EBSA
Notices
Grant of Individual Exemption Involving Ford Motor Company, Located in Detroit, MI
[ 3/24/2010]
[ PDF]
FR Doc 2010-6458
[Federal Register: March 24, 2010 (Volume 75, Number 56)]
[Notices]
[Page 14192-14205]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr10-114]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Prohibited Transaction Exemption 2010-08; Exemption Application No. L-
11575]
Grant of Individual Exemption Involving Ford Motor Company,
Located in Detroit, MI
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Grant of individual exemption.
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This document contains a final exemption issued by the Department
of Labor (the Department) from certain prohibited transaction
restrictions of the Employee Retirement Income Security Act of 1974
(the Act or ERISA). The transactions involve the UAW Ford Retirees
Medical Benefits Plan (the Ford VEBA Plan) and its funding vehicle, the
UAW Retiree Medical Benefits Trust (the VEBA Trust), (collectively the
VEBA).\1\
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\1\ Because the Ford VEBA Plan will not be qualified under
section 401 of the Internal Revenue Code of 1986, as amended (the
Code), there is no jurisdiction under Title II of the Act pursuant
to section 4975 of the Code. However, there is jurisdiction under
Title I of the Act.
DATES: Effective Date: This exemption is effective as of December 31,
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2009.
FOR FURTHER INFORMATION CONTACT: Warren Blinder, Office of Exemption
Determinations, Employee Benefits Security Administration, U.S.
Department of Labor, telephone (202) 693-8553. (This is not a toll-free
number.)
SUPPLEMENTARY INFORMATION: On December 8, 2009, the Department
published a notice of proposed individual exemption in the Federal
Register at 74 FR 64716 from the restrictions of sections 406(a)(1)(A),
406(a)(1)(B), 406(a)(1)(D), 406(a)(1)(E), 406(a)(2), 406(b)(1),
406(b)(2), and 407(a) of ERISA. The proposed exemption was requested in
an application filed by the Ford Motor Company (Ford or the Applicant)
pursuant to section 408(a) of ERISA and in accordance with the
procedures set forth in 29 CFR 2570, Subpart B (55 FR
[[Page 14193]]
32836, August 10, 1990). Effective December 31, 1978, section 102 of
Reorganization Plan No. 4 of 1978, (43 FR 47713, October 17, 1978)
transferred the authority of the Secretary of the Treasury to issue
exemptions of the type requested to the Secretary of Labor.
Accordingly, this final exemption is being issued solely by the
Department.
Background
On February 13, 2006, Ford and the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America
(the UAW) and a class of Ford retirees entered into a settlement
agreement (the Hardwick I Settlement Agreement) in the case of Int'l
Union, UAW, et al. v. Ford Motor Company, Civil Action No. 05-74730,
2006 WL 1984363 (E.D. Mich. July 13, 2006). The case was brought to
contest whether Ford had the right to unilaterally modify hourly
retiree welfare benefits for hourly retirees who had been represented
by the UAW. Under the terms of the Hardwick I Settlement Agreement,
benefits provided under a new plan were to be paid from a voluntary
employees' beneficiary association (the Mitigation VEBA) controlled by
a committee independent of Ford. The Mitigation VEBA was to be funded
by Ford through cash and other payments, and by contributions from
active Ford employees through wage deferrals and the diversion of cost-
of-living adjustments.
In light of deteriorating global economic conditions and the
significant impact on Ford's financial health by retiree health care
funding obligations, in 2007 Ford announced its intention to terminate
retiree health care coverage for UAW represented employees and retirees
and its plan to terminate the Hardwick I Settlement Agreement,
effective in 2011. As a result, on November 9, 2007, the UAW and a
class of retirees (the 2007 Class) filed suit against Ford in the
United States District Court for the Eastern District of Michigan (the
District Court), challenging Ford's unilateral right to alter retiree
health benefits and asserting that such benefits were vested. See Int'l
Union, UAW, et al. v. Ford Motor Company, Civil Action No. 07-14845,
2008 WL 4104329 (E.D. Mich. Aug. 29, 2008).
Following a series of negotiations, Ford and the UAW agreed to a
proposed settlement (the Hardwick II 2008 Settlement Agreement,
otherwise referred to as the 2008 Settlement Agreement), under which
Ford's obligations for providing post-retirement medical benefits to
the 2007 Class and a group of Ford active employees eligible for
retiree benefits (the 2007 Covered Group) would be terminated and the
Ford VEBA Plan would be established and maintained by an independent
committee (the Committee).\2\ Pursuant to the 2008 Settlement
Agreement, the Ford VEBA Plan would be funded by the VEBA Trust, which
would be responsible for the payment of post-retirement medical
benefits to members of the 2007 Class and the 2007 Covered Group.
Furthermore, under the terms of the 2008 Settlement Agreement, coverage
and operations for the Ford VEBA Plan would commence on the day
following the ``Implementation Date,'' or January 1, 2010. Ford also
agreed to transfer assets to the VEBA Trust on behalf of the Ford VEBA
Plan with an estimated worth of $13.2 billion, based on a present value
as of December 31, 2007.
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\2\ See Ford Motor Co., 2008 WL 4104329.
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On July 23, 2009, Ford, the UAW, and Class Counsel entered into an
agreement to amend the 2008 Settlement Agreement (the Amendment
Agreement) by providing, inter alia, that Ford could use Ford common
stock (Ford Common Stock) to pay up to approximately 50% of certain
future obligations to the VEBA Trust on behalf of the Ford VEBA Plan.
The revised settlement agreement (the 2009 Settlement Agreement) took
effect on November 9, 2009, upon the District Court's issuance of an
``Order and Final Judgment'' granting approval to the Amendment
Agreement, including approval of the amendment to the trust agreement
for the VEBA Trust and certification of the class under the modified
class definition.\3\
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\3\ See Int'l Union, UAW, et al. v. Ford Motor Company, Civil
Action No. 07-14845, (E.D. Mich. Nov. 9, 2009) (Doc. 71,
Order and Final J.).
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The 2009 Settlement Agreement obligates Ford to contribute to the
VEBA Trust, on behalf of the Ford VEBA Plan, the following deposits or
remittances: (a) The balance in a temporary asset account created under
the 2008 Settlement Agreement (the TAA) as of the date of transfer or,
at Ford's discretion, cash in lieu of some or all of the investments in
the TAA, (b) two promissory notes issued by Ford in an aggregate
principal amount of $13.2 billion (New Note A and New Note B, and
collectively, the New Notes), (c) warrants to acquire 362,391,305
shares of Ford Common Stock, at a par value of $.01 and at a strike
price of $9.20 per share (the Warrants), and (d) any shares of Ford
Common Stock transferred by Ford in settlement of its payment
obligation under New Note B (Payment Shares). In addition, Ford is
obligated to direct the trustee of the Existing Internal VEBA (as
defined below) to transfer to the VEBA Trust all assets in the Existing
Internal VEBA or cash in an amount equal to the Existing Internal VEBA
balance on the date of transfer. Furthermore, the District Court's
Order and Final Judgment directed the committee of the Mitigation VEBA,
or the trustee of the Mitigation VEBA, to transfer the assets of such
plan to the VEBA Trust.
Written Comments
The Department invited all interested persons to submit written
comments and/or requests for a public hearing with respect to the
notice of proposed exemption on or before January 21, 2010. During the
comment period, the Department received three (3) telephone inquiries
and thirteen (13) written comments from interested persons on the
proposed exemption. Of the written comments received, ten (10) were
submitted by participants in the Ford VEBA Plan. Ford, counsel for the
Committee, and Independent Fiduciary Services (IFS), the independent
fiduciary for the Ford VEBA Plan (the Independent Fiduciary), submitted
the remaining comments. The Department received no hearing requests
during the comment period.
Several of the written comments and callers supported the adoption
of the exemption. In this regard, the UAW, along with Class Counsel,
reviewed Ford's application for exemption and expressed support for the
application and stated their belief that the transactions which are the
subject of the exemption are in the best interest of the Ford VEBA
Plan's participants and beneficiaries. Furthermore, the Department
received written comments from Ford, the Committee, and IFS, which
supported the exemption and requested certain modifications and/or
clarifications regarding the exemption.
Following is a discussion of the aforementioned comments, including
the responses made by Ford or the Department to address the issues
raised therein.
Participant Comments
The telephone inquiries received by the Department from
participants in the Ford VEBA Plan related primarily to the commenters'
difficulty in understanding the notice of proposed exemption or the
effect of the exemption on the commenters' benefits, including a
concern that the 2009 Settlement Agreement was too advantageous to Ford
and would not ensure that benefit levels would remain affordable for
all retirees.
[[Page 14194]]
With respect to the written comments received by the Department
from Ford VEBA Plan participants, the majority of commenters neither
supported nor opposed the exemption but instead raised other concerns
which were beyond the scope of the exemption. Such comments related to
the perceived unfair treatment of retirees within the UAW; lack of
bargaining power of retirees in the settlement negotiation process
between Ford, the UAW, and Class Counsel; and concerns about the rising
costs of maintaining healthcare coverage under the Ford VEBA Plan.
However, several commenters did raise concerns that were relevant to
the Department's consideration of the final exemption.
One commenter questioned whether, when Ford returns to
profitability, participants in the Ford VEBA Plan would benefit from
any increase in the health benefits of active UAW members that may be
earned as a result of negotiations between the UAW and Ford with
respect to future labor contracts. A second commenter was concerned
that the amount of employer securities contributed by Ford to the VEBA
Trust was ``inherently insecure and unstable,'' in light of the
volatility in the stock markets. The commenter also asked whether Ford
would provide additional funding to the Ford VEBA Plan if the fair
market value of Ford Common Stock declines, and what else Ford had done
to ensure that the securities will maintain their value.
