SETTLEMENT AGREEMENT
EXHIBIT 10.1
This settlement agreement (which, together with the Exhibits hereto, is referred to as the
“Settlement Agreement”), dated February 21, 2008, is between General Motors Corporation (“GM”), by
and through its attorneys, and the International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America (“UAW”), by and through its attorneys, and the Class
Representatives, on behalf of the Class, by and through Class Counsel, in (1) the class action of
Int’l Union, UAW, et. al. v. General Motors Corp., Civil Action No. 07-14074 (E.D. Mich. filed
Sept. 9, 2007) (“Xxxxx XX”), and/or (2) the class action of UAW et al. v. General Motors Corp., No.
05-CV-73991, 2006 WL 891151 (E.D. Mich. Mar. 31, 2006, aff’d, Int’l Union, UAW v. General Motors
Corp., 497 F.3d 615 (6th Cir. 2007) (“Xxxxx I”). This Settlement Agreement shall cover and has
application to:
(i) the Class;
(ii) the Covered Group;
(iii) the Existing External VEBA;
(iv) the trustee and committee that administer the Existing External VEBA;
(v) the UAW;
(vi) the GM Plan; and
(vii) GM.
With regard to GM, the UAW and the Class, this Settlement Agreement: (i) resolves and settles
all claims that arise in connection with Xxxxx XX; (ii) resolves and settles all claims, motions
and other issues pertaining to or remaining in Xxxxx I; (iii) amends, supersedes or otherwise
supplants the settlement agreement dated December 16, 2005 approved in Xxxxx I (“Xxxxx I Settlement
Agreement”); and (iv) provides the basis upon which the judgment entered March 31, 2006 in Xxxxx I
shall be satisfied, superseded or amended as necessary to give full force and effect to the terms
of this Settlement Agreement. This Settlement Agreement also resolves and settles any and all
claims for GM contributions to the Existing External VEBA, and provides for the termination of the
Existing External VEBA and the transfer of all assets and liabilities of the Existing External VEBA
to the New VEBA. However, except as otherwise specifically set forth herein, nothing in this
Settlement Agreement is intended to alter the eligibility provisions of the GM Plan or to provide
GM contributions or benefits to individuals who are not otherwise entitled to such under the GM
Plan.
This Settlement Agreement is subject to approval by the Court and the parties shall request
that the Court incorporate the entirety of this Settlement Agreement in the Approval Order. In the
event of an inconsistency between this Settlement Agreement and any prior agreements or documents,
including the Memorandum of Understanding Post-Retirement Medical Care September 26, 2007 (“MOU”),
this Settlement Agreement shall control. In the event of an inconsistency between the body of this
Settlement Agreement and the Exhibits
hereto, this Settlement Agreement shall control, unless explicitly stated otherwise in this
Settlement Agreement.
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This Settlement Agreement recognizes and approves on the basis set forth herein: (i) the
amendment of the GM Plan to terminate coverage for and exclude from coverage the Class and the
Covered Group; (ii) the division of the Existing Internal VEBA into the UAW Related Account and
Non-UAW Related Account and the transfer of the UAW Related Account to the New VEBA; (iii) the
termination of participation by the Class and the Covered Group under the Existing Internal VEBA;
(iv) the termination of the Existing External VEBA in conjunction with the establishment of the New
Plan, and the transfer to the New VEBA of all assets and liabilities of the Existing External VEBA;
(v) that all claims for Retiree Medical Benefits incurred on or after the Implementation Date by
the Class and the Covered Group, including but not limited to COBRA continuation coverage where
such election is or had been made on or after retirement and any coverage provided on a self-paid
basis in retirement, shall be solely the responsibility and liability of the New Plan and the New
VEBA; (vi) the Committee’s designation under the New Plan and New VEBA as named fiduciary and
administrator of the New Plan; (vii) that the New Plan shall replace the GM Plan regarding the
provision of Retiree Medical Benefits to the Class and the Covered Group; (viii) that the New VEBA
shall receive certain payments as described herein from the Existing Internal VEBA, the Existing
External VEBA, and GM; (ix) that GM’s obligation to pay into the New VEBA is fixed and capped as
described herein; and (x) that the New VEBA shall serve as the exclusive funding mechanism for the
New Plan.
1. Definitions
Actuary. The term “Actuary” is defined in Exhibit A to this Settlement Agreement.
Adjustment Event. The term “Adjustment Event” is defined in Section 13 of this
Settlement Agreement.
Admissions. The term “Admissions” shall mean any statement, whether written or oral,
any act or conduct, or any failure to act, that could be used (whether pursuant to Rules 801(d)(2)
or 804(b)(3) of the Federal Rules of Evidence, a similar rule or standard under other applicable
law, the doctrines of waiver or estoppel, other rule, law, doctrine or practice, or otherwise) as
evidence in a proceeding of proof of agreement with another party’s position or proof of adoption
of, or acquiescence to, a position that is contrary to the interest of the party making such
statement, taking such action, or failing to act.
Alternative Convertible Note. The term “Alternative Convertible Note” is defined in
Section 12.F of this Settlement Agreement.
Approval Order or Judgment. The terms “Approval Order” or “Judgment” shall mean an
order obtained from the Court approving and incorporating this Settlement Agreement in all respects
as set forth in Section 28 of this Settlement Agreement. In the event that the Court enters
separate orders certifying the Class and approving this Settlement Agreement, the terms “Approval
Order” or “Judgment” shall apply to both orders collectively.
Base Amounts. The term “Base Amounts” shall mean the payment(s) to be made by GM that
are specified in Sections 7.D and 8.E of this Settlement Agreement.
Board of Directors. The term “Board of Directors” shall mean the Board of Directors
of GM or any committee established by the Board of Directors.
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Cash Flow Projections. The term “Cash Flow Projections” shall mean the cash flow
projections described in Exhibit A to this Settlement Agreement, which is for the purpose of
determining whether payment of a Shortfall Amount is required in a given year.
Class or Class Members. The term “Class” or “Class Members” shall mean all persons
who are:
(i) GM-UAW Represented Employees who, as of October 15, 2007, were retired from GM with
eligibility for Retiree Medical Benefits under the GM Plan, and their eligible spouses, surviving
spouses and dependents;
(ii) surviving spouses and dependents of any GM-UAW Represented Employees who attained
seniority and died on or prior to October 15, 2007 under circumstances where such employee’s
surviving spouse and/or dependents are eligible to receive Retiree Medical Benefits from GM and/or
under the GM Plan;
(iii) UAW retirees of Delphi Corporation (“Delphi”) who as of October 15, 2007 were retired
and as of that date were entitled to or thereafter become entitled to Retiree Medical Benefits from
GM and/or the GM Plan under the terms of the UAW-Delphi-GM Memorandum of Understanding Delphi
Restructuring dated June 22, 2007, Attachment B to the UAW-Delphi-GM Memorandum of Understanding
Delphi Restructuring dated June 22, 2007 (without regard to whether any of the conditions described
in Section K.2 of such Memorandum of Understanding or Section 2 of such Attachment B occur), or the
Benefit Guarantee agreement between GM and the UAW dated September 30, 1999, and their eligible
spouses, surviving spouses and dependents of all such retirees;
(iv) surviving spouses and dependents of any UAW-represented employee of Delphi who attained
seniority and died on or prior to October 15, 2007 under circumstances where such employee’s
surviving spouse and/or dependents are eligible to receive Retiree Medical Benefits from GM and/or
the GM Plan under the terms of the UAW-Delphi-GM Memorandum of Understanding Delphi Restructuring
dated June 22, 2007, Attachment B to the UAW-Delphi-GM Memorandum of Understanding Delphi
Restructuring dated June 22, 2007 (without regard to whether any of the conditions described in
Section K.2 of such Memorandum of Understanding or Section 2 of such Attachment B occur), or the
Benefit Guarantee agreement between GM and the UAW dated September 30, 1999;
(v) GM-UAW Represented Employees or former UAW-represented employees who, as of October 15,
2007, were retired from any previously sold, closed, divested or spun-off GM business unit (other
than Delphi) with eligibility to receive Retiree Medical Benefits from GM and/or the GM Plan by
virtue of any other agreement(s) between GM and the UAW, and their eligible spouses, surviving
spouses, and dependents; and
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(vi) surviving spouses and dependents of any GM-UAW Represented Employee or any
UAW-represented employee of a previously sold, closed, divested or spun-off GM business unit (other
than Delphi), who attained seniority and died on or prior to October 15, 2007 under circumstances
where such employee’s surviving spouse and/or dependents are eligible to receive Retiree Medical
Benefits from GM and/or the GM Plan.
Class Certification Order. The term “Class Certification Order” shall mean the final
order entered by the Court as described in Section 28.A of this Settlement Agreement.
Class Counsel. The term “Class Counsel” shall mean the law firm of Stember,
Feinstein, Xxxxx & Xxxxx, LLC, or its successor.
Class Representatives. The term “Class Representatives” shall mean Xxxx X. Xxxxx,
Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxxx, and Xxxx Xxxxx.
Committee. The term “Committee” shall mean the governing body set forth in Section
4.A of this Settlement Agreement that acts on behalf of the EBA and serves as the named fiduciary
and administrator of the New Plan, as those terms are defined in ERISA and that is so described in
the Trust Agreement.
Convertible Note. The term “Convertible Note” shall mean the $4.3725 billion
aggregate principal amount of 6.75% Series U Convertible Senior Debentures Due December 31, 2012
issued under that Indenture, dated as of January 8, 2008, between GM and the Bank of New York, as
Trustee, including all supplemental indentures thereto, substantially in the form attached as
Exhibit B to this Settlement Agreement.
Court. The term “Court” shall mean the United States District Court for the Eastern
District of Michigan.
Covered Group. The term “Covered Group” shall mean:
(i) all GM Active Employees who have attained seniority as of September 14, 2007, and who
retire after October 15, 2007 under the GM-UAW National Agreements, or any other agreement(s)
between GM and the UAW, and who upon retirement are eligible for Retiree Medical Benefits under the
GM Plan or the New Plan, as applicable, and their eligible spouses, surviving spouses and
dependents;
(ii) all UAW-represented active employees of Delphi or a former Delphi unit who retire from
Delphi or such former Delphi unit on or after October 15, 2007, and upon retirement are entitled to
or thereafter become entitled to Retiree Medical Benefits from GM and/or the GM Plan or the New
Plan under the terms of the UAW-Delphi-GM Memorandum of Understanding Delphi Restructuring dated
June 22, 2007, Attachment B to the UAW-Delphi-GM Memorandum of Understanding Delphi Restructuring
dated June 22, 2007 (without regard to whether any of the conditions described in Section K.2 of
such Memorandum of Understanding or Section 2 of such Attachment B occur), or the Benefit Guarantee
agreement between GM and the UAW dated September 30, 1999, and the eligible spouses, surviving
spouses and dependents of all such retirees;
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(iii) all surviving spouses and dependents of any UAW-represented employee of Delphi or a
former Delphi unit who dies after October 15, 2007 but prior to retirement under circumstances
where such employee’s surviving spouse and/or dependents are eligible or thereafter become eligible
for Retiree Medical Benefits from GM and/or the GM Plan or the New Plan under the terms of the
UAW-Delphi-GM Memorandum of Understanding Delphi Restructuring dated June 22, 2007, Attachment B to
the UAW-Delphi-GM Memorandum of Understanding Delphi Restructuring dated June 22, 2007 (without
regard to whether any of the conditions described in Section K.2 of such Memorandum of
Understanding or Section 2 of such Attachment B occur), or the Benefit Guarantee agreement between
GM and the UAW dated September 30, 1999;
(iv) all former GM-UAW Represented Employees and all UAW-represented employees who, as of
October 15, 2007, remain employed in a previously sold, closed, divested, or spun-off GM business
unit (other than Delphi), and upon retirement are eligible for Retiree Medical Benefits from GM
and/or the GM Plan or the New Plan by virtue of any other agreement(s) between GM and the UAW, and
their eligible spouses, surviving spouses and dependents; and
(v) all eligible surviving spouses and dependents of a GM Active Employee, former GM-UAW
Represented Employee or UAW-represented employee identified in (i) or (iv) above who attained
seniority on or prior to September 14, 2007 and die after October 15, 2007 but prior to retirement
under circumstances where such employee’s surviving spouse and/or dependents are eligible for
Retiree Medical Benefits from GM and/or the GM Plan or the New Plan.
Debt. The term “Debt” shall mean notes, bonds, debentures or other similar evidences
of indebtedness for money borrowed.
Derivative Contracts. The term “Derivative Contracts” shall mean those various
derivative instruments substantially in the forms set forth in Exhibit H.
Dispute Party. The term “Dispute Party” is defined in Section 26.B of this Settlement
Agreement.
DOL. The term “DOL” shall mean the United States Department of Labor.
Employees Beneficiary Association or EBA. The term “Employees Beneficiary Association”
or “EBA” shall mean the employee organization within the meaning of section 3(4) of ERISA that is
organized for the purpose of establishing and maintaining the New Plan, with a membership
consisting of the individuals who are members of the Class and the Covered Group, and on behalf of
which the Committee acts.
ERISA. The term “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended.
Existing External VEBA. The term “Existing External VEBA” shall mean the defined
contribution – Voluntary Employees’ Beneficiary Association trust established pursuant to the Xxxxx
I Settlement Agreement.
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Existing Internal VEBA. The term “Existing Internal VEBA” shall mean the General
Motors Welfare Benefit Trust that is funded and maintained by GM.
Fairness Hearing. The term “Fairness Hearing” is defined in Section 27 of this
Settlement Agreement.
Final Effective Date. The term “Final Effective Date” shall mean the first date after
any appeals from, or other challenges to, the Approval Order have been exhausted or the time
periods for filing such appeal(s) or challenge(s) have expired, provided that the Final Effective
Date shall be deemed to have occurred only if, at such time, (i) the Approval Order has not been
disapproved or modified as a result of any appeal(s) or other challenge(s) and (ii) GM has
completed, on a basis reasonably satisfactory to GM, its discussions with the Securities and
Exchange Commission (“SEC”) regarding the accounting treatment with respect to the New Plan and the
New VEBA as set forth in Section 21 of this Settlement Agreement.
General Motors Asset Management Valuation Policies and Procedures. The term “General
Motors Asset Management Valuation Policies and Procedures” shall mean GMAM’s valuation policies
and procedures, copies of which have been provided to the UAW and Class Counsel, as the same may be
amended from time to time by GMAM (who shall notify the UAW and the Committee about any such
intended amendments in a timely manner).
GM Active Employees. The term “GM Active Employees” shall mean those hourly employees
of GM who, as of September 14, 2007 or any date thereafter, are covered by the 2007 GM-UAW National
Agreement or are covered by any subsequent GM-UAW National Agreement. For purposes of this
definition, “active employee” shall include hourly employees on vacation, layoff, protected status,
medical or other leave of absence, and any other employees who have not broken seniority as of
September 14, 2007.
GM Actuary. The term “GM Actuary” is defined in Exhibit A to this Settlement
Agreement.
GMAM. The term “GMAM” shall mean General Motors Asset Management Corporation and its
subsidiaries, and as specifically referring to the investment manager for the Existing Internal
VEBA, refers to General Motors Investment Management Corporation. GMAM is a wholly owned
subsidiary of General Motors Corporation.
