Public Interest Standard, the Company must ensure that 2009 compensation structures for
these employees do not result in an increase in the amounts payable pursuant to these
arrangements.

7. Departed Employees

In addition, three employees that would have been Covered Employees had they
remained employed are no longer employed by the Company. With respect to these
employees, the Special Master has determined that cash salaries through the date of the
termination of employment, and payment of up to $25,000 in perquisites and “other”
compensation are consistent with the Public Interest Standard. No other payments to
these employees of any kind would be consistent with the Public Interest Standard. Any
exceptions to this limitation will require that the Company provide to the Office of the
Special Master an independent justification for the payment that is satisfactory to the
Special Master.

V. CORPORATE GOVERNANCE

As noted in Part III above, the Rule requires the Special Master to consider the
extent to which compensation structures are “performance-based over a relevant
performance period,” 31 C.F.R. § 30.16(b)(1)(iv). In light of the importance of this
principle, GMAC must take certain additional corporate governance steps, including
those required by the Rule, to ensure that the compensation structures for the Covered
Employees, and the amounts payable or potentially payable under those structures, are
consistent with the Public Interest Standard.

A. Requirements Relating to Compensation Structures

In order to ensure that objective compensation performance criteria are
“measurable, enforceable, and actually enforced if not met,” id. § 30.16(b)(1)(iv), long-
term incentive awards may not be granted unless the Company’s compensation
committee determines to grant such an award in light of the employee’s performance as
measured against objective performance criteria that the Committee has developed and
reviewed in consultation with the Office of the Special Master. This evaluation must be
disclosed in, and certified by the committee as part of, the Company’s securities filings.
In addition, the committee must retain discretion with respect to each executive to reduce
(but not to increase) the amount of any incentive award on the basis of its overall
evaluation of the executive’s or the Company’s performance (notwithstanding full or
partial satisfaction of the performance criteria).

In addition, as noted in Part III, above and described in Exhibits I and I, the
structures determined by the Special Master to be consistent with the Public Interest
Standard include grants of stock in GMAC. It is critical that these compensation
structures achieve the Rule’s objective of “appropriate| ly] allocat{ing] the components of
compensation [including] long-term incentives, as well as the extent to which
compensation is provided in...equity.” id. § 30.16(b)(ii).

AlO


ANNEX A
DETERMINATION MEMORANDUM

I. INTRODUCTION

The Emergency Economic Stabilization Act of 2008, as amended by the
American Recovery and Reinvestment Act of 2009 (“EESA”), requires the Secretary of
the Treasury to establish standards related to executive compensation and corporate
governance for financial institutions receiving financial assistance under the Troubled
Asset Relief Program (“TARP”). Through the Department of the Treasury’s Interim
Final Rule on TARP Standards for Compensation and Corporate Governance (the
“Rule”), the Secretary delegated to the Office of the Special Master for TARP Executive
Compensation (the “Office of the Special Master” or, the “Office”) responsibility for
reviewing compensation structures of certain employees at financial institutions that
received exceptional financial assistance under the TARP (“Exceptional Assistance
Recipients”). 31 C.F.R. § 30.16(a); id. § 30.16(a)(3). For these employees, the Special
Master must determine whether the compensation structure will or may result in
payments “inconsistent with the purposes of section 111 of EESA or TARP, or [is]
otherwise contrary to the public interest.” Id.

General Motors Acceptance Corporation Financial Services (“GMAC” or the
“Company”), one of seven Exceptional Assistance Recipients, has submitted to the
Special Master proposed compensation structures for review pursuant to Section
30.16(a)(3) of the Rule. These compensation structures apply to five employees that the
Company has identified as senior executive officers (the “Senior Executive Officers,” or
“SEOs”) for purposes of the Rule, and 17 employees the Company has identified as
among the most highly compensated employees of the Company for purposes of the Rule
(the “Most Highly Compensated Employees,” and, together with the SEOs, the “Covered
Employees”).

The Special Master has completed the review of the Company's proposed
compensation structures for the Covered Employees pursuant to the principles set forth in
the Rule. /d. § 30.16(b)(1). This Determination Memorandum sets forth the
determinations of the Special Master, pursuant to Section 30.16(a)(3) of the Rule, with
respect to the Covered Employees.

I. BACKGROUND

On June 15, 2009, the Department of the Treasury (“Treasury”) promulgated the
Rule, creating the Office of the Special Master and delineating its responsibilities.
Immediately following that date, the Special Master, and Treasury employees working in
the Office of the Special Master, conducted extensive discussions with GMAC officials.
During these discussions, the Office of the Special Master informed GMAC about the
nature of the Office’s work and the authority of the Special Master under the Rule. These
discussions continued for a period of months, during which the Special Master and
GMAC explored potential compensation structures for the Covered Employees.

