GM Files for Protection Under Chapter 11 of the Bankruptcy Code

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1 Corporate Restructuring Alert June 8, 2009 GM Files for Protection Under Chapter 11 of the Bankruptcy Code As widely expected, GM and all of its domestic subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on June 1, Besides General Motors Corporation, the other three associated debtors are: Chevrolet-Saturn of Harlem, Inc., Saturn, LLC and Saturn Distribution Corporation. Please note that GMAC is not included in these bankruptcy filings. Many stakeholder constituencies have agreed to an accelerated process to minimize GM s stay in bankruptcy. However, the bankruptcy still has a significant impact on suppliers, vendors and other executory contract counterparties, as well as the approximately 1,100 dealers whose contracts are expected to be rejected. A motion for the sale of GM and substantially all of its assets to the highest bidder(s) and six First Day motions were filed on June 1, 2009, which directly impact suppliers, vendors and dealers immediately. 1. Motion for Sale of Property under Section 363(b) / Debtors Motion Pursuant to 11 U.S.C. 105, 363(b), (f), (k), and (m), and 365 and Fed. R. Bankr. P. 2002, 6004, and 6006, to (I) Approve (A) The Sale Pursuant to The Master Sale and Purchase Agreement with Vehicle Acquisition Holdings LLC, A U.S. Treasury-Sponsored Purchaser, Free and Clear of Liens, Claims, Encumbrances, and Other Interests; (B) The Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (C) Other Relief; and (II) Schedule Sale Approval Hearing The Sale motion seeks authority to sell substantially all the Debtors assets to Vehicle Acquisitions Holdings LLC (sometimes referred to as New GM), and the order approving the motion entered on June 2, 2009, provides for (A) approval of the proposed sale procedures (B) scheduling a bid deadline and sale hearing date; (C) establishing procedures for assuming and assigning the Assumable Executory Contract; and (D) fixing notice procedures and approving the form of notice. The relevant deadlines and provisions are as follows: > The deadline for submitting a Qualified Bid shall be June 22, 2009 (the Bid Deadline);

2 > The deadline for objecting to approval of the 363 Transaction, including the sale of the Purchased Assets free and clear of liens, claims, encumbrances, and interests, including rights or claims based on any successor or transferee liability shall be June 19, 2009, at 5:00 p.m. (Eastern Time) (the Objection Deadline), provided however, that in the event the Sale Procedures result in a Successful Bidder other than the Purchaser, the deadline for objecting to the sale of the Purchased Assets to the Successful Bidder shall be at the Sale Hearing; > The Purchaser shall constitute a Qualified Bidder for all purposes and in all respects with respect to the Sale Procedures and is not required to make a Good Faith Deposit; and > The Court shall conduct the Sale Hearing on June 30, 2009, at 9:45 a.m. (Eastern Time), at which time the Court will consider approval of the 363 Transaction to the Successful Bidder and approval of the UAW Retiree Settlement Agreement. In the event the Successful Bidder is not the Purchaser, non-debtor parties to the Assumable Executory Contracts may raise objections to adequate assurance of future performance at the Sale Hearing. Determination of Assumable Contracts > The Sellers shall maintain a schedule (the Schedule) of Executory Contracts and Leases that the Purchaser has designated as Assumable Executory Contracts. From the date of the MPA until thirty (30) days after the Closing Date (or a later date if mutually agreed upon by the Sellers and the Purchaser) (the Executory Contract Designation Deadline), the Purchaser may (i) designate any additional Executory Contracts and Leases as Assumable Executory Contracts and add them to the Schedule or (ii) remove any Assumable Executory Contract from the Schedule, which shall cease to be an Assumable Executory Contract. Once an Assumable Executory Contract has already been assumed and assigned, it cannot be removed from the Schedule. > For each Assumable Executory Contract, the Purchaser must determine, prior to the Executory Contract Designation Deadline, the date on which it seeks to have the assumption and assignment become effective, which date may be the Closing or a later date (the Proposed Assumption Effective Date). > In addition to the Schedule, the Sellers shall maintain a secure website (the Contract Website) that the non-debtor counterparty to an Assumable Executory Contract can access to find current information about the status of its respective Executory Contract or Lease. The Contract Website contains, for each Assumable Executory Contract, (i) an identification of each Assumable Executory Contract that the Purchaser has designated for assumption and assignment and (ii) the Cure Amounts that must be paid to cure any prepetition defaults under the respective Assumable Executory Contract as of the Commencement Date. The information on the Contract Website shall be made available to the non-debtor counterparty to the Assumable Executory 2

