Notice of Proposed Amendment to Prohibited Transaction Exemption (PTE) 2010-08 Involving Ford Motor Company, Located in Detroit, MI |
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Topics: Ford Motor Company
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Ivan Strasfeld
Federal Register
March 15, 2011
[Federal Register: March 15, 2011 (Volume 76, Number 50)]
[Notices]
[Page 14074-14083]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15mr11-132]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
[Application No. L-11641]
Notice of Proposed Amendment to Prohibited Transaction Exemption
(PTE) 2010-08 Involving Ford Motor Company, Located in Detroit, MI
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Notice of proposed amendment.
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This document contains a notice of pendency (the Notice) before the
Department of Labor (the Department) of a proposed amendment to PTE
2010-08 (75 FR 14192, March 24, 2010), an individual exemption 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\ The proposed amendment,
if granted, would affect the VEBA, and its participants and
beneficiaries.
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\1\ Because the Ford VEBA Plan is not qualified under section
401 of 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: If granted, this proposed amendment will be
effective as of December 31, 2009, except with respect to Section
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I(a)(7), which will be effective as of June 25, 2010.
DATES: Written comments and requests for a public hearing on the
proposed amendment should be submitted to the Department within 51 days
from the date of publication of this Federal Register Notice.
ADDRESSES: All written comments and requests for a public hearing
concerning the proposed amendment should be sent to the Office of
Exemption Determinations, Employee Benefits Security Administration,
Room N-5700, U.S. Department of Labor, 200 Constitution Avenue, NW.,
Washington DC 20210, Attention: Application No. L-11641. Interested
persons are also invited to submit comments and/or hearing requests to
the Department by facsimile to (202) 219-0204 or by electronic mail to
Blinder.Warren@dol.gov by the end of the scheduled comment period. The
application pertaining to the proposed amendment and the comments
received will be available for public inspection in the Public
Disclosure Room of the Employee Benefits Security Administration, U.S.
Department of Labor, Room N-1513, 200 Constitution Avenue, NW.,
Washington, DC 20210. Comments and hearing requests will also be
available online at http://www.regulations.gov and http://www.dol.gov/
ebsa, at no charge.
Warning: If you submit written comments or hearing requests, do not
include any personally-identifiable or confidential business
information that you do not want to be publicly-disclosed. All comments
and hearing requests are posted on the Internet exactly as they are
received, and they can be retrieved by most Internet search engines.
The Department will make no deletions, modifications or redactions to
the comments or hearing requests received, as they are public records.
FOR FURTHER INFORMATION CONTACT: Mr. 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: \2\
This document contains a notice of proposed exemption that, if
granted, would amend PTE 2010-08, which relates to the Ford VEBA Plan
and the VEBA Trust. Specifically, PTE 2010-08, which is effective as of
December 31, 2009, provides exemptive relief 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 for (a) the acquisition by the
Ford VEBA Plan and the VEBA Trust of the Securities,\3\ transferred by
Ford and deposited in the Ford Employer Security Sub-Account of the
Ford
[[Page 14075]]
Separate Retiree Account of the VEBA Trust; (b) the acquisition by the
Ford VEBA Plan of Payment Shares; (c) 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, 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; (d) the holding by the Ford VEBA Plan of the Securities in the
Ford Employer Security Sub-Account of the Ford Separate Retiree Account
of the VEBA Trust; (e) the deferred payment of any amounts due under
New Note B by Ford pursuant to the terms thereunder; and (f) the
disposition of the Securities by the Independent Fiduciary.
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\2\ The Notice incorporates by reference information contained
in the Notice of Proposed Individual Exemption Involving Ford Motor
Company Located in Detroit, MI, 74 FR 64716, December 8, 2009 (the
Proposed PTE) and PTE 2010-08. For ease of reference, unless
otherwise specified herein, all capitalized terms used in this
Summary have the meaning set forth in PTE 2010-08.
\3\ The term ``Securities'' includes New Note A and New Note B,
the Warrants, the LLC Interests, any Payment Shares received under
New Note B, and any additional shares of Ford Common Stock acquired
in accordance with other transactions described in Sections I(a)(2)
and (3) of the proposed exemption, as such terms are defined in
Section VII of the proposed exemption.
