V. CORPORATE GOVERNANCE

As noted in Part II] 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 Covered Employees 26 — 100, 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)Gv). incentive compensation may
not be granted unless GMAC’s Compensation Committee determines to grant such
compensation 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 to shareholders in, and certified by the
Committee as part of, GMAC’s securities filings. In addition, the Committee must retain
discretion with respect to each employee to reduce (but not to increase) the amount of incentive
compensation on the basis of its overall evaluation of the employee’s or GMAC’s performance
(notwithstanding full or partial satisfaction of the performance criteria).

In addition, as noted in Part IV above, the structures determined by the Special Master to
be consistent with the Public Interest Standard, include grants of stock or stock units 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)(1)(iii).. Accordingly, the
Company must have in effect a policy that would prohibit a Covered 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 Part IV above. Such
transactions would be contrary to the principles set forth in the Rule.

Finally, because the compensation structures determined by the Special Master to be
consistent with the Public Interest Standard include grants of stock or stock units in GMAC, it is
particularly important that stock acquired pursuant to these grants provide “compensation [that
is] performance-based over a relevant performance period,” id. § 30.16(b)( 1)(iv). Accordingly,
GMAC’s Compensation Committee must ensure that each Covered Employee is subject to
holding requirements set forth in stock ownership commitment rules to be adopted by GMAC’s
Compensation Committee in consultation with the Office of the Special Master.

B. Additional Requirements

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

(1) Compensation Committee; Risk Review. Under the Rule, 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

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ANNEX A
DETERMINATION MEMORANDUM

I. INTRODUCTION

Under the Emergency Economic Stabilization Act of 2008, as amended (“EESA”) and
the Department of the Treasury’s Interim Final Rule on TARP Standards for Compensation and
Corporate Governance (the “Rule”), the Office of the Special Master for TARP Executive
Compensation (the “Office of the Special Master,” or the “Office”) is responsible for reviewing
compensation structures for the executive officers and 100 most highly employees, excluding
those employees subject to Section 30.10 of the Rule ( “Covered Employees 26 — 100”), at
financial institutions receiving exceptional financial assistance (“Exceptional Assistance
Recipients”) under the Troubled Asset Relief Program (the “TARP”). 31 C.F.R.

§ 30.16(a)(3)(ii).. The compensation review for Covered Employees 26 — 100 differs from the
Special Master’s review for the “Top 25” employees, which emphasized the individual “amounts
payable” to those employees, id. § 30.16(a)(3)(i). For Covered Employees 26 — 100, the Rule
does not require individual payment determinations; instead, it requires the Special Master to
determine only whether the proposed compensation structures “will or may result in payments
that are inconsistent with the purposes of Section 111 of EESA or TARP, or are otherwise
contrary to the public interest.” Jd. § 30.16(a)(3)(ii).

General Motors Acceptance Corporation Financial Services (“GMAC,” or the
“Company”), one of six remaining Exceptional Assistance Recipients, has submitted to the
Special Master proposed 2009 compensation structures for review pursuant to Section
30.16(a)(3)(ii) of the Rule. The Special Master has completed the review of the Company’s
proposed compensation structures for Covered Employees 26 ~ 100 pursuant to the principles set
forth in the Rule. Jd. § 30.16(b)(1). This Determination Memorandum sets forth the
determinations of the Special Master, pursuant to Section 30.16(a)(3)(ii) of the Rule, with respect
to Covered Employees 26 — 100.

Il. 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. Since that date, the
Special Master, and Treasury employees working in the Office of the Special Master, have
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 Covered
Employees 26 — 100.

The Rule requires that each Exceptional Assistance Recipient submit proposed
compensation structures for the Covered Employees 26 ~ 100. 31 C.F.R. § 30.16(a)(3)(ii). On
October 5, 2009, the Office of the Special Master requested from each Exceptional Assistance
Recipient, including GMAC, certain data and documentary information necessary to facilitate

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EXHIBIT IT
TERMS AND CONDITIONS OF COMPENSATION STRUCTURES
CONSISTENT WITH THE PUBLIC INTEREST STANDARD

The following general terms and conditions shall govern the compensation structures

described in Part IV.B of the Determination Memorandum. 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.

