Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 19345 

requested that the Department make 

corresponding changes to the Summary 

of Facts and Representations (the 

Summary) section of the Proposal. The 

Department notes these revisions to 

Representation 8 of the Summary. 

Condition (e) of the Proposal requires 

Citigroup to comply with certain 

recordkeeping requirements. However, 

Citigroup stated in its comment letter 

that only Condition (c) of the Proposal 

would lend itself to the maintenance of 

records regarding compliance with the 

exemption. Accordingly, Citigroup has 

requested that Condition (e) be revised 

to limit the recordkeeping requirement 

to ‘‘the conditions of subsection (c) of 

the exemption.’’ The Department does 

not agree with the Applicant on this 

point because recordkeeping would 

apply to the continuing validity of the 

exemption as a whole. Accordingly, the 

Department has not changed the 

condition. 

Condition (f) of the Proposal currently 

provides that ‘‘Citigroup has adopted 

procedures to afford ample protection of 

the interests of the participants and 

beneficiaries of employee benefit 

plans.’’ The Applicant stated that it is 

unsure what the word ‘‘ample’’ is 

intended to mean and requested in its 

comment letter that the Department 

delete this word from Condition (f). The 

Department has done so. The Applicant 

also requested that the deletion of the 

word ‘‘ample’’ be made from 

Representation 8 of the Summary. The 

Department so notes. 

In its comment letter, the Applicant 

had other requested changes to the 

Summary. The Applicant noted that the 

last sentence of Representation 2 

indicates that CBB has no ERISA plan 

clients and is not expected to have any 

such clients in the future. According to 

the Applicant, although CBB does not 

act as a fiduciary to any ERISA plan, 

Citigroup cannot guarantee that an 

ERISA plan will never be a counterparty 

to any transaction entered into by CBB. 

As a result, the Applicant requested that 

the Department revise the last sentence 

of Representation 2 of the Proposal to 

state that ‘‘* * *CBB is not expected to 

have any ERISA plan clients for whom 

it will perform any fiduciary or QPAM 

services or otherwise exercise 

discretionary control over plan assets in 

the future.’’ In response, the Department 

notes this revision. 

The Applicant represents that after a 

further review of the facts and 

circumstances surrounding the criminal 

convictions of CBB, it has determined 

that: (a) prior to his termination of 

employment, Jose de Penaranda de 

Franchimont was the Chief Country 

Officer and Chief Executive Officer of 

CBB, rather than its Chief Compliance 

Officer; and (b) the convictions were 

related to the use of fact sheets, in 

addition to marketing letters and 

leaflets, as well as a prospectus. The 

Applicant has therefore requested in its 

comment letter that Footnote 57 to 

Representation 3 be revised to replace 

Mr. de Penaranda de Franchimont’s title 

as ‘‘Chief Country Officer and Chief 

Executive Officer.’’ The Applicant also 

notes the correct spelling of Mr. de 

Penaranda de Franchimont’s name. In 

addition, Citigroup has requested that 

the third sentence of Representation 3 

be revised to refer to the ‘‘use of certain 

marketing letters, leaflets and fact 

sheets, as well as a prospectus.’’ The 

Department notes these revisions. 

Representation 5 addresses the 

reasons that the Proposal would be 

protective of the rights of participants 

and beneficiaries of affected plans. For 

purposes of clarity, the Applicant 

requested in its comment letter that the 

Department revise subsection (d) of 

Representation 5 to read: ‘‘A consistent 

framework and requirements were 

developed through the policy for 

mandatory sales force training on 

products, as well as Citigroup policies.’’ 

The Department notes this revision. 

Representation 7 addresses 

Citigroup’s compliance policies and 

procedures and notes that Mr. 

Staroukine, CBB’s Belgium Country 

Counsel, has no involvement with 

ERISA plans and will not have any 

future dealings with ERISA plans while 

employed by Citigroup, CBB, or an 

affiliate. The Applicant stated in its 

comment letter that although it is 

correct that Mr. Staroukine does not act 

as a fiduciary to any ERISA plan, CBB 

cannot ensure that he will never have 

any involvement in any transaction in 

which an ERISA plan may be a 

counterparty. The Department so notes. 

In addition, Citigroup contended in its 

comment letter that Mr. Staroukine 

should not be prohibited from ever 

acting as a fiduciary to an ERISA plan 

in the event his conviction is overturned 

on appeal. Therefore the Applicant 

requested that the last sentence of 

Representation 7 of the Proposal be 

revised to read: ‘‘The Applicant further 

represents that Mr. Staroukine, although 

currently serving as CBB’s Belgium 

Country Counsel, does not act as a 

fiduciary to any ERISA plan, and will 

not act as a fiduciary to any ERISA plan 

while he is employed by the Applicant, 

CBB or an affiliate, unless the 

convictions are overturned on appeal. 

The Department notes this revision. 

The Department has considered the 

entire record, including the comment 

letter filed by the Applicant, and has 

determined to grant the exemption as 

proposed, subject to the revisions 

described herein. 

FOR FURTHER INFORMATION CONTACT: Gary 

H. Lefkowitz of the Department, 

telephone (202) 693–8546. (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 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) 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 

describe all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 27th day of 

March 2012. 

Lyssa E. Hall, 

Acting Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–7705 Filed 3–29–12; 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. 

mstockstill on DSK4VPTVN1PROD with NOTICES

19346 Federal Register / Vol. 77, No. 62 / Friday, March 30, 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). 

2For purposes of this proposed exemption, 

references to provisions of Title I of the Act, unless 

otherwise specified, refer also to corresponding 

provisions of the Code. 

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– 

11582, South Plains Financial, Inc. 

Employee Stock Ownership Plan (the 

Plan or the Applicant); and D–11668, 

TIB Financial Corp. Employee Stock 

Ownership Plan with 401(k) Provisions 

(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. 

llll, 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. 

South Plains Financial, Inc. Employee 

Stock Ownership Plan (the Plan or the 

Applicant) 

Located in Lubbock, TX [Application 

No. D–11582] 

Proposed Exemption 

Based on the facts and representations 

set forth in the application, the 

Department is considering granting an 

exemption under the authority of 

section 408(a) of the Act 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).2 If 

the exemption is granted, the 

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

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

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), (D) and (E) of the Code, 

shall not apply, (1) effective December 

17, 2008, to the acquisition and holding 

by the Plan of certain interests (the LLC 

Interests) in SPFI Investment Group, 

LLC (the LLC), a former wholly owned 

subsidiary of the Plan sponsor, South 

Plains Financial, Inc. (SPF), which were 

distributed (the Distribution) as 

dividends to the Plan as a shareholder 

of SPF; and (2) the proposed redemption 

(the Redemption) by the LLC of the LLC 

Interests held by the Plan, provided that 

the following conditions are met: 

(a) The Plan’s acquisition and holding 

of the LLC Interests occurred in 

connection with the Distribution, 

wherein the Plan acquired the LLC 

Interests automatically and without any 

action on its part. 

(b) The Plan’s acquisition of the LLC 

Interests resulted from an independent 

act of SPF as a corporate entity for 

business reasons which did not involve 

the Plan. As such, all shareholders of 

SPF, including the Plan, were treated in 

the same manner. 

(c) The Plan paid no fees or 

commissions in connection with the 

acquisition and holding of the LLC 

Interests. 

(d) Within ninety (90) days after 

publication of the notice granting the 

final exemption in the Federal Register, 

the LLC redeems the LLC Interests held 

by the Plan for no less than the greater 

of $1,036,665 or the fair market value of 

the LLC Interests on the date that the 

Redemption occurs. 

(e) The Redemption is a one-time sale 

of the LLC Interests for cash. 

(f) The terms and conditions of the 

Redemption are at least as favorable to 

the Plan as those obtainable in an arm’s 

length transaction with an unrelated 

party. 

(g) The Plan pays no commissions, 

costs or other expenses in connection 

with the Redemption. 

(h) An independent fiduciary has 

approved the Redemption and monitors 

such transaction on behalf of the Plan. 

Effective Date: If granted, this 

proposed exemption will be effective as 

of December 17, 2008, with respect to 

the acquisition and holding by the Plan 

of the LLC Interests. In addition, this 

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Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 19347 

3City Bank directors (the City Bank Directors) 

include the SPF Directors. City Bank officers (the 

City Bank Officers) include Curtis Griffith, Mike 

Liner, Cory Newsom, and Kevin Bass, who are both 

SPF Directors and City Bank Directors. 

4The Plan’s participants also included and 

continue to include many of the officers and 

directors of the entities described herein. 

5The Applicant represents that as of December 

31, 2011, the ESOP portion of the Plan had two 

outstanding loans. The first loan, dated September 

27, 2002, was made by Lubbock National Bank in 

the original amount of $5,999,928. Each principal 

payment is $600,000 and is due in January of each 

year. As of December 31, 2011, there was one 

principal payment remaining. The interest rate is 

the prime interest rate published in the Wall Street 

Journal with a floor of 5.15% and a ceiling of not 

more than 9% per annum. The interest projection 

for 2012 was approximately $8,000. As of December 

31, 2011, the balance of the first loan was $599,822. 

The second loan, dated May 25, 2007, was also 

made by Lubbock National Bank in the original 

amount of $6,767,360. Each principal payment is 

$676,735 and is due in January of each year. As of 

December 31, 2011, there was one principal 

payment remaining. The interest rate is a variable, 

per diem rate equal to the prime interest rate 

published in the Wall Street Journal less 50 basis 

points. As of December 31, 2011, the balance of that 

loan was $4,060,416. The Applicant represents that 

both loans have satisfied the requirements of 

section 408(b)(3) of the Act. 

6The Department expresses no opinion herein 

regarding whether the conditions of section 

408(b)(3) of the Act have been satisfied. In this 

regard, the Department notes that it is providing no 

relief for the ESOP Loans beyond that provided in 

the statutory exemption. 

proposed exemption will be effective as 

of the date the final exemption is 

granted with respect to the LLC’s 

Redemption of the LLC Interests held by 

the Plan. 

Summary of Facts and Representations 

SPF 

1. SPF, the Plan sponsor, is located in 

Lubbock, Texas. SPF is a Texas 

corporation and registered bank holding 

company which conducts its principal 

activities through its subsidiaries’ 

offices located throughout Texas and 

eastern New Mexico. SPF’s principal 

activities include commercial and retail 

banking, along with insurance, 

investment, trust and mortgage services. 

SPF is currently taxed as a Subchapter 

S corporation for federal income tax 

purposes. Subsidiaries of SPF include 

the following entities: City Bank, Zia 

Financial Corporation, City Bank New 

Mexico and Windmark Insurance 

Agency, Inc. The subsidiaries of SPF are 

all adopting employers of the Plan. 

