Notice of Proposed Amendment to Prohibited Transaction Exemption (PTE) 2010-08 Involving Ford Motor Company, Located in Detroit, MI, 14074-14083 [2011-5912]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Notices]
[Pages 14074-14083]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5912]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Employee Benefits Security Administration

[Application No. L-11641]


Notice of Proposed Amendment to Prohibited Transaction Exemption 
(PTE) 2010-08 Involving Ford Motor Company, Located in Detroit, MI

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

ACTION: Notice of proposed amendment.

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

    This document contains a notice of pendency (the Notice) before the 
Department of Labor (the Department) of a proposed amendment to PTE 
2010-08 (75 FR 14192, March 24, 2010), an individual exemption from 
certain prohibited transaction restrictions of the Employee Retirement 
Income Security Act of 1974 (the Act or ERISA). The transactions 
involve the UAW Ford Retirees Medical Benefits Plan (the Ford VEBA 
Plan) and its funding vehicle, the UAW Retiree Medical Benefits Trust 
(the VEBA Trust), (collectively the VEBA).\1\ The proposed amendment, 
if granted, would affect the VEBA, and its participants and 
beneficiaries.
---------------------------------------------------------------------------

    \1\ Because the Ford VEBA Plan is not qualified under section 
401 of the Code, there is no jurisdiction under Title II of the Act 
pursuant to section 4975 of the Code. However, there is jurisdiction 
under Title I of the Act.

DATES: Effective Date: If granted, this proposed amendment will be 
effective as of December 31, 2009, except with respect to Section 
---------------------------------------------------------------------------
I(a)(7), which will be effective as of June 25, 2010.

DATES: Written comments and requests for a public hearing on the 
proposed amendment should be submitted to the Department within 51 days 
from the date of publication of this Federal Register Notice.

ADDRESSES: All written comments and requests for a public hearing 
concerning the proposed amendment should be sent to the Office of 
Exemption Determinations, Employee Benefits Security Administration, 
Room N-5700, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Washington DC 20210, Attention: Application No. L-11641. Interested 
persons are also invited to submit comments and/or hearing requests to 
the Department by facsimile to (202) 219-0204 or by electronic mail to 
Blinder.Warren@dol.gov by the end of the scheduled comment period. The 
application pertaining to the proposed amendment and the comments 
received will be available for public inspection in the Public 
Disclosure Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210. Comments and hearing requests will also be 
available online at https://www.regulations.gov and https://www.dol.gov/ebsa, at no charge.
    Warning: If you submit written comments or hearing requests, do not 
include any personally-identifiable or confidential business 
information that you do not want to be publicly-disclosed. All comments 
and hearing requests are posted on the Internet exactly as they are 
received, and they can be retrieved by most Internet search engines. 
The Department will make no deletions, modifications or redactions to 
the comments or hearing requests received, as they are public records.

FOR FURTHER INFORMATION CONTACT: Mr. Warren Blinder, Office of 
Exemption Determinations, Employee Benefits Security Administration, 
U.S. Department of Labor, telephone (202) 693-8553. (This is not a 
toll-free number.)

SUPPLEMENTARY INFORMATION: \2\
    This document contains a notice of proposed exemption that, if 
granted, would amend PTE 2010-08, which relates to the Ford VEBA Plan 
and the VEBA Trust. Specifically, PTE 2010-08, which is effective as of 
December 31, 2009, provides exemptive relief from the restrictions of 
sections 406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(E), 406(a)(2), 
406(b)(1), 406(b)(2) and 407(a) of ERISA for (a) the acquisition by the 
Ford VEBA Plan and the VEBA Trust of the Securities,\3\ transferred by 
Ford and deposited in the Ford Employer Security Sub-Account of the 
Ford

[[Page 14075]]

Separate Retiree Account of the VEBA Trust; (b) the acquisition by the 
Ford VEBA Plan of Payment Shares; (c) the acquisition by the Ford VEBA 
Plan of shares of Ford Common Stock pursuant to (i) the Independent 
Fiduciary's exercise of all or a pro rata portion of the Warrants, and 
(ii) an adjustment, substitution, conversion, or other modification of 
Ford Common Stock in connection with a reorganization, restructuring, 
recapitalization, merger, or similar corporate transaction, provided 
that each holder of Ford Common Stock is treated in an identical 
manner; (d) the holding by the Ford VEBA Plan of the Securities in the 
Ford Employer Security Sub-Account of the Ford Separate Retiree Account 
of the VEBA Trust; (e) the deferred payment of any amounts due under 
New Note B by Ford pursuant to the terms thereunder; and (f) the 
disposition of the Securities by the Independent Fiduciary.
---------------------------------------------------------------------------

    \2\ The Notice incorporates by reference information contained 
in the Notice of Proposed Individual Exemption Involving Ford Motor 
Company Located in Detroit, MI, 74 FR 64716, December 8, 2009 (the 
Proposed PTE) and PTE 2010-08. For ease of reference, unless 
otherwise specified herein, all capitalized terms used in this 
Summary have the meaning set forth in PTE 2010-08.
    \3\ The term ``Securities'' includes New Note A and New Note B, 
the Warrants, the LLC Interests, any Payment Shares received under 
New Note B, and any additional shares of Ford Common Stock acquired 
in accordance with other transactions described in Sections I(a)(2) 
and (3) of the proposed exemption, as such terms are defined in 
Section VII of the proposed exemption.
---------------------------------------------------------------------------

    In addition, PTE 2010-08 provides relief from the restrictions of 
sections 406(a)(1)(A), 406(b)(1), and 406(b)(2) of ERISA for the sale 
of Ford Common Stock or Warrants held by the Ford VEBA Plan to Ford in 
accordance with the Right of First Offer or a Ford self-tender under 
the Securityholder and Registration Rights Agreement.
    Furthermore, PTE 2010-08 provides relief from the restrictions of 
sections 406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA, 
for (a) the extension of credit or transfer of assets by Ford, the Ford 
Retiree Health Plan, or the Ford VEBA Plan in payment of a benefit 
claim that was the responsibility and legal obligation of one of the 
other aforementioned parties; (b) the reimbursement by Ford, the Ford 
Retiree Health Plan, or the Ford VEBA Plan, of a benefit claim that was 
paid by another of the aforementioned parties, which was not legally 
responsible for the payment of such claim, plus interest; (c) the 
retention of an amount by Ford until payment to the Ford VEBA Plan 
resulting from an overaccrual of pre-transfer expenses attributable to 
the TAA or the retention of an amount by the Ford VEBA Plan until 
payment to Ford resulting from an underaccrual of pre-transfer expense 
attributable to the TAA; and (d) the Ford VEBA Plan's payment to Ford 
of an amount equal to any underaccrual by Ford of pre-transfer expenses 
attributable to the TAA or the payment by Ford to the Ford VEBA Plan of 
an amount equal to any overaccrual by Ford of pre-transfer expenses 
attributable to the TAA.
    Finally, PTE 2010-08 provides relief from the restrictions of 
sections 406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA 
for the return to Ford of assets deposited or transferred to the Ford 
VEBA Plan by mistake, plus interest.

