exv10w1



 





Exhibit 10.1




Memorandum of Understanding

Post-Retirement Medical Care

September 26, 2007



The UAW and the Company have discussed at length the Company’s on-going financial difficulties,
loss of market share and other competitive challenges. The parties have also discussed that the
current cost of providing post-retirement medical care is one of the most critical issues facing
the Company’s ability to compete in the North American marketplace. The UAW’s goal in these
discussions was to secure, to the greatest extent possible, these benefits which are absolutely
crucial to the retirement security of UAW retirees who have spent a lifetime working for the
Company.



In connection with these discussions, the Company has provided the UAW extensive access to the
Company’s financial records as well as actuarial information about the current and future costs of
the Company’s post-retirement medical programs. The UAW, along with its outside consultants and
advisors, has conducted a thorough review of the Company’s financial position and the actuarial
information.



The importance of permanently restructuring post-retirement medical coverage for UAW represented
employees and retirees is underscored by the fact that the Company advised the UAW that it plans to
terminate the settlement agreement approved in the class action of Int’l Union, UAW, et. al. v.
General Motors Corp., Case No. 06-1475/2064 (the “Henry Case”), in accordance with its terms in
2011, and exercise its right to terminate and/or modify post-retirement medical coverage for UAW
retirees and their dependents. In these discussions, the UAW has reasserted its legal position
that post-retirement medical coverage for current UAW retirees is vested and unalterable.



As a result of these discussions, the parties have agreed, as set forth below, that responsibility
for providing post retirement medical benefits will permanently shift from the Company to the New
Plan and New VEBA as described in this MOU. This MOU is subject in its entirety to ratification
and necessary approvals as described below. This shall include, inter alia,
approval by the SEC of settlement or negative plan amendment accounting, and final court approval
of this Memorandum of Understanding (“MOU”) and the Final Settlement Documentation acceptable to
the parties and Class Counsel, including approval of a non-opt out class.



1. Definitions





	 	a.	 	Approval Order shall mean the order to be obtained from the United States
District Court for the Eastern District of Michigan, approving in all respects this
MOU and the Final Settlement Agreement Documentation, on a class-wide basis,
applicable to the Covered Group.




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	 	b.	 	Cash Flow Projections shall have the meaning set forth in Appendix A.
	 
	 	c.	 	Class Counsel shall mean counsel retained by named plaintiffs in the Henry
Case.
	 
	 	d.	 	The Committee shall mean the governing body that is responsible for the
management and operation of the New Plan and New VEBA.
	 
	 	e.	 	Company shall mean General Motors Corporation.
	 
	 	f.	 	Covered Group shall mean: i) all “Class Members” as such term is defined in
the settlement agreement in the Henry Case; ii) all “Future Retirees” as such term is
defined in the settlement agreement in the Henry Case who are retired as of September
14, 2007; iii) all active UAW-represented employees of the Company who are on roll and
have attained seniority as of September 14, 2007, and who retire from the Company with
eligibility for Retiree Medical Benefits utilizing the eligibility provisions of the
General Motors Health Care Program for Hourly Employees, as applicable to UAW
represented Company employees under the Supplemental Agreement Covering Health Care
Program of the 2003 GM-UAW National Agreement; iv) all UAW retirees of Delphi who are
retired as of September 14, 2007 and entitled to Retiree Medical Benefits from the
Company under the terms of Attachment B to the UAW-Delphi-GM Memorandum of
Understanding Delphi Restructuring; v) all UAW represented active employees of Delphi
or a former Delphi unit as of September 14, 2007, who retire with eligibility for
Retiree Medical Benefits from the Company under the terms of Attachment B to the
UAW-Delphi-GM Memorandum of Understanding Delphi Restructuring; vi) all UAW retirees
of any other closed or divested Company-UAW business unit who are retired as of the
date of this MOU to the extent the Company has responsibility for their Retiree
Medical Benefits; and vii) all UAW represented active employees of any other closed or
divested Company-UAW business unit who retire after the date of this MOU under
circumstances where the Company has responsibility for their Retiree Medical Benefits.
For purposes of this paragraph, the term active employee shall include 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. The Covered Group
shall also include eligible spouses, surviving spouses and dependents of the employees
and retirees in the Covered Group, and surviving spouses entitled to Retiree Medical
Benefits as a consequence of the death of an employee, who had seniority on or prior
to September 14, 2007 and who died prior to retirement while still an employee with
seniority, but in all cases only if they otherwise meet applicable health care program
eligibility rules for Retiree Medical Benefits. In applying this term, it is the
intent of the parties that all Company obligations for Retiree Medical Benefits for
UAW represented retirees and employees, including that related to the eligible
spouses, surviving spouses and dependents of such UAW represented retirees and
employees, shall be




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	 	 	 	terminated and transferred to the New Plan and New VEBA as of the Implementation Date.
Under no circumstances can the definition of the Covered Group be expanded beyond such
individuals or additional individuals be allowed to participate in the New Plan or New
VEBA.
	 
	 	g.	 	Existing External VEBA shall mean the DC VEBA established for mitigation
purposes pursuant to the settlement agreement in the Henry Case.
	 
	 	h.	 	Existing Internal VEBA shall mean the General Motors Welfare Benefit Trust
which is funded and maintained by the Company.
	 
	 	i.	 	Final Effective Date shall mean the date on which 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, the Approval Order has not
been disapproved or modified as a result of any appeal(s) from or other challenge(s)
to the Approval Order and the Company has completed, on a basis reasonably
satisfactory to the Company, its discussions with the staff of the SEC regarding
accounting treatment with respect to the New VEBA and the Company’s post-employment
retiree health obligation for the Covered Group as set forth in paragraph 24 —
Accounting Treatment.
	 
	 	j.	 	Final Settlement Documentation shall mean a detailed settlement agreement,
trust agreement, and other necessary documents, consistent in all material respects
with this MOU, as agreed to by the UAW, the Company, and Class Counsel and submitted
for court approval.
	 
	 	k.	 	Implementation Date shall mean the later of January 1, 2010 or the Final
Effective Date.
	 
	 	l.	 	Initial Effective Date shall mean the date on which the U.S. District Court
enters the Approval Order.
	 
	 	m.	 	New Plan shall mean the new retiree health care plan funded by the New VEBA
and established and maintained by either an independent committee or the joint
labor-management committee, as set forth in paragraph 16 — Trust Management, to
provide Retiree Medical Benefits for the Covered Group.
	 
	 	n.	 	New VEBA shall mean a new trust fund to be established effective on the
Implementation Date pursuant to this MOU and the Final Settlement Documentation. Such
trust fund shall be qualified as a Voluntary Employee Beneficiary Association by the
Internal Revenue Service under Section 501(c)(9) of the Internal Revenue Code and, if
applicable, meet the requirements of Section 302(c)(5) of the Labor Management
Relations Act, 29 U.S.C. Section 186(c)(5).




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	 	o.	 	Retiree Medical Benefits shall mean all post retirement medical benefits,
including but not limited to HSM, prescription drug, vision, dental and the $76.20
Special Benefit related to Medicare.
	 
	 	p.	 	Shortfall Amount Contribution shall mean the contribution amount, if any,
defined in section 11 — Shortfall Amount Contributions of this MOU.





Coverage and Benefits



2. Coverage. Under this MOU and the Final Settlement Documentation the New Plan and the New VEBA
will, as of the Implementation Date, assume responsibility for all Retiree Medical Benefits for
which the Company would have formerly been responsible with regard to the Covered Group. The
medical benefit coverages for active employees prior to their retirement are not within the scope
of this MOU and will continue to be provided in accordance with the terms of the applicable
collective bargaining agreement and health care benefit plan. Similarly, Retiree Medical Benefits
for UAW-represented employees of the Company who become seniority employees after September 14,
2007 are outside the scope of this MOU and such benefits, if any, will be provided in accordance
with the applicable provisions of the 2007 or a subsequent GM-UAW National Agreement.



