

Stock, as determined by the CFO of 

EnergyNet, as of the most recent 

valuation of such Stock; 

(c) The Plan pays no commissions or 

fees in regard to the transaction; and 

(d) The terms of the sale are no less 

favorable to the Plan than those the Plan 

would have received in similar 

circumstances when negotiated at arm’s 

length with unrelated third parties. 

Summary of Facts and Representations 

1. The Plan is a defined benefit plan 

established in 2001. The Plan is 

sponsored by Ed Laur (Mr. Laur), a sole 

proprietor. As of December 31, 2010, the 

Plan had $335,442.64 in assets. It is 

represented that the estimated value of 

the Plan’s assets, as of December 31, 

2011, is $350,000. Mr. Laur and his 

wife, Mrs. Laur are the only participants 

in the Plan. It is represented that the 

benefit accruals under the Plan were 

frozen in 2006 and currently remain 

frozen. 

2. Mr. Laur is the trustee and primary 

fiduciary with respect to the Plan. Mr. 

Laur works as a consultant in the grain 

industry. 

3. EnergyNet is a local Amarillo, 

Texas corporation. EnergyNet is not 

traded on any exchange, but is traded 

locally in the Amarillo, Texas area. It is 

represented that there is no relationship 

between Mr. Laur and the ownership of 

EnergyNet. It is represented that 

EnergyNet in 2011 converted from a 

C-corporation to an S-corporation status. 

4. In 2002, 2005, 2007, and 2010, the 

Plan purchased the Stock of EnergyNet 

for investment purposes from 

EnergyNet. It is represented that the 

Plan purchased a total of 161,012 shares 

of the Stock at an aggregate cost of 

$39,082.40. It is represented that the 

estimated amount of income received by 

the Plan from EnergyNet through 

December 31, 2011 is $5,000. It is 

further represented that the Plan did not 

incur any expenses as a result of the 

holding of the Stock through December 

31, 2011. It is represented that, as of 

December 31, 2011, the Stock held by 

the Plan had an aggregate value of 

$40,253. It is represented that the value 

of the Stock represents slightly less than 

12% of the total fair market value of the 

assets of the Plan. 

5. As a result of the conversion in 

2011 of EnergyNet from a 

‘‘C-Corporation’’ to an ‘‘S-Corporation,’’ 

it is represented that the Plan became a 

‘‘tax payer’’ with respect to the income 

pass-through from EnergyNet to the 

Plan. As a result of the conversion, it is 

represented that the Plan will have 

received, pursuant to section 512(e) of 

the Code,16 unrelated business taxable 

income (UBTI) on the Plan’s share of the 

2011 dividends from EnergyNet in the 

amount of $11,000. The tax on such 

amount at a rate of 25.7 percent (25.7%) 

is represented to be $2,827 ($11,000 × 

.257 = $2,827). In addition, it is 

represented that the Plan will incur the 

cost of preparing and filing Form 990– 

T. 

6. Mr. Laur proposes to purchase the 

Stock from the Plan at a purchase price 

which is the current fair market value of 

the Stock. 

7. Mr. Laur represents that the 

proposed transaction is feasible in that 

it will be a one-time transaction in 

which the Plan will receive cash. In 

addition, Mr. Laur will bear any and all 

costs associated with the subject 

transaction and the filing of the 

application for exemption. 

8. Mr. Laur represents that the 

proposed transaction is in the interest of 

the Plan, in that the Plan will receive in 

cash the fair market value of the Stock. 

Further, it is represented that as the 

conversion of EnergyNet from a 

‘‘C-Corporation’’ to an ‘‘S-Corporation’’ 

was unforeseen when the Stock was 

purchased, it is represented that the 

Plan never intended to become subject 

to UBTI. Accordingly, it is represented 

that it would be in the interest of the 

Plan to avoid incurring UBTI on the 

2011 dividends from EnergyNet and 

also to avoid the cost of preparing and 

filing Form 990–T. Further, the 

proposed exemption is in the interest of 

the Plan in that the Plan will pay no 

commissions or fees with regard to the 

subject transaction. 

9. It is represented that the proposed 

transaction has sufficient safeguards in 

place for the protection of the Plan and 

its participants and beneficiaries. In this 

regard, the fair market value of the Stock 

will be determined, as of the most 

recent valuation date, by Jim Black (Mr. 

Black), the CFO of EnergyNet. It is 

represented that Mr. Black at the end of 

each calendar year provides a written 

stock value to Mr. Laur in Mr. Laur’s 

capacity as the trustee of the Plan. It is 

represented that based on a letter from 

Mr. Black, the aggregate value of the 

161,012 shares of the Stock held by the 

Plan is $40,253, as of December 31, 

2011. 

10. In summary, Mr. Laur represents 

that the proposed transaction satisfies 

the criteria of section 4975(c)(2) of the 

Code because: 

(a) The sale of the Stock by the Plan 

to Mr. Laur will be a one-time 

transaction in which the Plan will 

receive cash; 

(b) As the result of the sale, the Plan 

will receive the fair market value of the 

Stock, as determined by the CFO of 

EnergyNet, as of the most recent 

valuation of such Stock; 

(c) The Plan will pay no commissions 

or fees in regard to the transaction; and 

(d) The terms of the sale will be no 

less favorable to the Plan than those the 

Plan would have received in similar 

circumstances when negotiated at arm’s 

length with unrelated third parties. 