Al


EXHIBITI
COVERED EMPLOYEES

2009 Compensation

Company Name: GMAC Financial Services

Stock Salary
(Performance based: | Long-Term Restricted Stock Total Direct
The stock vests at grant | (Performance based: Awarded | Compensation
and is redeemable in based on achievement of (Cash salary paid to
three equal, annual objective performance goals, _|date plus two months at
Cash Salary _| installments beginning on | Vests afier 3 years of service. | new run rate + stock
(Rate going | the 2nd anniversary of | Transferability dependent on salary + long-term,
Employee ID forward.) grant.) TARP repayment.) restricted stock.)
582903 $850,000 $4,491,667 $2,816,667 $8,450,000
120881 $400,000 $415,000 $1,320,000
151695 $500,000 3 $1,088,000 $3,363,000
172265 $500,000 $2,730,000 $1,615,000 $4,845,000,
197253 $500,000 $1,941,667 $1,050,000. $3,325,000
250095 $500,000. $4,437,500 $2,500,000 $7,500,000,
3 $375,000 833 $400,000 $1,200,000
353403 $365,000. $046,111 $500,000 $1,500,000,
391076 $450,000 $1,133,333 $725,000 $2.225.000
398005 $450,000, $625,833 $500,000 $1,530,000
SOL828 $450,000. $1,850,000. $1.150,000 $3,450,000
509014 $400,000, $852,278, $618,000 s 000,
513416 50,000 $880,000. $665,000, $1,995,000.
546145 $500,000, $1,641,667 6.667 $3,650,000
555076 $480,000 $1,029,167 $750,000 $2.255.000
682168 $600,000, $3,083,333 S$1.716,667 $5,150,000
[699403 $380,000 $483,783 $420,000. $1,270,000
725547 $450.00 $1,220,833 000,
805106 00,000 $2.21 $1,300,000 000
1021597 $400,000 $1,149,872 $665,000 $2,070,000
036790 $400,000 S1.141,667 $725,000 $2,225,000
96-4006 $450.000 $2,391,667 $1.400,000 $4.200.000
Comparison of 2009 Compensation to Prior Years: 2007 & 2008 Compensation
2008 Cash decreased by $10.4M or 50.2%
Total Direct Compensation decreased by $413.3M or 85.6%
2007 Cash decreased by $5.0M or 42.5%
Total Direct Compensation decreased by $185.9M or 78.2%
Note: |: Amounts reflected in this Exhibit do not include amounts the Company has asserted to be payable pursuant to legally

binding

ghts under valid employment contracts, see 31 C.F.R. § 30.10(e)(2).

Note:2: The total number of Covered Employees may be less than 25 because of terminations. departures and retirements,

after January 1, 2008.

El



5. Non-Qualified Deferred Compensation

GMAC proposed that certain Covered Employees receive substantial
compensation in the form of accruals under a “non-qualified deferred compensation”
plan.

6. Severance Arrangements

GMAC’s submission to the Office of the Special Master indicated that, in some
cases, the proposed compensation structures would result in increases in amounts payable
to these employees pursuant to existing severance arrangements. These arrangements
generally provide for cash amounts payable upon termination of employment, including
termination in light of the employee’s performance.

B. Determinations of the Special Master

The Special Master has reviewed the Proposed Structures in detail by application
of the principles set forth in the Rule and described in Part II above. In light of this
review and analysis, the Special Master has determined that both the structural design of
GMAC’s proposals and the amounts potentially payable to Covered Employees under the
proposals would be inconsistent with the Public Interest Standard and, therefore, require
modification.

The Special Master has determined, in light of the considerations that follow, that
the compensation structures described in Exhibits I and IT to this Determination
Memorandum will not, by virtue of either their structural design or the amounts
potentially payable under them, result in payments inconsistent with the Public Interest
Standard.

1. Cash Salary

The Special Master reviewed the cash salary proposals in light of the principle
that compensation structures should generally be comparable to “compensation structures
and amounts for persons in similar positions or roles at similar entit 31 CFR.

§ 30.16(b)(1)(v).. The Special Master has concluded that, for Covered Employees at
Exceptional Assistance Recipients, cash salaries generally should target the 50th
percentile as compared to persons in similar positions or roles at similar entities because
such levels of cash salaries balance the need to attract and retain talented employees with
the need for compensation structures that reflect the circumstances of Exceptional
Assistance Recipients

In conducting this review, the Special Master made use of the resources described
in Part II. Based on this review, the Special Master has concluded that GMAC’s
proposed cash salaries would be inconsistent with the Public Interest Standard because
the amounts potentially payable to certain Covered Employees cannot be supported by
comparison to cash salaries provided to persons in similar positions or roles at similar
entities.

A6


¢ Consultation with Lucian A. Bebchuk, a world-renowned expert in executive
compensation and the William J. Friedman and Alicia Townsend Friedman
Professor of Law, Economics, and Finance and Director of the Program on
Corporate Governance at Harvard Law School; and

¢ =Consultation with of Kevin J. Murphy, a world-renowned expert in executive
compensation and the Kenneth L. Trefftzs Chair in Finance in the department of
finance and business economics at the University of Southern California’s
Marshall School of Business.

The Special Master considered these views, in light of the statutory and regulatory
standards described in Part II below, when evaluating the Company’s proposed
compensation structures for the Covered Employees for 2009.