Ford's Response to Participant Comments
In responding to both of the commenters' concerns, Ford initially
observes that the funding of the VEBA Trust was not unilaterally
determined by Ford, but rather was the product of a prolonged and
intense negotiation among Ford, the UAW (representing active
employees), and Class Counsel (representing retirees). Ford contends
that, although no party got everything it wanted, all three parties
were ultimately satisfied that the 2009 Settlement Agreement was the
best one that they could achieve under the circumstances. Otherwise,
Ford points out that no agreement would have been reached. As Ford
notes, the 2009 Settlement Agreement was also approved by a Federal
court, which had to satisfy itself that the 2009 Settlement Agreement
was fair, reasonable, and adequate, and was in the best interests of
the retiree Class.
In responding to the first commenter's concerns, Ford contends that
the fundamental deal reached by the parties is that Ford will make the
payments specified by the 2009 Settlement Agreement at the times
specified by the agreement, to an independent VEBA (i.e., the VEBA
Trust) over which it has no authority. Ford notes that, in exchange,
its obligation to pay for retiree health care is extinguished, and
instead, the VEBA Trust will establish and administer a welfare plan
that will provide Ford retirees with health care benefits.
Ford explains that under this structure, the health care benefits
to be provided to retirees by the VEBA Trust are completely separate
from the health care benefits to be provided to active employees by
Ford. Neither Ford nor the UAW has the ability to adjust retiree health
benefits. Rather, notes Ford, retiree health benefits are set by the
Committee of the VEBA Trust in the interest of present and future
retirees within the Covered Group whose health care will be funded by
the VEBA Trust. Ford explains that, if Ford and the UAW were to agree
on improved benefits for active employees, the Committee could consider
increasing benefit levels, but would not have to do so.
In sum, Ford represents that its responsibility is to provide no
more or no less than the agreed-upon funding for the VEBA Trust. Ford
remarks that, what the Committee of the Ford VEBA Plan does with those
funds, including how much health care coverage to provide for retirees,
is a matter for the Committee to decide, and not Ford.
In responding to the second commenter, Ford explains that, as a
condition of agreeing to accept employer securities in lieu of cash,
the UAW and Class Counsel negotiated a number of provisions designed to
protect the VEBA Trust. Ford notes that, for example, the VEBA Trust is
provided with ``registration rights,'' to aid the Independent Fiduciary
in divesting the Ford securities that are paid into the VEBA Trust. In
addition, Ford makes it clear that the 2009 Settlement Agreement sets
forth several specific conditions under which Ford is prevented from
exercising its option to make contributions in Ford Common Stock.
Moreover, Ford explains that its option to contribute securities
instead of cash is itself a form of protection for the VEBA Trust. As
Ford notes, its continued commercial viability is necessary to ensure
that the VEBA Trust is fully funded. Ford asserts that permitting it to
make contributions in Ford Common Stock rather than cash gives Ford the
flexibility to avoid cash payments in low liquidity environments.
Moreover, Ford maintains that it is not in anyone's interest to compel
a payment that pushes Ford into insolvency, thereby jeopardizing the
New VEBA's funding going forward.
With respect to the second commenter's concern regarding market
volatility, Ford notes that its option to contribute shares of Ford
Common Stock does not have a fixed share price, but rather fluctuates
with the market. Ford explains that, specifically, it must pay the
number of shares equal in value to the amount of the cash payment it
was obligated to make, calculated using a share price derived from an
average of recent market prices. If Ford's share price is down,
observes Ford, it must pay proportionally more shares of Ford Common
Stock to the VEBA Trust to satisfy its payment obligation. According to
Ford, the Independent Fiduciary can then assess the market--acting
solely in the interest of the VEBA Trust (and thus, of retirees)--to
determine whether to continue to hold Ford Common Stock, thereby giving
the VEBA Trust the advantage of any appreciation, or whether to sell
it, using the registration rights noted above.
Ford reiterates that it will pay what it is obligated to do so
under the 2009 Settlement Agreement, and whether that obligation is
settled in more or fewer securities is a function of Ford's market
price. Ford notes that it does not have an obligation to ``true-up''
the Ford VEBA Plan. If, for example, the price of Ford Common Stock
falls before the VEBA Trust disposes of the securities, Ford explains
that the parties have agreed that the other rights possessed by the
VEBA Trust and the Independent Fiduciary are sufficient to protect the
VEBA Trust. In addition, Ford notes that it is paying $25 million extra
under New Note A in each year where there is a payment date under New
Note B. Ford maintains that this additional amount was designed to
compensate the VEBA Trust for any costs in selling shares of Ford
Common Stock and for any short term risk of stock price volatility.
In sum, Ford represents that it, the UAW, and the Class Counsel, on
behalf of retirees, agreed that giving Ford the option to pay part of
its payment obligation to the VEBA Trust with employer securities was
in the long term interest of the VEBA Trust, Ford retirees, and Ford,
given the protections that were put in place to protect the VEBA Trust
from downside risk.
Ford's Comment
The Department also received a written comment from Ford, which
provides factual corrections and supplemental information regarding the
2009 Settlement Agreement and events occurring after the date on which
the
[[Page 14195]]
proposed exemption was published in the Federal Register. The comment
also requests the modification of certain operative language of the
proposed exemption. Furthermore, Ford's comment requests the
Department's confirmation relating to the party in interest status of
the Existing Internal VEBA and modifications regarding the duties and
responsibilities of the Committee and the Independent Fiduciary.
A. Supplemental Information Regarding Implementation of the 2009
Settlement Agreement
1. Name Change of the LLC. Ford represents that, on December 1,
2009, the name of its wholly-owned limited liability company, ``Ford-
UAW Holdings LLC'' (the LLC), was changed to ``VEBA-F Holdings LLC.''
As is described in Representation 8, on pages 64720--64721 of the
Summary of Facts and Representations of the proposed exemption (the
Representations, and each individually, a Representation), Ford
established the LLC to hold the assets in the TAA, the New Notes, the
Warrants, and any Payment Shares transferred by Ford in settlement of
its first payment obligation under New Note B. Under the 2009
Settlement Agreement, Ford had the option to transfer its wholly owned
interest in the LLC (the LLC Interest) to the VEBA Trust in lieu of
transferring the assets inside the LLC. According to Ford, the name was
changed in advance of Ford's transfer of the LLC Interest to the VEBA
Trust on behalf of the Ford VEBA Plan because Ford's trademark policy
prohibits Ford from transferring an entity with ``Ford'' in its name to
an unaffiliated party.
2. Execution of Agreements and Exchange of Notes. As described in
Representation 9, on page 64721 of the proposed exemption, the 2009
Settlement Agreement provides that the ``Term Note,'' \4\ ``Convertible
Note,'' \5\ ``TAA Note'' \6\ and the right to future ``Base Amount
Payments,'' \7\ will be exchanged for the New Notes and Warrants, in
accordance with the terms of the Security Exchange Agreement (the
Exchange Agreement) among Ford, certain subsidiary guarantors, and the
LLC.\8\
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\4\ The Term Note, issued by Ford in April 2008 and due January
1, 2018, was issued in the original principal amount of $3.0 billion
and bears 9.50% interest per annum, which is payable semi-annually.
\5\ The Convertible Note, issued by Ford in April 2008 and due
January 1, 2013, was issued with an aggregate principal amount of
$3.3 billion and bears 5.75% interest per annum, which is payable
semi-annually.
\6\ The TAA Note was issued by Ford to the LLC in late 2008
under the 2008 Settlement Agreement in exchange for a payment of
$2.282 billion, the value of the assets in the TAA as of December
31, 2008. The TAA Note had an interest rate of 9% per annum and a
maturity date of December 31, 2009.
\7\ The Base Amount Payments are annual payments of $52.3
million that Ford is obligated to make for 15 years to the VEBA
Trust under the 2008 Settlement Agreement.
\8\ Upon the exchange, the aggregate principal amount of the New
Notes and the amortization thereof represent the equivalent value of
(a) the principal amounts of and interest payments on the Term Note,
the Convertible Note and the TAA Note; (b) any unpaid Base Amount
Payments; and (c) an additional $25 million per year during the
period 2009 through 2018, which is intended to cover transaction
costs the Ford VEBA Plan incurs in selling any shares of Ford Common
Stock delivered pursuant to Ford's exercise of the stock settlement
option under New Note B.
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Ford represents that, on December 11, 2009, Ford, the LLC, and
certain subsidiary guarantors entered into the Exchange Agreement. On
the same date, Ford and the LLC also entered into the Securityholder
and Registration Rights Agreement, and Ford and ComputerShare Trust
Company N.A. (Ford's transfer agent) entered into an agreement (the
Warrant Agreement) to effect the transfer of the Warrants to the VEBA
Trust. In accordance with the 2009 Settlement Agreement and the
Exchange Agreement, Ford issued New Note A, New Note B, certain
guaranties, and the Warrants to the LLC on December 31, 2009 in
exchange for the Convertible Note, the Term Note, and the TAA Note.
Upon the exchange, the Convertible Note, the Term Note, and the TAA
Note were cancelled. The Department notes the foregoing updates and
additional representations.
3. Payments Under New Note A and New Note B. On page 64721 of the
proposed exemption, Representation 9 describes the payment schedule
under the New Notes which Ford is obligated to follow unless Ford
elects to prepay the amounts due thereunder. Ford represents that, on
December 31, 2009, with respect to New Note A, it paid to the LLC the
payment due on that date of $1,268,470,000, the payment of an estimated
``True-Up Amount'' of $150,000,000,\9\ and a partial prepayment of New
Note A in the amount of $500,000,000. Furthermore, Ford represents that
it also paid $609,950,000 in cash to the LLC on December 31, 2009 in
accordance with the terms of New Note B.
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\9\ Under the terms of New Note A, Ford is obligated to pay to
the LLC a ``True-up Amount,'' calculated according to a formula
provided in the TAA Note, to reflect a hypothetical investment
return on the TAA assets paid to Ford in exchange for the TAA Note.