Stock salary. Because this is a new compensation element, stock salary may be granted
ona nunc 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 based on the fair market value on the date of grant. Unless otherwise
provided in the Determination Memorandum, stock or stock equivalents granted as stock
salary may not be redeemable during the one-year period immediately following the date
it is earned, except for stock salary withheld or transferred immediately upon vesting to
enable the employee to pay taxes. Whether a nunc pro tunc grant or payment that is
labeled stock salary is salary or a bonus for purposes of the Rule is determined based on
all the facts and circumstances.

Prior compensation. \n accordance with the Rule, unless otherwise noted compensation
paid to Covered Employees 26 — 100 during the period from June 15, 2009, to the date of
the Determination Memorandum will be treated as complying with the Rule, provided
that such compensation was paid under a compensation structure established by the
Company as of June 14, 2009, and provided further that the Company promptly complies
with the modifications set forth in the Determination Memorandum. 31 C.F.R.

§ 30.16(a)(3)Gii).

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 (with the exception of employee-funded elective deferrals) 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 26 ~ 100 in tax-qualified retirement, broad-based
employee health and welfare plans, and similar plans is consistent with the Public Interest
Standard.


determined that, to be consistent with the Public Interest Standard, compensation structures for
Covered Employees 26 — 100 may not provide for cash salaries in excess of $500,000, other than
in exceptional circumstances for good cause shown. Any such exceptions must be individually
certified to the Office of the Special Master by GMAC’s Compensation Committee.

b. Stock Salary

The Special Master reviewed the Proposed Structures in light of the principle that
compensation structures should “appropriately allocate the components of compensation such as
salary... as well as the extent to which compensation is provided in cash, equity, or other types
of compensation,” id. § 30.16(b)(1)(iii). The Proposed Structures generally provide for payment
of base salary only in the form of cash. The Special Master has concluded that, to be consistent
with the Public Interest Standard, compensation structures should permit the payment of base
compensation in the form of vested stock salary, which facilitates an appropriate allocation of
fixed, annual compensation to stock.

The Special Master also reviewed the Proposed Structures in light of the principle that
compensation structures should provide compensation that is “performance-based over a relevant
performance period.” Id. § 30.16(b)(1)(iv). The Special Master has concluded that, to provide
compensation that is performance-based over a relevant period, stock salary may not be
transferred or otherwise redeemed prior to the first anniversary of the date such stock salary is
earned, except for stock withheld or transferred immediately upon vesting to enable the
employee to pay taxes.

c. Incentive Compensation

The Special Master reviewed GMAC’s proposed incentive compensation for Covered
Employees 26 — 100 in light of the principle that compensation structures should provide
performance-based compensation based on “performance metrics [that are] measurable,
enforceable, and actually enforced if not met,” id. § 30.16(b)(1)(iv). In general, incentive
compensation should not be granted unless the achievement of performance metrics is reviewed
and certified on an independent basis. Accordingly, the Special Master has concluded that, to be
consistent with the Public Interest Standard, the compensation structures for Covered Employees
26 — 100 must provide that no incentive compensation may be granted to a Covered Employee
unless the employee achieves objective performance metrics developed by appropriate GMAC
officials and reviewed and approved by GMAC’s Compensation Committee (which is composed
solely of independent directors) in consultation with the Office of the Special Master. As
described below, incentive compensation may be delivered in a mix of cash and stock, but must
be payable over time and subject to “clawback” if the performance assessment resulting in the
grant is later discovered to be inaccurate.

i. Cash Incentives

The Special Master reviewed GMAC’s proposed incentive compensation in light of the
principle that compensation structures should provide performance-based compensation based on
“performance metrics [that are] measurable, enforceable, and actually enforced if not met.” Jd.

§ 30.16(b)(iv). In general, the Special Master has concluded that cash incentives should be

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— 100 of Exceptional Assistance Recipients, the “Public Interest Standard”). The Rule requires
that the Special Master consider six principles when making these compensation determinations:

(1) Risk. The compensation structure should avoid incentives that encourage 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)(i).

(2) Taxpayer return. The compensation structure and amount payable should reflect the
need for the Exceptional Assistance Recipient to remain a competitive enterprise, and 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.

Id. § 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, deferred compensation, or other
compensation and benefits previously paid or granted. /d. § 30.16(b)(1)(iii).

(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 structures should be consistent
with, and not excessive taking into account, compensation structures 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. Jd.

§ 30.16(b)(1)(v).

