Individual Exemption Involving General Motors Company, General Motors Holdings LLC, and General Motors LLC, Located in Detroit, MI, 62879-62889 [2010-25686]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 75, Number 197 (Wednesday, October 13, 2010)]
[Notices]
[Pages 62879-62889]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-25686]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Prohibited Transaction Exemption No. 2010-30; Application No. L-11568]


Individual Exemption Involving General Motors Company, General 
Motors Holdings LLC, and General Motors LLC, Located in Detroit, MI

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

ACTION: Grant of individual exemption.

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SUMMARY: This document contains an exemption from certain prohibited 
transaction restrictions of the Employee Retirement Income Security Act 
of 1974 (the Act or ERISA). The transactions involve the UAW GM Retiree 
Medical Benefits Plan (the New UAW-GM Retirees Plan) and its associated 
UAW Retiree Medical Benefits Trust (the VEBA Trust) (collectively the 
New Plan).\1\ The exemption will affect the New Plan, and its 
participants and beneficiaries.
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    \1\ In the notice of proposed exemption published with respect 
to the exemption granted herein (74 FR 47963, September 18, 2009), 
the Department referred to UAW GM Retiree Medical Benefits Plan as 
``the New GM VEBA Plan'' and collectively referred to the New GM 
VEBA Plan and the VEBA Trust as the ``VEBA.'' At the request of the 
Applicant, the Department has substituted the terms ``the New UAW-GM 
Retirees Plan'' and ``the New Plan,'' respectively, therefor.

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DATES: Effective Date: This exemption is effective as of July 10, 2009.

SUPPLEMENTARY INFORMATION: On September 18, 2009, the Department 
published in the Federal Register 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 ERISA (the Notice).\2\ The proposed exemption was requested in an 
application filed by General Motors Corporation (Old GM) 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). Subsequent to 
the submission of its application, Old

[[Page 62880]]

GM sold substantially all of its assets to General Motors Company (New 
GM).\3\
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    \2\ 74 FR 47963.
    \3\ Effective December 31, 1978, section 102 of Reorganization 
Plan No. 4 of 1978 (43 FR 47713, October 17, 1978), transferred the 
authority of the Secretary of the Treasury to issue exemptions of 
the type requested to the Secretary of Labor. Accordingly, this 
final exemption is being issued solely by the Department.
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Background

    On July 5, 2009, the U.S. Bankruptcy Court for the Southern 
District of New York approved a sale under Section 363 of Title 11 of 
the U.S. Code by which New GM succeeded to certain assets and 
liabilities of Old GM (the Section 363 Sale). The bankruptcy court also 
approved an agreement, known as the Modified Settlement Agreement, 
between Old GM and the International Union, United Automobile, 
Aerospace and Agricultural Implement Workers of America (UAW), which 
governed the provision of post-retirement medical benefits by New GM to 
certain employees and retirees. Pursuant to the Modified Settlement 
Agreement, New GM was required to transfer the following to the New 
Plan: (i) New GM common stock (the New GM Common Stock) representing 
17.5% of New GM's common equity, (ii) $6.5 billion of New GM preferred 
stock (the Preferred Stock), (iii) a note with a principal amount of 
$2.5 billion (the Note), (iv) warrants entitling the New Plan to 
acquire an additional 2.5% of New GM Common Stock (the Warrants) and 
(v) assets of two pre-existing VEBAs, the Mitigation VEBA and the UAW-
Related Account of the GM Internal VEBA, established by Old GM.
    Old GM submitted an application for relief from the prohibited 
transaction provisions of ERISA for two sets of transactions. The first 
set of transactions involves the transfer of the securities described 
above to the New Plan and the subsequent holding and management of such 
securities. The second set of transactions involves asset transfers to 
and from the New Plan necessitated by the transition of benefit payment 
responsibility from certain predecessor plans (the Old GM Plan and the 
New GM Plan) to the New Plan,\4\ or due to mistaken deposits into the 
New Plan.
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    \4\ As described in the Notice, the Old GM Plan provided 
benefits to, among others, individuals who ultimately became covered 
by the New Plan. The New GM Plan provided benefits to most of those 
same individuals from the date of the Section 363 Sale to the date 
of implementation of the New Plan.
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Written Comments and Hearing Requests

    In the Notice, the Department invited interested persons to submit 
written comments and requests for a hearing on the proposed exemption. 
All comments and requests for a hearing were due November 2, 2009. 
During the comment period, the Department received more than 200 
telephone calls, approximately 100 letters, emails and faxes, and 15 
requests for a public hearing from New Plan participants. The 
Department additionally received written comments from General Motors 
LLC,\5\ the committee that is the plan administrator and named 
fiduciary of the New Plan (the Committee), and the Independent 
Fiduciary retained to manage the New GM securities held by the New 
Plan.\6\
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    \5\ As described in more detail below, General Motors LLC is a 
newly-created indirect wholly-owned subsidiary of New GM.
    \6\ The Committee sought and received a one-week extension of 
the comment period, to November 9, 2009. On March 16, 2010, with the 
Department's permission, the Committee filed an additional comment. 
On April 12, 2010, New GM submitted a response to the Committee's 
March 16, 2010 comment. During this time frame, the Department also 
accepted additional submissions from plan participants.
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Participant Comments

