[Federal Register Volume 63, Number 118 (Friday, June 19, 1998)]
[Notices]
[Pages 33732-33735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16336]


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

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration
[Application Nos. D-10470 and D-10576]


Navistar International Transportation Corporation (Navistar); 
Located in Chicago, IL and the Supplemental Program Committee of the 
Navistar International Transportation Corporation Retiree Health 
Benefit and Life Insurance Plan (Supplemental Program Committee) 
Located in Euclid, OH

AGENCY: Department of Labor.

ACTION: Notice of proposed amendments to Prohibited Transaction 
Exemption (PTE) 93-69

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

SUMMARY: This document contains a notice of pendency before the 
Department of Labor (the Department) of proposed amendments to PTE 93-
69 [58 FR 51105, September 30, 1993]. PTE 93-69 provides an exemption 
from certain prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 for: (1) the acquisition and 
holding by the Navistar International Transportation Corporation 
Retiree Health Benefit and Life Insurance Plan (New Plan) of shares of 
Class B Common Stock and Series A Preference Stock of Navistar 
International Corporation (NIC); (2) the holding by the New Plan of 
shares of NIC Common Stock resulting from the conversion of NIC Class B 
Common Stock into such shares; (3) the extension of credit between 
Navistar and the New Plan, which may occur in conjunction with 
Navistar's annual obligation to advance funds to the Supplementary 
Benefit Program Trust; and (4) the sale of shares of NIC Class B Common 
Stock by the New Plan to Navistar. The proposed amendments, if granted, 
would affect participants and beneficiaries of, and fiduciaries with 
respect to the New Plan.

EFFECTIVE DATE: If granted, the proposed amendments will be effective 
July 1, 1998.

DATES: Written comments and requests for a public hearing must be 
received by the Department of Labor on or before the expiration of 
August 3, 1998.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Office of Exemption Determinations, 
Pension and Welfare Benefits Administration, room N-5649, U.S. 
Department of Labor, 200 Constitution Avenue, NW., Washington DC 20210, 
Attention: Application Nos. D-10470 and D-10576. The applications for 
amendments and the comments received will be available for public 
inspection in the Public Documents Room of the Pension and Welfare 
Benefits Administration, U.S. Department of Labor, room N-5638, 200 
Constitution Avenue, NW., Washington DC 20210.

FOR FURTHER INFORMATION CONTACT: Lyssa E. Hall of the Department of 
Labor, telephone (202) 219-8971. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: Notice is hereby given of the pendency 
before the Department of proposed amendments to PTE 93-69. The proposed 
amendments were requested in applications filed by the Supplemental 
Program Committee and Navistar pursuant to section 408(a) of the Act 
and in accordance with procedures set forth in 29 CFR part 2570, 
subpart B (55 FR 32836, 32847. August 10, 1990). One of the proposed 
amendments would permit William Craig, a member of the Supplemental 
Program Committee, to continue to serve on the NIC board of directors 
beyond the termination of the Lock-up Period. The other amendment would 
permit the sale of shares of NIC Common Stock by the New Plan to NIC or 
Navistar for not less than adequate consideration as defined in section 
3(18) of the Act.

Summary of Facts and Representations

    The applications contain representations with regard to the 
proposed amendments which are summarized below. Interested persons are 
referred to the applications on file with the Department for the 
complete representations of the applicants.

1. Background

    (a) Navistar, a Delaware corporation headquartered in Chicago, 
Illinois, is a manufacturer of large and medium size trucks and mid-
range diesel engines.
    (b) NIC is a publicly-traded corporation which wholly owns 
Navistar.
    (c) The Supplemental Program Committee is a five-member committee 
which is responsible for managing the assets of the Supplemental 
Benefit Program Trust.
    (d) In 1992 , Navistar proposed to terminate its retiree health and 
life insurance benefit program and to replace it with a plan providing 
a reduced schedule of benefits. The New Plan was created as part of the 
1993 settlement of a class action which was filed by the Navistar 
retirees against Navistar in response to the proposed

[[Page 33733]]

termination.1 The New Plan consists of two parts, the 
Retiree Health Benefit Program and Trust (``Base Program'' and ``Base 
Trust'') and the Supplemental Benefit Program and Trust. The 
Supplemental Benefit Program Trust was initially funded with 
approximately 255 million shares of NIC Class B Common Stock.
---------------------------------------------------------------------------

    \1\ Shy et al. v. Navistar International Corporation, et. al., 
Civil Action No. C-3-92-333 (S.D. Ohio, 1992) (Shy Settlement).
---------------------------------------------------------------------------