3. Benefits for the Covered Group. Retiree Medical Benefits for the Covered Group will be provided
as follows: (i) Retiree Medical Benefits will continue to be provided through the Implementation
Date under the General Motors Health Care Program for Hourly Employees at the same scope and level
set forth in the settlement agreement in the Henry Case, including Mitigation (for those entitled
to it) by the Existing External VEBA; (ii) from the Implementation Date through December 31, 2015,
Retiree Medical Benefits will continue to be provided at the scope and level set forth in the
settlement agreement in the Henry Case but shall be provided through the New Plan and the New VEBA;
and (iii) commencing January 1, 2016, Retiree Medical Benefits will continue to be provided through
the New Plan and New VEBA at the scope and level set forth in the settlement agreement in the Henry
Case, except that the Escalation (as defined in the settlement agreement in the Henry Case) will
be 4%. Provided that as to both (ii) and (iii) the Committee will have the authority provided for
in the Trust Agreement as set forth in paragraph 17 — Trust Agreement.



4. Implementation of New VEBA and Benefits Upon the Implementation Date. The New VEBA shall be
solely responsible for providing Retiree Medical Benefits to the Covered Group beginning with
claims incurred on or after the Implementation Date. In this regard, the Approval Order shall
provide that on the Implementation Date the New VEBA shall assume all the responsibilities and
liabilities of the Company and any Company benefit plan associated with the provision of Retiree
Medical Benefits for the Covered Group for claims incurred on or after the Implementation Date and
all the responsibilities and liabilities of the Existing External VEBA on such date. The parties
agree that the provisions of the General Motors Health Care Program for Hourly


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Employees in any way related to Retiree Medical Benefits for the Covered Group and all applicable
collective bargaining agreements, letters and understandings in any way related to Retiree Medical
Benefits for the Covered Group will be amended to terminate effective on the Implementation Date.
No Retiree Medical Benefits or payments related to claims incurred after the Implementation Date
will be provided by the Company or a Company benefit plan to the Covered Group after the
Implementation Date. The General Motors Health Care Program for Hourly Employees will remain
responsible for claims incurred prior to the Implementation Date and the payment of such claims
will not reduce the Company’s funding obligations regarding the New VEBA under this MOU.




Payments to the New VEBA and Certain Other Financial Items



5. Separate Bookkeeping Within Existing Internal VEBA. Effective January 1, 2008 for bookkeeping
purposes only, the Company will cause the Existing Internal VEBA to be divided into two bookkeeping
accounts. One account will consist of the percentage of the Existing Internal VEBA’s assets as of
January 1, 2008 equal to the percentage of GM’s hourly OPEB liability that is not attributable to
UAW associated employees and retirees, their eligible spouses, surviving spouses and dependents
(the “Non-UAW Related Account”). The second account will consist of the remaining assets as of
January 1, 2008 (the “UAW Related Account”). Investment returns on and after January 1, 2008 will
be applied to the bookkeeping accounts proportionally in relation to the value the assets in the
UAW Related Account have to all the assets in the Existing Internal VEBA. All the assets in the
Existing Internal VEBA (both in the Non-UAW Related Account and the UAW Related Account) shall be
invested by the Company in the same manner as it has historically invested the assets of the
Existing Internal VEBA. During the period beginning January 1, 2008 and ending on the Final
Effective Date no amounts from the UAW Related Account, including its asset returns, will be
disbursed from the Existing Internal VEBA. If the Final Effective Date occurs, the Company will
cause the assets in the UAW Related Account on the date of the transfer to be transferred from the
Existing Internal VEBA to the New VEBA as provided in paragraph 9 — Sequencing of Initial Payments
to the New VEBA. The Company can elect to transfer cash in lieu of some or all of the investments
in the Existing Internal VEBA, including an amount equivalent to accrued and unpaid interest and
dividends net of reasonable liquidation costs.



6. Temporary Asset Account. On January 1, 2008, or as soon as reasonably practicable thereafter,
the Company shall establish a Temporary Asset Account (“TAA”) to be held by the Company or a wholly
owned subsidiary thereof, and shall deposit to the TAA a contingent cash payment in an amount equal
to the difference between $18.5 billion and the value of the UAW Related Account on January 1,
2008, plus interest on the amount of the contingent cash payment at 9% for the period from January
1, 2008 to the date of deposit. The $18.5 billion includes $2.5 billion which represents the
present value of the COLA adjustments ($1 billion) and the UAW’s decision to forego a 2009 wage
increase ($1.5 billion) as referred to in sub-paragraphs 10.c and 10.b — Wage Deferral of this
MOU. The Approval Order and the Final Settlement Documentation shall provide that, on the Initial
Effective Date, or as soon as reasonably practicable thereafter,


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the Company will deposit in the TAA: (i) an amount representing the $3.8 billion on a present value
basis as of January 1, 2008, as adjusted below, or in its discretion an annual amount as described
in the amortization schedule under Appendix C; and (ii) pay a $1.8 billion lump sum on a present
value basis as of January 1, 2008 or in its discretion pay an annual amount as described in the
amortization schedule under Appendix C. The payments in both (i) and (ii) will be increased to
reflect interest at 9% from January 1, 2008 to date of deposit. With regard to the adjustment of
the $3.8 billion, if the Initial Effective Date is after January 1, 2008, then the $3.8 billion
will be reduced by the value of wage deferral contributions paid or payable to the Existing
External VEBA under the settlement agreement in the Henry Case (assuming a 9% rate of return on
such contributions) from January 1, 2008 through the Initial Effective Date. With regard to
payments in (i) and (ii) above, the Company reserves the right to pre-fund the future annual
payments by paying the applicable “Buyout Amount” shown in Appendix C. Except as provided in this
MOU, control of the TAA and the assets in it shall be solely within the Company’s discretion. To
the extent practicable the assets in the TAA, other than the GM convertible note, shall be invested
in a manner consistent with the Existing Internal VEBA.



7. Convertible Note. On January 1, 2008, or as soon as practicable thereafter, the Company will
deposit in the TAA the GM convertible note described in Appendix B.



8. Payment to New VEBA. If the Final Effective Date occurs, the balance in the TAA as of the Final
Effective Date, excluding the convertible note provided for in Appendix B (the “TAA Equivalency”),
shall be deposited in the New VEBA as provided in section 9 — Sequencing of Initial Payments to the
New VEBA. If the Final Effective Date does not occur because (a) the Approval Order has been
disapproved or modified as the result of an appeal, or (b) the Company has not completed, on a
basis reasonably satisfactory to the Company, its discussions with the staff of the SEC regarding
accounting treatment with respect to the New VEBA and the Company’s obligation for Retiree Medical
Benefits for the Covered Group as set forth in paragraph 24 — Accounting Treatment, the TAA shall
be terminated. In addition, if the Final Effective Date has not occurred by December 31, 2011, the
TAA shall be terminated. If the TAA is terminated prior to the Final Effective Date, the Company
shall contribute to the Existing External VEBA cash in an amount equal to the amount that would
have otherwise been contributed to the Existing External VEBA, under the terms of the settlement
agreement in the Henry case, between the Initial Effective Date and the date of termination of the
TAA plus the earnings associated with such amount. Upon termination of the TAA, the remaining
assets may be used for any corporate purpose or purposes by the Company. The December 31, 2011 date
may be extended by agreement between the Company and the UAW.