Summary of Facts and Representations \4\
---------------------------------------------------------------------------

    \4\ The Summary of Facts and Representations (the Summary) is 
based on the Applicant's representations and does not reflect the 
views of the Department.
---------------------------------------------------------------------------

1. Background

    The Department originally granted PTE 2010-08 in response to an 
application for exemption submitted by Ford on July 24, 2009 (the 
Application). The Application was an integral part of the wholesale 
restructuring of retiree health care benefits by the three major 
domestic car companies, which sought to contain skyrocketing healthcare 
costs and settle lawsuits brought by the International Union, United 
Automobile, Aerospace and Agricultural Implement Workers of America 
(the UAW) and the companies' respective classes of retirees.\5\
---------------------------------------------------------------------------

    \5\ See UAW v. Ford Motor Company, No. 07-14845, 2008 WL 4104329 
(E.D. Mich. August 29, 2008); UAW v. Gen. Motors Corp., No. 07-CV-
14074-DT, 2008 WL 2968408 (E.D. Mich. July 31, 2008); UAW v. 
Chrysler, No. 07-CV-14310, 2008 WL 2980046 (E.D. Mich. July 31, 
2008).
---------------------------------------------------------------------------

    Pursuant to a court approved class wide settlement (the 2008 
Settlement Agreement) in the case of Int'l Union, UAW, et al. v. Ford 
Motor Company, on January 1, 2010, the Ford VEBA Plan assumed the 
responsibility for providing post-retirement medical benefits for a 
class of retirees of Ford (the Class) and a group of Ford active 
employees (the Covered Group) eligible for retiree benefits.\6\ 
Pursuant to the 2008 Settlement Agreement, the Ford VEBA Plan would be 
funded by the VEBA Trust, which would be responsible for the payment of 
post-retirement medical benefits to members of the Class and the 
Covered Group as of January 1, 2010.\7\ Ford agreed to transfer assets 
to the VEBA Trust on behalf of the Ford VEBA Plan with an estimated 
worth of $13.2 billion, based on a present value as of December 31, 
2007, designed to provide retiree health benefits for members of the 
Class and the Covered Group for an indefinite duration.\8\
---------------------------------------------------------------------------

    \6\ See Ford Motor Co., 2008 WL 4104329.
    \7\ For a full description of the VEBA Trust, see pages 64718-
64719 of the Proposed PTE.
    \8\ See Ford Motor Co., 2008 WL 4104329.
---------------------------------------------------------------------------

    On July 23, 2009, Ford, the UAW, and counsel for the Class amended 
the 2008 Settlement Agreement, effective November 9, 2009 (as amended, 
the 2009 Settlement Agreement), to provide that, inter alia, Ford could 
contribute Ford Common Stock to the VEBA Trust to satisfy up to 
approximately 50% of certain future obligations to the VEBA Trust on 
behalf of the Ford VEBA Plan.\9\ In accordance with the terms of the 
2009 Settlement Agreement, on December 31, 2009, Ford transferred the 
Securities to the Ford Employer Security Sub-Account, the sub-account 
established and maintained in the Ford Separate Retiree Account of the 
VEBA Trust to hold Securities on behalf of the Ford VEBA Plan and any 
proceeds from the disposition of any such Security.\10\
---------------------------------------------------------------------------

    \9\ See Int'l Union, UAW, et al. v. Ford Motor Company, Civil 
Action No. 07-14845, (E.D. Mich. November 9, 2009) (Doc.  
71, Order and Final J.).
    \10\ For a full description of the assets transferred to the 
VEBA Trust under the 2009 Settlement Agreement, see pages 64720-
64721 of the Proposed PTE and pages 14195-14197, 14199, and 14200-
14201 of PTE 2010-08.
---------------------------------------------------------------------------

2. The New Notes

    Among the Securities transferred to the VEBA Trust and held in the 
Ford Employer Security Sub-Account were the New Notes, consisting of 
New Note A and New Note B, which were structured to provide a series of 
payments over 13 years. New Note A was issued in the principal amount 
of $6,705,470,000, and New Note B was issued in the principal amount of 
$6,511,850,000. The New Notes were to be non-interest bearing and 
mature on June 30, 2022.\11\
---------------------------------------------------------------------------

    \11\ For a full description of the New Notes, see pages 64721-
64722 of the Proposed PTE and pages 14195-14196 of PTE 2010-08.
---------------------------------------------------------------------------

    Whereas New Note A was payable only in cash, under the 2009 
Settlement Agreement, New Note B was to be payable in either cash or, 
upon the satisfaction of certain conditions, shares of Ford Common 
Stock designated as ``Payment Shares'' of equal value. The number of 
Payment Shares payable would be determined based on the volume-weighted 
average selling price per share (VWAP) of Ford Common Stock for the 30 
trading-day period ending on the second business day prior to the 
relevant payment date. In addition, Payment Shares received by the VEBA 
Trust in lieu of cash pursuant to New Note B would be subject to 
certain registration rights and transfer restrictions, as described in 
the Proposed PTE.

[[Page 14076]]

    Ford made its first scheduled payments in respect of the New Notes 
on December 31, 2009, including a partial prepayment of New Note A in 
the amount of $500,000,000.\12\ After Ford made such payments, the 
payment schedule under the New Notes, beginning with the June 30, 2010 
payment date, became the following:
---------------------------------------------------------------------------

    \12\ Pursuant to the terms of New Note A, Ford's partial pre-
payment of New Note A reduced proportionately each future principal 
payment on New Note A, beginning with the June 30, 2010 payment.

----------------------------------------------------------------------------------------------------------------
              Payment date                         Payment of Note A                   Payment of Note B
----------------------------------------------------------------------------------------------------------------
June 30, 2010...........................  $249.45 million...................  $609.95 million.
June 30, 2011...........................  $249.45 million...................  $609.95 million.
June 30, 2012...........................  $584.06 million...................  $654 million.
June 30, 2013...........................  $584.06 million...................  $654 million.
June 30, 2014...........................  $584.06 million...................  $654 million.
June 30, 2015...........................  $584.06 million...................  $654 million.
June 30, 2016...........................  $584.06 million...................  $654 million.
June 30, 2017...........................  $584.06 million...................  $654 million.
June 30, 2018...........................  $584.06 million...................  $654 million.
June 30, 2019...........................  $22.36 million....................  $26 million.
June 30, 2020...........................  $22.36 million....................  $26 million.
June 30, 2021...........................  $22.36 million....................  $26 million.
June 30, 2022...........................  $22.36 million....................  $26 million.
----------------------------------------------------------------------------------------------------------------

    As noted above, Ford could prepay in cash either or both of the New 
Notes in whole or in part. For prepayments in whole, the payment on 
each payment date would equal the corresponding amounts set forth as a 
schedule to the applicable New Note. In the event of any partial 
prepayment, future payments would be determined on a basis that 
provided the economically equivalent present value and duration to the 
VEBA Trust using a discount rate of 9% per annum.

