Grant of Individual Exemption Involving Chrysler LLC, Located in Auburn Hills, MI, 21668-21678 [2010-9607]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 75, Number 79 (Monday, April 26, 2010)]
[Notices]
[Pages 21668-21678]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-9607]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption 2010-12; Exemption Application No. L-
11566]


Grant of Individual Exemption Involving Chrysler LLC, Located in 
Auburn Hills, MI

AGENCY: Employee Benefits Security Administration, U.S. Department of 
Labor.

ACTION: Grant of individual exemption.

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    This document contains an individual 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 New Chrysler 
VEBA Plan and its associated UAW Retiree Medical Benefits Trust (the 
VEBA Trust) (collectively the VEBA).\1\
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    \1\ Because the New Chrysler VEBA Plan will not be qualified 
under section 401 of the Internal Revenue Code of 1986, as amended, 
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.

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DATES: Effective Date: This exemption is effective as of June 10, 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 October 5, 2009, the Department published 
a notice of proposed individual exemption 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 the Act (the Notice, or 
proposed exemption).\2\ The proposed exemption was requested in an 
application filed by New Chrysler, the successor to the assets of 
Chrysler LLC, pursuant to section 408(a) of the Act 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 Department 
to issue exemptions of the type requested to the Secretary of Labor. 
Accordingly, this final exemption is being issued solely by the 
Department.
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    \2\ See Notice of Proposed Individual Exemption Involving 
Chrysler LLC, Located in Auburn Hills, MI, 74 FR 51182 (October 5, 
2009).
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Background

    On March 30, 2008, Chrysler LLC and the International Union, United 
Automobile, Aerospace and Agricultural Implement Workers of America 
(the UAW), along with respective class representatives (Class Counsel) 
of plaintiff class members in UAW v. Chrysler LLC (the English Case) 
entered into a Settlement Agreement (the English Settlement Agreement) 
providing, among other things, that Chrysler LLC transfer 
responsibility and funding for retiree health care benefits to a 
voluntary employees' beneficiary association (a VEBA).\3\ The English 
Case had been brought to contest Chrysler LLC's asserted right to 
unilaterally modify the retiree health benefits under the Chrysler 
Health Care Program for Hourly Employees. Under the English Settlement 
Agreement, Chrysler LLC's obligation to provide post-retirement medical 
benefits to the ``Class'' and ``Covered Group'' would be terminated, 
and instead, Chrysler LLC would transfer certain assets to the VEBA 
Trust to provide the Class and Covered Group with post-retirement 
medical benefits under the New Chrysler VEBA Plan.\4\
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    \3\ See, International Union, United Automobile, Aerospace and 
Agricultural Implement Workers of America, et al. v. Chrysler, LLC, 
Civ. Act. No. 2:07-cv-14310 (E.D. Mich, complaint filed October 11, 
2007).
    \4\ The New Chrysler VEBA Plan provides retiree medical benefits 
to members of the ``Class'' and the ``Covered Group'' as defined in 
the Settlement Agreement and in Section VI. of this exemption.
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    As a result of deteriorating economic conditions and a growing 
liquidity crisis, on April 30, 2009, Chrysler LLC and 26 of its 
domestic direct and indirect subsidiaries filed a bankruptcy action 
under chapter 11 of Title 11 of the United States Code (the Bankruptcy 
Code) with the Bankruptcy Court and announced a plan for a partnership 
with Italian automaker Fiat S.p.A. (Fiat).\5\ On June 10, 2009, 
Chrysler LLC completed the sale under Section 363 of the Bankruptcy 
Code (a Section 363 Sale) of substantially all of its assets to an 
entity called New Carco Acquisition LLC (later renamed Chrysler Group 
LLC, and hereinafter referred to as ``New Chrysler''), a Delaware 
limited liability company formed by Fiat North America LLC, a 
subsidiary of Fiat.\6\ As discussed in greater detail in the proposed 
exemption, Fiat will initially own a minority 20% stake of New Chrysler 
with the option of acquiring additional equity if certain milestones 
are met.
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    \5\ In light of the Bankruptcy Proceeding, the English 
Settlement Agreement is of no further force or effect.
    \6\ In re Chrysler LLC, et al., Case No. 09B 50002 (Document 
3073), slip op. (Bankr. S.D.N.Y. May 31, 2009).
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    Through the Bankruptcy proceeding, New Chrysler acquired certain 
core assets from Chrysler LLC in exchange for the assumption of certain 
liabilities of Chrysler LLC and a cash payment to Chrysler LLC pursuant 
to the Master Transaction Agreement, dated as of April 30, 2009 as 
subsequently amended (collectively with other ancillary and supporting 
documents, the ``MTA''). Following the Bankruptcy proceeding and the 
sale of the assets from Chrysler LLC to New Chrysler, initial ownership 
of New Chrysler will be broken into two classes of membership 
interests, Class A (800,000 interests) and Class B (200,000 interests). 
Fiat will initially own the 200,000 Class B membership interests, 
representing 20% of the voting and economic interest of New Chrysler; 
the United States Treasury Department (the Treasury Department) will 
own 98,461 Class A membership interests; the Canadian Government will 
together own 24,615 Class A membership interests, and the VEBA Trust 
will own 676,924 Class A membership interests (the Class A membership 
interests initially owned by the Trust are referred to herein as the 
``Shares''), in each case, subject to the applicable terms and 
conditions described below. In addition, after the Sale, New Chrysler 
became the new legal entity, Chrysler Group LLC.
    The assets in the Section 363 Sale were sold free and clear of 
liens, claims,

