Notice2023-02703
Proposed Exemptions From Certain Prohibited Transaction Restrictions
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 9, 2023
Issuing agencies
Labor DepartmentEmployee Benefits Security Administration
Abstract
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). If granted, these proposed exemptions allow designated parties to engage in transactions that would otherwise be prohibited provided the conditions stated there in are met. This notice includes the following proposed exemptions: Unit Corporation Employees' Thrift Plan, D-12026; The Liberty Media 401(k) Savings Plan and The Liberty Media 401(k) Savings Plan Trust, D-12023; The Occidental Petroleum Corporation Savings Plan and The Anadarko Employee Savings Plan, D-12032 and D-12033.
Full Text
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<title>Federal Register, Volume 88 Issue 27 (Thursday, February 9, 2023)</title>
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[Federal Register Volume 88, Number 27 (Thursday, February 9, 2023)]
[Notices]
[Pages 8462-8475]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-02703]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Proposed Exemptions From Certain Prohibited Transaction
Restrictions
AGENCY: Employee Benefits Security Administration, Labor.
ACTION: Notice of proposed exemptions.
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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). If granted, these proposed
exemptions allow designated parties to engage in transactions that
would otherwise be prohibited provided the conditions stated there in
are met. This notice includes the following proposed exemptions: Unit
Corporation Employees' Thrift Plan, D-12026; The Liberty Media 401(k)
Savings Plan and The Liberty Media 401(k) Savings Plan Trust, D-12023;
The Occidental Petroleum Corporation Savings Plan and The Anadarko
Employee Savings Plan, D-12032 and D-12033.
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, by March 27, 2023.
ADDRESSES: All written comments and requests for a hearing should be
sent to the Employee Benefits Security Administration (EBSA), Office of
Exemption Determinations, U.S. Department of Labor, Attention:
[[Page 8463]]
Application No. ___, stated in each Notice of Proposed Exemption via
email to <a href="/cdn-cgi/l/email-protection#3451197b717074505b581a535b42"><span class="__cf_email__" data-cfemail="e88dc5a7adaca88c8784c68f879e">[email protected]</span></a> or online through <a href="http://www.regulations.gov">http://www.regulations.gov</a> by
the end of the scheduled comment period. Any such comments or requests
should be sent 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 Disclosure Room of the Employee
Benefits Security Administration, U.S. Department of Labor, Room N-
1515, 200 Constitution Avenue NW, Washington, DC 20210. See
SUPPLEMENTARY INFORMATION below for additional information regarding
comments.
SUPPLEMENTARY INFORMATION:
Comments
Persons are encouraged to submit all comments electronically and
not to follow with paper copies. Comments should state the nature of
the person's interest in the proposed exemption and the manner in which
the person would be adversely affected by the exemption, if granted. A
request for a hearing can be requested by any interested person who may
be adversely affected by an exemption. A request for a hearing must
state: (1) The name, address, telephone number, and email address of
the person making the request; (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; and (3) a statement of the issues to be
addressed and a general description of the evidence to be presented at
the hearing. The Department will grant a request for a hearing made in
accordance with the requirements above where a hearing is necessary to
fully explore material factual issues identified by the person
requesting the hearing. A notice of such hearing shall be published by
the Department in the Federal Register. The Department may decline to
hold a hearing where: (1) The request for the hearing does not meet the
requirements above; (2) the only issues identified for exploration at
the hearing are matters of law; or (3) the factual issues identified
can be fully explored through the submission of evidence in written
(including electronic) form.
Warning: All comments received will be included in the public
record without change and may be made available online at <a href="http://www.regulations.gov">http://www.regulations.gov</a>, including any personal information provided,
unless the comment includes information claimed to be confidential or
other information whose disclosure is restricted by statute. If you
submit a comment, EBSA recommends that you include your name and other
contact information in the body of your comment, but DO NOT submit
information that you consider to be confidential, or otherwise
protected (such as Social Security number or an unlisted phone number)
or confidential business information that you do not want publicly
disclosed. However, if EBSA cannot read your comment due to technical
difficulties and cannot contact you for clarification, EBSA might not
be able to consider your comment. Additionally, the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website is an ``anonymous access'' system, which
means EBSA will not know your identity or contact information unless
you provide it in the body of your comment. If you send an email
directly to EBSA without going through <a href="https://www.regulations.gov">https://www.regulations.gov</a>,
your email address will be automatically captured and included as part
of the comment that is placed in the public record and made available
on the internet.
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, unless otherwise stated in the Notice of Proposed
Exemption, 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.
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\1\ The 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).
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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.
Unit Corporation Employees' Thrift Plan Located in Tulsa, Oklahoma
[Application No. D-12026]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Employee Retirement Income Security
Act of 1974, as amended (ERISA), to the Unit Corporation Employee's
Thrift Plan (the Plan) in accordance with the Department's exemption
procedures.\2\ This proposed exemption would permit: (1) the
acquisition by the participants' accounts (the Accounts) in the Plan,
of warrants (the Warrants) issued by Unit Corporation, the Plan
sponsor, in connection with Unit Corporation's chapter 11 bankruptcy
filing (the Bankruptcy Filing), in exchange for the participants'
waiver of claims against ``Released Parties;'' \3\ and (2) the holding
of the Warrants by the Plan (together, the Proposed Transactions),
provided that the conditions set forth herein are met.
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\2\ 29 CFR part 2570, subpart B (75 FR 66637, 66644, October 27,
2011). For purposes of this proposed exemption, references to
specific provisions of title I of ERISA unless otherwise specified,
should be read to refer as well to the corresponding provisions of
Internal Revenue Code (Code) section 4975.
\3\ As stated in the Reorganization Plan, the Released Parties
include: (a) Unit Corporation; (b) the Reorganized Unit Corporation;
(c) the Debtor-in-possession Agent; (d) the Debtor-in-possession
Lenders; (e) the RBL Agent (the agent for secured parties holding
First-Priority Lien Obligations); (d) the RBL Lenders (a type of
asset-based lending (ABL) commonly used in the oil and gas sector,
reserve based loans are made against, and secured by, an oil and gas
field or a portfolio of undeveloped or developed and producing oil
and gas assets; (e) the Consenting Noteholders; (f) the Exit
Facility Agent; (g) the Exit Facility Lenders; and (h) the
Subordinated Notes Indenture Trustee.
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Summary of Facts and Representations <SUP>4</SUP>
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\4\ The Department notes that the facts and representations
stated herein are those of the Applicant and they are assumed to be
true for purposes of the Department's review of the application for
an exemption. The Department cautions that the availability of this
exemption, if granted, is subject to the express condition that the
material facts and representations contained in application D-12026
are true and complete, and accurately describe all material terms of
the transactions covered by the exemption. If there is any material
change in a transaction covered by the exemption, or in a material
fact or representation described by the Applicant in the
application, the exemption will cease to apply as of the date of the
change.
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Background
1. Unit Corporation. Unit Corporation (also referred to as the
Applicant) is a
[[Page 8464]]
publicly-traded energy company engaged in oil and natural gas
exploration and production, contract drilling, and midstream services.
The Applicant is headquartered in Tulsa, Oklahoma and employs 650
individuals. Unit Corporation stock is currently traded on the over-
the-counter marketplace following its delisting from the New York Stock
Exchange as a result of its Bankruptcy Filing (as discussed in more
detail below). During the year ended December 31, 2019, Unit
Corporation recorded revenues of $674.6 million and a net loss of
$553.9 million, or $10.48 per share.
2. The Plan. The Plan is a participant-directed 401(k) individual
account plan. As of December 1, 2021, the Plan covered 472 participants
and held total assets of approximately $70,127,000. Fidelity Management
Trust Company (the Trustee) serves as directed trustee and recordkeeper
for the Plan. The Unit Corporation Benefits Committee (the Benefits
Committee) serves as the Plan Administrator with overall responsibility
for the operation and administration of the Plan and as the named
fiduciary for purposes of investment-related matters.
3. Unit Common Stock. As of September 3, 2020, the Plan held
4,932,864 shares of Unit common stock (Old Unit Common Stock), which
comprised 0.68% of the Plan's total assets.\5\ Plan-held shares of Old
Unit Common Stock were allocated among the individual Accounts of Plan
participants (the Invested Participants) and held in a stock fund
within the Plan (the Stock Fund).
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\5\ At the time, the Plan's 4,932,864 shares represented
approximately 9% of all outstanding Old Unit Common Stock.
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4. The Plan's Pass-Through Process. Provisions of the Trust
Agreement covering the voting of Employer Stock state that: ``Each
participant with an interest in the Stock Fund shall have the right to
direct the Trustee as to the manner in which the Trustee is to vote
(including not to vote) that number of shares of Employer Stock that is
credited to his Account.'' As represented by the Applicant, Invested
Participants have routinely voted their pro-rata interest in the
Company Stock Fund on matters such as annual shareholder proxies.
5. The Bankruptcy Filing. On May 22, 2020, Unit Corporation and
certain of its affiliates filed voluntary petitions for relief under
Chapter 11 of Title 11 of the United States Code in the United States
Bankruptcy Court for the Southern District of Texas, Houston Division
under Case No. 20-327401 (the Bankruptcy Filing).\6\ On May 26, 2020,
the New York Stock Exchange (NYSE) suspended trading in Old Unit Common
Stock because of the Bankruptcy Filing. On June 10, 2020, the NYSE
filed a Securities and Exchange Commission Form 25 to delist and
deregister Old Unit Common Stock.
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\6\ Jointly administered under Case No. 20-327401.
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On June 19, 2020, Unit Corporation filed a Debtors' First Revised
Proposed Joint Chapter 11 Plan of Reorganization (the Reorganization
Plan) and a First Revised Disclosure Statement for the Debtors' First
Revised Proposed Joint Chapter 11 Plan of Reorganization (the
Disclosure Statement) with the Bankruptcy Court to reduce its debt
obligations and right-size its balance sheet for go-forward operations.