2. Curtis Griffith, Cory Newsom, 

Ricky Neal, Kevin Bass, Lonnie 

Hollingsworth, Larry Beseda, Bobby 

Neal, Jodie Riley and Danny Campbell 

are the current directors (the SPF 

Directors) of SPF. Each of the SPF 

Directors is a shareholder of SPF except 

for Danny Campbell. Curtis Griffith, 

Kevin Bass, Cory Newsom, Sandy 

Wallace and Steve Crockett are the 

current officers of SPF (the SPF 

Officers). 

The Plan 

3. The Plan is an individual account 

plan as described in section 3(34) of the 

Act. The Plan includes an employee 

stock ownership plan (the ESOP 

Portion) and a cash or deferred 

arrangement (the 401(k) Portion). The 

ESOP Portion of the Plan is designed to 

invest primarily in qualifying employer 

securities pursuant to section 4975(e)(7) 

of the Code. 

Participants’ individual accounts are 

divided into sub-accounts, which 

include the following: (a) A Company 

Stock Account, which contains the 

shares of qualifying employer securities 

allocated pursuant to the ESOP Portion 

of the Plan; (b) an Other Investments 

Account, which contains the allocations 

of net gain of the Plan, forfeitures and 

employer contributions in other than 

the qualifying employer securities (the 

LLC Interests are held in a sub-account 

of a participant’s Other Investments 

Account); (c) an Elective Account, 

which contains a participant’s pre-tax 

elective deferrals and Roth elective 

deferrals (no part of the Elective 

Account is invested in qualifying 

employer securities); and (d) a Rollover 

Account, which contains distributions 

from other qualified retirement plans 

(no part of the Rollover Account is 

invested in qualifying employer 

securities). 

Pursuant to an amendment to the Plan 

effective January 1, 2011, the ‘‘ESOP 

Committee’’ is the administrator of the 

Plan (the Plan Administrator). Curtis 

Griffith, Cory Newsom, Steve Crockett, 

Rob Dean, Larry Beseda and Raymond 

Richardson are the current members of 

the ‘‘ESOP Committee’’. SPF was the 

Plan Administrator prior to the ‘‘ESOP 

Committee’’. 

4. City Bank is a Texas chartered bank 

subsidiary of SPF and adopting 

employer of the Plan.3 Its trust 

department serves as a directed trustee 

(the Trustee) with respect to: (a) The 

Company Stock Account; (b) the 

participant-directed investments of 

participant elective contributions in the 

Elective Account; (c) the participant 

rollover contributions in the Rollover 

Account; and (d) the investment of SPF 

stock pursuant to direction from the 

Plan Administrator. The Trustee is also 

a discretionary trustee with respect to 

the investment of assets which are held 

in the Other Investments Account and 

which are not participant directed (i.e., 

participant elective contributions in the 

Elective Account and rollover 

contributions in the Rollover Account). 

The Trustee follows the guidelines of 

the Funding and Investment Policy, but 

acts with discretion as to the time and 

manner of the implementation of such 

policy. 

5. As of December 17, 2008, the date 

of the Distribution described herein, the 

Plan had a total of 953 participants 4 and 

assets with an approximate aggregate 

fair market value of $40,162,889 

(excluding the value of the LLC Interests 

that were acquired that day). As of the 

same date, about 77.15% or $30,984,190 

of the Plan’s assets was invested in SPF 

stock. Also as of the same date, an 

estimated 882 Plan participants held a 

total of 99,949 shares of SPF stock, 

representing an approximately 24.05% 

ownership interest in SPF. 

Of the 99,949 SPF shares held by the 

Plan, 70,280 shares were allocated to 

Plan participant accounts and 29,669 

shares were held in an unallocated 

suspense account as collateral for 

certain non-recourse loans (the ESOP 

Loans) 5 to the Plan. The Applicant 

represents that the ESOP Loans were 

used to acquire qualifying employer 

securities and that such loans satisfy the 

statutory exemption provided under 

section 408(b)(3) of the Act.6

6. As of December 31, 2010, the Plan 

had a total of 1,026 participants and 

assets with an approximate aggregate 

fair market value of $33,315,524. As of 

the same date, 57% or $18,990,310 of 

the Plan’s assets was invested in SPF 

stock. Also as of December 31, 2010, out 

of the 1,026 Plan participants, an 

estimated 964 Plan participants held a 

total of 79,828 shares of the 411,454 

outstanding shares of SPF (which, 

together with the 24,895 shares of SPF 

held by the Plan in a suspense account, 

equaled 24.29% of SPF). 

The Property 

7. On November 19, 1991, City Bank 

purchased a parcel of improved real 

property located at 5219 City Bank 

Parkway (the Property) for $2,800,000 

from CSM, Inc., an unrelated party. In 

October 1993, SPF acquired City Bank 

and City Bank’s assets, including the 

Property for $4,900,000. SPF believed 

that the acquisition of City Bank and its 

assets was a prudent investment and 

would increase its West Texas presence. 

8. The Property is an irregularlyshaped site that consists of 9.8762 acres 

of land, made up of the bank site at 

8.9862 acres, and excess land of 0.89 

acres. The Property is improved with a 

3-story, multi-tenant office building 

containing 116,616 square feet (gross 

building area). Total net rentable area 

for the building is computed as 85,001 

square feet. The building was 

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19348 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 

7The Applicant notes that the Texas Business 

Organizations Code, which applies to all Texas 

limited liability companies registered to transact 

business in Texas, does not require, in connection 

with the formation of a new limited liability 

company, that a person be named as an initial 

member in the Certificate of Formation. 

Accordingly, at the time that the LLC was formed, 

no members were listed. 

8The Applicant represents that the Lease is not 

a prohibited transaction. The Applicant states, in 

pertinent part, that the Departments regulations (see 

29 CFR 2510.3–101(a)(2)) establish a ‘‘look-through 

rule’’ under which underlying assets of certain 

entities in which a plan may invest are regarded as 

plan assets. However, the Applicant explains, in 

pertinent part, that the ‘‘look-through rule’’ does not 

apply if the equity investment in the entity by a 

benefit plan is not significant. The Applicant 

further explains that equity participation by benefit 

plan investors is significant as of any date if benefit 

plan investors hold 25% or more of the value of any 

class of equity interest. The Applicant states that by 

its calculation the benefit plan investors have an 

equity interest of 24.599% in the LLC. Therefore, 

the Applicant represents that the underlying assets 

of the LLC are not considered plan assets of such 

benefit plan investors and the Lease is not a 

prohibited transaction. 

The Department expresses no opinion herein on 

whether the underlying assets of the LLC are plan 

assets pursuant to 29 CFR 2510.3–101 and, 

accordingly, is not proposing any relief for the 

Lease. 

9TCB sold a participation interest in the Loan to 

Founders Bank, SSB on or before March 31, 2009. 

10Certain SPF Directors, SPF Officers, City Bank 

Directors, and City Bank Officers acquired LLC 

Interests in either or both their individual capacities 

and their capacities as Plan participants as a result 

of the Distribution. In addition, certain Plan 

participants (e.g., new participants) did not have 

SPF shares allocated to their Plan accounts. 

constructed in 1983 and has undergone 

numerous remodels over the years. The 

Property has been used for City Bank’s 

main office in Lubbock, Texas since its 

acquisition. 

The LLC 

9. On November 12, 2008, City Bank 

formed the LLC, which is also located 

at 5219 City Bank Parkway, Lubbock, 

Texas, as a Texas limited liability 

company.7 On December 10, 2008, City 

Bank contributed the Property to the 

LLC in exchange for 100% of the 

member interest in the LLC. The LLC 

was wholly owned by City Bank from 

December 10, 2008 to December 16, 

2008. On December 16, 2008, City Bank 

distributed 100% of its member interest 

to SPF. Accordingly, SPF became the 

successor member to City Bank. The 

LLC was then wholly owned by SPF 

from December 16, 2008 until SPF 

distributed the LLC Interests to its 

shareholders on December 17, 2008. 

(See Representation 15.) Around the 

time of the Distribution, the LLC had 

cash assets totaling $696,643. 

10. Since its formation, the LLC’s 

principal business activity has been the 

rental and management of commercial 

real estate. The managers of the LLC (the 

LLC Managers) are Cory Newsom and 

Kevin Bass. In addition, members of the 

LLC include the SPF Directors, the SPF 

Officers, the City Bank Directors, and 

the City Bank Officers. 

The Lease 

11. By lease agreement (the Lease) 

dated December 16, 2008, City Bank and 

the LLC entered into a triple net, tenyear lease whereby City Bank leased the 

Property from the LLC8 in order to 

continue using the Property as its main 

office space. The Lease requires 

monthly rental payments of $166,460.29 

($1,997,523.48 annually) or $23.50 per 

square foot from January 1, 2009 

through December 31, 2013. Beginning 

on January 1, 2014 through December 

31, 2018, the monthly rental payment 

will be $183,106.32 ($2,197,275.84 

annually) or $25.85 per square foot. The 

Lease is subject to eight five-year 

renewal periods. 

City Bank currently leases 100% of 

the office building on the Property from 

the LLC, and occupies about 60% of the 

office building, itself. City Bank 

subleases the remaining space in the 

office building that it does not occupy 

to unrelated tenants. 

The Loan 

12. A loan (the Loan) in the amount 

of $15,800,000 was entered into on 

December 16, 2008 between the LLC as 

borrower and Texas Capital Bank, 

National Association (TCB), a national 

banking association and third party 

lender, as both lender and 

administrative agent with respect to the 

Loan. The purpose of the Loan was to 

provide additional capital to City Bank. 

The Loan was evidenced by a credit 

agreement (the Credit Agreement), and 

an accompanying promissory note, both 

executed on December 16, 2008. The 

Credit Agreement provides that one or 

more lenders may make the Loan in an 

amount up to $15,800,000. 

The terms of the Loan require that the 

unpaid principal balance bear interest at 

the rate per annum equal to the lesser 

of (a) the maximum rate of interest 

which may be charged, contracted for, 

taken, received or reserved by a lender 

in accordance with applicable Texas 

law (or applicable United States federal 

law to the extent that such law permits 

a lender to charge, contract for, receive 

or reserve a greater amount of interest 

than under Texas law) or (b) the rate of 

interest per annum quoted in the 

‘‘money Rates’’ section of The Wall 

Street Journal from time to time and 

designated as the ‘‘Prime Rate’’. The 

terms of the Loan further require that 

the Loan be repaid in monthly 

installments of principal and interest in 

the amount of $120,000 each, due and 

payable on the first day of each calendar 

month beginning February 1, 2009, and 

continuing on the first day of each 

month thereafter through, and 

including, January 2, 2014. 

