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Federal Register / Vol. 71, No.

207 / Thursday, October 26, 2006 / Notices 62615

(f) Not less frequently than quarterly, (1) Such majority members alone will independent fiduciary or the Fund, or
the independent fiduciary will perform give prior approval upon determining their affiliates, or commercial or
periodic reviews to ensure that the that such services are necessary and the financial information which is
services offered by the Service Providers associated fees charged are reasonable; privileged or confidential.
remain appropriate for the Service and (3) For purposes of this section,
Providers and that the fees charged by (2) Any member of the Board of references to the Fund shall also include
the Service Providers represent Directors of the Thrift Plan the Service Providers.
reasonable compensation for such contemporaneously participating as a The availability of this exemption is
services; member of the Board of Directors of subject to the express condition that the
(g) Not less frequently than annually, Pentegra (Trustco) will remove himself material facts and representations
the Service Providers will provide a or herself from all consideration by the contained in the application for
written report to the board of directors Thrift Plan regarding the provision of exemption are true and complete and
of the Fund describing in detail the services by Trustco (Pentegra) to the accurately describe all material terms of
services provided to the Plans, the Thrift Plan and will not otherwise the transactions. In the case of
Employers, the IRAs, and the Thrift exercise, with respect to such continuing transactions, if any of the
Plan, a detailed accounting of the fees provision(s) of services, any of the material facts or representations
received for such services, and an authority, control or responsibility described in the application change, the
estimate as to the amount of fees the which makes him or her a fiduciary. exemption will cease to apply as of the
Service Providers expect to receive date of such change. In the event of any
Section II. Recordkeeping such change, an application for a new
during the following year from such
Plans and Employers; (1) The independent fiduciary and the exemption must be made to the
(h) Not less frequently than annually, Fund will maintain, or cause to be Department.
the independent fiduciary will conduct maintained, for a period of 6 years, the For a more complete statement of the
a detailed review of approximately 10 records necessary to enable the persons facts and representations supporting the
percent of all transactions completed by described in paragraph (2) of this Department’s decision to grant this
the Service Providers which will section to determine whether the exemption, refer to the proposed
include a reasonable cross-section of all conditions of this exemption have been exemption and PTE 95–31 which are
services performed; such transactions met, except that: (a) A prohibited cited above.
will be reviewed for compliance with transaction will not be considered to Ivan L. Strasfeld,
the terms and conditions of this have occurred if, due to circumstances
Director of Exemption Determinations,
exemption; beyond the control of the independent Employee Benefits Security Administration,
(i) The financial statements of the fiduciary and the Fund, or their agents, U.S. Department of Labor.
Service Providers will be audited each the records are lost or destroyed before [FR Doc. E6–17922 Filed 10–25–06; 8:45 am]
year by an independent certified public the end of the six year period; and (b)
BILLING CODE 4510–29–P
accountant, and such audited no party in interest other than the
statements will be reviewed by the independent fiduciary and the Board of
independent fiduciary; Directors of the Fund shall be subject to DEPARTMENT OF LABOR
(j) The independent fiduciary shall the civil penalty that may be assessed
have the authority to prohibit the under section 502(i) of the Act, or to the Employee Benefits Security
Service Providers from performing taxes imposed by section 4975(a) and (b) Administration
services that such fiduciary deems of the Code, if the records are not
[Application No. L–11348]
inappropriate and not in the best maintained, or are not available for
interests of the Service Providers and examination as required by paragraph Notice of Proposed Individual
the Fund; (2) below. Exemption Involving Kaiser Aluminum
(2)(a) Except as provided in section Corporation and Its Subsidiaries
(k) Each Service Provider contract
(b) of this paragraph and (Together, Kaiser) Located in Foothill
with an Employer, an IRA, the Thrift
notwithstanding any provisions of Ranch, CA
Plan or a Plan will be subject to
subsections (a)(2) and (b) of section 504
termination without penalty by any of AGENCY: Employee Benefits Security
of the Act, the records referred to in
the parties to the contract for any reason Administration, U.S. Department of
paragraph (1) of this section shall be
upon reasonable written notice; Labor.
unconditionally available at their
(l) Trustco will act solely as a directed
customary location during normal ACTION: Notice of proposed individual
trustee and will not:
business hours by: exemption.
(1) Have any investment discretion (1) Any duly authorized employee or
with respect to the assets being held in representative of the Department or the This document contains a notice of
trust, Internal Revenue Service; pendency before the Department of
(2) Engage in any securities lending (2) Any employer participating in the Labor (the Department) of a proposed
transactions, and/or Fund and/or Thrift Plan or any duly individual exemption from certain
(3) Provide any cash management authorized employee or representative prohibited transaction restrictions of the
services; and of such employer; Employee Retirement Income Security
(m) A majority of the Board of (3) Any participant or beneficiary of Act of 1974 (the Act or ERISA).1 If
Directors of the Thrift Plan will at all the Fund, Thrift Plan, or Plan or any granted, the proposed exemption would
times be independent of, and separate duly authorized representative of such permit, effective July 6, 2006, (1) the
from, the Board of Directors of the Fund, participant or beneficiary; and
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the Board of Directors of Pentegra, and (4) Any Individual; 1 Because the VEBAs are not qualified under

the Board of Directors of Trustco, and, (b) None of the persons described section 401 of the Internal Revenue Code of 1986,
as amended (the Code) there is no jurisdiction
with respect to the selection of Trustco above in subparagraphs (a)(2) and (a)(3) under Title II of the Act pursuant to section 4975
and/or Pentegra as provider(s) of of this paragraph (2) shall be authorized of the Code. However, there is jurisdiction under
services to the Thrift Plan: to examine trade secrets of the Title I of the Act.

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62616 Federal Register / Vol. 71, No. 207 / Thursday, October 26, 2006 / Notices