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In addition, PTE 2010-08 provides relief from the restrictions of
sections 406(a)(1)(A), 406(b)(1), and 406(b)(2) of ERISA for 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.
Furthermore, PTE 2010-08 provides relief from the restrictions of
sections 406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA,
for (a) 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 of one of the
other aforementioned parties; (b) the reimbursement by Ford, the Ford
Retiree Health Plan, or the Ford VEBA Plan, of a benefit claim that was
paid by another of the aforementioned parties, which was not legally
responsible for the payment of such claim, plus interest; (c) 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 (d) 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.
Finally, PTE 2010-08 provides relief from the restrictions of
sections 406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA
for the return to Ford of assets deposited or transferred to the Ford
VEBA Plan by mistake, plus interest.
Summary of Facts and Representations \4\
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\4\ The Summary of Facts and Representations (the Summary) is
based on the Applicant's representations and does not reflect the
views of the Department.
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1. Background
The Department originally granted PTE 2010-08 in response to an
application for exemption submitted by Ford on July 24, 2009 (the
Application). The Application was an integral part of the wholesale
restructuring of retiree health care benefits by the three major
domestic car companies, which sought to contain skyrocketing healthcare
costs and settle lawsuits brought by the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America
(the UAW) and the companies' respective classes of retirees.\5\
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\5\ See UAW v. Ford Motor Company, No. 07-14845, 2008 WL 4104329
(E.D. Mich. August 29, 2008); UAW v. Gen. Motors Corp., No. 07-CV-
14074-DT, 2008 WL 2968408 (E.D. Mich. July 31, 2008); UAW v.
Chrysler, No. 07-CV-14310, 2008 WL 2980046 (E.D. Mich. July 31,
2008).
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Pursuant to a court approved class wide settlement (the 2008
Settlement Agreement) in the case of Int'l Union, UAW, et al. v. Ford
Motor Company, on January 1, 2010, the Ford VEBA Plan assumed the
responsibility for providing post-retirement medical benefits for a
class of retirees of Ford (the Class) and a group of Ford active
employees (the Covered Group) eligible for retiree benefits.\6\
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 Class and the
Covered Group as of January 1, 2010.\7\ Ford 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, designed to provide retiree health benefits for members of the
Class and the Covered Group for an indefinite duration.\8\
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\6\ See Ford Motor Co., 2008 WL 4104329.
\7\ For a full description of the VEBA Trust, see pages 64718-
64719 of the Proposed PTE.
\8\ See Ford Motor Co., 2008 WL 4104329.
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On July 23, 2009, Ford, the UAW, and counsel for the Class amended
the 2008 Settlement Agreement, effective November 9, 2009 (as amended,
the 2009 Settlement Agreement), to provide that, inter alia, Ford could
contribute Ford Common Stock to the VEBA Trust to satisfy up to
approximately 50% of certain future obligations to the VEBA Trust on
behalf of the Ford VEBA Plan.\9\ In accordance with the terms of the
2009 Settlement Agreement, on December 31, 2009, Ford transferred the
Securities to the Ford Employer Security Sub-Account, the sub-account
established and maintained in the Ford Separate Retiree Account of the
VEBA Trust to hold Securities on behalf of the Ford VEBA Plan and any
proceeds from the disposition of any such Security.\10\
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\9\ See Int'l Union, UAW, et al. v. Ford Motor Company, Civil
Action No. 07-14845, (E.D. Mich. November 9, 2009) (Doc.
71, Order and Final J.).
\10\ For a full description of the assets transferred to the
VEBA Trust under the 2009 Settlement Agreement, see pages 64720-
64721 of the Proposed PTE and pages 14195-14197, 14199, and 14200-
14201 of PTE 2010-08.
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2. The New Notes
Among the Securities transferred to the VEBA Trust and held in the
Ford Employer Security Sub-Account were the New Notes, consisting of
New Note A and New Note B, which were structured to provide a series of
payments over 13 years. New Note A was issued in the principal amount
of $6,705,470,000, and New Note B was issued in the principal amount of
$6,511,850,000. The New Notes were to be non-interest bearing and
mature on June 30, 2022.\11\
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\11\ For a full description of the New Notes, see pages 64721-
64722 of the Proposed PTE and pages 14195-14196 of PTE 2010-08.