[[Page 21669]]

interests, and encumbrances. In addition, the claims of Chrysler LLC's 
unsecured creditors were not assumed by New Chrysler through the 
Bankruptcy proceeding unless expressly provided for pursuant to the 
MTA. Among the claims that were not assumed by New Chrysler, was the 
obligation owed by Chrysler LLC to provide retiree medical benefits 
pursuant to the Memorandum of Understanding Post-Retirement Medical 
Care, dated October 12, 2007, between Chrysler LLC and the UAW and the 
Memorandum of Understanding of Post-Retirement Medical Care, dated 
April 29, 2009, between Chrysler LLC and the UAW (together, the 
``MOUs''), as well as the English Settlement Agreement.
    The UAW asserted during the Bankruptcy proceeding, and New Chrysler 
denied, that New Chrysler was bound by the MOUs as a successor to 
Chrysler LLC and that it was, therefore, responsible for providing the 
retiree medical benefits contemplated. After engaging in a series of 
negotiations, New Chrysler and the UAW agreed to enter into an 
additional settlement agreement that was presented to the Bankruptcy 
Court for approval once notice was provided to affected parties. 
Pursuant to the UAW Retiree Settlement Agreement dated June 10, 2009, 
between Chrysler Group LLC and the UAW (the Modified Settlement 
Agreement), New Chrysler agreed to provide retiree medical benefits to 
a defined group of current UAW retirees who were formerly employed by 
Chrysler LLC as well as a defined group of current active employees 
(once retired) of New Chrysler who are covered under a collective 
bargaining agreement between New Chrysler and the UAW (collectively, 
the Covered Group).
    Ultimately, the Modified Settlement Agreement was approved by the 
Bankruptcy Court and the initial steps towards implementing the 
transactions that were at the heart of this exemption began to occur as 
contemplated. Specifically, upon the ``Implementation Date,'' the 
retiree medical benefit obligations to the Covered Group became fixed 
and such obligations were transferred to the New Chrysler VEBA Plan and 
the VEBA Trust. The VEBA Trust was established and maintained by an 
independent committee (the Committee). Moreover, the Modified 
Settlement Agreement provided that the New Chrysler VEBA Plan was to be 
funded exclusively through the VEBA Trust. Accordingly, the VEBA Trust 
would be solely responsible for the payment of post-retirement medical 
benefits to members of the Class and Covered Group on and after January 
1, 2010.
    Under the Modified Settlement Agreement, New Chrysler became 
obligated to contribute to the VEBA Trust, on behalf of the New 
Chrysler VEBA Plan, (1) the Shares, which represent sixty-seven and 
sixty-nine one-hundredths percent (67.69%) of the fully diluted 
ownership of New Chrysler as of the consummation of the Section 363 
Sale; and (2) a note issued by New Chrysler with a principal amount of 
$4,587,000,000 and an implicit interest rate of nine percent (9%) (the 
Note), payable in fixed annual installments pursuant to the following 
schedule:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
1...........................  Payment of $315       July 15, 2010.
                               million.
2...........................  Payment of $300       July 15, 2011.
                               million.
3...........................  Payment of $400       July 15, 2012.
                               million.
4...........................  Payment of $600       July 15, 2013.
                               million.
5...........................  Payment of $650       July 15, 2014.
                               million.
6...........................  Payment of $650       July 15, 2015.
                               million.
7...........................  Payment of $650       July 15, 2016.
                               million.
8...........................  Payment of $650       July 15, 2017.
                               million.
9...........................  Payment of $823.8     July 15, 2018.
                               million.
10..........................  Payment of $823.8     July 15, 2019.
                               million.
11..........................  Payment of $823.8     July 15, 2020.
                               million.
12..........................  Payment of $823.8     July 15, 2021.
                               million.
13..........................  Payment of $823.8     July 15, 2022.
                               million.
14..........................  Final Payment of      July 15, 2023.
                               $827.1 million.
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    The Shares and the Note (together, the ``New Chrysler Securities'') 
were contributed to the VEBA Trust on June 10, 2009, which was the 
closing date of the Section 363 Sale. In addition, New Chrysler was 
obligated, under the Modified Settlement Agreement, to cause the assets 
held under a pre-existing internal Chrysler LLC VEBA (the Internal 
VEBA), attributable to the UAW retirees covered under the Modified 
Settlement Agreement and valued at $1,589,500,000 as of March 31, 2009, 
to be transferred to the VEBA Trust within 10 days after January 1, 
2010.