acquisition by the VEBA for Retirees of 2570, Subpart B (55 FR 32836, August negotiations was the extent to which
Kaiser Aluminum (the Hourly VEBA) 10, 1990). Effective December 31, 1978, Kaiser could restructure retiree benefit
and by the Kaiser Aluminum Salaried section 102 of Reorganization Plan No. obligations in order to emerge as a
Retirees VEBA (the Salaried VEBA; 4 of 1978, (43 FR 47713, October 17, viable entity. As a result, Kaiser began
together, the VEBAs) of certain publicly 1978) transferred the authority of the negotiations with the International
traded common stock issued by Kaiser Secretary of the Treasury to issue Association of Machinists and
(the Stock or the Shares), through an in- exemptions of the type requested to the Aerospace Workers (IAM), the United
kind contribution to the VEBAs by Secretary of Labor. Accordingly, this Automobile, Aerospace and Agricultural
Kaiser of such Stock, for the purpose of proposed exemption is being issued Implement Workers of America (UAW),
prefunding VEBA welfare benefits; (2) solely by the Department. the International Chemical Workers
the holding by the VEBAs of such Stock Summary of Facts and Representations Union Council—United Food &
acquired pursuant to the contribution; Commercial Workers (ICWU), PACE, the
and (3) the management of the Shares, The Applicant USW (collectively, Unions) and a
including their voting and disposition, 1. Kaiser is a U.S. manufacturer and committee of five former Kaiser
by an independent fiduciary (the distributor of fabricated aluminum executives (the Salaried Committee)
Independent Fiduciary) designated to products. Kaiser’s fabricated products appointed pursuant to the Bankruptcy
represent the interests of each VEBA business, which operates 11 facilities, is Code as authorized representatives of
with respect to the transactions. The a leading producer of rolled, extruded, current and future salaried retirees.
proposed exemption, if granted, would drawn and forged aluminum products, These series of negotiations
affect the VEBAs and their participants serving market segments with a variety culminated in agreements to terminate
and beneficiaries. of transportation and industrial end existing retiree welfare arrangements
EFFECTIVE DATE: If granted, this proposed uses. Kaiser has approximately 2,300 and establish the VEBAs described
exemption will be effective as of July 6, employees in the United States, of herein. Kaiser, the Unions, and the
2006. which approximately 1,134 are respective VEBA Committees
DATES: Written comments and requests represented by the (USW) 2 and other recognized that terminating the existing
for a public hearing on the proposed unions (collectively, the Unions). As of retiree welfare arrangements and
exemption should be submitted to the June 30, 2006, Kaiser had total assets of establishing the VEBAs was the only
Department by November 21, 2006. $1,579,900,000. Kaiser maintains its viable alternative for funding future
ADDRESS: All written comments and headquarters in Foothill Ranch, welfare benefits for current and certain
requests for a public hearing concerning California. future retirees. Therefore, all legacy
the proposed exemption should be sent retiree welfare benefit obligations were
The Bankruptcy Proceedings and
to the Office of Exemptions discharged as of May 31, 2004, in
Kaiser’s Negotiations
Determinations, Employee Benefits connection with the Bankruptcy Court
2. On February 12, 2002, Kaiser and order issued on June 1, 2004.
Security Administration, Room N–5700, certain affiliates filed voluntary
U.S. Department of Labor, 200 petitions for relief under Chapter 11 of The Hourly VEBA
Constitution Avenue, NW., Washington, the U.S. Bankruptcy Code (the
DC 20210, Attention: Application No. 4. Pursuant to the Hourly Settlement
Bankruptcy Code). Additional affiliates Agreement, Kaiser and the Unions
D–11348. Alternatively, interested filed for similar relief on March 15, 2002
persons are invited to submit comments created the Board of Trustees of the
and its remaining domestic affiliates Hourly VEBA (the Hourly Board) 4 to
or hearing requests to the Department by filed on January 14, 2003. The Chapter
e-mail to chuksorji.blessed@dol.gov or implement new retiree medical
11 cases were consolidated for arrangements through the establishment
by facsimile at (202) 219–0204. procedural purposes only, and were
The application pertaining to the of the Hourly Trust, which in turn funds
administered jointly in the United benefits provided under the Hourly
proposed exemption and the comments States District Court for the District of
received will be available for public Plan. Together, the Hourly Trust and the
Delaware (the Bankruptcy Court). On Hourly Plan comprise the Hourly
inspection in the Public Disclosure July 6, 2006, Kaiser emerged from
Room of the Employee Benefits Security VEBA,5 which was established as of
bankruptcy.3 June 1, 2004 through a series of court
Administration, U.S. Department of 3. Kaiser explains that its ability to
Labor, Room N–1513, 200 Constitution orders. National City Bank, located in
emerge from bankruptcy was dependent Pittsburgh, Pennsylvania, serves as the
Avenue, NW., Washington, DC 20210. on the achievement of a number of
FOR FURTHER INFORMATION CONTACT: Ms.
Hourly VEBA’s trustee (the Hourly
interrelated agreements among its Trustee).
Blessed Chuksorji, Office of Exemption creditors, lenders, interested
Determinations, Employee Benefits government agencies, and employees. 4 Kaiser explains that the Hourly Board was
Security Administration, U.S. Kaiser indicates that the negotiation of established pursuant to the Hourly Settlement
Department of Labor, telephone (202) modifications to the collective Agreement and consists of four individuals, two
693–8567. (This is not a toll-free bargaining agreements with the Unions appointed by Kaiser and two appointed by the
number.) was important to its successful USW. The members serve until death, incapacity,
resignation or removal by unanimous vote of the
SUPPLEMENTARY INFORMATION: This reorganization. A key issue in these remaining members as set forth in the Hourly Trust
document contains a notice of proposed Agreement, Section 9.3. In addition, both Kaiser
2 The USW is the result of a merger that took and the USW have the power to remove and replace
individual exemption from the
effect April 12, 2005, between the Paper, Allied- the Hourly Board members it appoints at any time.
restrictions of sections 406(a)(1)(E), Industrial, Chemical and Energy Workers 5 Kaiser represents that the Hourly VEBA was
406(a)(2), 406(b)(1), 406(b)(2) and 407(a) International Union, AFL–CLC (PACE) and the
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negotiated to provide medical benefits for current


of the Act. The proposed exemption has United Steelworkers of America AFL–CIO–CLC and future retirees who had worked under union-
been requested in an application filed (USWA). The resulting union is known as the USW. negotiated collective bargaining agreements and
3 Following its emergence from bankruptcy, who previously had been entitled to medical
by Kaiser pursuant to section 408(a) of Kaiser retains a 49% interest in Anglesey, a United coverage under plans maintained by Kaiser that
the Act, and in accordance with the Kingdom corporation that owns and operates an were terminated during the bankruptcy
procedures set forth in 29 CFR part aluminum smelter in Holyhead, Wales. proceedings.

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Federal Register / Vol. 71, No. 207 / Thursday, October 26, 2006 / Notices 62617

The Hourly VEBA is sponsored by the meaning of section 105 of the Code and The Stock Transfer Restriction
Hourly Board. The Hourly Board is also an employee welfare benefit plan within Agreement, which was executed by and
the Hourly VEBA’s named fiduciary and the meaning of section of 3(1) of the Act. between Kaiser and the Hourly Trustee
plan administrator. In this regard, the The Salaried Board is both the sponsor and assented to and acknowledged by
Hourly Board determines the benefits to and administrator of the Salaried VEBA. the Hourly Independent Fiduciary,
be provided under the Hourly Plan, Kaiser is obligated to make certain cash provides that, during the ten-year period
including, without limitation, which contributions to the Salaried Trust and commencing on the Effective Date (i.e.,
participants are eligible to receive to pay a certain portion of the Salaried July 6, 2006), the Hourly Trustee is
benefits, in what form, and in what VEBA’s administrative costs.7 prohibited from disposing of any of the
amount, and the contributions (if any) The Salaried Trustee receives all cash Shares, unless at the time of the
that the participants are required to contributions on behalf of the Salaried disposition, the number of Shares to be
make to help defray the cost of their Trust. In turn, the Salaried Trustee, at included in the transfer, together with
coverage. In addition, the Hourly Board the direction of the Salaried Board, all such Shares included in other
may retain independent professional invests the proceeds, disburses funds to transfers by the Hourly Trust that have
service providers that it deems cover the creation and administrative occurred during the 12 months
necessary and appropriate to administer costs of both the Salaried Trust and the preceding the transfer, is not more than
the Hourly VEBA. The Hourly Board Salaried Plan, and disburses funds to 15% of the total number of Shares
receives no compensation from the pay benefits, if and when the benefits received by the Hourly Trust pursuant
Hourly VEBA. Kaiser’s obligation to are distributed under the Salaried Plan. to the Plan of Reorganization (except, at
contribute to the Hourly VEBA will Kaiser explains that the Salaried Board the outset, larger amounts of Shares may
terminate in 2012. As of July 31, 2006, has engaged a professional employee be permitted to be sold in specified
the Hourly VEBA had 7,120 benefits plan administrator to carry out transactions). However, Kaiser’s Board
participants. Also, as of July 31, 2006, a majority of the tasks associated with of Directors may, but is not required to,
the Hourly VEBA had assets of the day-to-day administration of the allow dispositions by the Hourly
$102,338,684.35. Salaried Plan. Trustee that would otherwise violate
The Salaried VEBA As of December 31, 2005, the Salaried this restriction.
VEBA had 4,117 participants. As of The principal purpose of the Stock
5. In January 2004, Kaiser and the August 23, 2006, the Salaried VEBA had Transfer Restriction Agreement is to
Salaried Committee 6 reached and $77,901,362.49 in assets. assure that Kaiser’s net operating loss
entered into the Salaried Settlement
Funding Arrangements for the VEBAs carryovers (the NOLs) will continue to
Agreement, which provided for the
be available to Kaiser without limitation
creation of the Salaried VEBA. The 6. Under the terms of the Hourly following its emergence from
Salaried Committee chose to form a Settlement Agreement and the Salaried bankruptcy. The NOLs will enable
separate VEBA for the benefit of eligible Settlement Agreement, Kaiser agreed to Kaiser to operate without an excessive
salaried retirees in order for them to fund the Hourly Trust and the Salaried tax burden for a number of years.9 In
receive partial recompense from Kaiser Trust, which would, in turn, fund order to preserve the full value of the
for the termination of their retiree benefits provided by the Hourly Plan NOLs, Kaiser must not undergo another
benefits, rather than to participate in a and the Salaried Plan through (a) in- change of ownership following the
single VEBA with the Unions. The kind contributions of Stock, (b) cash Effective Date while the NOLs are still
Salaried VEBA is comprised of a trust, contributions in fixed amounts, and (c) available for use by Kaiser.
the Salaried Trust, and a plan, the profit sharing pool contributions.
Salaried Plan. The Salaried Trust is the The Registration Rights Agreement,
(a)(1) Contribution of Stock to the which was executed by and between
funding vehicle for the Salaried Plan
Hourly VEBA. On July 7, 2006, Kaiser Kaiser and the Hourly Trustee and
and together, these form the Salaried
issued 8,809,000 shares of its common assented to and acknowledged by the
VEBA.
stock to the Hourly Trust.8 This Stock Independent Fiduciary for the Hourly
On May 31, 2004, the Salaried Trust
contribution represented 44% of VEBA (the Hourly Independent
was formed under a Trust Agreement
Kaiser’s fully diluted common equity. Fiduciary) on the Effective Date,
entered into between the Salaried
The Shares contributed to the Hourly provides generally that, during the
Board, consisting of three salaried
Trust are subject to provisions in the period commencing on July 6, 2006 and
retired employees of Kaiser and Union
Stock Transfer Restriction Agreement ending March 31, 2007, the Hourly
Bank of California, N.A., the Salaried
and the Registration Rights Agreement, Trustee may request (and shall request
Trustee. On this same date, the Salaried
each of which is discussed below. if the Hourly Independent Fiduciary
Board adopted the Salaried Plan. The
Salaried Trust was formed to hold and directs) that Kaiser effect a registration
7 Under the Salaried Settlement Agreement,
distribute trust fund assets in the form under the Securities Exchange Act of
Kaiser states it is obligated to reimburse one-half of
of retiree benefits to eligible salaried the Salaried VEBA’s administrative expenses, not to
1933 to permit the resale of a portion of
retirees of Kaiser and their spouses and exceed $36,250. the Shares held by the Hourly Trustee
dependents. The Salaried Plan was 8 The Hourly VEBA was entitled to receive in an underwritten public offering
formed for the purpose of providing 11,439,900 Shares (representing a 57.2% ownership meeting specified requirements and
interest in Kaiser) but sold, pursuant to procedures that, at any time following March 31,
retiree benefits. The Salaried Board is approved by the Bankruptcy Court, rights to
the named fiduciary for the Salaried 2,630,000 of such Shares to unrelated third parties 2007, the Hourly Trustee may request
VEBA. Kaiser states that the Salaried in pre-emergence sales. For purposes of the (and shall request if the Hourly
VEBA is intended to qualify as a percentage limitations contained in the Stock Independent Fiduciary directs) that
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Transfer Restriction Agreement described below, Kaiser effect a registration to permit the
medical reimbursement plan within the and unless Kaiser later agrees otherwise or the IRS
rules that these pre-emergence sales do not count
6 The Salaried Committee was dissolved effective as sales on or after the Effective Date for purposes 9 In the Disclosure Statement related to Kaiser’s