Based on year-end returns available after December 31, 2009, Ford
determined that the final True-Up Amount due under New Note A is
$150,000,000.
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According to Ford, it determined to make the $500,000,000
prepayment on New Note A in order to retire some of its most expensive
debt, and, as a result, improve its balance sheet. Ford maintains that
this prepayment was beneficial to the Ford VEBA Plan, both as a
creditor and as a shareholder of Ford.
Consequently, Ford notes that in accordance with the terms of New
Note A, described in Representation 10 of the proposed exemption, on
page 64722, each future principal payment on New Note A, beginning with
the June 30, 2010 payment, will be reduced proportionately to reflect
the prepayment made on December 31, 2009. As a result, the payment
schedule under the New Notes has been modified as follows to reflect
the foregoing payments:
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Payment date Payment of note A Payment of note B
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June 30, 2010................. $249.45 million.. $609.95 million
June 30, 2011................. 249.45 million... 609.95 million
June 30, 2012................. 584.06 million... 654 million
June 30, 2013................. 584.06 million... 654 million
June 30, 2014................. 584.06 million... 654 million
June 30, 2015................. 584.06 million... 654 million
June 30, 2016................. 584.06 million... 654 million
June 30, 2017................. 584.06 million... 654 million
June 30, 2018................. 584.06 million... 654 million
June 30, 2019................. 22.36 million.... 26 million
June 30, 2020................. 22.36 million.... 26 million
June 30, 2021................. 22.36 million.... 26 million
[[Page 14196]]
June 30, 2022................. 22.36 million.... 26 million
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4. Transfer of Certain Assets to the VEBA Trust. Ford represents
that, at the close of business on December 31, 2009, it exercised its
right under the 2009 Settlement Agreement, as described in
Representation 15.a.(1), on pages 64724-64725 of the proposed
exemption, to transfer the LLC Interest to the VEBA Trust in order to
satisfy its contractual obligations thereunder. Ford notes that the
unaudited fair market value of assets in the TAA Account as of December
31, 2009, excluding New Notes A and B and the Warrants, was
$768,716,494.20.
Ford also represents that it caused certain assets of the Existing
Internal VEBA to be transferred to the VEBA Trust upon the close of
business on December 31, 2009 in satisfaction of its obligations under
the 2009 Settlement Agreement, described in Representation 13, on page
64724 of the proposed exemption. Ford notes that the unaudited fair
market value of the assets in the Existing Internal VEBA as of December
31, 2009 was $3,517,847,429.91.
Furthermore, Ford represents that, in accordance with the 2009
Settlement Agreement, as described in Representation 15.c.(2) on pages
64726-64727 of the proposed exemption, the Existing Internal VEBA
retained $850,000, which may be used for outstanding fees owed by the
Existing External VEBA to its investment managers. Ford notes further
that after these outstanding expenses are satisfied, any remaining
funds will be transferred to the VEBA Trust.
In response to the above referenced comments, the Department has
revised the name of the LLC in Section VII(l) of the final exemption.
In addition, the Department takes note of the foregoing clarifications
and updates to the Representations.
B. Comments on the Summary of Facts and Representations
1. Factual Corrections. Ford maintains that certain statements in
the Representations attributed to the Applicant are not accurate.
Specifically, Ford notes that in Representation 3, the definition of
the term ``Covered Group'' appearing on page 64718 of the proposed
exemption in the last sentence of the first full paragraph in the
second column, inaccurately states that the 2009 Settlement Agreement
expanded the members included in the definition of the 2007 Covered
Group. Instead, according to Ford, the definition of the ``Covered
Group'' reduced the number of members in the 2007 Covered Group as
certain of these members retired since the 2008 Settlement Agreement
and became members of the expanded Class.
In addition, Ford suggests that, on page 64721 of the proposed
exemption, in Representation 9, the amortization schedule for New Note
A should have included the ``True-Up Amount'' that was due on December
31, 2009. As noted above, the final True-Up Amount was calculated to be
$150,000,000 and paid by Ford to the LLC on December 31, 2009.
In response to these comments, the Department takes note of the
foregoing clarifications and updates to the Representations.
2. Status of Existing Internal VEBA as a ``Party in Interest''. As
described on page 64724 of the proposed exemption, in Representation
13, the Existing Internal VEBA was the subaccount of the Ford-UAW
Benefits Trust previously maintained by Ford as a source of funding for
retiree health care expenses. As of December 31, 2008, the Existing
Internal VEBA had an estimated asset value of approximately $2.7
billion. Until the Existing Internal VEBA's assets were transferred to
the VEBA Trust, the assets were invested in a manner consistent with
its investment policy.
As described above, on December 31, 2009, Ford directed the trustee
of the Existing Internal VEBA to transfer to the VEBA Trust all assets
in the Existing Internal VEBA or cash in an amount equal to the
Existing Internal VEBA balance on the date of the transfer. The
Existing Internal VEBA retained an amount equal to the Existing
Internal VEBA's share of expenses (to the extent permitted by ERISA)
subject to reconciliation with actual expenses incurred.
In its exemption application, Ford stated that it believed that any
deposits, remittances or asset transfers between the VEBA Trust and the
Existing Internal VEBA do not implicate any prohibited transactions
under section 406(a) of ERISA because the Existing Internal VEBA is not
a ``party in interest'' as defined under section 3(14) of ERISA, with
respect to the Ford VEBA Plan. The VEBA Trust and the Ford VEBA Plan
were established by the UAW Ford Retirees Employees' Beneficiary
Association (the Ford EBA), an employees' beneficiary organization
within the meaning of section 3(4) of ERISA, acting through the
Committee.
Ford requests that the Department confirm that the Existing
Internal VEBA was not a ``party in interest'' with respect to the Ford
VEBA Plan at the time the trustee of the Existing Internal VEBA
transferred assets to the VEBA Trust in accordance with the terms of
the 2009 Settlement Agreement based on its analysis of section 3(14) of
ERISA. In this regard, Ford explains that the Existing Internal VEBA
was a ``voluntary employees' beneficiary association'' and a tax-exempt
trust authorized by section 501(c)(9) of the Code. Ford also explains
that the Existing Internal VEBA was governed by the Ford-UAW Benefits
Trust Master Trust Agreement between Ford Motor Company and The
Northern Trust Company and that the Existing Internal VEBA is managed
by the Asset Management department of Ford Motor Company through
various third party managers. In addition, Ford examined the party in
interest provisions under section 3(14) of ERISA and concludes that the
Existing Internal VEBA and the Ford VEBA Plan would not fit any of the
party in interest relationships that are described therein with respect
to each other.
Based upon Ford's representations that neither VEBA was a fiduciary
or service provider to the other or is otherwise described in any of
the other categories of party in interest under section 3(14) of ERISA,
the Department is of the view that neither the Existing Internal VEBA
nor the Ford VEBA Plan is a party in interest with respect to each
other. Based upon Ford's representations, the transfer of assets from
the Existing Internal VEBA to the Ford VEBA Plan was not a prohibited
sale, exchange or transfer of assets between a plan and a party in
interest under section 406(a) of ERISA.
C. Comments on the Operative Language
1. Covered Transactions. On page 64730 of the proposed exemption,
Section I(b) provides exemptive relief for the sale of Ford Common
Stock held by the Ford VEBA Plan to Ford in accordance with the Right
of First Offer or a Ford self-tender under the Securityholder and
Registration Rights Agreement. However, Ford notes that the
Securityholder and Registration Rights Agreement provides that Ford
[[Page 14197]]
may purchase Payment Shares or Warrants, that the VEBA Trust intends to
transfer to third parties in accordance with the Right of First Offer
or a Ford self-tender. Moreover, Representation 12.c of the proposed
exemption, on page 64724, also states that the Right of First Offer
applies to ``Warrants, Payment Shares or shares of Ford Common Stock
received upon the exercise of all or a portion of the Warrants.''
To ensure that the final exemption aligns with the description in
the Representations, as well as with the substantive underlying
documents themselves, Ford requests that Section I(b) of the proposed
exemption be revised as follows:
If the exemption is granted, the restrictions of sections
406(a)(1)(A), 406(b)(1), and 406(b)(2) of ERISA shall not apply,
effective December 31, 2009, to the sale of Ford Common Stock or
Warrants held by the Ford VEBA Plan to Ford in accordance with the
Right of First Offer or a Ford self-tender under the Securityholder
and Registration Rights Agreement.
The Department acknowledges the fact that Warrants were
inadvertently excluded from Section I(b) of the proposed exemption. As
such, the Department concurs with Ford's requests to modify Section
I(b), and conforming changes have been made to the final exemption.
2. Definitions. Ford suggests that certain definitions should be
added to Section VII of the final exemption or modified for clarity and
to reflect the occurrence of certain events prescribed by the 2009
Settlement Agreement. Specifically, Ford suggests that the following
definition for ``Payment Shares'' be added in the final exemption to
the Definitions in Section VII, because the term is not defined and it
is an element of the previously defined term ``Securities'':
The term ``Payment Shares'' means any shares of Ford Common
Stock issued by Ford to satisfy all or a portion of its payment
obligation under New Note B, subject to the terms and conditions
specified in New Note B.
Ford also requests that the following definitions in Section VII be
modified in the final exemption to correct the effective dates, and
updated to reflect recent events described in Section A above:
The term ``Exchange Agreement'' means the Security Exchange
Agreement among Ford, the subsidiary guarantors listed in Schedule I
thereto, and the LLC, dated as of December 11, 2009.
The term ``LLC'' means the Ford-UAW Holdings LLC, established by
Ford as a wholly-owned LLC, and subsequently renamed VEBA-F Holdings
LLC, established to hold the assets in the TAA and certain other
assets required to be contributed to the VEBA under the 2008
Settlement Agreement, as amended by the 2009 Settlement Agreement.
The term ``Securityholder and Registration Rights Agreement''
means the Securityholder and Registration Rights Agreement by and
among Ford and the LLC, dated as of December 11, 2009.