(6) Employee contribution to TARP recipient value. The compensation structures 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

A3


the Office of the Special Master’s review of the Company’s proposed compensation structures.
The request required GMAC to submit data describing its proposed 2009 compensation
structures, as well as the historical compensation structures for Covered Employees 26 — 100.

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.”
Id. § 30.16(d). GMAC was 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 October 13,
2009. Following a preliminary review of the submission, and the provision by GMAC of certain
additional information requested by the Office of the Special Master, on October 30, 2009, the
Special Master determined that GMAC’s submission was substantially complete for purposes of
the Rule. /d. § 30.16(a)(3)(ii). The Office of the Special Master then commenced a formal
review of GMAC’s proposed compensation structures for Covered Employees 26 — 100. The
Rule provides that the Special Master is required to issue a compensation determination within
60 days of a substantially complete submission. /d.

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
executive compensation and corporate governance;

¢ 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 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 III below, when evaluating the Company’s proposed compensation
structures for the Covered Employees 26 — 100 for 2009.

IIL. STATUTORY AND REGULATORY STANDARDS
The Rule requires that the Special Master determine for each of the Covered Employees
26 — 100 whether GMAC’s proposed compensation structures “will or may result in payments

that are inconsistent with the purposes of Section 111 of EESA or TARP, or are otherwise
contrary to the public interest.” 31 C.F.R. § 30.16(a)(3)(ii) (as applied to Covered Employees 26

A2


The Special Master has determined that the compensation structures described in this Part
IV.B will not. by virtue of their structural design, result in payments inconsistent with the Public
Interest Standard. These compensation structures are described in further detail in Exhibits I and
I.

1. Total Compensation

The Special Master reviewed GMAC’s Proposed Structures in light of the principle that
an “appropriate portion of the compensation should be performance-based over a relevant
performance period.” Jd. § 30.16(b)(1)(iv). In general, the Special Master has concluded that
compensation payable no earlier than three years from the date it is earned provides employees
with incentives to maximize the long-term value of the Company. Accordingly, the Special
Master has concluded that, in order to be consistent with the Public Interest Standard,
compensation structures for Covered Employees 26 — 100, whether in the form of cash or stock,
must provide that at least 50% of compensation other than cash salary is payable no earlier than
three years from the date it is earned.

The Special Master also reviewed the Proposed Structures in light of the principle that “a
significant portion of the overall compensation should be long-term compensation that aligns the
interest of the employee with the interests of shareholders and taxpayers.” Jd. § 30.16(b)(1)(ii).
In general, compensation payable in the form of cash does not align employees’ incentives with
the interests of shareholders and taxpayers as effectively as compensation payable in the form of
Company stock. Accordingly, the Special Master has concluded that, in order to be consistent
with the Public Interest Standard, the total amount of cash included in the compensation structure
for any Covered Employee who receives more than $500,000 in cash salary and cash incentive
compensation should not exceed 45% of total compensation, other than in exceptional cases for
good cause shown.' Any such exceptions should be individually certified to the Office of the
Special Master by GMAC’s Compensation Committee. The remaining percentage of total
compensation must be payable in the form of Company stock. To provide for reasonable levels
of liquidity, a Covered Employee who earns less than $500,000 in cash salary and cash incentive
compensation may receive more than 45% of total compensation in cash, but must receive a
material portion of total compensation in the form of Company stock.

a. Cash Salary

The Special Master reviewed GMAC’s proposed cash salaries in light of the principle
that compensation structures should generally be consistent with compensation structures “for
persons in similar positions or roles at similar entities that are similarly situated, including
entities competing in the same markets.” 31 C.F.R. § 30.16(b)(1)(v). The Special Master has

ee
' In some cases, a Covered Employee may have received cash compensation prior to the date of this Determination
Memorandum that prohibits the Company from complying with the prescriptions of Part IV.B.1. if the Company
provides such Covered Employee with the total 2009 compensation described in the Proposed Structures. The
Special Master has determined that, with respect to any such Covered Employee, in order for the compensation
structure to be consistent with the Public Interest Standard, GMAC must provide any additional 2009 compensation,
except for continued payment of a level of cash base salary consistent with the principles set forth in Part 1V.B.1.a.,
in the form of Company stock.