On July 30, 2020, the Bankruptcy Court confirmed Unit Corporation's
Reorganization Plan and on September 3, 2020, Unit Corporation
announced that it had emerged from bankruptcy protection upon the
completion of a financial restructuring process and the implementation
of the Reorganization Plan. Upon Unit Corporation's emergence from
bankruptcy, shares of Old Unit Common Stock were cancelled.
6. The Warrants. Under the Reorganization Plan, Unit Corporation
completed a debt-for-equity exchange with holders of its previous $650
million, 6.625% senior subordinated notes that were due in 2021, and
exchanged Old Unit Common Stock for the Warrants. Each Warrant entitles
its registered holder to receive from Unit Corporation one share of
newly-issued common stock in Unit Corporation (New Unit Common Stock)
upon the exercise of the Warrant through the payment of an Exercise
Price during an Exercise Period. The exchange rate for the Warrants is
1 to .03460447, where one share of Old Unit Common Stock converts to
.03460447 Warrants.
7. Acceptance or Rejection of the Warrants. As holders of the Old
Unit Common Stock, the Invested Participants qualify to receive the
Warrants under the Reorganization Plan. However, the Warrants have not
yet been issued to the Plan. The Warrants will be issued to the Plan if
the Department grants a final exemption. The Applicant represents that
the Benefits Committee has not had any involvement with the Warrants
since Unit Corporation's emergence from bankruptcy.
To accept the Warrants, an Invested Participant must agree to
release potential claims against Unit Corporation and affiliates (i.e.,
the Released Parties, as described in Footnote 3 of this proposed
exemption). The Applicant represents that this liability release (the
Liability Release) was imposed by the Bankruptcy Court and the
creditors and applies to all former holders of Old Unit Common Stock,
not just the Plan. The Applicant states that such releases, which are
generally applied to creditors in exchange for cash and other property
(including warrants), are common in the context of bankruptcy
reorganizations. Liability releases allow the debtor-in-possession to
operate their business free from potential claims arising pre-
bankruptcy, so long as all similarly-situated creditors and other
claimants are treated equivalently. As a condition of this exemption,
the Liability Release must be described to the Invested Participants in
a clearly written communication from Unit Corporation.
Acceptance or rejection of the Warrants by the Invested
Participants is a two-step process: first, the Warrants will be
automatically accepted into the Plan by the Trustee where they will be
held in a suspense account; and second, the Invested Participants will
have the choice to either accept the Warrants and release their claims
or reject the Warrants. If an Invested Participant makes no election,
the Warrants will be deemed as having been accepted by the Invested
Participant. However, neither step will happen unless and until the
Department grants a final exemption.
As a condition of this proposed exemption, the acquisition of the
Warrants by the Accounts of the Invested Participants must be
implemented on the same material terms as the acquisition of the
Warrants by all shareholders of Old Unit Common Stock. Further, each
shareholder of Old Unit Common Stock, including each of the Invested
Participants' Account, must receive the same proportionate number of
Warrants based on the number of shares of Old Unit Common Stock held by
each shareholder.
8. Exercising the Warrants. The Applicant states that the final
exercise price for the Warrants is $63.74. Decisions regarding the
exercise or sale of the Warrants can be made only by the individual
Invested Participants in whose Accounts the Warrants are allocated. In
this regard, an Invested Participant can exercise his or her Warrants
only during an Exercise Period, which will begin after the effective
date of a final exemption if granted by the Department, and end on the
earliest of: (a) September 3, 2027; (b) the consummation of a cash sale
(as defined in the Warrant Agreement); or (c) the consummation of a
liquidation,
[[Page 8465]]
dissolution or winding up of Unit Corporation.
The Plan Trustee will not allow Invested Participants to exercise
the Warrants held in their Plan Accounts if the fair market value of
New Unit Common Stock is less than the exercise price of the Warrants.
Each Warrant that is not exercised during the Exercise Period will
expire, and all rights under the Warrants and the Warrant Agreement
will cease upon the conclusion of the Exercise Period. This proposed
exemption requires Unit Corporation to notify and inform each Invested
Participant in writing at least thirty days before the conclusion of
the Exercise Period that each Warrant held in the Invested
Participant's Account will expire and all rights under the Warrants and
the Warrant Agreement will cease upon the conclusion of the Exercise
Period.
An Invested Participant may exercise all or any whole number of
their Warrants at any time during the Exercise Period through: (a)
written notice provided to Unit Corporation and the warrant agent,
American Stock Transfer & Trust Company, LLC (the Warrant Agent); and
(b) the Invested Participant's full payment of the Exercise Price,
either by a transfer of funds or on a cashless basis subject to a
cashless exercise ratio, as defined in the Warrant Agreement.\7\ The
Applicant represents that the Warrant Agent is independent of Unit
Corporation and the Trustee. The Applicant also represents that the
Warrant Agent has not and will not sell the Warrants. The Invested
Participants may also sell the Warrants in over-the-counter (OTC)
markets where sale prices for the Warrants will be determined by supply
and demand and not by any independent valuation of the Warrants.
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\7\ The Applicant represents that a ``cashless basis''
transaction allows a warrant holder to exercise Warrants without a
cash outlay. Under a cashless exercise, a Warrant holder may
surrender a portion of their Warrants to cover the exercise price of
other Warrants that they hold, rather than transferring funds to
cover the Exercise Price.
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9. As noted above, the Plan held 4,932,864 shares (or approximately
9 percent) of Old Unit Common Stock before the Bankruptcy Filing. With
the Warrant exchange rate set at 1 to .03460447, Invested Participants
will receive approximately 170,709 Warrants.
10. According to the Applicant, since the effective date of the
reorganization on September 4, 2020, the Reorganized Debtors and their
advisors have been working to reconcile claims filed in the bankruptcy
case, file objections to certain claims, and negotiate resolutions of
disputed claims. On June 21, 2021, the Chapter 11 cases for all debtors
other than Unit Petroleum Company were closed and the Unit Petroleum
Company case (Case No. 20-32738) was the only remaining open case. The
Reorganized Debtors have now completed the claims reconciliation
process and anticipate filing a motion to close the Unit Petroleum
Case.
11. Selling the Warrants. The Warrants can be sold, assigned,
transferred, pledged, encumbered, or in any other manner transferred or
disposed of, in whole or in part in accordance with the terms of the
Warrant Agreement and all applicable laws.\8\ In this regard, Invested
Participants will have the right to sell the Warrants allocated to
their Plan Accounts on the open market at any time before the Warrant
expiration date in the same manner as other holders of the Warrants.
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\8\ The Department notes that relief under this exemption does
not extend to the sale of the Warrants, which must be executed as
``blind'' transactions.
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12. Disclosures Associated with the Warrants. As a condition of
this exemption, the terms of the Warrants Offering must be described to
the Invested Participants in clearly written communications containing
all material terms provided by the Applicant. In addition to the
prospectus for the Warrant Offering, Invested Participants must receive
a separate communication from the Applicant that clearly explains all
aspects of the Warrants Offering, including: (a) that Unit Corporation
is granting the Warrants to former holders of Old Unit Common Stock;
(b) how the Warrants work; (c) that the decision regarding whether to
accept or reject the Warrants is the decision of the Invested
Participant; and (d) the liability release described above.
The Independent Fiduciary
13. On September 23, 2020, Unit and the Committee retained Newport
Trust Company of New York, NY (Newport) to serve as the Independent
Fiduciary to the Plan with respect to the Proposed Transactions.
Newport represents that it understands and acknowledges its duties and
responsibilities under ERISA in acting as the Independent Fiduciary on
behalf of the Plan, and that in this capacity it must act solely in the
interest of the Invested Participants with care, skill, and prudence in
discharging its duties.
14. Newport represents that it does not have any prior relationship
with any parties in interest to the Plan, including Unit Corporation,
or any Unit Corporation affiliates. In this regard, Newport represents
that it is independent of, and unrelated to Unit Corporation, and that:
(a) it does not directly or indirectly control, is not controlled by,
and is not under common control with Unit Corporation; and (b) neither
it, nor any of its officers, directors, or employees is an officer,
director, partner or employee of Unit Corporation (or is a relative of
such persons). Newport also represents that (a) the payment it receives
as Independent Fiduciary is not contingent upon, or in any way affected
by, the contents of its Independent Fiduciary Report, and (b) the total
fee it has received from any party in interest, including the Plan,
Unit Corporation, or any Unit Corporation affiliates, does not exceed
1% of its annual revenues from all sources based upon its prior income
tax year.
15. Newport represents: (a) that no party related to Unit
Corporation has, or will, indemnify Newport in whole or in part for
negligence and/or for any violation of state or federal law that may be
attributable to Newport in performing its duties as Independent
Fiduciary on behalf of the Plan; (b) that it has not performed any
prior work on behalf of Unit Corporation, or on behalf of any party
related to Unit Corporation; (c) that it has no financial interest with
respect to its work as Independent Fiduciary, apart from the express
fees paid to Newport to represent the Plan with respect to the Proposed
Transactions; (d) that it has not received any compensation or entered
into any financial or compensation arrangements with Unit Corporation,
or any parties related to Unit Corporation; and (e) that it will not
enter into any agreement or instrument regarding the Proposed
Transactions that violates ERISA section 410 or the Department's
regulations codified in 29 CFR 2509.75-4.\9\
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\9\ ERISA section 410 provides, in relevant part, that ``except
as provided in ERISA sections 405(b)(1) and 405(d), any provision in
an agreement or instrument which purports to relieve a fiduciary
from responsibility or liability for any responsibility, obligation,
or duty under this part [meaning ERISA section 410(a)] shall be void
as against public policy.''