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Whereas New Note A was payable only in cash, under the 2009
Settlement Agreement, New Note B was to be payable in either cash or,
upon the satisfaction of certain conditions, shares of Ford Common
Stock designated as ``Payment Shares'' of equal value. The number of
Payment Shares payable would be determined based on the volume-weighted
average selling price per share (VWAP) of Ford Common Stock for the 30
trading-day period ending on the second business day prior to the
relevant payment date. In addition, Payment Shares received by the VEBA
Trust in lieu of cash pursuant to New Note B would be subject to
certain registration rights and transfer restrictions, as described in
the Proposed PTE.
[[Page 14076]]
Ford made its first scheduled payments in respect of the New Notes
on December 31, 2009, including a partial prepayment of New Note A in
the amount of $500,000,000.\12\ After Ford made such payments, the
payment schedule under the New Notes, beginning with the June 30, 2010
payment date, became the following:
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\12\ Pursuant to the terms of New Note A, Ford's partial pre-
payment of New Note A reduced proportionately each future principal
payment on New Note A, beginning with the June 30, 2010 payment.
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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.
June 30, 2022........................... $22.36 million.................... $26 million.
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As noted above, Ford could prepay in cash either or both of the New
Notes in whole or in part. For prepayments in whole, the payment on
each payment date would equal the corresponding amounts set forth as a
schedule to the applicable New Note. In the event of any partial
prepayment, future payments would be determined on a basis that
provided the economically equivalent present value and duration to the
VEBA Trust using a discount rate of 9% per annum.
3. The Holding, Management and Disposition of the Ford Securities Held
in the Ford Employer Security Sub-Account
As a condition of the Department's granting relief under PTE 2010-
08 for the transactions described above, the Committee of the Ford VEBA
Plan was required to retain an Independent Fiduciary to manage the
Securities, including the New Notes, held in the Ford Employer Security
Sub-Account.\13\ To satisfy such condition, and in accordance with the
Trust Agreement, the Committee appointed Independent Fiduciary
Services, Inc. (IFS) to represent the interests of the Ford VEBA Plan
for the duration of the Ford VEBA Plan's holding of the New Notes or
any Ford security in the Ford Employer Security Sub-Account of the VEBA
Trust.
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\13\ For a full description of the rights and obligations of the
Independent Fiduciary, see pages 64727-64728 of the Proposed PTE and
pages 14197-14201 of PTE 2010-08.
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In accordance with PTE 2010-08, IFS may also authorize the
disposition, by the trustee of the VEBA Trust, State Street Bank and
Trust Company (the Trustee), of any Securities, including the New
Notes, once IFS 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.
Furthermore, IFS must discharge its duties consistent with the terms of
the Ford VEBA Plan, the Trust Agreement, and the UAW Retiree Medical
Benefits Trust Independent Fiduciary Agreement Relating to Ford Motor
Company, dated as of December 1, 2009, between the VEBA Trust and IFS,
as amended by Amendment Number 1 thereto effective June 25, 2010 (the
Independent Fiduciary Agreement), and any other documents governing the
Securities, such as the Securityholder and Registration Rights
Agreement, and any successors to those agreements.
As the Independent Fiduciary representing the Ford VEBA Plan's
interest in the Ford Employer Security Sub-Account of the VEBA Trust,
IFS has had sole discretionary authority relating to the holding,
ongoing management and disposition of the Securities pursuant to the
Trust Agreement and the Independent Fiduciary Agreement. In that
regard, on April 6, 2010, IFS, on behalf of the Ford VEBA Plan,
completed the sale in a secondary public offering of all 362,391,305
Warrants held by the VEBA Trust. The offering was priced at $5.00 per
Warrant through a modified Dutch auction that took place on March 30,
2010. The aggregate net proceeds to the VEBA Trust from the offering
were approximately $1.78 billion.
IFS states that, after the sale of the Warrants, it began looking
for ways to further reduce the amount of Securities that the Ford VEBA
Plan held, which still equaled as much as 42.8% of the assets in the
Ford Separate Retiree Account. Accordingly, IFS met with
representatives from leading investment banking firms to discuss
possible approaches to the marketing of New Note A and of any shares of
Ford Common Stock that the VEBA Trust might receive from Ford on June
30, 2010 in its annual principal payment on New Note B. IFS states
that, as the June 30th payment date approached, it was aware that
conditions in the credit markets had deteriorated as a result of
uncertainties surrounding European nations' sovereign debt and other
market factors.