3 Contract (the Non-Debtor Counterparty), but shall not otherwise be publicly available. > Objections, if any, to the proposed assumption and assignment of the Assumable Executory Contracts (the Contract Objections) must be made in writing, filed with the Court, and served on the Objection Deadline Parties (as defined in the order, which is available upon request) so as to be received no later than 10 days after the date of the Assumption and Assignment Notice (the Contract Objection Deadline) and must specifically identify in the objections the grounds therefore. 2. Motion of Debtors For Entry of Order Pursuant to 11 U.S.C. 105, 363, and 364 Authorizing Debtors to (I) Pay Prepetition Claims of Certain Essential Suppliers, Vendors and Service Providers; (II) Continue Troubled Supplier Assistance Program; and (III) Continue Participation in the United States Treasury Auto Supplier Support Program The Bankruptcy Court entered an interim order on June 1, 2009, approving the motion and setting a hearing on final order for June 25, The interim order provides the following relief: > That the Debtors are authorized, but not required to require essential vendors to enter into a trade agreement, substantially similar to the agreement attached to the motion; > The trade agreement obligates the essential vendor to continue supplying goods and services to the Debtors under (i) MNS-2 payment terms or more favorable payment terms as may be customary between such vendor and the Debtors, (ii) the terms and conditions embodied in the Debtors general terms and conditions or such other more favorable trade terms, practices and programs in effect between such vendor and the Debtors in the twelve months prior to June 1, 2009, and (iii) those other terms that ensure the continued flow of goods and services, the expeditious resolution of claim disputes, and the unfettered transfer of vendors relationships to the Purchaser of the Debtors business (collectively the Customary Trade Terms ), or such other favorable trade terms to which the Debtors and essential vendor agree; > That if an essential vendor refuses to supply goods and/or services to the Debtors on Customary Trade Terms following receipt of payment of its essential vendor claim or Customary Trade Terms following receipt of payment of its essential vendor claim or fails to comply with its trade agreement, then the Debtors may seek authority, in their discretion and without further order of the Bankruptcy Court, to declare that (i) any trade agreement between the Debtors and such essential vendor is terminated (if applicable), and (ii) all payments made to such essential vendor with respect to its essential vendor claim be deemed to have been made in payment of the essential vendor s then outstanding post petition claims (iii) such essential vendor shall immediately repay the Debtors the amount of any payment made to the essential vendor with respect to its essential vendor claim in excess of the post petition claim of such essential vendor, without giving effect to any rights of setoff, reclamation, or otherwise (iv) in the event that a trade agreement is 3

4 terminated or an essential vendor refuses to supply goods and/or services to the Debtors on Customary Trade Terms following receipt of payment of its essential vendor claim, the Bankruptcy Court intends to return the parties to their position immediately prior to the entry of the essential vendor order with respect to all prepetition claims (v) any trade agreement terminated as a result of an essential vendor s refusal to comply with its terms may be reinstated if: (vi) such determination is subsequently reversed by the Bankruptcy Court, for good cause shown that the determination was materially incorrect; (vii) the default under any trade agreement was fully cured by the essential vendor not later than five (5) business days following the Debtors notification to the essential vendor that a default had occurred; or (viii) the Debtors, in their discretion, reach a favorable alternative resolution with the essential vendor; > For the payment to a recalcitrant vendor and the procedure for a rule to show cause why the recalcitrant vendor should not be held in violation of the automatic stay provisions of the Bankruptcy Code; and > That nothing in the order limits, or in any way affects, the Debtors ability to dispute any essential vendor claim or waives the Debtors rights to contest any invoice of or other claim of an essential vendor under applicable law; > That the Debtors are authorized (but not directed) to continue to provide Troubled Supplier Assistance and to make all payments and extend all accommodations pursuant thereto whether relating to the period prior to or after the Commencement Date; > That the Debtors are authorized (but not directed), in their discretion, to provide Troubled Supplier Assistance to any suppliers that may become financially or operationally distressed after the Commencement Date in the ordinary course of the Debtors businesses; and > That the Debtors are authorized, in their sole discretion and in the ordinary course of their businesses, to fully participate in the United States Treasury Auto Supplier Support Program (the UST Support Program) and to make all payments required with respect thereto. 3. Motion of Debtors for Entry of Order Pursuant to 11 U.S.C. Sections 105(a) and 503(b)(9) Establishing Procedures for the Assertion, Resolution, and Satisfaction of Claims Asserted Pursuant to 11 U.S.C Section 503(b)(9) This motion requests authority to grant administrative priority expense (the first priority in the Debtors cases) for and authority to pay in the ordinary course of business, undisputed claims of suppliers arising from post petition delivery of goods ordered prepetition. The interim order entered by the Bankruptcy Court on June 1, 2009, provides that the Debtors are authorized to pay in the ordinary course of business all undisputed obligations arising from the post petition delivery or shipment by vendors of goods and services under prepetition orders consistent with their customary practices. A hearing on entry of a final order is set for June 25, Motion of Debtors for Entry of Order Pursuant to 11 U.S.C. Sections 105 and 546(c) Establishing and Implementing Exclusive and Global Procedures for Treatment of 4