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16. Independent Fiduciary Duties. As Independent Fiduciary to the
Plan with respect to the Proposed Transactions, Newport must: (a)
determine whether the Proposed Transactions are in the interests of the
Plan and the Invested Participants; (b) determine whether the Plan may
enter into the Proposed Transactions in accordance with the
requirements of this exemption; and (c) submit its determinations to
the Department in a report (the Independent
[[Page 8466]]
Fiduciary Report) that includes a detailed analysis of the reasons why
the Proposed Transactions are in the interests of, and protective of
the rights of, the Plan and the Invested Participants, and a
representation that the Invested Participants received all they were
entitled to receive with respect to the Proposed Transactions. The
Independent Fiduciary must review and confirm that the communications
sent to participants meet the requirements of this exemption.
Additionally, the Independent Fiduciary or an appropriate Plan
fiduciary will monitor the holding and sale of warrants by the Plan in
accordance with the obligations of prudence and loyalty under ERISA
section 404(a) to ensure that the Proposed Transactions remain prudent,
protective of, and in the interests of the participants. Finally, not
later than 90 days after the end of the Exercise Period, the
Independent Fiduciary must submit a written statement to the Department
confirming and demonstrating that the Applicant has met all of the
exemption's requirements.
17. Independent Fiduciary Report. On January 29, 2021, Newport
completed its Independent Fiduciary Report, wherein it determined that
the Proposed Transactions are prudent, in the interest of, and
protective of, the Plan and the Invested Participants. In completing
its Independent Fiduciary Report, Newport represents that it conducted
a thorough due diligence process to evaluate the Proposed Transactions,
which involved discussions and correspondence with representatives of
Unit Corporation, Unit Corporation's outside counsel, and
representatives of the Trustee. Newport represents that it also
reviewed information provided by Unit Corporation and the Benefits
Committee, as well as additional publicly available information.
In the Independent Fiduciary Report, Newport states that its
recommendation to the Benefits Committee to pass through the decision
whether to accept or reject the Warrants to Invested Participants
comports with the Plan's standard practice of granting Invested
Participants individual discretion over shareholder matters and with
the Plan's standing practice for corporate actions within the Company
Stock Fund. Newport further states that allowing the Plan to hold the
Warrants places Invested Participants on equal footing with other non-
Plan shareholders of Old Unit Common Stock, and that this pass-through
empowers Invested Participants to make an election that is consistent
with their particular economic interests. Newport further states that
Invested Participants have historically enjoyed the same rights and
privileges as shareholders outside the Plan.
Newport states that Invested Participants who choose to accept the
Warrants could realize value through the future exercise or sale of the
Warrants, while participants who choose to reject the Warrants would
maintain their legal right to bring claims against Unit Corporation.
Newport states that the terms and conditions of the Proposed
Transactions require that no fees or commissions be paid by Invested
Participants, and that Invested Participants will only be allowed to
exercise the Warrants for economic gain. Newport further states that
there is currently no public market for the Warrants or for New Unit
Common Stock, and the terms of the Warrants do not entitle holders to
``put'' the Warrants to the Applicant.
Newport states that any shareholder who elects not to receive the
Warrants would not waive any claims that could be brought against Unit
Corporation and other Released Parties, including claims seeking
restitution for losses on an individual or class action basis under
securities law. Newport further states that Invested Participants who
elect not to receive the Warrants would also not waive their right to
file a claim seeking restitution for losses under ERISA.
Newport represents that the methodology used by Stout to determine
the fair market value of the Warrants was reasonable, sound, and
consistent with good valuation practices. In this regard, Newport
states that the Black-Scholes formula used by Stout is commonly
employed across the financial industry to establish the fair market
value of equity options, including rights and warrants. Newport further
states that Stout applied this methodology in an objective manner and
exercised professional judgment to account for the Warrants' specific
characteristics.
Newport notes that, as the Independent Fiduciary to the Plan with
respect to the Proposed Transactions, it has the responsibility to
determine whether to override the Plan's pass-through process and,
thus, disregard participant's elections with respect to the receipt of
the Warrants and the release of claims. Newport states that, based on
the reported value of the Warrants and the uncertain economic value of
the potential claims, it determined not to override the Plan's pass-
through process, and therefore not to disregard Invested Participant
elections in connection with the receipt of Warrants and the release of
claims.
18. Newport states that it reviewed public information about the
Applicant and the Plan and performed legal research related to the
Applicant's active lawsuits to confirm that no active claims are
pending that would potentially be released through receipt of the
Warrants. Newport notes that, based on a review of the public record,
there is no indication that the Applicant's financial difficulties were
brought on by its mismanagement or any other inappropriate activities
by the Applicant or any affiliated entity. Newport further states that
there are no pending lawsuits or active court cases involving the
Applicant aside from the Bankruptcy Filing.
19. Newport concludes that, based on this analysis and the
assumption that the Applicant provides Invested Participants with the
appropriate disclosures described above, it would be imprudent for
Newport to disallow participants' rights to exercise their judgment
with respect to the Warrants by overriding the Plan's pass-through
process and disregard the Invested Participants' selections in
connection with the receipt of Warrants and the release of claims based
on the facts as they existed at the time of their analysis. However, as
noted above, the Independent Fiduciary or an appropriate Plan fiduciary
will monitor the holding and sale of Warrants by the plan in accordance
with its obligations of prudence and loyalty under ERISA section 404(a)
to ensure that the Proposed Transactions remain prudent, protective of,
and in the interests of the participants.
ERISA Analysis
20. The acquisition and holding of the Warrants would violate
certain prohibited transaction restrictions of ERISA. Although the
Warrants constitute ``employer securities,'' as defined under ERISA
section 407(d)(1), they do not satisfy the definition of ``qualifying
employer securities,'' as defined under ERISA section 407(d)(5),
because they are not stock or marketable debt securities. Under ERISA
section 407(a)(1)(A), a plan may not acquire or hold any ``employer
security'' that is not a ``qualifying employer security.'' In addition,
ERISA section 406(a)(1)(E) prohibits the acquisition, on behalf of a
plan, of any ``employer security in violation of section 407(a) of
[ERISA].'' Finally, ERISA section 406(a)(2) prohibits a fiduciary who
has authority or discretion to control or manage a plan's assets from
permitting the plan to hold any ``employer security'' in violation of
ERISA section 407(a). Therefore, the acquisition and holding
[[Page 8467]]
of the Warrants by the Plan would constitute prohibited transactions
that violate ERISA sections 406(a)(1)(E) and 406(a)(2).
21. Furthermore, the acquisition of the Warrants would violate
ERISA section 406(a)(1)(A). In relevant part, ERISA section
406(a)(1)(A) provides that a plan fiduciary shall not cause the plan to
engage in a transaction if the fiduciary knows or should know that the
transaction is a sale or exchange of any property between a plan and a
party in interest. Because the Invested Participants who acquire the
Warrants will release their claims against the Released Parties, the
acquisition of the Warrants will constitute a sale or exchange of
property between the Plan and Unit Corporation, a party in interest, in
violation of ERISA section 406(a).
Statutory Findings
22. ERISA section 408(a) provides, in part, that the Department may
not grant an exemption from the prohibited transaction provisions
unless the Department finds that the exemption is administratively
feasible, in the interest of affected plan and of its participants and
beneficiaries, and protective of the rights of such participants and
beneficiaries. Each of these criteria are discussed below.
23. The Proposed Exemption Is ``Administratively Feasible.'' The
Department has tentatively determined that the proposed exemption is
administratively feasible. In this regard, the Department notes that
the Independent Fiduciary must represent the interests of the Plan for
all purposes with respect to the Proposed Transactions and must
determine that the Proposed Transactions, including all terms and
conditions of the proposed exemption are in the interests of the Plan
and the Invested Participants.
24. The Proposed Exemption Is ``In the Interests of the Plan.'' The
Department has tentatively determined that the proposed exemption is in
the interests of the Plan. In this regard, the Department notes that
Invested Participants who choose to accept the Warrants could realize
value through the future exercise or sale of the Warrants, while
participants who choose to reject the Warrants would maintain their
legal right to bring claims against Unit Corporation. Further, Invested
Participants would pay no fees or commissions and will only be allowed
to exercise the Warrants for economic gain. Absent the receipt of
Warrants, the Invested Participants may not receive any value for the
shares of Old Unit Common Stock they held before the Bankruptcy
Filing.\10\
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\10\ The Department notes that in proposing this exemption it is
not expressing any views regarding whether Invested Participants
should ultimately accept or reject the Warrants.
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25. The Proposed Exemption Is ``Protective of the Plan.'' The
Department has tentatively determined that the proposed exemption is
protective of the rights of the Invested Participants. In this regard,
the Department notes that all decisions regarding the holding, exercise
and disposition of the Warrants will be made by the Invested
Participants. Further, this proposed exemption requires the terms of
the Warrants to be described in clearly-written communications provided
to the Invested Participants by the Applicant. Finally, the Department
notes that the Trustee will not allow Invested Participants to exercise
the Warrants unless the fair market value of New Unit Stock exceeds the
exercise price of the Warrants on the date of exercise and Invested
Participants may choose to reject the Warrants and maintain their legal
right to bring claims against Unit Corporation.
Summary
26. Based on the conditions included in this proposed exemption,
the Department has tentatively determined that the relief sought by the
Applicant would satisfy the statutory requirements for an individual
exemption under ERISA section 408(a).
Proposed Exemption
The Department is considering granting an exemption under the
authority of ERISA section 408(a) and Code section 4975(c)(2) and in
accordance with its exemption procedures set forth in 29 CFR part 2570,
subpart B (29 CFR part 2570, subpart B (75 FR 66637, 66644, October 27,
2011)).
Section I. Definitions
(a) The term ``Bankruptcy Filing'' means Unit Corporation's May 22,
2020 filing for relief under chapter 11 of title 11 of the United
States Code, in the United States Bankruptcy Court for the Southern
District of Texas, Houston Division, under Case No. 20-327401.
(b) The term ``Exercise Period'' means the period during which
Invested Participants can exercise their Warrants, which will end on
the earliest of the following: (1) September 3, 2027; (2) the
consummation of a cash sale (as defined in the Warrant Agreement); or
(3) the consummation of a liquidation, dissolution or winding up of
Unit Corporation.