GM Plan. The term “GM Plan” shall mean the collectively bargained General Motors
Health Care Program for Hourly Employees as set forth in Exhibit C-1 of the 2007 and prior GM-UAW
National Agreements, as applicable to those GM-UAW Represented Employees who had attained seniority
prior to September 14, 2007.
GM-UAW National Agreements. The term “GM-UAW National Agreements” shall mean the
agreement(s) negotiated on a multi-facility basis and entered into between GM and the UAW covering
GM employees represented by the UAW. The current GM-UAW National Agreement is dated October 15,
2007.
GM-UAW Represented Employees. The term “GM-UAW Represented Employees” shall mean
those individuals who were represented by the UAW in their employment with GM.
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Implementation Date. The term “Implementation Date” shall mean the later of January
1, 2010 or the Final Effective Date.
Indemnified Party. The term “Indemnified Party” is defined in Section 23 of this
Settlement Agreement.
Indemnification Liabilities. The term “Indemnification Liabilities” is defined in
Section 23 of this Settlement Agreement.
Indemnity Expenses. The term “Indemnity Expenses” is defined in Section 23 of this
Settlement Agreement.
Independent Attestation. The term “Independent Attestation” shall mean an agreed-upon
procedures engagement performed for GM, the UAW and the Committee by a nationally recognized
independent registered public accounting firm selected by GM and conducted in accordance with the
attestation standards of the Public Company Accounting Oversight Board, the subject matter of which
would be (a) in the case of an Adjustment Event under Section 13.A(i) of this Settlement Agreement
whether the balance of the Existing Internal VEBA and/or specified assets therein have been valued
in accordance with the General Motors Asset Management Valuation Policies and Procedures; or (b) in
the case of an Adjustment Event under Section 13.A(ii) or (iii) of this Settlement Agreement
whether specified assets of the Existing Internal VEBA have been valued in accordance with the
General Motors Asset Management Valuation Policies and Procedures. The agreed-upon procedures
shall be mutually agreed among the accounting firm, GM and the Committee in connection with any
such engagement.
Independent Audit. The term “Independent Audit” shall mean an audit of the
consolidated financial statements of GM performed in accordance with the standards of the Public
Company Accounting Oversight Board by the independent registered public accounting firm that has
been designated by GM.
Initial Accounting Period. The term “Initial Accounting Period” shall mean the period
before the later of the date that (a) GM determines that its obligations, if any, with respect to
the New Plan made available to the Class and Covered Group are subject to settlement accounting as
contemplated by paragraphs 90-95 of FASB Statement No. 106, as amended, or its functional
equivalent; or (b) GM is no longer obligated to make any further payments or deposits to the New
VEBA, including, but not limited to, any Shortfall Amounts.
Initial Effective Date. The term “Initial Effective Date” shall mean the date on
which the Court enters the Approval Order.
Initial Shortfall Amount. The term “Initial Shortfall Amount” is defined in Section
7.D of this Settlement Agreement.
Interest. The term “Interest” shall mean an interest rate of 9 percent (9%) per annum
(computed on the basis of a 360-day year consisting of twelve 30-day months and the number of days
elapsed in any partial month), credited and compounded annually, unless otherwise specified in this
Settlement Agreement.
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Limited Liability Company. The term “Limited Liability Company” or “LLC” shall mean
LBK, LLC, a Delaware limited liability company created by GM under Section 7.B of this Settlement
Agreement for the purpose of holding the Convertible Note and the Short Term Note, entering into
and holding the Derivative Contracts, and receiving interest on the Convertible Note as described
in this Settlement Agreement.
Manufacturing Subsidiary. The term “Manufacturing Subsidiary” shall mean any
Subsidiary (A) substantially all the property of which is located within the continental United
States of America, (B) which owns a Principal Domestic Manufacturing Property and (C) in which GM’s
investment, direct or indirect and whether in the form of equity, debt, advances or otherwise, is
in excess of U.S. $2,500,000,000 as shown on the books of GM as of the end of the fiscal year
immediately preceding the date of determination; provided, however, that “Manufacturing Subsidiary”
shall not include GMAC, LLC and its Subsidiaries (or any corporate successor of any of them) or any
other Subsidiary which is principally engaged in leasing or in financing installment receivables or
otherwise providing financial or insurance services to GM or others or which is principally engaged
in financing GM’s operations outside the continental United States of America.
Mitigation. The term “Mitigation” shall have the same meaning as in the Xxxxx I
Settlement Agreement.
Mortgage. The term “Mortgage” shall mean any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or other similar encumbrance.
National Institute for Health Care Reform or Institute. The term “National Institute
for Health Care Reform” or “Institute” is defined in Section 31 of this Settlement Agreement.
New Plan. The term “New Plan” shall mean the new retiree welfare benefit plan that is
the subject of this Settlement Agreement, and that is funded in part by the GM Separate Retiree
Account (as defined in the Trust Agreement), which New Plan shall provide Retiree Medical Benefits
to the Class and Covered Group.
New VEBA. The term “New VEBA” shall mean a new trust fund to be established as
described in Section 4 of this Settlement Agreement.
Non-UAW Related Account. The term “Non-UAW Related Account” is defined in Section
6.A of this Settlement Agreeement.
Notice Order. The term “Notice Order” is defined in Section 27 of this Settlement
Agreement.
Pension Plan. The term “Pension Plan” shall mean the General Motors Hourly-Rate
Employees Pension Plan.
Principal Domestic Manufacturing Property. The term “Principal Domestic Manufacturing
Property” shall mean any manufacturing plant or facility owned by GM or any Manufacturing
Subsidiary which is located within the continental United States of America and,
in the opinion of the Board of Directors, is of material importance to the total business
conducted by GM and its consolidated affiliates as an entity.
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Retiree Medical Benefits. The term “Retiree Medical Benefits” shall mean all post
retirement medical benefits, including but not limited to hospital surgical medical, prescription
drug, vision, dental, hearing aid and the $76.20 Special Benefit related to Medicare.
Short Term Note. The term “Short Term Note” is defined in Section 7.C of this
Settlement Agreement.
Shortfall Amounts. The term “Shortfall Amount” shall mean the payment(s) to be made
by GM that are defined in Section 10 of this Settlement Agreement.
State. The term “State” shall mean any state of the United States.
Subsidiary. The term “Subsidiary” shall mean any corporation or other entity of which
at least a majority of the outstanding stock or other beneficial interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or other governing body
of such corporation or other entity (irrespective of whether or not at the time stock or other
beneficial interests of any other class or classes of such corporation or other entity shall have
or might have voting power by reason of the happening of any contingency) is at the time owned by
GM, or by one or more Subsidiaries, or by GM and one or more Subsidiaries.
Temporary Asset Account. The term “Temporary Asset Account” or “TAA” shall mean the
temporary account controlled at all times by GM that is established by GM or a wholly owned
subsidiary of GM under Section 7.A of this Settlement Agreement for the purpose of holding certain
GM payments as described in this Settlement Agreement.
Trust Agreement. The term “Trust Agreement” shall mean the New VEBA trust agreement
the form of which is set forth in Exhibit E to this Settlement Agreement.
UAW OPEB 12/31/07 Split. The term “UAW OPEB 12/31/07 Split” is defined in Section 6.A
of this Settlement Agreement.
UAW Related Account. The term “UAW Related Account” is defined in Section 6.A of this
Settlement Agreeement.
UAW Releasees. The term “UAW Releasees” shall mean the UAW, the Class
Representatives, the Class, Class Counsel, the Covered Group and anyone claiming on behalf of,
through or under them by way of subrogation or otherwise.
Wages/COLA Amount. The term “Wages/COLA Amount” shall mean the payments to be made by
GM that are defined in Sections 7.D and 8.F of this Settlement Agreement.
2. Purpose of New Plan and New VEBA
The New Plan and the New VEBA will, as of the Implementation Date, be the employee welfare
benefit plan and trust that are exclusively responsible for all Retiree Medical Benefits for
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which GM, the GM Plan and any other GM entity or benefit plan formerly would have been
responsible with regard to the Class and the Covered Group. All assets paid or transferred by GM
to the New VEBA (including any investment returns thereon) will be credited to a GM Separate
Retiree Account and must be used for the exclusive purpose of providing Retiree Medical Benefits to
the participants of the New Plan and their eligible beneficiaries, and to defray the reasonable
expenses of administering the New Plan, as set forth in the Trust Agreement. All obligations of
GM, the GM Plan and any other GM entity or benefit plan for Retiree Medical Benefits for the Class
and the Covered Group arising from any agreement(s) between GM and the UAW shall be forever
terminated as of the Implementation Date. GM’s sole obligations to the New Plan and the New VEBA
are those set forth in this Settlement Agreement. Eligibility rules for the New Plan shall be the
same as those currently included in the GM Plan, and may not be expanded.
3. Factual Investigation and Legal Inquiry and Decision to Settle
Throughout the 2007 negotiations between GM and the UAW over the terms of a new National
Agreement, the parties engaged in extended discussions concerning the impact of rising health care
costs on GM’s financial condition and its ability to compete in the North American marketplace. GM
provided the UAW with extensive information as to its financial condition and health care
expenditures. On behalf of the UAW, a team of investment bankers, actuaries, and legal experts
have reviewed GM’s information, and provided the UAW with an assessment as to the state of GM’s
financial condition and analyzed the benefits of entering into the MOU. GM officials also met with
representatives of the UAW and its team of experts and answered questions and provided further
detail, as requested. The UAW and its team of experts have now analyzed, inter
alia, the funds necessary to provide ongoing Retiree Medical Benefits through the New Plan
and the New VEBA.
During these discussions, GM asserted, as it had in Xxxxx I, that it has the right to
unilaterally modify and/or terminate the health care benefits applicable to its hourly retirees and
that, without this Settlement Agreement, GM would exercise its right to terminate the Xxxxx I
Settlement Agreement according to its terms as well as exercise its right to unilaterally modify
retiree health care benefits. Although the UAW acknowledges GM’s right to terminate the Xxxxx I
Settlement Agreement, it continues to assert that the retiree health care benefits are vested and
GM does not have the right to unilaterally modify or terminate retiree health care benefits.
On behalf of the Class, Class Counsel has conducted a substantial factual investigation and
legal inquiry prior to entering into this Settlement Agreement. Similar to what was done by the
UAW, this included, inter alia, review of GM’s financial information, review and analysis of
collective bargaining agreements, relevant health care plan documents, and actuarial information,
and review of material on GM’s health care costs. Class Counsel retained experts to review the
financial and actuarial information and, with the assistance of these experts, conducted an
extensive review of GM’s projected financial condition, GM’s ability to provide Retiree Medical
Benefits over the long term, and the proposed New VEBA’s ability to provide Retiree Medical
Benefits over the long term with the funds available from the proposed Settlement Agreement. Class
Counsel has also thoroughly investigated the law applicable to the Class Members’ claims and has
done so considering the collective bargaining agreements and health care plan
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documents affecting these claims. Class Counsel examined the benefits and certainty to be
obtained under the proposed Settlement Agreement for an aging Class, and has considered the costs,
risks and delays associated with the prosecution of complex and time-consuming litigation, the
likely appeals of any rulings in favor of any party. Class Counsel has considered the fact that,
under the proposed Settlement Agreement, the benefits of Xxxxx I through 2011 are preserved. Class
Counsel believes that, in consideration of all the circumstances, the proposed settlement embodied
in this Settlement Agreement is fair, reasonable, adequate and in the best interest of all members
of the Class. Class Counsel participated in the negotiation of this Settlement Agreement.
4. New Plan and New VEBA
A. Committee. The Approval Order shall provide that the New Plan and New VEBA, both
subject to ERISA, shall be administered by the Committee. The Committee shall be in place within
120 days after the Initial Effective Date. The Committee shall consist of 11 members, 5 of which
are to be appointed by the UAW, and 6 independent members. The Approval Order shall designate the
initial public members who are set forth in Attachment 1 of Exhibit E to this Settlement Agreement.
In the event that any member of the Committee resigns, dies, becomes incapacitated or otherwise
ceases to be a member, a replacement member shall be appointed as described in the Trust Agreement.
B. Establish and Maintain. The EBA, acting through the Committee, shall establish
and maintain the New Plan for the purpose of providing Retiree Medical Benefits to the Class and
Covered Group as set forth in this Settlement Agreement. The Committee shall begin administering
the New Plan so as to be able to provide Retiree Medical Benefits for the Class and Covered Group
with respect to claims incurred on or after the Implementation Date. The Committee shall implement
the New VEBA at the earlier of (i) the expiration of 180 days following the Initial Effective Date,
or (ii) the Implementation Date. The New Plan shall be ERISA-covered and the New VEBA shall meet
the requirements of Section 501(c)(9) of the Internal Revenue Code.
C. Limitation on GM Role. No member of the Committee shall be a current or former
officer, director or employee of GM or any member of the GM controlled group; provided however,
that a retiree who was represented by the UAW in his/her employment with GM or an employee of GM
who is on leave from GM and who is represented by the UAW is not precluded by this provision from
serving on the Committee. No member of the Committee shall be authorized to act for GM or shall be
an agent or representative of GM for any purpose. Furthermore, GM shall not be a fiduciary with
respect to the New Plan or New VEBA, and will have no rights or responsibilities with respect to
the New Plan or New VEBA other than as specifically set forth in this Settlement Agreement.
5. Provision and Scope of Retiree Medical Benefits
A. Before Implementation Date. With respect to claims incurred prior to the
Implementation Date, Retiree Medical Benefits for the Class and the Covered Group will continue to
be provided by the GM Plan and the Existing External VEBA at the same level and scope as provided
for by the GM Plan and the Existing External VEBA under the Xxxxx I
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Settlement Agreement, including Mitigation from the Existing External VEBA (for those entitled
to it). The payment by GM and/or the GM Plan of Retiree Medical Benefits for claims incurred prior
to the Implementation Date will not reduce GM’s payment obligations to the New Plan and the New
VEBA under this Settlement Agreement.
B. On and After Implementation Date. With respect to claims incurred on and after
the Implementation Date, the New Plan and the New VEBA shall have sole responsibility for and be
the exclusive source of funds to provide Retiree Medical Benefits for the Class and the Covered
Group, including but not limited to COBRA continuation coverage where such election is made after
retirement. Neither GM, the GM Plan, the Existing Internal VEBA, nor any other GM person, entity,
or benefit plan shall have any responsibility or liability for Retiree Medical Benefits for
individuals in the Class or in the Covered Group for claims incurred on or after the Implementation
Date. GM’s sole obligations to the New Plan and the New VEBA are those set forth in this
Settlement Agreement.
From the Implementation Date until December 31, 2011, the Retiree Medical Benefits under the
New Plan and the New VEBA will continue to be provided at the levels described in the Xxxxx I
Settlement Agreement and as set forth in the Trust Agreement, except for the additional monthly
contribution attributable to the pension cost pass-through described in Section 15 of this
Settlement Agreement. On and after January 1, 2012, the Committee shall have such authority to
establish Benefits as described in the Trust Agreement, including raising or lowering benefits.