The Department concurs with the above referenced additions and
modifications to Section VII of the proposed exemption, and it has made
conforming changes to the final exemption.
3. Conditions. Ford notes that on pages 64730--64731 of the
proposed exemption, Section II provides ``Conditions Applicable to
Section I(a) and I(b)'' that relate to the duties and responsibilities
of the Committee and the Independent Fiduciary. Ford requests that, to
the extent the parallel conditions proposed in both General Motor
Corporation's and Chrysler LLC's proposed individual exemptions \10\
are substantively modified in a manner affecting Ford's proposed
exemption, conforming modifications will be made to the conditions
proposed for Ford.
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\10\ See Section II-Conditions Applicable to Section I(a),
Notice of Proposed Individual Exemption Involving General Motors
Corporation, Located in Detroit, MI, 74 FR 47963, September 18,
2009; Section II-Conditions Applicable to Section I(a), Notice of
Proposed Individual Exemption Involving Chrysler LLC, Located in
Auburn Hills, MI, 74 FR 51182, October 5, 2009.
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The Department concurs with Ford's request to conform modifications
of the operative language in Section II of the proposed exemption
relating to the functions of the Committee and the Independent
Fiduciary.
The Committee's Comment
The Committee submitted a written comment that was supportive of
the proposed exemption, and suggests certain modifications to the
operative language of the proposed exemption and the Representations.
The Committee's comment letter also relates to the respective roles of
the Independent Fiduciary and any investment banks retained by the
Independent Fiduciary with respect to the Securities held by the VEBA
Trust.
A. Modifications to Summary of Facts and Representations
1. Number of Investment Banks. As illustrated on page 64718 of the
proposed exemption, Representation 4 states that the trust agreement
for the VEBA Trust provides for separate retiree accounts designed to
segregate payments attributable to GM, Chrysler, and Ford, pursuant to
the terms of each company's settlement agreement with the UAW and each
respective class (the Separate Retiree Accounts). As described on page
64728 of the proposed exemption, in Representation 16, the Committee
represented that, in the event that a single Independent Fiduciary
represents two or more Separate Retiree Accounts:
A separate investment bank will be retained with respect to each
of the three plans comprising the VEBA Trust. The investment bank's
initial recommendations will be made solely with the goal of
maximizing the returns for the single plan that owns the securities
for which the investment bank is responsible.
In its initial discussions with the Department, the Committee made
the argument that the arrangement for retention of separate investment
banks would minimize the likelihood of an immediate transactional
conflict inherent wherein one Independent Fiduciary managing more than
one Separate Retiree Account would be immediately confronted by the
need to dispose of the securities of each company.
The Committee has retained IFS as the Independent Fiduciary with
respect to the Securities, and has currently retained separate
independent fiduciaries with respect to the GM and Chrysler Separate
Retiree Accounts. As noted, however, it is conceivable that at some
future date any or all three Independent Fiduciary engagements may be
consolidated and the foregoing conditions would then come into play. In
such event, the Committee argues that the requirement for different
investment banks for each Separate Retiree Account would not be in the
interest of the Ford VEBA Plan and would not advance the goal of
reducing potential fiduciary conflicts. The Committee contends that the
need to retain multiple investment banks should be at the discretion of
the Independent Fiduciary and the investment banks themselves, or that
such requirement should be limited to investment banks performing a
traditional underwriting role and being paid on a transactional basis,
not those retained for ongoing valuation or investment consulting
services.\11\
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\11\ The Committee suggests that an investment bank performing
valuation or investment consulting and advisory services will often
be paid a flat or asset-based fee, while an investment bank
performing underwriting and brokerage services will be paid a
transaction-based fee as a percentage of the overall sale.
Additionally, the Committee notes that it is not anticipated that
the Independent Fiduciary likely would retain a separate consulting
and advisory firm for day-to-day advice (unless appropriate).
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[[Page 14198]]
The Committee points out that, as a threshold matter, the term
``investment bank'' or ``investment banker'' is not a precise term, but
refers to a range of services including investment valuation,
investment consulting and advice, and brokerage or underwriting
performed under the authority and supervision of one or more regulators
(including, but not limited to the Federal Reserve and/or the SEC). The
Committee maintains that typically, though not necessarily, an
investment bank engaged to provide a regular valuation will not be the
same as an investment bank engaged to assist the Independent Fiduciary
in connection with a large private sale or an initial public offering,
and even in the latter event, different investment banks may be
employed for different markets (public versus private, international
versus domestic, institutional versus retail).
The Committee suggests that, particularly in the case of an
investment bank engaged only to provide valuation or investment advice,
the Independent Fiduciary may conclude that there is no potential
conflict in retaining a single investment bank with respect to two or
more Separate Retiree Accounts. Furthermore, the Committee believes
that retaining a single investment bank may in fact provide potential
benefits in the form of experience, cost savings, and communication.
The Committee proffers that Ford, Chrysler, and GM are at vastly
different stages of marketability, are competing for capital in
different markets (including public versus private), and are not
competing against each other so much as they are part of a huge global
automobile market with many other competitors.\12\ The Committee notes
that a conflict could arise in the unlikely event that the Independent
Fiduciary proposes to sell large blocks of stock of two or more car
companies in the same market at the exact same time. In that case, the
Committee suggests that the Independent Fiduciary would probably
(though not necessarily) engage separate investment bankers at that
time to underwrite the sales. Furthermore, the Committee contends that
it would maintain safeguards to mitigate the risk of conflicts. For
example, the Committee notes that it would still appoint a conflicts
monitor and perform its own monitoring of the Independent Fiduciary,
and it would continue to raise any questions about potential conflicts.
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\12\ According to the Committee, the most likely reason that an
investment bank would propose going to market under this scenario is
if the overall market itself is booming, such that there is ample
appetite for the securities. In the event that a plan needs
liquidity in a falling market, the Committee is more likely to
explore other options, including reducing benefits or seeking
alternative sources of capital such as through borrowing.
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Accordingly, the Committee proposes that, on page 64728 of the
proposed exemption, Representation 16 should be revised, to replace the
text referenced above, as follows:
In the event that a single Independent Fiduciary is retained to
represent two or more plan Accounts, and it proposes to sell
Securities from two or more such Accounts at the same time, a
separate investment bank (if any) will be retained for each Account
with respect to the marketing or underwriting of the Securities. For
this purpose, an investment bank will be considered as having been
retained to market or underwrite securities if it is compensated on
the success of the offering and/or as a percentage of the offering
or sales proceeds. The foregoing does not preclude the engagement of
a single investment bank to provide valuation services or long-term
investment consulting on behalf of two or more plan Accounts,
provided that (1) the fees of the investment bank are not contingent
upon the success or size of an offering or sale, and (2) for each
plan Account, the investment bank's recommendations are made solely
with the goal of maximizing the returns for such Account.
In addition, the Committee explains that there may be some
confusion as to whether two different Independent Fiduciaries may
retain the same investment bank. The Committee states that there should
be no limitations on the number of investment banks that the
Independent Fiduciary must retain other than general fiduciary
principles. According to the Committee, although it is unlikely that an
Independent Fiduciary would consider, or that an investment bank would
accept, an engagement that might involve marketing securities of two
different companies in the same market at the same time, it would not
be unusual, for instance, to retain the same investment bank to make a
private offering of securities in the domestic market and a public
offering of different securities in a foreign market, where such
investment bank is best qualified to do so.
Accordingly, the Committee suggests that Representation 16 of the
proposed exemption be modified to include the following:
To the extent that two Accounts are represented by different
Independent Fiduciaries, nothing herein shall prohibit the
Independent Fiduciaries from retaining the same investment bank with
respect to the Accounts which they manage if they determine that it
is in the interest of their respective Accounts to do so.
The Department concurs with the Committee that, in the event that
one Independent Fiduciary represents two or more (Separate Retiree)
Accounts, and it proposes to sell Securities from two or more such
Separate Retiree Accounts at the same time, then a separate investment
bank (if any) will be retained for each Separate Retiree Account with
respect to the marketing or underwriting of the Securities.
Notwithstanding the above, nothing in the final exemption would
preclude the Independent Fiduciary of two or more Separate Retiree
Accounts from retaining the same investment banker to provide valuation
services or long-term investment consulting on behalf of two or more of
such Separate Retiree Accounts.\13\ Lastly, with respect to the
Committee's suggestion that, to the extent that two Separate Retiree
Accounts are represented by different Independent Fiduciaries, nothing
herein shall prohibit the Independent Fiduciaries from retaining the
same investment bank with respect to the Separate Retiree Accounts
which they manage if they determine that it is in the interest of their
respective Separate Retiree Accounts to do so, the Department is of the
view that a separate investment bank (if any) must be retained to
represent each such Separate Retiree Account with respect to the
marketing or underwriting of the Securities. Therefore, subject to
these limitations, the Department concurs with the Committee's
requested clarifications.
---------------------------------------------------------------------------
\13\ In reaching the Department's conclusion, it is our
understanding, based on the Committee's representations, that the
fees paid to a single investment bank to provide valuation services
or long-term investment consulting on behalf of two or more Separate
Retiree Accounts will not be contingent upon the success or size of
an offering or sale, and for each Separate Retiree Account, the
investment bank's recommendations are made solely with the goal of
maximizing the returns for such Account.
---------------------------------------------------------------------------
2. Reporting Deviations From an Investment Bank's Recommendations.
If a single Independent Fiduciary is retained with respect to more than
one Separate Retiree Account, on page 64728 of the proposed exemption,
Representation 16 provides that the Independent Fiduciary shall report
each instance in which it proposes to ``deviate'' from a
``recommendation'' of the investment bank. The Committee initially
represented to the Department that such arrangement would help to
minimize the likelihood of a conflict inherent in retaining one
Independent Fiduciary to manage the securities of more than one
Separate Retiree Account.