(c) The term ``Invested Participants'' means Plan participants who
held shares of Old Unit Common Stock as of the date of the Bankruptcy
Filing.
(d) The term ``the Plan'' means the Unit Corporation Employees'
Thrift Plan.
(e) The term ``Independent Fiduciary'' means Newport Trust Company
of New York, NY (Newport) or a successor Independent Fiduciary, to the
extent Newport or the successor Independent Fiduciary continues to
serve in such capacity, and who:
(1) Is not an affiliate of Unit Corporation and does not hold an
ownership interest in Unit Corporation or affiliates of Unit
Corporation;
(2) Was not a fiduciary with respect to the Plan before its
appointment to serve as the Independent Fiduciary;
(3) Has acknowledged in writing that it:
(i) Is a fiduciary with respect to the Plan and has agreed not to
participate in any decision regarding any transaction in which it has
an interest that might affect its best judgment as a fiduciary; and
(ii) Has appropriate technical training or experience to perform
the services contemplated by the exemption;
(4) Has not entered into any agreement or instrument that violates
the prohibitions on exculpatory provisions in ERISA section 410 or the
Department's regulation relating to indemnification of fiduciaries at
29 CFR 2509.75-4;
(5) Has not received gross income from Unit Corporation (including
Unit Corporation affiliates) for any fiscal year in an amount that
exceeds two percent (2%) of the Independent Fiduciary's gross income
from all sources for the prior fiscal year. This provision also applies
to a partnership or corporation of which the Independent Fiduciary is
an officer, director, or 10 percent (10%) or more partner or
shareholder, and includes as gross income amounts received as
compensation for services provided as an independent fiduciary under
any prohibited transaction exemption granted by the Department; and
(6) No organization or individual that is an Independent Fiduciary,
and no partnership or corporation of which such organization or
individual is an officer, director, or ten percent (10%) or more
partner or shareholder, may acquire any property from, sell any
property to, or borrow any funds from Unit Corporation or from
affiliates of Unit Corporation while serving as an Independent
Fiduciary. This prohibition
[[Page 8468]]
will continue for a period of six months after the party ceases to be
an Independent Fiduciary and/or the Independent Fiduciary negotiates
any transaction on behalf of the Plan during the period that the
organization or individual serves as an Independent Fiduciary.
(f) The term ``Released Parties,'' as referenced below and in
footnote 3 above, means: (1) Unit Corporation; (2) the Reorganized Unit
Corporation; (3) the Debtor-in-possession Agent; (4) the Debtor-in-
possession Lenders; (5) the RBL Agent; (6) the RBL Lenders; \11\ (7)
the Consenting Noteholders; (8) the Exit Facility Agent; (9) the Exit
Facility Lenders; and (10) the Subordinated Notes Indenture Trustee.
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\11\ RBL stands for ``Reserve Based Lending.''
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(g) The term ``Unit Corporation'' means Unit Corporation and any
affiliate of Unit Corporation.
(h) The term ``Warrants'' means the Warrants issued by Unit
Corporation in connection with the Bankruptcy Filing that entitle their
registered holders to receive the Warrants, pursuant to an exchange
rate of 1 to .03460447, where one share of Old Unit Common Stock will
convert to .03460447 Warrants, through the payment of an Exercise Price
during the Exercise Period.
Section II. Covered Transactions
If the proposed exemption is granted, the restrictions of ERISA
sections 406(a)(1)(A), 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A), shall
not apply to: (1) the acquisition by the Invested Participant Accounts,
of the Warrants issued by Unit Corporation, the Plan sponsor, in
connection with the Bankruptcy Filing, in exchange for a waiver of
claims against Released Parties; and (2) the holding of the Warrants by
the Plan, provided that the conditions set forth in section III are
met.
Section III. Conditions
(a) The acquisition of the Warrants by the Accounts of the Invested
Participants is implemented on the same material terms as the
acquisition of the Warrants by all shareholders of Old Unit Common
Stock;
(b) The acquisition of the Warrants by the Accounts of Invested
Participants resulted from an independent corporate act of Unit
Corporation;
(c) Each shareholder of Old Unit Common Stock, including each of
the Accounts of the Invested Participants, receives the same
proportionate number of Warrants, and this proportionate number of
Warrants is based on the number of shares of Old Unit Common Stock held
by each shareholder;
(d) The Warrants are acquired pursuant to, and in accordance with,
provisions under the Plan for the individually-directed investment of
the Accounts by the Invested Participants whose Accounts in the Plan
held Old Unit Common Stock;
(e) The decision regarding the acquisition, holding and disposition
of the Warrants by the Accounts of the Invested Participants have been
and will continue to be made by the Invested Participants whose
Accounts received the Warrants;
(f) If any of the Invested Participants fail to provide the Trustee
with instructions to exercise or sell the Warrants received by July 30,
2027, the Warrants will be automatically sold in blind transactions on
the New York Stock Exchange, and the sales proceeds will be distributed
pro-rata to the Accounts of the Invested Participants whose Warrants
are sold;
(g) No brokerage fees, commissions, subscription fees, or other
charges have been paid or will be paid by the Plan or the Invested
Participants' Accounts for the acquisition and holding of the Warrants,
and no commissions, fees, or expenses have been paid or will be paid by
the Plan or the Invested Participants' Accounts to any related broker
in connection with the sale or exercise of any of the Warrants or the
acquisition of the New Unit Common Stock through the exercise of the
Warrants;
(h) Unit Corporation does not influence any Invested Participant's
election with respect to the Warrants;
(i) The terms of the Offering of the Warrants are described to the
Invested Participants in clearly-written communications from Unit
Corporation containing all material terms of the Warrant Offering. In
addition to the prospectus for the Warrant Offering, Invested
Participants must receive a separate communication from Unit
Corporation that clearly explains all aspects of the Warrants Offering,
including: (1) that Unit Corporation is granting the Warrants to former
holders of Old Unit Common Stock; (2) how the Warrants work; (3) that
the decision regarding whether to accept or reject the Warrants is made
solely by the Invested Participants; and (4) the liability release. The
Independent Fiduciary described in (j) below must review and confirm
that the communications sent to participants meet the requirements of
this exemption;
(j) An Independent Fiduciary that is unrelated to Unit Corporation
and/or its affiliates and acting solely on behalf of the Plan has
determined that:
(1) The Proposed Transactions are prudent, in the interest of, and
protective of the Plan and its participants and beneficiaries; and
(2) The Plan may enter into the Proposed Transactions in accordance
with the requirements of this exemption; and
(k) The Independent Fiduciary must document its initial and final
determinations in written reports that include a detailed analysis
regarding whether the Proposed Transactions are in the interests of the
Plan and the Invested Participants, and protective of the rights of
Invested Participants of the Plan;
(l) The Independent Fiduciary or an appropriate Plan fiduciary will
monitor the holding and sale of warrants by the plan in accordance with
the obligations of prudence and loyalty under ERISA section 404(a) to
ensure that the Proposed Transactions remain prudent, protective of,
and in the interests of the participants.
(m) No later than 90 days after the end of the Exercise Period, the
Independent Fiduciary must submit a written statement to the Department
confirming and demonstrating that all requirements of the exemption
have been met. In its written statement, the Independent Fiduciary must
confirm that all Invested Participants receive everything to which they
are entitled pursuant to the terms of this exemption, the Warrant
Agreement, and any other documents relevant to this exemption.
(n) The Independent Fiduciary must represent that it has not and
will not enter into any agreement or instrument that violates ERISA
section 410 or 29 CFR 2509.75-4;
(o) At least thirty days before the conclusion of the Exercise
Period, Unit Corporation must notify and inform each Invested
Participant in writing that each Warrant held in the Invested
Participant's Account will expire and all rights under the Warrants and
the Warrant Agreement will cease upon the conclusion of the Exercise
Period; and
(p) All of the material facts and representations set forth in the
Summary of Facts and Representations are true and accurate. If there is
any material change in a transaction covered by the exemption, or in a
material fact or representation described by the Applicant in the
application, the exemption will cease to apply as of the date of the
change.
Effective Date: This exemption, if granted will be effective on the
date the Department publishes a grant notice in the Federal Register
and will continue until the date all Warrants are exercised, sold, or
expire.
[[Page 8469]]
Notice to Interested Persons
Those persons who may be interested in the publication in the
Federal Register of the notice of proposed exemption (the Notice)
include participants and beneficiaries of the Plan. The Applicant will
provide notification to interested persons by electronic mail, and
first-class mail within ten (10) calendar days of the date of the
publication of the Notice in the Federal Register. The mailing will
include a copy of the Notice, as it appears in the Federal Register on
the date of publication, plus a copy of the Supplemental Statement, as
required, pursuant to 29 CFR 2570.43(b)(2), which will advise
interested persons of their right to comment and/or to request a
hearing.
The Department must receive all written comments and requests for a
hearing by March 27, 2023.
All comments will be made available to the public.
Warning: Do not include any personally identifiable information
(such as a name, address, Social Security number, or other contact
information) or confidential business information that you do not want
publicly disclosed. All comments may be posted on the internet and can
be retrieved by most internet search engines.
For Further Information Contact: Mr. Joseph Brennan of the
Department, telephone (202) 693-8456. (This is not a toll-free number.)
The Liberty Media 401(k) Savings Plan and the Liberty Media 401(k)
Savings Plan Trust Located Englewood, Colorado
[Application No. D-12023]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Employee Retirement Income Security
Act of 1974, as amended (ERISA), and in accordance with the procedures
set forth in 29 CFR part 2570, subpart B (76 FR 66637, 66644, October
27, 2011). The proposed exemption would permit, for the period
beginning May 18, 2020, and ending June 5, 2020: (1) the Liberty Media
401(k) Savings Plan's (the Plan) acquisition of certain stock
subscription rights (the Rights) to purchase shares of the Series C
Liberty SiriusXM common stock (the Series C Liberty SiriusXM Stock), in
connection with a rights offering (the Rights Offering) by Liberty
Media Corporation (LMC); and (2) the Plan's holding of the Rights
during the subscription period of the Rights Offering, provided that
certain conditions are satisfied.