However, in no event may the Committee amend the New Plan or New VEBA to provide benefits other
than Retiree Medical Benefits until the expiration of the Initial Accounting Period. The ability
of the New Plan and the New VEBA to pay for Retiree Medical Benefits will depend on numerous
factors, many of which are outside of the control of UAW, the Committee, the New Plan and the New
VEBA, including, without limitation, the investment returns, actuarial experience and other
factors.
C. Amendment of GM Plan and Reimbursement of GM. The Approval Order shall provide
that all obligations of GM and all provisions of the GM Plan in any way related to Retiree Medical
Benefits for the Class and/or the Covered Group, and all provisions of applicable collective
bargaining agreements, contracts, letters and understandings in any way related to Retiree Medical
Benefits for the Class and the Covered Group are terminated on the Implementation Date, or
otherwise amended so as to be consistent with this Settlement Agreement and the fundamental
understanding that all GM obligations regarding Retiree Medical Benefits for the Class and the
Covered Group are terminated as set forth in this Settlement Agreement. Summary Plan Descriptions
of the GM Plan are amended to reflect the termination of GM and GM Plan responsibilities for
Retiree Medical Benefits for the Class and the Covered Group for claims incurred on or after the
Implementation Date as set forth herein.
The New Plan and New VEBA shall reimburse GM or the GM Plan, as applicable, for any Retiree
Medical Benefits advanced or provided by GM or the GM Plan with regard to claims incurred by
members of the Class and the Covered Group on or after the Implementation Date, including, but not
limited to situations where a retirement is made retroactive and the medical claims were incurred
on or after the Implementation Date or where GM is notified of an intent by a member of the Class
and the Covered Group to retire under circumstances where there is insufficient time to transfer
responsibility for Retiree Medical Benefits to the New Plan and GM
- 12 -
or the GM Plan provides interim coverage for Retiree Medical Benefits. To the extent such
reimbursement may not be permitted by law, the UAW, the Class, Class Counsel and the Committee will
fully cooperate with GM in securing any legal or regulatory approvals that are necessary to permit
such reimbursement.
6. Division of Existing Internal VEBA
A. UAW Related Account. Effective January 1, 2008 for bookkeeping purposes only, GM
will take the necessary steps to divide the Existing Internal VEBA into two bookkeeping accounts.
One account will consist of the percentage of the Existing Internal VEBA’s assets as of January 1,
2008 that is equal to the estimated percentage of GM’s hourly OPEB liability covered by the
Existing Internal VEBA attributable to Non-UAW represented employees and retirees, their eligible
spouses, surviving spouses and dependents (“Non-UAW Related Account”). The second account will
consist of the remaining percentage of the assets in the Existing Internal VEBA as of January 1,
2008 (“UAW Related Account”). GM shall use the same actuarial assumptions, generally consistent
with past practice, in respect of both the Non-UAW Related Account and the UAW Related Account, for
estimating the percentage of GM’s hourly OPEB liability attributable to the Non-UAW Related Account
and the UAW Related Account.
The value of the UAW Related Account as of January 1, 2008 shall be equal to: (i) the
percentage of GM’s hourly OPEB liability as of December 31, 2007 attributable to UAW associated
employees and retirees, their eligible spouses, surviving spouses and dependents (“UAW OPEB
12/31/07 Split”), multiplied by (ii) the Existing Internal VEBA balance as of December 31, 2007.
The UAW OPEB 12/31/07 Split shall be determined based on the percentage of (i) the discounted
actuarial cash flows for health care and life insurance of OPEB obligations attributable to UAW
associated employees and retirees, their eligible spouses, surviving spouses and dependents, over
(ii) the discounted actuarial cash flows for health care and life insurance of the entire GM hourly
OPEB liability covered by the Existing Internal VEBA. Both calculations will be made as of
December 31, 2007 using the valuation discount rate of the hourly health care obligation of 6.35%.
The Existing Internal VEBA balance as of December 31, 2007 shall be determined using the
December 31, 2007 valuation from State Street Bank and Trust, which shall be based on the existing
General Motors Asset Management Valuation Policies and Procedures. GM’s hourly OPEB obligation as
of December 31, 2007 shall be determined in accordance with generally accepted accounting
principles in the United States, including Statement of Financial Accounting Standards 106 and 158.
Both the determination of the Existing Internal VEBA balance as of December 31, 2007 and the
GM hourly OPEB obligation as of December 31, 2007 shall be final and binding on GM, the UAW, the
Committee, the Class Representatives, the Class, the Covered Group and Class Counsel for purposes
of this Settlement Agreement upon an Independent Audit. The determination of the Existing Internal
VEBA balance as of December 31 of each succeeding year shall also be final and binding on GM, the
UAW, the Committee, the Class Representatives, the Class, the Covered Group and Class Counsel for
purposes of this Settlement Agreement upon an Independent Audit of each respective succeeding year.
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Utilizing the process referenced above, GM has determined that the UAW OPEB 12/31/07 Split is
92.6 percent. GM shall provide the UAW and Class Counsel as soon as possible with background
information and work papers used to determine the UAW OPEB 12/31/07 Split. Thereafter, the UAW and
Class Counsel shall advise GM as soon as practicable after receipt of such materials of any
concerns regarding GM’s calculation. If any concerns are identified regarding GM’s calculation,
the parties will meet, confer and resolve any concerns by March 3, 2008 so that the face amount of
the Short Term Note is set by such date.
B. Investment of Assets. GMAM will continue to oversee the investment of the assets
in the Existing Internal VEBA (both in the Non-UAW Related Account and the UAW Related Account) and
all such assets shall continue to be invested under the existing investment policy (as may be
amended from time to time by GM who shall notify the UAW and the Committee about intended
amendments in a timely manner) applicable to the Existing Internal VEBA. Investment returns, net
of Existing Internal VEBA trust expenses (this shall only include expenses to the extent permitted
by ERISA), on all assets of the Existing Internal VEBA on and after January 1, 2008 will be applied
to these accounts proportionally in relation to the value of the assets in the UAW Related Account
in relation to the total amount of assets in the Existing Internal VEBA. In other words,
investment returns (i.e., the percentage return on the total Existing Internal VEBA), net of
Existing Internal VEBA trust expenses (this shall only include expenses to the extent permitted by
ERISA), will be applied to the value of the UAW Related Account and separately to the value of the
Non-UAW Account (as adjusted to reflect any withdrawals by GM). However, neither GM nor GMAM
guarantee or warrant the investment returns on the assets in the Existing Internal VEBA.
C. Disposition of Assets. No amounts will be withdrawn by GM from the UAW Related
Account, including its investment returns, from January 1, 2008 until transfer to the New VEBA
under Section 12 or termination of this Settlement Agreement under Section 30 of this Settlement
Agreement. GM will retain any and all rights to withdraw amounts from the Non-UAW Related Account,
subject to the rights of the UAW and the Committee pursuant to Section 13 of this Settlement
Agreement. If the Final Effective Date occurs, GM will cause the pro rata share attributable to
the UAW Related Account of all assets in the Existing Internal VEBA, including investment returns
thereon, net of a pro rata share of trust expenses (this shall only include expenses to the extent
permitted by ERISA) not previously taken into account in determining investment returns, to be
transferred from the Existing Internal VEBA to the New VEBA as set forth in Sections 8.A and 12.B
of this Settlement Agreement. GMAM and the Committee shall enter into discussions in advance of
such transfer with regard to the method of allocating, transfering and/or otherwise handling any
illiquid or otherwise non-transferable investments in the Existing Internal VEBA so as to preserve
as much as possible the economic value of such investments and minimize any losses due to the
liquidation of assets. Such discussions shall be completed by June 30, 2009. The determinations
made by GMAM as a product of these discussions with the Committee regarding the way to transfer
illiquid or otherwise non-transferable investments in the Existing Internal VEBA shall be final and
binding on GM, the UAW, the Committee, the Class Representatives, the Class, the Covered Group and
Class Counsel.
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7. Temporary Asset Account and Limited Liability Company
A. Creation of TAA. Prior to April 1, 2008, GM shall establish the TAA to be held by
GM or a wholly owned subsidiary thereof. Subject to termination of this Settlement Agreement, the
sole purpose of the TAA is to serve as tangible evidence of the availability of assets equal to the
sum that GM agrees to pay on the Implementation Date to the New VEBA in this Settlement Agreement.
Neither the TAA nor the assets therein shall be used for any purposes other than as set forth in
this Settlement Agreement. GM shall keep true and correct books and records regarding the assets
held in the TAA as well as all amounts credited to and debited against the TAA, including
investment returns.
B. Creation of LLC. As of the date of this Settlement Agreement, GM has created LBK,
LLC, a Delaware limited liability company (“LLC”) to hold the Convertible Note and the Short Term
Note, enter into and hold the Derivative Contracts, and receive interest on the Convertible Note.
Interest on the Convertible Note will be deposited in the TAA in accordance with Section 7.D of
this Settlement Agreement. Subject to termination of this Settlement Agreement, the sole purpose
of the LLC is to hold the Convertible Note and the Short Term Note and enter into and hold the
Derivative Contracts, which serve as tangible evidence of the availability of assets equal to the
Convertible Note, the Short Term Note and the Derivative Contracts that GM agrees to pay and/or
transfer on or after the Implementation Date to the New VEBA as provided in this Settlement
Agreement. The LLC shall engage in no activities other than holding the notes, entering into and
holding the Derivative Contracts, and transferring the Convertible Note, the Derivative Contracts
and the amounts payable under the Short Term Note to the New VEBA. The LLC shall not exercise any
conversion rights under the Convertible Note. The LLC shall not agree to any amendments to the
Convertible Note or the Derivative Contracts without the consent of the Committee. Subject to
termination of this Agreement, neither GM nor the LLC will terminate the Derivative Contracts
before their transfer to the New VEBA. If any of the events specified in Section 1(a) of the
Convertible Note occur prior to the transfer of the Convertible Note and the Derivative Contracts
to the New VEBA, the parties will meet and discuss an appropriate alternative (if any) which
provides equivalent economic value to the New VEBA taking into account the impact (if any) of such
event(s) on the Convertible Note and the Derivative Contracts. If any of the events specified in
clauses (iii) – (vi) of Section 1(a) of the Convertible Note occur after the transfer of the
Convertible Note and the Derivative Contracts to the New VEBA, the parties will meet and discuss an
appropriate alternative (if any) which provides equivalent economic value to the New VEBA taking
into account the impact (if any) of such event(s) on the Derivative Contracts for which the New
VEBA is acting in the capacity of “Buyer” and “Counterparty” under and as defined in the Derivative
Contracts. Promptly after creation of the LLC, GM shall cause the LLC to execute and deliver an
instrument of accession in which it agrees to be bound by and to perform the provisions of Sections
7, 8 and 12 of this Settlement Agreement to the extent applicable to the LLC.
C. GM Deposits in LLC. GM shall make the following deposits in the LLC during the
time period from January 1, 2008 to termination of the TAA.
(i) Convertible Note. GM shall issue the Convertible Note to the LLC on February
22, 2008 or as soon as reasonably practicable thereafter. GM hereby represents that, since
September 26, 2007, no event has occurred that would have given rise to an adjustment
- 15 -
of the Conversion Rate (as defined in the Convertible Note) pursuant to Section 3 of the
Convertible Note if such event had occurred after the issuance of the Convertible Note and
GM agrees to adjust the initial Conversion Rate included in the form attached hereto as
Exhibit B accordingly if such an event occurs prior to the issuance of the Convertible Note.
Notwithstanding any provisions in the Convertible Note to the contrary, GM shall (x) not be
entitled to exercise the right to redeem the Convertible Note on or after January 1, 2011,
pursuant to the first paragraph of Section 5 of the Convertible Note, unless the
Implementation Date has occurred and the Convertible Note has been transferred to the New
VEBA in accordance with Sections and 8.C. and 12.F. of this Settlement Agreement, and (y)
only be entitled to make a Termination Redemption (as defined in the Convertible Note) upon
termination of the TAA and LLC as provided in Section 7.G of this Settlement Agreement or
upon determination of an appropriate alternative to transferring the Convertible Note or the
Alternative Convertible Note to the New VEBA as provided in Section 22 of this Settlement
Agreement which is satisfactory to the UAW and Class Counsel.
(ii) Short Term Note. GM shall issue to the LLC a short term note, substantially
in the form attached as Exhibit C to this Settlement Agreement, with the face amount of
$4,015,187,871.00 (the difference between $18.5 billion and the estimated value of the UAW
Related Account on January 1, 2008 (“Short Term Note”), as may be amended in accordance with
Section 6.A). The Short Term Note shall carry Interest on such face amount from and
including the date of the Short Term Note to, but excluding, the date of payment to the New
VEBA pursuant to Sections 8.B and 12.E. The parties agree that $1 billion of the Short Term
Note represents the present value of the COLA adjustments agreed to by GM and the UAW with
respect to the time period between December 1, 2007 and September 1, 2011 of up to four
cents per hour per quarter and continued in perpetuity, and another $1.5 billion of the
Short Term Note represents GM’s agreement to pre-fund what would have been the impact of
providing a 3% general wage increase to UAW represented employees in 2009.
D. GM Deposits in TAA. GM shall make the following deposits in the TAA during the
time period from January 1, 2008 to termination of the TAA.
(i) Shortfall Amount. On April 1, 2008 or as soon as reasonably practicable
thereafter, GM shall deposit in the TAA $165 million (“Initial Shortfall Amount”) plus
Interest on such amount from and including April 1, 2008 to, but excluding, the date of
deposit. The Initial Shortfall Amount represents the Shortfall Amount payable to the TAA on
April 1, 2008 as set forth in the Shortfall Amount column of the amortization schedule in
Exhibit D to this Settlement Agreement. If prior to the Implementation Date any additional
Shortfall Amount payment is required pursuant to Section 10 and the Shortfall Amount column
of the amortization schedule in Exhibit D to this Settlement Agreement, such Shortfall
Amount payment will also be made by GM to the TAA. At all times, these payments shall be
subject to GM’s right to pre-fund all then-remaining Shortfall Amount payments by paying the
applicable Buyout Amount set forth in the Shortfall Amount column of the amortization
schedule in Exhibit D.
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(ii) Interest on Convertible Note. On June 30, 2008, GM shall cause the LLC to
deposit $147,571,875 in the TAA. This amount represents the first 6.75% interest payment
payable under the terms of the Convertible Note plus an amount representing a 6.75% return
on the principal amount of the Convertible Note from January 1, 2008 to the date of the
Convertible Note. If $147,571,875 is not deposited in the TAA on June 30, 2008, Interest
shall accrue on such amount from and including June 30, 2008 to but excluding the date of
deposit. If prior to the Implementation Date any additional interest payments are payable
under the terms of the Convertible Note, GM shall cause the LLC to make such payments to the
TAA.
(iii) Xxxxx I Increase in Stock Value and Dividends. On September 1, 2009, GM
shall pay to the TAA (i) the difference between $240 million and the aggregate amount of the
payments related to the “Increase in Stock Value” and “Dividends” as set forth in section
13.D and 13.E of the Xxxxx I Settlement Agreement plus (ii) Interest (x) on $240 million
from and including January 1, 2008 to but excluding the date, if any, on which GM makes a
cash contribution related to the “Increase in Stock Value” and “Dividends,” and thereafter
(y) on the difference between $240 million (plus Interest accrued pursuant to clause (x)
through the date of any applicable cash contribution) and the aggregate of any such cash
contributions made from and including the date of each such cash contribution in each case
to but excluding the date of the following cash contribution, if any, or September 1, 2009
whichever is earlier. Any payments under this Section 7.D(iii) are further subject to
provisions set forth in Section 11 of this Settlement Agreement.