13. TCB, as a lender, agreed to make 

the Loan provided that on or before 

March 31, 2009, either (a) additional 

lenders would become parties to the 

Loan and finance at least $3,000,000 of 

the Loan or buy at least $3,000,000 in 

participations in the Loan, or (b) the 

LLC would repay to TCB the difference 

between $3,000,000 and the amount of 

the Loan financed by other lenders.9

14. The Loan is collateralized by the 

Property. Pursuant to the Credit 

Agreement, TCB has a first lien Deed of 

Trust in the Property and an 

Assignment of Rents Paid pursuant to 

the Lease. The LLC uses the monthly 

Lease payments it receives from City 

Bank to repay the Loan. The LLC 

members are also not liable for the Loan 

in their individual capacities. 

The Distribution 

15. By letter dated December 15, 2008 

(the Notice of Distribution), SPF notified 

its shareholders of the intended 

Distribution. In the Notice of 

Distribution, SPF explained that the 

purpose of the Distribution was to 

increase City Bank’s capital by 

converting the Property into working 

capital that City Bank could leverage to 

increase its lending capabilities. In 

addition, SPF informed its shareholders 

of the Loan and Lease transactions, 

described above, and explained how the 

Loan proceeds would be used to 

increase City Bank’s operating capital 

and liquidity, and how the Lease 

proceeds would be used to service the 

Loan, as well as provide distributions to 

the LLC members in an amount that 

would allow them to pay the individual 

tax liabilities resulting from their 

ownership of the LLC Interests. SPF was 

of the view that increasing City Bank’s 

operating capital, and thus its liquidity, 

would allow City Bank to continue to 

grow and provide City Bank with a 

competitive advantage over its peer 

banks. 

16. On December 16, 2008, City Bank 

distributed its LLC Interests to SPF. On 

December 17, 2008, SPF declared a pro 

rata Distribution of the LLC Interests to 

its shareholders of record as of that 

date.10 The shareholders of SPF at the 

time of the Distribution collectively 

acquired 100% of the membership 

interests in the LLC at a book value of 

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11The Plan states that the primary purpose of the 

formation of the LLC, the Lease and the Loan 

transactions which resulted in the Distribution to 

the Plan was for SPF to realize the value of the 

Property which City Bank had owned for many 

years and which had appreciated. The transactions 

resulted in the conversion of the value of the 

Property into working capital that SPF could 

leverage to increase the capital levels of City Bank. 

12The Applicant states that around the time of 

the Distribution, its attorney, Kimberly Wilkerson, 

advised SPF, as the employer and Plan 

Administrator at that time, not to sign the Right of 

First Refusal Agreement on behalf of the Plan and 

not to ask the Trustee to sign a Right of First Refusal 

on behalf of the Plan. Ms. Wilkerson explains that 

she was concerned that the granting of the Right of 

First Refusal could result in a prohibited 

transaction if the Assignee or another LLC member 

was a party in interest. 

13The Applicant states that there is no particular 

reason that the Certificate was not issued to Argent 

Trust immediately following the Plan’s receipt of 

LLC Interests in the Distribution. The Applicant 

further states that the LLC Managers believed the 

Certificate only evidenced ownership and that the 

date the Certificate was issued did not affect the 

Plan’s ownership interest. 

14The Department expresses no opinion herein as 

to whether the SPF Directors violated any of the 

general fiduciary responsibility provisions of Part 4 

of Title I of the Act when, shortly following the 

Plan’s acquisition of the LLC Interests, the SPF 

Directors specifically revised the Plan’s Funding 

and Investment Policy to require that the Plan 

divest itself of such interests. However, the 

Department notes that section 404(a) of the Act 

requires, among other things, that a plan fiduciary 

act prudently and solely in the interest of the plan’s 

participants and beneficiaries when making 

investment decisions on behalf of the plan. 

$721,500. Neither SPF nor City Bank 

retained any interest in the LLC. 

17. The Distribution was an 

independent act of SPF as a corporate 

entity for business reasons which did 

not involve the Plan.11 All shareholders 

of SPF were treated in the same manner. 

The Plan, as a shareholder of SPF stock, 

acquired the LLC Interests 

automatically, without any action on the 

part of the Plan, and in proportion to its 

ownership interests in SPF. As a result 

of the pro rata Distribution of the LLC 

Interests, the Plan received 24.05% of 

the outstanding membership interests in 

the LLC. At the Plan participant level, 

an estimated 882 participants received a 

total of 99,949 LLC Interests of the 

415,509 outstanding LLC Interests. 

According to the Plan’s unaudited 

financial statement for December 31, 

2008, the LLC Interests acquired by the 

Plan in the Distribution were valued at 

that time at $721,500. The Applicant 

represents that the value was 

determined by adding the total 

estimated current fair market value of 

the Property ($18,100,000), plus cash 

assets in the LLC ($700,000), subtracting 

the outstanding Loan on the Property in 

the amount of $15,800,000, resulting in 

an amount of $3,000,000, multiplied by 

the Plan’s ownership percentage 

(24.05%), which equaled $721,500. The 

Plan paid no fees to SPF in connection 

with the Distribution. 

18. Pursuant to an amendment to the 

Plan dated December 23, 2008, the LLC 

Interests have been held on behalf of the 

Plan in a sub-account of a Plan 

participant’s ‘‘Other Investments 

Account’’ known as the Special Trust 

Fund. 

Following the Distribution, each 

member of the LLC, other than the Plan, 

executed a Right of First Refusal 

Agreement.12 The Right of First Refusal 

Agreement requires that each member of 

the LLC give the LLC, any assignee of 

the LLC and the other members of the 

LLC, in that order, a right to purchase 

the member’s LLC Interest before it can 

be sold for the offered price, provided 

that the offered price is equal to fair 

market value, as defined in such 

agreement. Aside from the Plan, 

certificates (the Certificates) evidencing 

the LLC Interests were provided upon 

receipt by any one of the LLC Managers 

of the executed right of first refusal 

agreement from all those shareholders of 

SPF receiving LLC Interests. The 

Certificates were issues at different 

times. The Plan’s Certificate, dated 

December 17, 2008 and evidencing its 

ownership of LLC Interests, was 

received and posted to the trust 

accounting system at Argent Trust 

Company of Louisiana (Argent Trust), 

the Plan’s independent fiduciary, on 

June 2, 2009.13

The Funding and Investment Policy 

19. On March 26, 2009, the SPF 

Directors considered and adopted a 

revised Funding and Investment Policy 

for the Plan in order to address the 

Plan’s ownership of assets, such as the 

LLC Interests. Specifically, Section III of 

the Funding and Investment Policy was 

revised to provide that the Plan could 

not invest in any non-publicly traded 

securities other than SPF stock. In 

revising the Funding and Investment 

Policy, the SPF Directors considered, 

among other things, the Plan’s 

‘‘investment’’ in the LLC, how the LLC 

Interests affected the Plan and its design 

to be invested primarily in SPF stock, 

the Plan’s liquidity needs, and its 

diversification requirements. 

Accordingly, the SPF Directors advised 

Argent Trust to sell the Plan’s LLC 

Interests.14

On December 17, 2010, the SPF 

Directors adopted a revised Funding 

and Investment Policy for the Plan to 

once more address the Plan’s ownership 

of the LLC Interests. Specifically, 

Section III of the Funding and 

Investment Policy was revised to 

provide that the Plan could not invest 

in any non-publicly traded securities 

other than SPF stock, except to the 

extent that Argent Trust, the Plan’s 

independent fiduciary, determined that 

an investment in the LLC Interests was 

in the best interests of the Plan. In 

revising the Funding and Investment 

Policy, the SPF Directors decided the 

change was in the best interests of Plan 

participants so that there would be no 

question that the decision to sell the 

Plan’s LLC Interests was being made 

solely in the interests of the participants 

and with the requisite prudence and 

diligence by an independent fiduciary. 

On June 7, 2011, the Funding and 

Investment Policy was revised again by 

the ESOP Committee. However, no 

changes were made to Section III of 

such policy. 

The Qualified Independent Fiduciary 

20. By an Appointment of Trustee 

Agreement (the Appointment 

Agreement), executed on December 26, 

2008 between Argent Trust and SPF on 

behalf of the Plan, Argent Trust became 

the Plan’s independent fiduciary, 

effective December 19, 2008, with 

respect to the custody, management and 

sale of the Plan’s LLC Interests to the 

LLC. Argent Trust, a subsidiary of 

Argent Financial Group, Inc. (AFG), is a 

privately held trust bank regulated by 

the United States Office of the 

Comptroller of Currency. Originating as 

the trust department of Ruston State 

Bank, Argent Trust has roots dating back 

to 1930. In 1990, the trust department of 

Ruston State Bank was transferred to an 

independent banking charter forming 

The Trust Company of Louisiana 

(TTCL). In 1991, certain individual 

shareholders of TTCL purchased TTCL 

and formed AFG as a holding company. 

TTCL obtained a national banking 

charter and the name was changed to 

National Independent Trust Company, 

with Argent Trust as a division of that 

company. As of December 31, 2010, 

Argent Trust had assets equal to 

$1,086,490,000, and five offices staffed 

with 24 professionals. For the year 

ended December 31, 2010, Argent Trust 

generated revenue of $4,245,062. 

21. Argent Trust represents that it is 

qualified to act as independent fiduciary 

for the Plan because it has a long history 

of serving as a fiduciary and trustee to 

qualified plans. In this regard, Argent 

Trust has historically served, and 

currently does serve, as trustee of 

several ESOPs, primarily sponsored by 

financial institutions. These ESOPs 

include plans that are leveraged, plans 

for both closely-held and publically 

traded sponsors, plans that have had to 

file for change of control with the 

Federal Reserve System and plans for 

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15Argent Trust represents that as set forth in its 

Appointment Agreement, except for its receipt of 

the LLC Interests on behalf of the Plan, it did not 

participate in the deliberations, discussions or other 

steps leading up to SPF’s decision to declare a 

dividend of the LLC Interests or any of the 

antecedent decisions related to the transactions 

involving SPF or the LLC or the Property. Argent 

Trust further notes that it was engaged to receive 

the LLC Interests on behalf of the Plan, and hold 

such interests until the earlier of the disposition of 

the LLC Interests following a decision by the 

Department on the issuance of a prohibited 

transaction exemption or Argent Trust’s resignation 

or removal. 

sponsors who have converted corporate 

status to S–Corporations. 