July 6, 2006. Its members consisted of five former of preserving net operating loss carryovers, the pre- Plan of Reorganization, the present value of the
executives of Kaiser who served without emergence sales are treated as if they occurred on estimated tax savings from the NOLs was estimated
compensation. or after the Effective Date. at approximately $65 million to $85 million.

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62618 Federal Register / Vol. 71, No. 207 / Thursday, October 26, 2006 / Notices

resale of the Shares held by the Hourly to future years) to the extent that the prospects. Although Lazard conducted a
Trust on a continuous basis. Pool would cause Kaiser’s liquidity to review and analysis of Kaiser’s
(a)(2) Contribution of Stock to the be less than $50 million. As indicated businesses, operating assets and
Salaried VEBA. On July 6, 2006, Kaiser above, the Pool, if any, will be liabilities, and business plans, Lazard
issued 999,867 shares of its common distributed 85.5% to the Hourly Trust assumed and relied on the accuracy and
stock to the Salaried Trust.10 This Stock and 14.5% to the Salaried Trust. completeness of the information
contribution represented slightly less furnished to it by Kaiser and by other
than 5% of Kaiser’s fully diluted The Stock Valuation
firms retained by Kaiser as well as
common equity. 7. Based on a valuation analysis publicly-available information.
(b) Cash Contributions. After an initial performed by Lazard Frerès & Co., LLC In preparing its valuation analysis of
one-time contribution to the Trusts of (Lazard), an independent financial Kaiser, Lazard analyzed the enterprise
$1.2 million in cash in June 2004 and adviser and an investment banker values of public companies that it
continuing until its emergence from located in New York, New York, deemed to be generally comparable to
bankruptcy, Kaiser contributed cash to Kaiser’s reorganized value (the the operating businesses of Kaiser. In
the Trusts at the rate of $1.9 million per Reorganized Value) was estimated to be addition, Lazard utilized a discounted
month, with the initial and monthly approximately $395 million to $470 cash flow approach in which it
cash contributions to the Trusts million, with a midpoint of computed the present value of Kaiser’s
aggregating $48.7 million as of the approximately $430 million as of free cash flows and terminal value.
Effective Date. These cash contributions September 30, 2005. Further, Lazard analyzed the financial
were credited against $36 million in The Reorganized Value consisted of terms of certain acquisitions of
cash due to the Trusts on the Effective the theoretical enterprise value of companies that it believed were
Date and will be credited against the Kaiser, plus excess cash and other non- comparable to the operating businesses
first approximately $12.7 million of operating cash flows and assets. Lazard of Kaiser.
variable cash contributions that Kaiser estimated the Reorganized Value as of
is obligated to make to the Trusts from September 30, 2005, under the Administrative Exemptive Relief
the profit sharing pool described below. assumption that the Reorganized Value 8. Accordingly, Kaiser requests an
Of the $48.7 million of cash would not change materially through administrative exemption from the
contributions made to the Trusts prior the assumed Effective Date of December Department with respect to: (1) The past
to the Effective Date, $41.0 million was 31, 2005. contribution and the acquisition by the
contributed to the Hourly Trust and $7.7 The imputed reorganized equity value VEBAs of the Shares; (2) the holding by
million was contributed to the Salaried (the Equity Value) of Kaiser, which took the VEBAs of such Shares acquired
Trust. In addition, Kaiser made a one- into account estimated debt balances pursuant to the contributions; and (3)
time contribution to the Hourly Trust of and other obligations as of the assumed the management of the Shares by an
$1 million in cash on March 31, 2005; Effective Date, was estimated to range Independent Fiduciary. Kaiser explains
such cash contribution has not been and from approximately $340 million to that the contribution of the Shares to the
will not be credited against any of $415 million, with a midpoint of Hourly and Salaried Trusts would
Kaiser’s obligations to contribute approximately $380 million. Based on violate sections 406(a)(1)(E), 406(a)(2),
additional cash to the Hourly Trust. Any the imputed range on this Effective and 407(a) of the Act.
variable cash contributions from the Date, the Equity Value per share of the Section 406(a)(1)(E) of the Act
profit sharing pool described below will Stock was estimated to be provides that a fiduciary with respect to
be made 85.5% to the Hourly Trust and approximately $17.00 to $20.75, with a a plan shall not cause the plan to engage
14.5% to the Salaried Trust. midpoint of approximately $19.00. in a transaction if he knows or should
(c) Profit Sharing Pool. Following the Thus, the estimated Equity Value of know that such transaction constitutes a
Effective Date, Kaiser established a the 11,439,900 Shares of Kaiser common direct or indirect ‘‘acquisition, on behalf
profit sharing pool (the Pool) and, stock that were originally to be of the plan, of any employer security
subject to the $12.7 million credit contributed to the Hourly VEBA before * * * in violation of Section 407(a).’’
described above, is required to the pre-emergence sales had an Section 406(a)(2) of the Act prohibits a
distribute the Pool, if any, for a fiscal estimated value of between $194.5 fiduciary who has authority or
year on the earlier of 120 days following million and $237.4 million, with a discretionary control of plan assets to
the end of the fiscal year or 15 days after midpoint of $217.4 million. With permit the plan to hold any employer
Kaiser files the Annual Report on Form respect to the Salaried VEBA, the security if he knows or should know
10–K for the fiscal year with the SEC 1,940,000 Shares of Kaiser common that holding such security violates
(or, if no such report is required to be stock that were originally to be Section 407(a). Section 407(a)(1) of the
filed, within 15 days of the delivery of contributed to such VEBA before the Act states that a plan may not acquire
the independent auditor’s opinion of pre-emergence sales had an estimated or hold any employer security which is
Kaiser’s annual financial statements for value of between $33 million and $40.3 not a qualifying employer security.
the fiscal year). The Pool, if any, for a million, with a midpoint of $36.9 Section 407(a)(2) of the Act states that
fiscal year will be 10% of the first $20 million. a plan may not acquire any qualifying
million of adjusted pre-tax profit, plus In preparing its estimate of the employer security, if immediately after
20% of adjusted pre-tax profit in excess Reorganized Value of Kaiser, Lazard: (a) such acquisition the aggregate fair
of $20 million, provided that the Pool Reviewed historical financial market value of the employer securities
will not exceed $20 million and the information concerning Kaiser; (b) held by the plan exceeds 10% of the fair
Pool will be limited (with no carryover reviewed internal financial and market value of the assets of the plan.
operating data regarding Kaiser and Section 407(d)(5) of the Act defines the
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10 The Salaried VEBA was entitled to receive financial projections relating to Kaiser’s term ‘‘qualifying employer security’’ to
1,940,000 Shares (representing a 9.7% ownership business and prospects; and (c) met mean an employer security which is a
interest in Kaiser) but sold, pursuant to procedures
approved by the Bankruptcy Court, rights to
with certain members of the senior stock, a marketable obligation, or an
940,233 of such Shares to unrelated third parties in management of Kaiser to discuss interest in certain publicly traded
pre-emergence sales. Kaiser’s operations and future partnerships. After December 17, 1987,