However, the Committee now proffers that this requirement may not
be practical, in light of information gained
[[Page 14199]]
during the process of interviewing and selecting the Independent
Fiduciaries in connection with the Ford, GM, and Chrysler exemption
applications. The Committee notes that, typically, an investment bank
will not ``recommend'' a single, specific course of action, but through
a dialogue with the Independent Fiduciary will present, discuss, modify
and refine various options and scenarios that the Independent Fiduciary
ultimately will use in making its decisions as a fiduciary. Thus, the
Committee argues that it would not be feasible for the Independent
Fiduciary to report back to the Committee when it proposes to deviate
from a specific recommendation, given that interactions between the
Independent Fiduciary and an investment bank generally lack a single,
identifiable ``recommendation'' (either orally or in writing) that the
Independent Fiduciary does or does not intend to follow.
Moreover, the Committee contends that some investment banker
recommendations are unlikely ever to raise conflict issues. For
instance, the Committee notes that an investment bank may develop a
preliminary valuation of certain Ford Securities of $xx, and after
thorough consideration, the Independent Fiduciary may determine that
such securities are actually worth $yy. In such event, the Committee
asserts that the Independent Fiduciary's valuation might be viewed as a
``deviation'' from the initial recommendation but is unlikely to raise
any conflict vis-[agrave]-vis any Securities held by the VEBA Trust.
The Committee is also concerned that the requirement for the
Committee to review the reported deviations will cause the Committee to
interpose itself between the two parties before such parties have
reached a consensus. In this event, the Committee is concerned that it
may have an implied obligation to substitute its judgment for that of
the Independent Fiduciary.
The Department concurs with the Committee's comment that their
initial representation that the Independent Fiduciary would report any
deviations from the recommendation of the investment bank raises
operational issues. Nevertheless, the Department notes that the
Independent Fiduciary and the Committee are not relieved from their
fiduciary duties under ERISA in carrying out their respective
responsibilities. There may be circumstances where the Independent
Fiduciary has a responsibility under ERISA to inform the conflicts
monitor or the Committee of a deviation from the investment bank's
recommendations, and the Committee, as part of its oversight
responsibility, may need to take appropriate action based on such
disclosure. Subject to the caveat above, the Department takes note of
these clarifications and updates to the Summary of Facts and
Representations of the proposed exemption.
3. Ford's right to defer payments under New Note B. The Committee
suggests that the description of Ford's ability to defer payments in
respect of New Note B, set out in Representation 9.b. in the middle
column of page 64722 (beginning with ``Furthermore * * *'') may be
inaccurate. The proposed exemption provides that, on each New Note B
payment date, subject to satisfaction of all of the ``Stock Settlement
Conditions'' (as described in the proposed exemption), Ford has the
option to settle any or all of the amount due with respect to New Note
B with Ford Common Stock designated as ``Payment Shares.'' The proposed
exemption further provides that:
* * * if on any payment date under New Note B, conditions 1., 2.,
3., 5., and 6. are met, then, subject to certain limitations, Ford
would generally have the right to defer such payment by paying it in
up to five equal annual installments beginning with the next
scheduled payment date, with interest accruing at 9% beginning on
the date such payment was originally due and continuing through the
date such payment is made. Thus, Ford may make such payment (or
installment thereof) in common stock on any deferred installment
date if all the conditions for payment in common stock have been met
on such date.
The Committee suggests that the above paragraph describing Ford's
ability to defer payments in respect of New Note B, set out on page
67422 of the proposed exemption, should be revised to provide the
following:
Furthermore, if on any payment date under New Note B, all of the
foregoing Stock Settlement Conditions other than conditions 4., 7.
and/or 8. are met, then, subject to certain conditions, Ford would
generally have the option to defer such payment and to pay it in up
to five equal annual installments on the first through fifth
anniversaries of such payment date together with interest at the
rate of 9% from the date such payment was originally due through the
applicable installment payment date. On each such installment
payment date, if all of the Stock Settlement Conditions are then
satisfied, Ford will have the option to pay the installment by
delivering Payment Shares with the number of Payment Shares to be so
delivered determined based on the volume-weighted average selling
price per shares of Ford Common Stock for the 30 trading day period
ending on the second business day prior to such installment payment
date.
The Department concurs with the Committee's suggested revision to
the proposed exemption, and takes note of the foregoing clarifications
and updates to the Representations.
B. Requests for Confirmation
1. Conditions Applicable in the Event That the Committee Appoints a
Single Independent Fiduciary. The Committee's comment requested
confirmation that certain terms and conditions described in the
Representations on page 64728, and incorporated into Sections II(b)(1)
through (3) on page 64731, of the proposed exemption would apply only
if and to the extent that the same Independent Fiduciary is appointed
to represent two or more Separate Retiree Accounts.
Sections II(b)(1) through (3) of the proposed exemption provide
that the Committee will take certain steps to mitigate potential
conflicts of interest, including the appointment of a conflicts
monitor, the adoption of procedures to facilitate prompt replacement of
the Independent Fiduciary due to a conflict of interest, the adoption
of a written policy by the Independent Fiduciary regarding conflicts,
and the periodic reporting of actual or potential conflicts.
Additionally, on page 64728 of the proposed exemption, Representation
16 provides that a separate investment bank will be retained with
respect to each Separate Retiree Account, and in the event that the
Independent Fiduciary deviates from the ``initial recommendations'' of
an investment bank, ``it would find it necessary to explain why it
deviated from a recommendation.''
The Department concurs with the Committee, that the terms and
conditions described above will apply only if and to the extent that
the same Independent Fiduciary is appointed to represent two or more
Separate Retiree Accounts. Notwithstanding the above, nothing in the
final exemption would preclude the Committee from adopting procedures
similar to those described in Sections II(b)(1) through (3) of the
proposed exemption in furtherance of its oversight responsibilities.
However, the Department believes that the requirement that the
Independent Fiduciary retain separate investment banks with respect to
each Separate Retiree Account, subject to the limitations described
above, applies regardless of how many Separate Retiree Accounts are
represented by the same Independent Fiduciary.
2. Investment Bank's Acknowledgement that the VEBA Trust is its
Ultimate Client. On page 64731 of the proposed exemption, Section II(e)
provides that ``any contract between the
[[Page 14200]]
Independent Fiduciary and an investment banker includes an
acknowledgement by the investment banker that the investment banker's
ultimate client is an ERISA Plan.'' In assisting the Department in
formulating the conditions of the proposed exemption, the Committee
represented to the Department that such acknowledgement would be
helpful in the event that the Committee is forced to replace the
Independent Fiduciary (such as in the event of an irreconcilable
conflict). The Committee reasoned that this requirement would ensure
that, in the event the Independent Fiduciary was replaced, the
investment banker would continue to represent the plan and work with
the replacement Independent Fiduciary.
After conducting interviews and consulting with numerous parties in
its search for an independent fiduciary to manage the Securities
received by the Ford VEBA Plan, the Committee has raised concerns
regarding such condition. The Committee has requested that the
Department confirm that this condition will not cause the investment
bank to become a fiduciary or otherwise obligate the investment bank or
the Independent Fiduciary to provide to the Committee any of the
investment bank's work-product except upon request, nor will it
obligate the Committee to request or review any such work product. The
Committee contends that the Independent Fiduciary is both a named
fiduciary and an investment manager, thus it should be free within the
parameters of its contract to determine what information it shares with
the Committee.
The Department confirms that the requirement that the investment
banker acknowledge that its ultimate client is the Ford VEBA Plan will
not, by itself, make the investment banker a fiduciary of the Ford VEBA
Plan. Rather, whether an investment banker referred to in Section II of
the proposed exemption becomes a fiduciary as a result of its provision
of services depends on whether it meets the definition of a
``fiduciary'' as set forth in section 3(21) of ERISA and the
regulations promulgated thereunder.
3. Obligation of the Committee to Review the Investment Banker
Reports. As described in Representation 16, on page 64728 of the
proposed exemption, several safeguards are provided to reduce the risk
of conflict in the event that a single independent fiduciary is
retained with respect to more than one Retiree Separate Account.
Specifically, in assisting the Department to formulate these
procedures, the Committee had suggested that a ``conflicts monitor''
would develop a process for identifying potential conflicts. As a
result, the Department added Section II(b)(1)(ii) of the proposed
exemption, which provides that a conflicts monitor appointed by the
Committee ``regularly review the[hellip] investment banker
reports[hellip] to identify the presence of factors that could lead to
a conflict.''
After conducting interviews with candidates for the Independent
Fiduciary position, the Committee has raised a concern regarding the
conflicts monitor's duties. The Committee has requested confirmation
that Section II(b)(1)(i) does not independently impose any obligation
on the Committee to provide (or request) ``investment banker reports''
as a matter of course (i.e., beyond ERISA's general fiduciary
requirements). In its comment letter, the Committee notes that it may
be appropriate for the conflicts monitor or the Committee (or any
subcommittee with delegated authority) to review investment banker
reports when provided to them by the Independent Fiduciary, or to
request such reports under certain circumstances. However, the
Committee maintains that such reports may contain information that is
confidential or proprietary, or preliminary, or simply irrelevant to
its responsibilities. Furthermore, according to the Committee, it is
not clear what constitutes a ``report,'' with the result that informal
notes and/or emails may fall under the definition.
The Department concurs with the Committee that Section II(b)(1)(ii)
of the proposed exemption does not independently impose an affirmative
obligation on the Committee to provide (or request) ``investment banker
reports'' as a matter of course beyond ERISA's general fiduciary
requirements.
IFS' Comment
IFS submitted a written comment that is supportive of the proposed
exemption, and seeks written clarification and confirmation from the
Department as to the scope of the exemptive relief provided under the
proposed exemption with respect to certain transactions involving
Securities held by the Ford VEBA Plan.