Summary of Facts and Representations <SUP>12</SUP>
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\12\ The Department notes that the availability of this
exemption, if granted, is subject to the express condition that the
material facts and representations contained in application D-12023
(the Application) are true and complete, and accurately describe all
material terms of the transactions covered by the exemption. If
there is any material change in a transaction covered by the
exemption, or in a material fact or representation described in the
Application, the exemption will cease to apply as of the date of the
change.
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Background
1. LMC (or the Applicant) is a Delaware corporation with its
principal place of business in Englewood, Colorado. LMC is primarily
engaged in media, communications and entertainment businesses.
2. LMC sponsors the Plan. The Plan is a defined contribution plan
covering employees of LMC and qualifying subsidiaries. As of December
31, 2020, the Plan had total assets of $161,681,000 and 1,015
participants.
3. The Plan is administered by an administrative committee (the
Administrative Committee). The Plan's assets are held in the Liberty
Media 401(k) Savings Plan Trust (the Trust). Fidelity Management Trust
Company is the Plan's trustee (the Trustee or Fidelity), and it
executes investment directions in accordance with Plan participants'
written instructions.
4. The Plan permits participants to direct the investment of their
Plan accounts, including their 401(k) contributions, any employer
contributions, and any rollover contributions, into one of 27
investment alternatives, which includes certain employer securities
issued by LMC and employer securities issued by other employers
participating in the Plan. The Plan allows the employer to contribute
any property to the Plan that the Trustee is authorized to invest. As
of May 13, 2020, the Plan held a total of $7,186,824 in Series C
Liberty SiriusXM Stock, which represented 6% of total Plan assets.
5. Solely with respect to the Rights described below, the Plan
permitted the Rights Offering because the Trustee was authorized to
receive the Rights. The Administrative Committee acted as trustee of
the temporary separate trust established to hold the Rights (the Rights
Trust), and Fidelity acted as custodian of those Rights.
Description of Liberty SiriusXM Stock
6. The Series A, B, or C Liberty SiriusXM stock is LMC stock that
is intended to track and reflect the separate economic performance of
the business, assets, and liabilities of Sirius XM Holdings. Sirius XM
Holdings operates two audio entertainment businesses: Sirius XM and
Pandora. As of February 10, 2020, Sirius XM Holdings' investments
included $75 million in SoundCloud.
The Rights Offering
7. LMC conducted the Rights Offering with holders of shares of
Series C Liberty SiriusXM Stock. Each holder of Series A Liberty
SiriusXM Stock, Series B Liberty SiriusXM Stock, and Series C Liberty
SiriusXM Stock, as of May 13, 2020, received 0.0939 of a Right (rounded
up to the nearest whole Right).\13\ Each Right entitled the holder to
purchase one share of Series C Liberty SiriusXM Stock at a subscription
price of $25.47, which was equal to an approximate 20% discount to the
volume weighted average trading price of Series C Liberty SiriusXM
Stock for the 3-day trading period ending on and including May 9, 2020.
The Rights Offering for 231,861,714 shares of Series C Liberty SiriusXM
Stock commenced on May 18, 2020, and remained open until June 5, 2020.
The market closing price for each share of Series C Liberty SiriusXM
Stock on these dates was $32.59 and $38.88, respectively.
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\13\ The ticker symbols for the stock were as follows: Series C
Liberty SiriusXM Stock (``LSXMK''), Series A Liberty SiriusXM Stock
(``LSXMA''), and Series B Liberty SiriusXM Stock (``LSXMB'').
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8. According to the Applicant, Plan participants were notified of
the Rights Offering, and of the procedure for instructing Fidelity of
the participant's desires with respect to the Rights. Plan participants
received the following documents: (a) Questions and Answers, which
explained the Rights issuance and participant's option to exercise or
sell the Rights attributable to the employer securities allocated to
the participant's Plan account; (b) the Rights Offering Instructions,
which explained the steps for the participant to take to exercise or
sell the Rights; and (c) the Prospectus (within LMC's Form S-3 as filed
with the Securities and Exchange Commission on May 14, 2020), which was
made available to all shareholders explaining the Rights issued by LMC.
The Applicant represents that these materials were reviewed in detail
by the Applicant, the Plan administrator, the Trustee, the outside
counsel addressing the Rights Offering, and the Applicant's outside
benefits counsel. All involved Plan participants were notified in
advance of the procedure for instructing
[[Page 8470]]
Fidelity of the participants' desires with respect to the Rights.
9. The Applicant represents that the acquisition of the Rights by
the Plan was consistent with provisions of the Plan for the
individually-directed investment of participant accounts. Under the
terms of the Plan and the Trust, the Trustee passed through its right
to vote or take action on employer securities to the Plan participants.
Each participant could then decide whether to exercise or sell the
Rights attributable to the shares of employer securities allocated to
the participant's account.
10. Due to securities law restrictions, certain participants who
were reporting persons under Rule 16(b) \14\ of the Securities Exchange
Act of 1934 (Rule 16(b)) with respect to LMC did not have the right to
instruct Fidelity to either sell or exercise the Rights credited to
their Plan Accounts. As provided by the Plan, and as directed by the
Administrative Committee, Fidelity sold the Rights credited to these
Rule 16(b) participant accounts, along with the Rights of other
participants who did not elect to sell or exercise the Rights credited
to their accounts, during the last few days of the Rights Offering
period.
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\14\ Rule 16(b) requires an officer, director, or any
shareholder holding more than 10% of the outstanding shares of a
publicly-traded company who makes a profit on a transaction with
respect to the company's stock during a given six month period, to
pay the difference back to the company.
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Temporary Investment Funds
11. The Plan established two temporary investment funds to
accommodate the Rights. The first fund, the ``Rights Holding Fund,''
was a separate fund established under the Rights Trust, to hold the
Rights when they were issued. Rights were credited to participants'
accounts based on their respective holdings of Series C Liberty
SiriusXM Stock as of the record date. The second fund, the ``Rights
Receivable Fund,'' received the Series C Liberty SiriusXM Stock shares
following the exercise of the Rights on June 5, 2020 (the last day of
the Rights Offering period), as directed by the Plan participants.
Participants Who Elected To Exercise Rights
12. With the exception of those reporting persons under Rule l6(b),
each participant in the Plan could elect to exercise any percentage of
the Rights allocated to his or her Plan account. A participant could
exercise the Rights by speaking to a Fidelity representative at any
time before 4:00 p.m. Eastern Time, on June 1, 2020 (the ``Election
Close-Out Date''). Plan participants ended up exercising 3,219 rights.
13. For those individuals with insufficient funds to permit the
exercise of the entire elected amount of Rights, Fidelity exercised as
many Rights as the participant's account balance permitted.
14. On or about June 4, 2020, the Rights to be exercised and
necessary funds were submitted by Fidelity to Broadridge Corporate
Issuer Solutions, Inc. (Broadridge), the subscription agent, for the
purchase of shares. Plan participants' balances in the Rights Holding
Fund were reduced by the number of Rights exercised on the
participant's behalf. Upon receipt of the new shares, the Rights
Receivable Fund was closed and the newly-received shares were allocated
to the participants' accounts.
15. According to the Applicant, those participants who elected to
exercise only a portion of their Rights could later elect to exercise
additional Rights to the extent that sufficient time existed before the
Election Close-Out Date. In addition, on or about June 2 through June
5, 2020, Fidelity sold 17,808 unexercised Rights on the NASDAQ Global
Market (the NASDAQ) in ``blind transactions'' for an average price of
$11.79 per Right for a total price $209,956.32. The proceeds from the
sales were allocated proportionally to the relevant participants'
accounts. Thus, all unexercised Rights were sold by Fidelity, and no
Rights expired.\15\
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\15\ The Applicant represents that the brokerage services and
fees received by either Fidelity or Broadridge in connection with
the sale of the Rights are exempt under ERISA section 408(b)(2).
However, the Department is not providing any relief for the receipt
of any commissions, fees, or expenses in connection with the sale of
the Rights in blind transactions to unrelated third parties on the
NASDAQ, beyond that provided under ERISA section 408(b)(2). In this
regard, the Department is not opining on whether the conditions set
forth in ERISA section 408(b)(2) and the Department's regulations
under 29 CFR 2550.408(b)(2), have been satisfied.
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Participants Who Elected To Sell Rights
16. In order to sell his or her Rights, a Plan participant was
required to: (a) contact a Fidelity representative or log on to the
Fidelity website for the Plan; and (b) specify the whole percentage of
the Rights the participant desired to sell. The selling period for
participants ran from the date that Fidelity first started accepting
participant directions (which was May 26, 2020, through June 1, 2020).
A total of 1,506 Rights (rounded to the nearest whole Right) were sold
by Fidelity at Plan participants' directions.
17. According to the Administrative Committee's Chairman, the Plan
fiduciary or fiduciaries responsible for overseeing the Plan's
participation in the Rights offering prudently and loyally determined
on behalf of the Plan that: (a) the Plan's acquisition, holding and
sale of the Rights could proceed on the terms established by such
fiduciaries, and (b) the Plan's participants received all they were
entitled to under the Rights arrangement (i.e., the Participants got at
least the fair market value for the exercise and sales of the Rights).
18. LMC represents that it filed the Exemption Application after
the last day of the Offering Period to provide up to date information
about the Offering Period with respect to the Rights Offering.
ERISA Analysis
19. ERISA section 406(a)(1)(E) provides that a fiduciary with
respect to a plan shall not cause the plan to engage in a transaction
if he or she knows or should know that such transaction constitutes the
acquisition, on behalf of the plan, of any employer security in
violation of ERISA section 407(a). ERISA section 406(a)(2) provides
that a fiduciary of a plan shall not permit the plan to hold any
employer security if he or she knows or should know that holding such
security violates ERISA section 407(a).