    The great majority of participants who contacted the Department 
either by telephone or written comment (commenters) expressed 
difficulty in understanding the Notice or the effect of the exemption 
on the commenters' benefits. A few commenters supported the exemption. 
Many other commenters raised questions and concerns regarding the 
transactions described in the Notice.
    Specifically, some of the commenters were opposed to the transfer 
of the New GM securities to the New Plan due to the uncertain value and 
current lack of marketability of the securities. Some commenters were 
concerned that the New Plan would not be able to provide benefits for 
the duration of their lifetimes. A number of commenters raised concerns 
that are beyond the scope of the exemption. These concerns included the 
perceived unfair treatment of retirees within the UAW; lack of 
participation afforded to retirees in the process of approving the 
Modified Settlement Agreement; the validity of Old GM's bankruptcy; and 
concerns about the rising costs of maintaining healthcare coverage 
under the New Plan. The commenters who requested a public hearing 
shared these same concerns. However, none of the commenters offered any 
information regarding the substance of the subject transactions.
    In responding to commenters' concerns as to the funding of the New 
Plan, General Motors LLC notes that the funding of the New Plan was 
determined after lengthy, arms-length negotiations that included GM and 
the UAW as both the representative of the active employees and as the 
authorized representative under Section 1114 of the U.S. Bankruptcy 
Code of those persons receiving retiree health care benefits. Class 
Counsel for the retirees also played a role in these negotiations and 
acknowledged and confirmed his agreement to the terms of the Modified 
Settlement Agreement. In addition, representatives of the U.S. Treasury 
participated in the negotiations. Further, General Motors LLC points 
out that the Modified Settlement Agreement was approved by an order of 
the federal bankruptcy court, which stated that the terms and 
conditions of the Modified Settlement Agreement (including but not 
limited to those relating to the funding of the New Plan) were ``fair, 
reasonable, and in the best interests of the retirees.''

General Motors Comments

    General Motors LLC submitted a comment disclosing certain corporate 
changes since the date of the exemption application. According to the 
comment, on August 11, 2009, New GM created three new entities under 
Delaware law: (1) General Motors Holding Company (``Holdco''), a 
corporation formed as a direct and wholly-owned subsidiary of New GM, 
(2) General Motors Holdings LLC (``Holdings''), a limited liability 
company formed as a direct and wholly-owned subsidiary of Holdco; and 
(3) GM Merger Subsidiary, Inc. (``Merger Subsidiary''), a corporation 
formed as a direct and wholly-owned Delaware corporate subsidiary of 
Holdings.
    The comment disclosed that during the period October 15, 2009, 
through November 2, 2009, New GM underwent a corporate reorganization. 
On October 15, 2009, Merger Subsidiary merged with and into New GM, 
with New GM as the surviving corporation, as a wholly-owned subsidiary 
of Holdings. On October 16, 2009, New GM converted to a limited 
liability company under the name General Motors LLC. Immediately 
thereafter, Holdco changed its name to General Motors Company (New GM). 
On October 19, 2009, General Motors LLC assigned its indebtedness to 
the U.S. Treasury and the New Plan to Holdings.\7\
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    \7\ According to the comment, these corporate changes were 
accompanied by the requisite resolutions, stockholder consents, 
certificate of incorporation and by-law changes, stock conversions 
etc. as applicable. Each share of pre-reorganization New GM Common 
Stock was converted into a right to acquire a share of common stock 
issued by post-reorganization New GM, with the same features.

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[[Page 62881]]

    General Motors LLC provided the following graphic illustration of 
the merger process:
[GRAPHIC] [TIFF OMITTED] TN13OC10.111

    In this regard, General Motors LLC provided certain revisions to 
its representations. First, the applicant is now identified as General 
Motors LLC, although the comment stated that General Motors LLC would 
not object if the exemption were issued to New GM, Holdings and General 
Motors LLC collectively. Second, the Note issued to the New Plan by New 
GM became an obligation of Holdings. Accordingly, with regard to the 
exemption for the acquisition and holding of the Note, the direct 
parties to the transactions are Holdings and the New Plan. With regard 
to the exemptions for the acquisition and holding of the New GM Common 
Stock, the Preferred Stock, and the Warrants, the direct parties are 
New GM and the New Plan. With regard to the exemption for the 
transition payments, the direct parties to the transactions are General 
Motors LLC, Old GM (i.e, General Motors Corporation, which has changed 
its name to Motors Liquidation Company), the Old GM Plan, the New GM 
Plan and the New Plan.
    General Motors LLC provided the following explanation of the reason 
for the corporate reorganization:

    The decision to create Holdings as an intermediate corporate 
layer and place the debt obligations in Holdings was prompted by a 
suggestion from [the United States Treasury]. Given the holding 
company structure, the ``issuer'' of the other securities--the 
Common Stock, Preferred Stock, and the Warrants--must be [New GM], 
the holding company. [General Motors LLC], the third-tier 
subsidiary, is an LLC and not a suitable issuer of securities that 
are intended to be widely held and publicly traded. In addition, the 
100% ownership in the chain would not be possible if the Common 
Stock were not issued by New GM. Moreover, the stock is far more 
desirable if issued by the top-tier company in the structure than if 
issued by a second-tier or third-tier company. For the debt, 
however, the reason for making Holdings the obligor (as opposed, for 
example, to [New GM]) was to place the obligor as close to the 
underlying assets as possible. And [General Motors LLC] itself could 
not be the obligor because the guarantors on the Notes are not only 
[General Motors LLC] and its U.S. subsidiaries, but also the non-
U.S. auto subsidiaries of Holdings. Further, it is contemplated that 
Holdings will be the obligor on any future financings.