In the early 1990s, TTCL was the 

court-appointed trustee for a bank that 

went into receivership by the Federal 

Deposit Insurance Corporation (FDIC) 

and completed the termination process 

of the plan with the FDIC as the 

sponsor. Further, as part of its services, 

Argent Trust has assisted many of its 

client plans in responding to inquiries 

and investigations made by the 

Department. 

22. Ann Marie Mills, Senior Vice 

President and Employee Benefits 

Manager for Argent Trust, is the officer 

assigned to represent the Segregated 

Trust Fund. Ms. Mills represents that 

she has 26 years of experience working 

with qualified plans and IRAs. In 

addition, Gary Moore, President of 

Argent Trust, has 30 years of trust 

experience, and D. Kyle McDonald, 

President and CEO of Argent Trust, has 

26 years of trust experience. 

Argent Trust confirms that it is 

independent of, and does not have any 

other business relationship with, SPF, 

City Bank, or the LLC. In addition, 

Argent Trust confirms that it derives 

less than one percent of its gross annual 

income, based on the previous year’s 

income tax return, from SPF or its 

affiliates. 

23. Pursuant to the Appointment 

Agreement, Argent Trust has the 

following responsibilities with respect 

to managing the Plan’s Special Trust 

Fund: (a) To receive the LLC Interests 

on behalf of the Plan and to hold such 

interests until they are sold or otherwise 

conveyed; (b) to monitor the LLC 

Interests; (c) to receive any income 

derived from or distributions made with 

respect to the LLC Interests; (d) to 

exercise any rights of membership, 

including voting rights; (e) to invest the 

income derived from the LLC Interests 

as provided in the Appointment 

Agreement; (f) to pay any taxes or 

expenses assessed against the Special 

Trust Fund; (g) to appoint an 

independent appraiser to perform a 

valuation of the LLC Interests, with the 

understanding that more than one 

appraisal may be needed depending on 

the period between the filing of the 

application for a prohibited transaction 

exemption and the determination made 

by the Department; (h) to review and 

approve the independent appraisal of 

the LLC Interests; (i) to review the terms 

of any sale or other conveyance of the 

LLC Interests to confirm that they are 

consistent with an approval of the 

Plan’s request for exemptive relief from 

the Department; and (j) to direct that the 

proceeds of any sale of the LLC Interests 

be transferred to the Primary Trustee, as 

defined in the Appointment Agreement 

(i.e., the City Bank trust department).15

In addition, to the extent that these 

functions and others listed in the 

Appointment Agreement would not in 

themselves have made Argent Trust a 

discretionary fiduciary with regard to 

the Plan’s LLC Interests, Argent Trust 

has subsequently agreed to act as a 

discretionary fiduciary with respect to 

the Segregated Trust Fund. In that 

capacity, Argent Trust represents that it 

is its responsibility to determine if, 

when and on what terms the Plan’s 

interests in the LLC may be sold, 

including approval of the purchaser. 

24. In addition to performing its 

duties with respect to the management 

of the Plan’s Special Trust Fund, as 

outlined in the Appointment Agreement 

described above, Argent Trust has 

reviewed the circumstances 

surrounding the Plan’s acquisition of 

the LLC Interests and determined that it 

was in the best interests of the Plan 

participants to accept the Distribution of 

such LLC Interests. In a letter dated 

March 16, 2012, Argent Trust sets forth 

the following reasons for its opinion. 

First, Argent Trust states that it was 

not feasible for the Applicant to obtain 

a prohibited transaction exemption 

before the Distribution was made, and 

believes that it is unrealistic to think 

that other shareholders would have 

abided a delay in their receipt of the 

LLC Interests given SPF’s legal 

obligation to make the Distribution and 

its willingness to do so immediately. 

Argent Trust also states that both tax 

consequences to the shareholders and 

corporate governance issues for SPF 

would have been implicated in such a 

delay. Further, Argent Trust opines that 

such a delay could only have been 

undertaken if the Plan had been treated 

substantially less favorably than other 

shareholders, which would have 

prejudiced participants who received an 

immediate financial benefit from the 

receipt of the LLC Interests. In addition, 

Argent Trust opines that whatever the 

LLC Interests were worth, they were 

clearly worth something, and that the 

participants gave up no rights or value 

to acquire these interests. As such, 

Argent Trust believes that rejecting or 

even delaying acceptance of the LLC 

Interests would have been demonstrably 

prejudicial to the participants. 

Second, Argent Trust states that the 

Plan’s right to the receipt of the LLC 

Interests was inherent in its status as a 

shareholder of SPF, and to refuse 

acceptance of these LLC Interests would 

have violated such right. Further, 

Argent Trust represents that like other 

shareholders, the Plan had a legally and 

immediately enforceable right to receive 

the LLC Interests. In addition, Argent 

Trust represents that a rejection of the 

LLC Interests would have violated the 

Plan’s right as a shareholder of SPF to 

receive the Distribution on the same 

basis as other SPF shareholders. 

Third, Argent Trust represents that 

the Plan’s receipt of the LLC Interests 

did not cost the Plan anything, but a 

rejection of the LLC Interests would 

have resulted in a denial of opportunity 

to the Plan without offsetting benefits to 

the Plan. Argent Trust explains that the 

Distribution of LLC Interests was a 

unilateral transfer of a valuable property 

right for which the Plan participants 

gave no consideration. As such, Argent 

Trust states that rejecting the LLC 

Interests would have clearly denied 

Plan participants the opportunity to 

gain from the value of such interests and 

given them nothing in exchange. In 

addition, Argent Trust opines that to the 

participants, accepting the Distribution 

of LLC Interests was all upside and 

rejecting the LLC Interests would have 

been all downside. Further, Argent 

Trusts states that traditionally, trustees 

have had the authority to abandon 

burdensome or worthless property. 

However, Argent Trust states that in the 

absence of any indication that the LLC 

Interests would be burdensome or were 

worthless, Argent Trust had a duty to 

accept the assets on behalf of Plan 

participants. Argent Trust opines that 

the LLC Interests clearly could not have 

been so perceived at the time of receipt 

and have not become so since then. 

Accordingly, Argent Trust represents 

that acceptance of the LLC Interests was 

not only consistent with Argent Trust’s 

fiduciary duties, it was required. In 

addition, Argent Trust believes that 

rejecting the LLC Interests would have 

been prejudicial to the best interests of 

Plan participants and contrary to Argent 

Trust’s fiduciary duties. 

25. Argent Trust, acting as the Plan’s 

qualified, independent fiduciary, with 

respect to the Special Trust Fund, 

represents that it has exercised its 

discretion to determine that the 

Redemption by the LLC of the LLC 

Interests is in the best interest and 

protective of the rights of the Plan 

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16Blosser Appraisal lists SPF, City Bank, the LLC 

and the SPF Directors as parties in interest. 

participants and beneficiaries. 

Specifically, Argent Trust opines that 

the proposed Redemption will allow the 

Plan to diversify its investments, 

improve its liquidity, and fulfill the 

Plan’s primary purpose of investing in 

employer securities, and reduce its 

expenses. In addition, Argent Trust 

states that the Redemption will reduce 

the dependence of the Plan and its 

participants on a single enterprise and 

one locality. 

Moreover, Argent Trust states that a 

final decision on whether it is in the 

best interests of the Plan participants to 

retain or sell the LLC Interests cannot be 

made until the Department grants 

exemptive relief for the Redemption. 

However, Argent Trust states that, based 

on the facts existing at that time, if it 

determines that an investment in the 

LLC Interests is not in the best interests 

of the Plan, disposing of the LLC 

Interests would be consistent with the 

most recent amendment to the Funding 

and Investment Policy. 

Finally, Argent Trust represents that it 

will monitor the proposed Redemption 

through closing and delivery of funds to 

the Plan. 

Request for Exemptive Relief 

26. The Applicant states that section 

406(a)(1)(E) of the Act prohibits a 

fiduciary from causing a plan to engage 

in a transaction which the fiduciary 

knows (or should know) constitutes the 

acquisition on behalf of the plan, of any 

employer security in violation of section 

407(a). The Applicant believes that 

because the LLC was an affiliate of SPF 

for purposes of section 407(d)(7) of the 

Act at the time of the Distribution, the 

LLC Interests would constitute an 

‘‘employer security’’ within the meaning 

of section 407(d)(1) of the Act but not 

a ‘‘qualifying employer security’’ under 

section 407(d)(5) of the Act, inasmuch 

as the LLC Interests did not fall within 

any of the covered categories. The 

Applicant opines that while the LLC is 

no longer a party in interest to the Plan, 

it is an entity in which the SPF officers 

and directors may have interests that 

would affect their best judgment as Plan 

fiduciaries. 

Therefore, SPF states that exemptive 

relief is needed with respect to the 

acquisition and continued holding of 

the LLC Interests by the Plan to the 

extent there have been violations of 

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

and section 407(a) of the Act. 

27. In addition, SPF represents that it 

is possible that the Redemption of the 

Plan’s LLC Interests by the LLC will 

violate section 406(b)(1) and (b)(2) of the 

Act. In this regard, the Applicant notes 

that the LLC would no longer be 

considered a party in interest with 

respect to the Plan because City Bank 

and SPF have retained no interest in the 

LLC. However, the Applicant represents 

that the LLC Managers are participants 

in the Plan and Plan fiduciaries. 

Further, the Applicant states that the 

LLC Managers are members of the LLC 

in their individual capacities. Therefore, 

the Applicant believes that the 

Redemption of the Plan’s LLC Interests 

by the LLC could affect the best 

judgment of these individuals as 

fiduciaries with respect to the Plan and 

it has requested exemptive relief from 

section 406(b)(1) and (b)(2) of the Act 

for this transaction. 

28. Accordingly, SPF requests an 

administrative exemption from the 

Department with respect to the Plan’s 

acquisition and holding of the LLC 

Interests and the proposed redemption 

of the Plan’s LLC Interests by the LLC. 

If granted, the exemption will be 

effective as of December 17, 2008, with 

respect to the acquisition and holding 

by the Plan of the LLC Interests. In 

addition, this exemption will be 

effective as of the date the final 

exemption is granted with respect to the 

LLC’s Redemption of the Plan’s LLC 

Interests. 

The Appraisals 

29. The Plan’s LLC Interests have 

been appraised by John Seright, CPA/ 

ABV, CFFA, and Woody Boyd, CPA/ 

ABV, CVA (the LLC Appraisers) of 

Robinson Burdette Martin & Seright, 

L.L.P. (RBMS). RBMS is a full-service 

public accounting firm located in 

Lubbock, Texas. In a letter dated May 

16, 2011, the LLC Appraisers certify that 

the valuation was performed on a basis 

of non-advocacy, that they have no 

present or contemplated interest in the 

property valued and have no personal 

bias with respect to the parties involved. 