(iv) Additional Deposits in TAA. As soon as reasonably practicable following the
Initial Effective Date, GM will make the following additional deposits in the TAA.
(a) Base Amount. A lump sum payment of $1.8 billion plus Interest from
January 1, 2008 to the date of deposit in the TAA, or, in GM’s discretion, as set
forth in the Base column of the amortization schedule in Exhibit D to this
Settlement Agreement, annual payments and/or a Buyout Amount as applicable to the
time period up to the date of transfer of the TAA to the New VEBA under Section 12.D
of this Settlement Agreement; provided that GM specifically reserves the right to
pre-fund all then-remaining Base Amount payments by paying the applicable Buyout
Amount set forth in Exhibit D.
(b) Wages/COLA Amount. A lump sum payment of $3.8 billion (which
represents the present value of the future Xxxxx I wage deferrals described in
Section 9.A of this Settlement Agreement), plus Interest from January 1, 2008 to the
date of deposit in the TAA, or, in GM’s discretion, as set forth in the Wages/COLA
column of the amortization schedule in Exhibit D to this Settlement Agreement,
annual payments and/or a Buyout Amount as applicable to the time period up to the
date of transfer of the TAA to the New VEBA under Section 12.D of this Settlement
Agreement; provided that GM specifically reserves the right to pre-fund all
then-remaining Wages/COLA payments by paying the applicable Buyout Amount set forth
in Exhibit D. Any such Wages/COLA payments shall be reduced by the value of the
wage and COLA deferrals paid or payable by GM to the Existing External VEBA pursuant
to the
- 17 -
terms of Xxxxx I Settlement Agreement (with Interest on such deferrals) from January
1, 2008 until the date of deposit by GM of a Wages/COLA payment into the TAA.
E. Derivative Contracts. As soon as reasonably practicable after issuance of the
Convertible Note, GM and the LLC shall enter into the Derivative Contracts which shall be held by
the LLC as provided for in Section 7.B of this Settlement Agreement.
F. Control of TAA and LLC. Control of the TAA and the LLC and all the assets therein
shall be solely within GM’s discretion. GM agrees to retain GMAM to oversee the investment of the
assets in the TAA. To the extent practicable given the differences in time horizon and other
investment parameters, GMAM shall invest the assets in the TAA in a manner that is consistent with
the investment policy of the Existing Internal VEBA. However, neither GM nor GMAM guarantee or
warrant the investment returns on the assets in the TAA and/or LLC.
G. Termination of TAA and LLC. If the Final Effective Date does not occur because
(a) the Approval Order has not been entered as described in Section 28.B, (b) the Approval Order
has been disapproved or modified, or (c) GM has not completed, on a basis reasonably satisfactory
to GM, its discussions with the SEC regarding the accounting treatment with respect to the New Plan
and New VEBA as set forth in Section 21 of this Settlement Agreement, or (d) this Settlement
Agreement has been terminated for any other reason as provided in Section 30 of this Settlement
Agreement, the TAA and LLC shall be terminated. In addition, if the Final Effective Date has not
occurred by December 31, 2011, the TAA and LLC shall be terminated; provided however, that this
date may be extended by agreement between GM, the UAW and Class Counsel. Upon termination of the
TAA and LLC for any reason, GM may use the assets of the TAA and LLC for any corporate purpose.
H. Communications Regarding Investment Results. GM agrees to cause GMAM to
periodically inform and hold discussions with the UAW, Class Counsel and the Committee about the
investment results of and decisions regarding the assets in the TAA and the Existing Internal VEBA.
GMAM shall, with respect to the performance of its duties in managing the Existing Internal VEBA
and the TAA, participate in the following meetings and provide the following reports to the UAW and
the Committee: (i) quarterly reports of TAA and Existing Internal VEBA asset class and benchmark
performance for relevant time periods; and (ii) semi-annual or quarterly meetings with UAW and/or
Committee representatives to report on TAA and Existing Internal VEBA returns and analysis of
performance, and to review significant activities affecting investments. Any input from the UAW,
Class Counsel and/or the Committee shall not be a basis of GM’s or GMAM’s investment decisions
within the meaning of the DOL regulations set forth at 29 CFR § 2510-3.21(c).
8. GM Payments to New Plan and New VEBA
GM’s financial obligation and payments to the New Plan and New VEBA are fixed and capped by
the terms of this Settlement Agreement. The timing of all payments to the New VEBA shall be as set
forth in Section 12 of this Settlement Agreement; it being agreed and acknowledged that the New
Plan, funded by the New VEBA, shall provide Retiree Medical Benefits for the Class and the Covered
Group on and after the Implementation Date, and that all
- 18 -
obligations of GM and the GM Plan for Retiree Medical Benefits for the Class and the Covered
Group shall terminate as of the Implementation Date, as set forth in this Settlement Agreement.
All assets shall be transferred or paid by GM free and clear of any liens, claims or other
encumbrances. Pursuant to this Settlement Agreement, GM shall have the following, and only the
following, obligations to the New VEBA and the New Plan, and all payments and transfers in this
Section 8 and in Sections 9 through 11 of this Settlement Agreement shall be credited to the GM
Separate Retiree Account of the New VEBA:
A. UAW Related Account. Provide for the transfer to the New VEBA of the assets (or,
with regard to any illiquid or otherwise non-transferable investments, equivalent alternatives
resulting from discussions between GMAM and the Committee pursuant to Section 6.C of this
Settlement Agreement) of the UAW Related Account in the Existing Internal VEBA, net of Existing
Internal VEBA trust expenses (this shall only include expenses to the extent permitted by ERISA),
as described in Section 12.B of this Settlement Agreement.
B. Short Term Note. GM shall cause the LLC to pay to the New VEBA $4,015,187,871.00
in cash (which amount is equal to the face amount of the Short Term Note), plus cash in an amount
equal to the Interest accrued on such amount from and including the date of the Short Term Note to,
but excluding, the date of deposit in the New VEBA, as described in Section 12.E of this Settlement
Agreement.
C. Convertible Note. Cause the LLC to transfer to the New VEBA the Convertible Note
issued to the LLC or, at GM’s option, issue to the New VEBA the Alternative Convertible Note, as
described in Section 12.F of this Settlement Agreement. In the event that the transfer of the
Convertible Note (or the issuance of the Alternative Convertible Note) to the New VEBA occurs
subsequent to a Record Date and on or prior to the Interest Payment Date (as such terms are defined
in the Convertible Note), GM shall cause the LLC to transfer to the New VEBA immediately upon
receipt the interest payment that the LLC will receive that corresponds to such Interest Payment
Date. GM shall pay any and all documentary, stamp or similar issue or transfer taxes that may be
payable in requesting the issue or transfer of the Convertible Note or Alternative Convertible Note
to the New VEBA.
D. Interest on Convertible Note. Transfer to the New VEBA the assets in the TAA that
represent the value in the TAA, as of the date of transfer to the New VEBA, of the interest paid on
the Convertible Note, and the investment returns thereon, net of expenses (but limited to those
expenses that could be charged under ERISA if the TAA was a plan subject to ERISA), or at GM’s
option cash in lieu of some or all of these assets in the TAA. Thereafter, pay to the New VEBA any
additional interest amounts due under the terms of the Convertible Note.
E. Base Amount. Transfer to the New VEBA the assets in the TAA that represent the
value in the TAA, as of the date of transfer to the New VEBA, of the Base Amount described in
Section 7.D of this Settlement Agreement and the investment returns thereon, net of expenses (but
limited to those expenses that could be charged to the TAA under ERISA if the TAA was a plan
subject to ERISA), or at GM’s option cash in lieu of some or all of these assets in the TAA.
Thereafter, subject to GM’s option to buy out the Base Amount at any time, pay an annual Base
Amount to the New VEBA as set forth in Exhibit D to this Settlement Agreement. In addition, GM may
at any time request to make a partial pre-payment of a Buyout Amount of the Base
- 19 -
Amount on terms that provide economically equivalent present value to the New VEBA, provided
that such partial pre-payment shall be made only if mutually agreed between GM and the Committee.
The Committee shall be entitled to accept or reject any such request in its sole discretion.
F. Wages/COLA Amount. Transfer to the New VEBA the assets in the TAA that represent
the value in the TAA, as of the date of transfer to the New VEBA of the Wages/COLA Amount described
in Section 7.D of this Settlement Agreement and the investment returns thereon, net of expenses
(but limited to those expenses that could be charged to the TAA under ERISA if the TAA was a plan
subject to ERISA), or at GM’s option cash in lieu of some or all of these assets. Thereafter,
subject to GM’s option to buyout the Wages/COLA Amount at any time, pay an annual Wages/COLA Amount
to the New VEBA as described in Section 9 and Exhibit D to this Settlement Agreement. In addition,
GM may at any time request to make a partial pre-payment of a Buyout Amount of the Wages/COLA
Amount on terms that provide economically equivalent present value to the New VEBA, provided that
such partial pre-payment shall be made only if mutually agreed between GM and the Committee. The
Committee shall be entitled to accept or reject any such request in its sole discretion.
G. Shortfall Amount. Transfer to the New VEBA the assets in the TAA that represent
the value in the TAA, as of the date of transfer to the New VEBA, of the Initial Shortfall Amount
and any additional Shortfall Amount payment(s) described in Section 7.D of this Settlement
Agreement made to the TAA and the investment returns thereon, net of expenses (but limited to those
expenses that could be charged to the TAA under ERISA if the TAA was a plan subject to ERISA), or
at GM’s option cash in lieu of some or all of these assets. Thereafter, subject to GM’s option to
buy out the Shortfall Amount at any time, pay an annual Shortfall Amount to the New VEBA as
described in Section 10 and Exhibit D to this Settlement Agreement.
H. Final Xxxxx X Xxxx Contribution. GM’s final cash payment of $1 billion required
by section 13.A of the Xxxxx I Settlement Agreement will continue to be payable by GM as set forth
in the Xxxxx I Settlement Agreement and judgment. The Approval Order shall provide that such
payment will be made to the New VEBA, rather than the Existing External VEBA, if the payment is
payable after the Implementation Date.
X. Xxxxx I Increase in Stock Value and Dividends. Transfer to the New VEBA the
assets in the TAA that represent the value in the TAA, as of the date of transfer to the New VEBA,
of the Xxxxx I Increase in Stock Value and Dividends payment described in Section 7.D of this
Settlement Agreement, if any, and the investment returns thereon, net of account expenses (but
limited to those expenses that could be charged to the TAA under ERISA if the TAA was a plan
subject to ERISA), or at GM’s option cash in lieu of some or all of these assets.
J. Derivative Contracts. Cause the LLC to transfer to the New VEBA the Derivative
Contracts held by the LLC as described in Section 12.F of this Settlement Agreement.
The payments described in this Section 8 are subject to reduction for the amounts set forth in
Sections 11 and 12.A of this Settlement Agreement.
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9. Wage and COLA Deferrals
A. Impact on Xxxxx I Wage and COLA Deferral. GM will continue to deposit into the
Existing External VEBA the wage and COLA deferrals set forth in Section 13.C. of the Xxxxx I
Settlement Agreement (including all COLA subtraction and non-payment of the September 18, 2006
general increase to the hourly wage rate) until the Initial Effective Date. The Wages/COLA Amount
set forth in Sections 7.D and 8.F and Exhibit D to this Settlement Agreement represent the future
wage deferral cash flow impact of such wage and COLA deferrals from the Xxxxx I settlement and
judgment. As a result of GM agreeing to deposit into the TAA and pay to the New VEBA such
Wages/COLA Amount, the Approval Order shall provide that as of the Initial Effective Date (i) GM
will no longer be required to make deposits of the wage and COLA deferrals from Xxxxx I into the
Existing External VEBA, (ii) the Wages/COLA Amount paid by GM pursuant to this Settlement Agreement
shall be in full satisfaction of any and all of GM’s obligations under Section 13.C of the Xxxxx I
Settlement Agreement and the provisions of the judgment in Xxxxx I regarding wage and COLA
deferrals, (iii) GM will have no further obligations as to such payments or contributions to the
Existing External VEBA, and (iv) the Xxxxx I wage and COLA deferrals will inure thereafter solely
to the benefit of GM and continue in perpetuity increasing at $0.02 per hour per quarter as
described in Section 13.C of the Xxxxx I Settlement Agreement.
If the TAA is terminated prior to the Final Effective Date, GM shall contribute cash to the
Existing External VEBA in an amount equal to the amount that would have otherwise been contributed
to the Existing External VEBA pursuant to the terms of the Xxxxx I Settlement Agreement between the
Initial Effective Date and the date of termination of the TAA, plus an amount equal to the
investment returns that would have been earned on such amounts, at the rate equal to the overall
investment return of the Existing External VEBA for the respective period, if such amounts had been
contributed to the Existing External VEBA in accordance with the terms of the Xxxxx I Settlement
Agreement, and obligations pursuant to the Xxxxx I Settlement Agreement will be reinstated.
B. 2009 Wage Deferral. In negotiating the MOU and 2007 GM-UAW National Agreement, GM
and UAW agreed that there shall be no general increase to the hourly wage rate for GM Active
Employees in 2009 regardless of whether or not the Final Effective Date occurs. As a result, GM
agreed to include in the Short Term Note the $1.5 billion referred to in Section 7.C of this
Settlement Agreement. This $1.5 billion represents the future impact of a 3% wage increase in 2009
for GM Active Employees. If the Final Effective Date does not occur, the wage increase will not be
reinstated.
C. 2007 COLA Diversion. In negotiating the MOU and 2007 GM-UAW National Agreement,
GM and UAW also agreed that, effective with the December 1, 2007 COLA adjustment and ending
September 1, 2011, up to four cents ($0.04) per hour per quarter will be diverted from COLA
otherwise calculated for GM Active Employees. These deferred amounts will inure solely to the
benefit of GM and will not be reinstated after September 1, 2011 but will continue to be deferred
in perpetuity. As a result, GM agreed to include in the Short Term Note the $1 billion referred to
in Section 7.C of this Settlement Agreement. This $1 billion represents the future cash flow
impact of this 2007 COLA diversion. If the Final Effective Date does not
occur, the cumulative effect of four cents ($0.04) per hour per quarter of COLA will be
reinstated and GM and the UAW will agree on the disposition of such COLA adjustment.
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10. Shortfall Amounts
If in 2009 or any year thereafter, the Cash Flow Projection as set forth in Exhibit A to this
Settlement Agreement shows that the GM account or sub-account of the New VEBA will become insolvent
within 25 years following the January 1 immediately preceding such Cash Flow Projection, GM shall
pay to the New VEBA (or the TAA for periods prior to the Implementation Date) by April 1 of that
year $165 million per occurrence (“Shortfall Amount”); provided however, that the maximum number of
Shortfall Amount payments, excluding the Initial Shortfall Amount on April 1, 2008, shall be
nineteen (19). Beginning in 2009, for any year in which the Cash Flow Projection shows that the GM
account or sub-account of the New VEBA will maintain solvency for at least 25 years beyond the
January 1 immediately preceding such Cash Flow Projection, no Shortfall Amount payment will be
required. Further, GM reserves the right to pre-pay, at any time, all then-remaining future
possible annual Shortfall Amounts by paying the applicable Buyout Amount (which represents the
present value of the remaining possible Shortfall Amount payments as of January 1 of the year of
the buyout, plus Interest from January 1 until the date of the buyout amount) as shown in the
amortization schedule for Shortfall Amount in Exhibit D to this Settlement Agreement.