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in the case of a plan, other than an Trusts. Kaiser notes that this would be duties with respect to the Stock
eligible individual account plan, an extremely difficult to accomplish in the contribution include or have included:
employer security will be considered a case of the uncertain number of future (a) Conducting a due diligence review of
qualifying employer security only if retirees whose eligibility for future the transactions for which exemptive
such employer security satisfies the benefits depends upon the length of relief has been requested; (b) negotiating
requirements of section 407(f)(1) of the credited service with Kaiser at the time additional or different terms on behalf
Act. Section 407(f)(1) of the Act states they eventually retire or terminate their of the Hourly VEBA, as appropriate, in
that stock satisfies the requirements of employment. Furthermore, Kaiser states connection with Kaiser’s application for
this paragraph if, immediately following that if the Shares were distributed in exemptive relief; (c) determining
the acquisition of such stock no more kind, each covered retiree would have whether the Hourly VEBA should
than 25% of the aggregate amount of the received a relatively small number of participate in the transactions; (d)
same class issued and outstanding at the Shares, which would be fully taxable furnishing the Department a statement
time of acquisition is held by the plan, upon receipt. Kaiser explains that outlining such determinations and the
and at least 50% of the aggregate retirees would likely sell at least some rationale; (e) effecting the transactions
amount of such stock is held by persons of the Shares upon receipt to cover their by directing National City Bank, the
independent of the issuer. tax liability. If this occurred, Kaiser institutional trustee, to accept and
In this regard, Kaiser represents that indicates that the resultant selling maintain the Shares on behalf of the
the Stock held by the Trusts would not pressure would likely adversely affect Hourly VEBA in accordance with the
comply with the requirements of section the market, so that the sale price for the relevant terms of the Plan of
407(f)(1) of the Act, because at least Shares would be less than their Reorganization, issued by the
50% of the Shares would not be held by economic value. Finally, Kaiser explains Bankruptcy Court; (f) arranging for
persons ‘‘independent of Kaiser,’’ and, that individual retirees would not be periodic valuations of the Shares that
in the case of the Hourly Trust, more able to manage the Shares and replicate have been contributed to the Hourly
than 25% of the Shares issued and for themselves the benefits provided for VEBA, including the selection and
outstanding would be held by the under the terms of the VEBAs.11 retention of (i) the valuation firm to
Hourly Trust immediately after their perform such services, or (ii) upon IFS’
acquisition. In addition, even if the Independent Fiduciary for the Hourly advice to the Hourly Trustees, a
Shares constituted qualifying employer VEBA financial advisory firm (which may be
securities as provided in section 10. (a) Duties and Responsibilities. the same firm as the valuation firm) to
407(d)(5) of the Act, Kaiser states that Pursuant to the Plan of Reorganization, evaluate the merits of a merger,
the contribution of the Shares would on October 6, 2005, the Hourly Board acquisition, or tender offer affecting the
cause each of the Trusts to exceed the entered into the Hourly Independent value of such Shares; (g) directing the
10% assets limitation under section Fiduciary Agreement with IFS of Hourly Trustee to demand that Kaiser
407(a)(2) of the Act. Washington, DC, to serve as the Hourly prepare and file with the SEC a ‘‘shelf’’
If granted, the exemption would be VEBA’s Independent Fiduciary. (The registration statement covering the
effective as of July 6, 2006. Department’s views on the duties of the resale of the Shares or to permit the
Rationale for Exemptive Relief Independent Fiduciary are presented in Hourly VEBA to sell the Shares without
Representation 12). IFS is a wholly registration pursuant to Rule 144 under
9. Without an administrative the 1933 Securities Act or otherwise;
exemption, Kaiser states that it would owned Delaware corporation with no
subsidiaries or affiliates. IFS engages in and (h) managing the Shares that have
have contributed the maximum number been contributed to the Hourly VEBA,
of Shares allowable under sections 406 structuring and monitoring pension and
welfare fund investment programs and including the authority to direct the
and 407 of the Act to the VEBAs, which Hourly Trustee as to the voting of the
in turn could retain the Shares for the fiduciary decision-making on behalf of
such funds. IFS represents that it is Shares and as to the effecting of any
purpose of providing retiree welfare purchase, sale, exchange, or liquidation
benefits. Kaiser explains that because of independent from Kaiser, the USW, the
Hourly Board and the Hourly Trustee. of the Shares.
the 10% asset limitation imposed by (b) Views about the Transactions. IFS
section 407(a)(2), it is likely that very Prior to its retention by the Hourly
Board to serve as the Hourly believes that the transactions were in
few Shares would be contributed to the the best interests of the Hourly VEBA’s
Trusts. In this event, Kaiser represents Independent Fiduciary, IFS states that it
participants and beneficiaries and
that it would have been necessary to had no previous relationship with
protective of their interests because a
develop a new agreement or an Kaiser or any of its benefit plans or with
retiree welfare plan that is funded
alternative means of utilizing the Shares any of the other parties who will have
primarily with company stock is
for the exclusive benefit of participants fiduciary responsibilities to the Hourly
preferable to a plan that is unfunded
and beneficiaries of the Trusts. As a Plan in connection with the transactions
and preferable to no plan at all. IFS
result, Kaiser explains that this would described herein. IFS is engaged, and
states its determination on whether to
have unwound the Agreements already has been in the past engaged, to provide
acquire the Shares was consistent with
reached with the Unions, the Hourly investment consulting services to
its fiduciary obligations since
Board and the Salaried Committee. employee benefit plans covering management of the Shares would be in
Kaiser represents that the chain of members of one or more of the Unions. its sole discretion.
events that this would set into effect However, IFS states that none of these Since being hired as the Hourly
would have jeopardized Kaiser’s ability engagements has or had any Independent Fiduciary, IFS states that it
to reorganize and would have rendered relationship to the covered transactions. has been instrumental in several
Kaiser unable to make any contributions Under the terms of the Hourly changes in the terms of the Plan and the
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to fund health benefits for its retirees. Independent Fiduciary Agreement, IFS’ VEBA Trust that protect the interest of
Lastly, Kaiser states that the Trustees 11 The Department expresses no opinion on the
the Hourly Plan’s participants. Among
would have had no choice but to amend application of ERISA’s prohibited transaction
these are clarifications to the
the Trusts to provide for a distribution restrictions to the alternate uses of the Shares as Registration Rights Agreement regarding
of Shares to the beneficiaries of both described above. the circumstances under which Kaiser