AS


DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220

December 11, 2009

Drema M. Kalajian, Esquire

General Motors Acceptance Corporation Financial Services
200 Renaissance Center

MC-BO09-B11

Detroit, MI 48265

Re: — Proposed Compensation Structures for Certain Executive Officers and Most
Highly Compensated Employees (“Covered Employees 26 — 100”)

Dear Ms. Kalajian:

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 employees who are either executive
officers of General Motors Acceptance Corporation Financial Services (“GMAC”) or one of
GMAC’s 100 most highly compensated employees, excluding those employees subject to
Section 30.10 of the Interim Final Rule (“Covered Employees 26 ~ 100”). Attached as Annex A
is a Determination Memorandum (accompanied by Exhibits I and I) providing the
determinations of the Special Master with respect to 2009 compensation structures for Covered
Employees 26 ~ 100. 31 C.F.R. § 30.16(a)(3)(ii).

The compensation review for Covered Employees 26 ~ 100 differs from the Special
Master’s review of GMAC’s “Top 25” employees, which emphasized the individual “amounts
payable” to those employees, id. § 30.16(a)(3)(i). For Covered Employees 26 — 100, the Interim
Final Rule does not require individual payment determinations; instead, it requires the Special
Master to determine only whether the proposed compensation structures “will or may result in
payments that are inconsistent with the purposes of section 111 of EESA or TARP, or are
otherwise contrary to the public interest.” Jd. § 30.16(a)(3)(ii). The Special Master has
determined that, to satisfy this standard, the 2009 compensation structures for Covered
Employees 26 — 100 generally must comport with the following important standards:

¢ The compensation structures for Covered Employees 26 — 100 must be consistent with
the principles emphasized in the Special Master’s previous determinations, including: pay
based on individual and Company performance, long-term incentives, avoidance of
“guaranteed” bonuses and retention payments, and appropriate levels of compensation
compared to compensation for persons in similar positions or roles at similar entities.

¢ Toachieve these principles, Covered Employees 26 ~ 100 should receive compensation
in three primary components: cash salary, stock salary, and incentive compensation. The
amounts and conditions of the components for each Covered Employee will be
determined by the Company’s compensation committee, subject to the structural rules
described herein and set forth in detail in the attached Determination Memorandum.


2. Covered Employees 26 — 100 Entering the “Top 25”

If a Covered Employee becomes a “Top 25” employee in 2010, several complications
arise with respect to that Covered Employee’s compensation structure. In particular, Section 111
of EESA, and Section 30.10 of the Rule, impose restrictions on the accrual or payment of cash
“bonuses” in 2010 for any Covered Employee who becomes a “Top 25” employee in 2010, even
if the compensation relates to performance prior to the employee joining the “Top 25.” The
Special Master has considered these issues and has determined that, if GMAC reasonably
expects that a Covered Employee may become one of the “Top 25” employees in 2010, the
compensation structure for that C ‘overed Employee will be subject to the following additional
terms and conditions to assure compliance with pertinent statutory and regulatory requirements.
The Special Master has determined that the restructuring of such a Covered Employee’s 2009
compensation structure to conform to the following terms and conditions, including with respect
to stock-based compensation previously granted in 2009, is consistent with the Public Interest
Standard.

First, in accordance with the Special Master’s October 22, 2009, determinations for the
“Top 25,” additional stock salary may be granted to the Covered Employee on a nunc pro func
basis, provided that the stock vests immediately and is only redeemable in three equal, annual
installments beginning on the second anniversary of grant, with each installment redeemable one
year early if TARP obligations are repaid (except stock withheld or transferred immediately
upon vesting to enable the employee to pay taxes).

Second, any incentive compensation for performance in 2009 that would be payable to
the Covered Employee in cash in the first quarter of 2010 (consistent with the principles set forth
in Part IV.B.1.c.i) may be paid on or before December 31, 2009.

Third, notwithstanding the other requirements of this Part IV.B., up to one-third of the
Covered Employee’s “annual compensation” may be paid in the form of “long-term restricted
stock,” as those terms are defined in the Rule.

3. “Other” Compensation and Perquisites

GMAC’s proposals provide for limited payments of “other” compensation, as well as
perquisites, to Covered Employees 26 — 100. 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 the compensation structures should not be
allocated to such perquisites and “other” compensation. See id. §30.16(b)(1)(iii).

Accordingly, to be consistent with the Public Interest Standard, the compensation
structure for each Covered Employee generally must provide no more than $25,000 in “other”
compensation and perquisites. 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.