Further, in a letter dated August 1, 2011, 

RMBS represents that it has derived less 

than 1% of its annual income from the 

parties in interest and related affiliates, 

which include SPF, City Bank, the LLC 

and the SPF Directors, for the years 

2009 and 2010. 

In connection with rendering this 

valuation, the LLC Appraisers 

considered, among other things, the 

following: (a) The Company Agreement 

of SPFI Investment Group, LLC dated 

December 10, 2008; (b) unaudited 

(‘‘management prepared’’) balance 

sheets and income statements; 

(c) restricted use real estate appraisal 

report; (d) economic statistics published 

by the government or other sources; and 

(e) information provided by SPF 

management. 

30. The Property underlying the LLC 

Interests has been appraised by Gerald 

A. Teel, MAI, CRE and Michael G. 

Divin, Managing Partner (together, the 

Property Appraisers) of Blosser 

Appraisal (a Division of Gerald A. Teel 

Company, Inc.). Blosser Appraisal is 

located in Lubbock, Texas. Blosser 

Appraisal represents that it has derived 

less than 1% of its annual income from 

the parties in interest 16 with respect to 

the Plan and related affiliates for the 

years 2010 and 2011. In an independent 

appraisal dated April 27, 2011 (the 2011 

Property Appraisal), the Property 

Appraisers updated a December 30, 

2008 independent appraisal (the 2008 

Property Appraisal) that was prepared 

by their firm, in which the Property’s 

leased fee value and fair market rental 

value were placed at $18,100,000 and 

$23.50 per square foot, respectively, as 

of December 30, 2008. Using the Income 

Approach to valuation, the Property 

Appraisers determined that the Property 

had a leased fee value of $18,130,000 

and a fair market rent value of $23.50 

per square foot, as of April 27, 2011. 

31. Taking into consideration the 

2011 Property Appraisal, among the 

other factors listed above, in an 

independent appraisal dated May 16, 

2011 (the 2011 LLC Appraisal), the LLC 

Appraisers updated a May 17, 2010 

independent appraisal (the 2010 LLC 

Appraisal) that was prepared by their 

firm, in which the Plan’s LLC Interests 

were valued at $826,868, as of March 

31, 2010. Using the Cost (i.e., Net Asset 

Value) Approach to valuation (with 

adjustments for lack of control and lack 

of marketability of the LLC Interests), 

the LLC Appraisers concluded that the 

Plan’s LLC Interests, if valued on a 

‘‘Minority/Non-Managing Membership’’ 

basis, had a fair market value of 

$1,036,665 as of March 31, 2011. The 

LLC Appraisers will update the 2011 

LLC Appraisal on the date of the 

Redemption. 

32. In addition, Joe Rainer of Argent 

Property Services, a separate subsidiary 

of AFG that provides support to Argent 

Trust accounts in matters of property 

management, among other things, has 

reviewed the appraisal reports prepared 

by the LLC Appraisers. Argent Trust 

represents that Mr. Rainer has 35 years 

of experience in this area, and that prior 

to joining AFG, Mr. Rainer served as 

Manager of Minerals and Taxes for 

Willamete Industries, Inc. Mr. Rainer 

states that the methods and procedures 

used in determining the fair market 

value of the Plan’s LLC Interests are 

sound, accurate, and follow the 

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17The Plan holds the LLC Interests as a pooled 

investment. Each Plan participant’s ‘share’ of the 

pooled investment in the LLC is generally based on 

the ratio of SPF stock allocated to the participant’s 

account to the total number of allocated SPF stock. 

18For purposes of this proposed exemption, 

references to the provisions of Title I of the Act, 

unless otherwise specified, refer also to the 

corresponding provisions of the Code. 

accepted methods for business 

valuations. Mr. Rainer further states 

that, based on the data he reviewed, he 

agrees with the LLC Appraisers 

estimated value for the Plan’s LLC 

Interests. 

The Redemption 

33. On the basis of the foregoing, 

within ninety (90) days after the 

publication of the notice granting the 

final exemption in the Federal Register, 

the LLC will redeem the LLC Interests 

held by the Plan for the greater of 

$1,036,655 or the fair market value of 

the LLC Interests on the date that the 

Redemption occurs. The proceeds of the 

Redemption will be reallocated by 

Employee Incentive Plans, Inc., a third 

party administrator, among Plan 

participants to their Other Investments 

Accounts in proportion to each such 

participant’s ownership of LLC Interests 

at the time of the Redemption.17

34. In summary, it is represented that 

the transactions satisfied or will satisfy 

the statutory criteria for an exemption 

under section 408(a) of the Act because: 

(a) The Plan’s acquisition and holding 

of the LLC Interests occurred in 

connection with the Distribution, 

wherein the Plan acquired the LLC 

Interests automatically and without any 

action on its part. 

(b) The Plan’s acquisition of the LLC 

Interests resulted from an independent 

act of SPF as a corporate entity for 

business reasons which did not involve 

the Plan. As such, all shareholders of 

SPF, including the Plan, were treated in 

the same manner. 

(c) The Plan paid no fees or 

commissions in connection with the 

acquisition and holding of the Interests. 

(d) Within ninety (90) days after 

publication of the notice granting the 

final exemption in the Federal Register, 

the LLC will redeem the LLC Interests 

held by the Plan for no less than the 

greater of $1,036,665 or the fair market 

value of the LLC Interests on the date 

that the Redemption occurs. 

(e) The Redemption will be a one-time 

sale of the LLC Interests for cash. 

(f) The terms and conditions of the 

Redemption will be at least as favorable 

to the Plan as those obtainable in an 

arm’s length transaction with an 

unrelated party. 

(g) The Plan will pay no commissions, 

costs or other expenses in connection 

with the Redemption. 

(h) An independent fiduciary has 

approved the Redemption and will 

monitor such transaction on behalf of 

the Plan. 

Notice to Interested Persons 

The Applicant will provide notice of 

the proposed exemption within ten (10) 

days of the date of publication of the 

notice of proposed exemption in the 

Federal Register to all interested 

persons who are actively employed Plan 

participants by electronic mail with 

receipt of delivery requested, and to all 

other interested persons via first class 

mail. Such notice will include a copy of 

the proposed exemption, as published 

in the Federal Register, and a 

supplemental statement, as required 

pursuant to 29 CFR 2570.43(b)(2). The 

supplemental statement will inform 

interested persons of their right to 

comment on and/or to request a hearing 

with respect to the proposed exemption. 

Comments regarding the proposed 

exemption and requests for a public 

hearing are due within forty (40) days of 

the date of publication of the notice of 

pendency in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Anna Mpras Vaughan of the 

Department, telephone (202) 693–8565. 

(This is not a toll-free number.) 

TIB Financial Corp. Employee Stock 

Ownership Plan With 401(k) Provisions 

(the Plan) 

Located in Naples, Florida 

[Application No. D–11668] 

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).18 If 

the exemption is granted, the 

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

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

407(a) of the Act and the sanctions 

resulting from the application of section 

4975(c)(1)(A) and (E) of the Code, shall 

not apply, effective December 17, 2010 

through January 18, 2011, to: (1) The 

acquisition of certain stock rights (the 

Rights) by the Plan in connection with, 

and under the terms and conditions of, 

a Rights offering (the Offering) by TIB 

Financial Corp. (TIB or the Applicant), 

the Plan sponsor and a party in interest 

with respect to the Plan, and (2) the 

holding of the Rights by the Plan during 

the subscription period of the Offering; 

provided that the following conditions 

were met: 

(a) The receipt of the Rights by the 

Plan occurred pursuant to Plan 

provisions for individually directed 

investments of such accounts, in 

connection with the Offering, and was 

made available by TIB on the same 

terms to all shareholders of record (the 

Shareholders) of TIB’s common stock 

(Common Stock) as of 4:01 p.m., New 

York City time, on July 12, 2010 (the 

Record Date); 

(b) The acquisition of the Rights by 

the Plan resulted from an independent 

act of TIB as a corporate entity, and all 

holders of the Rights, including the 

Plan, were treated in the same manner 

with respect to such acquisition; 

(c) All Shareholders of Common 

Stock, including the Plan, received the 

same proportionate number of Rights 

based on the number of shares of 

Common Stock held by such 

Shareholders; 

(d) All decisions regarding the Rights 

held by the Plan were made by the 

individual Plan participants 

(Participants) whose accounts in the 

Plan received the Rights pursuant to the 

Offering, in accordance with the 

provisions under the Plan for 

individually-directed investment of 

such account; and 

(e) The Plan did not pay any fees or 

commissions in connection with the 

acquisition and or holding of the Rights. 

Effective Date: This proposed 

exemption, if granted, will be effective 

from December 17, 2010, through and 

including January 18, 2011. 

Summary of Facts and Representations 

Background 

1. TIB is a bank holding company 

organized in February 1996 under the 

laws of the State of Florida with its 

principal place of business in Naples, 

Florida. Its operating subsidiaries 

consist of TIB Bank (which commenced 

its commercial banking operations in 

Islamorada, Florida in 1974) and Naples 

Capital Advisors, Inc. (which 

commenced its investment advisory 

services in Naples, Florida in 2007). TIB 

and TIB Bank have 27 full-service 

banking offices in Florida which are 

located in Monroe, Miami-Dade, Collier, 

Lee, and Sarasota counties. TIB Bank 

serves over 60,000 customers in these 

five counties. As of September 30, 2010, 

TIB Bank had approximately $1.74 

billion in total assets, $1.33 billion in 

total deposits, $1.02 billion in total 

loans and $177 million in shareholders’ 

equity. TIB’s investment advisory firm, 

Naples Capital Advisors, Inc., is a 

Registered Investment Advisor under 

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19The Applicant states that, as of February 1, 

2012, the Warrant had not been exercised. 

20The Applicant notes that the difference 

between the number of Participants holding 

Common Stock in their Plan accounts as of the 

Record Date (183) and the Commencement Date 

Continued 

the Investment Advisers Act of 1940 

that manages assets for high net worth 

clients. 

2. TIB sponsors the Plan for the 

benefit of its employees and the 

employees of its subsidiaries and such 

individuals’ beneficiaries. The Plan is 

an employee stock ownership plan 

containing a 401(k) cash or deferred 

arrangement under section 401(a) of the 

Code and is designed to be an employee 

stock ownership plan under section 

4975(e)(7) of the Code. The Plan 

provides for regular pre-tax employee 

401(k) contributions and employer-paid 

matching and profit-sharing 

contributions. According to the 

Applicant, as of January 27, 2012, the 

Plan had 377 Participants and 

approximately $6,498,826 in net assets. 

