[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]
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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
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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.
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\1\ Shy et al. v. Navistar International Corporation, et. al.,
Civil Action No. C-3-92-333 (S.D. Ohio, 1992) (Shy Settlement).
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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.
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\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''.
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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:
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\3\ 58 FR 35467, 35468 (July 1, 1993).
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(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