11. Other Payments to Existing External VEBA
The Approval Order shall provide that any obligation of GM related to the amounts called for
in the “Benefit Change Profits” or the “Incremental Amount,” as set forth and defined in section
13.B of the Xxxxx I Settlement Agreement, shall cease upon the Initial Effective Date. In the
event that any amounts related to such items have been paid by GM to the Existing External VEBA
prior to the Final Effective Date, the required payments set forth in Section 8 of this Settlement
Agreement will be reduced by such amount plus interest at 6% per annum (computed on the basis of a
360-day year consisting of twelve 30-day months and the number of days elapsed in any partial
month), credited and compounded annually.
The Approval Order shall also provide that if the aggregate amount of the payments related to
“Increase in Stock Value” and “Dividends” as set forth in section 13.D and 13.E of the Xxxxx I
Settlement Agreement is less than $240 million, then GM will pay to the New VEBA on September 1,
2009 the amounts set forth in Section 7.D(iii) of this Settlement Agreement.
If the aggregate amount of the payments related to “Increase in Stock Value” and “Dividends”
as set forth in section 13.D and 13.E of the Xxxxx I Settlement Agreement is more than $240
million, GM shall deduct from the amount required to be transferred from the TAA to the New VEBA
under Sections 8 and 12 of this Settlement Agreement (i) the amount of aggregate cash payments paid
to the Existing External VEBA in excess of $240 million plus (ii) Interest on the portion of the
first such cash payment that resulted in the aggregate exceeding $240 million from and including
the date of its payment and on the amount of each of the following cash payments from and including
their respective payment dates, in each case to but excluding the date of transfer of the amounts
from the TAA to the New VEBA under Sections 8 and 12 of this Settlement Agreement.
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12. Sequencing of Initial Deposits to the New VEBA and Termination of Existing
External VEBA, LLC and TAA
The initial deposits to the New VEBA shall be made and credited to the GM Separate Retiree
Account, and the Existing External VEBA and TAA shall be terminated, as provided below.
A. Deposit No. 1: Within 30 days of the Initial Effective Date or the establishment of
the New VEBA, whichever is later, GM shall cause a transfer of $1 million from the TAA to the New
VEBA. Thereafter, and until the Implemenation Date, within 30 days of any request by the
Committee, GM shall cause the transfer of such additional amount as the Committee shall request,
provided that there shall be no more than five such requests prior to the Implementation Date and
the aggregate of all such transfers, including the initial transfer, shall not exceed $20 million.
Such amounts shall represent an advance to the New VEBA to cover reasonable and necessary
preparatory expenses incurred by the New Plan or New VEBA in anticipation of the transition of
responsibility for Retiree Medical Benefits as of the Implementation Date as set forth in Section 5
of this Settlement Agreement. These advance payments shall not increase or add to the amounts GM
has agreed to pay under this Settlement Agreement.
B. Deposit No. 2. Within 10 business days after the Implementation Date, GM shall
direct the trustee of the Existing Internal VEBA to transfer to the New VEBA the UAW Related
Account’s share of assets in the Existing Internal VEBA, the amount of which shall be determined as
provided in Section 6 of this Settlement Agreement. The Approval Order shall provide that, upon
such transfer, the Existing Internal VEBA shall be deemed to be amended to terminate participation
and coverage regarding Retiree Medical Benefits for the Class and the Covered Group, effective as
of the Implementation Date. Accruals for trust expenses (this shall only include expenses to the
extent permitted by ERISA) through the date of transfer will be made and an amount equal to the UAW
Related Account’s share of such accruals will be retained within the Existing Internal VEBA to pay
such expenses. After payment of these trust expenses is completed, a reconciliation of the
accruals and the actual expenses (this shall only include expenses to the extent permitted
by ERISA) will be performed. GM agrees to cause the payment to the New VEBA by the Existing
Internal VEBA of any overaccruals for the UAW Related Account’s share of such expenses. Similarly,
in the event of an underaccrual the New VEBA will return to the Existing Internal VEBA the amount
of the underaccrual of expenses for the UAW Related Account.
C. Deposit No. 3. The Approval Order shall direct the committee and the trustees of
the Existing External VEBA to transfer all assets and liabilities into the New VEBA and terminate
the Existing External VEBA within 15 days after the Implementation Date. This transfer of assets
and liabilities shall include, but not be limited to, the transfer of all rights and obligations
granted to or imposed on the Existing External VEBA under Section 14.C(e) of the Xxxxx I Settlement
Agreement and GM agrees that, following the Implementation Date, the New VEBA shall be substituted
for the Existing External VEBA for such purposes.
D. Deposit No. 4. The balance in the TAA as of the date of transfer, or at GM’s
discretion, cash in lieu of some or all of the assets in the TAA as of the date of transfer, shall
be paid to the New VEBA before the 20th business day after the Implementation Date. If
GM elects
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to pay cash in lieu of some or all of the investments in the TAA, the cash GM will pay shall
include an amount equivalent to accrued and unpaid interest and dividends on such investments net
of reasonable liquidation costs. Accruals for expenses (but limited to those expenses that could
be charged to the TAA under ERISA if the TAA was a plan subject to ERISA) through the date of
transfer will be made and an amount equal to the TAA’s share of such accruals will be retained
within the TAA to pay such expenses. After payment of these expenses is completed, a
reconciliation of the accruals and the actual expenses (but limited to those expenses that could be
charged to the TAA under ERISA if the TAA was a plan subject to ERISA) will be performed. GM
agrees to cause the payment to the New VEBA by the TAA of any overaccruals for the TAA’s share of
such expenses. Similarly, in the event of an underaccrual the New VEBA will return to the TAA, or
to GM, as applicable, the amount of the underaccrual for the TAA’s share of the expenses.
E. Deposit No. 5. On or before the 20th business day after the Implementation Date,
GM shall cause the LLC to pay to the New VEBA in cash the face value of the Short Term Note, plus
cash in an amount equal to the Interest accrued on such amount from and including the date of the
Short Term Note to, but excluding, the date of payment to the New VEBA.
F. Transfer of Convertible Note and Derivative Contracts. GM will cause the LLC to
transfer the Convertible Note and the Derivative Contracts to the New VEBA after Payments No. 4 and
No. 5 have been made, within 25 business days after the Implementation Date if no legal or
regulatory approvals are required, or within 10 business days of securing final legal or regulatory
approval. In lieu of causing the LLC to transfer the Convertible Note, GM, in its sole
discretion, may elect to transfer to the New VEBA a convertible note containing economic terms and
conditions identical to those of the Convertible Note (“Alternative Convertible Note”), including
accrued interest. The transfer of the Convertible Note or the Alternative Convertible Note and the
Derivative Contracts will only occur as permitted by law. GM and/or the New Plan, as applicable,
will apply for any necessary legal or regulatory approvals, including but not limited to the
prohibited transaction exemptions described in Section 22 of this Settlement Agreement and any
required federal or state bank regulatory approvals. The UAW, the Class and Class Counsel will
support and cooperate with any such requests for legal or regulatory approvals. If GM and the New
VEBA cannot timely obtain necessary legal or regulatory approvals, the parties will meet and
discuss appropriate alternatives to the transfer of the Convertible Note that provide equivalent
economic value to the New VEBA. Notwithstanding the foregoing, any transfer of the Convertible
Note or Alternative Convertible Note will be conditioned upon execution and delivery by the New
VEBA of a Security Holder and Registration Rights Agreement substantially in the form of Exhibit F
to this Settlement Agreement.
The parties acknowledge that, upon completion of GM’s transfer of the assets in the TAA to the
New VEBA as contemplated by this Settlement Agreement, no assets should remain in the TAA and the
TAA shall be terminated. If, however, assets remain in the TAA as the result of GM’s exercise of
its option to transfer cash in lieu of TAA assets, GM’s deduction for payments related to the
Increase in Stock Value and Dividends under Section 11 of this Settlement Agreement, or other
deductions permitted under this Settlement Agreement, then GM may thereafter use or dispose of such
assets, including any investment returns thereon, for any corporate purpose. After deposit Nos. 4
and 5 have been made and after transfer of the
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Convertible Note or transfer of the Alternative Convertible Note and the Derivative Contracts,
the LLC shall be terminated. All assets transferred or contributed to the New VEBA shall be free
and clear of any liens, claims or other encumbrances.
If a deposit or payment or any portion thereof is made by GM to the TAA or the New VEBA by
mistake under any provision of this Settlement Agreement, including, but not limited to Sections 7
through 12 of this Settlement Agreement, (i) as to the TAA, GM may deduct such amount from the TAA
plus earnings thereon from the date of deposit in the TAA up to, but excluding, the date of
deduction, and (ii) as to the New VEBA, the Committee shall, upon written direction of GM, return
such amounts as may be permitted by law to GM (plus earnings thereon from the date of payment to
but excluding the date of return) within 30 days of notification by GM that such payment was made
by mistake. If a dispute arises with regard to such payment, the dispute will be resolved pursuant
to Section 26 of this Settlement Agreement.
13. Adjustment Events
A. Adjustment Event. “Adjustment Event” shall mean:
(i) the determination of the Existing Internal VEBA balance as of any day on which amounts
are withdrawn by GM from the Non-UAW Related Account as set forth in Section 6 of this
Settlement Agreement and the determination of the value of any assets transferred to GM or
liquidated to effect the withdrawal by GM, other than a withdrawal on December 31 of any
year after January 1, 2008;
(ii) the determination of the value of any assets in lieu of which GM elects to
transfer cash to the New VEBA pursuant to Sections 8 and 12 of this Settlement Agreement; or
(iii) the determination of the value of any illiquid or otherwise non-transferable
investments in the Existing Internal VEBA in case that the discussions between GMAM and the
Committee as set forth in Section 6.C of this Settlement Agreement result in transferring
something other than a pro rata share of such investment.
B. Due Diligence and Adjustment Mechanism.
In connection with any Adjustment Event, GM shall deliver, as soon as practicable, to the
Committee (or the UAW prior to establishment of the Committee) information in reasonable detail
about the determinations made by GM with regard to such Adjustment Event and the work papers,
underlying calculations and other documents and materials on which such determinations are based,
including non-privileged materials from GM’s advisors, if any (collectively, the “Determination
Materials”).
The Committee shall have 30 days from receipt of the Determination Materials from GM to
submit to GM a written request for an Independent Attestation of a determination(s) by GM listed in
Section 13.A(i), (ii) and (iii) of this Settlement Agreement. As a part of this review process,
the Committee may ask for additional information regarding the calculations, and the data and
information provided by GM. GM shall as promptly as practicable, respond to all reasonable
requests from the Committee for such additional information. However, a request for additional
information shall not extend the 30 day review period, unless an extension is
reasonably necessary to allow the Committee to review such additional information, but in no
event longer than 45 days from receipt of the Determination Materials.
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All determinations made by GM with regard to a determination(s) listed in Section 13.A(i),
(ii) and (iii) of this Settlement Agreement shall be final and binding on GM, the UAW, the Class
Representatives, the Class, the Covered Group, Class Counsel, the Committee and the New Plan and
New VEBA, unless the Committee timely submits a request for an Independent Attestation. If the
Committee timely submits such a request, GM shall engage a nationally recognized independent
registered public accounting firm to conduct an Independent Attestation regarding a
determination(s) by GM listed in Section 13.A(i), (ii) and (iii) of this Settlement Agreement The
Independent Attestation shall be final and binding on GM, the UAW, the Class Representatives, the
Class, the Covered Group, Class Counsel, the Committee and the New Plan and New VEBA.
Nothing in the foregoing paragraphs shall prevent the division, deposit, withdrawal or
transfer of any assets the valuation of which is not in dispute pending resolution of the disputed
amounts.
C. Confidentiality. All information and data provided by GM to the UAW and/or the
Committee under Section 7.H of this Settlement Agreement and as a part of this due diligence and
adjustment process shall be considered confidential. The UAW and the Committee shall use such
information and data solely for the purpose set forth in this Section 13 of the Settlement
Agreement. The UAW and the Committee shall not disclose such information or data to any other
person without GM’s written consent, provided that the UAW and the Committee may disclose such
information and data to their attorneys and professional advisors subject to the agreement of such
attorneys and advisors to the confidentiality restrictions set forth herein.
14. Future Contributions
The UAW, the Class and the Covered Group may not negotiate any increase of GM’s funding or
payment obligations set out herein. The UAW also agrees not to seek to obligate GM to: (i)
provide any additional payments to the New VEBA other than those specifically required by this
Settlement Agreement; (ii) make any other payments for the purpose of providing Retiree Medical
Benefits to the Class or the Covered Group; or (iii) provide or assume the cost of Retiree Medical
Benefits for the Class or the Covered Group through any other means. Provided that, the UAW may
propose that GM Active Employees be permitted to make contributions to the New VEBA of amounts
otherwise payable in profit sharing, COLA, wages and/or signing bonuses, if not prohibited by law.
15. Pension Benefits
GM and the UAW agree to amend the Pension Plan on the Implementation Date to provide to
retirees and eligible surviving spouses who are members of the Class or the Covered Group a flat
monthly special lifetime benefit of $66.70 (which will not be escalated) commencing on the first of
the month immediately following the Implementation Date. This same benefit will also be provided
to retirees who retire after the Implementation Date and eligible surviving spouses who are members
of the Covered Group, commencing with their
- 26 -
entitlement to pension benefits. This special lifetime benefit is intended to serve as a cost
pass-through of an equivalent after-tax increase in the monthly contribution regarding Retiree
Medical Benefits for the Class and the Covered Group. As a result, the New Plan and New VEBA
shall, as of the Implementation Date, assess an additional non-escalating monthly contribution
payable by retirees and eligible surviving spouses of the Class and the Covered Group for Retiree
Medical Benefits of $51.67 per month, to be credited to the GM Separate Retiree Account in the New
VEBA.
Retirees and surviving spouses who are members of the Class and the Covered Group but who do
not receive a monthly benefit from the Pension Plan will not be entitled to receive the flat
monthly special lifetime benefit of $66.70, and the terms of the New Plan and the New VEBA shall
not require them to make the additional monthly contribution to the New VEBA of $51.67. For
purposes of determining a Class or Covered Group member’s status as a Protected Retiree under the
terms of the Xxxxx I settlement agreement, the flat monthly special lifetime benefit described
above and any other new pension increase negotiated in the 2007 GM-UAW National Agreement shall not
be included in the determination of pension income.
Nothing in this Section 14 shall detract from the discretion afforded the Committee as set
forth in the Trust Agreement.
16. Administrative Costs
The New VEBA will be responsible for all costs to administer the New Plan and the New VEBA
commencing on the Implementation Date and continuing thereafter. The New Plan and the New VEBA
trust agreement shall be drafted consistent with this requirement.