20. ERISA section 407(a)(1)(A) provides that a plan may not acquire
or hold any ``employer security'' which is not a ``qualifying employer
security.'' ERISA section 407(d)(1) defines ``employer securities,'' in
relevant part, as securities issued by an employer of employees covered
by the plan, or by an affiliate of such employer. ERISA section
407(d)(5) provides, in relevant part, that ``qualifying employer
securities'' are stock or marketable obligations. Because the Rights do
not constitute either stock or marketable obligations for indebtedness,
the Rights are not ``qualifying employer securities.'' However, once a
participant exercises his or her Rights and the Plan acquires the
Series C Liberty SiriusXM Stock on behalf of such participant, then a
violation of ERISA sections 406(a)(1)(E), 406(a)(2), and 407(a)(1)(A)
occurs. If granted, the exemption will be effective for the period May
18, 2020, through June 5, 2020.
Department's Note: This proposal, if granted, does not provide an
exemption from any other provision of ERISA or the Code, including each
Plan fiduciary's duties of prudence and loyalty in connection with the
exercise or sale of the rights.
[[Page 8471]]
Statutory Findings
21. ERISA section 408(a) provides, in part, that the Department may
not grant an exemption unless the Department finds that the exemption
is administratively feasible, in the interest of affected plans and of
their participants and beneficiaries, and protective of the rights of
such participants and beneficiaries, which criteria are discussed
below.
a. The Proposed Exemption Is ``Administratively Feasible.'' The
Department has tentatively determined that the proposal is
administratively feasible because, among other things, the Plan
participants received the Rights pursuant to LMC's independent
corporate act in which all shareholders, including the Plan
participants, were treated in a like manner with respect to the
acquisition and holding of the Rights, with two minor exceptions: (1)
the oversubscription option available under the Rights Offering was not
available to participants in the Plan; \16\ and (2) certain
participants deemed to be reporting persons under Rule 16(b) with
respect to LMC did not have the right to instruct Fidelity to sell or
exercise the Rights credited to their Plan Accounts.
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\16\ An oversubscription option, or privilege, allows
shareholders (with this option or privilege) to buy shares that were
not purchased by other shareholders.
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b. The Proposed Exemption Is ``In the Interest of the Plan.'' The
Department has tentatively determined that the proposed exemption is in
the interests of the participants and beneficiaries of the Plan
because, among other things: each Plan participant was able to make an
independent decision whether to liquidate his or her account assets to
purchase additional employer securities at a discount; each Plan
participant received their Rights at no additional cost; the
participants who exercised their Rights paid $25.47 per share of the
Series C Liberty SiriusXM Stock, which was equal to an approximate 20%
discount to the volume weighted average trading price of Series C
Liberty SiriusXM Stock for the 3-day trading period ending on and
including May 9, 2020; and those who sold their Rights received an
average of $11.79 for each Right.
c. The Proposed Exemption Is ``Protective of the Plan.'' The
Department has tentatively determined that the proposed exemption is
protective of the rights of participants and beneficiaries because,
among other things, the Rights were sold by Fidelity on the NASDAQ for
a discounted market value, in arms' length transactions between
unrelated parties, and all shareholders were treated in the same manner
during the Rights Offering's process. Furthermore, the Plan did not pay
any fees or commissions with respect to the acquisition or holding of
the Rights, and it did not pay any commissions to any affiliate of LMC
in connection therewith. Finally, the Plan did not pay any fees in
connection with the exemption request.
Summary
22. Based on the conditions that are included in this proposed
exemption, the Department has tentatively determined that the relief
sought by the Applicant would satisfy the statutory requirements for an
individual exemption under ERISA section 408(a).
Proposed Exemption
Section I. Transactions
If the proposed exemption is granted, for the period beginning May
18, 2020, and ending June 5, 2020, the restrictions of ERISA sections
406(a)(1)(E), 406(a)(2), and 407(a)(1)(A) shall not apply, to:
(a) The acquisition by the Plan of certain stock subscription
rights (the Rights), pursuant to a stock rights offering (the Offering)
by Liberty Media Corporation (LMC) to purchase shares of Series C
Liberty SiriusXM common stock; and
(b) The holding of the Rights by the Plan during the subscription
period of the Offering, provided the conditions set forth below in
section II are satisfied.
Section II. Conditions
(a) The Plan's acquisition of the Rights resulted solely from an
independent corporate act of LMC's Board of Directors;
(b) All holders of Series A, Series B, or Series C Liberty SiriusXM
common stock, including the Plan, were issued the same proportionate
number of Rights based on the number of shares of the Series A, B, or C
Liberty SiriusXM Stock held by each such shareholder;
(c) For purposes of the Rights Offering, all holders of Series A,
B, or C Liberty SiriusXM Stock, including the Plan, were treated in a
like manner, with two exceptions:
(1) The oversubscription option available under the Rights Offering
was not available to participants in the Plan; and
(2) Certain participants deemed to be reporting persons under Rule
16(b) \17\ of the Securities Exchange Act of 1934 (Rule 16(b)) with
respect to LMC did not have the right to instruct Fidelity to either
sell or exercise the Rights credited to their Plan Accounts;
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\17\ Rule 16(b) requires an officer, director, or any
shareholder holding more than 10% of the outstanding shares of a
publicly-traded company to disgorge any profit made on a purchase
and sale, or sale and purchase, of the company's stock within any
period of less than six months.
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(d) The acquisition of the Rights by the Plan was consistent with
provisions of the Plan for the individually-directed investment of
participant accounts;
(e) The Liberty Media 401(k) Savings Plan administrative committee
did not exercise any discretion with respect to the acquisition,
holding or sale of the Rights by the Plan;
(f) The Plan fiduciary or fiduciaries responsible for overseeing
the Plan's participation in the Rights offering prudently and loyally
determined on behalf of the Plan that: (1) the Plan's acquisition,
holding and sale of the Rights could proceed on the terms established
by such fiduciaries, and (2) the Plan's participants received all they
were entitled to under the Rights arrangement (i.e., the Participants
got at least the fair market value for the exercise and sales of the
Rights);
(g) Each Plan participant made an independent decision whether to
liquidate his or her account assets in the Rights Holding Fund to
purchase additional shares of Series C Liberty SiriusXM common stock at
a discount;
(h) The Plan did not pay any fees or commissions to LMC and/or its
affiliates in connection with the acquisition, holding, or sale of the
Rights;
(i) The Plan did not pay any fees in connection with the exemption
request; and
(j) All material facts and representations set forth in the Summary
of Facts and Representations are true and accurate.
Effective Date: This proposed exemption, if granted, will be in
effect from May 18, 2020, the date that the Plan received the Rights,
through June 5, 2020, the last date the Rights were sold on the NASDAQ.
Notice to Interested Persons
The Applicant will provide notice of the proposed exemption to all
interested persons within 15 days of the publication of the notice of
proposed exemption in the Federal Register. The notice will be given to
interested persons by first class U.S. mail at their last known mailing
address. The 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(a)(2). The
supplemental statement will inform
[[Page 8472]]
interested persons of their right to comment on the pending exemption.
Written comments are due by March 27, 2023.
All comments will be made available to the public.
Warning: If you submit a comment, EBSA recommends that you include
your name and other contact information in the body of your comment,
but DO NOT submit information that you consider to be confidential, or
otherwise protected (such as a Social Security number or an unlisted
phone number) or confidential business information that you do not want
publicly-disclosed. All comments may be posted on the internet and can
be retrieved by most internet search engines.
For Further Information Contact: Frank Gonzalez of the Department,
telephone (202) 693-8553. (This is not a toll-free number.)
The Occidental Petroleum Corporation Savings Plan and the Anadarko
Employee Savings Plan Located in Houston, TX
[Application Nos. D-12032 and D-12033, Respectively]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Employee Retirement Income Security
Act of 1974, as amended (ERISA). As more fully described below, this
proposed exemption, if granted, would permit: (1) the acquisition, on
August 3, 2020, by the Occidental Petroleum Corporation Savings Plan
(the Oxy Plan) and the Anadarko Employee Savings Plan (the Anadarko
Plan; together, the Plans), of warrants (the Warrants) issued by
Occidental Petroleum Company; and (2) the holding of the Warrants by
the Plans, provided that the conditions set forth below are met.
Summary of Facts and Representations <SUP>18</SUP>
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\18\ The Department notes that the availability of this
exemption, if granted, is subject to the express condition that the
material facts and representations made by the Applicants and
contained in applications D-12022 and D-12033 are true and complete,
and accurately describe all material terms of the transactions
covered by the exemption. If there is any material change in a
transaction covered by the exemption, or in a material fact or
representation described in the application, the exemption will
cease to apply as of the date of the change.
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The Applicants
1. The Applicants are: (a) the Occidental Petroleum Corporation
(Oxy); (b) the Anadarko Petroleum Corporation (Anadarko), a wholly
owned subsidiary of Oxy; and (c) the Oxy Plan and the Anadarko Plan
(the Plans), which are sponsored by Oxy and Anadarko, respectively.
2. Oxy is an international energy company headquartered in Houston,
Texas. Oxy common stock is publicly-traded on the New York Stock
Exchange (the NYSE) under the ticker symbol ``OXY.'' As of July 6,
2020, there were 29,023 stockholders of record and approximately
918,533,498 million shares of Oxy common stock issued and outstanding.
The Plans
3. The Oxy Plan is a participant-directed stock bonus plan that
allows participants to invest in an investment fund holding common
stock issued by Oxy. The Bank of New York Mellon serves as the Oxy
Plan's directed trustee (the Trustee). As of August 28, 2020, the Oxy
Plan had 12,604 participants and total assets having a fair market
value of $2,055,378,936. As of that same date, the fair market value of
the Oxy common stock held by the Oxy Plan was $170,813,875, or 8.3% of
the fair market value of the Oxy Plan's assets.