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would be required to accede to IFS’ were needed to value the Shares as of IFS explains that the overall restriction
demand for an underwritten offering, the Effective Date. Thus, on July 7, 2006, scheme is on par with other previously
and amendments to the Summary Plan the Stock was listed on the NASDAQ granted individual exemptions and is
Description and the VEBA Trust exchange at an opening value of $45.00 less restrictive in some respects, due to
Agreement to clarify that the Plan’s per share.13 At such time as IFS the sales permitted.15 For example, after
benefit obligation would be conditioned concludes that a sufficient market exists the first few years, IFS notes that the
on available cash and that no fiduciary for the Shares, it is anticipated that the Hourly VEBA would have had a
or other person would be required to NASDAQ trading price will constitute a substantial opportunity to sell the Stock
liquidate any plan asset to generate helpful reference point for determining on the open market. If prudent to do so,
cash. In IFS’ view, both of these changes the fair market value of the Shares held IFS further explains that the Hourly
would reduce the likelihood that the by the Hourly VEBA. However, while VEBA may sell 100% of its Stock in just
Shares would be liquidated at an the Hourly VEBA continues to hold over six years. More significantly, IFS
inopportune time in terms of price or Shares constituting a large proportion of points out that the NOLs will be
market effect. In addition, IFS states that the Stock, IFS may determine to apply forfeited if, in any rolling three-year
it sought and obtained approval from a control premium, blockage discount, period, a change of ownership occurs
the Hourly Board to hire professionals marketability or liquidity discount with respect to 50% or more of Kaiser’s
that might be needed in the execution (owing to the restrictions in the Stock Stock.
of IFS’ responsibilities. Finally, IFS Transfer Restriction Agreement) or other With respect to the Registration Rights
anticipates that it would implement a appropriate adjustments to the Agreement, IFS explains that between
program to liquidate the Hourly Plan’s NASDAQ trading price of the Shares. July 6, 2006 and March 31, 2007, it may
holdings of the Shares over time to (c) Views on the Stock Transfer direct the Hourly Trustee to demand
generate cash for the payment of Restriction Agreement and the that Kaiser effect a registration to permit
benefits under the Hourly Plan and to Registration Rights Agreement. IFS the sale of a portion of the Shares held
diversify the Hourly Plan’s investment explains that although the Stock by the Hourly VEBA. At any time after
assets. Transfer Restriction Agreement and the March 31, 2007, IFS states it may direct
(c) Pricing of the Hourly VEBA’s Registration Rights Agreement the Hourly VEBA Trustee to demand
Shares. IFS retained an independent circumscribe its discretion, the that Kaiser effect a shelf registration, to
corporate valuator, Empire Valuation limitations imposed therein are permit the sale of shares on a
Consultants (Empire), to advise IFS in designed to help assure an orderly continuous basis. IFS further represents
valuing the Shares that were to be market for the Shares and to prevent the that all expenses associated with
contributed. In this regard, Empire loss of Kaiser’s NOLs. IFS explains that effecting a demand or shelf registration,
analyzed Lazard’s estimate and on April preserving these tax credits would ease including piggy-back rights, will be
12, 2006, completed a preliminary the tax burden on Kaiser thereby borne by Kaiser.16
analysis of Kaiser’s financial enhancing Kaiser’s ability to meet its IFS states that the terms of the
information in light of the current and cash obligations, including its Registration Rights Agreement are
projected economic and industry obligations to the Hourly Plan, and comparable to the terms found in
climates, using the discounted cash flow enhancing the value of Kaiser whose previously granted exemptions. For
method and the guideline company Shares the Hourly Plan would own. example, IFS explains that the Hourly
method, to reach an estimate of the fair Concerning the Stock Transfer VEBA will not need to wait five years
market value of Kaiser (and thereby of Restriction Agreement, IFS explains before making a demand registration for
that, generally, during the ten-year an underwritten offering. In addition,
the Shares that were to be contributed
period commencing on the Effective IFS states that the Hourly VEBA will not
to the Hourly VEBA). This preliminary
Date, the Hourly VEBA is prohibited have responsibility for the costs of
analysis was updated in a valuation
from disposing of the Shares unless at effecting a demand registration. IFS
report prepared by Empire on August
the time of disposition, the number of further represents that the Hourly VEBA
18, 2006 12 to reflect the fair market
such Shares to be included in the may demand a shelf registration (after
value of the Stock owned by the Hourly
transfer, together with all such Shares the first year) that will allow it to market
VEBA. The Hourly VEBA received its
included in other transfers that occurred the Stock as rapidly as possible under
8,809,000 Shares as of July 7, 2006.
during the 12 months preceding the the Stock Transfer Restriction
Empire placed the fair market value of
transfer, is not more than 15% of the Agreement. Under these circumstances,
such Stock at $36.50 per Share as of July total number of Shares received by the Kaiser will be responsible for paying
7, 2006. The update also took into Hourly Trust. Notwithstanding this
account the restrictions on marketability general rule, however, IFS notes that the 15 For instance, IFS cites Navistar International
under the Stock Transfer Restriction Hourly VEBA may sell as much as 30% Transportation Corporation (PTE 93–69, 58 FR
Agreement and other benefits or of its Shares in the first year after the
51105 (September 30, 1993)) where the Navistar
detriments placed on the Hourly plan could sell no shares at all for five years.
Effective Date, as long as it does not sell Additionally, IFS states that in Wheeling-Pittsburgh
VEBA’s Shares. In the interim, the more than 45% of its Shares during the Steel Corporation (PTE 2005–04, 70 FR 5703
market-driven sales of pre-emergence three-year period beginning on such (February 2, 2005)) the plan could sell no shares for
Shares described above provided a two years, although the company consented to a
Effective Date.14 sale near the end of the restriction period. In both
benchmark for assessing the value of the IFS acknowledges that the maximum cases, IFS explains that the plans after the first few
Shares to which the Hourly VEBA was restriction period of ten years, pursuant years had to have essentially the same number of
eventually entitled on July 7, 2006. to the Stock Transfer Restriction shares that initially had been contributed to their
IFS, with its advisers, continued to plans.
Agreement, is a long duration. However, 16 The Department notes that a shelf registration
monitor Kaiser’s financial status to
is a registration of a new issue, which can be
ycherry on PROD1PC64 with NOTICES

determine whether additional steps 13 On July 7, 2006, the last reported sales price prepared up to two years in advance, so that the
for the Kaiser common stock on the NASDAQ issue can be offered as soon as funds are needed
12 Kaiser represents that the Stock was not listed Global Market was $42.20. or market conditions are available.
on the Effective Date. Kaiser explains that the Stock 14 IFS represents that the Hourly VEBA may sell Piggy-back rights are the rights of an investor to
did not begin to trade until the next day, July 7, more than 15% in any year if the Kaiser Board register and sell his/her unregistered stock in the
2006. consents. event that the company conducts an offering.