ILL. STATUTORY AND REGULATORY STANDARDS

The Rule requires that the Special Master determine for each of the Covered
Employees whether GMAC’s proposed compensation structure, including amounts
payable or potentially payable under the compensation structure, “will or may result in
payments that are inconsistent with the purposes of section 111 of EESA or TARP, or [is]
otherwise contrary to the public interest.” 31 C.F.R. § 30.16(a)(3) (as applied to Covered
Employees of Exceptional Assistance Recipients, the “Public Interest Standard”).
Regulations promulgated pursuant to the Rule require that the Special Master consider six
principles when making these compensation determinations:

(1) Risk. The compensation structure should avoid incentives which encourage
executive officers and employees to take unnecessary or excessive risks that could
threaten the value of the exceptional assistance recipient, including incentives that
reward employees for short-term or temporary increases in value or performance;
or similar measures that may undercut the long-term value of the exceptional
assistance recipient. Compensation packages should be aligned with sound risk
management. /d. § 30.16(b)(1)().

(2) Taxpayer return. The compensation structure and amount payable should reflect
the need for the exceptional assistance recipient to remain a competitive
enterprise, to retain and recruit talented employees who will contribute to the
recipient's future success, so that the Company will ultimately be able to repay its
TARP obligations. Jd. § 30.16(b)(1)(ii).

(3) Appropriate allocation. The compensation structure should appropriately allocate
the components of compensation such as salary and short-term and long-term
performance incentives, as well as the extent to which compensation is provided
in cash, equity, or other types of compensation such as executive pensions, or
other benefits, or perquisites, based on the specific role of the employee and other
relevant circumstances, including the nature and amount of current compensation,

A3


The Rule required that each Exceptional Assistance Recipient submit proposed
compensation structures for each senior executive officer and Most Highly Compensated
Employee no later than August 14, 2009. 31 C.F.R. § 30.16(a)(3). On July 20, 2009, the
Special Master requested from each Exceptional Assistance Recipient, including GMAC,
certain data and documentary information necessary to facilitate the Special Master’s
review of the Company’s compensation structures. The request required GMAC to
submit data describing its proposed compensation structures, and the payments that
would result from the proposed structures, concerning each Covered Employee.

In addition, the Rule authorizes the Special Master to request information from an.
Exceptional Assistance Recipient “under such procedures as the Special Master may
determine.” Jd. § 30.16(d). GMAC was required to submit competitive market data
indicating how the amounts payable under GMAC’s proposed compensation structures
relate to the amounts paid to persons in similar positions or roles at similar entities.
GMAC was also required to submit a range of documentation, including information
related to proposed performance metrics, internal policies designed to curb excessive
risk, and certain previously existing compensation plans and agreements.

GMAC submitted this information to the Office of the Special Master on August
14, 2009. Following a preliminary review of the submission, and the submission of
certain additional information, on August 31, 2009, the Special Master determined that
GMAC’s submission was substantially complete for purposes of the Rule. /d. The
Office of the Special Master then commenced a formal review of GMAC’s proposed
compensation structures for the Covered Employees. The Rule provides that the Special
Master is required to issue a compensation determination within 60 days of a
substantially complete submission. Id. § 30.16(a)(3).

The Office of the Special Master’s review of the Company’s proposals was aided
by analysis from a number of internal and external sources, including:

e Treasury personnel detailed to the Office of the Special Master, including
executive compensation specialists with significant experience in reviewing,
analyzing, designing and administering executive compensation plans, and
attorneys with experience in matters related to executive compensation;

© Competitive market data provided by the Company in connection with its
submission to the Office of the Special Master;

e External information on comparable compensation structures extracted from the
U.S. Mercer Benchmark Database-Executive;

¢ External information on comparable compensation structures extracted from
Equilar’s Executivelnsight database (which includes information drawn from
publicly filed proxy statements) and Equilar’s Top 25 Survey Summary Report
(which includes information from a survey on the pay of highly compensated
employees);


EXHIBIT I
TERMS AND CONDITIONS OF PAYMENTS AND STRUCTURES
CONSISTENT WITH THE PUBLIC INTEREST STANDARD

The following general terms and conditions shall govern the compensation
structures described in Exhibit I. The Special Master's determination that those
structures are consistent with the Public Interest Standard is qualified in its entirety by the
Company’s adherence to these terms and conditions.

© Cash base salary. Cash base salaries reflect the go-forward rate for the employee
effective as of November 1, 2009. Compensation paid in the form of cash base
salary prior to that date in accordance with the terms of employment as of June
14, 2009 shall be permitted unless otherwise noted. 31 C.F.R. § 30.16(a)(3)(iii).

© Stock salary. Rates of stock salary grants reflect full-year values. Because this is
a new compensation element, the amounts are payable on a mune pro tunc basis
effective January 1, 2009. Stock salary must be determined as a dollar amount
through the date salary is earned, be accrued at the same time or times as the
salary would otherwise be paid in cash, and vest immediately upon grant, with the
number of shares or units based on the fair market value or a share on the date of
award. Stock or stock units granted as stock salary may only be redeemed in
three equal, annual installments beginning on the second anniversary of grant,
with each installment redeemable one year early if TARP obligations are repaid.