    Until the end of the Lock-up Period (July 1, 1998),2 the 
NIC Class B Common Stock generally is restricted and has no voting or 
transfer rights. The NIC Class B Common Stock certificates bear a 
legend indicating that the stock has not been registered under the 
Securities Act of 1933 and may not be sold or transferred. In addition, 
under the terms of NIC's Certificate of Incorporation and pursuant to 
the Shy Settlement, the Supplemental Benefit Program Trust could not 
sell its Class B Common Stock until the end of the Lock-up Period, 
except in a transaction approved by NIC's board of directors. On July 
1, 1998 (or upon an earlier sale approved by the Board), the Class B 
Common Stock will automatically convert to NIC Common Stock, a widely-
held publicly-traded New York Stock Exchange security with full voting 
rights. After the Lock-up Period expires, a Registration Rights 
Agreement gives the Supplemental Benefit Program Trust the right to 
require NIC to register the Supplemental Benefit Program Trust's NIC 
Common Stock and the exclusive right to sell NIC Common Stock to the 
public for five years or until the sale of $500 million in NIC Common 
Stock by the Supplemental Benefit Program Trust, whichever occurs 
first. All decisions regarding management of the Supplemental Benefit 
Trust, including decisions affecting the NIC stock, are made by a five-
person committee, the Supplemental Program Committee.
---------------------------------------------------------------------------

    \2\ The period beginning on the date of the contribution of 
Class B Common Stock to the Supplemental Benefit Program Trust in 
1993 until July 1, 1998 is the ``Lock-up Period''.
---------------------------------------------------------------------------

    PTE 93-69 provides, in part, that effective July 1, 1993, the 
restrictions of sections 406(a), 406(b)(1), 406(b)(2) and 407(a) of the 
Act shall not apply to the acquisition and holding by the New Plan of 
Class B Common Stock, the extension of credit which may occur in 
conjunction with Navistar's annual obligation to advance funds to the 
Supplemental Benefit Trust the holding by the New Plan of shares of NIC 
Common Stock resulting from the conversion of NIC Class B Common Stock 
into such shares, or the sale of NIC Class B Common Stock by the New 
Plan to Navistar. One of the conditions in the notice of proposed 
exemption for PTE 93-69 3 requires in part, that:
---------------------------------------------------------------------------

    \3\ 58 FR 35467, 35468 (July 1, 1993).
---------------------------------------------------------------------------

    (1) the majority of the members of the Supplemental Program 
Committee would be individuals who:
    (a) Are not affiliates of Navistar, NIC or the UAW;
    (b) Did not have any ownership interest in Navistar or NIC;
    (c) Are not officers, directors, or 5 percent or more shareholders 
or partners of a person in which NIC has an ownership interest.
    In commenting on the proposed exemption, the UAW requested that the 
final exemption permit the Supplemental Program Committee to name one 
of its non-UAW members to serve on NIC's board of directors. The UAW 
represented that the failure to allow a non-UAW member of the 
Supplemental Program Committee to serve on NIC's board of directors 
would impair the Committee's ability to pursue the most prudent course 
towards maximizing the value of the Supplemental Benefit Program Trust. 
The UAW stated that the Supplemental Program Committee desired to make 
[board] selections that would best facilitate the Committee's efforts 
to protect its stake in the company. The UAW further stated that 
without dual membership on the part of at least one of its 
appointments, the Committee felt that its ability to act as an 
effective ``watchdog'' over NIC's management would be materially 
diminished. After considering the UAW's comment, the Department decided 
to modify the final exemption to permit one of the three non-UAW 
members of the Supplemental Program Committee to serve on NIC's board 
of directors during the Lock-up Period. In this regard, William Craig 
has served on NIC's board of directors as well as on the Supplemental 
Program Committee up to the present time.
2. The Supplemental Program Committee's Requested Amendment
    (a) In support of its application to amend PTE 93-69 to allow Mr. 
Craig to continue to serve on both the board of directors of NIC and on 
the Supplemental Program Committee, the Committee represents that Mr. 
Craig has a broad background in, and extensive knowledge of the 
trucking industry and, especially, NIC's role therein which has brought 
important insights to the deliberations of the Supplemental Program 
Committee. The Committee members have learned to rely on his judgement 
and abilities as he has brought his wealth of experience to bear on 
issues arising from his service as both a non-UAW member of the 
Supplemental Program Committee and a member of NIC's board of 
directors.
    The applicant further notes that Mr. Craig's current dual service 
has only served to enhance the value of his views to the Supplemental 
Program Committee. He has demonstrated both a dedication to furthering 
the interests of the shareholders of NIC and an acute sensitivity to 
the importance that successful resolution of labor-management issues 
confronting NIC has to the future success of NIC and the health and 
welfare of its employees and retirees.
    In addition, the Supplemental Program Committee states that the 
unique perspective afforded Mr. Craig as a result of the dual service 
permitted under PTE 93-69 and the distinct background and abilities he 
brings to this dual service provides a function that the Supplemental 
Program Committee believes it can ill afford to lose.
    (b) In commenting on the proposed exemption, the UAW represented 
that the potential for conflict regarding dual membership, if any, is 
minimal. To the extent any conflicts were to arise a Committee/board 
members' conduct would be reviewable under ERISA's fiduciary standards 
and, moreover, the Committee would, in such circumstances, be empowered 
to remove such individual from the NIC board, if appropriate.
    (c) The Supplemental Program Committee has acknowledged that they 
have been briefed and understand the limits that are placed on Mr. 
Craig under federal and state securities laws relating to Mr. Craig's 
ability to make disclosures to the Committee regarding information he 
obtains at meetings of the board of directors of NIC. Despite those 
limitations, the Supplemental Program Committee members believe that 
Mr. Craig's continuing dual service on the Committee and on the board 
of directors of NIC is critical to the Supplemental Benefit Plan's 
success. The Committee further noted that Mr. Craig will have available 
to him, at all times, two different, expert legal advisors, one for his 
service on the Supplemental Program Committee and one in his role on 
NIC's board of directors.
    (d) In summary, the Supplemental Program Committee believes that 
the requested amendment to permit Mr. Craig to continue in his dual 
roles will assist the Supplemental Program Committee in its future 
planning and