A8&


deferred over a period of time designed to ensure that the performance metrics giving rise to the
payment accurately measured performance. Accordingly, the Special Master has concluded that,
to be consistent with the Public Interest Standard, the compensation structure for any Covered
Employee who receives more than $500,000 in cash salary and cash incentive compensation
must provide that at least 50% of incentive compensation granted after the date of this
Determination Memorandum and paid in cash be deferred for at least one year after the date the
grant is made, in order to assure compliance with the performance metrics upon which the
incentive compensation was based.

ii. Stock Incentives

The Special Master reviewed GMAC’s proposed incentive compensation in light of
recently adopted international standards providing that incentive compensation should generally
be payable over a period of three years, as well as the principle that compensation structures
should ensure that “an appropriate portion of the compensation should be performance-based
over a relevant performance period.” Jd. § 30.16(b)(1)(iv). The Special Master has concluded
that a significant amount of the compensation paid as an incentive should reflect the Company’s
performance over the long term. Accordingly, to be consistent with the Public Interest Standard,
the compensation structures for Covered Employees 26 — 100 must provide that at least 50% of
incentive compensation be paid in the form of stock or stock equivalents that cannot be
transferred or otherwise redeemed until at least three years from the date of grant and cannot be
transferred or otherwise redeemed until one year following vesting, except for stock withheld or
transferred immediately upon vesting to enable the employee to pay taxes. The remaining 50%
of incentive compensation may be paid in a form, and at a time, determined by GMAC’s
compensation committee, subject to the principles set forth in Part IV.B. of this Determination
Memorandum. The Special Master has determined that the restructuring of any equity grants
previously made in 2009 to conform to the three-year requirement would be consistent with the
Public Interest Standard.

iii. Total Incentives

Finally, the Special Master reviewed GMAC’s proposed incentive compensation in light
of the principle that compensation structures “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.” Id. § 30.16(b)(1)(v). The Special Master has
determined that safeguards with respect to the aggregate amount of incentive compensation
payable to Covered Employees 26 — 100 are necessary to ensure that compensation structures for
Covered Employees 26 — 100 are generally comparable to those for persons in similar positions
or roles at similar entities that are similarly situated. Accordingly, the Special Master has
determined that, in order to be consistent with the Public Interest Standard, the compensation
structures for Covered Employees 26 ~ 100 may not provide for incentive compensation that, in
the aggregate, exceeds a specified percentage of GMAC’s eligible earnings. Such eligible
earnings will be determined by GMAC’s Compensation Committee and may be reviewed by the
Office of the Special Master.

A7


may have had with respect to any change in the financial health or competitive position
of the recipient. /d. § 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. /d.

In addition, 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.

The Rule also provides an exemption where a Covered Employee’s annual compensation
does not exceed $500,000 (excluding “long-term restricted stock,” as that term is defined in the
Rule). Compensation structures that fit within this exemption are automatically deemed to meet
the requirements of the Rule, and the approval of the Special Master is not required to implement
these structures. 31 C.F.R. § 30.16(a)(3)(ii).

IV. COMPENSATION STRUCTURES

A. GMAC Proposals

GMAC provided the Office of the Special Master with detailed information concerning
its proposed 2009 compensation structures for Covered Employees 26 — 100 (the “Proposed
Structures”). Under the Proposed Structures, Covered Employees 26 — 100 would generally
receive a combination of cash salary, cash bonuses and stock-based compensation.

Cash salaries generally would comprise 20% to 50% of each employee’s target total
direct compensation. Short-term cash bonuses would be administered on a pooled basis, with
target incentive pools for each GMAC business unit based on the aggregated individual target
bonuses for Covered Employees 26 — 100 in that unit. Actual amounts payable from each pool
and to each Covered Employee would be determined by GMAC’s Compensation Committee
based on business unit and individual performance, respectively. Stock grants were previously
made to Covered Employees 26 — 100 in 2009 in the form of restricted stock units that vest in
four equal, annual installments.

B. Determinations of the Special Master

The Special Master reviewed the Proposed Structures in detail by application of the
principles set forth in the Rule and described in Part [I] above. In light of this review, the
Special Master has determined that the Proposed Structures are, on the whole, inconsistent with
the Public Interest Standard and require modification.