9. Sequencing of Initial Payments to the New VEBA; Termination of Existing External VEBA and TAA.
The initial payments to the New VEBA shall be made, and the Existing External VEBA and TAA shall be
terminated, as provided below.





	 	a.	 	Within 10 business days after the Final Effective Date, the Company shall
direct the trustee of the Existing Internal VEBA to transfer to the New VEBA




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	 	 	 	the assets of the UAW Related Account or an amount equal to the balance in the UAW
Related Account on the date of the transfer (“Payment No. 1”). Upon transfer, the
Existing Internal VEBA trust agreement shall be amended to terminate participation and
coverage regarding Retiree Medical Benefits for the Covered Group.
	 
	 	b.	 	The Approval Order shall provide that the Existing External VEBA Committee
shall amend the terms of that VEBA to permit the transfer of its assets to and the
assumption of its liabilities by the New VEBA, and such Committee shall instruct the
trustee of the Existing External VEBA to transfer the entire balance of that VEBA to
the New VEBA after Payment No. 1 has been made and before the 15th business
day after the Final Effective Date (“Payment No. 2”). The Approval Order shall also
provide that the Existing External VEBA shall be terminated after Payment No. 2 has
been made.
	 
	 	c.	 	The balance in the TAA, excluding the convertible note, or at GM’s discretion
assets having a value equal to the balance in the TAA, excluding the convertible note,
as of the Final Effective Date, shall be transferred to the New VEBA after Payment No.
2 has been made and before the 20th business day after the Final Effective
Date (Payment No. 3). If the Company elects to transfer cash in lieu of some or all of
the investments in the TAA (other than the convertible note), it will include an
amount equivalent to accrued and unpaid interest and dividends net of reasonable
liquidation costs.
	 
	 	d.	 	The convertible note will be transferred to the New VEBA after Payment No. 3
has been made. This transfer will occur within 25 business days after the Final
Effective Date assuming the contribution is permitted by law. If the convertible note
is not a qualifying employer security, the Company and the New VEBA will apply for a
prohibited transaction exemption to permit the New VEBA to acquire and hold such
employer securities. Similarly, if employer securities and employer real property
would exceed 10 percent of the total assets in the New VEBA immediately after deposit
of the convertible note, the Company and the New VEBA will apply for a prohibited
transaction exemption to permit the New VEBA to acquire and hold the convertible note.
If the Company and New VEBA cannot timely obtain a needed exemption, the parties will
meet and discuss an appropriate alternative with comparable risk and value parameters.
After the contribution of the convertible note, the TAA shall be terminated.
	 
	 	e.	 	The UAW and the Company acknowledge that the instrument establishing the TAA
and communications to the Covered Group 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.
In the event the Company determines that the assets in the TAA are plan assets the
Company will apply for a prohibited transaction exemption to permit the acquisition
and holding of the employer securities in the TAA.




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10. Wage Deferral.





	 	a.	 	The Company will continue to deposit into the Existing External VEBA
the wage deferral established pursuant to the Section 13.C. of the settlement
agreement in the Henry Case (including all of the Cost of Living Allowance “COLA”
subtraction and non-payment of the September 18, 2006 general increase to the
hourly wage rate) until the Initial Effective Date. As a result of the Company
agreeing to pre-fund into the TAA the future wage deferral cash flow impact of
$3.8 billion from the Henry Case on the basis set forth in paragraph 6 — Temporary
Asset Account, the Approval Order shall provide that the Company will no longer be
required to make deposits of the wage deferral from the Henry Case and such wage
deferral will continue into perpetuity increasing at $0.02 per hour per quarter as
described in the settlement agreement in the Henry Case.
	 
	 	b.	 	There shall be no general increase to the hourly wage rate in 2009
regardless of whether or not the Final Effective Date occurs. As a result, the
Company agreed to pre-fund into the TAA $1.5 billion which represents the future
impact of a 3% Wage Increase in 2009.
	 
	 	c.	 	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 current or future employees into perpetuity.
As a result, the Company agreed to pre-fund into the TAA $1 billion which
represents the impact of this future COLA adjustments; provided however, that if
the Final Effective Date does not occur the cumulative effect of four cents
($0.04) per hour per quarter of COLA referred to in this subsection c. will be
reinstated and contributed prospectively to the Existing External VEBA, if
permitted by law. If not permitted by the law, the Company and the UAW will agree
on the disposition of such COLA adjustment.




11. Shortfall Amount Contributions. The Company will make an initial Shortfall Amount Contribution
of $165 million to the TAA on April 1, 2008. If in a given year after the year of such initial
payment, the Cash Flow Projection shows that the Company account or sub-account of the New VEBA
will become insolvent within 25 years following the January 1 immediately preceding such Cash Flow
Projection, the Company shall contribute to the New VEBA (or the TAA for periods prior to the Final
Effective Date) by April 1 an amount in cash equal to $165 million per occurrence. There will be no
more than 19 Shortfall Amount Contributions after the initial Shortfall Amount Contribution on
April 1, 2008. For any year in which the Cash Flow Projection shows that the Company’s account or
sub-account will maintain solvency for more than 25 years beyond the January 1 immediately
preceding such Cash Flow Projection, no Shortfall Amount Contribution will be required. (See
Appendix A for details concerning the Cash Flow Projections and Shortfall Amount Contributions
calculations.) Further, the Company reserves the right to pre-fund, at any time, all then-remaining
future annual


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Shortfall Amount payments by paying the applicable “buyout amount” (determined by the number of
Shortfall Amount payments made prior to the exercise of this pre-payment option) as shown in the
amortization schedule in Appendix C.



12. Other Payments to the Existing External VEBA.





	 	a.	 	The “Third Contribution” of $1 billion will continue to be
payable by the Company as set forth in the settlement agreement in the Henry
Case. In the event such payment becomes payable only after the Final Effective
Date, the Approval Order shall provide that such payment will be made to the New
VEBA rather than the Existing External VEBA.
	 
	 	b.	 	The Approval Order shall provide that any obligation of the
Company related to the amounts called for in the “Benefit Change Profits” or the
“Incremental Amount”, as set forth and defined in section 13 of the settlement
agreement in the Henry Case, shall cease upon the Initial Effective Date. In the
event that any amounts related to such items have been paid by the Company to
the Existing External VEBA prior to the Final Effective Date, the required
contributions set forth in paragraph 8 — Payment to New VEBA will be reduced by
such amount plus interest at 6%.
	 
	 	c.	 	The Approval Order shall also provide that if the contribution
related to “Increase in Stock Value” and “Dividends” as set forth in section 17
of the settlement agreement in the Henry Case is less than $240 million the
Company will contribute to the New VEBA the difference between the total
proceeds received in normal course and $240 million plus interest at 9%
effective from January 1, 2008 up to September 1, 2009. If the contribution
related to “Increase in Stock Value” and “Dividends” is more than $240 million
the required contributions set forth in paragraph 8 — Payment to New VEBA will
be reduced by the amount in excess of $240 million, plus interest at 9%.




13. Future Contributions. The UAW and the Covered Group may not negotiate to increase any of the
funding obligations set out herein. The UAW also agrees not to seek to obligate GM to: (i) provide
any additional contributions to the New VEBA; (ii) make any other payments for the purpose of
providing Retiree Medical Benefits to the Covered Group; or (iii) provide Retiree Medical Benefits
through any other means to the Covered Group. Provided, that, to the extent that may be proposed by
the UAW, employees are permitted to make contributions to the New VEBA of amounts otherwise payable
in profit sharing, COLA, wages and/or signing bonuses. The Approval Order shall specify that any
such future contribution by employees is permitted under Section 302.