    General Motors LLC further represented that ``the rights of [the 
New Plan] under the Amended and Restated Secured Note Agreement of 
August 14, 2009 (``Note'') remain just as they were under the Secured 
Note Agreement of July 10, 2009 (``Original Note'') before the 
reorganization occurred, notwithstanding the substitution of General 
Motors Holdings LLC (``Holdings'') for General Motors Company as 
obligor on the Note * * * The terms of the Note remain the same in all 
material respects as they were under the Original Note.''
    General Motors LLC also requested some minor wording changes to the 
operative language of the exemption, to which the Department agreed. 
Specifically, the Department revised:
     Section I(a) to add a new subsection (1)(v) to separately 
set forth relief for the acquisition of New GM Common Stock pursuant to 
the exercise of the Warrants or through a corporate transaction, for 
avoidance of confusion, and to delete subsection (2) as duplicative of 
the new subsection (1)(v), and to renumber the remaining subsections;
     Section II(c) to state that the Independent Fiduciary must 
determine that the transaction is ``protective of the rights of 
participants and beneficiaries * * *'' in order to more closely track 
ERISA section 408(a); and
     Section III(b) to add the words ``as applicable'' after 
the word ``administrator(s)'' and the words ``if any'' after the phrase 
``the dollar amount of mispayments made.'' \8\
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    \8\ The Department has determined to add the words ``if any'' 
after the phrase ``the dollar amount of mispayments made'' in 
Section III(a) as well.
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    Additionally, the Department deleted the first clause of section 
V(b) (``(1) Except as provided in section (2) of this paragraph''), as 
unnecessary in light of the fact that there is no section V(b)(2). At 
General Motors LLC's request, the Department further revised section V 
of the final exemption. The section, which addresses recordkeeping, was 
tailored to take into account the fact that multiple parties have 
recordkeeping responsibilities under the exemption.
    Finally, on March 12, 2010, General Motors LLC represented to the 
Department that all assets described in the application as transferring 
to the GM Separate Retiree Account \9\ of the VEBA Trust had been 
transferred, with the exception of approximately $20.7 million of cash 
in the GM Internal VEBA, held back for the payment of expenses 
(primarily, investment

[[Page 62882]]

manager fees and expenses for custody, legal, and Promark Global 
Advisors, Inc. (Promark) services) accrued before the GM Internal VEBA 
assets were transferred.\10\ Regarding this hold-back, General Motors 
LLC expects to furnish an initial reconciliation to the VEBA Trust by 
mid-summer 2010. The Department notes that the Applicant disclosed in 
its initial application that this hold-back would occur.
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    \9\ The GM Separate Retiree Account is the separate retiree 
account of the VEBA Trust designed to segregate payments to the VEBA 
Trust attributable to GM pursuant to the Modified Settlement 
Agreement.
    \10\ With respect to the payment by the GM Internal VEBA of 
expenses for the services of Promark, an affiliate of New GM, 
General Motors LLC clarified that Promark charges for its services 
only direct expenses permitted under the Department's regulations at 
29 CFR Sec. Sec.  2550.408b-2(e)(3) and .408c-2(b)(3). The 
Department notes that this exemption does not provide relief for any 
services provided to the GM Internal VEBA by Promark, nor to the 
payment of compensation for such services. Lastly, we note that 
section 408(b)(2) of ERISA does not provide relief for acts 
described in ERISA section 406(b).
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Committee Comments

    The Committee, which is the named fiduciary of the New Plan, 
submitted a comment suggesting certain modifications to the Summary of 
Facts and Representations of the Notice and to the operative language 
of the proposed exemption, and requesting certain clarifications from 
the Department. The Committee's comments were submitted after 
consultation with the Independent Fiduciary.

Number of Investment Banks

    As set forth in the Notice, the VEBA Trust has three separate 
retiree accounts (the Separate Retiree Accounts) designed to segregate 
payments to the VEBA Trust attributable to GM, Ford and Chrysler, 
pursuant to the terms of each company's settlement agreement with the 
UAW and each respective class. In this regard, 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 Fiduciary Counselors Inc. (FCI) as the 
Independent Fiduciary with respect to the securities held in the GM 
Separate Retiree Account, and has currently retained separate 
independent fiduciaries with respect to the Chrysler and Ford Separate 
Retiree Accounts. As noted, however, it is conceivable 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 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 
a requirement should be limited to investment banks performing a 
traditional underwriting role and being paid on a transactional basis, 
not those retained for ongoing valuation or investment consulting 
services.\11\
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    \11\ The Committee suggests that an investment bank performing 
valuation or investment consulting and advisory services will often 
be paid a flat or asset-based fee, while an investment bank 
performing underwriting and brokerage services will be paid a 
transaction-based fee as a percentage of the overall sale. 
Additionally, the Committee notes that it is not anticipated that 
the Independent Fiduciary likely would retain a separate consulting 
and advisory firm for day-to-day advice (unless appropriate).
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    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.
    The Committee proffers that GM, Chrysler, and Ford are at vastly 
different stages of marketability, are competing for capital in 
different markets (including public versus private), and are not 
competing against each other so much as they are part of a huge global 
automobile market with many other competitors.\12\ The Committee notes 
that a conflict could arise in the unlikely event that the Independent 
Fiduciary proposes to sell large blocks of stock of two or more car 
companies in the same market at the exact same time. In that case, the 
Committee suggests that the Independent Fiduciary would probably 
(though not necessarily) engage separate investment bankers at that 
time to underwrite the sales. Furthermore, the Committee contends that 
it would maintain safeguards to mitigate the risk of conflicts. For 
example, the Committee notes that it would still appoint a conflicts 
monitor and perform its own monitoring of the Independent Fiduciary, 
and it would continue to raise any questions about potential conflicts.
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    \12\ According to the Committee, the most likely reason that an 
investment bank would propose going to market under this scenario is 
if the overall market itself is booming, such that there is ample 
appetite for the securities. In the event that a plan needs 
liquidity in a falling market, the Committee is more likely to 
explore other options, including reducing benefits or seeking 
alternative sources of capital such as through borrowing.
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    Accordingly, the Committee proposes to replace the above-referenced 
text with the following representation:

    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

[[Page 62883]]

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 the proposed exemption be 
modified to include the following:

    To the extent 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 further notes that the Independent Fiduciary may not 
in all cases have discretion over the selection of the investment 
bank(s) that may participate in an underwriting/sale of New GM 
securities. The Committee points to section 2.1.4 of the Equity 
Registration Rights Agreement, which provides that the U.S. Treasury 
generally has the right to select the lead underwriter in the case of a 
demand registration (and New GM the right to select co-managing 
underwriters) and section 2.2.3 of the Equity Registration Rights 
Agreement, which provides that New GM generally has the right to select 
the investment bank(s) in the case of a piggyback offering. In any such 
case where the Independent Fiduciary is not selecting the investment 
bank(s), in the Committee's view, none of the exemption conditions 
regarding investment banks should apply.
    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 
Accounts at the same time, then a separate investment bank (if any) 
will be retained for each Separate Retiree Account with respect to the 
marketing or underwriting of the securities. Notwithstanding the above, 
nothing in the final exemption would preclude the Independent Fiduciary 
of two or more Separate Retiree Accounts from retaining the same 
investment banker to provide valuation services or long-term investment 
consulting on behalf of two or more of such Separate Retiree 
Accounts.\13\ 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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    \13\ In reaching this conclusion, it is the Department's 
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 does not have discretion with 
respect to the selection of an investment banker. In the Department's 
view, the likelihood of conflicts in the case where an investment bank 
is selected by the U.S. Treasury or New GM is lower than in a situation 
where an offering of New GM 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 Plan appear 
to align more closely with the interests of New GM in the marketing and 
selling of the underwritten securities. Therefore, subject to these 
limitations, the Department concurs with the Committee's requested 
clarifications.

Reporting Deviations From an Investment Bank's Recommendations

    If a single Independent Fiduciary is retained with respect to more 
than one Separate Retiree Account, the Summary of Facts and 
Representations of the Notice 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 GM, Chrysler and Ford exemption applications. The Committee 
notes that, typically, an investment bank will not ``recommend'' a 
single, specific course of action, but through a dialogue with the 
Independent Fiduciary will present, discuss, modify and refine various 
options and scenarios that the Independent Fiduciary ultimately will 
use in making its decisions as a fiduciary. Thus, the Committee argues 
that it would not be feasible for the Independent Fiduciary to report 
back to the Committee when it proposes to deviate from a specific 
recommendation, given that interactions between the Independent 
Fiduciary and an investment bank generally lack a single, identifiable 
``recommendation'' (either orally or in writing) that the Independent 
Fiduciary does or does not intend to follow.
    Moreover, the Committee contends that some investment banker 
recommendations are unlikely ever to raise conflict issues. For 
instance, the Committee notes that an investment bank may develop a 
preliminary valuation of certain GM securities of $xx, and after 
thorough consideration, the Independent Fiduciary may determine that 
such securities are actually worth $yy. In such event, the Committee 
asserts that the Independent Fiduciary's valuation might be viewed as a 
``deviation'' from the initial recommendation but is unlikely to raise 
any conflict vis-[agrave]-vis any securities held by the VEBA Trust.
    The Committee is also concerned that the requirement for the 
Committee to review the reported deviations will cause the Committee to 
interpose itself between the two parties before such parties have 
reached a consensus. In this event, the Committee is concerned that it 
may have an implied obligation to substitute its judgment for that of 
the Independent Fiduciary.
    The Department concurs with the Committee's comment that their 
initial representation that the Independent Fiduciary would report any 
deviations from the recommendation of the

[[Page 62884]]

investment bank raises operational issues. Nevertheless, the Department 
notes that the Independent Fiduciary and the Committee are not relieved 
from their fiduciary duties under ERISA in carrying out their 
respective responsibilities. There may be circumstances where the 
Independent Fiduciary has a responsibility under ERISA to inform the 
conflicts monitor or the Committee of a deviation from the investment 
bank's recommendations, and the Committee, as part of its oversight 
responsibility, may need to take appropriate action based on such 
disclosure. Subject to the caveat above, the Department takes note of 
these clarifications and updates to the Summary of Facts and 
Representations of the Notice.