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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 Annex A. If
GMAC does not request reconsideration within 30 days, these initial determinations will be

treated as final determinations. Jd. § 30.16(c)(1).

Very truly yours,

lth f

nneth R. Feifiberg
Office of the Special Master
for TARP Executive Compensation

Attachments

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


officers any risks that could threaten the value of GMAC. In particular, the Rule requires
that 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) employee
compensation plans that could encourage behavior focused on short-term results and not
on long-term value creation; and (2) employee compensation plans that could encourage
the manipulation of GMAC’s reported earnings to enhance the compensation of any of
the employees. 31 C.F.R. § 30.4; id. § 30.5.

(2) Disclosure with Respect to Compensation Consultants. The Rule requires that the
compensation committee 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) Clawback. The Rule requires that any bonus payment made to a senior executive officer
or one of the next twenty most highly compensated employees of GMAC be subject to a
provision for recovery or “clawback.” Id. § 30.8. The Special Master has determined
that this important requirement should also apply to each of GMAC’s Covered
Employees 26 — 100. Accordingly, any incentive compensation must be subject to
forfeiture if it is later determined to be 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
compensation was earned.

(4) Prohibition on Tax Gross-Ups. The Rule prohibits GMAC from providing (formally or
informally) a tax “gross-up.” as defined in the Rule, to any senior executive officer or
most highly compensated employee. Jd. § 30.11(d). The Special Master has determined
that this important requirement should also apply to each of GMAC’s Covered
Employees 26 — 100. Accordingly, GMAC must not provide (formally or informally) a
tax “gross-up,” as defined in the Rule, to any Covered Employee following the date of
this Determination Memorandum.

VI. CONCLUSION

The Special Master has reviewed GMAC’s Proposed Structures 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.

Part [V.B sets forth structures that the Special Master has concluded comport with the
Rule’s principles. Pursuant to the authority vested in the Special Master by the Rule, and in
accordance with Section 30.16(a)(3)(ii) thereof, the Special Master hereby determines that the
compensation structures set forth in Part IV.B, including the amounts payable or potentially
payable under such compensation structures, will not result in payments that are inconsistent

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EXHIBIT I
SAMPLE COMPENSATION STRUCTURE
CONSISTENT WITH THE PUBLIC INTEREST STANDARD

Example: Covered Employee with total compensation package of $1,190,000.
e Base salary.
= Cash: The Covered Employee receives a total of $350,000 in cash salary.

* Stock Salary: The covered Employee receives $200,000 in Stock Salary,
which vests immediately but may not be transferred prior to the first
anniversary of the date it is earned.

¢ Incentive Compensation. The Covered Employee may also receive $640,000 in
incentive compensation as follows:

= Cash Incentive: $190,000

¢ $95,000 immediately payable

e $95,000 paid at least one year from grant date
= Stock incentive: $450,000

¢ The entire amount may not be transferred or otherwise redeemed
prior to the third anniversary of the grant date.

© Total compensation. The Covered Employee’s total compensation is $1,190,000, with
45% of the total delivered in cash and 55% delivered in stock (62% of delivered short
term and 38% delivered long term).

Breakdown of Total Direct Compensation Short Term vs. Long Term

Cash Sala
w Amounts payable in the current year

Stock Salary - 1 year after grant

Annual Incentive Equity-Not payable until me Amounts payable nti 20a) oa
the 3rd Year

DAnnual Incentive Cash-50% immediately,]| Amounts payable in 3+ years
50% one year later

Note 1: This Exhibit does not include amounts payable pursuant to legally binding rights under valid employment
contracts, see 31 C.F.R. § 30.10(e)(2).


e The achievement of all performance objectives must be certified by GMAC’s
Compensation Committee. These performance objectives must be reviewed and
approved by the Office of the Special Master.

e Each Covered Employee will be prohibited from engaging in any hedging, derivative or
other transactions that have an equivalent economic effect 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 any Covered Employee.
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. /d. § 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 majority of compensation payable under the
approved structures depends on GMAC and individual performance, and ties the financial
incentives of GMAC employees to the overall performance of the Company. A
significant portion of the total compensation paid to employees under these structures
will be redeemable over a period of not less than three years. The ultimate value realized
by each Covered Employee therefore will depend on GMAC’s performance over the long
term. Guaranteed amounts payable in cash, in contrast, are rejected. Id. § 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 these approved compensation
structures are competitive when compared with persons in similar positions or roles at
similar entities. Jd. § 30.16(b)(1 (ii).