[[Page 33734]]

help to ensure the future stability of the Supplemental Benefit Program 
Trust.

4. Navistar's Requested Amendment

    Upon the expiration of the Lock-up Period, the NIC Class B Common 
Stock will automatically convert to NIC Common Stock. Navistar requests 
an amendment to PTE 93-69 to permit the Supplemental Benefit Program 
Trust to sell NIC Common Stock to either NIC or Navistar after the 
expiration of the Lock-up Period for not less than adequate 
consideration as defined in section 3(18) of the Act. Navistar 
represents that having the ability to sell NIC Common Stock to NIC or 
Navistar will provide the Supplemental Benefit Program Trust with an 
additional market for the stock. In this regard, Navistar notes that 
NIC Common Stock is widely traded on the New York Stock Exchange, thus 
pricing issues associated with non-publicly traded securities would not 
be present in these transactions.
    The proposed amendments, if granted, will be subject to the express 
condition that the material facts and representations contained in the 
applications are true and complete, and that the applications 
accurately describe all material terms of the transactions to be 
consummated pursuant to the proposed amendment.

Notice to Interested Persons

    Because of the large number of potentially interested parties, it 
is not possible to provide a separate copy of notice of the proposed 
amendment to each participant. The only practical form of notice to 
interested parties is the Federal Register. The Committee will, 
however, provide notices to both NIC and the UAW. Also, the 
Supplemental Program Committee will supply copies of the notice to 
union locals and chapters of salaried employee retiree organizations 
for posting or other possible distribution to retirees. Provision of 
notice in this manner can be accomplished within 15 working days of 
publication.

General Information

    The attention of interested persons is directed to the following:
    (1) The fact that a transaction is the subject of an exemption 
under section 408(a) of the Act does not relieve a fiduciary or other 
party in interest from certain other provisions of the Act, including 
any prohibited transaction provisions to which the exemption does not 
apply and the general fiduciary responsibility provisions of section 
404 of the Act, which among other things require a fiduciary to 
discharge his duties respecting the plan solely in the interest of the 
participants and beneficiaries of the plan and in a prudent fashion in 
accordance with section 404(a)(1)(B) of the Act.
    (2) The proposed amendments to PTE 93-69, if adopted, will not 
extend to transactions prohibited under section 406(b)(3) of the Act.
    (3) Before an exemption may be granted under section 408(a) of the 
Act, the Department must find that the exemption is administratively 
feasible, in the interest of the plan and of its participants and 
beneficiaries and protective of the rights of participants and 
beneficiaries of the plan; and
    (4) The proposed amendments to PTE 93-69, if adopted, will be 
supplemental to, and not in derogation of, any other provisions of the 
Act, including statutory or administrative exemptions. 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.

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemption to the address above, 
within the time period set forth above.
    All comments will be made a part of the record. Comments received 
will be available for public inspection with the applications for 
amendment at the address set forth above.