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registration expenses, while the Hourly administrative relief; (d) manage the bankruptcy retiree welfare programs and
VEBA will be responsible for paying Shares on an ongoing basis subject to the nature of the post-bankruptcy retiree
underwriting commissions and other the terms and conditions of the Salaried welfare plans. Ultimately, FCI explains
selling fees. Trust Agreement, the Salaried that the bargaining parties agreed that
Finally, IFS states that the Hourly Independent Fiduciary Agreement, and the pre-bankruptcy programs would be
VEBA may participate on a piggy-back the Department’s administrative relief; terminated and replaced with the
basis if Kaiser proposes to file a (e) determine, in its sole discretion, Hourly VEBA and the Salaried VEBA.
registration statement, whether or not whether and when to sell the Shares, With respect to the Salaried VEBA, FCI
for its own account. IFS explains that if and in what amounts, and upon such further explains that Kaiser agreed to
the marketability of Kaiser’s offering is terms and conditions that would be in make certain cash contributions to the
affected, the number of Hourly VEBA the best interests of the Salaried Plan Salaried VEBA and to contribute a
shares that may be included is generally and its current and future participants substantial number of Shares.
limited. and beneficiaries, but subject to the In addition, FCI represents that the
restrictions contained in the Certificate Plan of Reorganization provides for the
Independent Fiduciary for the Salaried
of Incorporation; 17 and (f) vote the hiring of an independent fiduciary for
VEBA
Shares in person or by proxy in such the purpose of determining whether to
11. (a) Duties and Responsibilities. manner as the Independent Fiduciary acquire the Shares, and assuming the
Pursuant to the Plan of Reorganization, deems to be in the best interests of the independent fiduciary’s decision is to
on September 6, 2005, the Salaried Salaried Plan and its current and future acquire the Shares, to manage the
Board for the Salaried VEBA entered participants and beneficiaries on all Shares. FCI explains that it was hired by
into an agreement (the Salaried matters brought before the holders of the Salaried Board to perform these
Independent Fiduciary Agreement) with Kaiser common stock for a vote. fiduciary services and that its
FCI of Washington, DC to serve as the FCI states that it would represent the determination to acquire the Shares
Salaried VEBA’s Independent Fiduciary. interests of the Salaried VEBA and its would be consistent with section 404 of
The Salaried Board determined that it participants and beneficiaries for the the Act.
was appropriate and desirable to retain duration of the administrative relief FCI further represents that
the services of FCI to exercise the granted for acquiring and holding of the management of the Shares would be in
Salaried Trust’s responsibilities and Stock and would take all necessary its sole discretion, subject to the terms
control over all matters concerning the actions on behalf of the Plan in of the Salaried Trust, the Salaried Plan,
Shares including, without limitation, accordance with the terms of the the Salaried Independent Fiduciary
control over the acquisition, holding, Salaried Independent Fiduciary Agreement, and the Certificate of
management and disposition of the Agreement. FCI anticipates that the Incorporation. FCI recognizes that while
Shares. Salaried VEBA would implement a the Certificate of Incorporation limits its
FCI, a Delaware corporation, explains program to liquidate its holdings of the discretion, it explains that in its
that it is a pension consultant and Shares over time with the objectives of experience the limitations imposed by
investment adviser registered under the generating cash for the payment of the Certificate of Incorporation are
Investment Advisers Act of 1940. FCI benefits under the Salaried VEBA and typical of the terms of similar
primarily acts as an investment manager diversifying the Salaried VEBA’s transactions between unrelated parties
and independent fiduciary for employee investment assets. Because the Shares acting at arm’s length under similar
benefit plans covered by the Act. FCI would be freely tradable, FCI indicates circumstances to preserve the value of
states that it is independent from Kaiser, that it would value the Shares at the the NOLs of a company emerging from
the USW, the Salaried Board and the market price. In the event the Shares are bankruptcy. Moreover, FCI states that
Salaried Trustee. FCI is wholly owned thinly-traded, FCI states that it would preserving the NOLs would materially
by eight of its employees and has no retain an independent firm to provide a ease the tax burden on Kaiser following
affiliates or subsidiaries. FCI explains valuation. Such valuations would then its emergence from bankruptcy, thereby
that prior to its engagement by the be based on either of three enhancing Kaiser’s ability to meet its
Salaried Board, FCI had no previous methodologies: (a) Comparable cash contribution obligations, including
relationship with Kaiser or any of its companies, (b) comparable transactions, its obligations to the Salaried VEBA. FCI
benefit plans or with any of the other or (c) discounted cash flow. explains this would enhance the value
parties who will have fiduciary (b) Views about the Transactions. FCI of Kaiser whose Shares the Salaried
responsibility to the Salaried VEBA in believes that the transactions would be VEBA would then own.
connection with the proposed in the best interests of the Salaried Finally, FCI represents that
exemptive relief from the Department. VEBA and protective of the participants administrative relief from the prohibited
Pursuant to the Salaried Independent and beneficiaries of such VEBA because transaction provisions of the Act is
Fiduciary Agreement, FCI agreed to: (a) a retiree welfare plan that is funded critical to the operation of the Salaried
Represent the Salaried Trust in primarily with Kaiser Stock is preferable VEBA. If the relief sought is not granted,
discussions with the DOL concerning to a plan that is unfunded, and the consequences for the Salaried
administrative exemptive relief and any preferable to no plan at all. FCI notes VEBA’s participants and beneficiaries
administrative requirements imposed by that Kaiser and the Salaried Committee would likely be adverse, and would
the Department as a condition for bargained at arm’s length over the extent have required Kaiser to distribute the
exemptive relief; (b) issue a to which Kaiser would continue its pre- Shares directly to the Salaried Plan
determination of whether the Stock participants and beneficiaries, thereby
contribution would be in the best 17 The Salaried VEBA, like all Kaiser frustrating the benefit objectives of the
interest of the Salaried VEBA and its Salaried VEBA and forcing the
ycherry on PROD1PC64 with NOTICES

shareholders, will be prohibited from selling


current and future participants and directly to a 5% shareholder (or one who would participants and beneficiaries to face
beneficiaries; (c) provide documentation become a 5% shareholder as a result of the sale) adverse tax consequences.
unless Kaiser consents to the sale. This restriction,
to the Department or satisfaction of such which is contained in the Certificate of
(c) Pricing of the Salaried VEBA’s
other conditions as may be required in Incorporation, is intended to preserve Kaiser’s Shares. FCI represents that the Shares
connection with obtaining the requested NOLs. received by the Salaried VEBA were