© Appropriate allocation. The total compensation payable to GMAC employees is
weighted heavily toward long-term structures that are tied to GMAC’s performance. As
a general principle, guaranteed income is rejected. Fixed compensation payable to
GMAC employees should consist only of cash base salaries and stock salary at sufficient
levels to attract and retain employees and provide them a reasonable level of liquidity.
Id. § 30.16(b)(1)(iii).

wo


© Total compensation must emphasize long-term performance. At least 50% of a Covered
Employee’s compensation other than cash base salary — whatever the mix of
components for that individual — must not be transferable or otherwise redeemable for at
least three years. The objective is to promote long-term performance. In addition, the
total amount of cash included in any compensation package for an individual who earns
$500,000 or more in cash may not exceed 45% of the total compensation for that
individual, except in exceptional cases for good cause shown.

© Cash salary should not exceed $500,000 per year, except in exceptional cases for
good cause shown.

e Stock salary will immediately vest, but will not be transferable or otherwise
redeemable until at least one year after it is earned.

e Incentive compensation may be granted if—and only if—the Covered Employee
achieves objective performance metrics determined by the compensation committee
of GMAC’s Board of Directors (“GMAC’s Compensation Committee”), which is
comprised solely of independent directors, in consultation with the Office of the
Special Master. Incentive compensation may be delivered in a mix of cash and stock,
but must be payable over time and subject to “clawback” if the performance
assessment resulting in the compensation is later discovered to be inaccurate.

¢ The total value of all incentive compensation granted to Covered Employees 26 — 100
cannot exceed a specified percentage of GMAC’s eligible earnings, which will be
determined by GMAC’s Compensation Committee and may be reviewed by the Special
Master.

e IfGMAC reasonably expects that a Covered Employee may become one of the “Top 25”
employees in 2010 and therefore subject to “bonus” restrictions under the Emergency
Economic Stabilization Act of 2008, as amended, and the Interim Final Rule, the
compensation structure for that employee will be subject to additional terms and
conditions described in the Determination Memorandum to assure compliance with
pertinent statutory and regulatory requirements.

© Cash guarantees payable pursuant to previously existing agreements should be
restructured to be consistent with the principles above.

e The restrictions described in the Special Master’s “Top 25” determinations pertaining to
perquisites, severance benefits and supplemental executive retirement plans shall be
extended to Covered Employees 26 ~ 100.

The Special Master has also determined that, in order for the approved compensation
structures to satisfy the standards of 31 C.F.R. § 30.16(a)(3)(ii), GMAC must adopt policies
applicable to Covered Employees 26 -- 100 as follows:


4. Supplemental Executive Retirement Plans and Non-Qualified Deferred
Compensation

GMAC also proposed that certain Covered Employees receive limited 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.” /d. § 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 employee upon leaving the Company.

Covered Employees 26 ~ 100 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, in order to be consistent with the Public Interest Standard, the
compensation structures for Covered Employees 26 — 100 must not provide for further 2009
accruals under supplemental retirement plans or Company credits to other “non-qualified
deferred compensation” plans (with the exception of employee-funded elective deferrals)
following the date of this Determination Memorandum.

5. Severance Plans

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)(i)(iv), and that payments should be appropriately allocated among the
elements of compensation, id. § 30.16(b)(1 (iii). Accordingly, in order to be consistent with the
Public Interest Standard, the compensation structures for Covered Employees 26 — 100 must
ensure that 2009 compensation structures do not result in an increase in the amounts payable
pursuant to these arrangements.

6. Exemption for Certain Covered Employees 26 — 100

The Proposed Structures for certain Covered Employees would result in annual
compensation (other than long-term restricted stock) not exceeding $500,000. If the Proposed
Structure for a Covered Employee satisfies the exemption set forth in Section 30.16(a)(3 (ii) of
the Rule and described in Part III above, the structure is automatically deemed to meet the
requirements of the Rule.

AQ


with the purposes of Section 111 of EESA or TARP, and will not otherwise be contrary to the
public interest.

Pursuant to the 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. /d. § 30.16(c)(1).

The foregoing determinations are limited to the compensation structures described in Part
IV.B, 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 30.1 6(a)(3)(ii) 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 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 the Company 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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