A. Exchange of Warrants for Warrants
Section I(a)(1)-(5), on page 64730 of the proposed exemption,
provides relief for the acquisition and holding of Securities by the
Ford VEBA Plan and its funding vehicle, the VEBA Trust, from the
restrictions of sections 406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(E),
406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA if the proposed
exemption is granted by the Department. Additionally, on page 64730 of
the proposed exemption, Section I(a)(6) provides relief for the
disposition of Securities by the Independent Fiduciary, if the
exemption is granted. For these purposes, Section VII(q) and Section
VII(z), on page 64733 of the proposed exemption, define ``Securities''
and ``Warrants,'' respectively, as ``the New Note A, the New Note B,
the Warrants, the LLC Interest, any Payment Shares, and additional
shares of Ford Common Stock acquired pursuant to the Independent
Fiduciary's exercise of the Warrants,'' and as ``warrants to acquire
shares of Ford Common Stock, par value $0.01 per share, issued by
Ford.''
IFS requests clarification as to whether the aforementioned relief
extends to warrants issued by Ford or Ford Common Stock acquired and
held by the Ford VEBA Plan as a result of the disposition of all or
some of the Securities of a like type (e.g., warrant for warrant or
stock for stock) (In-Kind Ford Securities) by the Independent Fiduciary
in exchange for some or all of the Securities. IFS posits that the same
question arises in the context of a disposition of Warrants by the
Independent Fiduciary in a transaction in which the consideration the
Ford VEBA Plan receives consists in whole or in part of In-Kind Ford
Securities that constitute Ford issued warrants.
IFS notes that it may determine that it is in the interest of the
Ford VEBA Plan's participants and beneficiaries to sell certain
Warrants in exchange for a combination of cash and other Ford issued
warrants.\14\ IFS explains that the warrants [given by Ford] would have
a fair market value no less than the fair market value of the Warrants
the Ford VEBA Plan is selling.\15\ For example, IFS suggests that it
may find it in the interest of the Ford VEBA Plan and its participants
and beneficiaries to sell a Warrant to Ford in exchange for cash and a
replacement warrant of shorter/longer duration or with a different
strike price. In this example, IFS highlights three transactions;
namely, (1) the disposition of Warrants by IFS in its role as the
Independent Fiduciary in favor of other Ford issued warrants, (2) the
acquisition of the new warrants by the Ford VEBA Plan, and (3) the
holding of
[[Page 14201]]
these warrants by the Ford VEBA Plan. IFS is seeking confirmation from
the Department that each of these In-Kind Ford Securities and like
transactions, assuming the transactions otherwise meet the conditions
set forth in Section II of the proposed exemption, would fall within
the exemptive relief contemplated under the proposed exemption.\16\
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\14\ IFS states that any such transaction would be entered into
only after IFS has met all the conditions precedent to entering into
such a transaction as set forth in Section II of the proposed
exemption, including, but not limited to, determining that the
transaction is feasible, in the best interests of the Ford VEBA
Plan, and protective of the participants and beneficiaries of the
Ford VEBA Plan.
\15\ IFS notes that for this purpose, it would seek the advice
of an investment advisor to determine value.
\16\ IFS notes that it is not suggesting that transactions which
would fundamentally alter the terms of the Settlement Agreement are
being contemplated, nor is IFS seeking to bring any such
transactions within the scope of the Proposed PTE.
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More specifically, IFS is seeking confirmation that what it has
defined as ``other Ford issued warrants'' would fall within the
definitions of Securities and warrants, as applicable, for purposes of
the proposed exemption. IFS states that inclusion of such warrants in
the definitions of Securities and Warrants is critical inasmuch as the
warrants will themselves be subject to future transactions as IFS seeks
to dispose of these securities in a manner that is consistent with its
duties to the Ford VEBA Plan and its participants and beneficiaries.
B. Securities Acquired in Connection With a Corporate Transaction
In addition to the transactions discussed above, IFS requests
clarification whether the proposed exemption would cover Ford Common
Stock or Warrants acquired in connection with a corporate transaction,
restructuring or other change in capital structure of Ford (such
Securities hereinafter referred to as after-acquired securities). IFS
notes that, under this scenario, the Ford VEBA Plan would receive
after-acquired securities in exchange for, or with respect to, all or
some of the Securities of like kind then held by the Ford VEBA Plan due
to a corporate transaction, restructuring, or other change in Ford's
capital structure.\17\
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\17\ IFS notes that certain corporate transactions are
contemplated under the Warrants such that on the occurrence of the
transaction the exercise price available to the Ford VEBA Plan would
be adjusted. See, e.g., Section 5.01(e) of the Warrant Agreement
dated as of December 11, 2009 between Ford Motor Company and
Computershare Trust Company, N.A. as Warrant Agent; See, also,
Section 7.02 of the Securityholder and Registration Rights
Agreement.
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As noted in Representation 16 of the proposed exemption, on page
64727, the Independent Fiduciary does not have authority to vote Ford
Common Stock. Thus, IFS notes that it would have little, if any,
ability to affect the negotiation and ultimate approval of any such
corporate transaction. Moreover, IFS suggests that the Department has
previously issued relief from sections 406(a)(1)(A), 406(a)(1)(B),
406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA for
the disposition of securities by an independent fiduciary as well as
the acquisition and holding of any after-acquired securities in this
type of scenario in a previous individual exemption.\18\
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\18\ Calpine Corporation, PTE 2009-01, 74 FR 3644 (January 21,
2009). See also The Golden Comprehensive Security Program, et al.,
PTE 2002-02, 67 FR 1243 (January 9, 2002).
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In response to the above referenced comments, the Department
confirms that the proposed exemption provides exemptive relief for
other Ford issued warrants acquired in exchange for Warrants held by
the Ford VEBA Plan at the direction of the Independent Fiduciary, and
such relief also extends to additional shares of Ford Common Stock or
other Ford issued warrants acquired in exchange for Ford Common Stock
or Warrants held by the Ford VEBA Plan in connection with a
restructuring, recapitalization, merger or other corporate transaction
involving Ford. Accordingly, the Department has made revisions to the
definitions of ``Securities'' and ``Warrants'' in Section VII(r) and
Section VII(aa), respectively, of the final exemption. In addition, the
Department takes note of the foregoing clarifications and updates to
the Representations.
The Department has carefully considered the issues expressed by the
commenters in their written comments, including the issues raised by
the individuals who had telephoned the Department. After consideration
of the commenters' concerns and documentation provided, the Department
does not believe that any material factual issues have been raised
which would require the convening of a public hearing. Further, after
giving full consideration to the entire record, including the comments,
the Department has determined to grant the exemption, subject to the
modifications and clarifications described herein.
For a complete statement of the facts and representations
supporting the Department's decision to grant this exemption, refer to
the notice of proposed exemption that was published in the Federal
Register on December 8, 2009 at 74 FR 64716. For further information
regarding the comments and other matters discussed herein, interested
persons are encouraged to obtain copies of the exemption application
file (Exemption Application No. L-11575) the Department is maintaining
in this case. The complete application file, as well as all
supplemental submissions received by the Department, are made available
for public inspection in the Public Disclosure Room of the Employee
Benefits Security Administration, Room N-1513, US Department of Labor,
200 Constitution Avenue, NW., Washington, DC 20210. The written
comments may also be viewed online at http://www.regulations.gov, at
Docket ID Number: EBSA-2009-0026.
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 ERISA does not relieve a fiduciary or other
party in interest from certain other provisions of ERISA, including any
prohibited transaction provisions to which the exemption does not apply
and the general fiduciary responsibility provisions of section 404 of
ERISA, 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 ERISA;
(2) In accordance with section 408(a) of ERISA, the Department
makes the following determinations:
(a) The exemption is administratively feasible;
(b) The exemption is in the interests of the Ford VEBA Plan and of
its participants and beneficiaries; and
(c) The exemption is protective of the rights of participants and
beneficiaries participating in the Ford VEBA Plan; and
(3) The exemption is supplemental to, and not in derogation of, any
other provisions of ERISA, 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.
Accordingly, the following exemption is granted under the authority
of section 408(a) of ERISA and in accordance with the procedures set
forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10,
1990).
Exemption
Section I. Covered Transactions
(a) The restrictions of sections 406(a)(1)(A), 406(a)(1)(B),
406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA shall
not apply, effective December 31, 2009, to:
(1) The acquisition by the UAW Ford Retirees Medical Benefits Plan
(the Ford
[[Page 14202]]
VEBA Plan) and its funding vehicle, the UAW Retiree Medical Benefits
Trust (the VEBA Trust) of: (i) The LLC Interests; (ii) New Note A;
(iii) New Note B (together with New Note A, the New Notes); and (iv)
Warrants, transferred by Ford and deposited in the Ford Employer
Security Sub-Account of the Ford Separate Retiree Account of the VEBA
Trust.
(2) The acquisition by the Ford VEBA Plan of shares of Ford Common
Stock pursuant to Ford's right to settle its payment obligations under
New Note B in shares of Ford Common Stock (i.e., Payment Shares),
consistent with the 2009 Settlement Agreement;
(3) The acquisition by the Ford VEBA Plan of shares of Ford Common
Stock pursuant to (i) the Independent Fiduciary's exercise of all or a
pro rata portion of the Warrants, consistent with the 2009 Settlement
Agreement and (ii) an adjustment, substitution, conversion, or other
modification of Ford Common Stock in connection with a reorganization,
restructuring, recapitalization, merger, or similar corporate
transaction, provided that each holder of Ford Common Stock is treated
in an identical manner;
(4) The holding by the Ford VEBA Plan of the aforementioned
Securities in the Ford Employer Security Sub-Account of the Ford
Separate Retiree Account of the VEBA Trust, consistent with the 2009
Settlement Agreement;
(5) The deferred payment of any amounts due under New Note B by
Ford pursuant to the terms thereunder; and
(6) The disposition of the Securities by the Independent Fiduciary.