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freely tradable when received on July the interest’’ of the plan’s participants (g) The Hourly Board and the Salaried
13, 2006, so no appraisal was necessary. and beneficiaries, and with a view to the Board have maintained and will
The Salaried VEBA trustees were able to need to diversify plan assets when maintain for a period of six years from
sell a sufficient amount of the Salaried deciding whether to accept an in kind the date any Shares are contributed to
VEBA’s Shares during certain pre- contribution. If accepting an in kind the VEBAs, the records necessary to
emergence sales so the Salaried VEBA contribution is not ‘‘prudent,’’ or not enable certain persons, such as the
received less than 5 percent of the ‘‘solely in the interest’’ of the Salaried Board, VEBA participants,
outstanding Stock and was therefore no participants and beneficiaries of the Kaiser or any authorized employee or
longer subject to the NOL restrictions by plan, the responsible fiduciaries of the representative of the Department, to see
the time the Stock was distributed. The plan would be liable for any losses whether the conditions of this
Salaried VEBA received its 999,867 resulting from such a breach of fiduciary exemption have been met.
Shares on July 13, 2006. Union Bank of responsibility, even if the contribution Notice to Interested Persons
California, the custodian for the Salaried in kind does not constitute a prohibited
VEBA, booked the Shares at a total transaction under section 406 of the Act. Notice of the proposed exemption
value of $44,244,114.75 (or $44.25 per 13. In summary, Kaiser represents that will be provided to all interested
Share) on the NASDAQ. FCI states that the transactions have satisfied or will persons by first class mail within 8 days
it sold 10,000 Shares on the open satisfy the statutory criteria for an of approval by the Department. Such
market that day at an average price of exemption under section 408(a) of the notice will include a copy of the notice
$44.23 per Share. Act because: of proposed exemption, as well as a
(a) An Independent Fiduciary has supplemental statement or ‘‘Summary
Duties of the Independent Fiduciary Notice,’’ as required pursuant to 29 CFR
represented and will separately
12. The Department notes that the represent each VEBA and its 2570.43(b)(2), which shall inform
appointment of Independent Fiduciaries participants and beneficiaries for all interested persons of their right to
to represent the interests of the Hourly comment on the proposed exemption
purposes with respect to the Shares and
and Salaried VEBAs with respect to the and/or to request a hearing. Comments
has determined or will determine that
covered transactions described in this and hearing requests with respect to the
each such transaction is in the interests
exemption request is a material factor in notice of proposed exemption are due
of the VEBA it represents.
its determination to propose exemptive within 29 days of the date of approval
(b) The Independent Fiduciary for the
relief. The Department believes that it of the notice of pendency by the
Hourly VEBA has discharged or will
would be helpful to provide general Department.
information regarding its views on the discharge its duties consistent with the
responsibilities of an independent terms of the Hourly Trust, the Stock General Information
fiduciary in connection with the in kind Transfer Restriction Agreement, the The attention of interested persons is
contribution of property to an employee Certificate of Incorporation, the directed to the following:
benefit plan. Registration Rights Agreement, the (1) The fact that a transaction is the
As noted in the Department’s Hourly Independent Fiduciary subject of an exemption under section
Interpretive Bulletin, 29 CFR 2509.94– Agreement, and successors to these 408(a) of the Act does not relieve a
3(d) (59 FR 66736, December 28, 1994), documents. fiduciary or other party in interest or
apart from consideration of the (c) The Independent Fiduciary for the disqualified person from certain other
prohibited transaction provisions, plan Salaried VEBA has discharged or will provisions of the Act, including any
fiduciaries must determine that discharge its duties consistent with the prohibited transaction provisions to
acceptance of an in kind contribution is terms of the Salaried Trust, the which the exemption does not apply
consistent with the general standards of Certificate of Incorporation, the Salaried and the general fiduciary responsibility
fiduciary conduct under the Act. It is Independent Fiduciary Agreement, and provisions of section 404 of the Act,
the view of the Department that successors to these documents. which require, among other things, a
acceptance of an in kind contribution is (d) The Independent Fiduciaries have fiduciary to discharge his or her duties
a fiduciary action subject to section 404 negotiated and approved or will respecting the plan solely in the interest
of the Act. In this regard, section negotiate and approve on behalf of their of the participants and beneficiaries of
404(a)(1)(A) and (B) of the Act requires respective VEBAs any transactions the plan and in a prudent fashion in
that fiduciaries discharge their duties to between the VEBA and Kaiser involving accordance with section 404(a)(1)(B) of
a plan solely in the interests of the the Shares that may be necessary in the Act;
participants and beneficiaries, for the connection with the transactions (2) The proposed exemption, if
exclusive purpose of providing benefits (including but not limited to registration granted, will not extend to transactions
to participants and beneficiaries and of the Shares contributed to the Hourly prohibited under section 406(b)(3) of the
defraying reasonable administrative Trust). Act;
expenses, and with the care, skill, (e) The VEBAs have not incurred or (3) Before an exemption can be
prudence, and diligence under the will not incur any fees, costs or other granted under section 408(a) of the Act,
circumstances then prevailing that a charges (other than those described in the Department must find that the
prudent person acting in a like capacity the Hourly and Salaried Trusts, the exemption is administratively feasible,
and familiar with such matters would Independent Fiduciary Agreements, the in the interest of the plan and of its
use in the conduct of an enterprise of a Hourly Settlement Agreement, and the participants and beneficiaries and
like character and with like aims. In Salaried Settlement Agreement) as a protective of the rights of participants
addition, section 404(a)(1)(C) of the Act result of any of the transactions and beneficiaries of the plan; and
requires that fiduciaries diversify plan described herein. (4) The proposed exemption, if
ycherry on PROD1PC64 with NOTICES

investments so as to minimize the risk (f) The terms of the transactions have granted, will be supplemental to, and
of large losses, unless under the been and will be no less favorable to the not in derogation of, any other
circumstances it is clearly prudent not VEBAs than terms negotiated at arm’s provisions of the Act, including
to do so. Accordingly, the fiduciaries of length under similar circumstances statutory or administrative exemptions.
a plan must act ‘‘prudently,’’ ‘‘solely in between unrelated third parties. Furthermore, the fact that a transaction

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is subject to an administrative or beneficiaries for all purposes related to (h) The Board of Trustees of the
statutory exemption is not dispositive of the contributions for the duration of Hourly VEBA (the Hourly Board) and
whether the transaction is in fact a each VEBA’s holding of the Shares and the Board of Trustees of the Salaried
prohibited transaction. will have sole responsibility relating to Board have maintained or will maintain
the acquisition, holding, disposition, for a period of six years from the date
Written Comments and Hearing
ongoing management, and voting of the any Shares are contributed to the
Requests
Stock. The Independent Fiduciary has VEBAs, any and all records necessary to
All interested persons are invited to determined or will determine, before enable the persons described in
submit written comments and/or taking any actions regarding the Shares, paragraph (i) below to determine
requests for a public hearing on the that each such action or transaction is whether conditions of this exemption
pending exemption to the address in the interests of the VEBA it have been met, except that (1) a
above, within the time frame set forth represents. prohibited transaction will not be
above, after the approval of this notice (b) The Independent Fiduciary for the considered to have occurred if, due to
of pendency. All comments and hearing Hourly VEBA has discharged or will circumstances beyond the control of the
requests will be made a part of the discharge its duties consistent with the Hourly Board and the Salaried Board,
record. Comments and hearing requests terms of the Hourly Trust Agreement, the records are lost or destroyed prior to
should state the reasons for the writer’s the Stock Transfer Restriction the end of the six-year period, and (2)
interest in the proposed exemption. Agreement, the Certificate of no party in interest other than the
Comments and hearing requests Incorporation, the Registration Rights Hourly Board and the Salaried Board
received will also be available for public Agreement, the Hourly Independent shall be subject to the civil penalty that
inspection with the referenced Fiduciary Agreement, and successors to may be assessed under section 502(i) of
application at the address set forth these documents. the Act if the records are not
above. (c) The Independent Fiduciary for the maintained, or are not available for
Proposed Exemption Salaried VEBA has discharged or will examination as required by paragraph (i)
discharge its duties consistent with the below.
Based on the facts and representations terms of the Trust Agreement between (i)(1) Except as provided in section (2)
set forth in the application, the the Salaried Board of Trustees (the of this paragraph and not withstanding
Department is considering granting the Salaried Board) and the Salaried Trustee any provisions of subsections (a)(2) and
requested exemption under the (the Salaried Trust Agreement), the (b) of section 504 of the Act, the records
authority of section 408(a) of the Act Certificate of Incorporation, the Salaried referred to in paragraph (h) above have
and in accordance with the procedures Independent Fiduciary Agreement, and been or shall be unconditionally
set forth in 29 CFR Part 2570, Subpart successors to these documents. available at their customary location
B (55 FR 32836, August 10, 1990), as during normal business hours by:
(d) The Independent Fiduciaries have
follows: (A) Any duly authorized employee or
negotiated and approved or will
Section I. Covered Transactions negotiate and approve on behalf of their representative of the Department;
If the exemption is granted, the respective VEBAs any transactions (B) The United Steel, Paper and
restrictions of sections 406(a)(1)(E), between the VEBA and Kaiser involving Forestry, Rubber, Manufacturing,
406(a)(2), 406(b)(1), 406(b)(2), and the Shares that may be necessary in Energy, Allied Industrial and Service
407(a) of the Act shall not apply, connection with the subject transactions Workers International Union (the USW)
effective July 6, 2006, to: (1) the (including, but not limited to, or any duly authorized representative of
acquisition by the VEBA for Retirees of registration of the Shares contributed to the USW, and other unions or their duly
Kaiser Aluminum (the Hourly VEBA) the Hourly Trust), as well as the ongoing authorized representatives, as to the
and by the Kaiser Aluminum Salaried management and voting of such Shares. Hourly VEBA only;
Retirees VEBA (the Salaried VEBA; (e) The Independent Fiduciary has (C) The Salaried Board or any duly
together, the VEBAs) of certain publicly authorized or will authorize the Trustee authorized representative of the Salaried
traded common stock issued by Kaiser of the respective VEBA to accept or Board, as to the Salaried VEBA only;
(the Stock or the Shares), through an in- dispose of the Shares only after such (D) Kaiser or any duly authorized
kind contribution to the VEBAs by Independent Fiduciary determines, at representative of Kaiser; and
Kaiser of such Stock, for the purpose of the time of each transaction, that such (E) Any participant or beneficiary of
prefunding VEBA welfare benefits; (2) transaction is feasible, in the interest of the VEBAs, or any duly authorized
the holding by the VEBAs of such Stock the Hourly or Salaried VEBA, and representative of such participant or
acquired pursuant to the contributions; protective of the participants and beneficiary, as to the VEBA in which
and (3) the management of the Shares, beneficiaries of such VEBAs. such participant or beneficiary
including their voting and disposition, (f) The VEBAs have incurred or will participates.
by an independent fiduciary (the incur no fees, costs or other charges (2) None of the persons described
Independent Fiduciary) designated to (other than those described in the above in subparagraph (1)(B), (C), or (E)
represent the interests of each VEBA Hourly and Salaried Trusts, the of this paragraph (i) has been or shall be
with respect to the transactions. Independent Fiduciary Agreements, the authorized to examine the trade secrets
Hourly Settlement Agreement, and the of Kaiser, or commercial or financial
Section II. Conditions Salaried Settlement Agreement) as a information that is privileged or
This proposed exemption is result of any of the transactions confidential.
conditioned upon adherence to the described herein.
Section III. Definitions
material facts and representations (g) The terms of any transactions
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described herein and upon satisfaction between the VEBAs and Kaiser have For purposes of this proposed
of the following conditions: been or will be no less favorable to the exemption, the term—
(a) An Independent Fiduciary has VEBAs than terms negotiated at arm’s (a) ‘‘Certificate of Incorporation’’
been appointed to separately represent length under similar circumstances means the certificate of incorporation of
each VEBA and its participants and between unrelated third parties. Kaiser as amended and restated as of the