Written Comments

    The Department invited all interested persons to submit written 
comments and/or requests for a public hearing with respect to the 
Notice on or before November 19, 2009. Due to the failure by the 
Applicant to notify a small number of interested persons of the Notice, 
the Department extended the comment period until December 23, 2009.
    During the comment period, the Department received ninety-two (92) 
telephone inquiries and forty (40) written comments from interested 
persons on the proposed exemption. Of the written comments received, 
the majority were submitted by participants in the New Chrysler VEBA 
Plan. In addition, counsel for the Committee and the Independent 
Fiduciary submitted 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 New Chrysler'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 New 
Chrysler Plan's participants and beneficiaries. Furthermore, the 
Department received written comments from the Committee and the 
Independent Fiduciary 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 the Department to address the issues raised 
therein.

Participant Comments

    The telephone inquiries received by the Department from 
participants in the New Chrysler VEBA Plan related to the commenters' 
difficulty in understanding the Notice or the effect of the exemption 
on the commenters' benefits, including

[[Page 21670]]

the general concern that the Modified Settlement Agreement is too 
advantageous to New Chrysler and would not ensure that benefit levels 
for participants will remain affordable.
    With respect to the written comments submitted by interested 
persons, the majority of commenters neither supported nor opposed the 
exemption but instead raised other concerns that are beyond the scope 
of this exemption. Many such comments related to the perceived unfair 
treatment of retirees within the UAW and Chrysler LLC; a lack of 
participation afforded to retirees in the process of approving the 
settlements between Chrysler LLC and the UAW; concerns about the rising 
costs of healthcare; and the perceived government favoritism of the car 
companies at retirees' expense.
    Several written comments and callers supported the adoption of the 
exemption. In addition, New Chrysler submitted a comment in support of 
the application and confirmed that New Chrysler effectuated the asset 
transfers to the VEBA Trust in accordance with the terms of the 
Modified Settlement Agreement. Specifically, New Chrysler represented 
that, pursuant to the Modified Settlement Agreement and under the terms 
of the Asset and Equivalent Transfer Agreement between New Chrysler and 
the UAW dated January 1, 2010, New Chrysler transferred $1.97 billion 
in cash and marketable securities to the VEBA Trust on January 1, 
2010.\7\
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    \7\ Assets held under the Internal VEBA plus the earnings 
thereon. These assets are in addition to the Shares and Note issued 
by Chrysler, which were contributed on June 10, 2009.
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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 Summary of Facts 
and Representations (the ``Representations,'' and individually, a 
``Representation''). 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 in the right column 
on page 51187 of the proposed exemption, the Representations state that 
the VEBA Trust will have three separate retiree accounts (the Separate 
Retiree Accounts) designed to segregate payments attributable to New 
Chrysler, General Motors (GM), and Ford Motor Company (Ford), pursuant 
to the terms of each company's settlement agreement with the UAW and 
each respective class. As described in the middle column of page 51190 
of the proposed exemption, 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 Brock Securities LLC (Brock) as the 
Independent Fiduciary with respect to the Securities, and has currently 
retained separate independent fiduciaries with respect to the GM and 
Ford 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 New Chrysler 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.\8\
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    \8\ 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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    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 
Securities and Exchange Commission). 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.
    According to the Committee, Chrysler, Ford, 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.\9\ 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