(b) The restrictions of sections 406(a)(1)(A), 406(b)(1), and
406(b)(2) of ERISA shall not apply, effective December 31, 2009, to the
sale of Ford Common Stock or Warrants held by the Ford VEBA Plan to
Ford in accordance with the Right of First Offer or a Ford self-tender
under the Securityholder and Registration Rights Agreement.
(c) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D),
406(b)(1), and 406(b)(2) of ERISA shall not apply, effective December
31, 2009, to:
(1) The extension of credit or transfer of assets by Ford, the Ford
Retiree Health Plan, or the Ford VEBA Plan in payment of a benefit
claim that was the responsibility and legal obligation, under the terms
of the applicable plan documents, of one of the other parties listed in
this paragraph;
(2) The reimbursement by Ford, the Ford Retiree Health Plan, or the
Ford VEBA Plan, of a benefit claim that was paid by another party
listed in this paragraph, which was not legally responsible for the
payment of such claim, plus interest;
(3) The retention of an amount by Ford until payment to the Ford
VEBA Plan resulting from an overaccrual of pre-transfer expenses
attributable to the TAA or the retention of an amount by the Ford VEBA
Plan until payment to Ford resulting from an underaccrual of pre-
transfer expense attributable to the TAA; and
(4) The Ford VEBA Plan's payment to Ford of an amount equal to any
underaccrual by Ford of pre-transfer expenses attributable to the TAA
or the payment by Ford to the Ford VEBA Plan of an amount equal to any
overaccrual by Ford of pre-transfer expenses attributable to the TAA.
(d) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D),
406(b)(1), and 406(b)(2) of ERISA shall not apply, effective December
31, 2009, to the return to Ford of assets deposited or transferred to
the Ford VEBA Plan by mistake, plus interest.
Section II. Conditions Applicable to Section I(a) and I(b)
(a) The Committee appoints a qualified Independent Fiduciary to act
on behalf of the Ford VEBA Plan for all purposes related to the
transfer of the Securities to the Ford VEBA Plan for the duration of
the Ford VEBA Plan's holding of the Securities. Such Independent
Fiduciary will have sole discretionary responsibility relating to the
holding, ongoing management and disposition of the Securities, except
for the voting of the Ford Common Stock. The Independent Fiduciary has
determined or will determine, before taking any actions regarding the
Securities, that each such action or transaction is in the interest of
the Ford VEBA Plan.
(b) In the event that the same Independent Fiduciary is appointed
to represent the interests of one or more of the other plans comprising
the VEBA Trust (i.e., the UAW Chrysler Retiree Medical Benefits Plan
and/or the UAW General Motors Company Retiree Medical Benefits Plan)
with respect to employer securities deposited into the VEBA Trust, the
Committee takes the following steps to identify, monitor and address
any conflict of interest that may arise with respect to the Independent
Fiduciary's performance of its responsibilities:
(1) The Committee appoints a ``conflicts monitor'' to: (i) develop
a process for identifying potential conflicts; (ii) regularly review
the Independent Fiduciary reports, investment banker reports, and
public information regarding the companies, to identify the presence of
factors that could lead to a conflict; and (iii) further question the
Independent Fiduciary when appropriate.
(2) The Committee adopts procedures to facilitate prompt
replacement of the Independent Fiduciary if the Committee in its sole
discretion determines such replacement is necessary due to a conflict
of interest.
(3) The Committee requires the Independent Fiduciary to adopt a
written policy regarding conflicts of interest. Such policy shall
require that, as part of the Independent Fiduciary's periodic reporting
to the Committee, the Independent Fiduciary includes a discussion of
actual or potential conflicts identified by the Independent Fiduciary
and options for avoiding or resolving the conflicts.
(c) The Independent Fiduciary authorizes the trustee of the Ford
VEBA Plan to dispose of the Ford Common Stock (including any Payment
Shares or any shares of Ford Common Stock acquired pursuant to exercise
of the Warrants), the LLC Interests, the New Notes, or exercise the
Warrants, only after the Independent Fiduciary determines, at the time
of the transaction, that the transaction is feasible, in the interest
of the Ford VEBA Plan, and protective of the participants and
beneficiaries of the Ford VEBA Plan.
(d) The Independent Fiduciary negotiates and approves on behalf of
the Ford VEBA Plan any transactions between the Ford VEBA Plan and any
party in interest involving the Securities that may be necessary in
connection with the subject transactions (including but not limited to
the registration of the Securities contributed to the Ford VEBA Plan).
(e) Any contract between the Independent Fiduciary and an
investment banker includes an acknowledgement by the investment banker
that the investment banker's ultimate client is an ERISA plan.
(f) The Independent Fiduciary discharges its duties consistent with
the terms of the Ford VEBA Plan, the Trust Agreement, the Independent
Fiduciary Agreement, and any other documents governing the Securities,
such as the Registration Rights Agreement.
(g) The Ford VEBA Plan incurs no fees, costs or other charges
(other than described in the Trust Agreement, the 2009 Settlement
Agreement, and the Securityholder and Registration Rights Agreement) as
a result of the transactions exempted herein.
(h) The terms of any transaction exempted herein are no less
favorable to the Ford VEBA Plan than the terms
[[Page 14203]]
negotiated at arms' length under similar circumstances between
unrelated parties.
Section III. Conditions Applicable to Section I(c)(1) and I(c)(2)
(a) The Committee and the Ford VEBA Plan's third party
administrator will review the benefits paid during the transition
period and determine the dollar amount of mispayments made, subject to
the review of the Ford VEBA Plan's independent auditor. The results of
this review will be made available to Ford.
(b) Ford and the applicable third party administrator of the Ford
Active Health Plan will review the benefits paid during the transition
period and determine the dollar amount of mispayments made, subject to
the review of the plan's independent auditor. The results of this
review will be made available to the Committee.
(c) Interest on any reimbursed mispayment will accrue from the date
of the mispayment to the date of the reimbursement.
(d) Interest will be determined using the applicable 6 month
published LIBOR rate.
(e) If there is a dispute as to the amount, timing or other feature
of a reimbursement payment, the parties will enter into the Dispute
Resolution Procedure found in Section 26B of the 2009 Settlement
Agreement and described further in Section VII(c) herein.
Section IV. Conditions Applicable to Section I(c)(3) and I(c)(4)
(a) Ford and the Committee will cooperate in the calculation and
review of the amounts of expense accruals related to the TAA, and the
amount of any overaccrual shall be made subject to the review of an
independent auditor selected by Ford and the amount of any underaccrual
shall be made subject to the review of the Ford VEBA Plan's independent
auditor.
(b) Ford must make a claim for any underaccrual to the Committee,
and the Committee must make a claim for any overaccrual to Ford, as
applicable, within the Verification Time Period, as defined in Section
VII(z).
(c) Interest on any true-up payment will accrue from the date of
transfer of the assets in the TAA (or the LLC containing the TAA) for
the amount in respect of the overaccrual or underaccrual, as
applicable, until the date of payment of such true-up amount.
(d) Interest will be determined using the published six month LIBOR
rate.
(e) If there is a dispute as to the amount, timing or other feature
of a true-up payment in respect of TAA expenses, the parties will enter
into the Dispute Resolution Procedure found in Section 26B of the 2009
Settlement Agreement and described further in Section VII(c) herein.
Section V. Conditions Applicable to Section I(d)
(a) Ford must make a claim to the Committee regarding the specific
deposit or transfer made in error or made in an amount greater than
that to which the Ford VEBA Plan was entitled.
(b) The claim is made within the Verification Time Period, as
defined in Section VII(z).
(c) Interest on any mistaken deposit or transfer will accrue from
the date of the mistaken deposit or transfer to the date of the
repayment.
(d) Interest will be determined using the published six-month LIBOR
rate.
(e) If there is a dispute as to the amount, timing or other feature
of a mistaken payment, the parties will enter into the Dispute
Resolution Procedure found in Section 26B of the 2009 Settlement
Agreement and described further in Section VII(c) herein.
Section VI. Conditions Applicable to Section I
(a) The Committee and the Independent Fiduciary maintain for a
period of six years from the date (i) the Securities are transferred to
the Ford VEBA Plan, and (ii) the shares of Ford Common Stock are
acquired by the Ford VEBA Plan through the exercise of the Warrants or
Ford's delivery of Payment Shares in settlement of its payment
obligations under New Note B, the records necessary to enable the
persons described in paragraph (b) below to determine whether the
conditions of this exemption have been met, provided that (i) a
separate prohibited transaction will not be considered to have occurred
if, due to circumstances beyond the control of the Committee and/or the
Independent Fiduciary, the records are lost or destroyed prior to the
end of the six-year period, and (ii) no party in interest other than
the Committee or the Independent Fiduciary shall be subject to the
civil penalty that may be assessed under ERISA section 502(i) if the
records are not maintained, or are not available for examination as
required by paragraph (b) below; and
(b) Notwithstanding any provisions of subsections (a)(2) and (b) of
section 504 of ERISA, the records referred to in paragraph (a) above
shall be unconditionally available at their customary location during
normal business hours to:
(1) Any duly authorized employee or representative of the
Department or the Internal Revenue Service;
(2) The UAW or any duly authorized representative of the UAW;
(3) Ford or any duly authorized representative of Ford;
(4) The Independent Fiduciary or any duly authorized representative
of the Independent Fiduciary;
(5) The Committee or any duly authorized representative of the
Committee; and
(6) Any participant or beneficiary of the Ford VEBA Plan or any
duly authorized representative of such participant or beneficiary.
(c) None of the persons described above in paragraphs (b)(2), (4)-
(6) shall be authorized to examine trade secrets of Ford, or commercial
or financial information which is privileged or confidential, and
should Ford refuse to disclose information on the basis that such
information is exempt from disclosure, Ford shall, by the close of the
thirtieth (30th) day following the request, provide a written notice
advising that person of the reasons for the refusal and that the
Department may request such information.