5 Reclamation Claims This motion seeks to establish procedures for the treatment of reclamation claims. The Order entered by the Bankruptcy Court approving the procedures was entered on June 1, 2009, and requires, among other things, that: > Any Seller asserting a reclamation claim must submit a written demand asserting such reclamation claim (a Reclamation Demand) which shall (i) include (A) a description of the goods subject to the Reclamation Demand; (B) the name of the GM debtor (see above) to whom such Goods were delivered; (C) copies of any purchase orders and invoices relating to such Goods; and (D) any evidence regarding the date(s) such Goods were shipped to and received by the Debtors; and (ii) be delivered to (A) the Debtors, c/o General Motors Corporation, Cadillac Building, Van Dyke Avenue, Warren, MI , Attn: Warren Command Center, Mailcode ; and (B) attorneys for the Debtors, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attn: Nathan M. Pierce, Esq., so as to be received in accordance with the deadlines set forth in section 546(c) of the Bankruptcy Code, which is 45 days after the receipt of the goods by the Debtors or not later than 20 days after June 1, 2009, if the 45 day period expires after June 1, 2009; > No later than 120 days after June 1, 2009 (the Reclamation Notice Deadline), the Debtors shall file with the Court a notice (the Reclamation Notice), listing the Reclamation Claims and the amount (if any) of each such Reclamation Claim that the Debtors determine to be valid. The Debtors will serve the Reclamation Notice on various parties, including the supplier that filed the reclamation notice; > If the Debtors fail to file the Reclamation Notice by the Reclamation Notice Deadline, the reclamation claimant may bring a motion on its own behalf to seek relief with respect to its Reclamation Claim; > Objections to a Reclamation Notice must be in writing, include copies of certain documents and be filed with the Bankruptcy Court and served on the Debtors and various other parties within 20 days of when the Reclamation Notice was filed (the Objection Deadline); and > If any Reclamation Claims are still subject to an objection 90 days following the Objection Deadline (or a later date as may be agreed to by the Seller and the Debtors) and the objection has not been settled, the Debtors may file a motion with the Bankruptcy Court to fix the allowed amounts of such Reclamation Claims and schedule a hearing to consider such motion. 5. Motion of Debtors for Entry of Order Pursuant to 11 U.S.C. Sections 105(a) and 503(b)(9) Establishing Procedures for the Assertion, Resolution, and Satisfaction of Claims Asserted Pursuant to 11 U.S.C Section 503(b)(9) This motion seeks to establish procedures with respect to claims asserted pursuant to Section 503(b)(9) of the Bankruptcy Code, which claims are for the value of any goods sold to the Debtors in the ordinary course of the Debtors businesses and received by the Debtors within 20 days of the bankruptcy filing date of June 1, The order entered 5

6 by the Bankruptcy Court on June 1, 2009, provides, among other things, that: > Any claimant asserting a 503(b)(9) Claim (a Claimant) shall prepare a proof of claim (a Proof of 503(b)(9) Claim) that sets forth (i) the value of the goods the Claimant contends the Debtors received within 20 days prior to the Commencement Date; (ii) documentation, including invoices, receipts, bills of lading and the like, identifying the particular goods for which the 503(b) (9) Claim is being asserted; and (iii) documentation regarding which Debtor the goods were shipped to, the date the goods were received by such Debtor, and the alleged value of such goods; > All Proofs of 503(b)(9) Claims must be filed with The Garden City Group, Inc. GM Claims Agent, P.O. Box 9386, Dublin, Ohio , Attn: Craig Johnson, with a copy served on (i) the Debtors, c/o General Motors Corporation, General Motors Corporation, Cadillac Building, Van Dyke Avenue, Warren, MI , ATTN: Warren Command Center, Mailcode ; and (ii) attorneys for the Debtors, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York (Attn: Nathan M. Pierce, Esq.), so as to be received no later than the ninetieth day after June 1, 2009 (the 503(b)(9) Claim Filing Deadline); > The Debtors shall have 60 days after the 503(b)(9) Claim Filing Deadline to file with the Court and serve upon Claimants any objections to timely filed 503(b)(9) Claims (the Objection Deadline ); > Claimants shall have 20 days from the Objection Deadline to file with the Court and serve upon the Debtors and their attorneys any replies to such objections; > All timely filed 503(b)(9) Claims shall be deemed allowed unless objected to by the Debtors on or before the Objection Deadline; > Notwithstanding and without limiting the foregoing, the Debtors are authorized, but not required, to negotiate, in their sole discretion, with any Claimant and to seek an agreement resolving any objection to such Claimant s 503(b)(9) Claim. The approval of such an agreement shall be subject to notice and a hearing; and > To the extent a 503(b)(9) Claim is allowed, such 503(b)(9) Claim shall be satisfied pursuant to and as set forth in such plan of reorganization as shall be confirmed by the Court, or as otherwise ordered by the Court after notice and an opportunity for a hearing. 6. Motion of Debtors for Entry of Order Pursuant to 11 U.S.C. Sections 105(a) and 363(b) (I) Authorizing Debtors to Pay Prepetition Obligations to Foreign Creditors and (II) Authorizing and Directing Financial Institutions to Honor and Process Related Checks and Transfers This motion seeks authority for the Debtors to pay, in the ordinary course of business, as and when due, any prepetition claims owing to Foreign Creditors as well as authorizing and directing Debtors Banks to honor and pay all outstanding prepetition checks drawn 6