[[Page 21671]]

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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    \9\ 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, in the middle column on 
page 51190 of the proposed exemption, the aforementioned Representation 
should be revised, to replace the text, 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, on page 51190 of the 
proposed exemption, the representation be modified to contain 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 Committee also requests that the Department clarify that, in 
all circumstances, the restrictions applicable to investment banks 
would not apply in the event that the Independent Fiduciary elects to 
participate in a broader offering of Securities by New Chrysler and 
such offering is underwritten by an investment bank selected by New 
Chrysler (see, e.g., Section 3.1(h) of the Registration Rights 
Agreement), rather than by the Independent Fiduciary.
    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.\10\ Furthermore, 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.
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    \10\ 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.
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    Lastly, the Department concurs with the Committee that the 
restrictions applicable to investment banks would not apply in the 
event that the Independent Fiduciary elects to participate in a broader 
offering of Securities by New Chrysler and such offering is 
underwritten by an investment bank selected by New Chrysler (see, e.g., 
Section 3.1(h) of the Registration Rights Agreement), rather than by 
the Independent Fiduciary. In the Department's view, the likelihood of 
conflicts is lower than in a situation where an offering of New 
Chrysler Securities is underwritten by an investment bank retained to 
sell the securities of one or more of the other Separate Retiree 
Accounts, because the interests of the New Chrysler VEBA Plan appear to 
align more closely with the interests of New Chrysler in the marketing 
and selling of the underwritten securities. Therefore, subject to the 
limitations above, the Department concurs with the Committee's 
requested clarifications.
    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, in the middle column on page 51190 of the 
proposed exemption, the preamble 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 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

[[Page 21672]]

raise conflict issues. For instance, the Committee notes that an 
investment bank may recommend that the VEBA Trust sell stock of New 
Chrysler in the market on a particular day, but the Independent 
Fiduciary determines that it would be more convenient to wait 24 hours. 
According to the Committee, it is questionable whether the Independent 
Fiduciary's decision constitutes a deviation. Similarly, the Committee 
notes that an investment bank may develop a preliminary valuation of 
certain New Chrysler Securities of $xx, and after thorough 
consideration, the Independent Fiduciary may determine that such 
securities are actually worth $yy. In such event, the Committee 
suggests 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 explains 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 the Act in carrying out their respective 
responsibilities. There may be circumstances where the Independent 
Fiduciary has a responsibility under the Act 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.

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, in the middle column on page 51190, and incorporated 
into Sections II(b)(i) through (iii) on page 51192 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)(i) through (iii) 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, in the middle column on page 51190 of the proposed 
exemption, the Representations provide 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)(i) through (iii) 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 51193 of the proposed exemption, Section II(e) 
provides that ``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.'' 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 New Chrysler 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 New Chrysler VEBA 
Plan will not, by itself, make the investment banker a fiduciary of the 
New Chrysler 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 the Act 
and the regulations promulgated thereunder.
    3. Obligation of the Committee to Review the Investment Banker 
Reports. As described in the middle column on page 51190 of the 
proposed exemption, the Representations describe several safeguards 
that are provided to reduce the risk of conflict in the event that a 
single independent fiduciary is retained with respect to more than one 
Separate Retiree 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)(i)(2) of the 
proposed exemption, which provides that a conflicts monitor appointed 
by the Committee ``regularly review the * * * investment banker reports 
* * * to identify the presence of factors that could lead to a 
conflict.''
    After conducting interviews with candidates for the Independent

[[Page 21673]]

Fiduciary position, the Committee has raised a concern regarding the 
conflicts monitor's duties. The Committee has requested confirmation 
that Section II(b)(i)(2) does not independently impose any obligation 
on the Committee to provide (or request) ``investment banker reports'' 
as a matter of course (i.e., beyond the Act'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)(i)(2) 
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 the Act's general fiduciary 
requirements.