The Plan allows its Participants to selfdirect the investment of their accounts 

and is intended to operate in accordance 

with section 404(c) of the Act. Pursuant 

to a trust agreement (the Trust 

Agreement) between TIB and Reliance 

Trust Company, Inc. (the Trustee), dated 

April 16, 2002, the Trustee serves as the 

Plan’s trustee. 

3. The Plan’s investment options 

include a wide variety of mutual funds 

from which Participants may choose to 

invest. In addition, Participants may 

invest amounts held in their Plan 

accounts in the TIB Financial Corp. 

Employer Stock Fund (the TIB Stock 

Fund). The TIB Stock Fund allows 

Participants to invest in shares of the 

same class of Common Stock that is 

available to all other investors. 

Furthermore, the Plan’s terms require 

that the TIB Stock Fund will be offered 

as an investment option, but investment 

in that fund by Participants is entirely 

voluntary. 

4. The Applicant explains that neither 

TIB nor its subsidiaries contribute 

Common Stock to the Plan. Instead, all 

employer contributions are made in 

cash, and Common Stock is acquired for 

the Plan only as a result of Participantdirected investment decisions. The 

Applicant explains that, upon the 

direction from a Participant to invest in 

the TIB Stock Fund, the Trustee 

purchases the Common Stock on the 

open market at the prevailing market 

price. The Trustee acts only as a 

directed trustee with respect to all Plan 

investments and, as such, is required to 

carry out Participants’ directions 

regarding investing in the TIB Stock 

Fund. 

The Plan’s administrator, Ingham 

Retirement Group, has the responsibility 

of coordinating with the Trustee as to 

the administrative procedures to 

implement Participant investment 

decisions regarding Common Stock but 

otherwise has no authority with respect 

to the TIB Stock Fund. Upon the 

settlement of the trade implementing a 

Participant’s direction to invest in the 

TIB Stock Fund, the Trustee becomes 

the Shareholder of record and the 

Participant becomes the beneficial 

owner. With respect to voting, the Plan 

provides for full pass-through voting of 

Common Stock to the Participants. 

5. As of December 17, 2010, the date 

of commencement of the Offering (the 

Commencement Date), there were 371 

active Participants and 71 terminated 

Participants who still had funds 

remaining in the Plan. The Plan’s assets 

totaled $8,302,093, and 167 Participants 

held shares in the TIB Stock Fund (38 

of these 167 were terminated 

Participants who still had funds 

remaining in the Plan at the time). 

Therefore, as of the Commencement 

Date, the Plan held 4,477 shares of 

Common Stock, or approximately 0.04% 

of the then outstanding shares of 

Common Stock, with a value of 

approximately $154,457 based on its 

closing price on the NASDAQ of $34.50, 

or approximately 2% of Plan assets. 

The Investment Agreement 

6. On June 29, 2010, TIB entered into 

an Investment Agreement (the 

Investment Agreement) with TIB Bank 

and North American Financial 

Holdings, Inc. (NAFH), an unrelated 

third party. According to the Applicant, 

at the time the Investment Agreement 

was entered into, TIB was facing 

financial challenges and potential 

regulatory actions as a result of the 

credit crisis and therefore was pursuing 

strategic alternatives to recapitalize its 

banking subsidiary. The Applicant 

explains that the potential regulatory 

action involved the delisting of TIB’s 

common stock from the NASDAQ, since 

at the time, TIB’s stock price had fallen 

below the NASDAQ’s $1.00 minimum 

required bid price. Thus, TIB 

determined that a potential investment 

by NAFH would permit TIB to obtain 

needed capital and continue to operate 

and was therefore in the best interests 

of its shareholders and other 

constituencies. 

7. On September 30, 2010, TIB 

completed the issuance and sale to 

NAFH of 7,000,000 shares of Common 

Stock, 70,000 shares of mandatorily 

convertible participating voting Series B 

Preferred Stock (the Preferred Stock) 

and a warrant to purchase up to 

11,666,667 shares of Common Stock of 

TIB for aggregate consideration of $175 

million (the Warrant). The consideration 

consisted of approximately $162.8 

million in cash and a contribution 

worth approximately $12.2 million of 

all 37,000 outstanding shares of Series 

A Preferred Stock previously issued to 

the United States Department of the 

Treasury under the Troubled Asset 

Relief Program Capital Purchase 

Program (TARP) and a related warrant 

to purchase shares of Common Stock 

(the TARP Warrant), which NAFH 

purchased directly from the Treasury. 

The Series A Preferred Stock and the 

TARP Warrant were retired by TIB on 

September 30, 2010 and are no longer 

outstanding. The 70,000 shares of 

Preferred Stock received by NAFH 

automatically converted into an 

aggregate of 4,666,667 shares of 

Common Stock on December 1, 2010. 

The Warrant is exercisable, in whole or 

in part, and from time to time, from 

September 30, 2010 to March 30, 2012, 

at an exercise price of $15.00 per share, 

subject to anti-dilution adjustments.19

As a result of the NAFH investment, 

NAFH owned approximately 99% of 

TIB’s Common Stock, and TIB became 

a controlled subsidiary of NAFH. 

Further, the operating entities below 

NAFH and TIB have all been merged so 

TIB is an intermediate holding 

company. 

8. Furthermore, following the closing 

of the sale to NAFH of Common Stock 

and the Preferred Stock and TIB’s 

issuance of the Warrant to NAFH, the 

Investment Agreement provided that 

TIB would commence a stock rights 

offering. According to the Applicant, the 

Offering was conducted in order to raise 

equity capital and provide existing 

Shareholders with the opportunity to 

increase their ownership of shares of 

Common Stock following the 

completion of the investment by NAFH. 

The Offering 

9. Pursuant to the terms of the 

Offering, which commenced on 

December 17, 2010, TIB distributed at 

no charge, nontransferable Rights to 

Shareholders, in the aggregate, to 

purchase up to 1,488,792 shares of 

Common Stock. Each Shareholder 

received ten Rights for each share of 

Common Stock held as of the Record 

Date (i.e., July 12, 2010). Of the 

Participants who held shares in the TIB 

Stock Fund as of the Record Date, 183 

received rights to purchase Common 

Stock in the Offering. Of these 183 

Participants, 49 were terminated 

Participants who still had funds 

remaining in the Plan at the time.20

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(167) was caused by terminated employees who 

either had their Plan account balances paid out or 

rolled over to a different plan (a New Plan) during 

such interim period. 

21The Applicant notes that, as of the 

Commencement Date, the price of Common Stock 

was listed on the NASDAQ Global Select Market, 

but due to non-compliance with certain listing 

standards, NASDAQ granted TIB’s request for its 

listing to be moved to the NASDAQ Capital Market, 

which occurred on January 27, 2011, several days 

after the January 18, 2011 closing date of the 

Offering. 

10. Each Right held by a Shareholder 

entitled the Shareholder to purchase 

one one-hundredth (1/100th) of a share 

of Common Stock at a subscription price 

of $15.00 per full share (the 

Subscription Price). In this regard, the 

Applicant explains that the Investment 

Agreement required the Subscription 

Price to be $0.15 per share of Common 

Stock, which, adjusted for a 100-to-1 

reverse stock split that TIB effected after 

the close of business on December 15, 

2010, constituted the $15.00 per share 

Subscription Price in the Offering. 

According to the Applicant, the 

Subscription Price was not necessarily 

related to TIB’s book value, results of 

operations, cash flows, financial 

condition or the future market value of 

Common Stock, but rather was the price 

negotiated and established in the 

Investment Agreement. 

11. According to the Applicant, in 

connection with the Offering, TIB did 

not charge any fees or sales 

commissions to issue Rights to a 

Shareholder or to issue shares of 

Common Stock to a Shareholder if the 

Shareholder exercised his or her Rights. 

The Applicant states further that there 

was no over-subscription privilege 

associated with the Offering and no 

party provided a backstop for the 

Offering. Finally, the Applicant notes 

that no Shareholder had the opportunity 

to purchase additional shares not 

purchased by other Shareholders 

pursuant to such other Shareholders’ 

subscription privileges. A Shareholder 

was entitled to exercise their 

subscription privilege for some or all of 

his or her Rights, or the Shareholder 

could choose not to exercise any portion 

of their subscription privilege. 

12. The Applicant states that the 

Offering and all Rights were originally 

scheduled to expire at 5 p.m., New York 

City time, on January 10, 2011 (the 

Original Shareholder Expiration Date). 

However, pursuant to the terms of the 

Offering, TIB extended the Offering 

until 5 p.m., New York City time, 

January 18, 2011 (the Shareholder 

Expiration Date). According to the 

Applicant, therefore, Shareholders were 

informed that they would need to 

complete their subscription rights 

election form properly and deliver it, 

along with the full payment amount in 

respect of the number of Rights they 

wished to exercise at the Subscription 

Price (the Subscription Payment), to the 

subscription agent, American Stock 

Transfer & Trust Company, LLC (the 

Subscription Agent) before 5 p.m. on the 

Shareholder Expiration Date. All 

required documents and payment were 

required to be received prior to the 

Shareholder Expiration Date. After 5 

p.m. on the Shareholder Expiration 

Date, all unexercised subscription rights 

became null and void. Other than the 

extension of the Original Shareholder 

Expiration Date, the Applicant states 

that all of the Offering terms described 

in TIB’s prospectus dated December 17, 

2010 remained the same and applied 

during the subscription period of the 

Offering (including the extension 

thereof). 

13. The Applicant states that the 

shares of Common Stock issued in 

connection with the Offering are 

currently listed on the NASDAQ Capital 

Market, and have been so listed since 

they were issued in connection with the 

Offering.21 The Rights themselves, 

however, could not be sold, transferred 

or assigned and, consequently, were not 

listed for trading on any exchange. The 

Applicant represents that the TIB Board 

of Directors did not make any 

recommendations to the Shareholders 

regarding whether they should exercise 

their Rights but urged Shareholders to 

make independent decisions based on 

their assessment of TIB’s business and 

the risk factors associated with a rights 

offering. 

14. According to the Applicant, since 

the Plan held shares of Common Stock 

on the Record Date, the Plan and its 

Participants were required to be treated 

the same as the other Shareholders in 

the Offering. Furthermore, to comply 

with Florida law, TIB was required to 

distribute Rights to all Shareholders on 

a pro rata basis, and the Applicant states 

that it could not issue Rights to some 

Shareholders, but not to others. Had the 

Plan been denied participation in the 

Offering, the Applicant notes that 

Participants who owned Common Stock 

in the TIB Stock Fund as of the Record 

Date would not have been treated 

equally to Shareholders outside the 

Plan, and they would have been denied 

the opportunity to purchase additional 

shares at the Subscription Price. 