14. Pension Benefits. As part of the consideration for the economic substance of the matters set
forth in this MOU, the Company and the UAW agree to amend the General Motors Hourly-Rate Employees
Pension Plan (“Pension Plan”) on the Final Effective Date to provide to retirees who are members of
the Covered Group and eligible surviving


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spouses who are members of 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 Final
Effective Date. This special lifetime benefit is intended to serve as a cost pass-through to the
New VEBA of an equivalent after tax increase in the monthly contribution regarding Retiree Medical
Benefits for the Covered Group. As a result, the New Plan and New VEBA shall assess an additional
non-escalating monthly contribution payable by the Covered Group for Retiree Medical Benefits of
$51.67 per month.



Retirees and surviving spouses who are members of the Covered Group but not currently receiving a
monthly benefit from the Pension Plan will not be entitled to receive the flat monthly special
lifetime benefit of $66.70 nor will they be required to make the monthly contribution to the VEBA
of $51.67. For purposes of determining a current or future Covered Group member’s status as a
Protected Retiree under the terms of the settlement agreement in the Henry Case, 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 pension income.



15. Administrative Costs. The New VEBA will be responsible for all administrative costs of the New
Plan and the New VEBA commencing on the Implementation Date.




Other Items



16. Trust Management. During the negotiations regarding this MOU, the UAW proposed that the
Company agree to structure the New VEBA as a multi-employer trust governed by a joint
labor-management committee in accordance with Section 302(c)(5) of the Labor Management Relations
Act, 29 U.S.C. §186(c)(5), that included Company representation. The Company responded by
indicating that it would consider the request subject to the need to secure appropriate accounting
treatment as set forth in paragraph 24 — Accounting Treatment. To resolve this issue, the Company
has agreed to include as a part of its submission to the SEC a request for guidance on the impact
of a Company representative serving as a member of the New VEBA trust committee in accordance with
the terms of the trust agreement as described in paragraph 17 — Trust Agreement. If as a result
of the Company’s discussions with the SEC staff the Company reasonably believes that participation
on the New VEBA trust committee would adversely impact the Company’s proposed accounting regarding
the transaction, the Company may elect not to participate on the New VEBA trust committee. The
Company’s failure to secure the required favorable accounting treatment as set forth in paragraph
24 — Accounting Treatment will result in no Company participation on the New VEBA trust committee.



In the event that the Company participates on a trust committee with Ford and/or Chrysler, the
Trust Agreement and the Final Settlement Documentation will provide for separate accounts or
separate sub-accounts for each participating company and that the assets in each separate account
or sub-account may only be used for the covered group of each respective company. If more than one
company participates in the New VEBA, all benefits provided shall be paid from the respective
company’s sub-account. No assets in the Company account or sub-account may be used to pay for
benefits to persons other


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than the Covered Group and assets from any other account or sub-account in the New VEBA may not be
used to pay for benefits for the Covered Group. In addition, the Trust Agreement, Final Settlement
Documentation and Approval Order shall provide that the Company or the Company’s account or
sub-account will not have any liability for the obligations of either Ford and/or Chrysler or their
retirees if a multi-employer structure should apply.



17. Trust Agreement. The Final Settlement Documentation will include a trust agreement (the “Trust
Agreement”) which will govern the operation of the New VEBA. The Trust Agreement shall be prepared
by the UAW and Class Counsel, and shall be subject to approval by the Company whose approval shall
not be unreasonably withheld. The trust agreement will incorporate the following:





	 	a.	 	The Trust Agreement shall provide that to the extent
permitted by law the New VEBA shall indemnify and hold the Committee, the
UAW, GM and the employees, officers and agents of each of them harmless from
and against any liability that they may incur in connection with their duties
in regard to the New Plan and New VEBA, unless such liability arises from
their gross negligence or intentional misconduct. 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.
	 
	 	b.	 	The Committee shall establish the New Plan for the Covered
Group consistent with the terms of this MOU and, if applicable, Ford and/or
Chrysler covered groups respectively. Except as otherwise specified in this
MOU and the Trust Agreement, the Committee shall have sole discretion to
determine the Retiree Medical Benefits to be provided to the Covered Group
(and if applicable the Ford and/or Chrysler covered groups) by the New Plan
and New VEBA, including without limitation, the form, amount and conditions
of such benefits and the contributions that the Covered Group must make to
help defray the cost of their coverage.
	 
	 	c.	 	The Committee will be required to maintain benefit levels
in all cases to be consistent with the level set forth in the terms of the
settlement agreement in the Henry Case until January 1, 2012.
	 
	 	d.	 	The Committee will have the authority and the obligation to
adjust benefit designs to accommodate evolving clinical standards and
appropriate new technologies. The Committee shall also have authority to
implement utilization management/review programs and take other reasonable
steps to promote efficient delivery of benefits.
	 
	 	e.	 	The Trust Agreement shall provide that on or after the
Implementation Date the New VEBA shall be entitled to receive any Medicare
Part D




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	 	 	 	subsidies and other health care related subsidies regarding benefits actually
paid by the New VEBA which may result from future legislative changes, and that
the Company shall not be entitled to receive subsidies related to prescription
drug benefits and other health care related benefits provided to the Covered
Group by the New Plan and New VEBA.




18. Default and Cure. The Committee of the New VEBA will have the right to accelerate some or all
of the payment obligations of the Company under this MOU if the Company defaults on any payment
obligations under this MOU and such default is not cured within 15 business days after the
Committee gives the Company notice of such default. To cure such default, the Company will pay the
amount then in default plus accrued interest on such amount at the rate of 9% per annum. Payments
due under the convertible note may also be accelerated under this provision only to the extent that
the note is then held by the New VEBA. GM also agrees to provide the trust with the same covenants
in Section 4.06 of the GM indenture, filed with the SEC on Form S-3, dated November 14, 1995.



19. Cooperation. The Company shall cooperate with the Committee and at the Committee’s request
undertake such reasonable actions as will assist the Committee in the transition of responsibility
for plan administration from the Company to the New VEBA and the Committee. Such cooperation shall
include educational efforts and communications with respect to the Covered Group so that they
understand the transition and understand the claims submission process and any other administrative
changes undertaken by the Committee. Before and after the Implementation Date, at the Committee’s
request and as permitted by law, the Company shall 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 VEBA and the New Plan, including, without limitation, the
implementation and administration of voluntary premium deductions from the pension benefits of
retirees, and the retrieval of data in a form and to the extent maintained by the Company regarding
age, service, pension and medical benefit eligibility, marital status, mortality, claims history
and enrollment information of the Covered Group. The Company shall also cooperate with the Union
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 New VEBA, including ensuring an orderly
transition from Company administration of the Retiree Medical Benefits to the New Plan and New
VEBA. The Company shall be financially responsible for reasonable costs associated with the
transition of coverage for the Covered Group to the New Plan and New VEBA. This shall include
educational efforts and communications with respect to retirees, creation of administrative
procedures, initial development of record sharing procedures, the testing of computer systems,
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


12









 






there under. The Company payments described in this Paragraph shall not reduce its funding, and if
the New VEBA is a multi-employer welfare trust 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.



20. Fees. The UAW will apply to the court for reimbursement of reasonable attorney and
professional fees (not to include any success fee, completion bonus or rate premiums) for work
performed in connection with the court proceedings and approval for the payment of certain
professional fees associated with the settlement process. The Company agrees not to oppose such
application for reasonable fees, and the Company shall bear the cost of mailing all required
notices to Company related class members in connection with obtaining court approval.



21. Indemnification. The parties will seek court approval of a mutually agreeable indemnity
provision whereby the Company agrees to indemnify the UAW from liability incurred as a result of
the UAW’s entering into, or participation in the discussions regarding this MOU.