The Independent Fiduciary's Comment

    The Independent Fiduciary, Brock, 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. Brock's comment relates to the effects of a 
potential corporate transaction involving New Chrysler, including a 
change in corporate structure of the company and the VEBA Trust's 
potential acquisition of additional employer securities pursuant to 
future corporate reorganizations and other ministerial changes to 
certain definitions in Section VI of the proposed exemption. In 
addition, Brock suggests certain revisions to the Representations meant 
to correct or clarify information presented in the proposed exemption.
A. Clarifications to the Operative Language
    1. Change in New Chrysler's Corporate Structure. As described in 
the Representations, in the far right column on page 51184 of the 
proposed exemption, New Chrysler is a Delaware limited liability 
company that was formed by Fiat North America LLC, a subsidiary of 
Fiat, in order to receive the assets of Chrysler LLC, generally free 
and clear from all liens in connection with the Section 363 Sale. Brock 
notes that, in the event of consolidation, merger, sale, conveyance or 
public offering of New Chrysler, the company may no longer take the 
form of a Delaware limited liability company. Therefore, Brock suggests 
that Section VI(i), on page 51195 of the proposed exemption, should be 
amended to read in its entirety as follows:

    The term ``New Chrysler'' shall mean a Delaware Limited 
Liability Company formed by Fiat North America LLC, a subsidiary of 
Fiat S.p.A., a manufacturer of automobiles and automotive parts in 
Turin, Italy, and its successors and assigns. New Chrysler is the 
Company that acquired certain assets and liabilities from Chrysler 
LLC pursuant to the Section 363 Sale.

    The Department concurs with Brock that in the event of a 
consolidation, merger, sale, conveyance or public offering of New 
Chrysler, the company may no longer take the form of a Delaware limited 
liability company. Accordingly, the Department has made changes to the 
Definitions in Section VI(j) of the final exemption to clarify that the 
term ``New Chrysler'' includes such entity's successors and assigns in 
the event of a reorganization, restructuring, recapitalization, merger, 
or similar corporate transaction.
    2. Effect of Corporate Transaction. Section I(a), on page 51192 of 
the proposed exemption, provides exemptive relief for the acquisition, 
holding, and disposition by the New Chrysler VEBA Plan and the VEBA 
Trust of the Shares and the Note transferred by New Chrysler and 
deposited in the Chrysler Employer Security Sub-Account of the Chrysler 
Separate Retiree Account of the VEBA Trust.
    Brock notes that, in the event of a consolidation, merger, sale or 
conveyance of New Chrysler, its corporate form may be reclassified and 
its equity interests may no longer fall under the current definition of 
``Shares'' provided in Section VI(k) of the proposed exemption. In such 
event, the VEBA Trust may no longer hold ``Shares,'' as defined by the 
proposed exemption. Furthermore, Brock notes that, pursuant to the 
Shareholders Agreement by and Among Fiat North America LLC, the U.S. 
Department of the Treasury, the VEBA Trust, 7169931 Canada Inc. 
(Canada), and the VEBA Holdcos Signatory Thereto (the Shareholders 
Rights Agreement), Brock, as the Independent Fiduciary, will have 
limited input in the terms and execution of any corporate transaction. 
Therefore, in order to continue to provide exemptive relief, Brock 
suggests that the definition of Shares should be modified to take into 
account the effect of a future change in New Chrysler's corporate form. 
Accordingly, Brock requests that Section VI(k) of the proposed 
exemption be amended in its entirety to read as follows:

    The term ``Shares'' means the membership interests issued by New 
Chrysler, including any membership interest, partnership interest, 
shares of stock or other equity resulting from an adjustment, 
substitution, conversion, or other modification of New Chrysler 
Shares in connection with a reorganization, restructuring, 
recapitalization, merger, or similar corporate transaction, provided 
that each holder of Shares is treated in an identical manner.

    In response to the above referenced comment, the Department 
confirms that the proposed exemption provides exemptive relief for 
other equity acquired as a result of an adjustment, substitution, 
conversion, or other modification of Shares in connection with a 
restructuring, recapitalization, merger or similar corporate 
transaction involving New Chrysler. Accordingly, the Department has 
revised the definition of ``Shares'' in Section VI(o) of the final 
exemption, and takes note of the foregoing clarifications and updates 
to the Representations.
    3. Conforming Relief Requested. Brock requests that, to the extent 
the final exemptive relief granted to the Ford or GM separate retiree 
accounts is equally applicable to the facts and circumstances covered 
by the proposed exemption for New Chrysler, any such relief be granted 
with respect to the exemption for New Chrysler as well.
    The Department concurs with Brock's request to conform the 
exemptive relief granted to Ford or GM to the extent that such relief 
is equally applicable to the facts and circumstances covered by the 
proposed exemption for New Chrysler.
B. Modifications to Summary of Facts and Representations
    1. Dates of Call Option Exercise Period. In the middle column on 
page 51186 of the proposed exemption, the Representations describe 
certain mechanisms for the VEBA Trust to sell the Shares to other 
parties prior to New Chrysler becoming a publicly traded company. The 
Representations provide that, in accordance with the Call Option 
Agreement, dated as of June 10, 2009, by and among Fiat, the VEBA 
Trust, Canada, and the Treasury Department (the Call Option Agreement), 
Fiat has the option to purchase from the VEBA Trust up to 40% of the 
VEBA Trust's equity interests in New Chrysler, between July 1, 2012 and 
June 1, 2016.