17. Trust Agreement; Segregated Account; Indemnification
Assets paid or transferred to the New VEBA by or at the direction of GM, including all
investment returns thereon, shall be used solely to provide Retiree Medical Benefits to the Class
and the Covered Group as defined in this Settlement Agreement until expiration of the Initial
Accounting Period. Thereafter, Benefits will be provided to the Class and the Covered Group as
described in the Trust Agreement. The Trust Agreement shall provide: (i) for the GM Separate
Retiree Account to be credited with the assets deposited or transferred to the New VEBA by GM, or
at GM’s direction, under this Settlement Agreement; (ii) that the assets in the GM Separate Retiree
Account may be used only to provide Benefits (as defined in the Trust Agreement) for such Class and
such Covered Group; and (iii) that under no circumstances will GM or the GM Separate Retiree
Account be liable or responsible for the obligations of any other employer or for the provision of
Retiree Medical Benefits or any other benefits for the employees or retirees of any other employer.
Further, the Trust Agreement shall provide that the Committee, on behalf of the New VEBA,
shall take all such reasonable action as may be needed to rebut any presumption of control that
would limit the New VEBA’s ability to own GM common stock or the Convertible Note or as may be
required to comply with all applicable laws and regulations, including but not limited to federal
and state banking laws and regulations.
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To the extent permitted by law, the New VEBA shall indemnify and hold the Committee, the UAW,
GM, the GM Plan, and the employees, officers and agents of each of them harmless from and against
any liability that they may incur in connection with the New Plan and New VEBA, unless such
liability arises from their gross negligence or intentional misconduct, or breach of this
Settlement Agreement. The Committee shall not be required to give any bond or any other security
for the faithful performance of its duties under the Trust Agreement, except as such may be
required by law.
18. Subsidies
With regard to claims incurred on or after the Implementation Date, the New VEBA shall be
entitled to receive any Medicare Part D subsidies and other health care related subsidies regarding
benefits actually paid by the New VEBA which may result from future legislative changes, and GM
shall not be entitled to receive any such subsidies related to prescription drug benefits and other
health care related benefits provided to the Class and the Covered Group by the New Plan and New
VEBA.
19. Default and Cure
A. General. The Committee will have the right to accelerate some or all of the payment
obligations of GM under this Settlement Agreement (other than the Shortfall Amount payments set
forth in Sections 8.G and 10 and Exhibit D of this Settlement Agreement) if GM defaults on any
payment obligations under this Settlement Agreement and such default is not cured within 15
business days after the Committee gives GM notice of such default. To cure such default, GM will
pay the amount then in default plus accrued Interest on such amount. Payments due under the
Convertible Note may also be accelerated under this provision only to the extent that the
Convertible Note is then held by the New VEBA.
B. Limitation on Liens. Effective as of the Implementation Date and until all payments
required of GM under this Settlement Agreement, other than the Shortfall Amount payments set forth
in Sections 8.G and 10 and Exhibit D of this Settlement Agreement, have been made, GM will not, nor
will it permit any Manufacturing Subsidiary to, issue or assume any Debt secured by a Mortgage upon
any Principal Domestic Manufacturing Property of GM or any Manufacturing Subsidiary or upon any
shares of stock or indebtedness of any Manufacturing Subsidiary (whether such Principal Domestic
Manufacturing Property, shares of stock or indebtedness are now owned or hereafter acquired)
without in any such case effectively providing concurrently with the issuance or assumption of any
such Debt that the payment obligations by GM under this Settlement Agreement, other than the
Shortfall Amount payments set forth in Sections 8.G and 10 and Exhibit D of this Settlement
Agreement, (together with, if GM shall so determine, any other indebtedness of GM or such
Manufacturing Subsidiary ranking equally with the payment obligations by GM under this Settlement
Agreement and then existing or thereafter created) shall be secured equally and ratably with such
Debt, unless the aggregate amount of Debt issued or assumed and so secured by Mortgages, together
with all other Debt of GM and its Manufacturing
Subsidiaries which (if originally issued or assumed at such time) would otherwise be subject
to the foregoing restrictions, but not including Debt permitted to be secured under clauses (i)
through (vi) of the immediately following paragraph, does not at the time exceed 20% of the
stockholders’ equity of GM and its consolidated subsidiaries, as
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determined in accordance with
generally accepted accounting principles and shown on the audited consolidated balance sheet
contained in the latest published annual report to the stockholders of GM.
The above restrictions shall not apply to Debt secured by (i) Mortgages on property, shares of
stock or indebtedness of any corporation or other entity existing at the time such corporation or
other entity becomes a Manufacturing Subsidiary; (ii) Mortgages on property existing at the time of
acquisition of such property by GM or a Manufacturing Subsidiary, or Mortgages to secure the
payment of all or any part of the purchase price of such property upon the acquisition of such
property by GM or a Manufacturing Subsidiary or to secure any Debt incurred prior to, at the time
of, or within 180 days after, the later of the date of acquisition of such property and the date
such property is placed in service, for the purpose of financing all or any part of the purchase
price thereof, or Mortgages to secure any Debt incurred for the purpose of financing the cost to GM
or a Manufacturing Subsidiary of improvements to such acquired property; (iii) Mortgages securing
Debt of a Manufacturing Subsidiary owing to GM or to another Subsidiary; (iv) Mortgages on property
of a corporation or other entity existing at the time such corporation or other entity is merged or
consolidated with GM or a Manufacturing Subsidiary or at the time of a sale, lease or other
disposition of the properties of a corporation or other entity as an entirety or substantially as
an entirety to GM or a Manufacturing Subsidiary; (v) Mortgages on property of GM or a Manufacturing
Subsidiary in favor of the United States of America or any State thereof, or any department, agency
or instrumentality or political subdivision of the United States of America or any State thereof,
or in favor of any other country, or any political subdivision thereof, to secure partial,
progress, advance or other payments pursuant to any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the purchase price or the
cost of construction of the property subject to such Mortgages; or (vi) any extension, renewal or
replacement (or successive extensions, renewals or replacements) in whole or in part of any
Mortgage referred to in the foregoing clauses (i) to (v), inclusively; provided, however, that the
principal amount of Debt secured thereby shall not exceed by more than 115% the principal amount of
Debt so secured at the time of such extension, renewal or replacement and that such extension,
renewal or replacement shall be limited to all or a part of the property which secured the Mortgage
so extended, renewed or replaced (plus improvements on such property).
C. Dispute Resolution. The dispute resolution process set forth in Section 26 of this
Settlement Agreement shall apply in the event of a dispute over whether GM has defaulted on any
payment obligation under this Settlement Agreement. In this regard, the time limit applicable to
GM’s right to cure a default shall be 15 business days after agreement by the parties that GM has
defaulted, or entry by the Court of a final ruling determining that GM has defaulted on its payment
obligations. Application of the dispute resolution process set forth in Section 26 of this
Settlement Agreement does not relieve GM of the obligation to pay accrued Interest for the period
of time that the dispute resolution process is in effect in order to cure a default.
20. Cooperation
A. Cooperation by GM. GM will cooperate with the UAW and the Committee and at the
Committee’s request undertake such reasonable actions as will assist the Committee in the
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transition of responsibility for administration of the Retiree Medical Benefits by the Committee
for the New Plan and the New VEBA. Such cooperation will include assisting the Committee in
educational efforts and communications with respect to the Class and the Covered Group so that they
understand the terms of the New Plan, the New VEBA and the transition, and understand the claims
submission process and any other initial administrative changes undertaken by the Committee.
Before and after the Implementation Date, at the Committee’s request and as permitted by law, GM
will furnish to the Committee such information and shall provide such cooperation as may be
reasonably necessary to permit the Committee to effectively administer the New Plan and the New
VEBA, including, without limitation, the retrieval of data in a form and to the extent maintained
by GM regarding age, amounts of pension benefits, service, pension and medical benefit eligibility,
marital status, mortality, claims history, births, deaths, dependent status and enrollment
information of the Class and the Covered Group. At the request of the Committee, GM will continue
to perform the necessary eligibility work for a reasonable period of time, not to exceed 90 days
after the Implementation Date in order to allow the Committee to establish and test the eligibility
database, and for which GM will be entitled to reimbursement for reasonable costs. GM shall also
assist the Committee in transitioning benefit provider contracts to the New VEBA. GM shall also
cooperate with the UAW and the Committee and undertake such reasonable actions as will enable the
Committee to perform its administrative functions with respect to the New Plan and the New VEBA,
including insuring an orderly transition from GM administration of Retiree Medical Benefits to the
New Plan and the New VEBA.
To the extent permitted by law, GM will also allow retiree participants to voluntarily have
required contributions withheld from pension benefits and to the extent reasonably practical,
credited to the GM Separate Retiree Account of the New VEBA on a monthly basis. A retiree
participant may elect or withdraw consent for pension withholdings at any time by providing 45 days
written notice to the Pension Plan administrator or such shorter period that may be required by
law.
To the extent permitted by law, GM will also cooperate with the Committee to make provision
for the New VEBA payments of the $76.20 Special Benefit to be incorporated into monthly GM pension
checks for eligible retirees and surviving spouses. It will be the responsibility of the Committee
and the New VEBA to advise GM’s pension administrator in a timely manner of eligibility changes
with regard to the Special Benefit payment. The timing of the information provided to GM’s pension
administrator will determine the timing for the incorporation into the monthly pension check. It
will be the responsibility of the Committee and the New VEBA to establish a bank account for the
funding of the Special Benefit payments, and GM’s pension administrator will be provided with the
approval to draw on that account for the payment of the benefit. The Committee and the New VEBA
will assure that the bank account is adequately funded for any and all such payments. If adequate
funds do not exist for the payments, then GM’s pension administrator will not make such payments
until the required funding is established in the account. It will be the responsibility of the
Committee and the New VEBA to audit the eligibility for, and payment of, the Special Benefit.
Additionally, the Committee and the New VEBA will be responsible for the payment of reasonable
costs
associated with GM’s administration of the payment of this Special Benefit and the pension
withholdings, including development of administrative and recordkeeping processes, monthly payment
processing, audit and reconciliation functions and the like.
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GM will be financially responsible for reasonable costs associated with the transition of
coverage for the Class and the Covered Group to the New Plan and New VEBA. This shall include the
cost of educational efforts and communications with respect to retirees, the New Plan’s initial
creation of administrative procedures, initial development of record sharing procedures, the
testing of computer systems, the Committee’s initial vendor selection and contracting, and other
activities incurred on or before the Implementation Date, including but not limited to costs
associated with drafting the trust agreement for the New VEBA, seeking from the Internal Revenue
Service a determination of the tax-exempt status of the New VEBA, plan design and actuarial and
other professional work necessary for initiation of the New Plan and New VEBA and the benefits to
be provided thereunder. GM payments described in this Section shall not reduce its payment
obligations under this Settlement Agreement, and if the New VEBA is a multi-employer welfare trust,
the costs described in this Section, to the extent not allocable to a specific employer, shall be
pro-rated among the participating companies based on the ratio of required funding for each
company. Payment of these costs shall be set forth explicitly in the Approval Order.
B. Cooperation With GM. The UAW and the Committee will cooperate and shall timely
furnish GM with such information related to the New Plan and New VEBA, in a form and to the extent
maintained by the UAW and the Committee, as may be reasonably necessary to permit GM to comply with
requirements of the SEC, including, but not limited to, any disclosures contemplated or agreed to
with the staff of the SEC as a result of GM’s discussions with the staff pursuant to Section 21 of
this Settlement Agreement and any schedules supporting such information, and Generally Accepted
Accounting Principles, including but not limited to SFAS 87, SFAS 106, SFAS 132R, SFAS 157, and
SFAS 158 (as amended), for disclosure in GM’s financial statements and any filings with the SEC.
21. Accounting Treatment
Throughout the negotiations of the MOU and this Settlement Agreement, GM has maintained that a
necessary element in its decision to enter into the MOU and this Settlement Agreement is securing
accounting treatment that is reasonably satisfactory to GM regarding the transactions contemplated
by the MOU and this Settlement Agreement. In the event that the economic substance of the
transaction does not meet the specific requirements for settlement accounting as determined by
paragraphs 90-95 of FASB Statement No. 106, as amended, it is expected that the terms of this
Settlement Agreement would give rise to substantive plan amendment accounting. For purposes of
this provision, substantive plan amendment accounting would limit GM’s OPEB obligation to the
revised, fixed and capped obligations as determined under this Settlement Agreement. The parties
agree that this Settlement Agreement and Final Effective Date are contingent on GM securing the
appropriate accounting treatment regarding GM’s obligations to the Class and the Covered Group for
Retiree Medical Benefits. As soon as practicable, GM will discuss the accounting for the New Plan
and the New VEBA and its obligations to the Class and the Covered Group for Retiree Medical
Benefits with the staff of the SEC. If, as a result of those discussions, GM believes that the
accounting for the transaction may
not be a settlement as contemplated by paragraphs 90-95 of FASB Statement No. 106, as amended,
or a substantive negative plan amendment reasonably satisfactory to GM, the parties will meet in an
effort to restructure the transaction to achieve such accounting. If the parties are unable to
reach an agreement on terms that GM reasonably believes will provide such accounting, this
Settlement Agreement will terminate.
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22. Prohibited Transaction Exemptions
The parties agree that the assets of the TAA and LLC shall not be “plan assets” of the New
Plan and New VEBA until actual transfer or payment to the New VEBA. The UAW, GM, and the Class and
Class Counsel acknowledge that the instrument establishing the TAA and communications to the Class
regarding the TAA, shall be consistent with the principles set forth in DOL Advisory Opinions
92-02A, 92-24 and 94-31A so as to avoid the assets in the TAA being deemed “plan assets” within the
meaning of ERISA. If GM determines that the assets in the TAA and/or LLC as described in Section 7
of this Settlement Agreement are likely to be deemed “plan assets,” GM will apply for a prohibited
transaction exemption from the DOL to permit the acquisition and holding of the employer security
in the TAA and/or LLC. The UAW, the Class and Class Counsel will fully cooperate with GM in
securing any such legal or regulatory approvals.
If GM elects to transfer the Convertible Note or the Alternative Convertible Note to the New
VEBA and such note is not a qualifying employer security, and/or if the Derivative Contracts are
not qualifying employer securities, GM and the New VEBA timely will apply for a prohibited
transaction exemption from the DOL to permit the New VEBA to acquire and hold such securities.
Similarly, if qualifying employer securities and employer real property would exceed 10 percent of
the total assets in the New VEBA immediately after transfer of the Convertible Note or the
Alternative Convertible Note and the Derivative Contracts to the New VEBA, then GM and the New VEBA
timely will apply for a prohibited transaction exemption to permit the New VEBA to acquire and hold
such securities. The UAW, the Class and Class Counsel will fully cooperate with GM and the New
VEBA in securing any such legal or regulatory approvals. If GM and the New VEBA cannot timely
obtain any necessary exemptions, the parties will meet and discuss an appropriate alternative which
provides equivalent economic value to the New VEBA.