Consequently, in the Offering, the 

Plan received Rights based on the 

number of shares of Common Stock that 

it held as of the Record Date, and in 

turn, the Rights were allocated to 

Participants based on the number of 

shares of Common Stock that were 

credited to Participants’ Plan accounts 

as of the Record Date. The Plan held the 

Rights until they either were exercised 

by Participants or expired on the 

Shareholder Expiration Date. The Plan 

accounts of Participants who had 

invested in the TIB Stock Fund on the 

Record Date were allocated the same 

proportion of Rights and the same 

information regarding the Offering as 

other Shareholders. 

Request for Exemptive Relief 

15. Although the Rights satisfy the 

definition of ‘‘employer securities’’ 

under section 407(d)(1) of the Act, i.e., 

‘‘security[ies] issued by an employer of 

employees covered by the plan, or by an 

affiliate of such employer,’’ the 

Applicant states that the Rights are not 

‘‘qualifying employer securities’’ within 

the meaning of section 407(d)(5) of the 

Act. Section 407(d)(5) defines the term 

‘‘qualifying employer security’’ as an 

employer security which is stock, a 

marketable obligation, or an interest in 

a publicly traded partnership (provided 

such partnership is an existing 

partnership as defined in the Code). 

Under section 407(a)(1) of the Act, a 

plan may not acquire or hold any 

‘‘employer security’’ which is not a 

‘‘qualifying employer security.’’ 

Moreover, section 406(a)(1)(E) of the Act 

prohibits the acquisition, on behalf of a 

plan, of any ‘‘employer security in 

violation of section 407(a)(1) of the Act. 

Finally, section 406(a)(2) of the Act 

prohibits a fiduciary who has the 

authority or discretion to control or 

manage the assets of a plan to permit the 

plan to hold any ‘‘employer security’’ 

that violates section 407(a) of the Act. 

According to the Applicant, a 

prohibited transaction occurs either 

directly or indirectly as a result of the 

Plan holding Rights that are not 

‘‘qualifying employer securities’’ and 

making them available to Participants. 

Therefore, the Applicant requests an 

administrative exemption from the 

Department, effective December 17, 

2010 until January 18, 2011, with 

respect to the acquisition and holding of 

the Rights by the Plan. 

Exercise of the Rights 

16. Pursuant to the terms of the 

Offering, each Right held by a 

Shareholder entitled the Shareholder to 

purchase one one-hundredth (1/100th) 

of a share of Common Stock at the 

Subscription Price of $15.00 per full 

share, which was below the public 

trading price of Common Stock at the 

close of the market on the 

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22On December 17, 2010, the closing trading 

price of Common Stock was $34.50, as listed on the 

NASDAQ Global Select Market. 

23The Applicant states that each Participant who 

terminated employment and either had their Plan 

account balance paid out or rolled over to a New 

Plan, was sent their Rights by TIB to the address 

that such Participant directed their Plan 

distribution be sent. According to the Applicant, it 

did not see any impediments to allowing 

Participants whose accounts were rolled over or 

paid out during the period between the Record Date 

and the Commencement Date, to participate in the 

Offering, and TIB implemented a process to treat 

such Participants in the same manner as all other 

Shareholders (subject, if applicable, to the New 

Plan’s administrative procedures). 

24The Applicant states that the original 

expiration date for Participants was January 4, 2011 

(the Original Participant Expiration Date), but the 

expiration date was later extended to the 

Participant Expiration Date, January 12, 2011, when 

the Offering was extended. 

25The Applicant notes that, because the 

extension of the subscription period of the Offering 

was announced after the Original Participant 

Expiration Date had occurred, Participants in the 

Plan who had already submitted 401(k) Participant 

Election Forms electing to subscribe and allocated 

sufficient funds to the Money Market Fund were 

deemed to have irrevocably exercised their right to 

participate in the Offering as of the Original 

Participant Expiration Date. Upon the extension of 

the subscription period of the Offering, Participants 

who had not yet elected to participate were given 

a second chance to make their election to 

participate, up to the Participant Expiration Date, 

but no Participant who elected to participate upon 

the Original Participant Expiration Date was 

allowed to withdraw their participation. 

Commencement Date.22 The Applicant 

explains that, for example, if a 

Shareholder owned 955 pre-split shares 

of Common Stock on the Record Date, 

a Shareholder would receive 9,550 

Rights and would have the right to 

purchase 95 shares of Common Stock 

(rounded down from 95.5 shares, with 

the total Subscription Payment being 

adjusted accordingly) at the 

Subscription Price, subject to an overall 

beneficial ownership limit of 4.9%. 

17. As noted above, the Applicant 

represents that the Shareholders were 

permitted to exercise all, some or none 

of their Rights, but Shareholders could 

only exercise Rights in whole numbers 

of shares. Fractional shares of Common 

Stock that resulted from the exercise of 

the subscription privilege were 

eliminated by rounding down to the 

nearest whole share, with the total 

Subscription Payment being adjusted 

accordingly. Any excess Subscription 

Payments received by the Subscription 

Agent were returned, without interest, 

as soon as practicable. 

18. According to the Applicant, the 

Rights were nontransferable, and any 

Rights that were not exercised by a 

Shareholder simply expired. 

Furthermore, an election to exercise a 

Right was irrevocable once made. The 

Applicant states that TIB did not charge 

any fees or sales commissions to issue 

the Rights or to issue shares to those 

who exercised their Rights. However, if 

Shareholders exercised Rights through a 

broker or other holder of their shares of 

Common Stock, the Shareholders were 

responsible for paying any fees that 

person may have charged. However, no 

fees or expenses were paid by the Plan. 

The Applicant explains that, to 

exercise Rights, a Shareholder generally 

was required to properly complete a 

subscription rights election form and 

deliver it, along with the full 

Subscription Payment, to the 

Subscription Agent, before 5 p.m., New 

York City time, on the Shareholder 

Expiration Date of January 18, 2011. 

Further, Shareholders holding their 

shares in street name or through brokers 

exercised their rights through their 

brokers. 

19. However, as explained by the 

Applicant, the process by which a 

Participant could exercise their Rights 

was different from that of other 

Shareholders.23 The Applicant states 

that Participants were mailed a special 

notice entitled ‘‘Instructions for 

Participants in the TIB Financial Corp. 

Employee Stock Ownership Plan with 

401(k) Provisions—Important 

Information on the TIB Financial Corp. 

Rights Offering,’’ (the 401(k) Participant 

Instructions) that, in nontechnical 

language, described the Offering and 

provided instructions to Participants 

who wanted to exercise the Rights that 

were allocated to their Plan accounts. 

Furthermore, the Participants were 

provided with a special election form to 

exercise their subscription rights, called 

the ‘‘TIB Financial Corp. Employee 

Stock Ownership Plan with 401(k) 

Provisions Non-Transferable 

Subscription Rights Election Form,’’ 

(the 401(k) Participant Election Form) 

and a prospectus that was provided to 

all Shareholders that described the 

Offering in more detail. 

20. The Applicant explains that the 

401(k) Participant Instructions and the 

prospectus were intended to provide 

Participants with the information 

necessary to understand the Offering. In 

addition, the Applicant states that the 

401(k) Participant Election Form was 

intended to provide Participants with 

the information they required in order 

to file the election properly and to 

ensure that the Participant’s directions 

with respect to the exercise of Rights 

were clear enough to avoid clerical or 

administrative problems. 

21. Accordingly, if a Participant held 

shares of Common Stock in his or her 

Plan account as of the Record Date, the 

Participant was entitled to exercise the 

Rights with respect to those shares of 

Common Stock by electing what amount 

(if any) of Rights that he or she wanted 

to exercise by properly completing the 

401(k) Participant Election Form 

described above. The Applicant 

explains that a Participant was required 

to return his or her properly completed 

401(k) Participant Election Form to the 

Ingham Retirement Group by 5 p.m., 

New York City time on January 12, 2011 

(the Participant Expiration Date). 

According to the Applicant, the 

Participant Expiration Date was six 

business days earlier than the 

Shareholder Expiration Date, because 

the Trustee, the Subscription Agent for 

the Offering and the Plan’s 

recordkeeper, trustee, custodian and the 

clearing agency for the Offering required 

additional time to process Participants’ 

elections to exercise their Rights, 

tabulate and confirm the results, 

liquidate the Participants’ funds, 

confirm the orders and the availability 

of the funds and remit payment to 

purchase the shares.24

22. According to the Applicant, if a 

Participant’s 401(k) Participant Election 

Form was not received by the 

Participant Expiration Date, any election 

to exercise the Participant’s Rights held 

in his or her Plan account was not 

effective and any Rights credited to the 

Participant’s Plan account expired. The 

Applicant states that, prior to the 

extension of the subscription period of 

the Offering, if a Participant elected to 

exercise some or all of the Rights in his 

or her Plan account, the Participant was 

also required to ensure that the total 

amount of the funds required for such 

exercise had been allocated to the 

Fidelity Retirement Money Market Fund 

(the Money Market Fund) in his or her 

Plan account by 4 p.m., New York City 

time, on January 4, 2011 and such 

amount remained in the Money Market 

Fund until liquidated into cash (which 

occurred on January 6, 2011). Pursuant 

to the extension of the subscription 

period of the Offering, Participants were 

given a second chance to exercise their 

Rights,25 and the total amount of the 

funds required for such exercise in the 

extended subscription period was 

required to have been allocated to the 

Money Market Fund in a Participant’s 

Plan account by 4 p.m., New York City 

time, on January 12, 2011. The 

Applicant states that, during the 

Offering, a total of thirty Participants 

exercised their Rights to purchase 

shares of Common Stock. 

23. The Applicant states that 

Participants were instructed not to remit 

any payments to the Subscription 

Agent. Instead, Participants were 

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26The Applicant notes that the terms of the 

Offering specifically provided for this process, and 

such process is also consistent with the terms of the 

Plan provisions for individually-directed 

investment of the Participant account. 

27The Applicant states that the reason behind 

freezing the Participants’ Money Market Fund 

accounts was to prevent the Participants from 

moving money out of that fund after the Original 

Participant Expiration Date and Participant 

Expiration Date lapsed but before the Trustee could 

liquidate it. 

28Funds from the liquidation of the Money 

Market Fund after the Original Participant 

Expiration Date were held in cash at an account at 

Fidelity Institutional, the custodian for the account. 

29Monday, January 17, 2011 was a holiday 

(Birthday of Martin Luther King, Jr.). 