3. The Holding, Management and Disposition of the Ford Securities Held 
in the Ford Employer Security Sub-Account

    As a condition of the Department's granting relief under PTE 2010-
08 for the transactions described above, the Committee of the Ford VEBA 
Plan was required to retain an Independent Fiduciary to manage the 
Securities, including the New Notes, held in the Ford Employer Security 
Sub-Account.\13\ To satisfy such condition, and in accordance with the 
Trust Agreement, the Committee appointed Independent Fiduciary 
Services, Inc. (IFS) to represent the interests of the Ford VEBA Plan 
for the duration of the Ford VEBA Plan's holding of the New Notes or 
any Ford security in the Ford Employer Security Sub-Account of the VEBA 
Trust.
---------------------------------------------------------------------------

    \13\ For a full description of the rights and obligations of the 
Independent Fiduciary, see pages 64727-64728 of the Proposed PTE and 
pages 14197-14201 of PTE 2010-08.
---------------------------------------------------------------------------

    In accordance with PTE 2010-08, IFS may also authorize the 
disposition, by the trustee of the VEBA Trust, State Street Bank and 
Trust Company (the Trustee), of any Securities, including the New 
Notes, once IFS determines, at the time of the transaction, that the 
transaction is feasible, in the interest of the Ford VEBA Plan, and 
protective of the participants and beneficiaries of the Ford VEBA Plan. 
Furthermore, IFS must discharge its duties consistent with the terms of 
the Ford VEBA Plan, the Trust Agreement, and the UAW Retiree Medical 
Benefits Trust Independent Fiduciary Agreement Relating to Ford Motor 
Company, dated as of December 1, 2009, between the VEBA Trust and IFS, 
as amended by Amendment Number 1 thereto effective June 25, 2010 (the 
Independent Fiduciary Agreement), and any other documents governing the 
Securities, such as the Securityholder and Registration Rights 
Agreement, and any successors to those agreements.
    As the Independent Fiduciary representing the Ford VEBA Plan's 
interest in the Ford Employer Security Sub-Account of the VEBA Trust, 
IFS has had sole discretionary authority relating to the holding, 
ongoing management and disposition of the Securities pursuant to the 
Trust Agreement and the Independent Fiduciary Agreement. In that 
regard, on April 6, 2010, IFS, on behalf of the Ford VEBA Plan, 
completed the sale in a secondary public offering of all 362,391,305 
Warrants held by the VEBA Trust. The offering was priced at $5.00 per 
Warrant through a modified Dutch auction that took place on March 30, 
2010. The aggregate net proceeds to the VEBA Trust from the offering 
were approximately $1.78 billion.
    IFS states that, after the sale of the Warrants, it began looking 
for ways to further reduce the amount of Securities that the Ford VEBA 
Plan held, which still equaled as much as 42.8% of the assets in the 
Ford Separate Retiree Account. Accordingly, IFS met with 
representatives from leading investment banking firms to discuss 
possible approaches to the marketing of New Note A and of any shares of 
Ford Common Stock that the VEBA Trust might receive from Ford on June 
30, 2010 in its annual principal payment on New Note B. IFS states 
that, as the June 30th payment date approached, it was aware that 
conditions in the credit markets had deteriorated as a result of 
uncertainties surrounding European nations' sovereign debt and other 
market factors.
    According to IFS, it also approached Ford, in order to inform the 
company of its desire to monetize the New Notes, particularly New Note 
A, and prepare for the possibility of receiving the June 30th payment 
of New Note B in Payment Shares. IFS represents that Ford then 
indicated that it would be interested in purchasing a substantial 
portion of New Note A, provided that Ford could obtain additional 
prepayment rights under New Note B. After considerable negotiation, 
during which it consulted extensively with its legal counsel, Proskauer 
Rose LLP (Proskauer Rose), and its financial advisors, including Sutter 
Securities Incorporated (Sutter), IFS states that it entered into an 
agreement, dated as of June 25, 2010 (the Note Agreement), by and among 
Ford, Ford Motor Credit Company LLC (Ford Credit), and the VEBA Trust, 
under which the VEBA Trust would sell New Note A to Ford and Ford 
Credit and New Note B would be amended to add provisions permitting 
Ford to prepay all or a portion of New Note B, in each case under the 
terms and conditions set forth

[[Page 14077]]

therein, described in further detail below.

4. Amendment of PTE 2010-08

    Ford, on behalf of IFS, the Trustee, and Ford Credit, has requested 
a new exemption that would amend PTE 2010-08, effective as of June 25, 
2010, which is the effective date of the Note Agreement. The amendment 
would extend the exemptive relief provided under PTE 2010-08 to (a) the 
execution of the Note Agreement by and between Ford, Ford Credit, and 
the VEBA Trust, acting by and through IFS; and (b) the amendment of New 
Note B to provide for a new prepayment right pursuant to the Note 
Agreement (the Subject Transactions).
    The Applicant states that the VEBA Trust's entering into the Note 
Agreement with Ford and Ford Credit and simultaneously amending New 
Note B to provide Ford additional prepayment rights in exchange for 
Ford's commitment to purchase the outstanding balance under New Note A 
and to make the June 30, 2010 scheduled principal payment under New 
Note B in cash, could be viewed as the sale or exchange of property 
between the Ford VEBA Plan and Ford if the new prepayment right is 
deemed to be ``property'' and a ``sale or exchange'' is deemed to occur 
for purposes section 406(a)(1)(A) of the Act, which prohibits such 
transactions. As a result, the Applicant explains that the Subject 
Transactions could be deemed to be a prohibited exchange of property 
under section 406(a)(1)(A). To facilitate this relief, the Applicant 
has requested that the Covered Transactions set forth in Section I(a) 
of PTE 2010-08 be modified to incorporate the Subject Transactions 
described above, retroactive to June 25, 2010.
    Furthermore, the Applicant is aware that the amendment of New Note 
B pursuant to the Note Agreement may constitute a material change of 
New Note B, and as such, New Note B, as amended, may not be covered by 
PTE 2010-08.\14\ Therefore, the Applicant has requested exemptive 
relief retroactively effective to June 25, 2010 for the holding of New 
Note B, as amended, by the Ford VEBA Plan. To facilitate this relief, 
the Applicant has requested that the definition of ``New Note B'' in 
PTE 2010-08 be amended to incorporate the terms of the amendment of New 
Note B pursuant to the Note Agreement, also retroactive to June 25, 
2010.
---------------------------------------------------------------------------

    \14\ For a more detailed description of the exemptive relief 
granted for the acquisition and holding of New Note B, refer to 
pages 64724-64726 of the Proposed PTE and pages 14196-14197 of PTE 
2010-08.
---------------------------------------------------------------------------

    After considering the Applicants' request, the Department has 
determined to propose an amendment to PTE 2010-08. The proposed 
amendment has been requested in an application filed by the Ford Motor 
Company (Ford or the Applicant) pursuant to section 408(a) of ERISA and 
in accordance with the procedures set forth in 29 CFR 2570, Subpart B 
(55 FR 32836, August 10, 1990). Effective December 31, 1978, section 
102 of Reorganization Plan No. 4 of 1978, (43 FR 47713, October 17, 
1978) transferred the authority of the Secretary of the Treasury to 
issue exemptions of the type requested to the Secretary of Labor. 
Accordingly, this proposed amendment is being issued solely by the 
Department.