4. The Anadarko Plan is a participant-directed plan that permits
participants to invest in an investment fund holding common stock
issued by Anadarko. As of August 28, 2020, the Anadarko Plan had 3,132
participants and total assets of $693,248,177. Fidelity Management
Trust Company also served as the Plan's directed Trustee. On August 28,
2020, the fair market value of Oxy common stock in the Anadarko Plan
was $2,077,278, and it represented 0.3% of the fair market value of the
Anadarko Plan's assets. After August 28, 2020, the Anadarko Plan was
terminated.
5. The Plans are administered by the Occidental Petroleum
Corporation Pension and Retirement Plan Administrative Committee (the
Administrative Committee). The Occidental Petroleum Corporation Pension
and Retirement Trust and Investment Committee (the Investment
Committee) has authority over the decisions relating to the investment
of the Plans' assets.
Issuance of Warrants
6. On June 26, 2020, Oxy announced that its Board of Directors had
declared a distribution of Warrants to its common stockholders to
purchase additional shares of Occidental's common stock, as of July 6,
2020 (the Record Date). The Warrants have a seven-year term and expire
on August 3, 2027. Recipients may exercise the Warrants to purchase
additional shares of Oxy common stock at the exercise price of $22 per
share or sell the Warrants at the prevailing market price on the
NYSE.\19\
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\19\ As of the Record Date, the closing price for Oxy common
stock on the NYSE was $18.18 per share.
---------------------------------------------------------------------------
7. On August 3, 2020, Oxy distributed the Warrants. Stockholders of
record, including the Plans, received 1/8th (12.5%) of a Warrant for
each share of Oxy common stock held as of the Record Date. Each Oxy
common stockholder, including the Plans, received the same
proportionate number of Warrants based on the number of shares of Oxy
common stock held as of the Record Date. The Plans and the other
stockholders received the Warrants automatically, because of Oxy's
unilateral and independent corporate act, and without any action on
their part.
8. On August 3, 2020, because of Oxy's distribution of the
Warrants, the Oxy Plan received 1,476,172 Warrants based on its holding
of 11,809,376 shares of Oxy common stock. The Anadarko Plan received
26,601 Warrants based on its holding of 212,813 shares of Oxy common
stock. Each Plan then established a Warrant account to reflect their
respective participants' proportionate interest in the Warrants. All
stockholders, including each Plan participant, received 1/8th of a
Warrant for every share of common stock of which they were the record
holder as of July 6, 2020.
9. On August 3, 2020, the Plans provided notices \20\ to affected
participants informing them: (a) of the Warrants, the Warrant account,
and the engagement of Fiduciary Counselors Inc. (FCI), a qualified
independent fiduciary within the meaning of 29 CFR 2570.31(j), as the
independent fiduciary; (b) that FCI would determine whether the
Warrants should be held, exercised, or sold; and (c) that Plan
participants could obtain more information by contacting their
respective Plan representative at the provided telephone number.
---------------------------------------------------------------------------
\20\ Active participants were provided notices via email while
non-active participants were provided notices at their last known
address via the United States Postal Service First Class Mail.
---------------------------------------------------------------------------
10. The Plans paid no fees or commissions in connection with the
acquisition and holding of the Warrants. On August 4, 2020, the
Warrants began regular trading on the NYSE, under the ticker symbol
``OXY WS.'' The average of the highest and lowest trading prices of the
Warrants on the NYSE on August 4, 2020, the first trading date
following the distribution of the Warrants, was $4.95 per Warrant
share. The August 4, 2020, closing price for OXY stock on the NYSE was
$15.74. As noted above, the
[[Page 8473]]
Warrants permitted their holder to purchase OXY common stock for $22
per share.
The Independent Fiduciary
11. After reviewing proposals submitted by independent fiduciary
candidates, the Investment Committee exercised its authority under the
terms of the Plans to appoint FCI, a registered investment adviser, as
the qualified independent fiduciary, on July 22, 2020. The Applicants
represent that the Investment Committee selected FCI based on its
proposal and experience in making decisions regarding the acquisition,
holding, and disposition of warrants by plans. The Applicants also
represent that the appointment of FCI to act as investment manager with
respect to the acquisition, holding and disposition of the Warrants is
consistent with the Plans' documents.
12. Under the terms of its engagement, FCI serves as ``investment
manager,'' as defined in ERISA section 3(38), and is a fiduciary, as
defined in ERISA section 3(21), with responsibility to: (a) direct the
Plans' Trustees to receive and hold the Warrants on behalf of the Plans
and determine whether the Warrants should continue to be held; (b)
determine whether and when to exercise some or all of the Warrants and
direct the Plans' Trustees, accordingly; and (c) determine whether and
when to sell some or all of the Warrants and direct the Plans'
Trustees, accordingly.
13. FCI represents that it is not related to or affiliated with any
of the other parties to the transactions, and it has not previously
been retained to perform services with respect to the Plans or any
other employee benefit plan sponsored by Oxy or Anadarko. FCI also
represents that: (a) it is independent of and unrelated to Oxy,
Anadarko, and the Plans, and does not directly or indirectly control,
is not controlled by, and is not under common control with, Oxy or
Anadarko; (b) neither it, nor any of its officers, directors, or
employees is an officer, director, partner, or employee of Oxy or
Anadarko (or is a relative of such persons); (c) it does not directly
or indirectly receive any consideration for its own account in
connection with its services related to the Plans or the Warrants,
except compensation from Oxy for such services; (d) its compensation
for services is not contingent upon or in any way affected by its
decisions; (e) the percentage of its 2020 gross revenues derived from
any party in interest and affiliates involved in the exemption
transactions was 2.08% of FCI's 2019 gross revenues; and (f) it
understands and acknowledges its duties and responsibilities under
ERISA in acting as a fiduciary on behalf of the Plans in connection
with the Warrants.
14. This proposal requires that FCI's Independent Fiduciary
Engagement Agreement does not: (a) include any indemnification
provisions that limit FCI's liability if FCI acts negligently in
performing its duties on behalf of the Plans, nor (b) contain any
provision that caps FCI's liability to the Plans. In addition, FCI
represents that it has not and will not enter into any agreement or
instrument that violates ERISA section 410 or the Department's
Regulation section 2509.75-4.\21\
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\21\ ERISA section 410 provides, in part, that ``except as
provided in ERISA sections 405(b)(1) and 405(d), any provision in an
agreement or instrument which purports to relieve a fiduciary from
responsibility or liability for any responsibility, obligation, or
duty under this part [meaning ERISA section 410(a] shall be void as
against public policy.''
---------------------------------------------------------------------------
15. This exemption requires that no party related to this exemption
application has, or will, indemnify FCI, in whole or in part, for
negligence and/or for any violation of state or federal law that may be
attributable to FCI in performing its duties. In addition, no contract
or instrument may purport to waive any liability under state or federal
law for any such violation.
FCI's Disposition of Warrants
16. As documented in the Independent Fiduciary Report, FCI
conducted a due diligence process in evaluating the Warrants on behalf
of the Plans. This process included discussions and correspondence with
representatives of the Plans and Oxy, the Plans' Trustees and the
Plans' recordkeepers. FCI also reviewed publicly-available information
and Plan-related information provided by Oxy. FCI considered four
alternatives (separately referred to herein as an ``Alternative'' or
collectively referred to herein as the ``Alternatives'') for the
Warrants on behalf of the Plans: (a) holding the Warrants; (b)
exercising the Warrants; (c) selling some Warrants on the NYSE at the
prevailing market price and exercising the remaining Warrants; and (d)
selling all of the Warrants on the NYSE at the prevailing market price.
Regarding Alternative (a) above, FCI represents that holding the
Warrants pending their sale or exercise would have resulted in the
Plans realizing no immediate monetary benefit for the Warrants they
received. Further, the value of the Warrants at some future date is
highly speculative; therefore, holding the Warrants involved delay and
unwarranted risks, including the possibility that the price of Oxy
stock would not exceed the Warrants' $22.00 per share exercise price
before they expired. Based on these factors, FCI determined that
continuing to hold the Warrants was an unacceptable alternative for the
Plans.
FCI represents that Alternative (b) above was not feasible, because
each Plan was amended to establish a separate Warrant account that
initially held only the Warrants. Therefore, no cash was available to
exercise the Warrants without selling some of them first.
Regarding Alternative (c) above, FCI could have directed the
Trustee for each of the Plans to sell some portion of the Warrants to
generate cash. Then, using the cash received from the sale of the
Warrants, the Plans could exercise the remaining Warrants to purchase
additional Oxy common stock at a price of $22 per share. However, FCI
determined that immediately exercising the Warrants at a price of
$22.00 per share when the underlying stock was trading at a price well
below that price did not make economic sense. When FCI made this
determination, Oxy stock was trading at $15.25 per share, and by
September 15, 2020, the price had declined to $10.91 per share. Waiting
until the price exceeded $22.00 per share would have involved an
indefinite delay with no assurance of when or whether that event would
occur, including whether it would occur before Warrants expired. It
also was possible that, exercising the Warrants at some future point
could generate higher proceeds than simply selling the Warrants when
the price of Oxy stock exceeded $22.00 per share.
Regarding Alternative (d) above, the Warrants would be sold on the
NYSE in a timely manner at prevailing market prices. Proceeds from the
sale would then be invested in accordance with the Plans' governing
documents. FCI determined that the benefits of selling the Warrants
immediately included simplicity, lower overall costs and complexity,
fewer administrative concerns, and less exposure to overall market risk
and volatility than the Alternatives that involved holding or
exercising any of the Warrants.
17. FCI ultimately determined that Alternative (d), involving
selling the Warrants, was in the best interests of the Plans and the
affected participants, and protective of the participants' rights. FCI
concluded that the benefits of selling the Warrants were immediate,
because it involved lower overall costs and complexity, fewer
administrative concerns, and less exposure to overall market risk and
volatility than the other alternatives. Accordingly, FCI concluded that
the sale of the Warrants
[[Page 8474]]
was in the best interests of the Plans and their participants and
beneficiaries and protective of their rights.