According to IFS, it also approached Ford, in order to inform the
company of its desire to monetize the New Notes, particularly New Note
A, and prepare for the possibility of receiving the June 30th payment
of New Note B in Payment Shares. IFS represents that Ford then
indicated that it would be interested in purchasing a substantial
portion of New Note A, provided that Ford could obtain additional
prepayment rights under New Note B. After considerable negotiation,
during which it consulted extensively with its legal counsel, Proskauer
Rose LLP (Proskauer Rose), and its financial advisors, including Sutter
Securities Incorporated (Sutter), IFS states that it entered into an
agreement, dated as of June 25, 2010 (the Note Agreement), by and among
Ford, Ford Motor Credit Company LLC (Ford Credit), and the VEBA Trust,
under which the VEBA Trust would sell New Note A to Ford and Ford
Credit and New Note B would be amended to add provisions permitting
Ford to prepay all or a portion of New Note B, in each case under the
terms and conditions set forth
[[Page 14077]]
therein, described in further detail below.
4. Amendment of PTE 2010-08
Ford, on behalf of IFS, the Trustee, and Ford Credit, has requested
a new exemption that would amend PTE 2010-08, effective as of June 25,
2010, which is the effective date of the Note Agreement. The amendment
would extend the exemptive relief provided under PTE 2010-08 to (a) the
execution of the Note Agreement by and between Ford, Ford Credit, and
the VEBA Trust, acting by and through IFS; and (b) the amendment of New
Note B to provide for a new prepayment right pursuant to the Note
Agreement (the Subject Transactions).
The Applicant states that the VEBA Trust's entering into the Note
Agreement with Ford and Ford Credit and simultaneously amending New
Note B to provide Ford additional prepayment rights in exchange for
Ford's commitment to purchase the outstanding balance under New Note A
and to make the June 30, 2010 scheduled principal payment under New
Note B in cash, could be viewed as the sale or exchange of property
between the Ford VEBA Plan and Ford if the new prepayment right is
deemed to be ``property'' and a ``sale or exchange'' is deemed to occur
for purposes section 406(a)(1)(A) of the Act, which prohibits such
transactions. As a result, the Applicant explains that the Subject
Transactions could be deemed to be a prohibited exchange of property
under section 406(a)(1)(A). To facilitate this relief, the Applicant
has requested that the Covered Transactions set forth in Section I(a)
of PTE 2010-08 be modified to incorporate the Subject Transactions
described above, retroactive to June 25, 2010.
Furthermore, the Applicant is aware that the amendment of New Note
B pursuant to the Note Agreement may constitute a material change of
New Note B, and as such, New Note B, as amended, may not be covered by
PTE 2010-08.\14\ Therefore, the Applicant has requested exemptive
relief retroactively effective to June 25, 2010 for the holding of New
Note B, as amended, by the Ford VEBA Plan. To facilitate this relief,
the Applicant has requested that the definition of ``New Note B'' in
PTE 2010-08 be amended to incorporate the terms of the amendment of New
Note B pursuant to the Note Agreement, also retroactive to June 25,
2010.
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\14\ For a more detailed description of the exemptive relief
granted for the acquisition and holding of New Note B, refer to
pages 64724-64726 of the Proposed PTE and pages 14196-14197 of PTE
2010-08.
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After considering the Applicants' request, the Department has
determined to propose an amendment to PTE 2010-08. The proposed
amendment has been 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 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 proposed amendment is being issued solely by the
Department.
5. The Note Agreement
On June 25, 2010, Ford and Ford Credit entered into the Note
Agreement with the VEBA Trust, acting by and through IFS. The Note
Agreement generally provides for Ford's agreement to purchase New Note
A and pay the June 30, 2010 principal payment of New Note B in cash, in
exchange for the VEBA Trust's agreement to amend New Note B to grant
additional prepayment rights for Ford.
Pursuant to the Note Agreement, Ford made the June 30, 2010 New
Note A principal payment of $249,452,786 to the VEBA Trust in cash, as
scheduled under the terms of such note and without any discount.