7 to pay Foreign creditors to the extent funds are available. The Interim order entered by the Bankruptcy Court on June 1, 2009, provides, among other things, that: > That the Debtors are authorized (but not required) to pay, in their discretion and in the ordinary course of business, as and when due, the Foreign Claims; > That in exchange for payment of their prepetition claims, the Foreign Creditors continue to provide goods and services to the Debtors on most favorable terms prior to the Commencement Date; and > If a Foreign Creditor is paid and does not continue to provide goods and services any payments made will be deemed an avoidable post-petition transfer and recoverable by the Debtors, leaving the Foreign Creditor with a pre-petition claim in the amount recovered The Final hearing is scheduled to be held on June 25, Motion of Debtors for Entry of Order Pursuant to 11 U.S.C. Sections 105 and 363(b) Authorizing Payment of Certain Prepetition (I) Shipping and Delivery Charges for Goods in Transit, (II) Customs Duties, and (III) Tooling and Mechanics Lien Charges This motion seeks authority for the Debtors to pay, in the ordinary course of business, as and when due, any prepetition amounts owing to Shippers, Warehousemen, Tooling Charges, Mechanics Liens Charges and Customs brokers. The order entered by the Bankruptcy Court on June 1, 2009, provides, among other things, that: > That the Debtors are authorized, but not directed, to make payments in respect of all Shipping and Warehousing Charges, whether relating to the period prior to or after the Commencement Date, as the Debtors determine, in the exercise of their business judgment, to be necessary or appropriate to obtain the release of raw materials, parts, components, certain finished goods, indirect materials, tooling, machinery, equipment, and other property; > That the Shippers and Warehousemen receiving such payments shall continue to provide services to the Debtors during the pendency of these chapter 11 cases on the most favorable terms that existed prior to the Commencement Date and agree that they shall not be permitted to cancel on less than 90 days notice any contract or agreement pursuant to which they provide services to the Debtors. If any party receiving payment under this order accepts payment pursuant to this Order on account of a prepetition obligation of the Debtors premised upon its compliance with the previously described conditions in this order, and thereafter fails to comply with any conditions of this order, any payments made pursuant to this Order shall be deemed an avoidable post petition transfer under section 549 of the Bankruptcy Code, and, therefore, shall be recoverable by the Debtors in cash upon written request; > That the Debtors are authorized, but not directed, to make payments in respect of all Tooling Charges, whether relating to the period prior to or after the Commencement Date, as the Debtors determine, in the exercise of their business judgment, to be necessary or appropriate to ensure the delivery and use of all Tooling for the Debtors or their Suppliers and obtain the release of liens against the Debtors Tooling; 7

8 > That the Debtors are authorized, but not directed, to make all payments in respect of all Mechanics Lien Charges, whether relating to the period prior to or after the Commencement Date, as the Debtors determine, in the exercise of their business judgment, to be necessary or appropriate to obtain the release of liens against real or personal property of the Debtors; and > That the Debtors and their customs brokers, acting as their agents, are hereby authorized, but not directed, to make all payments in respect of Customs Duties, whether relating to the period prior to or after the Commencement Date. Additional information regarding the GM bankruptcy can be obtained at gm.com/restructuring/. Copies of orders and filings in the GM bankruptcy can be obtained at We are sending you this alert on the GM proceedings to keep you informed. We will continue to monitor this case closely as it progresses and our lawyers are available to assist you as the unfolding circumstances require. 8

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