Conditions Applicable in the Event That the Committee Appoints a Single 
Independent Fiduciary

    The Committee requested confirmation that certain terms and 
conditions described in the Summary of Facts and Representations of the 
Notice and incorporated into Sections II(b)(1) through (3) of the 
proposed exemption would apply only if and to the extent that the same 
Independent Fiduciary is appointed to represent two or more Separate 
Retiree Accounts.
    Sections II(b)(1) through (3) of the proposed exemption provide 
that the Committee will take certain steps to mitigate potential 
conflicts of interest, including the appointment of a conflicts 
monitor, the adoption of procedures to facilitate prompt replacement of 
the Independent Fiduciary due to a conflict of interest, the adoption 
of a written policy by the Independent Fiduciary regarding conflicts, 
and the periodic reporting of actual or potential conflicts. 
Additionally, the Summary of Facts and Representations provides that a 
separate investment bank will be retained with respect to each Separate 
Retiree Account, and in the event that the Independent Fiduciary 
deviates from the ``initial recommendations'' of an investment bank, 
``it would find it necessary to explain why it deviated from a 
recommendation.''
    The Department concurs with the Committee, that the terms and 
conditions described above will apply only if and to the extent that 
the same Independent Fiduciary is appointed to represent two or more 
Separate Retiree Accounts. Notwithstanding the above, nothing in the 
final exemption would preclude the Committee from adopting procedures 
similar to those described in Sections II(b)(1) through (3) of the 
proposed exemption in furtherance of its oversight responsibilities. 
However, the Department believes that the requirement that the 
Independent Fiduciary retain separate investment banks with respect to 
each Separate Retiree Account, subject to the limitations described 
above, applies regardless of how many Separate Retiree Accounts are 
represented by the same Independent Fiduciary.

Investment Bank's Acknowledgement That the New Plan Is Its Ultimate 
Client

    Section II(e) of the proposed exemption 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 New 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 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 Plan will not, 
by itself, make the investment banker a fiduciary of the New Plan. 
Rather, whether an investment banker referred to in Section II of the 
exemption becomes a fiduciary as a result of its provision of services 
depends on whether it meets the definition of a ``fiduciary'' as set 
forth in section 3(21) of ERISA and the regulations promulgated 
thereunder.

Obligation of the Committee To Review the Investment Banker Reports

    As described in the Summary of Facts and Representations of the 
Notice, several safeguards are provided to reduce the risk of conflict 
in the event that a single independent fiduciary is retained with 
respect to more than one 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)(1)(ii) 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 
Fiduciary position, the Committee has raised a concern regarding the 
conflicts monitor's duties. The Committee has requested confirmation 
that Section II(b)(1)(ii) does not independently impose any obligation 
on the Committee to provide (or request) ``investment banker reports'' 
as a matter of course (i.e., beyond ERISA's general fiduciary 
requirements). In its comment letter, the Committee notes that it may 
be appropriate for the conflicts monitor or the Committee (or any 
subcommittee with delegated authority) to review investment banker 
reports when provided to them by the Independent Fiduciary, or to 
request such reports under certain circumstances. However, the 
Committee maintains that such reports may contain information that is 
confidential or proprietary, or preliminary, or simply irrelevant to 
its responsibilities. Furthermore, according to the Committee, it is 
not clear what constitutes a ``report,'' with the result that informal 
notes and/or emails may fall under the definition.
    The Department concurs with the Committee that Section II(b)(1)(ii) 
of the exemption does not independently impose an affirmative 
obligation on the Committee to provide (or request) ``investment banker 
reports'' as a matter of course beyond ERISA's general fiduciary 
requirements.

Definition of ``Securities''

    The Committee sought written clarification and confirmation from 
the Department as to the scope of the exemptive relief provided under 
the proposed exemption with respect to

[[Page 62885]]

certain transactions involving securities held by the New Plan.
    Section I(a)(1)-(3) of the proposed exemption provides 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 the New Plan's 
acquisition and holding of the New GM Common Stock, the Preferred 
Stock, the Note, the Warrants, and additional shares of New GM Common 
Stock acquired pursuant to exercise of the Warrants (collectively 
defined as the Securities) if the proposed exemption is granted by the 
Department. Additionally, Section I(a)(4) of the proposed exemption 
provides relief for the disposition of the Securities by the 
Independent Fiduciary, if the exemption is granted.\14\ The term 
``Securities'' is defined in Section VI(o) as ``(i) The New GM Common 
Stock; (ii) the Preferred Stock; (iii) the Note; (iv) the Warrants; and 
(v) additional shares of New GM Common Stock acquired pursuant to 
exercise of the Warrants.'' The term Warrants is defined in Section 
VI(q) as ``warrants to acquire shares of New GM Common Stock, par value 
$0.01 per share, issued by New GM.'' The Committee questions whether 
the relief proposed would include securities of New GM such as 
warrants, common stock, notes and other New GM securities (Other GM 
Securities) that are acquired and held by the New Plan as a result of 
disposition of some or all of the Securities by the Independent 
Fiduciary, in a transaction in which the consideration the New Plan 
receives consists in whole or in part of Other GM Securities or in 
exchange for some or all of the Securities currently held by the New 
Plan.\15\ For example, the Committee states that the Independent 
Fiduciary may find it in the interest of the New Plan and its 
participants and beneficiaries to sell Warrants to New GM in exchange 
for cash and replacement warrants of shorter/longer duration or with a 
different strike price.\16\ The Committee also sought to clarify 
whether the exemption would cover (i) New GM Common Stock acquired 
through exercise of Warrants, and (ii) other securities of New GM in 
exchange for all or some of the Securities then held by the New Plan 
due to a corporate transaction or restructuring of GM. The Committee 
notes that the Independent Fiduciary does not have the authority to 
vote the New GM Common Stock, and therefore, the Independent Fiduciary 
may have little, if any, ability to affect the negotiation and ultimate 
approval of any such corporate transaction.
---------------------------------------------------------------------------