¢ Long-term restricted stock. Long-term restricted stock may be granted upon the
achievement of specified, objective performance criteria that have been developed
and reviewed in consultation with the Office of the Special Master and certified
by the Company’s compensation committee. Any such stock may vest only if the
employee remains employed by the Company on the third anniversary of grant
(or, if earlier, upon death or disability). The stock shall be transferable only in
25% increments for each 25% of TARP obligations repaid by the Company.

© Other compensation and perquisites. No more than $25,000 in total other
compensation and perquisites may be provided to any Covered Employee, absent
exceptional circumstances for good cause shown, as defined by pertinent SEC
regulations.

¢ Supplemental executive retirement plans and non-qualified deferred
compensation plans. Following the date of the Determination Memorandum, no
additional amounts may be accrued under supplemental executive retirement
plans, and no Company contributions may be made to other “non-qualified
deferred compensation” plans, as defined by pertinent SEC regulations.

© Qualified Plans. For the avoidance of doubt, the Special Master has determined

that participation by the Covered Employees in tax-qualified retirement, health
and welfare, and similar plans is consistent with the Public Interest Standard.

E2


IV. COMPENSATION STRUCTURES AND PAYMENTS

A. GMAC Proposals

GMAC has provided the Office of the Special Master with detailed information
concerning its proposed 2009 compensation structures for the Covered Employees,
including amounts potentially payable under the compensation structure for each Covered
Employee (the “Proposed Structures”).

GMAC supported its proposal with detailed assessments of each Covered
Employee’s tenure and responsibilities at the Company (or its applicable subsidiary) and
historical compensation structure. The submission also included market data that,
according to the Company, indicated that the amounts potentially payable to each
employee were comparable to the compensation payable to persons in similar positions or
roles at a “peer group” of entities selected by the Company.

1. Cash Salary

GMAC proposed increasing the cash salary of each Covered Employee to
annualized amounts ranging from $380,000 to $1,000,000. The Company’s proposal
asserted that cash salaries at such levels could be justified by reference to the
compensation of persons in similar positions or roles at similar entities.

2. Stock Salary

GMAC proposed that Covered Employees receive substantial stock salary, in
annualized amounts ranging from $400,000 to $5,330,000. On each regular payroll date,
Covered Employees would earn fully vested stock units, which would then settle in two
tranches of 50% each on March 15, 2011, and March 15, 2012, respectively.

3. Annual Long-Term Incentive Awards

GMAC proposed that the Covered Employees be eligible in 2009 for substantial
grants of annual long-term incentive awards, with total potential values ranging from
$400,000 to $3,170,000. Under the proposal, the amount of an employee’s award would
be calculated based on achievement of individual performance goals, as assessed by the
GMAC’s compensation committee in consultation with the Company’s chief executive
officer. Awards would be paid in the form of long-term restricted stock with 50% vesting
after two years of service and 50% vesting after three years of service. Actual payment
would be made in 25% installments for each 25% repayment of GMAC’s TARP
obligations.

4. “Other” Compensation and Perquisites

GMAC proposed payments of “other” compensation, as well as perquisites, to the
Covered Employees. These proposed payments varied in value.


DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220

October 22, 2009

Mr. Al de Molina

Chief Executive Officer
General Motors Acceptance
Corporation Financial Services
420 Toringdon Way

Suite 400

Charlotte, NC, 28277

Re: Proposed Compensation Payments and
Structures for Senior Executive Officers and
Most Highly Compensated Employees

Dear Mr. de Molina:

Pursuant to the Department of the Treasury’s Interim Final Rule on TARP
Standards for Compensation and Corporate Governance, the Office of the Special Master
has completed its review of your 2009 compensation submission on behalf of the senior
executive officers and certain most highly compensated employees of General Motors
Acceptance Corporation Financial Services (*“GMAC”), Attached as Annex A is a
Determination Memorandum (accompanied by Exhibits I and H) providing the
determinations of the Special Master with respect to 2009 compensation for those
employees. Id. § 30.16(a)(3).

The Interim Final Rule requires the Special Master to determine whether the
compensation structure for each senior executive officer and certain most highly
compensated employees “will or may result in payments inconsistent with the purposes
of section 111 of EESA or TARP, or [is] otherwise contrary to the public interest.” 31
C.F.R. § 30.16(a)(3). The Special Master has determined that, to satisfy this standard,
2009 compensation for GMAC’s senior executive officers and ain most highly
compensated employees generally must comport with the following standards:

¢ There can be no guarantee of any “bonus” or “retention” awards among the
compensation structures approved by the Special Master.

e Rather than cash, the majority of each individual’s base salary will be paid in the
form of stock. This stock will immediately vest, in accordance with the Interim
Final Rule, but will only be redeemable in three equal, annual installments
beginning on the second anniversary of grant, with each installment redeemable
one year earlier if GMAC repays its TARP obligations.