23. Indemnification
Subject to approval by the Court as part of the Judgment, GM hereby agrees to indemnify and
hold harmless the UAW, and its officers, directors, employees and expert advisors (each, an
“Indemnified Party”), to the extent permitted by law, from and against any and all losses, claims,
damages, obligations, assessments, penalties, judgments, awards, and other liabilities related to
any decision, recommendations or other actions taken prior to the date of this Settlement Agreement
(collectively, “Indemnification Liabilities”), and will fully reimburse any Indemnified Party for
any and all reasonable and documented attorney fees and expenses (collectively, “Indemnity
Expenses”), as and when incurred, of investigating, preparing or defending any claim, action, suit,
proceeding or investigation, arising out of or in connection with any Indemnification Liabilities
incurred as a result of an Indemnified Party’s entering into, or participation in the negotiations
for, this Settlement Agreement and the MOU and the
transactions contemplated in connection herewith; provided, however, that such
indemnity shall not apply to any portion of any such Liability or Expense that resulted from the
gross negligence, illegal or willful misconduct by an Indemnified Party; provided, further, that
such indemnity shall not apply to any Indemnification Liabilities to a GM Active Employee for
breach of the duty of fair representation.
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Nothing in this Section 23 or any provision of this Settlement Agreement shall be construed to
provide an indemnity for any member or any actions of the Committee; provided however, that an
Indemnified Party who becomes a member of the Committee shall remain entitled to any indemnity to
which the Indemnified Party would otherwise be entitled pursuant to this Section 23 for actions
taken, or for a failure to take actions, in any capacity other than as a member of the Committee;
and provided further, that nothing in this Section 23 or any other provision of this Settlement
Agreement shall be construed to provide an indemnity for any Indemnification Liabilities or
Indemnity Expenses relating to (i) management of the assets of the New VEBA or (ii) for any action,
amendment or omission of the Committee with respect to the provision and administration of Retiree
Medical Benefits.
If an Indemnified Party receives notice of any action, proceeding or claim as to which the
Indemnified Party proposes to demand indemnification hereunder, it shall provide GM prompt written
notice thereof. Failure by an Indemnified Party to so notify GM shall relieve GM from the
obligation to indemnify the Indemnified Party hereunder only to the extent that GM suffers actual
prejudice as a result of such failure, but GM shall not be obligated to provide reimbursement for
any Indemnity Expenses incurred for work performed prior to its receipt of written notice of the
claim. If an Indemnified Party is entitled to indemnification hereunder, GM will have the right to
participate in such proceeding or elect to assume the defense of such action or proceeding at its
own expense and through counsel chosen by GM (such counsel being reasonably satisfactory to the
Indemnified Party). The Indemnified Party will cooperate in good faith in such defense. Upon the
assumption by GM of the defense of any such action or proceeding, the Indemnified Party shall have
the right to participate in, but not control the defense of, such action and retain its own counsel
but the expenses and fees shall be at its expense unless (a) GM has agreed to pay such Indemnity
Expenses, (b) GM shall have failed to employ counsel reasonably satisfactory to an Indemnified
Party in a timely manner, or (c) the Indemnified Party shall have been advised by counsel that
there are actual or potential conflicting interests between GM and the Indemnified Party that
require separate representation, and GM has agreed that such actual or potential conflict exists
(such agreement not to be unreasonably withheld); provided, however, that GM shall
not, in connection with any such action or proceeding arising out of the same general allegations,
be liable for the reasonable fees and expenses of more than one separate law firm at any time for
all Indemnified Parties not having actual or potential conflicts among them, except to the extent
that local counsel, in addition to its regular counsel, is required in order to effectively defend
against such action or proceeding. All such fees and expenses shall be invoiced to GM, with such
detail and supporting information as GM may reasonably require, in such intervals as GM shall
require under its standard billing processes.
If the Indemnified Party receives notice from GM that GM has elected to assume the defense of
the action or proceeding, GM will not be liable for any attorney fees or other legal expenses
subsequently incurred by the Indemnified Party in connection with the matter.
GM shall not be liable for any settlement of any claim against an Indemnified Party made
without GM’s written consent, which consent shall not be unreasonably withheld. GM shall not,
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without the prior written consent of an Indemnified Party, which consent shall not be unreasonably
withheld or delayed, settle or compromise any claim, or permit a default or consent to the entry of
any judgment, that would create any financial obligation on the part of the Indemnified Party not
otherwise within the scope of the indemnified liabilities.
The termination of this Settlement Agreement shall not affect the indemnity provided
hereunder, which shall remain operative and in full force and effect. Notwithstanding anything in
this Section 23 to the contrary, this Section 23 of the Settlement Agreement shall not be
applicable with respect to any of the matters covered by Article VI of the Securityholder and
Registration Rights Agreement.
24. Costs and Attorneys Fees
A. Fees and Expenses. GM agrees to support the application by the UAW and Class Counsel
to the Court for reimbursement by GM of reasonable attorney and professional fees and expenses
based on hours worked and determined in accordance with the current market rates (not to include
any upward adjustments such as any lodestar multipliers, risk enhancements, success fee, completion
bonus or rate premiums) incurred in connection with the court proceedings to obtain the Approval
Order and any appeals therefrom. Approval of these fee requests will be included in the Judgment.
B. Fees After The Final Effective Date. Each party to this Settlement Agreement agrees
not to seek any other future fees or expenses from any other party in connection with either Xxxxx
XX or Xxxxx I, except that the Class Representatives or any other party prevailing in any action to
enforce the terms of this Settlement Agreement may seek such fees and costs as may be allowed by
law.
25. Releases and Certain Related Matters
A. In consideration of GM’s entry into this Settlement Agreement, and the other obligations of
GM contained herein, the Class Representatives, the Class Counsel and the UAW hereby consent to the
entry of the Judgment, which shall be binding upon all Class Members pursuant to Rule 23(b)(2) of
the Federal Rules of Civil Procedure.
B. As of the Final Effective Date, each UAW Releasee releases and forever discharges each
other UAW Releasee and each other Indemnified Party and shall be forever released and discharged
with respect to any and all rights, claims or causes of action that such UAW Releasee had, has or
hereafter may have, whether known or unknown, suspected or unsuspected, concealed or hidden,
arising out of or based upon or otherwise related to (a) any of the claims arising, or which could
have been raised, in connection with either Xxxxx I or Xxxxx XX concerning the provision of Retiree
Medical Benefits and the terms of this Settlement Agreement, (b) any claims that this Settlement
Agreement, any document referred to or contemplated herein is not in compliance with applicable
laws and regulations, and (c) any
action taken to carry out this Settlement Agreement in accordance with this Settlement
Agreement and applicable law.
C. As of the Final Effective Date, the UAW Releasees release and forever discharge GM, and its
officers, directors, employees, agents, and subsidiaries, and the GM Plan and its
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fiduciaries, with
respect to any and all rights, claims or causes of action that any UAW Releasee had, has or
hereafter may have, whether known or unknown, suspected or unsuspected, concealed or hidden,
arising out of, based upon or otherwise related to (a) any of the claims arising, or which could
have been raised, in connection with Xxxxx I or Xxxxx XX concerning the provision of Retiree
Medical Benefits and the terms of this Settlement Agreement, (b) any claims that this Settlement
Agreement, any document referred to or contemplated herein is not in compliance with applicable
laws and regulations, and (c) any action taken to carry out this Settlement Agreement in
accordance with this Settlement Agreement and applicable law.
D. As of the Final Effective Date, the UAW Releasees release and forever discharge the
Existing External VEBA and the fiduciaries, trustees, and committee that administer the Existing
External VEBA, and the Existing Internal VEBA and the fiduciaries, trustees, and committee that
administer the Existing Internal VEBA with respect to any and all rights, claims or causes of
action that any UAW Releasee had, has or hereafter may have, whether known or unknown, suspected or
unsuspected, concealed or hidden, arising out of, based upon or otherwise related to (a) any of the
claims arising, or which could have been raised, in connection with Xxxxx I or Xxxxx XX concerning
the provision of Retiree Medical Benefits and the terms of this Settlement Agreement, (b) any
claims that this Settlement Agreement, any document referred to or contemplated herein is not in
compliance with applicable laws and regulations, and (c) any action taken by such fiduciaries,
trustee and/or committees to carry out this Settlement Agreement and to transfer assets of the
Existing External VEBA and Existing Internal VEBA to the New VEBA in accordance with this
Settlement Agreement and applicable law.
E. As of the Final Effective Date, GM releases and forever discharges the Class
Representatives and Class Counsel from any and all claims, demands, liabilities, causes of action
or other obligations of whatever nature, including attorney fees, whether known or unknown, that
arise from their participation or involvement with respect to the filing of the Xxxxx XX lawsuit or
in the negotiations leading to this Settlement Agreement. This release does not extend to
obligations arising from the terms of the Settlement Agreement itself.
F. Neither the entry into this Settlement Agreement nor the consent to the Judgment is, may be
construed as, or may be used as, an Admission by or against GM or any UAW Releasee of any fault,
wrongdoing or liability whatsoever.
26. Dispute Resolution
A. Coverage. Any controversy or dispute arising out of or relating to, or involving
the enforcement, implementation, application or interpretation of this Settlement Agreement shall
be enforceable only by GM, the Committee, the UAW, and if prior to the Implementation Date, Class
Counsel, and the Approval Order will provide that the Court will retain exclusive jurisdiction to
resolve
any such disputes. Notwithstanding the foregoing, any disputes relating solely to eligibility
for participation or entitlement to benefits under the New Plan shall be resolved in accordance
with the applicable procedures such Plan shall establish, and nothing in this Settlement Agreement
precludes Class Members from pursuing appropriate judicial review regarding such disputes; provided
however, that no claims related to Retiree Medical Benefits for claims incurred after the
Implementation Date may be brought against GM, any of its affiliates, or the GM Plan.
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B. Attempt at Resolution. Although the Court retains exclusive jurisdiction to
resolve disputes arising out of or relating to the enforcement, implementation, application or
interpretation of this Settlement Agreement, the parties agree that prior to seeking recourse to
the Court, the parties shall attempt to resolve the dispute through the following process:
(i) The aggrieved party shall provide the party alleged to have violated this Settlement
Agreement (“Dispute Party”) with written notice of such dispute, which shall include a description
of the alleged violation and identification of the Section(s) of the Settlement Agreement allegedly
violated. Such notice shall be provided so that it is received by the Dispute Party no later than
180 calendar days from the date of the alleged violation or the date on which the aggrieved party
knew or should have known of the facts that give rise to the alleged violation, whichever is later,
but in no event longer than 3 years from the date of the alleged violation.
(ii) If the Dispute Party fails to respond within 21 calendar days from its receipt of the
notice, the aggrieved party may seek recourse to the Court; provided however, that the aggrieved
party waives all claims related to a particular dispute against the Dispute Party if the aggrieved
party fails to bring the dispute before the Court within 180 calendar days from the date of sending
the notice. Provided, however, with respect to disputes relating to assumptions or methodology
used by the GM Actuary or the Actuary in calculating the Cash Flow Projection as set forth in
Exhibit A to this Settlement Agreement the parties may not seek recourse to the Court but will
submit such dispute to a neutral actuary in accordance with Exhibit A.
All the time periods in Section 26 of this Settlement Agreement may be extended by agreement
of the parties to the particular dispute.
C. Alternate Means of Resolution. Nothing in this Section shall preclude GM, the UAW,
the Committee, or Class Counsel from agreeing on any other form of alternative dispute resolution
or from agreeing to any extensions of the time periods specified in this Section.
27. Submission of the Settlement Agreement and Class Action Notice Order
The parties shall submit this Settlement Agreement to the Court and jointly work diligently to
have this Settlement Agreement approved by the Court as soon as possible either through Xxxxx XX or
Xxxxx I as deemed appropriate. In either event, the parties shall seek the Court’s approval of
this Settlement Agreement as superseding or satisfying the Xxxxx I Settlement Agreement. The
parties shall seek from the Court an order (the “Notice Order”)
providing that notice of the hearing on the proposed settlement (the “Fairness
Hearing”) shall be given at GM’s expense to the Class, as defined herein, by mailing a copy of
the notice contemplated in the Notice Order to the Class, and by publishing a notice approved by
the Court in the Detroit News/Free Press weekend edition, and a national newspaper such as USA
Today. Until entry of Judgment, copies of this Settlement Agreement shall also be made available
for inspection by Class Members at the Court, at the UAW offices in Detroit, Michigan, and at the
offices of Class Counsel.
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28. Conditions
This Settlement Agreement is conditioned upon the occurrence or resolution of the conditions
described in subparagraphs A, B, and C of this Section. The failure of subparagraphs A and B will
render this Settlement Agreement voidable at the discretion of any party. The failure of
subparagraph C will render this Settlement Agreement voidable at the sole discretion of GM.
A. Class Certification Order. A final order must be entered by the Court certifying
Xxxxx XX as a non-opt out class action, or amending and re-certifying the Xxxxx I class, such that
the Class is defined as stated in Section 1 of this Settlement Agreement. This condition shall be
deemed to have failed upon the Court’s issuance of a Class Order denying certification of Xxxxx XX
as a class action or denial of the motion to amend and re-certify the class in Xxxxx I to include
the Class as defined in this Settlement Agreement, if applicable, or upon issuance of a Class Order
certifying Xxxxx XX as a class action or amending and re-certifying a new class in Xxxxx I but
whose membership is less inclusive than as described in this Settlement Agreement unless GM, the
UAW and Class Counsel agree in writing to such alternative class description.
B. Judgment/Approval Order. A Judgment must be entered by the Court in either Xxxxx I
or Xxxxx XX approving this Settlement Agreement in all respects and as to all parties, including
GM, the UAW, and the Class. The Judgment shall be acceptable in form and substance to GM, the UAW
and Class Counsel. This condition shall be deemed to have failed upon issuance of an order
disapproving this Settlement Agreement, or upon the issuance of an order approving only a portion
of this Settlement Agreement but disapproving other portions, unless GM, the UAW and Class Counsel
agree otherwise in writing. Such Approval Order shall, inter alia, contain the conditions set
forth in this Settlement Agreement and direct the transfer of all the assets and liabilities of the
Existing External VEBA into the New VEBA and the termination of the Existing External VEBA.
C. Accounting Treatment Satisfactory to GM. The discussions between GM and the SEC
regarding accounting treatment shall have been completed in a manner reasonably satisfactory to GM
as set forth in Section 21 of this Settlement Agreement.
29. No Admission; No Prejudice
A. Notwithstanding anything to the contrary, whether set forth in this Settlement Agreement,
the MOU, the Judgment, the Notice Order, any documents filed with the Court in either Xxxxx I or
Xxxxx XX, any documents, whether provided in the course of or in any manner whatsoever relating to
the 2007 discussions between GM and UAW with respect to health care benefits or relating to this
Settlement Agreement or the MOU, whether distributed, otherwise made available to or obtained by
any person or organization, including without limit, GM Active Employees, Class Members, or their
spouses, surviving spouses or dependents, or to the UAW or GM in the course of the negotiations
that led to entry into this Settlement Agreement, or otherwise:
(a) GM denies and continues to deny any wrongdoing or legal liability arising out of
any of the allegations, claims and contentions made against GM in Xxxxx I or
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Xxxxx XX and in
the course of the negotiation of the MOU or this Settlement Agreement. Neither the MOU, nor
any disputes or discussions between GM and the UAW with respect to health care benefits or
entry into this Settlement Agreement occurring on or after January 1, 2007, nor this
Settlement Agreement, nor any document referred to or contemplated herein, nor any action
taken to carry out this Settlement Agreement, nor any retiree health care benefits provided
hereunder or any action related in any way to the ongoing administration of such retiree
health care benefits (collectively, the “Settlement Actions”) may be construed as,
or may be viewed or used as, an Admission by or against GM of any fault, wrongdoing or
liability whatsoever, or as an Admission by GM of the validity of any claim or argument made
by or on behalf of the UAW, Active Employees, the Class or the Covered Group, that retiree
health benefits are vested. Without limiting in any manner whatsoever the generality of the
foregoing, the performance of any Settlement Actions by GM may not be construed, viewed or
used as an Admission by or against GM that, following the termination of the December 16,
2005 Settlement Agreement in Xxxxx I, it does not have the unilateral right to modify or
terminate retiree health care benefits.