Proposed Amendments

    Under section 408(a) of ERISA and in accordance with the procedures 
set forth in 29 CFR Part 2570, Subpart B [55 FR 32836, 32847 August 10, 
1990], the Department proposes to amend PTE 93-69 as set forth below in 
italics in the republished exemption below.
Transactions
    If the exemption is granted, the restrictions of sections 406(a), 
406(b)(1), 406(b)(2) and 407(a) of the Act shall not apply to (1) the 
acquisition and holding by the Navistar International Transportation 
Corporation Retiree Health Benefit and Life Insurance Plan (the New 
Plan) of shares or Class B Common Stock and Series A Preference Stock 
of Navistar International Corporation (NIC); (2) the holding by the New 
Plan of shares of NIC Common Stock resulting from the conversion of NIC 
Class B Common Stock into such shares; (3) the extension of credit 
between Navistar and the New Plan, which may occur in conjunction with 
Navistar's annual obligation to advance funds to the Supplemental 
Benefit Program Trust; (4) the sale of shares of NIC Class B Common 
Stock by the New Plan to Navistar; and (5) the sale of shares of NIC 
Common Stock by the New Plan to NIC or Navistar, provided that:
    (a) All decisions regarding the management of the Supplemental 
Benefit Program Trust, including determinations affecting NIC stock 
held by such Trust, are made by the Supplemental Program Committee;
    (b) The Supplemental Program Committee will take whatever action is 
necessary to protect the New Plan's rights with respect to the 
transaction;
    (c) With respect to the sale of NIC Class B Common Stock by the New 
Plan to Navistar, each Class B share will be valued at the average 
closing price per share of NIC Common Stock during the 30 day trading 
period immediately prior to the date Navistar acquires the Class B 
Shares, but in no case will the price be less than adequate 
consideration as defined in section 3(18) of the Act;
    (d) With respect to the sale of NIC Common Stock by the New Plan to 
Navistar or NIC, in no case will the price be less than adequate 
consideration as defined in section 3(18) of the Act;
    (e) The Supplemental Program Committee shall maintain, for a period 
of six years, the records necessary to enable the persons described in 
paragraph (f) below to determine whether the conditions of this 
exemption have been met, except that (a) a prohibited transaction will 
not be considered to have occurred if, due to circumstances beyond the 
control of the Supplemental Program Committee, the records are lost or 
destroyed prior to the end of the six year period, and (b) no party in 
interest other than the Supplemental Program Committee shall be subject 
to the civil penalty that may be assessed under section 502(i) of the 
Act if the records are not maintained, or are not available for 
examination as required by paragraph (f) below; and
    (f)(1) Except as provided in section (2) of this paragraph and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to in paragraph (e) above shall be 
unconditionally available at their customary location during business 
hours by:
    (A) Any duly authorized employee or representative of the 
Department;
    (B) The UAW or any duly authorized representative of the UAW;
    (C) Any participant or beneficiary of the New Plan, or any duly 
authorized representative of such participant or beneficiary.

[[Page 33735]]

    (2) None of the persons described above in subparagraphs (B) and 
(C) of this paragraph (e) shall be authorized to examine the trade 
secrets of NIC or Navistar or commercial or financial information which 
is privileged or confidential.
    (g) For purposes of this exemption:
    (1) The majority of the members of the Supplemental Program 
Committee will be individuals who:
    (A) Are not affiliates of Navistar, NIC or the UAW;
    (B) Do not have any ownership interest in Navistar or NIC;
    (C) Are not officers, directors, or 5 percent or more shareholders 
or partners of a person in which NIC has any ownership interest;
    (D) Have acknowledged in writing acceptance of fiduciary 
responsibility;
    (E) Do not receive more than 5 percent of their annual gross income 
(excluding retirement income and directors fees received) for any 
taxable year in the aggregate from Navistar, UAW or any affiliate 
thereof; and
    (F) Will not acquire any property from, sell any property to or 
borrow any funds from NIC, UAW, or any affiliate thereof, during the 
period that such individual serves as a member of the supplemental 
Program Committee and continuing for a period of 6 months after such 
individual ceases to be a member of the Supplemental Program Committee 
or negotiate any such transaction during the period that such 
individual serves as a member of the Supplemental Program Committee.
    Notwithstanding (A) and (C) above, William Craig is not precluded 
from serving on NIC's board of directors while also serving as a member 
of the Supplemental Program Committee.
    (2) An affiliate of another person means:
    (A) Any person directly or indirectly, through one or more 
intermediaries, controlling, controlled by, or under common control 
with such other person;
    (B) Any officer, director, partner, employee, relative (as defined 
in section 3(15) of the Act), a brother, a sister, or a spouse of a 
brother or sister of such other person; and
    (C) Any corporation or partnership of which such other person is an 
officer director or partner.
    (3) Control means the power to exercise a controlling influence 
over the management or policies of a person other than an individual.

    Signed at Washington, D.C., this 16th day of June, 1998.
Ivan Strasfeld,
Director of Exemptions Determinations, Pension and Welfare Benefits 
Administration, U.S. Department of Labor.
[FR Doc. 98-16336 Filed 6-18-98; 8:45 am]
BILLING CODE 4510-29-P