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62624 Federal Register / Vol. 71, No. 207 / Thursday, October 26, 2006 / Notices

Effective Date of Kaiser’s Plan of appointed by the Hourly Board; and the contained in the application for
Reorganization. Salaried VEBA’s Independent Fiduciary exemption are true and complete and
(b) ‘‘Effective Date’’ means July 6, is Fiduciary Counselors Inc. (FCI), accurately describe all material terms of
2006, which is also the effective date of which has been appointed by the the transactions. In the case of
Kaiser’s Plan of Reorganization. Salaried Board. continuing transactions, if any of the
(c) ‘‘Hourly Board’’ means the Board (i) ‘‘Independent Fiduciary material facts or representations
of Trustees of the Hourly VEBA. Agreements’’ means the Hourly described in the applications change,
(d) ‘‘Hourly Independent Fiduciary Independent Fiduciary Agreement and the exemption will cease to apply as of
Agreement’’ means the agreement the Salaried Independent Fiduciary the date of such change. In the event of
between the Hourly Independent Agreement. any such change, an application for a
Fiduciary and the Hourly Board. (j) ‘‘Kaiser’’ means Kaiser Aluminum new exemption must be made to the
(e) ‘‘Hourly Settlement Agreement’’ Corporation and its wholly owned Department.
means the modified collective subsidiaries.
bargaining agreements with various (k) ‘‘Registration Rights Agreement’’ Ivan L. Strasfeld,
unions in the form of an agreement refers to the Registration Rights Director of Exemption Determinations,
under sections 1113 and 1114 of the Agreement between Kaiser, National Employee Benefits Security Administration,
United States Bankruptcy Code (the U.S. Department of Labor.
City Bank, and the Pension Benefit
Bankruptcy Code) between the USW Guaranty Corporation, acknowledged by [FR Doc. E6–17921 Filed 10–25–06; 8:45 am]
and Kaiser. the Hourly Independent Fiduciary with BILLING CODE 4510–29–P
(f) ‘‘Hourly Trust’’ means the trust respect to management of the Stock held
established under the Trust Agreement by the Hourly Trust.
between the Hourly Board and the (l) ‘‘Salaried Board’’ means the Board MILLENNIUM CHALLENGE
Hourly Trustee, effective June 1, 2004. of Trustees of the Kaiser Aluminum CORPORATION
(g) ‘‘Hourly VEBA’’ means ‘‘The Salaried Retirees VEBA.
VEBA For Retirees of Kaiser [MCC FR 06–16]
(m) ‘‘Salaried Independent Fiduciary
Aluminum’’ and its associated Agreement’’ means the agreement
voluntary employees’ beneficiary Report on Countries That Are
between the Salaried Independent Candidates for Millennium Challenge
association trust. Fiduciary and the Salaried Board.
(h) ‘‘Independent Fiduciary’’ means Account Eligibility in Fiscal Year 2007
(n) ‘‘Salaried Settlement Agreement’’ and Countries That Would Be
the Independent Fiduciary for the means the settlement, in the form of an
Hourly VEBA (or the Hourly Candidates but for Legal
agreement under section 1114 of the Prohibitions—Update
Independent Fiduciary) and the Bankruptcy Code, between Kaiser and a
Independent Fiduciary for the Salaried committee of five former executives of AGENCY: Millennium Challenge
VEBA (or the Salaried Independent Kaiser appointed pursuant to section Corporation.
Fiduciary). Such Independent Fiduciary 1114 of the Bankruptcy Code as ACTION: Notice.
is (1) independent of and unrelated to authorized representatives of current
Kaiser or its affiliates; and (2) appointed and future salaried retirees. SUMMARY: MCC is providing an update
to act on behalf of the VEBAs with (o) ‘‘Salaried Trust’’ means the trust to the report originally submitted on
respect to the acquisition, holding, established under the Trust Agreement August 11, 2006 to reflect a change in
management, and disposition of the between the Salaried Board and the the statutory eligibility status of
Shares. In this regard, the fiduciary will Salaried Trustee, effective May 31, 2004. candidate countries.
not be deemed to be independent of and (p) ‘‘Salaried VEBA’’ means the Kaiser
unrelated to Kaiser if: (1) Such fiduciary Report on Countries That Are
Aluminum Salaried Retirees VEBA and Candidates for Millennium Challenge
directly or indirectly controls, is its associated voluntary employees’
controlled by or is under common Account Eligibility for Fiscal Year 2007
beneficiary association trust. and Countries That Would Be
control with Kaiser; (2) such fiduciary (q) ‘‘Shares’’ or ‘‘Stock’’ refers to
directly or indirectly receives any Candidates but for Legal Prohibitions—
shares of common stock of reorganized Update
compensation or other consideration in Kaiser, par value $.01 per share.
connection with any transaction (r) ‘‘Stock Transfer Restriction MCC is providing an update to the
described in this proposed exemption; Agreement’’ means the agreement report originally submitted on August
except that the Independent Fiduciary between Kaiser, National City Bank, and 11, 2006 to reflect a change in the
may receive compensation for acting as the PBGC, acknowledged by the Hourly statutory eligibility status of candidate
an Independent Fiduciary from Kaiser Independent Fiduciary with respect to countries. This report to Congress is
in connection with the transactions management of the Kaiser’s Stock held provided in accordance with section
described herein if the amount or by the Hourly Trust. 608(a) of the Millennium Challenge Act
payment of such compensation is not (s) ‘‘Trusts’’ means the Salaried Trust of 2003, 22 U.S.C. 7701, 7707(a) (‘‘Act’’).
contingent upon or in any way affected and the Hourly Trust. The Act authorizes the provision of
by the Independent Fiduciary’s ultimate (t) ‘‘USW’’ means the United Steel, Millennium Challenge Account
decision, and (3) the annual gross Paper and Forestry, Rubber, (‘‘MCA’’) assistance to countries that
revenue received by the Independent Manufacturing, Energy, Allied enter into compacts with the United
Fiduciary, during any year of its Industrial and Service Workers States to support policies and programs
engagement, from Kaiser exceeds one International Union. that advance the progress of such
percent (1%) of the Independent (u) ‘‘VEBA’’ means a voluntary countries toward achieving lasting
Fiduciary’s annual gross revenue from employees’ beneficiary association. economic growth and poverty
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all sources (for Federal income tax (v) ‘‘VEBAs’’ refers to the Hourly reduction. The Act requires the
purposes) for its prior tax year. Finally, VEBA and Salaried VEBA. Millennium Challenge Corporation
the Hourly VEBA’s Independent The availability of this exemption is (‘‘MCC’’) to take a number of steps in
Fiduciary is Independent Fiduciary subject to the express condition that the determining the countries that will be
Services, Inc. (IFS), which has been material facts and representations eligible for MCA assistance for fiscal

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