    \14\ As noted above, at the request of New GM and in the 
interests of clarity, the Department has in this final exemption 
merged Section I(a)(1) and (2) of the proposed exemption, and 
renumbered the remaining subsections of Section I(a). Therefore, 
Section I(a)(4) of the proposed exemption has been renumbered 
Section I(a)(3) in this final exemption.
    \15\ The Committee states that any such transaction would be 
entered into only after the Independent Fiduciary has met all the 
conditions precedent to entering into such a transaction as set 
forth in Section II of the exemption, including, but not limited to 
determining that the transaction is feasible, in the interests of 
the New Plan, and protective of the rights of the participants and 
beneficiaries of the New Plan. The Committee also represents that 
the Independent Fiduciary would obtain a valuation of any securities 
involved in the transaction.
    \16\ The Committee notes that it is not suggesting that 
transactions which would fundamentally alter the terms of the 
Modified Settlement Agreement are being contemplated.
---------------------------------------------------------------------------

    In response to the above-reference comments, the Department 
confirms that the exemption provides relief for other New GM-issued 
warrants acquired in exchange for Warrants held by the New Plan at the 
direction of the Independent Fiduciary, and such relief also extends to 
additional shares of New GM Common Stock or other New GM-issued 
warrants acquired in exchange for New GM Common Stock or Warrants held 
by the New Plan in connection with a restructuring, recapitalization, 
merger or other corporate transaction involving New GM. The Department 
has revised Section I(a)(1) and the definitions of Securities and 
Warrants in Section VI of the final exemption to incorporate this 
clarification. The Department further confirms that the exemption 
provides relief for the acquisition, holding and disposition of 
additional shares of New GM Common Stock acquired through exercise of 
Warrants.

Old GM Bonds

    In its March 16, 2010 comment, the Committee informed the 
Department that a very small percentage of Old GM senior corporate debt 
(Old GM Bonds) was transferred to the VEBA Trust as part of the 
transfer of assets from the existing GM Internal VEBA. The Old GM Bonds 
were held in a fund known as CCM Pension-C, L.L.C., managed by 
Contrarian Capital Management, LLC (Contrarian). The VEBA Trust is the 
sole limited partner in the fund with an approximately 99.4% interest 
while Contrarian, as the general partner, holds a 0.6% interest. As of 
March 31, 2010, the estimated overall net asset value of the fund was 
$128,842,109. The Old GM Bonds were valued at $787,705 in total, and 
therefore represented 0.61% of the portfolio. The Committee stated that 
although attempts were made to determine the exact composition of 
underlying assets of each fund held by the GM Internal VEBA, in some 
cases complete portfolio information was not available until after the 
closing of the transfer. The Committee subsequently informed the 
Department that the Old GM Bonds were sold by Contrarian on April 16, 
2010.
    The Committee requested that relief be provided for the acquisition 
and holding of the Old GM Bonds by the New Plan retroactive to January 
1, 2010, through April 16, 2010. The Old GM Bonds were held in the GM 
Separate Retiree Account of the VEBA Trust; at no time were they held 
in the GM Employer Security Sub-Account thereof. The Committee made the 
point that Contrarian, which it understands to be independent of 
General Motors, acted as an independent fiduciary with respect to the 
continued holding of the Old GM Bonds. The Committee further noted that 
Contrarian alone made the decision to sell the Old GM bonds.
    New GM responded to the Committee's comment by asserting that the 
Old GM Bonds should not be considered employer securities for which 
relief would be required under ERISA sections 406 and 407, as Old GM 
has not had hourly employees at any time since the assets were 
transferred to the New Plan, and New GM did not assume the Old GM Bonds 
or any liability associated therewith in the Section 363 Sale. 
Notwithstanding New GM's response, Old GM appears to be a party in 
interest to the New Plan under ERISA section 3(14)(H) by virtue of its 
ownership of 10% of more of the equity securities of New GM,\17\ and 
the New Plan's holding of debt of Old GM is prohibited under ERISA 
section 406(a)(1)(B). Accordingly, exemptive relief is required. As the 
Department intended to provide relief necessary to maximize the funding 
of the New Plan in accordance with the Modified Settlement Agreement, 
the Department has modified Section I of the exemption to specifically 
incorporate relief for the acquisition and holding of the Old GM Bonds 
retroactive to January 1, 2010, through April 16, 2010.
---------------------------------------------------------------------------

    \17\ Old GM received 50,000,000 shares of New GM Common Stock, 
or 10% of New GM's common equity, in the Section 363 Sale.
---------------------------------------------------------------------------

Independent Fiduciary Comment

    Fiduciary Counselors Inc. (FCI) was selected as the Independent 
Fiduciary for the New GM securities held by the New Plan. FCI repeated 
concerns identified by the Committee with respect to the role of the 
Independent Fiduciary and the investment bank in