5. The Note Agreement

    On June 25, 2010, Ford and Ford Credit entered into the Note 
Agreement with the VEBA Trust, acting by and through IFS. The Note 
Agreement generally provides for Ford's agreement to purchase New Note 
A and pay the June 30, 2010 principal payment of New Note B in cash, in 
exchange for the VEBA Trust's agreement to amend New Note B to grant 
additional prepayment rights for Ford.
    Pursuant to the Note Agreement, Ford made the June 30, 2010 New 
Note A principal payment of $249,452,786 to the VEBA Trust in cash, as 
scheduled under the terms of such note and without any discount. 
Furthermore, the Applicant represents that, in compliance with the Note 
Agreement, on June 30, 2010, Ford made the scheduled New Note B 
principal payment of $609,950,000 to the VEBA Trust in cash and did not 
elect to make such payment in Payment Shares, as otherwise permitted by 
the terms of New Note B.\15\
---------------------------------------------------------------------------

    \15\ As described above, but for the Note Agreement, the value 
formula contained in New Note B allows Ford, in a declining market 
for its equity, to pay its annual principal payments on New Note B 
at a discount if the payments are made in Payment Shares (see page 
64722 of the Proposed PTE).
---------------------------------------------------------------------------

    In addition, on June 30, 2010, following Ford's payment of 
principal under the New Notes, Ford and Ford Credit together purchased 
the remaining outstanding principal amount of New Note A 
($2,962,066,894 on a present value basis) at a price of 98% of such 
remaining principal amount.\16\ In this regard, Ford purchased 
$1,635,536,281.76 of the present value of the remaining outstanding 
principal amount for a price of $1,602,825,556.12 and Ford Credit 
purchased $1,326,530,612.24 of the present value of the remaining 
outstanding principal amount for a price of $1.3 billion.
---------------------------------------------------------------------------

    \16\ The Applicant believes such purchase is covered by PTE 
2010-08 provided the conditions of the exemption have been 
satisfied. The Department concurs. Thus, the proposed amendment 
described herein relates solely to New Note B.
---------------------------------------------------------------------------

    The Applicant further represents that, pursuant to the Note 
Agreement, Section 2(g) of New Note B was amended to provide Ford a 
three-year right beginning in July 2010 to prepay in cash from time to 
time, on the last business day of each month except May and June, all 
or a portion of the present value of the outstanding principal amount 
of New Note B ($3,622,050,000 on a present value basis as of June 30, 
2010, following Ford's required annual payment of principal) \17\ at a 
5 percent discount for prepayments made prior to January 1, 2012 and at 
a 4 percent discount for prepayments made from January 1, 2012 until 
the last business day in July 2013. Under the terms of New Note B, as 
amended, Ford must provide 10 days' prior written notice to IFS of its 
intention to prepay all or a portion of New Note B.\18\
---------------------------------------------------------------------------

    \17\ Based on information provided by the Committee to IFS, as 
of June 30, 2010, the fair market value of New Note B, as amended, 
was $3.016 billion, representing approximately 20.7% of the 
aggregate fair market value of the total assets of the Ford VEBA 
Plan, or $14.596 billion. According to the Applicant, the VEBA Trust 
does not have a recent annual report on which to base the fair 
market value of the Securities due to the fact that the assets were 
transferred to the VEBA Trust on behalf of the Ford VEBA Plan on 
December 31, 2009. As a result, the fair market value is based on 
the June 30, 2010 payment date under the New Notes, consistent with 
other references to fair market value of assets held by the VEBA 
Trust. Similarly, the VEBA Trust does not have a recent financial 
statement.
    \18\ As described above, prior to the amendment by the Note 
Agreement, New Note B, by its terms, permitted Ford, without prior 
notice, to prepay such note at 100 percent of the scheduled 
prepayment amount on each annual June 30th scheduled principal 
payment date.
---------------------------------------------------------------------------

6. Fairness Opinion

    The Applicant states that IFS received a fairness opinion, dated 
June 24, 2010, from Sutter with respect to the transactions. Pursuant 
to terms of the Note Agreement, under which Ford agreed to pay 50% (but 
not in excess of $250,000) of the fee payable to Sutter for preparation 
of the fairness opinion, Ford paid $200,000 of the total fee payable to 
Sutter of $400,000 and the VEBA Trust paid $200,000.

7. Other Written Agreements

    In addition, in connection with the Note Agreement, Ford and IFS 
entered into an Indemnification Agreement dated as of June 25, 2010 
pursuant to which Ford may be required to

[[Page 14078]]

indemnify IFS for claims arising from Ford's exercise of its prepayment 
right under New Note B, as amended, if an exemption with retroactive 
application as of the effective date of the Note Agreement (i.e., June 
25, 2010) is not granted. Ford, the VEBA Trust and IFS also entered 
into a standard Confidentiality Agreement on June 25, 2010 in order to 
facilitate the transaction and the exchange of certain confidential, 
nonpublic information related to the transactions contemplated in the 
Note Agreement.

8. Determinations of the Independent Fiduciary

    As noted above, PTE 2010-08 provides that the Independent Fiduciary 
of the Ford VEBA Plan may authorize the disposition, by the Trustee, of 
the Securities once it determines that the transaction is feasible, in 
the interest of the Ford VEBA Plan, and protective of the participants 
and beneficiaries of the Ford VEBA Plan. In this regard, IFS, as the 
Independent Fiduciary, with the assistance of Sutter and Proskauer 
Rose, concluded that the Subject Transactions were administratively 
feasible, in the interest of, and protective of the Ford VEBA Plan and 
its participants and beneficiaries. Furthermore, IFS determined that 
reducing the exposure of the Ford Separate Retiree Account to Ford-
specific risk through a fair transaction that would generate cash to be 
invested in a more diversified portfolio would be consistent with the 
diversification aspect of prudence set forth in section 404 of the Act.
    IFS, together with Sutter, ascertained that the price paid for New 
Note A (i.e., 98% of par) pursuant to the Note Agreement was at least 
equal to the net proceeds the VEBA Trust would likely have achieved 
through a sale of New Note A to unrelated third parties. IFS resolved 
that there was no way to reliably predict if or when market conditions 
would improve to the point of allowing the VEBA Trust to realize a 
better price on New Note A. According to IFS, it realized that, under 
its original terms, the potential value of New Note A was limited by 
Ford's right to prepay all or a portion of New Note A at par each June 
30.
    Furthermore, IFS found that it would be advantageous to the Ford 
VEBA Plan to secure Ford's agreement to make 100% of the scheduled June 
30, 2010 principal payment on New Note B in cash. As described above, 
under New Note B, Ford could have made its June 30th payment with 
Payment Shares in an amount based on Ford Common Stock's VWAP for the 
30 trading days ending June 28. IFS determined that, in light of the 
downward trend during the preceding 30-trading day period in Ford's 
common stock price, the number of shares that Ford could have delivered 
would have had a market value (based on the stock's closing price on 
June 29) significantly less than the amount otherwise due in cash. 
Thus, by guaranteeing that the June 30, 2010, payment on New Note B was 
made in cash, IFS effectively saved the VEBA Trust $79 million.\19\ IFS 
was also cognizant of the fact that Ford's payment of cash allowed the 
VEBA Trust to avoid the transaction costs and market risk associated 
with monetizing any Payment Shares that could have been delivered in 
lieu of cash.
---------------------------------------------------------------------------