Standard, and that the determination that payment of stock salary to such employees is
consistent with the Public Interest Standard is conditioned upon such cancellation.

3. Annual Long-Term Incentive Awards

The Special Master reviewed GMAC’s proposed annual long-term incentive
awards in light of the principle that performance-based compensation should be based on
“performance metrics [that are] measurable, enforceable, and actually enforced if not
met.” Id. § 30.16(b)(1)(iv). The Special Master also evaluated GMAC’s proposed
awards by application of recently adopted international standards that provide that
incentive compensation should generally be payable over a period of three years as well
as the Rule’s principle that performance-based compensation should be payable “over a
relevant performance period,” id.

Although GMAC proposed individually tailored performance metrics to calculate
the size of long-term restricted stock awards, once awarded the restricted stock would
partially vest after only two years of service. In addition, the restricted stock would vest
immediately upon a Covered Employee’s involuntary employment termination without
“cause” either between the second and third anniversary of the grant date, or in the year
following a change in control of GMAC. Accordingly, the Special Master has concluded
that GMAC’s proposed annual long-term incentive awards would be inconsistent with the
Public Interest Standard because they may vest over a period too short to be relevant to
the long-term performance of the Company.

As described in Exhibits I and I, the structures the Special Master has
determined to be consistent with the Public Interest Standard include an annual long-term
incentive award payable only upon the achievement of specified, objective performance
criteria that have been developed and reviewed in consultation with the Office of the
Special Master, and that will not vest unless the employee remains employed until the
third anniversary of grant. In addition, as required by the Rule, these awards may only be
redeemed in 25% installments for each 25% of GMAC’s TARP obligations that are
repaid.

4. “Other” Compensation and Perquisites

GMAC proposed payments of “other” compensation, as well as perquisites, to the
Covered Employees. The Special Master has concluded that, absent special justification,
employees—not the Company—generally should be responsible for paying personal
expenses, and that significant portions of compensation structures should not be allocated
to such perquisites and “other” compensation. See id. §30.16(b)(1 (iii).

The Rule requires that each Exceptional Assistance Recipient annually disclose to
Treasury any perquisites where the total value for any Senior Executive Officer or Most
Highly Compensated Employee exceeds $25,000. An express justification for offering
these benefits must also be disclosed. Accordingly, as described in Exhibits I and I, the
compensation structures the Special Master has determined to be consistent with the
Public Interest Standard provide no more than $25,000 in “other”? compensation and

A8


In addition, because they do not create incentives for employees to pursue long-
term value creation or financial stability, the amount of cash salary provided to a Covered
Employee must be considered in comparison to the portion of compensation that is
“performance-based over a relevant performance period.” Id. § 30.16(b)(1)(iv). The
Special Master has concluded that the cash portion of the Covered Employee’s
compensation should in most cases not exceed $500,000. See Id. § 30.16(b)(1)(iii).

As described in further detail in Exhibits I and II, the cash salaries that the
Special Master has determined to be consistent with the Public Interest Standard compare
appropriately to those paid to persons in similar positions or roles at similar entities, and
are generally less than $500,000.

2. Stock Salary

The Special Master reviewed the amounts of stock salary proposed by GMAC and
found that they were not comparable to payments provided to persons in similar positions
or roles at similar entities. The Special Master has concluded that the amounts of stock
salary GMAC proposed paying to certain Covered Employees is excessive and that such
payments would be inconsistent with the Public Interest Standard. The compensation
structures that the Special Master has determined are consistent with the Public Interest
Standard provide lesser amounts of stock salary, as described in further detail in Exhibits
Tand I.

The Special Master also reviewed the structure of GMAC’s stock salary
proposal. The Rule requires that the Special Master consider whether an appropriate
portion of an employee’s compensation is allocated to long-term incentives /d. §
30.16(b)(1)(iii). Stock salary that can be liquidated too soon could incentivize employees
to pursue short-term results instead of long-term value creation by paying excessive
benefits to employees for short-term increases in share price. See /d. § 30.16(b)(1)(i).
Under the Company’s proposal, 50% of stock salary would be redeemable slightly more
than one year after being granted, and 100% of stock salary would be redeemable slightly
more than two years. The Special Master has concluded that one year is an insufficient
holding period to provide an appropriate long-term incentive.

As described in Exhibits I and IT, the compensation structures the Special Master
has determined to be consistent with the Public Interest Standard require that, at a
minimum, stock salary only become redeemable in three equal, annual installments
beginning on the second anniversary of grant, with each installment redeemable one year
earlier if GMAC repays its TARP obligations.

In addition, GMAC proposed that certain restricted stock unit awards granted to
Covered Employees in 2009 would be canceled in consideration of compensation
provided to such employees under the Proposed Structures. The Special Master has
concluded that the cancellation of such employees’ restricted stock unit awards in
consideration of eligibility to receive stock salary is consistent with the Public Interest

AT


deferred compensation, or other compensation and benefits previously paid or
awarded. Id. § 30.16(b)(1)Gii).