[[Page 62886]]

the event that a single Independent Fiduciary is appointed for the 
employer securities of more than one Separate Retiree Account 
comprising the VEBA Trust. Specifically, FCI was concerned about the 
requirement that a separate investment bank will be retained with 
respect to each of the three plans. FCI indicated that requiring 
separate investment banks in all circumstances could be unnecessarily 
costly to the plans involved. It requested flexibility in deciding 
whether to retain a separate investment bank, or in the event the 
separate investment bank requirement was retained, that the Department 
clarify that the Independent Fiduciary has the authority to determine 
when it is necessary to retain an investment bank. According to FCI, 
having an investment bank on retainer, when no transactions are 
contemplated, would needlessly drive up the VEBA Trust's expenses. The 
Department responded to some of FCI's concerns in its discussion of the 
Committee's comment, above. The Department additionally confirms that 
the exemption does not require that the Independent Fiduciary retain an 
investment bank at all times.
    FCI also expressed concern that, despite the VEBA Trust possessing 
certain information rights under the various agreements, including the 
right to financial statement information, it did not believe that it 
would have access to all of the information necessary to evaluate and 
value the New GM Securities during the period before the New GM 
securities are publicly traded. FCI requested that the Department 
include a requirement in the final exemption that New GM provide the 
Independent Fiduciary with such information as the Independent 
Fiduciary reasonably requests to fulfill its duties to the VEBA Trust 
under the exemption, for so long as the New GM Securities are not 
publicly traded. FCI indicated willingness to enter into appropriate 
confidentiality agreements to protect any non-public information.
    In the period since FCI submitted this comment, the Department 
understands that New GM and FCI have negotiated at length in an effort 
to reach agreement on the extent of the information that would be 
provided by New GM to FCI for purposes of valuing the Securities. New 
GM declined to provide certain of the requested information sought by 
FCI on grounds of confidentiality and sensitivity of the information 
sought. In the absence of agreement on the specific information to be 
provided, the parties attempted to agree on a process by which an 
independent third party would make a determination as to the necessity 
for valuation purposes of the information being sought by FCI. The 
parties entertained the possibility that one of the ``Big Four'' public 
accounting firms would make such determination but could not agree on 
the scope of the assignment.
    In response to FCI's comment, the Department has determined to 
include a condition in the final exemption which specifically addresses 
the disclosure of financial information by New GM for FCI's use in 
valuing the New GM Securities. In this regard, the Department has 
determined that it would be appropriate for one of the ``Big Four'' 
public accounting firms to determine whether the information sought by 
the Independent Fiduciary is necessary, pursuant to applicable 
accounting standards, for valuing securities of a privately-held 
company. Under this requirement, in the event that New GM declines to 
provide financial information requested by the Independent Fiduciary 
for valuation purposes, New GM will engage, at its expense, one of the 
``Big Four'' public accounting firms that is acceptable to the 
Independent Fiduciary (Accountant) to determine whether the information 
sought by the Independent Fiduciary is necessary for valuation 
purposes. The Department expects that the Accountant will base its 
conclusion on whether or not the information in question would be 
necessary to provide an opinion as to the fair value of the Securities 
as of the relevant date, consistent with ASC 820 on Fair Value 
Measurements and the AICPA Statement on Valuation Services. New GM will 
provide such information to the Independent Fiduciary as the Accountant 
determines necessary for valuation purposes according to the standard 
set forth above. The Department expects that the parties will work to 
ensure that any dispute regarding the disclosure of information will be 
resolved as expeditiously as possible in order to ensure that the 
Independent Fiduciary has timely access to information deemed necessary 
for valuation.
    Finally, FCI noted that, prior to FCI's appointment as Independent 
Fiduciary, New GM underwent a corporate reorganization and certain 
adjustments were made in the New GM Securities to reflect the 
reorganization of the GM controlled group. FCI requested that the 
Department clarify that FCI, as Independent Fiduciary, has 
responsibility only for transactions related to the New GM securities 
that occurred after its appointment. The Department concurs with this 
statement.

Conclusion

    The Department has carefully considered the issues expressed by the 
commenters both in written comments and telephone calls. After 
consideration of all the participant comments and documentation 
provided, the Department has concluded that no ``material factual 
issues'' were identified by the commenters that would warrant a public 
hearing under the Department's regulations at 29 CFR Sec.  2570.46. 
After giving full consideration to the entire record, the Department 
has determined to grant the exemption subject to the modifications and 
clarifications described herein. For a more complete statement of the 
facts and representations supporting the Department's decision to grant 
this exemption, refer to the Notice, at 74 FR 47963 (September 18, 
2009).
---------------------------------------------------------------------------

    \18\ Because the New Plan will not be qualified under section 
401 of the Internal Revenue Code of 1986, 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.
---------------------------------------------------------------------------