    \19\ Given the VWAP for the 30 trading days ending June 28, 2010 
of $11.35 per share, Ford could have made New Note B's principal 
installment payment of $609,950,000 with 53,740,088 shares of Ford 
Common Stock with a market value based on the stock's June 29, 2010 
closing price of $9.88, of only $530,952,071, a difference of 
$79,000,000. This amount fully offsets the 2% discount on the price 
that Ford and Ford Credit paid for New Note A.
---------------------------------------------------------------------------

    IFS also made a determination that the prepayment discount prices 
for New Note B payable by Ford during the three-year period ending July 
31, 2013 (i.e., 95% of par \20\ through 2011 and 96% of par in 2012 and 
2013) would likely be equal to, or greater than, the fair market value 
of New Note B. In this regard, IFS considered the possibility that 
principal payments of New Note B could be made in Payment Shares with a 
market value less than the scheduled principal payment if it were made 
in cash and the fact that, by its terms, New Note B is not transferable 
without the sole written consent of Ford. Moreover, it was important to 
IFS that any prepayment of principal would be made in cash, thus 
allowing the VEBA Trust to avoid the transaction costs and market risk 
associated with having to monetize shares of Ford Common Stock that 
could be delivered in payment of future principal payments.
---------------------------------------------------------------------------

    \20\ Pursuant to the Note Agreement, ``par'' is calculated by 
discounting the ``Prepayment Amount'' (as defined in New Note B) 
payable on the then next scheduled ``Payment Date'' (as defined in 
New Note B) at a rate per annum of 9% from the then next scheduled 
Payment Date back to such prepayment date.
---------------------------------------------------------------------------

    IFS also determined that the amendment of New Note B was protective 
of the Ford VEBA Plan and its participants and beneficiaries in and of 
itself. As described above, the newly provided prepayment options for 
New Note B must be in cash and on designated payment dates, and Ford 
must give the VEBA Trust advance notice of its intent to make any such 
prepayments. By contrast, IFS was aware that the original terms of New 
Note B did not require any advance notice of Ford's intent to make a 
prepayment, nor did they require that any prepayment must be in cash.
    Finally, IFS approved of the amendment, because under the new 
prepayment terms no additional prepayment opportunity could be 
exercised during the months of May and June, foreclosing the 
possibility of Ford's ``gaming'' the VWAP calculation feature of 
Payment Share calculation to deliver less value to the VEBA Trust upon 
a prepayment.\21\ IFS explains that it did not want to modify the 
requirement already in New Note B that a prepayment of principal on 
June 30 be at 100% of the outstanding principal. Thus, IFS notes, by 
barring Ford from exercising a prepayment right at 95% or 96% once the 
VWAP calculation period started, it assured that, at that point, Ford 
could only pay the principal installment due on June 30 at a discount 
if Ford stock declined during the VWAP calculation period (the discount 
would be limited to the result produced by the VWAP calculation). 
According to IFS, this also meant that Ford could not use the 95% or 
96% discount available outside the VWAP calculation period to make a 
discounted prepayment during the calculation period that would have the 
effect of reducing the principal installment due in cash at 100% on 
June 30.
---------------------------------------------------------------------------

    \21\ If not for such prohibition, the dates on which such notice 
of prepayment at the end of May and June would have fallen are 
within the periods in which the VWAP of Ford stock is calculated for 
purposes of determining the number of shares Ford would have to pay 
on the principal installment immediately following June 30.
---------------------------------------------------------------------------

9. Appropriateness of Exemptive Relief

    Ford suggests that, if exemptive relief is denied, the VEBA Trust 
would lose the economic benefits relating to the prepayment of New Note 
B. Ford explains that, under Section 5 of the Note Agreement, if an 
exemption for the amendment of New Note B is not granted on or prior to 
December 31, 2011, or such later date as agreed to in writing by the 
parties, or the Department indicates that the exemption will not be 
granted, then the amendment of New Note B will be deemed null and void 
from that date. Although Ford recognizes that the parties, on behalf of 
the VEBA Trust, could agree in the future to specific prepayment terms, 
the Note Agreement and the amendment of New Note B, both of which were 
required in order for the VEBA Trust to receive the benefit of the 
other provisions of the Note Agreement, created an opportunity for Ford 
to prepay New Note B in cash on set dates, at a price certain that IFS 
has

[[Page 14079]]

concluded is equal to, or greater than, the fair market value of New 
Note B. Thus, according to Ford, a denial of exemptive relief would 
decrease the likelihood that Ford would make such cash prepayments on 
New Note B and reduce the VEBA Trust's exposure to Ford-specific risk.
    Finally, Ford notes that IFS and its advisors negotiated the Note 
Agreement on behalf of the VEBA Trust in an adversarial process with 
Ford. In doing so, IFS states in its analysis that it was able to 
immediately and significantly reduce the VEBA Trust's exposure to Ford-
specific risk and give the VEBA Trust the opportunity to invest the 
cash proceeds of approximately $3.76 billion in a diversified 
portfolio. According to IFS, but for the Subject Transactions, the only 
cash the VEBA Trust was assured of receiving on June 30, 2010 was 
approximately $250 million (the amount of the principal payment due on 
New Note A), with no assurance of additional cash until June 30, 2011.

10. Description of Revisions to the Operative Language of PTE 2010-08

    The proposed amendment generally modifies the operative language of 
PTE 2010-08 to take into account the execution of the Note Agreement 
and the amendment of New Note B. Section I(a) of PTE 2010-8 has been 
amended to add new paragraph (7) as follows: ``The amendment of New 
Note B pursuant to the execution of the Note Agreement.'' Thus, the 
modification extends the exemptive relief provided by PTE 2010-08 to 
the VEBA Trust's execution of the Note Agreement in exchange for Ford's 
June 30, 2010 prepayment of New Note A and June 30, 2010 payment of New 
Note B in cash.
    In the Definitions, the proposed amendment also makes a 
modification to the term ``New Note B,'' in relettered Section VII(q), 
to include the descriptive clauses ``unless prepaid,'' and ``as amended 
by the Note Agreement effective June 25, 2010,'' in order to ensure 
that New Note B, as amended by the Note Agreement effective June 25, 
2010, is included in the exemptive relief afforded under PTE 2010-08.
    Furthermore, Section VII of PTE 2010-08, which sets forth the 
Definitions, has been modified by inserting new paragraph (h) which 
defines the term ``Ford Credit'' as referred to in the Note Agreement; 
inserting new paragraph (k) which defines the term IFS as referred to 
in the Note Agreement; inserting new paragraph (r) to define and 
describe the term ``Note Agreement'' to reflect changes made to the 
operative language of PTE 2010-08; and relettering the remaining 
paragraphs, accordingly.
    Finally, the Effective Date in new Section VIII is modified to 
provide that the exemption, if granted, will be effective as of 
December 31, 2009, except for Section I(a)(7), which will be effective 
as of June 25, 2010, the effective date of the Note Agreement and the 
amendment of New Note B. In addition, the flush language of Section 
I(a), (b), (c), and (d) has been modified to omit references to the 
December 31, 2009 effective date of exemptive relief in order to avoid 
confusion.