18. FCI sold the Oxy Plan's 1,476,172 Warrants in ``blind
transactions'' on the NYSE over the course of five trading dates
(August 6, 7, 10, 11, and 12, 2020). Gross proceeds received by the Oxy
Plan totaled $6,332,184.28 ($6,332,222.83, including interest) and were
fully and proportionately allocated to the Plan accounts of the
affected participants in the Oxy Stock Fund. Oxy also paid commissions
totaling $14,761.72, and $139.94 for SEC fees.
19. On August 10, 2020, FCI sold the Anadarko Plan's 26,601
Warrants in ``blind transactions'' on the NYSE, realizing a net benefit
to the affected Anadarko Plan participants of $115,538.88.\22\
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\22\ Because the Anadarko Plan Oxy Stock Fund is frozen and
unable to accept new investments or reinvestments, the Applicants
represent that the proceeds from the sale were proportionately
credited to the affected participants through the Anadarko Plan's
qualified designated investment alternative.
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ERISA Analysis
20. The Applicants have requested an administrative exemption from
the Department for: (a) the acquisition of the Warrants by the Plans in
connection with the distribution; and (b) the holding of the Warrants
by the Plans during the holding period. The Applicants represent that
the Warrants are not ``qualifying'' employer securities because they
are not stock, marketable obligations, or interests in a publicly-
traded partnership.
21. ERISA section 407(a)(1)(A) provides that a plan may not acquire
or hold any ``employer security'' which is not a ``qualifying employer
security.'' Under ERISA section 407(d)(1), ``employer securities'' are
defined, in relevant part, as securities issued by an employer of
employees covered by the plan, or by an affiliate of the employer.
ERISA section 407(d)(5) provides, in relevant part, that ``qualifying
employer securities'' are stock or marketable obligations. ERISA
section 406(a)(2) prohibits a plan fiduciary from permitting a plan to
hold any employer security if he or she knows or should know that
holding such security violates ERISA section 407(a).
22. ERISA section 406(a)(1)(E) prohibits a plan fiduciary from
causing the plan to engage in a transaction if he or she knows or
should know that the transaction constitutes the acquisition, on behalf
of the plan, of any employer security in violation of ERISA section
407(a).
Conditions in This Proposal
23. This proposed exemption contains conditions designed to ensure
that covered transactions were in the interest of the Plans, and that
the Plans' participants and beneficiaries were sufficiently protected.
For example, the proposal requires that Oxy: (1) issued the Warrants to
all stockholders of Oxy common stock, including the Plans; and (2)
treated all of Oxy common stockholders, including the Plans, the same
with respect to the acquisition and holding of the Warrants.
24. Additionally, the proposed exemption requires Oxy to have
issued the same proportionate number of Warrants to all Oxy common
stockholders, including the Plans, based on the number of shares of Oxy
common stock held by each stockholder. Moreover, the Plans' acquisition
of the Warrants must have resulted from a unilateral and independent
corporate act of Oxy without any participation by the Plans.
25. Further, all decisions regarding whether to hold, sell, or
exercise the Warrants by the Plans must have been made by FCI while
acting solely in the interests of the Plans and their participants and
beneficiaries, and in accordance with the Plan's provisions. The
proposal requires that FCI's decision to sell all of the Warrants
received by the Plans in blind transactions on the NYSE was protective
and in the interests of the Plans and their participants and
beneficiaries.
26. FCI must provide a written statement to the Department
demonstrating that the covered transactions have met all of the
exemption conditions within 90 days after the exemption is granted. The
proposal requires that the Plans paid no brokerage fees, commissions,
subscription fees, or other charges to Oxy with respect to the
acquisition and holding of the Warrants nor to any affiliate of Oxy or
FCI with respect to the sale of the Warrants. In addition, no party
related to this exemption request has or will, indemnify FCI, in whole
or in part, for negligence and/or for any violation of state or federal
law that may be attributable to FCI's performance of its duties as an
independent fiduciary overseeing the transaction. Further, no contract
or instrument may purport to waive FCI's liability under state or
federal law for any such violations.
27. The proposal also requires the Plans to provide each
participant the entire amount they were due with respect to the
acquisition and sale of the Warrants. Finally, all the material facts
and representations made by the Applicants and set forth in the Summary
of Facts and Representations must be true and accurate.
Statutory Findings
28. Based on the conditions included in this proposed exemption,
the Department has tentatively determined that the relief sought by the
Applicants would satisfy the statutory requirements for an exemption
under ERISA section 408(a) for the reasons discussed below.
a. The Proposed Exemption Is ``Administratively Feasible.''
The Department has tentatively determined that the proposed
exemption is administratively feasible because, among other things, a
qualified independent fiduciary, FCI, represented the Plans for all
purposes with respect to the acquisition, holding and disposition of
the Warrants, and will document its findings in a written report to the
Department. The Department notes that, under the terms of this proposed
exemption, FCI may not be indemnified, in whole or in part, for an act
of negligence by FCI in performing its duties and responsibilities to
the Plans.
b. The Proposed Exemption Is ``In the Interests of the Plans.'' The
Department has tentatively determined that the proposed exemption is in
the interest of the Plans because the Warrants were automatically
issued at no cost to Oxy common stockholders of record as of the Record
Date, including the Plans. The proposed exemption would also permit the
Plans' holding and disposition of the Warrants, thereby realizing their
value, either through the exercise or sale of the Warrants in blind
transactions on the open market.
c. The Proposed Exemption Is ``Protective of the Plans.'' The
Department has tentatively determined that the proposed is protective
of the plans and their participants and beneficiaries, because the
Warrants Offering was approved by the Oxy Board of Directors and all
Oxy common stockholders, including the Plans, were treated the same. In
addition, all decisions regarding whether to hold, sell, or exercise
the Warrants were made by FCI, acting solely in the interests of the
Plans' participants and beneficiaries, and in accordance with the
Plans' provisions. FCI also had exclusive responsibility for
determining whether to hold, exercise, or sell the Warrants, and
ultimately concluded that the sales of the Warrants were in the
interests of the Plans and their participants. Further, the market for
the Warrants was public and listed on the NYSE; therefore, their market
value could be readily determined. Finally, the Plans
[[Page 8475]]
did not pay any fees or commissions in connection with the acquisition
and holding of the Warrants.
Proposed Exemption
Section I. Covered Transactions
If this proposed exemption is granted, the restrictions of ERISA
sections 406(a)(1)(E), 406(a)(2) and 407(a)(1)(A), shall not apply to
the acquisition and holding by the Plans of Warrants, issued by Oxy,
provided the conditions set forth in section II are satisfied.
Section II. Conditions
(a) The Warrants were issued by Oxy to all Oxy common stockholders,
including the Plans;
(b) All Oxy common stockholders, including the Plans, were treated
in the same manner with respect to the acquisition and holding of the
Warrants;
(c) All Oxy common stockholders, including the Plans, were issued
the same proportionate number of Warrants based on the number of shares
of Oxy common stock held by such stockholder;
(d) The Plans' acquisition of the Warrants was a result of a
unilateral and independent corporate act of Oxy without any
participation by the Plans;
(e) All decisions regarding whether to hold, sell, or exercise the
Warrants by the Plans were made by Fiduciary Counselors Inc. (FCI), a
qualified independent fiduciary within the meaning of 29 CFR 2570.31(j)
while acting solely in the interests of the Plans and their
participants and beneficiaries and in accordance with the Plan's
provisions;
(f) FCI determined that it was protective and in the interests of
the Plans and their participants and beneficiaries to sell all of the
Warrants received by the Plans in blind transactions on the NYSE;
(g) FCI will provide a written statement to the Department
demonstrating that the covered transactions have met all of the
exemption conditions within 90 days after the exemption is granted;
(h) No brokerage fees, commissions, subscription fees, or other
charges were paid by the Plans to Oxy with respect to the acquisition
and holding of the Warrants, nor were they paid to any affiliate of Oxy
or FCI with respect to the sale of the Warrants;
(i) No party related to this exemption application has or will
indemnify FCI, in whole or in part, for negligence and/or any violation
of state or federal law that may be attributable to FCI in performing
its duties overseeing the transaction. In addition, no contract or
instrument may purport to waive FCI's liability under state or federal
law for any such violations;
(j) Each Plan participant received the entire amount they were due
with respect to the acquisition of the Warrants and the sale of the
Warrants; and
(k) All the material facts and representations made by the
Applicants that are set forth in the Summary of Facts and
Representations are true and accurate.
Effective Date: If granted, the proposed exemption will be
effective for the period beginning August 3, 2020, through and
including August 12, 2027.
Notice to Interested Persons
Oxy will provide notice (the Notice) of the publication of the
proposed exemption in the Federal Register by email (where available)
and by U.S. first class mail within fifteen (15) days after publication
of the proposed exemption in the Federal Register. Because Anadarko no
longer has its own website due to the Oxy and Anadarko merger, Oxy will
post the Notice on the Oxy website beginning on the same date Oxy mails
the Notices to interested persons. Each Notice will contain a copy of
the proposed exemption, as it appears in the Federal Register on the
date of publication, and a Supplemental Statement, as required under 29
CFR 2570.43(a)(2), which will advise all interested persons of their
right to comment and/or request a hearing with respect to the proposed
exemption. All written comments and/or requests for a hearing must be
received by the Department from interested persons by March 27, 2023.
All comments will be made available to the public.
Warning: Do not include any personally identifiable information
(such as a name, address, or other contact information) or confidential
business information with your comment that you do not want publicly
disclosed. All comments may be posted on the internet and can be
retrieved by most internet search engines.
For Further Information Contact: Blessed Chuksorji-Keefe of the
Department, telephone (202) 693-8567. (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.
George Christopher Cosby,
Director, Office of Exemption Determinations, Employee Benefits
Security Administration, U.S. Department of Labor.
[FR Doc. 2023-02703 Filed 2-8-23; 8:45 am]
BILLING CODE 4510-29-P
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</html>Indexed from Federal Register on February 9, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.