22. Legal Judgment. There is currently a dispute between the Company and the UAW regarding whether
the Company can unilaterally modify Retiree Medical Benefits or whether such benefits are vested
with respect to Covered Group Members currently receiving Retiree Medical Benefits. The Henry Case
was filed by the UAW and retirees in the U.S. District Court for the Eastern District of Michigan
regarding this dispute. As soon as reasonably practical, GM and the UAW will jointly file a motion
in the Henry Case to modify or amend the settlement agreement in that case to conform to the terms
of this MOU and Final Settlement Documentation, promptly serve a copy of the motion on Class
Counsel, and take whatever other action is reasonably necessary to obtain a judgment modifying the
existing Henry Case settlement agreement as described and approving a superseding class-wide
settlement which (a) incorporates this MOU and the Final Settlement Documentation, and (b) is
binding on all the Covered Group, the Company and the UAW. The parties will work diligently and in
good faith to finalize, as soon as possible, a settlement agreement, secure class certification,
and obtain a judgment approving a class settlement that is fair for all class members, consistent
with the terms of this MOU and binding upon the Covered Group. The parties will also work in good
faith to support the settlement should any appeals be filed.



23. No Prejudice. This MOU, and anything occurring in connection with reaching this MOU, are
without prejudice to the Company, the UAW and the Covered Group. It is intended that neither party
nor the Covered Group may use this MOU, or anything occurring in connection with reaching this MOU,
as evidence against GM, the UAW or the Covered Group in any circumstance except where the parties
are operating under or enforcing this MOU or the Approval Order.



24. Accounting Treatment. Throughout the negotiations, the Company has emphasized that a key
element in its decision to enter into the MOU is securing satisfactory accounting treatment
regarding the transaction. In the event that the


13









 






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 MOU would give rise to substantive plan amendment accounting. For purposes
of this provision, substantive plan amendment accounting would reflect the Company’s revised, fixed
and capped obligations as determined under this MOU. The parties agree that the MOU, Final
Settlement Agreement Documentation and Final Effective Date are contingent on the Company securing
the appropriate accounting treatment for the Company’s obligations to the Covered Group for Retiree
Medical Benefits. As soon as practicable after ratification of the MOU, the Company will discuss
the accounting for the New VEBA and its obligations to the Covered Group for Retiree Medical
Benefits with the staff of the Securities and Exchange Commission (SEC). If, as a result of those
discussions, the Company 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 the Company, 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 the Company reasonably believes will provide such accounting, the MOU will
terminate. If the discussions with the staff of the SEC are not complete by the date of the Final
Settlement Documentation, the Final Settlement Documentation will contain a corresponding provision
regarding the appropriate accounting and termination of the final settlement if such accounting is
not achieved as to the New VEBA and Company’s obligations to the Covered Group for Retiree Medical
Benefits.



25. Conditions Precedent. This MOU is subject, in its entirety, to ratification in accordance with
the UAW Constitution; obtaining a class certification order in a form acceptable in form and
substance to GM, the UAW and Class Counsel; obtaining an Approval Order as defined herein including
appropriate releases, in a form acceptable in form and substance to GM, the UAW and Class Counsel;
treatment of the Henry Case Settlement as described in this MOU; the Company’s completion, on a
basis reasonably satisfactory to the Company, of its discussions with the staff of the SEC
regarding accounting treatment with respect to the New VEBA and the Retiree Medical Benefits for
the Covered Group as set forth in paragraph 24 — Accounting Treatment; if applicable, a
determination by the Company that the New VEBA satisfies the requirements of Section 302(c)(5) of
the Labor Management Relations Act and that the Company Sub-account can be lawfully segregated from
claims by Ford and/or Chrysler retirees; and the occurrence of the Final Effective Date as defined
herein. In the event that the Final Effective Date has not occurred before January 1, 2012, but the
court approval process is still underway on such date, the Company and the UAW may, by mutual
agreement, maintain in full force and effect the settlement of the Henry Case.



26. Final Documents. All matters set forth in this agreement are subject to full legal
documentation satisfactory to the parties consistent with the provisions set forth in this
agreement.




14









 







27. Health Care Reform. The Company will publicly support federal policies to improve the quality
and affordability of health care, and work cooperatively with the UAW towards that goal in
accordance with Attachment E of the Memorandum of Understanding dated October 29, 2005.



28. National Institute For Health Care Reform. The parties agree to form a National Institute for
Health Care Reform to be effective on or after the Initial Effective Date. The details of such an
institute require further discussion and analysis by the parties with the goal of completing such
discussions by the date of the Final Settlement Documentation. Subject to Ford and Chrysler
participation and their financial support on a proportionate basis, the Company agrees to make five
annual $3 million dollar contributions to support a National Institute for Health Care Reform
commencing on the later of the Initial Effective Date or establishment of the institute.



Such institute would be established to conduct research and to analyze the current medical
delivery system in the United States, develop targeted and broad-based reform proposals to improve
the quality, affordability and accountability of the system, and educate the public, policymakers
and others about how these reforms could address the deficiencies in the current system, e.g.,
skyrocketing costs, massive number of people left uninsured, profit driven decision-making on
delivery of care, etc. The Institute would be the premier research and educational health care
reform “think tank” dedicated to understanding, evaluating and developing thoughtful and innovative
reform measures that would improve the medical delivery system in the U.S. and expand access to
high quality, affordable and accountable health coverage for all Americans. The Institute would:





	 	•	 	Engage economists, analysts, academics and others who are experts on the U.S. and
other health care systems as well as the public policies, physician, hospital and
other provider systems that would need to be changed to improve health care quality,
affordability and accountability in the U.S.
	 
	 	•	 	Conduct studies and analyses of the current system and alternative structures,
including ways to reduce prescription drug costs, ensure drug safety and better inform
patients of appropriate drug choices
	 
	 	•	 	Operate as a clearinghouse for best practices that should be employed throughout
the medical delivery system to ensure that error-free, high quality health care is
available throughout the U.S.
	 
	 	•	 	Develop innovative policy solutions to improve the current health care system
	 
	 	•	 	Host forums for discussion and debate of public policies that would improve the
health care system and facilitate the interaction of ideas among experts
	 
	 	•	 	Formulate wide-ranging communications materials that discuss and describe reform
measures.




29. No Responsibility for Asset Returns. The parties recognize that the Company is not responsible
for, nor does it guarantee the asset returns of the amounts in the TAA or the New VEBA.




15









 







30. Termination. This MOU shall terminate if:





	 	a.	 	The Final Effective Date has not occurred by December 31, 2011 and the Company and
the UAW do not agree to an extension of time to reach the Final Effective Date; or
	 
	 	b.	 	The conditions precedent set forth in paragraph 25 are not met by December 31, 2011
and the Company and the UAW do not agree to an extension of time to meet the conditions
precedent.





	 	 	 	 	 	 	 
	International Union, UAW

	 	 	 	General Motors Corporation	 	 
	 
	 


	 	 
	 	 

	 	 
	 


	 	 
	 	 

	 	 
	 


	 	 
	 	 

	 	 
	Dated:

	 	 	 	Dated:	 	 







16











 





Appendix A — Cash Flow Projections




Timing and Census Data



Each year prior to the Final Effective Date, before February 28th of such year, a
qualified actuary retained by the Company (the “Company Actuary”) or commencing on the Final
Effective Date, before the later of February 28, of such year, or 45 days after the communication
to the Committee by the Company of the actuarial assumptions described in the first paragraph of
Cash Flow Assumptions below, a qualified actuary retained by the Committee (the “Actuary”), shall
perform a 60 year cash flow projection (the “Cash Flow Projection”) based on generally accepted
actuarial standards of practice including the census data, assumptions and methods outlined below.
(Note: Reference to the “Actuary” herein shall be deemed to refer to the Company Actuary when
describing activities occurring prior to the Final Effective Date.)