Section VII. Definitions
(a) The term ``affiliate'' means: (1) Any person directly or
indirectly, through one or more intermediaries, controlling, controlled
by, or under common control with such other person; (2) any officer,
director, partner, or employee in any such person, or relative (as
defined in section 3(15) of ERISA) of any such person; or (3) any
corporation, partnership or other entity of which such person is an
officer, director or partner. (For purposes of this definition, the
term ``control'' means the power to exercise a controlling influence
over the management or policies of a person other than an individual).
(b) The ``Committee'' means the eleven individuals consisting of
six independent members and five UAW appointed members who will serve
as the plan administrator and named fiduciary of the Ford VEBA Plan.
(c) The term ``Dispute Resolution Procedure'' means the process
found in Section 26B of the 2009 Settlement Agreement to effectuate the
resolution of any dispute respecting the transactions described in
Sections I(c)(1), (c)(2), (c)(3), (c)(4), and (d) herein, and which
reads in pertinent part: (1) The aggrieved party shall provide the
party alleged to have violated the 2009 Settlement Agreement (Dispute
Party) with written notice of
[[Page 14204]]
such dispute, which shall include a description of the alleged
violation and identification of the Section(s) of the 2009 Settlement
Agreement allegedly violated. Such notice shall be provided so that it
is received by the Dispute Party no later than 180 calendar days from
the date of the alleged violation or the date on which the aggrieved
party knew or should have known of the facts that give rise to the
alleged violation, whichever is later, but in no event longer than 3
years from the date of the alleged violation; and (2) If the Dispute
Party fails to respond within 21 calendar days from its receipt of the
notice, the aggrieved party may seek recourse to the District Court;
provided however, that the aggrieved party waives all claims related to
a particular dispute against the Dispute Party if the aggrieved party
fails to bring the dispute before the District Court within 180
calendar days from the date of sending the notice. All the time periods
in Section 26 of the 2009 Settlement Agreement may be extended by
agreement of the parties to the particular dispute.
(d) The term ``Exchange Agreement'' means the Security Exchange
Agreement among Ford, the subsidiary guarantors listed in Schedule I
thereto and the LLC, dated as of December 11, 2009.
(e) The term ``Ford'' or the ``Applicant'' means Ford Motor
Company, located in Detroit MI, and its affiliates.
(f) The term ``Ford Active Health Plan'' means the medical benefits
plan maintained by Ford to provide benefits to eligible active hourly
employees of Ford and its participating subsidiaries.
(g) The term ``Ford Common Stock'' means the shares of common
stock, par value $0.01 per share, issued by Ford.
(h) The term ``Ford Employer Security Sub-Account of the Ford
Separate Retiree Account of the VEBA Trust'' means the sub-account
established in the Ford Separate Retiree Account of the VEBA Trust to
hold Securities on behalf of the Ford VEBA Plan.
(i) The term ``Ford Retiree Health Plan'' means the retiree medical
benefits plan maintained by Ford that provided benefits to, among
others, those who will be covered by the Ford VEBA Plan.
(j) The term ``Implementation Date'' means December 31, 2009.
(k) The term ``Independent Fiduciary'' means a fiduciary that is
(1) independent of and unrelated to Ford, the UAW, the Committee, and
their affiliates, and (2) appointed to act on behalf of the Ford VEBA
Plan with respect to the holding, management and disposition of the
Securities. In this regard, the fiduciary will be deemed not to be
independent of and unrelated to Ford, the UAW, the Committee, and their
affiliates if (1) such fiduciary directly or indirectly controls, is
controlled by, or is under common control with Ford, the UAW, the
Committee or their affiliates, (2) such fiduciary directly or
indirectly receives any compensation or other consideration from Ford,
the UAW or any Committee member in his or her individual capacity in
connection with any transaction contemplated in this exemption (except
that an Independent Fiduciary may receive compensation from the
Committee or the Ford VEBA Plan for services provided to the Ford VEBA
Plan in connection with the transactions discussed herein if the amount
or payment of such compensation is not contingent upon or in any way
affected by the independent fiduciary's ultimate decision), and (3) the
annual gross revenue received by the fiduciary, in any fiscal year,
from Ford, the UAW or a member of the Committee in his or her
individual capacity, exceeds 3% of the fiduciary's annual gross revenue
from all sources (for federal income tax purposes) for its prior tax
year.\19\
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\19\ The Department notes that the preceding conditions are not
exclusive, and that other circumstances may develop which cause the
Independent Fiduciary to be deemed not to be independent of and
unrelated to Ford, the UAW, the Committee, and their affiliates.
---------------------------------------------------------------------------
(l) The term ``LLC'' means the Ford-UAW Holdings LLC, established
by Ford as a wholly-owned LLC, and subsequently renamed VEBA-F Holdings
LLC, established to hold the assets in the TAA and certain other assets
required to be contributed to the VEBA under the 2008 Settlement
Agreement, as amended by the 2009 Settlement Agreement.
(m) The term ``LLC Interests'' means Ford's wholly-owned interest
in the LLC.
(n) The term ``New Note A'' means the amortizing guaranteed secured
note maturing on June 30, 2022, in the principal amount of
$6,705,470,000, with payments to be made in cash, in annual
installments from 2009 through 2022, issued by Ford and referred to in
the Exchange Agreement.
(o) The term ``New Note B'' means the amortizing guaranteed secured
note maturing June 30, 2022, in the principal amount of $6,511,850,000,
with payments to be made in cash, Ford Common Stock, or a combination
thereof, in annual installments from 2009 through 2022, issued by Ford
and referred to in the Exchange Agreement.
(p) The term ``Payment Shares'' means any shares of Ford Common
Stock issued by Ford to satisfy all or a portion of its payment
obligation under New Note B, subject to the terms and conditions
specified in New Note B.
(q) The term ``published six month LIBOR rate'' means the Official
British Banker's Association Six Month London Interbank Offered Rate
(LIBOR) 11:00am GMT ``fixing'' as reported on Bloomberg page
``BBAM''.\20\
---------------------------------------------------------------------------
\20\ LIBOR is calculated by Thomson Reuters and published by the
British Bankers' Association after 11 a.m. (and generally around
11:45 a.m.) each day (London time). It is a trimmed average of
inter-bank deposit rates offered by designated contributor banks,
for maturities ranging from overnight to one year. The rates are a
benchmark rather than a tradable rate, the actual rate at which
banks will lend to one another continues to vary throughout the day.
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(r) The term ``Securities'' means (1) New Note A; (2) New Note B;
(3) the Warrants; (4) the LLC Interests, (5) any Payment Shares, and
(6) additional shares of Ford Common Stock acquired in accordance with
the transactions described in Sections I(a)(2) and (3) of this
exemption.
(s) The term ``Securityholder and Registration Rights Agreement''
means the Securityholder and Registration Rights Agreement by and among
Ford and the LLC, dated as of December 11, 2009.
(t) The term ``2008 Settlement Agreement'' means the settlement
agreement, effective as of August 29, 2008, entered into by Ford, the
UAW, and a class of retirees in the case of Int'l Union, UAW, et al. v.
Ford Motor Company, Civil Action No. 07-14845, 2008 WL 4104329 (E.D.
Mich. Aug. 29, 2008).
(u) The term ``2009 Settlement Agreement'' means the 2008
Settlement Agreement, as amended by an Amendment to such Settlement
Agreement dated July 23, 2009, effective as of November 9, 2009,
entered into by Ford, the UAW, and a class of retirees in the case of
Int'l Union, UAW, et al. v. Ford Motor Company, Civil Action No. 07-
14845, 2008 WL 4104329 (E.D. Mich. Aug. 29, 2008), Order and Final
Judgment Granted, Civil Action No. 07-14845, Doc. 71, (E.D.
Mich. Nov. 9, 2009).
(v) The term ``TAA'' means the temporary asset account established
by Ford under the 2008 Settlement Agreement to serve as tangible
evidence of the availability of Ford assets equal to Ford's obligation
to the Ford VEBA Plan.
(w) The term ``Trust Agreement'' means the trust agreement for the
VEBA Trust.
(x) The term ``UAW'' means the International Union, United
[[Page 14205]]
Automobile, Aerospace and Agricultural Implement Workers of America.
(y) The term ``VEBA'' means the Ford UAW Retirees Medical Benefits
Plan (the Ford VEBA Plan) and its associated UAW Retiree Medical
Benefits Trust (the VEBA Trust).
(z) The term ``Verification Time Period'' means: (1) With respect
to each of the Securities other than the payments in respect of the New
Notes, the period beginning on the date of publication of the final
exemption in the Federal Register (or, if later, the date of the
transfer of any such Security to the Ford VEBA Plan) and ending 90
calendar days thereafter; (2) with respect to each payment pursuant to
the New Notes, the period beginning on the date of the payment and
ending 90 calendar days thereafter; and (3) with respect to the TAA,
the period beginning on the date of publication of the final exemption
in the Federal Register (or, if later, the date of the transfer of the
assets in the TAA to the Ford VEBA Plan) and ending 180 calendar days
thereafter.
(aa) The term ``Warrants'' means warrants issued by Ford to acquire
362,391,305 shares of Ford Common Stock at a strike price of $9.20 per
share, expiring on January 1, 2013. For purposes of this definition,
the term ``Warrants'' includes additional warrants to acquire Ford
Common Stock acquired in partial or complete exchange for, or
adjustment to, the warrants described in the preceding sentence, at the
direction of the Independent Fiduciary or pursuant to a reorganization,
restructuring or recapitalization of Ford as well as a merger or
similar corporate transaction involving Ford (each, a corporate
transaction), provided that, in such corporate transaction, similarly
situated warrantholders, if any, will be treated the same to the extent
that the terms of such warrants and/or rights of such warrantholders
are the same.
Signed at Washington, DC, this 19th day of March, 2010.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2010-6458 Filed 3-23-10; 8:45 am]
BILLING CODE 4510-29-P
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