[[Page 21674]]

    Brock suggests that, on page 51186 of the proposed exemption, 
``June 1, 2016'' should be corrected to read ``June 30, 2016'', which 
is the date set forth in the definition of ``Call Option Exercise 
Period'' in the Call Option Agreement. The Department acknowledges the 
fact that the ``Call Option Exercise Period'' means that period 
beginning on July 1, 2012 and ending on June 30, 2016. As such, the 
Department takes note of the foregoing clarifications and updates to 
the Representations.
    2. Description of Equity Repurchase Rights. The Representations, in 
the left column on page 51187 of the proposed exemption, provide that, 
in reference to the Treasury Department's repurchase right (a 
Repurchase Right) under the Equity Recapture Agreement, dated June 10, 
2009 between the VEBA Trust and the Treasury Department (the Equity 
Recapture Agreement), ``This right expires upon the earlier of its 
exercise and the VEBA Trust's surrender of all remaining New Chrysler 
interests held by the VEBA Trust to the Treasury Department.''
    However, Brock notes that, under Section III.B of the Equity 
Recapture Agreement, it is Fiat's Call Option, not the Treasury 
Department's, that expires ``upon the earlier of the exercise of the 
Repurchase Right and the surrender to the Holder of all remaining VEBA 
Interests held by VEBA Holdco or VEBA, as applicable.'' To clarify the 
rights of the parties under the Equity Recapture Agreement, Brock 
proposes that the sentence from page 51187 of the proposed exemption 
quoted above, and the sentence preceding it, be amended to read as 
follows:

    In addition, the Treasury Department has the right, at any time, 
to purchase all outstanding Shares held by the VEBA Trust for an 
amount equal to the Threshold Amount less the amount of any proceeds 
already received by the VEBA Trust in respect of any of the Shares 
(the ``Repurchase Right''). The Repurchase Right terminates 
following any payment on the December 31, 2018 interim settlement 
date, as described below, under the Equity Recapture Agreement, or 
upon the payment of the Threshold Amount Excess, if earlier. In 
addition, the Equity Recapture Agreement provides that the Fiat Call 
Option expires upon the earlier of the exercise of the Repurchase 
Right and the VEBA Trust's surrender of all remaining New Chrysler 
interests held by the VEBA Trust to the Treasury Department.

    3. Voting of Shares by the Independent Fiduciary. On page 51189 of 
the proposed exemption, in the middle column, the Representations 
provide the following:

    Additionally, under the Shareholder Rights Agreement, the New 
Chrysler VEBA Plan must vote its Membership Interest in New Chrysler 
in accordance with the recommendations of the independent directors 
of New Chrysler, in proportion to those recommendations. Therefore, 
the Independent Fiduciary will have no responsibility for the voting 
of the Membership Interests.

    Brock notes that Section 2.4 of the Shareholders Rights Agreement 
provides that the VEBA Trust will vote its interests in New Chrysler in 
accordance with the recommendations of the independent directors, but 
subject to certain exceptions with respect to major decisions set forth 
in the Amended and Restated Limited Liability Company Operating 
Agreement of Chrysler Group LLC, dated and effective as of June 10, 
2009 (the New Chrysler Operating Agreement). Brock points out that 
Section 10.7 of the New Chrysler Operating Agreement provides that if 
Fiat owns more than 50% of the membership interests of New Chrysler, 
the Board of Directors shall not take certain major decisions without 
the prior written consent of each non-Fiat member affected thereby, if 
such non-Fiat member would be adversely affected by such major decision 
disproportionately to Fiat. According to Brock, non-Fiat members would 
include the VEBA Trust.
    As such, Brock recommends that the language from page 51189 of the 
proposed exemption quoted above, beginning with ``Therefore, the 
Independent Fiduciary* * *'' be replaced with the following, to reflect 
the exception with respect to major decisions:

    Therefore, the Independent Fiduciary will have no responsibility 
for the voting of the membership interests; provided, however, that 
with respect to certain major decisions, as discussed in Section 
10.7 of the Operating Agreement, under certain circumstances New 
Chrysler will not take such major decisions without the prior 
written consent of non-Fiat holders once Fiat owns more than 50% of 
the membership interests in New Chrysler.