Notice to Interested Persons 

As Mr. Laur and Mrs. Laur, his wife, 

are the only participants in the Plan, it 

has been determined that there is no 

need to distribute the Notice of 

Proposed Exemption (the Notice) to 

interested persons. Therefore, comments 

and requests for a hearing must be 

received by the Department within 

thirty (30) days of the date of 

publication of this Notice in the Federal 

Register. 

FOR FURTHER INFORMATION CONTACT: 

Angelena C. Le Blanc of the Department, 

mstockstill on DSK4VPTVN1PROD with NOTICES

32698 Federal Register / Vol. 77, No. 106 / Friday, June 1, 2012 / Notices 

telephone (202) 693–8551. (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 or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

section 404(a)(1)(b) of the Act; nor does 

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

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

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 25th day of 

May, 2012. 

Lyssa E. Hall, 

Acting Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–13264 Filed 5–31–12; 8:45 am] 

BILLING CODE 4510–29–P 

DEPARTMENT OF LABOR 

Mine Safety and Health Administration 

[OMB Control No. 1219–0121] 

Proposed Extension of Existing 

Information Collection; Safety 

Standards for Roof Bolts in Metal and 

Nonmetal Mines and Underground 

Coal Mines 

AGENCY: Mine Safety and Health 

Administration, Labor. 

ACTION: Request for public comments. 

SUMMARY: As part of its continuing effort 

to reduce paperwork and respondent 

burden, the Department of Labor 

conducts a pre-clearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995. This 

program helps to assure that requested 

data can be provided in the desired 

format, reporting burden (time and 

financial resources) is minimized, 

collection instruments are clearly 

understood, and the impact of collection 

requirements on respondents can be 

properly assessed. Currently, the Mine 

Safety and Health Administration is 

soliciting comments concerning the 

extension of the information collection 

for 30 CFR 56.3203, 57.3203, and 

75.204(a) and (f)(6). OMB last approved 

this information collection request on 

September 28, 2009. The package 

expires on September 30, 2012. 

DATES: All comments must be 

postmarked or received by midnight 

Eastern Time on July 31, 2012. 

ADDRESSES: Comments concerning the 

information collection requirements of 

this notice must be clearly identified 

with ‘‘OMB 1219–0121’’ and sent to the 

Mine Safety and Health Administration 

(MSHA). Comments may be sent by any 

of the methods listed below. 

• Federal E–Rulemaking Portal: 

http://www.regulations.gov. Follow the 

on-line instructions for submitting 

comments. 

• Facsimile: 202–693–9441, include 

‘‘OMB 1219–0121’’ in the subject line of 

the message. 

• Regular Mail or Hand Delivery: 

MSHA, Office of Standards, 

Regulations, and Variances, 1100 

Wilson Boulevard, Room 2350, 

Arlington, VA 22209–3939. For hand 

delivery, sign in at the receptionist’s 

desk on the 21st floor. 

FOR FURTHER INFORMATION CONTACT: Greg 

Moxness, Chief, Economic Analysis 

Division, Office of Standards, 

Regulations, and Variances, MSHA, at 

moxness.greg@dol.gov (email); 202– 

693–9440 (voice); or 202–693–9441 

(facsimile). 

SUPPLEMENTARY INFORMATION: 

I. Background 

Accidents involving falls of roof, face, 

and rib in underground metal, 

nonmetal, and coal mines or falls of 

highwall in surface metal and nonmetal 

mines, are among the leading causes of 

injuries and deaths. Prevention or 

control of falls of roof, face, and rib is 

uniquely difficult because of the variety 

of conditions encountered in mines that 

can affect the stability of various types 

of strata and the changing nature of the 

forces affecting ground stability at any 

given operation at any given time. Roof 

and rock bolts and accessories are an 

integral part of ground control systems 

at these mines and are used to prevent 

the fall of roof, face, and rib. 

Advancements in technology of roof and 

rock bolts and accessories have aided in 

reducing the hazards associated with 

falls of roof, face, and rib. This 

information collection addresses the 

recordkeeping associated with: 

§ 56.3203 ............................... Rock fixtures 

§ 57.3203 ............................... Rock fixtures 

§ 75.204(a) & (f)(6) ................ Roof bolting 

II. Desired Focus of Comments 

The Mine Safety and Health 

Administration (MSHA) is soliciting 

comments concerning the proposed 

extension of the information collection 

related to safety standards for roof bolts 

in surface and underground metal and 

nonmetal mines and underground coal 

mines. MSHA is particularly interested 

in comments that: 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information has practical utility; 

• Evaluate the accuracy of the 

MSHA’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Suggest methods to enhance the 

quality, utility, and clarity of the 

information to be collected; and 

• Address the use of appropriate 

automated, electronic, mechanical, or 

other technological collection 

techniques or other forms of information 

technology (e.g., permitting electronic 

submissions of responses), to minimize 

the burden of the collection of 

information on those who are to 

respond. 

The public may examine publicly 

available documents, including the 

mstockstill on DSK4VPTVN1PROD with NOTICES