Furthermore, the Applicant represents that, in compliance with the Note
Agreement, on June 30, 2010, Ford made the scheduled New Note B
principal payment of $609,950,000 to the VEBA Trust in cash and did not
elect to make such payment in Payment Shares, as otherwise permitted by
the terms of New Note B.\15\
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\15\ As described above, but for the Note Agreement, the value
formula contained in New Note B allows Ford, in a declining market
for its equity, to pay its annual principal payments on New Note B
at a discount if the payments are made in Payment Shares (see page
64722 of the Proposed PTE).
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In addition, on June 30, 2010, following Ford's payment of
principal under the New Notes, Ford and Ford Credit together purchased
the remaining outstanding principal amount of New Note A
($2,962,066,894 on a present value basis) at a price of 98% of such
remaining principal amount.\16\ In this regard, Ford purchased
$1,635,536,281.76 of the present value of the remaining outstanding
principal amount for a price of $1,602,825,556.12 and Ford Credit
purchased $1,326,530,612.24 of the present value of the remaining
outstanding principal amount for a price of $1.3 billion.
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\16\ The Applicant believes such purchase is covered by PTE
2010-08 provided the conditions of the exemption have been
satisfied. The Department concurs. Thus, the proposed amendment
described herein relates solely to New Note B.
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The Applicant further represents that, pursuant to the Note
Agreement, Section 2(g) of New Note B was amended to provide Ford a
three-year right beginning in July 2010 to prepay in cash from time to
time, on the last business day of each month except May and June, all
or a portion of the present value of the outstanding principal amount
of New Note B ($3,622,050,000 on a present value basis as of June 30,
2010, following Ford's required annual payment of principal) \17\ at a
5 percent discount for prepayments made prior to January 1, 2012 and at
a 4 percent discount for prepayments made from January 1, 2012 until
the last business day in July 2013. Under the terms of New Note B, as
amended, Ford must provide 10 days' prior written notice to IFS of its
intention to prepay all or a portion of New Note B.\18\
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\17\ Based on information provided by the Committee to IFS, as
of June 30, 2010, the fair market value of New Note B, as amended,
was $3.016 billion, representing approximately 20.7% of the
aggregate fair market value of the total assets of the Ford VEBA
Plan, or $14.596 billion. According to the Applicant, the VEBA Trust
does not have a recent annual report on which to base the fair
market value of the Securities due to the fact that the assets were
transferred to the VEBA Trust on behalf of the Ford VEBA Plan on
December 31, 2009. As a result, the fair market value is based on
the June 30, 2010 payment date under the New Notes, consistent with
other references to fair market value of assets held by the VEBA
Trust. Similarly, the VEBA Trust does not have a recent financial
statement.
\18\ As described above, prior to the amendment by the Note
Agreement, New Note B, by its terms, permitted Ford, without prior
notice, to prepay such note at 100 percent of the scheduled
prepayment amount on each annual June 30th scheduled principal
payment date.
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6. Fairness Opinion
The Applicant states that IFS received a fairness opinion, dated
June 24, 2010, from Sutter with respect to the transactions. Pursuant
to terms of the Note Agreement, under which Ford agreed to pay 50% (but
not in excess of $250,000) of the fee payable to Sutter for preparation
of the fairness opinion, Ford paid $200,000 of the total fee payable to
Sutter of $400,000 and the VEBA Trust paid $200,000.
7. Other Written Agreements
In addition, in connection with the Note Agreement, Ford and IFS
entered into an Indemnification Agreement dated as of June 25, 2010
pursuant to which Ford may be required to
[[Page 14078]]
indemnify IFS for claims arising from Ford's exercise of its prepayment
right under New Note B, as amended, if an exemption with retroactive
application as of the effective date of the Note Agreement (i.e., June
25, 2010) is not granted. Ford, the VEBA Trust and IFS also entered
into a standard Confidentiality Agreement on June 25, 2010 in order to
facilitate the transaction and the exchange of certain confidential,
nonpublic information related to the transactions contemplated in the
Note Agreement.
8. Determinations of the Independent Fiduciary
As noted above, PTE 2010-08 provides that the Independent Fiduciary
of the Ford VEBA Plan may authorize the disposition, by the Trustee, of
the Securities once it determines 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. In this regard, IFS, as the
Independent Fiduciary, with the assistance of Sutter and Proskauer
Rose, concluded that the Subject Transactions were administratively
feasible, in the interest of, and protective of the Ford VEBA Plan and
its participants and beneficiaries. Furthermore, IFS determined that
reducing the exposure of the Ford Separate Retiree Account to Ford-
specific risk through a fair transaction that would generate cash to be
invested in a more diversified portfolio would be consistent with the
diversification aspect of prudence set forth in section 404 of the Act.