30As noted above, the Subscription Price was 

equal to $15.00 per share. 

required to have enough money 

available in their Money Market Fund 

accounts by the Original Participant 

Expiration Date and the Participant 

Expiration Date to satisfy the 

Subscription Payment for the Rights 

they elected to exercise. The Applicant 

notes that, by taking funds from 

Participants’ Money Market Funds, the 

Trustee effectively allowed Participants 

to choose which of their Plan 

investments they wanted to use to pay 

for their shares. In this regard, the 

Applicant explains, only the 

Participants’ Money Market Fund 

accounts would be liquidated, rather 

than a pro-rata portion of each of the 

funds in which Participants were 

invested.26 The Applicant explains 

further that, because Participants were 

initially not likely to have sufficient 

funds in their Money Market Fund 

accounts, the 401(k) Participant 

Instructions provided detailed 

instructions about how the Participant 

could transfer money into the Money 

Market Fund from the other investment 

funds held in the Participant’s Plan 

account. Thus, Participants were not 

forced to liquidate a portion of every 

fund in which they wished to remain 

invested at their current levels, but 

could select the portion(s) of particular 

funds to liquidate (with the exception of 

their Money Market Funds, which was 

used to pay for the exercise of the 

Rights). 

24. Accordingly, the Applicant 

explains, as soon as practicable after 

each of the Original Participant 

Expiration Time and the Participant 

Expiration Time, the Money Market 

Fund accounts of the Participants 

exercising rights 27 were liquidated to 

generate funds sufficient to cover the 

Participants’ Subscription Payments for 

their Rights.28 The Applicant notes that, 

if a Participant did not have enough 

money in their Money Market Fund, the 

Trustee (as instructed by TIB) did not 

exercise that Participant’s Rights. Once 

the Trustee was finished liquidating 

funds after the Participant Expiration 

Time, it lifted the freeze on the Money 

Market Fund. 

25. The Applicant states further that 

the Offering provided that no Rights 

held by the Plan would have been 

exercised if the per share closing price 

of Common Stock on Friday, January 14, 

2011 (one business day before the 

Shareholder Expiration Date) 29 of 

$19.51, as reported by the NASDAQ (the 

Closing Price), was not greater than or 

equal to the Subscription Price.30 In this 

regard, pursuant to the Letter 

Agreement, dated December 23, 2010 

between TIB and the Trustee, TIB was 

required to notify the Trustee in writing 

(the Final Instruction) (i) of the elections 

of Participants, (ii) whether the Closing 

Price on January 14, 2011 was equal to 

or exceeded $15.00 per share and (iii) of 

TIB’s direction that the Trustee either: 

(a) Exercise that number of Rights held 

by the Trustee pursuant to the Trust 

Agreement on behalf of the Plan, and to 

purchase that number of shares of 

Common Stock, set forth in the Final 

Instruction; or (b) not exercise any 

Rights pursuant to the Rights Offering 

on behalf of the Plan or Participants. 

26. If the Trustee exercised the 

Participants’ Rights, the Trustee was 

required to direct the custodian for the 

Plan to remit the Participants’ money, 

obtained from the liquidation of the 

Money Market Fund accounts of the 

applicable exercising Participants, to the 

Subscription Agent. The Subscription 

Agent then exercised the Rights held by 

the Plan, issued the shares of Common 

Stock to the Plan, and the Trustee 

credited the Participants’ TIB Stock 

Fund with the acquired shares. 

The Merits of the Transaction 

27. The Applicant states that the 

requested exemption is administratively 

feasible, because there was no need or 

reason for the Department to have 

monitored or supervised the covered 

transactions. The Applicant explains 

that, under the Investment Agreement, 

TIB was obligated to undertake (and did 

undertake) the Offering to allow its 

Shareholders to purchase additional 

shares of Common Stock at the stated 

Subscription Price, which was below 

the stock’s market price. Furthermore, 

according to the Applicant, it was not 

feasible for TIB to obtain an individual 

prohibited transaction exemption before 

proceeding with the Offering within the 

timeframe set forth in the Investment 

Agreement. 

28. The Applicant states that the 

requested exemption is in the interest of 

the Plan and its Participants and 

beneficiaries because the Participants 

had an opportunity, provided at no cost, 

to purchase Common Stock if they 

believed the terms of a purchase were 

favorable. Furthermore, according to the 

Applicant, the investment opportunity 

that was provided to Participants 

resulted in an immediate financial gain 

for the Participants who elected to 

exercise their Rights in the Offering, as 

they were given the opportunity to 

purchase shares of Common Stock 

worth $19.51 per share at a price of 

$15.00 per share. Therefore, according 

to the Applicant, proceeding with the 

exemption transaction allowed the 

Participants who chose to participate in 

the Offering to purchase additional TIB 

shares below the market price, at an 

immediate gain of $4.51 per share. 

Furthermore, the Applicant represents 

that TIB and the Plan entered into the 

covered transactions because not doing 

so would have violated the legal rights 

that Participants have as investors in 

Common Stock and as holders of 

Common Stock (through their Plan 

accounts) by, in effect, converting the 

Common Stock they held in their Plan 

accounts into a different, and inferior, 

class of Common Stock that did not 

have subscription rights under the 

Offering. Additionally, the Applicant 

states that, because the Plan and its 

Participants received the Rights at no 

cost, denial of the exemption would 

cause the Participants to lose an 

economic opportunity without any 

offsetting benefit. Further, to the extent 

other Shareholders exercised their 

Rights at below market prices, the 

Applicant notes that such exercise 

would be dilutive of the holdings of 

Participants. 

The Applicant suggests further that 

denying the Plan the ability to 

participate in the Offering would have 

raised questions whether other 

violations of the Act had occurred, since 

the Participants had previously 

purchased their shares at full value, but 

as a result of being denied the ability to 

participate, they would have obviously 

overpaid for those shares. Furthermore, 

if TIB had excluded the Plan and its 

Participants from the Offering, TIB’s 

other Shareholders would have received 

a benefit at a cost to the Plan and the 

Participants, thus receiving the benefit 

of not incurring the dilution of their 

shares when Participants participated in 

the Offering. Finally, according to the 

Applicant, omitting the Plan from the 

Offering would have violated the terms 

of the Plan and Trust Agreement which 

provided that distributions with respect 

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Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 19357 

to shares of Common Stock should be 

passed through to the accounts of 

Participants. 

29. The Applicant states that the 

requested exemption is protective of the 

rights of Participants and beneficiaries 

because they had the opportunity, at 

their own discretion, to participate in 

the Offering on the same terms as every 

other Shareholder. The Applicant 

stresses that Participants and their 

beneficiaries had no obligation to 

exercise their Rights, and in fact could 

not exercise their Rights if the 

Subscription Price was below the 

Closing Price on January 14, 2011 (any 

Rights not exercised by the Participants 

simply expired). The Applicant states 

that the terms of the Offering were 

described to the Participants in clearly 

written communications, namely the 

401(k) Participant Instructions and the 

401(k) Participant Election Form, and 

that the decision by Participants to 

exercise Rights held in their Plan 

Accounts of the Participants in the 

Offering was strictly voluntary. Finally, 

the Applicant notes that neither TIB nor 

any of the Plan fiduciaries placed any 

pressure on Participants to exercise 

their Rights in the Offering or otherwise 

attempted to influence their decision, 

and the Offering was conducted in a 

manner which did not prejudice the 

Participants. 

Summary 

30. In summary, the Applicant 

represents that the covered transactions 

satisfied the statutory requirements for 

an exemption under section 408(a) of 

the Act because: 

(a) The receipt of the Rights by the 

Plan occurred pursuant to Plan 

provisions for individually directed 

investments of such accounts, in 

connection with the Offering, and was 

made available by TIB on the same 

terms to all Shareholders of Common 

Stock as of the Record Date; 

(b) The acquisition of the Rights by 

the Plan resulted from an independent 

act of TIB as a corporate entity, and all 

holders of the Rights, including the 

Plan, were treated in the same manner 

with respect to such acquisition; 

(c) All Shareholders of Common 

Stock, including the Plan, received the 

same proportionate number of Rights 

based on the number of shares of 

Common Stock held by such 

Shareholders; 

(d) All decisions regarding the Rights 

held by the Plan were made by the 

Participants whose accounts in the Plan 

received the Rights pursuant to the 

Offering, in accordance with the 

provisions under the Plan for 

individually-directed investment of 

such account; and 

(e) The Plan did not pay any fees or 

commissions in connection with the 

acquisition and or holding of the Rights. 

Notice to Interested Persons 

Notice of the proposed exemption 

will be given to all Participants who 

received Rights within 20 days of the 

publication of the notice of proposed 

exemption in the Federal Register, by 

first class U.S. mail to the last known 

address of all such Participants. Such 

notice will contain a copy of the notice 

of proposed exemption, as published in 

the Federal Register, and a 

supplemental statement, as required 

pursuant to 29 CFR 2570.43(b)(2). The 

supplemental statement will inform 

interested persons of their right to 

comment on and to request a hearing 

with respect to the pending exemption. 

Written comments and hearing requests 

are due within 50 days of the 

publication of the notice of proposed 

exemption in the Federal Register. 

FOR FURTHER INFORMATION CONTACT: 

Warren Blinder of the Department, 

telephone (202) 693–8553. (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 27th day of 

March 2012. 

Lyssa E. Hall, 

Acting Director of Exemption Determinations, 

Employee Benefits Security Administration, 

U.S. Department of Labor. 

[FR Doc. 2012–7706 Filed 3–29–12; 8:45 am] 

BILLING CODE 4510–29–P 

OFFICE OF MANAGEMENT AND 

BUDGET 

Federal Participation in the 

Development and Use of Voluntary 

Consensus Standards and in 

Conformity Assessment Activities 

ACTION: Request for Information and 

Notice of public workshop. 

SUMMARY: The Office of Management 

and Budget (OMB) invites interested 

parties to provide input on current 

issues regarding Federal agencies’ 

standards and conformity assessment 

related activities. Input is being sought 

to inform OMB’s consideration of 

whether and how to supplement 

Circular A–119 (Federal Participation in 

the Development and Use of Voluntary 

Consensus Standards and in Conformity 

Assessment Activities). In addition, 

OMB is announcing a public workshop 

at the Department of Commerce’s 

National Institute of Standards and 

Technology (NIST) on May 15, 2012. A 

complementary NIST workshop, 

‘‘Conformity Assessment: Approaches 

and Best Practices,’’ will take place on 

April 11, 2012 to seek input from 

individuals on the planned update of 

Guidance on Federal Conformity 

Assessment Activities, issued by NIST 

in 2000. The NIST workshop was 

announced separately by NIST at 

http://www.nist.gov/director/sco/caworkshop-2012.cfm (see also 77 FR 

15719; March 16, 2012). 

DATES: Comments: Comments are due 

on or before April 30, 2012. 

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