Notice to Interested Persons

    Notice of the proposed exemption will be mailed by first class mail 
to each member of the Class and the Covered Group, as such terms are 
defined in the 2009 Settlement Agreement. Such notice will be given 
within 21 days of the publication of the notice of pendency in the 
Federal Register. The notice will contain a copy of the notice of 
proposed exemption, as published in the Federal Register, and a 
supplemental statement, as required pursuant to 29 CFR 2570.43(b)(2). 
The supplemental statement will inform interested persons of their 
right to comment on and/or to request a hearing with respect to the 
pending exemption. Written comments and hearing requests are due within 
51 days of the publication of the proposed exemption in the Federal 
Register.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of ERISA does not relieve a fiduciary or other 
party in interest from certain other provisions of ERISA, including any 
prohibited transaction provisions to which the exemption does not apply 
and the general fiduciary responsibility provisions of section 404 of 
ERISA, which, among other things, require a fiduciary to discharge his 
duties respecting the plan solely in the interest of the participants 
and beneficiaries of the plan and in a prudent fashion in accordance 
with section 404(a)(1)(b) of ERISA;
    (2) Before an exemption may be granted under section 408(a) of 
ERISA, the Department must find that the exemption is administratively 
feasible, in the interests of the plan and of its participants and 
beneficiaries, and protective of the rights of participants and 
beneficiaries of the plan;
    (3) The proposed exemption, if granted, will be supplemental to, 
and not in derogation of, any other provisions of ERISA, including 
statutory or administrative exemptions and transitional rules. 
Furthermore, the fact that a transaction is subject to an 
administrative or statutory exemption is not dispositive of whether the 
transaction is in fact a prohibited transaction; and
    (4) The proposed exemption, if granted, will be subject to the 
express condition that the material facts and representations contained 
in the application are true and complete, and that the application 
accurately describes all material terms of the transaction which is the 
subject of the exemption.

Proposed Exemption

    Based on the facts and representations set forth in the 
application, the Department is considering granting the requested 
exemption under the authority of section 408(a) of the Act and in 
accordance with the procedures set forth in 29 CFR part 2570, subpart B 
(55 FR 32836, 32847, August 10, 1990), as follows:

SECTION I. Covered Transactions

    (a) If the exemption is granted, the restrictions of sections 
406(a)(1)(A), 406(a)(1)(B), 406(a)(1)(E), 406(a)(2), 406(b)(1), 
406(b)(2) and 407(a) of ERISA shall not apply to the following 
transactions:
    (1) The acquisition by the UAW Ford Retirees Medical Benefits Plan 
(the Ford VEBA Plan) and its funding vehicle, the UAW Retiree Medical 
Benefits Trust (the VEBA Trust) of: (i) The LLC Interests; (ii) New 
Note A; (iii) New Note B (together with New Note A, the New Notes); and 
(iv) Warrants, transferred by Ford and deposited in the Ford Employer 
Security Sub-Account of the Ford Separate Retiree Account of the VEBA 
Trust.
    (2) The acquisition by the Ford VEBA Plan of shares of Ford Common 
Stock pursuant to Ford's right to settle its payment obligations under 
New Note B in shares of Ford Common Stock (i.e., Payment Shares), 
consistent with the 2009 Settlement Agreement;
    (3) The acquisition by the Ford VEBA Plan of shares of Ford Common 
Stock pursuant to (i) the Independent Fiduciary's exercise of all or a 
pro rata portion of the Warrants, consistent with the 2009 Settlement 
Agreement and (ii) an adjustment, substitution, conversion, or other 
modification of Ford Common Stock in connection with a reorganization, 
restructuring, recapitalization, merger, or similar corporate 
transaction, provided that each holder of Ford Common Stock is treated 
in an identical manner;

[[Page 14080]]

    (4) The holding by the Ford VEBA Plan of the aforementioned 
Securities in the Ford Employer Security Sub-Account of the Ford 
Separate Retiree Account of the VEBA Trust, consistent with the 2009 
Settlement Agreement;
    (5) The deferred payment of any amounts due under New Note B by 
Ford pursuant to the terms thereunder;
    (6) The disposition of the Securities by the Independent Fiduciary; 
and
    (7) The amendment of New Note B pursuant to the execution of the 
Note Agreement.
    (b) If the exemption is granted, the restrictions of sections 
406(a)(1)(A), 406(b)(1), and 406(b)(2) of ERISA shall not apply to the 
sale of Ford Common Stock or Warrants held by the Ford VEBA Plan to 
Ford in accordance with the Right of First Offer or a Ford self-tender 
under the Securityholder and Registration Rights Agreement.
    (c) If the exemption is granted, the restrictions of sections 
406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA shall not 
apply to:
    (1) The extension of credit or transfer of assets by Ford, the Ford 
Retiree Health Plan, or the Ford VEBA Plan in payment of a benefit 
claim that was the responsibility and legal obligation, under the terms 
of the applicable plan documents, of one of the other parties listed in 
this paragraph;
    (2) The reimbursement by Ford, the Ford Retiree Health Plan, or the 
Ford VEBA Plan, of a benefit claim that was paid by another party 
listed in this paragraph, which was not legally responsible for the 
payment of such claim, plus interest;
    (3) The retention of an amount by Ford until payment to the Ford 
VEBA Plan resulting from an overaccrual of pre-transfer expenses 
attributable to the TAA or the retention of an amount by the Ford VEBA 
Plan until payment to Ford resulting from an underaccrual of pre-
transfer expense attributable to the TAA; and
    (4) The Ford VEBA Plan's payment to Ford of an amount equal to any 
underaccrual by Ford of pre-transfer expenses attributable to the TAA 
or the payment by Ford to the Ford VEBA Plan of an amount equal to any 
overaccrual by Ford of pre-transfer expenses attributable to the TAA.
    (d) If the exemption is granted, the restrictions of sections 
406(a)(1)(B), 406(a)(1)(D), 406(b)(1), and 406(b)(2) of ERISA shall not 
apply to the return to Ford of assets deposited or transferred to the 
Ford VEBA Plan by mistake, plus interest.

SECTION II. Conditions Applicable to Section I(a) and I(b)