IFS, together with Sutter, ascertained that the price paid for New
Note A (i.e., 98% of par) pursuant to the Note Agreement was at least
equal to the net proceeds the VEBA Trust would likely have achieved
through a sale of New Note A to unrelated third parties. IFS resolved
that there was no way to reliably predict if or when market conditions
would improve to the point of allowing the VEBA Trust to realize a
better price on New Note A. According to IFS, it realized that, under
its original terms, the potential value of New Note A was limited by
Ford's right to prepay all or a portion of New Note A at par each June
30.
Furthermore, IFS found that it would be advantageous to the Ford
VEBA Plan to secure Ford's agreement to make 100% of the scheduled June
30, 2010 principal payment on New Note B in cash. As described above,
under New Note B, Ford could have made its June 30th payment with
Payment Shares in an amount based on Ford Common Stock's VWAP for the
30 trading days ending June 28. IFS determined that, in light of the
downward trend during the preceding 30-trading day period in Ford's
common stock price, the number of shares that Ford could have delivered
would have had a market value (based on the stock's closing price on
June 29) significantly less than the amount otherwise due in cash.
Thus, by guaranteeing that the June 30, 2010, payment on New Note B was
made in cash, IFS effectively saved the VEBA Trust $79 million.\19\ IFS
was also cognizant of the fact that Ford's payment of cash allowed the
VEBA Trust to avoid the transaction costs and market risk associated
with monetizing any Payment Shares that could have been delivered in
lieu of cash.
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\19\ Given the VWAP for the 30 trading days ending June 28, 2010
of $11.35 per share, Ford could have made New Note B's principal
installment payment of $609,950,000 with 53,740,088 shares of Ford
Common Stock with a market value based on the stock's June 29, 2010
closing price of $9.88, of only $530,952,071, a difference of
$79,000,000. This amount fully offsets the 2% discount on the price
that Ford and Ford Credit paid for New Note A.
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IFS also made a determination that the prepayment discount prices
for New Note B payable by Ford during the three-year period ending July
31, 2013 (i.e., 95% of par \20\ through 2011 and 96% of par in 2012 and
2013) would likely be equal to, or greater than, the fair market value
of New Note B. In this regard, IFS considered the possibility that
principal payments of New Note B could be made in Payment Shares with a
market value less than the scheduled principal payment if it were made
in cash and the fact that, by its terms, New Note B is not transferable
without the sole written consent of Ford. Moreover, it was important to
IFS that any prepayment of principal would be made in cash, thus
allowing the VEBA Trust to avoid the transaction costs and market risk
associated with having to monetize shares of Ford Common Stock that
could be delivered in payment of future principal payments.
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\20\ Pursuant to the Note Agreement, ``par'' is calculated by
discounting the ``Prepayment Amount'' (as defined in New Note B)
payable on the then next scheduled ``Payment Date'' (as defined in
New Note B) at a rate per annum of 9% from the then next scheduled
Payment Date back to such prepayment date.
---------------------------------------------------------------------------
IFS also determined that the amendment of New Note B was protective
of the Ford VEBA Plan and its participants and beneficiaries in and of
itself. As described above, the newly provided prepayment options for
New Note B must be in cash and on designated payment dates, and Ford
must give the VEBA Trust advance notice of its intent to make any such
prepayments. By contrast, IFS was aware that the original terms of New
Note B did not require any advance notice of Ford's intent to make a
prepayment, nor did they require that any prepayment must be in cash.
Finally, IFS approved of the amendment, because under the new
prepayment terms no additional prepayment opportunity could be
exercised during the months of May and June, foreclosing the
possibility of Ford's ``gaming'' the VWAP calculation feature of
Payment Share calculation to deliver less value to the VEBA Trust upon
a prepayment.\21\ IFS explains that it did not want to modify the
requirement already in New Note B that a prepayment of principal on
June 30 be at 100% of the outstanding principal. Thus, IFS notes, by
barring Ford from exercising a prepayment right at 95% or 96% once the
VWAP calculation period started, it assured that, at that point, Ford
could only pay the principal installment due on June 30 at a discount
if Ford stock declined during the VWAP calculation period (the discount
would be limited to the result produced by the VWAP calculation).