The cash flows included in the Cash Flow Projection will be based on the entire cash flow amount
(i.e., cash flow based on the “expected post-retirement benefit obligation” as defined by FASB
Statement No. 106), and will not be based on a pro-rata portion of the cash flow based on an
employees’ past years of service (i.e. cash flow based on the “accumulated post-retirement benefit
obligation” as defined by FASB Statement No. 106).



The Cash Flow Projection shall be performed based on an annual actuarial valuation with a
measurement date as of the December 31 immediately prior to the February 28 delivery date for the
Cash Flow Projection. The projected annual cash flow amounts included in the Cash Flow Projection
should be determined on a calendar year basis.



The participant census data used for the projection should be based on participant census
information collected no more than six (6) months prior to the measurement date described above,
updated for significant changes or events occurring between the data collection date and the
measurement date (examples of significant events include, but are not limited to, special attrition
programs, divestitures and plant closings). The participant census data file should only include
individuals in the Covered Group.




Cash Flow Assumptions



For purposes of performing the Cash Flow Projection, the following actuarial assumptions, as
communicated to the Committee by the Company should be identical to those used by the Company for
the Covered Group with the FASB Statement No. 87 (FAS87) actuarial valuation of the General Motors
Hourly Pension Plan for the fiscal year ending on or before the measurement date





	 	•	 	Mortality table assumptions for healthy and disabled participants
	 
	 	•	 	Employee turnover assumptions
	 
	 	•	 	Retirement age assumptions
	 
	 	•	 	Disability incidence assumptions




17









 












	 	•	 	Assumed age difference between employees/retirees and their covered spouse
(except where actual data is used and available such as existing retirees)




The health care trend rate assumption used for the Cash Flow Projection will be set based on the
average assumptions reported in the most recent Deloitte Consulting Annual Survey of Economic
Assumptions and the Watson Wyatt Annual Survey of Accounting and Other Post-retirement Benefits for
SFAS 106/87 Assumptions, as of the measurement date each year. The information used from the
survey shall be as follows:




	 	 	 
	i)

	 	Initial year health care trend rates

	ii)

	 	Ultimate health care trend rate
	iii)

	 	Number of years from the year of the initial year health care
trend rate to the year of the ultimate trend rate.






The health care trend rate components above shall be set equal to the average of the median results
reported in the two surveys. Health care trend rates between the initial and ultimate rate will be
determined based on grading the rates down linearly over the number of years from the initial to
the ultimate rate.



If the Actuary determines that the default health care trend rate assumptions described above do
not fall within a reasonable range (such as the Best Estimate Range as defined in the Actuarial
Standard of Practice 27) based on emerging plan experience, the Actuary may adjust those default
values to reflect such anticipated experience, as long as the adjusted values do not differ from
the default calculated values by an amount not to exceed the corridor shown below:



	 	 	 	 	 
	i)

	 	Initial year health care trend
	 	+/- 0.25%
	ii)

	 	Ultimate year health care trend
	 	no corridor
	iii)

	 	Trend for interim years
	 	pro rata from Initial to Ultimate
	iv)

	 	Years to Ultimate: default value
	 	+/- 2 years from rounded





The Company Actuary will provide the UAW and Committee (if in existence) or the Actuary will
provide the Company with documentation to justify the use of assumptions different from the default
health care trend, as anticipated under the Actuarial Standards of Practice.



The initial year health care trend rate shall be applied to increase base year per capita costs, as
defined below. For example, for the Cash Flow Projections with a Measurement Date of December 31,
2011, the initial year health care trend rate is applied to the increases in per capita claims
costs from 2010 to 2011.



The health care trend rate assumptions described above shall be applied to all of the per capita
cost amounts described below, except for the per capita costs for plan




18









 







administrative fees and expenses. The trend rate assumption to be applied to plan administrative
expenses shall be no more than 3% per annum



Health care trend rates shall not include the impact of i) any actual or anticipated plan design
changes, or ii) the impact of any changes in the age or Medicare-eligibility status of the Covered
Group already reflected in the per capita health care claims costs. Those cost drivers should be
separately reflected appropriately within the valuation, but outside of the medical trend
assumption.



To the extent that the published surveys referenced above cease to be published, or based on the
mutual agreement of the Company, and the Committee (as advised by their respective Actuaries) cease
to be appropriate for use in this analysis, a suitable alternative shall be found and agreed upon
by the parties.




Claim Cost Calculations



Base year per capita health care claims costs shall be prepared utilizing actual incurred per
capita health care claims for the calendar year immediately prior to the year of the measurement
date, with claims run-out for at least 3 months following the year (for example, for the December
31, 2011 measurement date, per capita claims costs shall be prepared based on actual per capita
claims costs incurred during the 2010 calendar year, based on claims run-out through at least March
31, 2011). Per capita claims costs should be adjusted for the estimated amount of any claims
incurred but paid after the run-out date using generally accepted actuarial principles and
historical actual claims run-out experience for the Retiree Medical Benefits provided to the
Covered Group.



Separate per capita claims costs should be prepared for each of the following benefits: HSM,
prescription drugs, dental, vision and plan administrative fees and expenses. For purposes of per
capita claim cost projections determined for claim costs prior to the Effective Date, a five (5)
basis point load for administrative expenses shall be included in the experience.



To the extent that the results are statistically credible, per capita costs should be prepared by 5
year age groups. Where cohort groups of five year age groups or benefits do not result in
statistically credible populations, reasonable actuarial techniques to smooth the claim experience,
combine age groups or otherwise determine costs in such a way as to approximate the desired level
of detail without compromising the integrity of the results will be permitted. Separate per capita
costs should be prepared for gross HMSD costs (prior to reduction for deductibles, coinsurance and
other point-of-care cost-sharing, but net of the portion of the costs paid by Medicare), HMSD
deductibles, coinsurance and other point-of-care cost-sharing, gross prescription drug costs
(prior to reduction for deductibles, coinsurance and other point-of-care cost-sharing, but net of
the portion of the costs paid by Medicare), and prescription drug deductibles, coinsurance and
other point-of-care cost-sharing. Separate HMSD per capita costs will be prepared for the TCN
program, the PPO program and for HMOs.




19









 







Prescription drug per capita costs shall reflect the level of prescription drug rebates, subsidies
or other discounts that the Committee has negotiated with their prescription drug vendor or
received from CMS or otherwise as of the measurement date.



The per capita costs should represent costs for the plan designs described in this MOU (and by
reference, the 2005 Henry Case). If the Committee changes the Retiree Medical Benefits provided to
the Covered Group from the plan designs described in this MOU, and/or if the historical claims
information used to develop the per capita costs reflect claims under a design that differs from
the design described in this MOU, the per capita costs should be appropriately adjusted to be no
larger or smaller than an actuarial estimate of the costs that would have been incurred under the
plan design described in this MOU. Adjustment factors should be developed based on generally
accepted actuarial standards and reflect differences in items such as (but not limited to) changes
in cost-sharing, changes in government programs and anticipated changes in utilization of health
care services. The adjustment factors used shall be mutually agreed upon by the Committee, the UAW
and the Company.



The current General Motors Hourly OPEB Medical FASB Statement No. 106 actuarial valuation assumes
that any savings attributable to changes in health care utilization resulting from the plan changes
approved in the settlement in the Henry Case will gradually decrease over time to the extent that
actual health care trend increases are higher than the annual Escalation of the retiree
cost-sharing amounts. The Cash Flow Projection should apply this same assumption for this gradual
decrease in utilization savings, unless actual experience proves to be different.