(4) Performance-based compensation. An appropriate portion of the compensation
should be performance-based over a relevant performance period. Performance-
based compensation should be determined through tailored metrics that
encompass individual performance and/or the performance of the Exceptional
Assistance Recipient or a relevant business unit taking into consideration specific
business objectives. Performance metrics may relate to employee compliance
with relevant corporate policies. In addition, the likelihood of meeting the
performance metrics should not be so great that the arrangement fails to provide
an adequate incentive for the employee to perform, and performance metrics
should be measurable, enforceable, and actually enforced if not met. Id. §
30.16(b)(1)(iv).

(5) Comparable structures and payments. The compensation structure, and amount
payable where applicable, should be consistent with, and not excessive, taking
into account compensation structures and amounts for persons in similar positions
or roles at similar entities that are similarly situated, including, as applicable,
entities competing in the same markets and similarly situated entities that are
financially distressed or that are contemplating or undergoing reorganization. Id.
§ 30.16(b)(1)(v).

(6) Employee contribution to TARP recipient value. The compensation structure and
amount payable should reflect the current or prospective contributions of an
employee to the value of the Exceptional Assistance Recipient, taking into
account multiple factors such as revenue production, specific expertise,
compliance with company policy and regulation (including risk management),
and corporate leadership, as well as the role the employee may have had with
respect to any change in the financial health or competitive position of the
recipient. Id. § 30.16(b)(1)(vi).

The Rule provides that the Special Master shall have discretion to determine the
appropriate weight or relevance of a particular principle depending on the facts and
circumstances surrounding the compensation structure or payment for a particular
employee. /d. § 30.16(b). To the extent two or more principles may appear inconsistent
in a particular situation, the Rule requires that the Special Master exercise his discretion
in determining the relative weight to be accorded to each principle. Jd.

The Rule provides that the Special Master may, in the course of applying these
principles, take into account other compensation structures and other compensation
earned, accrued, or paid, including compensation and compensation structures that are
not subject to the restrictions of section 111 of EESA. For example, the Special Master
may consider payments obligated to be made by the Company pursuant to certain legally
binding rights under valid written employment contracts entered into prior to enactment
of the statute and the accompanying Rule. /d. § 30.16(a)(3).

A4


should consist only of cash salaries at sufficient levels to attract and retain
employees and provide them a reasonable level of liquidity.

Pursuant to the Interim Final Rule, the Company may, within 30 days of the date
hereof, request in writing that the Special Master reconsider the determinations set forth
in the Determination Memorandum. If the Company does not request reconsideration
within 30 days, these initial determinations will be treated as final determinations. /d.

§ 30.16(c)(1).

enneth R. Feinberg
Office of the Special Master
for TARP Executive Compensation

Attachments

ce: Mr. Kim Fennebresque
William B Solomon, Jr., Esquire
Drema M. Kalajian, Esquire


The Company must have in effect a policy that would prohibit an employee from
engaging in hedging, derivative or other transactions that have an economically similar
effect that would undermine the incentives created by the compensation structures set
forth in Exhibits I and IT. Such transactions would be contrary to the principles set forth
in the Rule.

B. Additional Requirements

In addition to the requirements set forth above, pursuant to the requirements of the
Rule, GMAC is required to institute the following corporate governance reforms:

(1) Compensation Committee; Risk Review. GMAC must maintain a compensation
committee comprised exclusively of independent directors, Every six months, the
committee must discuss, evaluate, and review with GMAC’s senior risk officers
any risks that could threaten the value of GMAC. In particular, the committee
must meet every six months to discuss, evaluate, and review the terms of each
employee compensation plan to identify and limit the features in (1) SEO
compensation plans that could lead SEOs to take unnecessary and excessive risks
that threaten the value of GMAC; (2) the SEO or other employee compensation
plans that could encourage behavior focused on short-term results and not on
long-term value creation; and (3) the employees’ compensation plans that could
encourage the manipulation of GMAC’s reported earnings to enhance the
compensation of any of the employees. id. § 30.4; id. § 30.5.

(2) Disclosure with Respect to Compensation Consultants. The compensation
committee must disclose to Treasury an annual narrative description of whether
GMAC, its Board of Directors, or the committee has engaged a compensation
consultant during the past three years. If so, the compensation committee must
detail the types of services provided by the compensation consultant or any
affiliate, including any “benchmarking” or comparisons employed to identify
certain percentile levels of compensation. /d. § 30.11(c).

(3) Disclosure of Perquisites. As noted in Part II], GMAC must provide to Treasury
an annual disclosure of any perquisite whose total value for GMAC’s fiscal year
exceeds $25,000 for each of the Covered Employees. GMAC must provide a
narrative description of the amount and nature of these perquisites, the recipient
of these perquisites, and a justification for offering these perquisites (including a
justification for offering the perquisite, and not only for offering the perquisite
with a value that exceeds $25,000). /d. § 30.11(b).