    (a) The Committee appoints a qualified Independent Fiduciary to act 
on behalf of the Ford VEBA Plan for all purposes related to the 
transfer of the Securities to the Ford VEBA Plan for the duration of 
the Ford VEBA Plan's holding of the Securities. Such Independent 
Fiduciary will have sole discretionary responsibility relating to the 
holding, ongoing management and disposition of the Securities, except 
for the voting of the Ford Common Stock. The Independent Fiduciary has 
determined or will determine, before taking any actions regarding the 
Securities, that each such action or transaction is in the interest of 
the Ford VEBA Plan.
    (b) In the event that the same Independent Fiduciary is appointed 
to represent the interests of one or more of the other plans comprising 
the VEBA Trust (i.e., the UAW Chrysler Retiree Medical Benefits Plan 
and/or the UAW General Motors Company Retiree Medical Benefits Plan) 
with respect to employer securities deposited into the VEBA Trust, the 
Committee takes the following steps to identify, monitor and address 
any conflict of interest that may arise with respect to the Independent 
Fiduciary's performance of its responsibilities:
    (1) The Committee appoints a ``conflicts monitor'' to: (i) Develop 
a process for identifying potential conflicts; (ii) regularly review 
the Independent Fiduciary reports, investment banker reports, and 
public information regarding the companies, to identify the presence of 
factors that could lead to a conflict; and (iii) further question the 
Independent Fiduciary when appropriate.
    (2) The Committee adopts procedures to facilitate prompt 
replacement of the Independent Fiduciary if the Committee in its sole 
discretion determines such replacement is necessary due to a conflict 
of interest.
    (3) The Committee requires the Independent Fiduciary to adopt a 
written policy regarding conflicts of interest. Such policy shall 
require that, as part of the Independent Fiduciary's periodic reporting 
to the Committee, the Independent Fiduciary includes a discussion of 
actual or potential conflicts identified by the Independent Fiduciary 
and options for avoiding or resolving the conflicts.
    (c) The Independent Fiduciary authorizes the trustee of the Ford 
VEBA Plan to dispose of the Ford Common Stock (including any Payment 
Shares or any shares of Ford Common Stock acquired pursuant to exercise 
of the Warrants), the LLC Interests, the New Notes, or exercise the 
Warrants, only after the Independent Fiduciary determines, at the time 
of the transaction, that the transaction is feasible, in the interest 
of the Ford VEBA Plan, and protective of the participants and 
beneficiaries of the Ford VEBA Plan.
    (d) The Independent Fiduciary negotiates and approves on behalf of 
the Ford VEBA Plan any transactions between the Ford VEBA Plan and any 
party in interest involving the Securities that may be necessary in 
connection with the subject transactions (including but not limited to 
the registration of the Securities contributed to the Ford VEBA Plan).
    (e) Any contract between the Independent Fiduciary and an 
investment banker includes an acknowledgement by the investment banker 
that the investment banker's ultimate client is an ERISA plan.
    (f) The Independent Fiduciary discharges its duties consistent with 
the terms of the Ford VEBA Plan, the Trust Agreement, the Independent 
Fiduciary Agreement, and any other documents governing the Securities, 
such as the Registration Rights Agreement.
    (g) The Ford VEBA Plan incurs no fees, costs or other charges 
(other than described in the Trust Agreement, the 2009 Settlement 
Agreement, and the Securityholder and Registration Rights Agreement) as 
a result of the transactions exempted herein.
    (h) The terms of any transaction exempted herein are no less 
favorable to the Ford VEBA Plan than the terms negotiated at arms' 
length under similar circumstances between unrelated parties.

SECTION III. Conditions Applicable to Section I(c)(1) and I(c)(2)

    (a) The Committee and the Ford VEBA Plan's third party 
administrator will review the benefits paid during the transition 
period and determine the dollar amount of mispayments made, subject to 
the review of the Ford VEBA Plan's independent auditor. The results of 
this review will be made available to Ford.
    (b) Ford and the applicable third party administrator of the Ford 
Active Health Plan will review the benefits paid during the transition 
period and determine the dollar amount of mispayments made, subject to 
the review of the plan's independent auditor. The results of this 
review will be made available to the Committee.
    (c) Interest on any reimbursed mispayment will accrue from the date 
of

[[Page 14081]]

the mispayment to the date of the reimbursement.
    (d) Interest will be determined using the applicable 6 month 
published LIBOR rate.
    (e) If there is a dispute as to the amount, timing or other feature 
of a reimbursement payment, the parties will enter into the Dispute 
Resolution Procedure found in Section 26B of the 2009 Settlement 
Agreement and described further in Section VII(c) herein.

SECTION IV. Conditions Applicable to Section I(c)(3) and I(c)(4)

    (a) Ford and the Committee will cooperate in the calculation and 
review of the amounts of expense accruals related to the TAA, and the 
amount of any overaccrual shall be made subject to the review of an 
independent auditor selected by Ford and the amount of any underaccrual 
shall be made subject to the review of the Ford VEBA Plan's independent 
auditor.
    (b) Ford must make a claim for any underaccrual to the Committee, 
and the Committee must make a claim for any overaccrual to Ford, as 
applicable, within the Verification Time Period, as defined in Section 
VII(cc).
    (c) Interest on any true-up payment will accrue from the date of 
transfer of the assets in the TAA (or the LLC containing the TAA) for 
the amount in respect of the overaccrual or underaccrual, as 
applicable, until the date of payment of such true-up amount.
    (d) Interest will be determined using the published six month LIBOR 
rate.
    (e) If there is a dispute as to the amount, timing or other feature 
of a true-up payment in respect of TAA expenses, the parties will enter 
into the Dispute Resolution Procedure found in Section 26B of the 2009 
Settlement Agreement and described further in Section VII(c) herein.

SECTION V. Conditions Applicable to Section I(d)

    (a) Ford must make a claim to the Committee regarding the specific 
deposit or transfer made in error or made in an amount greater than 
that to which the Ford VEBA Plan was entitled.
    (b) The claim is made within the Verification Time Period, as 
defined in Section VII(cc).
    (c) Interest on any mistaken deposit or transfer will accrue from 
the date of the mistaken deposit or transfer to the date of the 
repayment.
    (d) Interest will be determined using the published six month LIBOR 
rate.
    (e) If there is a dispute as to the amount, timing or other feature 
of a mistaken payment, the parties will enter into the Dispute 
Resolution Procedure found in Section 26B of the 2009 Settlement 
Agreement and described further in Section VII(c) herein.

SECTION VI. Conditions Applicable to Section I

    (a) The Committee and the Independent Fiduciary maintain for a 
period of six years from the date (i) the Securities are transferred to 
the Ford VEBA Plan, and (ii) the shares of Ford Common Stock are 
acquired by the Ford VEBA Plan through the exercise of the Warrants or 
Ford's delivery of Payment Shares in settlement of its payment 
obligations under New Note B, the records necessary to enable the 
persons described in paragraph (b) below to determine whether the 
conditions of this exemption have been met, provided that (i) a 
separate prohibited transaction will not be considered to have occurred 
if, due to circumstances beyond the control of the Committee and/or the 
Independent Fiduciary, the records are lost or destroyed prior to the 
end of the six-year period, and (ii) no party in interest other than 
the Committee or the Independent Fiduciary shall be subject to the 
civil penalty that may be assessed under ERISA section 502(i) if the 
records are not maintained, or are not available for examination as 
required by paragraph (b) below; and
    (b) Notwithstanding any provisions of subsections (a)(2) and (b) of 
section 504 of ERISA, the records referred to in paragraph (a) above 
shall be unconditionally available at their customary location during 
normal business hours to:
    (1) Any duly authorized employee or representative of the 
Department or the Internal Revenue Service;
    (2) The UAW or any duly authorized representative of the UAW;
    (3) Ford or any duly authorized representative of Ford;
    (4) The Independent Fiduciary or any duly authorized representative 
of the Independent Fiduciary;
    (5) The Committee or any duly authorized representative of the 
Committee; and
    (6) Any participant or beneficiary of the Ford VEBA Plan or any 
duly authorized representative of such participant or beneficiary.
    (c) None of the persons described above in paragraphs (b)(2), (4)-
(6) shall be authorized to examine trade secrets of Ford, or commercial 
or financial information which is privileged or confidential, and 
should Ford refuse to disclose information on the basis that such 
information is exempt from disclosure, Ford shall, by the close of the 
thirtieth (30th) day following the request, provide a written notice 
advising that person of the reasons for the refusal and that the 
Department may request such information.