The Cash Flow Projection should reflect monthly contributions made by retirees and any future
Escalation on those amounts. The Cash Flow Projection should also reflect the contribution
associated with the flat monthly special lifetime benefit of $66.70 (which will not be escalated)
which, when adjusted for the net of average expected Federal, State and Local income taxes results
in a monthly amount of $51.67 to be contributed to the VEBA commencing on the first of the month
immediately following the Final Effective Date



The General Motors Hourly OPEB Medical FASB Statement No. 106 actuarial valuation currently
includes assumptions regarding the following:





	 	•	 	Percentage of retirees electing coverage
	 
	 	•	 	Percentage of future retirees electing coverage for a spouse
	 
	 	•	 	Prevalence of non-spouse dependents




As appropriate, and consistent with generally accepted actuarial principles, the Cash Flow
Projection shall include assumptions for the items listed above based on experience studies of the
Covered Group conducted at least every 5 years, and implemented as soon as practicable following
the completion of the experience study.




20









 







Cash Flow Projections will reflect any wage and COLA contributions as defined in the settlement
agreement in the Henry Case made through the Initial Effective Date. Additionally all Cash Flow
Projections will reflect agreed upon upfront cash settlements, such as those related to the present
value of the COLA adjustments and the UAW’s decision to forego a 2009 wage increase, and required
future contributions such as the “Third Contribution” and the Increase in Stock Value Contribution
described in Paragraph 12 of the Agreement. No additional employee contributions permitted under
Paragraph 13 of the Agreement will be included.




Shortfall Contribution



For purposes of determining whether any Shortfall Amount Contributions will be required under
Paragraph 11, the Cash Flow Projection shall use an expected return on assets compounded equivalent
to a 9% annual rate of return. The Cash Flow Projection shall not assume receipt of any future
Shortfall Amount Contributions.



For purposes of determining whether any Shortfall Amount Contributions will be required, the Cash
Flow Projection shall assume the following with respect to the timing and crediting of the assumed
9% expected return on assets of cash in-flows and out-flows:





	 	•	 	Health care benefits incurred, plan administrative fees, Medicare Part
B supplemental benefits, retiree point-of-care cost-sharing incurred and retiree
contributions incurred — assume annual amounts are incurred monthly, are equal to
1/12th of the projected annual calendar year amounts, and are
received/payable:
	 
	 	•	 	For the $76.20 Special Benefit related to Medicare Part B supplemental
benefits paid, and retiree contributions received: at the beginning of the month,
	 
	 	•	 	For all other benefits: at the middle of the month.
	 
	 	•	 	The Company Actuary or the Actuary may add a reasonable additional
first year cash flow to reflect the run-out of claims for services rendered prior
to the measurement date and the administrative expenses necessary to process such
claims (IBNR).
	 
	 	•	 	Cash and stock contributions will be contributed as of their scheduled
date.




For purposes of determining whether any Shortfall Amount Contributions will be required, the
starting and projected value of the assets of the New VEBA shall be measured on a market value
basis, adjusting for accrued income and accrued expenses. However, if the Committee modifies the
benefits provided by the New Plan or New VEBA the cumulative difference in actual benefits paid
versus those that would have been paid, had there been no change in the benefit structure or the
retiree group will be added/subtracted from the starting market value of assets to offset for such
changes. Such adjustment will also include expected investment returns on those payments at
historical




21









 







rates of return. Reasonable estimates may be used. Actual benefits paid may need to change
depending on asset returns, medical trend, and other factor.



For purposes of measuring the market value of the convertible notes for the solvency test, the
value used will be the greater of the value of the convertible security on an as converted basis or
the average of quotes received from three financial institutions to be chosen by the Committee.
Each of the financial institutions chosen by the Committee shall be one of the top five
underwriters (in dollar terms) of convertible debt securities in the last year. The individual
quotes from the financial institutions will be based on an average price of GM common stock for the
five business days immediately leading up to the solvency test date and will be based on common
valuation information provided by the Committee to the three institutions.



Generally accepted actuarial standards and practices evolve over time. In recognition of this fact,
the actuarial assumptions and methods used to prepare the Cash Flow Projections and to determine
whether Shortfall Amount Contributions are required may be changed from those outlined in this MOU
upon mutual agreement of the Committee and the Company.



In the event that the Company or the UAW disputes the assumptions or methodology used by the
Actuary in calculating the Cash Flow Projection, the dispute shall be resolved through an expedited
dispute resolution procedure (which shall be set forth in detail in the Final Settlement Agreement
Documentation), with final resolution by a neutral actuarial firm if necessary. In such event, the
Cash Flow Projection will be due not earlier than 30 days following the date of the dispute
resolution.



For purposes of determining the Company’s obligation to make a Shortfall Amount Contribution, the
Cash Flow Projection will not include Ford or Chrysler related assets or obligations.




Other



After the transfer of UAW Related Assets referenced in paragraph 9, the New VEBA will reimburse the
Company and the Company will reimburse the New VEBA within 10 business days (or, in the case of any
Actual Mitigation True Up Amounts, no later than the October 1 following the Implementation Date)
an amount based on generally accepted actuarial standards, as calculated by the Company Actuary and
reviewed and approved by the Actuary, for any mitigation or other amounts that the Existing
External VEBA owes or owed the Company, including but not limited to mitigation true up and
administrative cost in manner consistent with the Henry case settlement.



The Company and the Committee shall have the right to audit all information used to derive any
calculation or amount referenced in this section. The parties shall fully cooperate with any such
audit.






22









 








Appendix B — Convertible Note and Registration Rights




Summary Term Sheet:

$4.3725 billion Convertible Note




	 	 	 
	Term	 	Description
	Issuer:	 	GM

	 	 	 

	Holder:	 	New VEBA Trust

	 	 	 

	Aggregate Principal Amount:	 	$4.3725 billion

	 	 	 

	Annual Interest Rate:	 	6.75% yearly payable in cash, semiannually
beginning June 30, 2008 (for the period from
January 1, 2008 to June 30, 2008)

	 	 	 

	Maturity:	 	5 years from issue date

	 	 	 

	Conversion Price:	 	$40.00

	 	 	 

	Equivalent Common Stock:	 	109,312,500 shares at $40.00 conversion price

	 	 	 

	Issuer Call Option:	 	Callable at par at the Issuer’s option at
anytime 3 years after the date of issuance.
Issuer will also pay accrued and unpaid
interest up to the date of redemption plus
the Make-Whole, if any.

	 	 	 

	Holder Conversion Rights:	 	(1) Holder will have the option to convert
the Convertible Note into GM common stock
upon Issuer providing notice that it intends
to exercise its Call Option. (2) Holder will
have the option to convert during the 3
months prior to maturity. (3) Holder will
have the option to convert prior to maturity
under the following circumstance: During any
calendar quarter commencing after the
issuance date if the closing price of the
common stock exceeds 120% of the Conversion
Price (Conversion Trigger Price of $48.00)
for at least 20 trading days in the 30
consecutive trading days ending on the last
trading day of the preceding calendar
quarter. Upon any such conversion by Holder,
GM will pay Holder all accrued and unpaid
interest up to the date of conversion in cash
as well as, only, in the case of clause (1),
the Make-Whole, if any, in cash.

	 	 	 

	Make-Whole:	 	Upon call of all or a portion of the
Convertible Note (the “Called Amount”) by GM,
GM will pay to the New VEBA Trust the Call
Payment. The Call Payment is equal to the
present value, at 9%, to the date of the call
of the Remaining Cash Flow Payments due on
the Called Amount. The Remaining Cash Flow
Payments are equal to the difference between
the interest payments (at 6.75%) that would
have otherwise been received on the Called
Amount to the Maturity Date less the dividend
payments (based on the annual dividend in
effect at the time of the call) to be
received on the shares that the Called Amount
would be converted into (at a $40.00
conversion price) to the Maturity Date. The
Call Payment is not a transferable
instrument. GM should not have to pay the
Call Payment if GM stock has already accreted
to $69.04 after year 3 and $72.75 after year
4 for the portion of the stock that the New
VEBA Trust would be free to sell at that
time.