(4) Clawhack. GMAC must ensure that any incentive award paid to a Covered
Employee is subject to a clawback if the award was based on materially
inaccurate financial statements (which includes, but is not limited to, statements
of earnings, revenues, or gains) or any other materially inaccurate performance
metric criteria. GMAC must exercise its clawback rights except to the extent that
it is unreasonable to do so. [d. § 30.8.

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of any compensation structure with any other provision of the Rule. Moreover, this
Determination Memorandum has relied upon, and is qualified in its entirety by, the
accuracy of the materials submitted by GMAC to the Office of the Special Master, and
the absence of any material misstatement or omission in such materials.

Finally, the foregoing determinations are limited to the compensation structures
described herein, and no further compensation of any kind payable to any Covered
Employee without the prior approval of the Special Master would be consistent with the
Public Interest Standard.

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independent directors. These performance objectives must be reviewed and
approved by the Office of the Special Master.

e The employees will be prohibited from engaging in any hedging, derivative or
other transactions that have an equivalent economic effect involving company
stock that would undermine the long-term performance incentives created by the
compensation structures.

¢ GMAC may not provide a tax “gross up” of any kind to these employees.

* At least once every year, GMAC’s compensation committee must provide to the
Department of the Treasury a narrative description identifying each compensation
plan for its senior executive officers, and explaining how the plan does not
encourage the senior executive officers to take unnecessary and excessive risks
that threaten GMAC’s value. These requirements are described in further detail in
the attached Determination Memorandum.

The Special Master’s review has been guided by a number of considerations,
including each of the principles articulated in the Interim Final Rule. Jd. § 30.16(b)(1).
The following principles were of particular importance to the Special Master in his.
determinations with respect to GMAC’s compensation structures:

¢ = Performance-based compensation. The overwhelming majority of approved
compensation depends on GMAC’s performance, and ties the financial incentives
of GMAC employees to the overall performance of the Company. A majority of
the salary paid to employees under these structures will be paid in the form of
stock units; and, because the stock salary will become transferable only in three
equal, annual installments beginning on the second anniversary of the date stock
salary is earned (with each installment redeemable one year earlier if GMAC
repays its TARP obligations), the ultimate value realized by the executive will
depend on GMAC’s performance over the long term. Guaranteed amounts
payable in cash, in contrast, are generally rejected. /d. § 30.16(b)(1)(iv).

© Taxpayer return. The compensation structures approved by the Special Master
reflect the need for GMAC to remain a competitive enterprise and, ultimately, to
be able to repay TARP obligations. The Special Master has determined that the
approved compensation structures are competitive when compared to those
provided to persons in similar positions or roles at similar entities. Overall, the
compensation structures generally provide for total compensation packages that
target the 50th percentile when compared to such other executive officers and
employees. /d. § 30.16(b)(1)Gi).

¢ = Appropriate Allocation. The total compensation payable to GMAC employees is
weighted heavily towards long-term structures that are tied to GMAC’s
performance and are easily understood by shareholders. As a general principle,
guaranteed income is rejected. Fixed compensation payable to GMAC employees


e Base salary paid in cash should not exceed $500,000 per year, except in
appropriate cases for good cause shown. Overall, cash compensation must be
significantly reduced from cash amounts paid in 2008. In GMAC’s case, cash
compensation for these employees will decrease 50% from 2008 levels

¢ =Total compensation for each individual must both reflect the individual’s value to
GMAC and be appropriate when compared with total compensation provided to
persons in similar positions or roles at similar entities, and should generally target
the 50th percentile of total compensation for such similarly situated employees.
Overall, total direct compensation must be significantly reduced from 2008
amounts. In GMAC’s case, total direct compensation for these employees will
decrease 86% from 2008 levels.

e  If—and only if—the employee achieves objective performance metrics developed
and reviewed in consultation with the Office of the Special Master, employees
may be eligible for long-term incentive awards. These awards, however, must be
payable in the form of restricted stock that will be forfeited unless the employee
stays with GMAC for at least three years following grant, and may only be
redeemed in 25% installments for each 25% installment of GMAC’s TARP
obligations that are repaid. Such long-term incentive awards may not exceed one
third of total annual compensation.

e Any and all incentive compensation paid to employees will be subject to recovery
or “clawback” if the payments are based on materially inaccurate financial
statements or any other materially inaccurate performance metrics, or if the
employee is terminated due to misconduct that occurred during the period in
which the incentive was earned.

e Any and all “other” compensation and perquisites will not exceed $25,000 for
each employee (absent exceptional circumstances for good cause shown to the
satisfaction of the Special Master).

e No severance benefit to which an employee becomes entitled in the future may
take into account a cash salary increase, or any payment of stock salary, that the
Special Master has approved for 2009.

e No additional amounts in 2009 may be accrued under supplemental executive
retirement plans or credited by the company to other “non-qualified deferred
compensation” plans after the date of the Determination Memorandum.