    Brock also notes that in two instances in the proposed exemption, 
``membership interests'' is capitalized and should be made lower case. 
The Department takes note of the foregoing clarifications and updates 
to the Representations.
    4. Fiat's Right of Appointment of Directors. The Representations on 
page 51190 of the proposed exemption, in the right column, provide that 
``Fiat will have the right to appoint four (4) directors once it 
obtains an aggregate ownership interest of thirty-five percent (35%) or 
more in New Chrysler and the Final Director will resign once Fiat 
obtains the right to appoint a fourth director.'' Brock notes that, 
according to Section 5.3 of the New Chrysler Operating Agreement, 
``[f]or so long as Fiat remains a Member and the Fiat Group has a Total 
Interest exceeding fifty percent (50%), Fiat shall have the right to 
designate up to five Directors to the Board of Directors to serve as 
Directors.'' Accordingly, Brock recommends adding a more complete 
description of Fiat's rights under Section 5.3 of the New Chrysler 
Operating Agreement by inserting, after the sentence from the proposed 
exemption reproduced above, the following:

    Furthermore, Fiat will have the right to appoint five (5) 
directors once it obtains an aggregate ownership interest of fifty 
percent (50%) or more in New Chrysler, and the remaining director 
appointed by the Treasury Department who is not an independent 
director will resign once Fiat obtains the right to appoint a fifth 
director.

    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 October 5, 2009 at 74 FR 51182. 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-11566) 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 https://

[[Page 21675]]

www.regulations.gov, at Docket ID Number: EBSA-2009-0025.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act does not relieve a fiduciary or other 
party in interest from certain other provisions of the Act, including 
any prohibited transaction provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which, among other things, require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act;
    (2) In accordance with section 408(a) of the Act, the Department 
makes the following determinations:
    (a) The exemption is administratively feasible;
    (b) The exemption is in the interests of the New Chrysler VEBA Plan 
and of its participants and beneficiaries; and
    (c) The exemption is protective of the rights of participants and 
beneficiaries participating in the New Chrysler VEBA Plan; and
    (3) The exemption is supplemental to, and not in derogation of, any 
other provisions of the Act, 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 the Act and in accordance with the procedures set 
forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 
1990).

Section I. Covered Transactions

    (a) The restrictions of sections 406(a)(1)(A), (B), and (E), 
406(a)(2), 406(b)(1) and (2), and 407(a) of the Act shall not apply, 
effective June 10, 2009, to:
    (1) The acquisition by the UAW Chrysler Retiree Medical Benefits 
Plan (New Chrysler VEBA Plan) and its associated UAW Retiree Medical 
Benefits Trust (the VEBA Trust) of 676,924 New Chrysler Shares (the 
Shares) and a note issued by New Chrysler with a principal amount of 
$4,587,000,000 and an implicit interest rate of nine percent (9%) (the 
Note) transferred by New Chrysler and deposited in the Chrysler 
Employer Security Sub-Account of the Chrysler Separate Retiree Account 
of the VEBA Trust;
    (2) The holding of the Shares and the Note by the New Chrysler VEBA 
Plan in the Chrysler Employer Security Sub-Account of the Chrysler 
Separate Retiree Account of the VEBA Trust;
    (3) The disposition of the Shares and the Note; and
    (4) The sale by the New Chrysler VEBA Plan to Fiat S.p.A (Fiat) of 
Shares pursuant to the exercise by Fiat of the Call Option Agreement 
and/or the First Offer Right described in the New Chrysler Operating 
Agreement;
    (b) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D), 
406(b)(1) and 406(b)(2) of the Act shall not apply, effective June 10, 
2009, to:
    (1) The payment by New Chrysler, the Existing Internal VEBA, the 
New Chrysler VEBA Plan, or any affiliate of New Chrysler, 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; and
    (2) The reimbursement by New Chrysler, the Existing Internal VEBA, 
the New Chrysler VEBA Plan, or any affiliate of New Chrysler, 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.
    (c) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D), 
406(b)(1) and 406(b)(2) of the Act shall not apply, effective June 10, 
2009, to the return to New Chrysler of assets deposited or transferred 
to the New Chrysler VEBA Plan by mistake, plus interest.