	 	 	 

	Registration:	 	GM will provide registration rights for the
resale of the (1) Convertible Note or (2) GM
Common Stock issuable upon the conversion of
the Convertible Note, on terms consistent
with the Registration Rights Agreement
Summary Term Sheet attached hereto.

	 	 	 

	Anti-Dilution:	 	Standard anti-dilution protections.

	 	 	 

	Lock-Up:	 	Holder shall not sell, hedge, assign or
transfer any interest in the Convertible Note
or GM Common Stock as a result of the
conversion without the prior consent of GM
until 1/1/2010. After 1/1/2010, Holder may
sell the Convertible Note or GM Common Stock
subject to reasonable volume restrictions for
public offerings and limitations on block
sales to a single holder or group of holders.

	 	 	 

	Ranking:	 	The Convertible Note will constitute part of
Issuer’s senior debt. It will rank equally
with all the Issuer’s other unsecured and
unsubordinated debt.

	 	 	 

	Voting:	 	Shares of GM Common Stock issued upon
conversion of the Convertible Note and held
by the Holder will be voted by the Trustee in
the same proportion as votes cast by all
stockholders in the election.







23









 






	 	 	 
	Term	 	Description
	Events of Default and Acceleration:	 	The Convertible Note is subject to the same Events of Default and Acceleration as
outlined in the May 24, 2007 Prospectus
Supplement. Further, the MOU will contain
language that to the extent that obligations
under the MOU have been accelerated, Holder
may also accelerate the obligations under
this Convertible Note.

	 	 	 

	Other:	 	Other standard terms as included in GM’s
latest convertible note security issued in
May 2007, including without limitation,
Section 4.06 of the GM indenture, filed with
the SEC on Form S-3, dated November 14, 1995.







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Summary Term Sheet:

Registration Rights Agreement



Registration Rights are typically requested by holders of restricted securities. These rights
require the issuer to file a registration statement so that holders of the security can sell their
securities in the public market and thus obtain the highest price for the holder given liquidity
that the capital markets offer. In turn, the issuer typically agrees to file a registration
statement in return for certain restrictions placed on the holders of the securities. Share volume
restrictions are typical to ensure that an orderly sale of the securities is executed.



Following are provisions to be included in the Registration Rights Agreement between GM and the
VEBA Trust. These are typical of a registration rights agreement and are similar to those
registration rights provided in connection with GM’s contribution of GM securities to VEBA trusts
in 2003 while taking into consideration the type and structure of the security being issued.




	 	 	 	 	 
	Provision	 	Description	 	Terms
	 
	Applicability of
restrictions on
convertible notes
and common stock:

	 	 	 	The following
restrictions apply
to the convertible
note and common
stock after
conversion. To
evaluate the
convertible or to
perform any
calculations on the
convertible volume
restrictions, the
number of common
shares underlying
the convertible
note should be
used. In addition,
the hedging of
shares is also
subject to the same
volume restrictions
	 
	 	 	 	 
	Demand Rights:

	 	Restrictions on the number and size of plan
registrations that the holder can request. Can
only demand after lock-up period expires
	 	Later of 1/1/2010
or when convertible
notes are
transferred to New
VEBA: One Demand
Registration per
year (min. $500
million or 12.5
million shares /max.
54 million
shares). No more
than 54 million
shares per year in
combination with
Rule 144 sales
	 
	 	 	 	 
	Rule 144 Sales:

	 	Ability to execute a transfer without
registration under a Rule 144 exemption
	 	Later of 1/1/2010
or when convertible
notes are
transferred to New
VEBA: 13.5 million
shares per quarter.
No more than 54
million shares per
year in combination
with Demand
Registration
	 
	 	 	 	 
	Piggyback Rights:

	 	Ability to participate in issuer offerings of
common stock
	 	No limitation as
long as capacity
exists and
underwriters
determine amount is
appropriate.
Priority given to
issuer but in case
of excess demand,
pro-rated among
piggyback right
holders
	 
	 	 	 	 
	Priority over other

	 	Ability to exercise registration rights in
	 	Plan participates in offerings on pro-rata






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	Provision	 	Description	 	Terms
	Holders of
Registration
Rights:

	 	advance of other holders of registration rights
on the same security. Important if a number of
security holders have registration rights
	 	basis
relative to
beneficial
ownership of GM
stock.
	 
	 	 	 	 
	Shelf Registration:

	 	Registration statement covering note/stock “on
the shelf” — filed and immediately available
following demand
	 	Available
immediately after
lock-up expires,
however shelf
requires amendment
by GM prior to sale
of securities
	 
	 	 	 	 
	Restrictions on 

Block Sales:

	 	 	 	No sales of blocks
bigger than 2% of
shares outstanding
or to 5% holders
who have intent to
influence
	 
	 	 	 	 
	Tender Offers:

	 	Ability to participate in tender offers for the
securities held
	 	The trustee may
participate in a
tender offer only
if the offer has
been recommended by
an independent
committee of the GM
Board
	 
	 	 	 	 
	Blackouts:

	 	Issuer’s right to postpone registrations /
transfers
	 	Up to 180 days
	 
	 	 	 	 
	Initial Lockup:

	 	Initial restriction on the transferring of
securities
	 	Holder shall not
sell, hedge, assign
or transfer any
interest in the
convertible note or
GM common stock as
a result of the
conversion without
the prior consent
of GM until later
of 1/1/2010 or when
convertible notes
are transferred to
New VEBA
	 
	 	 	 	 
	Voting:

	 	Restrictions on voting rights attributable to
common stock held
	 	Shares of GM Common
Stock issued upon
conversion of the
Convertible Note
and held by the
Holder will be
voted by the
Trustee in the same
proportion as votes
cast by all
stockholders in the
election
	 
	 	 	 	 
	Marketing Rights:

	 	Issuer support for marketing of securities
(i.e., management time for road shows, etc)
	 	Management
available for
transfers of at
least 20 million
shares, but no more
than once per
calendar year
	 
	 	 	 	 
	Underwriters:

	 	Rights to appoint and responsibility of
underwriters
	 	In a Demand
Registration, GM
may choose one of
two underwriters to
sell the securities
and the Trust may
choose the other.
GM’s appointed
underwriter has the
ability to exercise
a cutback right if
the offering is too
large to clear the
market in an
orderly fashion
	 
	 	 	 	 
	Right of First
Offer:

	 	Issuer’s right of first offer on stock transfers
	 	GM has the right of
first offer to
purchase the
securities from the
Trust after notice
from the Trustee
that the Trust
plans to sell a
certain number of
securities
	 
	 	 	 	 
	Standstill 

Agreement:

	 	 	 	Trust will not
accumulate
additional GM
shares or
securities
convertible into GM
common stock
without GM Board’s
consent. Trust
will not launch or
aid anyone in
launching any proxy
contest or consent
solicitation
without GM Board’s
consent






26









 






Appendix C








Base and Wage/COLA — The Buyout Amounts listed above are based on payment as of January 1 of the
applicable year. If the Company makes a Buyout Amount payment on January 1, it shall pay the
amount listed in the Buyout Column for the applicable year. If the Company makes a Buyout Amount
payment between January 1 and the applicable scheduled annual payment date as listed above, it
shall increase the applicable Buyout Amount listed above to reflect 9% annual earnings for the
period between January 1 and the date of payment.



Shortfall Amount — The annual payments listed above shall be made on or before April 1 of each year
in which a Shortfall Payment is required. The Buyout Amount listed above represents the present
value of the remaining shortfall payments, as of January 1. If the Company elects to pay the
Buyout Amount, it shall make such payment between January 1 and April 1 and shall increase the
applicable Buyout Amount listed above to reflect 9% annual earnings for the period between January
1 and the date of payment.





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