The Special Master has also determined that, in order for the approved
compensation structures to satisfy the standards of Id. § 30.16(a)(3), GMAC must adopt
policies applicable to these employees as follows:

e The achievement of any performance objectives must be certified in the
company’s securities filings by the Compensation, Nomination and Governance
Committee of GMAC’s Board of Directors, which is composed solely of

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perquisites to each of these employees. Any exceptions to this limitation will require that
the Company provide to the Office of the Special Master an independent justification for
the payment that is satisfactory to the Special Master. To the extent that payments
exceeding this limitation have already been made to a Covered Employee in 2009, those
amounts should be promptly returned to the Company.

5. Non-Qualified Deferred Compensation

GMAC also proposed that certain Covered Employees receive compensation in
the form of accruals under a “non-qualified deferred compensation” plan. In such plans,
employers periodically credit employees with an entitlement to post-retirement payments.
Over time, these credits accumulate and employees may become entitled to substantial
cash guarantees payable on retirement—in addition to any payments provided under
retirement plans maintained for employees generally.

The Special Master has concluded that the primary portion of a Covered
Employee’s compensation package should be allocated to compensation structures that
are “performance-based over a relevant performance period.” Id. § 30.16(b)(1)(iv).
Payments under the Company’s “non-qualified deferred compensation” plans do not
depend upon “individual performance and/or the performance of the [Company] or a
relevant business unit,” id.; instead, such accruals are simply guaranteed cash payments
from the Company in the future. In addition, these payments can make it more difficult
for shareholders to readily ascertain the full amount of pay due a top executive upon
leaving the firm.

Covered Employees should fund their retirements using wealth accumulated
based on Company performance while they are employed, rather than being guaranteed
substantial retirement benefits by the Company regardless of Company performance
during and after their tenures. Accordingly, as described in Exhibits I and IT, the
compensation structures the Special Master has determined to be consistent with the
Public Interest Standard prohibit further 2009 accruals for Covered Employees under
supplemental retirement plans or Company credits to other “non-qualified deferred
compensation” plans following the date of this Determination Memorandum..

6. Severance Arrangements

GMAC’s submission to the Office of the Special Master indicated that, in some
cases, the proposed compensation structures would result in increases in amounts payable
to these employees pursuant to existing severance arrangements. These arrangements
generally provide for cash amounts payable upon termination of employment, including
termination in light of the employee’s performance.

The Special Master has concluded that an increase in the amounts payable under
these arrangements would be inconsistent with the principle that compensation should be
performance-based, id. § 30.16(b)(1)(iv), and that payments should be appropriately
allocated among the elements of compensation, id. § 30.16(b)(1)(iii). Accordingly, for
the compensation structures described in Exhibits I and IT to be consistent with the

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(5) Policy Addressing Excessive or Luxury Expenditures. GMAC was required to
adopt an excessive or luxury expenditures policy, provide that policy to Treasury,
and post it on the Company's website. If GMAC’s board of directors makes any
material amendments to this policy, within ninety days of the adoption of the
amended policy, the board of directors must provide the amended policy to
Treasury and post the amended policy on GMAC’s Internet website. /d. § 30.12.

(6) Prohibition on Tax Gross-Ups. Except as explicitly permitted under the Rule,
GMAC is prohibited from providing (formally or informally) tax gross-ups to any
of the Covered Employees. Id. § 30.11(d).

(7) CEO and CFO Certification. GMAC’s chief executive officer and chief financial
officer must provide to the Securities and Exchange Commission written
certification of GMAC’s compliance with the various requirements of section 111
of EESA. The precise nature of the required certification is identified in the Rule.
Id. § 30.15 Appx. A.

VI. CONCLUSION

The Special Master has reviewed the Proposed Structures for the Covered
Employees for 2009 in light of the principles set forth at 31 C.F.R. § 30.16(b). On the
basis of that review, the Special Master has determined that the Proposed Structures
submitted by GMAC require modification in order to meet the Public Interest Standard.

The Special Master has separately reviewed the compensation structures set forth
in Exhibits I and IT in light of the principles set forth at 31 C.F.R. § 30.16(b). Pursuant
to the authority vested in the Special Master by the Rule, and in accordance with Section
30.16(a)(3) thereof, the Special Master hereby determines that the compensation
structures set forth in Exhibits I and IT, including the amounts payable or potentially
payable under such compensation structures, will not result in payments that are
inconsistent with the purposes of section 111 of EESA or the TARP, and will not
otherwise be contrary to the public interest.

Pursuant to the Interim Final Rule, GMAC may, within 30 days of the date
hereof, request in writing that the Special Master reconsider the determinations set forth
in this Determination Memorandum. The request for reconsideration must specify a
factual error or relevant new information not previously considered, and must
demonstrate that such error or lack of information resulted in a material error in the initial
determinations. If GMAC does not request reconsideration within 30 days, the
determinations set forth herein will be treated as final determinations. 31 C.F.R.

§ 30.16(c)(1).

The foregoing determinations are limited to the compensation structures described
in Exhibits I and IT, and shall not be relied upon with respect to any other employee. The
determinations are limited to the authority vested in the Special Master by Section
30.16(a)(3) of the Rule, and shall not constitute, or be construed to constitute, the
judgment of the Office of the Special Master or Treasury with respect to the compliance

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