(b) Each of the UAW, the Class Representatives and the Class Members claim and continue
to claim that the allegations, claims and contentions made against GM in Xxxxx XX have
merit. Neither this Settlement Agreement nor any document referred to or contemplated
herein nor any Settlement Actions may be construed as, or may be viewed or used as, an
Admission by or against any of the UAW, the Class Representatives or the Class Members of
any fault, wrongdoing or liability whatsoever or of the validity of any claim or argument
made by or on behalf of GM that GM has a unilateral right to modify or terminate retiree
health care benefits or that retiree health care benefits are not vested. Without limiting
in any manner whatsoever the generality of the foregoing, the performance of any Settlement
Actions by any of the UAW, the Class Representatives or the Class Members, including without
limitation, the acceptance of any retiree health care benefits under any of the GM health
care plans set forth in this Settlement Agreement, may not be construed, viewed or used as
an Admission by or against any of the UAW, the Class Representatives or the Class that,
following the termination of the December 16, 2005 Settlement Agreement, GM has the
unilateral right to modify or terminate retiree health care benefits.
(c) There has been no determination by any court as to the factual allegations made
against GM in Xxxxx I or Xxxxx XX. Entering into this Settlement Agreement and performance
of any of the Settlement Actions shall not be construed as, or deemed to be evidence of, an
Admission by any of the parties hereto, and shall not be offered or received in evidence in
any action or proceeding against any party hereto in any court, administrative agency or
other tribunal or forum for any purpose whatsoever other than to enforce the provisions of
this Settlement Agreement or to obtain or seek approval of this Settlement Agreement in
accordance with Rule 23 of the Federal Rules of Civil Procedure and the Class Action
Fairness Act of 2005.
For the purposes of this Section 29, GM and the UAW refer to General Motors Corporation and
the Union, respectively, as organizations, as well as any and all of their respective directors,
officers, employees, and agents.
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This Settlement Agreement and anything occurring in connection with reaching this Settlement
Agreement are without prejudice to GM, the UAW and the Class. The parties may use this Settlement
Agreement to assist in securing the Judgment approving the settlement. It is intended that GM, the
UAW, the Committee, the Class Representatives, the Class, the Covered Group and Class Counsel shall
not use this Settlement Agreement, or anything occurring in connection with reaching this
Agreement, as evidence against GM, the UAW, the Class or the Covered Group in any circumstance
except where the parties are operating under or enforcing this Settlement Agreement or the Judgment
approving this Settlement Agreement.
30. Duration and Termination of Settlement Agreement
This Settlement Agreement will remain in effect unless and until terminated in accordance with
this Section and as provided for in Section 28 of this Settlement Agreement. If this Settlement
Agreement is terminated, then the Xxxxx I Settlement Agreement and judgment shall remain in full
force and effect and the parties will be restored to their respective positions immediately before
execution of this Settlement Agreement except as specifically noted herein.
Termination of this Settlement Agreement may occur as follows:
(i) If Xxxxx XX is enjoined or stayed, or withdrawn, dismissed, or otherwise terminated, or if
the Judgment is denied in whole or in material part, either GM, the UAW, or Class Counsel on behalf
of the Class Representatives may terminate this Settlement Agreement by 30 days’ written notice to
the other party; provided however, that the Settlement Agreement may not be terminated pursuant to
this subparagraph (i) if Xxxxx XX is stayed, withdrawn, or dismissed by the parties because this
Settlement Agreement is approved as a superseding settlement through the Xxxxx I litigation.
(ii) If a Class Order satisfactory to the parties, as described in Section 28.A of this
Settlement Agreement, is entered by the Court and subsequently overturned in whole or in part on
appeal or otherwise, either GM, the UAW, or Class Counsel on behalf of the Class may terminate this
agreement upon 30 days’ written notice to the other parties.
(iii) If an Approval Order satisfactory to the parties, as described in Section 28.B of this
Settlement Agreement, is entered by the Court, but overturned in whole or in part on appeal or
otherwise, either GM, the UAW, or Class Counsel on behalf of the Class Representatives may
terminate this Settlement Agreement upon 30 days’ written notice to the other parties.
(iv) If after GM’s discussions with the SEC, GM does not believe the accounting treatment for
the New Plan and the New VEBA is reasonably satisfactory to GM as set forth in Section 21 of this
Settlement Agreement, GM may immediately terminate this Settlement Agreement upon written notice to
the other parties.
(v) If any court, agency or other tribunal of competent jurisdiction issues a determination
that any part of this Settlement Agreement is prohibited or unenforceable, either GM, the UAW, or
Class Counsel on behalf of the Class Representatives may terminate this Settlement Agreement by 30
days’ written notice to the other party.
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Notwithstanding the foregoing, Sections 7.G, 8.H, 9.A, 9.B and 9.C to the extent these Sections
create rights and obligations relating to the non-occurrence of the Final Effective Date as well as
22, 23, 26 and 29, shall survive the termination of this Settlement Agreement.
31. National Institute for Health Care Reform
In recognition of the interest of GM, the UAW, the Class and the Covered Group in improving
the quality, affordability, and accountability of health care in the United States, the parties
agree that as a part of this settlement GM and the UAW shall establish a National Institute for
Health Care Reform (“Institute”). The Institute shall be established and receive its first annual
funding payment as soon as practicable after the Initial Effective Date on the basis set forth in
the term sheet attached hereto as Exhibit G to this Settlement Agreement. The annual funding
payment will be payable in four equal quarterly installments. The funding and operation of the
Institute shall be separate, independent and distinct from the New Plan and the New VEBA. Any
payments by GM to the Institute shall be governed exclusively by the term sheet and are not in any
way related to GM’s payment obligations as described in Sections 8 and 12 of this Settlement
Agreement. Additionally, Section 19 of this Settlement Agreement shall not apply to any obligation
GM may have to make payments with regard to the Institute.
32. Other Provisions
A. References in this Settlement Agreement to “Sections,” “Paragraphs” and “Exhibits” refer to
the Sections, Paragraphs, and Exhibits of this Settlement Agreement unless otherwise specified.
B. The Court will, subject to Section 26 of this Settlement Agreement, retain exclusive
jurisdiction to resolve any disputes relating to or arising out of or in connection with the
enforcement, interpretation or implementation of this Settlement Agreement. Each of the parties
hereto expressly and irrevocably submits to the jurisdiction of the Court and expressly waives any
argument it may have with respect to venue or forum non conveniens.
C. This Settlement Agreement constitutes the entire agreement between the parties regarding
the matters set forth herein, and no representations, warranties or inducements have been made to
any party concerning this Settlement Agreement, other than representations, warranties and
covenants contained and memorialized in this Settlement Agreement. This
Settlement Agreement supersedes any prior understandings, agreements or representations by or
between the parties, written or oral, regarding the matters set forth in this Settlement Agreement.
D. The captions used in this Settlement Agreement are for convenience of reference only and do
not constitute a part of this Settlement Agreement and will not be deemed to limit, characterize or
in any way affect any provision of this Settlement Agreement, and all provisions of this Settlement
Agreement will be enforced and construed as if no captions had been used in this Settlement
Agreement.
E. The Class Representatives expressly authorize Class Counsel to take all appropriate action
required or permitted to be taken by the Class Representatives pursuant to this Settlement
Agreement to effectuate its terms and also expressly authorize Class Counsel to enter into any
non-material modifications or amendments to this Settlement Agreement on behalf of
- 40 -
them that Class
Counsel deems appropriate from the date this Settlement Agreement is signed until the Effective
Date; provided, however, that the effectiveness of any such amendment which
adversely impacts the level of benefits to any Class Member as well as any material amendment shall
be subject to the approval of the Court.
F. This Settlement Agreement may be executed in two or more counterparts. All executed
counterparts and each of them shall be deemed to be one and the same instrument, provided that
counsel for the parties to this Settlement Agreement shall exchange among themselves original
signed counterparts.
G. No party to this Settlement Agreement may assign any of its rights hereunder without the
prior written consent of the other parties, and any purported assignment in violation of this
sentence shall be void. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
H. Each of GM, the UAW, the Committee, Class Representatives, Class Members and the Class
Counsel shall do any and all acts and things, and shall execute and deliver any and all documents,
as may be necessary or appropriate to effect the purposes of this Settlement Agreement.
I. This Settlement Agreement shall be construed in accordance with applicable federal laws of
the United States of America.
J. Any provision of this Settlement Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. To the extent any provision of this Settlement Agreement is invalid or
unenforceable as provided for in Section 32.J of this Settlement Agreement , it shall be replaced
by a valid and enforceable provision agreed to by GM, the UAW and Class Counsel (which agreement
shall not be unreasonably withheld) that preserves the same economic effect for the parties under
this Settlement Agreement; provided however, that to the extent that such prohibited or
unenforceable provision cannot be replaced as contemplated and the consequences of such prohibited
or unenforceable provision causes this Settlement Agreement to fail of its
essential purpose then this Settlement Agreement may be voided at the sole discretion of the
party seeking the benefit of the prohibited or unenforceable provision. Class Counsel is expressly
authorized to take all appropriate action to implement this provision.
K. In the event that any payment referenced in this Settlement Agreement is due to be made on
a weekend or a holiday, the payment shall be made on the first business day following such weekend
or holiday.
L. In the event that any legal or regulatory approvals are required to effectuate the
provisions of this Settlement Agreement, GM, the UAW, the Class, the Committee and Class Counsel
will fully cooperate in securing any such legal or regulatory approvals.
M. Any notice, request, information or other document to be given under this Settlement
Agreement to any of the parties by any other party shall be in writing and delivered
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personally, or
sent by Federal Express or other carrier which guarantees next-day delivery, transmitted by
facsimile, transmitted by email if in an Adobe Acrobat PDF file, or sent by registered or certified
mail, postage prepaid, at the following addresses. All such notices and communication shall be
effective when delivered by hand, or, in the case of registered or certified mail, Federal Express
or other carrier, upon receipt, or, in the case of facsimile or email transmission, when
transmitted (provided, however, that any notice or communication transmitted by facsimile or email
shall be immediately confirmed by a telephone call to the recipient.):
If to the Class Representatives or Class Counsel, addressed to:
Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxxxxxx Xxxxx & Xxxxx, LLC
Pittsburgh North Xxxxxx
0000 Xx. Xxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
xxxxxx@xxxxxxxx.xxx
Xxxxxxx Xxxxxxxxx Xxxxx & Xxxxx, LLC
Pittsburgh North Xxxxxx
0000 Xx. Xxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
xxxxxx@xxxxxxxx.xxx
In each case with copies to:
Xxxx Xxxxxxx
Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx Xxxxx & Xxxxx, LLC
1705 Allegheny Building
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
xxxxxxxx@xxxxxxxxxxxxxxxx.xxx
xxxxxxxxxx@xxxxxxxxxxxxxxxx.xxx
Xxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx Xxxxx & Xxxxx, LLC
1705 Allegheny Building
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Tel: (000) 000-0000
xxxxxxxx@xxxxxxxxxxxxxxxx.xxx
xxxxxxxxxx@xxxxxxxxxxxxxxxx.xxx
- 42 -
If to GM, addressed to:
Xxxxx Xxxxxxxx
GMNA Vice President of Labor Relations
General Motors Corporation
0000 Xxxxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Tel: (000) 000-0000
GMNA Vice President of Labor Relations
General Motors Corporation
0000 Xxxxxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Tel: (000) 000-0000
in each case with copies to:
Xxxxxxx X. Xxxxxxxx
Office of the General Counsel
General Motors Corporation
Mail Code 482-C25-B21
000 Xxxxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000-0000
Tel: (000) 000-0000
xxxxxxx.x.xxxxxxxx@xx.xxx
Office of the General Counsel
General Motors Corporation
Mail Code 482-C25-B21
000 Xxxxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000-0000
Tel: (000) 000-0000
xxxxxxx.x.xxxxxxxx@xx.xxx
If to UAW, addressed to:
Xxxxxx X. Xxxxxxxx
General Counsel
International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Tel: (000) 000-0000
General Counsel
International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Tel: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx Xxxxx & Xxxxxxxx LLP
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: A. Xxxxxxx Xxxxx/Xxxxxxx X. Xxxxxx/Xxxxx X. Xxxxxxxx
Tel: (000) 000-0000
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: A. Xxxxxxx Xxxxx/Xxxxxxx X. Xxxxxx/Xxxxx X. Xxxxxxxx
Tel: (000) 000-0000
Each party may substitute a designated recipient upon written notice to the other parties.
- 43 -
IN WITNESS THEREOF, the parties hereto have caused this Settlement Agreement to be executed by
themselves or their duly authorized attorneys.
| AGREED: | ||||
By:
|
/s/ Xxxxxxx X. Xxxxxxxx (with consent) | Date: February 21, 2008 | ||
| Xxxxxxx X. Xxxxxxxx | ||||
| Office of the General Counsel | ||||
| General Motors Corporation | ||||
| Mail Code 482-C25-B21 | ||||
| 000 Xxxxxxxxxxx Xxxxxx | ||||
| X.X. Xxx 000 | ||||
| Xxxxxxx, XX 00000-0000 | ||||
| Tel: (000) 000-0000 | ||||
| xxxxxxx.x.xxxxxxxx@xx.xxx | ||||
| COUNSEL FOR DEFENDANT | ||||
| GENERAL MOTORS CORPORATION | ||||
By:
|
/s/ Xxxxxx X. Xxxxxxxx (with consent) | Date: February 21, 2008 | ||
| Xxxxxx X. Xxxxxxxx (P37171) | ||||
| 0000 Xxxx Xxxxxxxxx Xxxxxx | ||||
| Xxxxxxx, XX 00000 | ||||
| Tel: (000) 000-0000 | ||||
| COUNSEL FOR PLAINTIFF | ||||
| INTERNATIONAL UNION, UNITED AUTOMOBILE, | ||||
| AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA |
||||
By:
|
/s/ Xxxxxxx X. Xxxxx (with consent) | Date: February 21, 2008 | ||
| Xxxxxxx X. Xxxxx | ||||
| Xxxxxxx Xxxxxxxxx Xxxxx & Xxxxx, LLC | ||||
| Pittsburgh North Xxxxxx | ||||
| 0000 Xx. Xxxxx Xxxxxxxxx | ||||
| Xxxxxxxxxx, XX 00000 | ||||
| Tel: (000) 000-0000 | ||||
| xxxxxx@xxxxxxxx.xxx | ||||
| COUNSEL FOR PLAINTIFFS | ||||
| HENRY, LAURIA, BAILEY, GENCO, MARLOW, MILLER, XXXXXXX, XXXXX AND THE CLASS |
||||
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