SECTION VII. Definitions

    (a) The term ``affiliate'' means: (1) Any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such other person; (2) any officer, 
director, partner, or employee in any such person, or relative (as 
defined in section 3(15) of ERISA) of any such person; or (3) any 
corporation, partnership or other entity of which such person is an 
officer, director or partner. (For purposes of this definition, the 
term ``control'' means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.)
    (b) The ``Committee'' means the eleven individuals consisting of 
six independent members and five UAW appointed members who will serve 
as the plan administrator and named fiduciary of the Ford VEBA Plan.
    (c) The term ``Dispute Resolution Procedure'' means the process 
found in Section 26B of the 2009 Settlement Agreement to effectuate the 
resolution of any dispute respecting the transactions described in 
Sections I(c)(1), (c)(2), (c)(3), (c)(4), and (d) herein, and which 
reads in pertinent part: (1) The aggrieved party shall provide the 
party alleged to have violated the 2009 Settlement Agreement (Dispute 
Party) with written notice of such dispute, which shall include a 
description of the alleged violation and identification of the 
Section(s) of the 2009 Settlement Agreement allegedly violated. Such 
notice shall be provided so that it is received by the Dispute Party no 
later than 180 calendar days from the date of the alleged violation or 
the date on which the aggrieved party knew or should have known of the 
facts that give rise to the alleged violation, whichever is later, but 
in no event longer than 3 years from the date of the alleged violation; 
and (2) If the Dispute Party fails to respond within 21 calendar days 
from its receipt of the notice, the aggrieved party may seek recourse 
to the District Court; provided however, that the aggrieved party 
waives all claims related to a particular dispute against the Dispute 
Party if the aggrieved party fails to bring the dispute before the 
District Court within 180 calendar days from the date of sending the 
notice. All the time periods in Section 26 of the 2009 Settlement 
Agreement may be extended by

[[Page 14082]]

agreement of the parties to the particular dispute.
    (d) The term ``Exchange Agreement'' means the Security Exchange 
Agreement among Ford, the subsidiary guarantors listed in Schedule I 
thereto and the LLC, dated as of December 11, 2009.
    (e) The term ``Ford'' or the ``Applicant'' means Ford Motor 
Company, located in Detroit, MI, and its affiliates.
    (f) The term ``Ford Active Health Plan'' means the medical benefits 
plan maintained by Ford to provide benefits to eligible active hourly 
employees of Ford and its participating subsidiaries.
    (g) The term ``Ford Common Stock'' means the shares of common 
stock, par value $0.01 per share, issued by Ford.
    (h) The term ``Ford Credit'' means Ford Motor Credit Company LLC, a 
Delaware limited liability company and an indirect, wholly owned 
subsidiary of Ford.
    (i) The term ``Ford Employer Security Sub-Account of the Ford 
Separate Retiree Account of the VEBA Trust'' means the sub-account 
established in the Ford Separate Retiree Account of the VEBA Trust to 
hold Securities on behalf of the Ford VEBA Plan.
    (j) The term ``Ford Retiree Health Plan'' means the retiree medical 
benefits plan maintained by Ford that provided benefits to, among 
others, those who will be covered by the Ford VEBA Plan.
    (k) The term ``IFS'' means Independent Fiduciary Services, Inc., a 
Delaware corporation, appointed by the Committee to be the Independent 
Fiduciary.
    (l) The term ``Implementation Date'' means December 31, 2009.
    (m) The term ``Independent Fiduciary'' means a fiduciary that is 
(1) independent of and unrelated to Ford, the UAW, the Committee, and 
their affiliates, and (2) appointed to act on behalf of the Ford VEBA 
Plan with respect to the holding, management and disposition of the 
Securities. In this regard, the fiduciary will be deemed not to be 
independent of and unrelated to Ford, the UAW, the Committee, and their 
affiliates if (1) such fiduciary directly or indirectly controls, is 
controlled by, or is under common control with Ford, the UAW, the 
Committee or their affiliates, (2) such fiduciary directly or 
indirectly receives any compensation or other consideration from Ford, 
the UAW or any Committee member in his or her individual capacity in 
connection with any transaction contemplated in this exemption (except 
that an Independent Fiduciary may receive compensation from the 
Committee or the Ford VEBA Plan for services provided to the Ford VEBA 
Plan in connection with the transactions discussed herein if the amount 
or payment of such compensation is not contingent upon or in any way 
affected by the independent fiduciary's ultimate decision), and (3) the 
annual gross revenue received by the fiduciary, in any fiscal year, 
from Ford, the UAW or a member of the Committee in his or her 
individual capacity, exceeds 3% of the fiduciary's annual gross revenue 
from all sources (for federal income tax purposes) for its prior tax 
year.\22\
---------------------------------------------------------------------------

    \22\ The Department notes that the preceding conditions are not 
exclusive, and that other circumstances may develop which cause the 
Independent Fiduciary to be deemed not to be independent of and 
unrelated to Ford, the UAW, the Committee, and their affiliates.
---------------------------------------------------------------------------

    (n) The term ``LLC'' means the Ford-UAW Holdings LLC, established 
by Ford as a wholly-owned LLC, and subsequently renamed VEBA-F Holdings 
LLC, established to hold the assets in the TAA and certain other assets 
required to be contributed to the VEBA under the 2008 Settlement 
Agreement, as amended by the 2009 Settlement Agreement.
    (o) The term ``LLC Interests'' means Ford's wholly-owned interest 
in the LLC.
    (p) The term ``New Note A'' means the amortizing guaranteed secured 
note maturing on June 30, 2022, in the principal amount of 
$6,705,470,000, with payments to be made in cash, in annual 
installments from 2009 through 2022, issued by Ford and referred to in 
the Exchange Agreement.
    (q) The term ``New Note B'' means the amortizing guaranteed secured 
note maturing June 30, 2022, in the principal amount of $6,511,850,000, 
with payments to be made in cash, Ford Common Stock, or a combination 
thereof, in annual installments from 2009 through 2022, unless prepaid, 
issued by Ford and referred to in the Exchange Agreement, and as 
amended by the Note Agreement, effective June 25, 2010.
    (r) The term ``Note Agreement'' means the Agreement, dated as of 
June 25, 2010 by and among Ford, Ford Credit, and the VEBA Trust, 
acting by and through IFS, wherein the VEBA Trust will sell New Note A 
to Ford and Ford Credit and New Note B is amended to add provisions 
permitting Ford to prepay all or a portion of New Note B, in each case 
under the terms and conditions set forth therein.
    (s) The term ``Payment Shares'' means any shares of Ford Common 
Stock issued by Ford to satisfy all or a portion of its payment 
obligation under New Note B, subject to the terms and conditions 
specified in New Note B.
    (t) The term ``published six month LIBOR rate'' means the Official 
British Banker's Association Six Month London Interbank Offered Rate 
(LIBOR) 11:00am GMT ``fixing'' as reported on Bloomberg page 
``BBAM''.\23\
---------------------------------------------------------------------------

    \23\ LIBOR is calculated by Thomson Reuters and published by the 
British Bankers' Association after 11 a.m. (and generally around 
11:45 a.m.) each day