Section II. Conditions Applicable to Section I(a)

    (a) The Committee appoints a qualified Independent Fiduciary to act 
on behalf of the New Chrysler VEBA Plan for all purposes related to the 
transfer of the Shares and Note to the Plan for the duration of the 
Plan's holding of the Shares and Note, except for the voting of the 
Shares. Such Independent Fiduciary will have sole discretionary 
responsibility relating to the holding, disposition and ongoing 
management of the Shares and the Note. The Independent Fiduciary will 
determine, before taking any of the actions regarding the Shares and 
the Note, that each such action or transaction is in the interest of 
the New Chrysler 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 General Motors Retiree Medical Benefits 
Plan and/or the UAW Ford Retiree Medical Benefits Plan) with respect to 
employer securities deposited into the 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:
    (i) The Committee appoints a ``conflicts monitor'' to: (1) Develop 
a process for identifying potential conflicts; (2) 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 (3) further question the 
Independent Fiduciary when appropriate.
    (ii) 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.
    (iii) 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 conflict.
    (c) The Independent Fiduciary authorizes the Trustee of the New 
Chrysler VEBA Plan to dispose of the Shares and the Note only after the 
Independent Fiduciary determines, at the time of the transaction, that 
the transaction is feasible, in the interest of the New Chrysler VEBA 
Plan, and protective of the participants and beneficiaries of the Plan.
    (d) The Independent Fiduciary negotiates and approves on behalf of 
the New Chrysler VEBA Plan any transactions between the New Chrysler 
VEBA Plan and any party in interest involving the Shares or the Note 
that may be necessary in connection with the subject transactions 
(including but not limited to the registration of the securities 
contributed to the New Chrysler 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 New Chrysler VEBA Plan, the Trust Agreement, the 
Independent

[[Page 21676]]

Fiduciary Agreement, and any other documents governing the employer 
securities, such as the registration rights agreement.
    (g) The New Chrysler VEBA Plan incurs no fees, costs or other 
charges (other than described in the VEBA Trust Agreement and the 
Modified Settlement Agreement) as a result of the transactions exempted 
herein.
    (h) The terms of any transaction exempted herein are no less 
favorable to the New Chrysler VEBA Plan than the terms negotiated at 
arms' length under similar circumstances between unrelated parties.

Section III. Conditions Applicable to Section I(b)

    (a) The Committee and the New Chrysler 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 VEBA Trust's independent auditor. The results of this 
review will be made available to New Chrysler.
    (b) New Chrysler and their respective plans' third party 
administrator(s) will review the benefits paid during the transition 
period and determine the dollar amount of mispayments made, subject to 
the review of the respective plans' 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 OPEB discount 
rate.\11\
---------------------------------------------------------------------------

    \11\ OPEB means Other Post-Employment Benefits, and typically 
includes retiree healthcare benefits, life insurance, tuition 
assistance, day care, legal services and the like. The OPEB discount 
rate is a rate used to discount projected future OPEB benefits 
payment cash flows to determine the present value of the OPEB 
obligation.
---------------------------------------------------------------------------

    (e) If there is a dispute as to the amount of a reimbursement 
requested, the parties will enter into an alternative dispute 
resolution procedure as defined in section VI.(b) of this exemption.

Section IV. Conditions Applicable to Section I(c)

    (a) New Chrysler 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 New Chrysler VEBA Plan was entitled.
    (b) The claim is made within the Verification Time Period, as 
defined in Section VI(s) of this exemption.
    (c) Interest on any mistaken deposit or transfer will accrue from 
the date of the mistaken payment to the date of the repayment.
    (d) Interest will be determined using the applicable OPEB discount 
rate.
    (e) If there is a dispute as to the amount of a mistaken payment, 
the parties will enter into an alternative dispute resolution procedure 
as defined in Section VI(b) of this exemption.

Section V. Conditions Applicable to Section I(a),(b),(c)

    (a) The Committee and the Independent Fiduciary maintain for a 
period of six (6) years from the date the Note or any Shares are 
transferred to the New Chrysler VEBA Plan the records necessary to 
enable the persons described in paragraph (b) below to determine 
whether conditions of this exemption have been met, except 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 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 the Act, the records referred to in paragraph (a) above 
shall be unconditionally available at their customary location during 
normal business