Exemption

Section I--Covered Transactions \18\

    (a) The restrictions of sections 406(a)(1)(A), 406(a)(1)(B), 
406(a)(1)(E), 406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA shall 
not apply, effective July 10, 2009, to:
    (1) The acquisition by the UAW GM Retiree Medical Benefits Plan 
(the New UAW-GM Retirees Plan) and its associated UAW Retiree Medical 
Benefits Trust (the VEBA Trust) (the New Plan) of: (i) 87,500,000 
shares of common stock of General Motors Company (New GM) (the New GM 
Common Stock) representing 17.5% of New GM equity; (ii) $6.5 billion of 
Series A Fixed Rate Cumulative Perpetual Preferred stock of New GM (the 
Preferred Stock); (iii) a note issued by New GM and assigned to General 
Motors Holdings LLC with a principal amount of $2.5 billion (the Note); 
(iv) warrants to acquire New GM Common Stock representing 2.5% of New 
GM equity (the Warrants); and (v) additional shares of New GM Common 
Stock acquired pursuant to (A) the Independent Fiduciary's exercise of 
the Warrants, and (B) an adjustment, substitution, conversion or other 
modification of New GM Common Stock in connection with a 
reorganization, restructuring, recapitalization, merger, or similar 
corporate transaction, provided that each holder of New GM Common Stock 
is treated in an identical manner (collectively, the Securities), 
transferred by New GM and deposited in the GM Employer Security Sub-

[[Page 62887]]

Account of the GM Separate Retiree Account of the VEBA Trust.
    (2) The holding by the New Plan of the Securities in the GM 
Employer Security Sub-Account of the GM Separate Retiree Account of the 
VEBA Trust; and
    (3) The disposition of the Securities.
    (b) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D), 
406(b)(1) and 406(b)(2) of ERISA shall not apply, effective July 10, 
2009, to:
    (1) The payment by Old GM, New GM, the Old GM Plan, the New GM Plan 
or the New Plan 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 Old GM, New GM, the Old GM Plan, the New 
GM Plan, or the New 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.
    (c) The restrictions of sections 406(a)(1)(B), 406(a)(1)(D), 
406(b)(1) and 406(b)(2) of ERISA shall not apply, effective July 10, 
2009, to the return to New GM of assets deposited or transferred to the 
New Plan by mistake, plus interest.
    (d) The restrictions of sections 406(a)(1)(B), 406(a)(1)(E), 
406(a)(2), 406(b)(1), 406(b)(2) and 407(a) of ERISA shall not apply, 
effective January 1, 2010, through April 16, 2010, to the acquisition 
and holding by the New Plan of Old GM senior corporate debt held in the 
CCM Pension-C, L.L.C. fund managed by Contrarian Capital Management, 
LLC.

Section II-Conditions Applicable to Section I(a)

    (a) The Committee appoints a qualified Independent Fiduciary to act 
on behalf of the New Plan for all purposes related to the transfer of 
the Securities to the New Plan for the duration of the New 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 New GM 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 New 
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 Ford 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 conflict.
    (c) The Independent Fiduciary authorizes the trustee of the New 
Plan to dispose of the New GM Common Stock (including additional shares 
of New GM Common Stock acquired pursuant to exercise of the Warrants), 
the Preferred Stock, and/or the Note, 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 
New Plan, and protective of the rights of participants and 
beneficiaries of the New Plan.
    (d) The Independent Fiduciary negotiates and approves on behalf of 
the New Plan any transactions between the New 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 New 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 Plan, the trust agreement, the Independent 
Fiduciary Agreement, and any other documents governing the employer 
securities, such as the Registration Rights Agreement.
    (g) The New Plan incurs no fees, costs or other charges (other than 
described in the 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 Plan than the terms negotiated at arms' length 
under similar circumstances between unrelated parties.
    (i) New GM furnishes the financial information necessary for the 
Independent Fiduciary to value the Securities for the period before the 
New GM securities are publicly traded. Notwithstanding the foregoing, 
if New GM declines to furnish the financial information requested by 
the Independent Fiduciary, New GM will engage, at its own expense, one 
of the ``Big Four'' public accounting firms that is acceptable to the 
Independent Fiduciary (Accountant), to determine whether, pursuant to 
applicable accounting standards, the requested information is necessary 
for valuing securities of a privately-held company. New GM will furnish 
such financial information to the Independent Fiduciary as the 
Accountant deems necessary for the valuation.

Section III-Conditions Applicable to Section I(b)

    (a) The Committee and the New Plan's third party administrator will 
review the benefits paid during the transition period and determine the 
dollar amount of mispayments made, if any, subject to the review of the 
VEBA Trust's independent auditor. The results of this review will be 
made available to Old GM and New GM.
    (b) Old GM and New GM and their respective plans' third party 
administrator(s), as applicable, will review the benefits paid during 
the transition period and determine the dollar amount of mispayments 
made, if any, 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.\19\
---------------------------------------------------------------------------

    \19\ 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.

---------------------------------------------------------------------------

[[Page 62888]]

    (e) If there is a dispute as to the amount of a reimbursement 
requested, the parties will enter into a dispute procedure set forth in 
section 26D of the Modified Settlement Agreement.

Section IV-Conditions Applicable to Section I(c)

    (a) New GM 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 Plan was entitled.
    (b) The claim is made within the Verification Time Period, as 
defined in Section VI(r).
    (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 a dispute procedure set forth in section 
26D of the Modified Settlement Agreement.

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

    (a) The Committee and the Independent Fiduciary maintain for a 
period of six years from (i) the date the Securities are transferred to 
the New Plan, and (ii) the date the shares of New GM Common Stock are 
acquired by the New Plan through the exercise of the Warrants, the 
records necessary to enable the persons described in paragraph (b) 
below to determine whether the conditions of this exemption have been 
met, except that (i) a separate prohibited transaction will not be 
considered to