According to IFS, this also meant that Ford could not use the 95% or
96% discount available outside the VWAP calculation period to make a
discounted prepayment during the calculation period that would have the
effect of reducing the principal installment due in cash at 100% on
June 30.
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\21\ If not for such prohibition, the dates on which such notice
of prepayment at the end of May and June would have fallen are
within the periods in which the VWAP of Ford stock is calculated for
purposes of determining the number of shares Ford would have to pay
on the principal installment immediately following June 30.
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9. Appropriateness of Exemptive Relief
Ford suggests that, if exemptive relief is denied, the VEBA Trust
would lose the economic benefits relating to the prepayment of New Note
B. Ford explains that, under Section 5 of the Note Agreement, if an
exemption for the amendment of New Note B is not granted on or prior to
December 31, 2011, or such later date as agreed to in writing by the
parties, or the Department indicates that the exemption will not be
granted, then the amendment of New Note B will be deemed null and void
from that date. Although Ford recognizes that the parties, on behalf of
the VEBA Trust, could agree in the future to specific prepayment terms,
the Note Agreement and the amendment of New Note B, both of which were
required in order for the VEBA Trust to receive the benefit of the
other provisions of the Note Agreement, created an opportunity for Ford
to prepay New Note B in cash on set dates, at a price certain that IFS
has
[[Page 14079]]
concluded is equal to, or greater than, the fair market value of New
Note B. Thus, according to Ford, a denial of exemptive relief would
decrease the likelihood that Ford would make such cash prepayments on
New Note B and reduce the VEBA Trust's exposure to Ford-specific risk.
Finally, Ford notes that IFS and its advisors negotiated the Note
Agreement on behalf of the VEBA Trust in an adversarial process with
Ford. In doing so, IFS states in its analysis that it was able to
immediately and significantly reduce the VEBA Trust's exposure to Ford-
specific risk and give the VEBA Trust the opportunity to invest the
cash proceeds of approximately $3.76 billion in a diversified
portfolio. According to IFS, but for the Subject Transactions, the only
cash the VEBA Trust was assured of receiving on June 30, 2010 was
approximately $250 million (the amount of the principal payment due on
New Note A), with no assurance of additional cash until June 30, 2011.
10. Description of Revisions to the Operative Language of PTE 2010-08
The proposed amendment generally modifies the operative language of
PTE 2010-08 to take into account the execution of the Note Agreement
and the amendment of New Note B. Section I(a) of PTE 2010-8 has been
amended to add new paragraph (7) as follows: ``The amendment of New
Note B pursuant to the execution of the Note Agreement.'' Thus, the
modification extends the exemptive relief provided by PTE 2010-08 to
the VEBA Trust's execution of the Note Agreement in exchange for Ford's
June 30, 2010 prepayment of New Note A and June 30, 2010 payment of New
Note B in cash.
In the Definitions, the proposed amendment also makes a
modification to the term ``New Note B,'' in relettered Section VII(q),
to include the descriptive clauses ``unless prepaid,'' and ``as amended
by the Note Agreement effective June 25, 2010,'' in order to ensure
that New Note B, as amended by the Note Agreement effective June 25,
2010, is included in the exemptive relief afforded under PTE 2010-08.
Furthermore, Section VII of PTE 2010-08, which sets forth the
Definitions, has been modified by inserting new paragraph (h) which
defines the term ``Ford Credit'' as referred to in the Note Agreement;
inserting new paragraph (k) which defines the term IFS as referred to
in the Note Agreement; inserting new paragraph (r) to define and
describe the term ``Note Agreement'' to reflect changes made to the
operative language of PTE 2010-08; and relettering the remaining
paragraphs, accordingly.
Finally, the Effective Date in new Section VIII is modified to
provide that the exemption, if granted, will be effective as of
December 31, 2009, except for Section I(a)(7), which will be effective
as of June 25, 2010, the effective date of the Note Agreement and the
amendment of New Note B. In addition, the flush language of Section
I(a), (b), (c), and (d) has been modified to omit references to the
December 31, 2009 effective date of exemptive relief in order to avoid
confusion.
Notice to Interested Persons
Notice of the proposed exemption will be mailed by first class mail
to each member of the Class and the Covered Group, as such terms are
defined in the 2009 Settlement Agreement. Such notice will be given
within 21 days of the publication of the notice of pendency in the
Federal Register. The notice will contain a copy of the notice of
proposed exemption, as published in the Federal Register, and a
supplemental statement, as required pursuant to 29 CFR 2570.43(b)(2).
The supplemental statement will inform interested persons of their
right to comment on and/or to request a hearing with respect to the
pending exemption. Written comments and hearing requests are due within
51 days of the publication of the proposed exemption in the Federal
Register.
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) Before an exemption may be granted under section 408(a) of
ERISA, the Department must find that the exemption is administratively
feasible, in the interests of the plan and of its participants and
beneficiaries, and protective of the rights of participants and
beneficiaries of the plan;
(3) The proposed exemption, if granted, will be 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; and
(4) The proposed exemption, if granted, will be subject to the
express condition that the material facts and representations contained
in the application are true and complete, and that the application
accurately describes all material terms of the transaction which is the
subject of the exemption.
Proposed Exemption
Based on the facts and representations set forth in the
application, the Department is considering granting the requested
exemption under the authority of section 408(a) of the Act and in
accordance with the procedures set forth in 29 CFR part 2570, subpart B
(55 FR 32836, 32847, August 10, 1990), as follows:
SECTION I. Covered Transactions
(a) If the exemption is granted, 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 to the following
transactions:
(1) The acquisition by the UAW Ford Retirees Medical Benefits Plan
(the Ford 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;
[[Page 14080]]
(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;
(6) The disposition of the Securities by the Independent Fiduciary;
and
(7) The amendment of New Note B pursuant to the execution of the
Note Agreement.
(b) 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 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) If the exemption is granted, the restrictions of sections
406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA shall not
apply 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) If the exemption is granted, the restrictions of sections
406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA shall not
apply 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 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
[[Page 14081]]
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(cc).
(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(cc).
(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 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
[[Page 14082]]
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 Credit'' means Ford Motor Credit Company LLC, a
Delaware limited liability company and an indirect, wholly owned
subsidiary of Ford.
(i) 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.
(j) 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.
(k) The term ``IFS'' means Independent Fiduciary Services, Inc., a
Delaware corporation, appointed by the Committee to be the Independent
Fiduciary.
(l) The term ``Implementation Date'' means December 31, 2009.
(m) 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.\22\
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\22\ 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.
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(n) 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.
(o) The term ``LLC Interests'' means Ford's wholly-owned interest
in the LLC.
(p) 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.
(q) 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, unless prepaid,
issued by Ford and referred to in the Exchange Agreement, and as
amended by the Note Agreement, effective June 25, 2010.
(r) The term ``Note Agreement'' means the Agreement, dated as of
June 25, 2010 by and among Ford, Ford Credit, and the VEBA Trust,
acting by and through IFS, wherein the VEBA Trust will sell New Note A
to Ford and Ford Credit and New Note B is amended to add provisions
permitting Ford to prepay all or a portion of New Note B, in each case
under the terms and conditions set forth therein.
(s) 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.
(t) 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''.\23\
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\23\ 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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(u) 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.
(v) 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.
(w) 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).
(x) 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).
(y) 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.
(z) The term ``Trust Agreement'' means the trust agreement for the
VEBA Trust.
(aa) The term ``UAW'' means the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America.
(bb) The term ``VEBA'' means the Ford UAW Retirees Medical Benefits
Plan
[[Page 14083]]
(the Ford VEBA Plan) and its associated UAW Retiree Medical Benefits
Trust (the VEBA Trust).
(cc) 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.
(dd) 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.
SECTION VIII. Effective Date
If granted, this proposed amendment to PTE 2010-08 will be
effective as of December 31, 2009, except with respect to Section
I(a)(7), which will be effective as of June 25, 2010.
Signed at Washington, DC, this 9th day of March 2011.
Ivan Strasfeld,
Director of Exemption Determinations, Employee Benefits Security
Administration, U.S. Department of Labor.
[FR Doc. 2011-5912 Filed 3-14-11; 8:45 am]
BILLING CODE 4510-29-P