<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ______________________
Commission file number 333-02543
---------------
Electronic Data Systems Holding Corporation
-------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2548221
---------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 Legacy Drive, Plano, Texas 75024-3105
-------------------------------------------
(Address of principal executive offices)
(Zip Code)
(214) 604-6000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes . No X .
--- ---
As of May 15, 1996, there were outstanding 1,000 shares of the registrant's
Common Stock, $.01 par value per share.
<PAGE>
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I -- Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income....................... 3
Condensed Consolidated Balance Sheets................... 4
Condensed Consolidated Statements of Cash Flows......... 5
Notes to Condensed Consolidated Financial Statements.... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 8
Part II -- Other Information
Item 1. Legal Proceedings................................... 14
Item 6. Exhibits and Reports on Form 8-K.................... 15
Signatures........................................................ 16
Exhibit 10(c) 1996 Electronic Data Systems Corporation Stock
Purchase Plan..................................... 17
Exhibit 27 Financial Data Schedule (for SEC information only)
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
Systems and other contracts revenues $3,366.9 $2,776.3
-------- --------
Costs and expenses
Cost of revenues 2,698.1 2,176.1
Selling, general, and administrative 309.9 281.0
-------- --------
Total costs and expenses 3,008.0 2,457.1
-------- --------
Operating income 358.9 319.2
Interest and other income, net (17.0) (11.7)
-------- --------
Income before income taxes 341.9 307.5
Provision for income taxes 123.1 110.7
-------- --------
Separate Consolidated Net Income $ 218.8 $ 196.8
======== ========
Average number of shares of GM
Class E common stock outstanding 463.2 300.0
Class E dividend base 484.4 482.4
Available Separate Consolidated Net
Income (Note 2) $ 209.2 $ 122.4
======== ========
Earnings Attributable to GM Class E
Common Stock on a Per Share Basis
(Note 2) $ 0.45 $ 0.42
======== ========
</TABLE>
Revenues related to GM and affiliates amounted to $962.2 million and $898.0
million for the three months ended March 31, 1996 and 1995, respectively.
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 935.9 $ 548.9
Accounts receivable 2,779.2 2,872.0
Accounts receivable from GM and affiliates 343.1 297.0
Other current assets 676.3 663.6
--------- ---------
Total current assets 4,734.5 4,381.5
--------- ---------
Property and equipment, net 3,262.0 3,242.4
--------- ---------
Operating and other assets
Land held for development, at cost 105.8 105.1
Investment in leases and other 1,516.9 1,573.5
Software, goodwill, and other intangibles, net 1,496.6 1,529.9
--------- ---------
Total operating and other assets 3,119.3 3,208.5
--------- ---------
Total Assets $11,115.8 $10,832.4
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 530.9 $ 603.9
Accrued liabilities 1,551.6 1,704.5
Deferred revenue 633.7 629.3
Income taxes 146.9 75.9
Notes payable, current portion 238.7 247.8
--------- ---------
Total current liabilities 3,101.8 3,261.4
--------- ---------
Deferred income taxes 749.0 739.7
Notes payable, less current portion 2,109.2 1,852.8
--------- ---------
Stockholder's equity
Common stock, without par value; authorized
1,000.0 shares; issued and outstanding
485.7 shares at March 31, 1996 (unaudited)
and 483.7 shares at December 31, 1995 559.9 517.7
Retained earnings 4,595.9 4,460.8
--------- ---------
Total stockholder's equity 5,155.8 4,978.5
--------- ---------
Total Liabilities and Stockholder's Equity $11,115.8 $10,832.4
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 512.1 $ 127.9
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable
securities 26.0 42.7
Proceeds from investment in
leases and other assets 80.8 5.8
Payments for purchase of
property and equipment (244.4) (259.3)
Payments for investments in
leases and other assets (90.4) (130.9)
Payments related to acquisitions,
net of cash acquired (38.0) (40.9)
Payments for purchase of
software and other intangibles (29.5) 4.0
Payments for purchase of
marketable securities (21.7) (10.8)
Other 3.8 2.4
--------- ---------
Net cash used in investing activities (313.4) (387.0)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 1,484.9 1,752.5
Payments on notes payable (1,236.8) (1,583.9)
Net increase in current notes
payable with maturities
less than 90 days -- 48.8
Employee stock transactions and
related tax benefits 20.1 14.7
Cash dividends paid to GM (72.6) (62.6)
--------- ---------
Net cash provided by financing
activities 195.6 169.5
--------- ---------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (7.3) 3.1
--------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents 387.0 (86.5)
Cash and Cash Equivalents at Beginning
of Period 548.9 608.2
--------- ---------
Cash and Cash Equivalents at End
of Period $ 935.9 $ 521.7
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
(consisting of only normal recurring items) which are necessary for a fair
presentation have been included. The results for interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the full year. For further information, refer to the consolidated
financial statements and notes thereto included in General Motors Corporation's
("GM") 1995 Annual Report on Form 10-K, as amended.
NOTE 2.
GM acquired all of the capital stock of Electronic Data Systems Corporation
("EDS") in October 1984. Prior to that time, EDS had been an independent,
publicly held corporation. Electronic Data Systems Holding Corporation ("EDS
Holding") was incorporated in Delaware in 1994 for the purpose of holding the
capital stock of EDS, which was incorporated in Texas in 1962. Accordingly, EDS
is an indirect wholly owned subsidiary of GM. Subject to GM stockholder
approval, the GM Board of Directors has approved a split-off (the "Split-Off")
of EDS to the holders of GM's Class E Common Stock in a transaction that is tax-
free for U.S. federal income tax purposes. In connection therewith, EDS Holding
filed a registration statement with the Securities and Exchange Commission which
was declared effective on April 23, 1996. The Split-Off has been submitted for
approval by the common stockholders of GM and, if approved, is expected to be
consummated in the second quarter of 1996. Immediately prior to the Split-Off,
EDS will be merged into EDS Holding, and EDS Holding will change its name to
EDS.
The effects of purchase accounting adjustments reflected in GM's
Consolidated Financial Statements that are applicable to EDS were not material
to the Consolidated Statements of Income for the three month periods ended March
31, 1996 and 1995. At March 31, 1996, the remaining carrying value of such
purchase accounting adjustments would not be material to EDS' Consolidated
Financial Statements.
Earnings Attributable to GM Class E Common Stock on a Per Share Basis have
been determined based on the relative amounts available for the payment of
dividends to holders of GM Class E common stock. Holders of GM Class E common
stock have no direct rights in the equity or assets of EDS, but rather have
rights in the equity and assets of GM (which includes 100% of the stock of EDS).
Dividends on the GM Class E common stock are declared out of the Available
Separate Consolidated Net Income of EDS earned since the acquisition of EDS by
GM. The Available Separate Consolidated Net Income of EDS is determined
quarterly and is equal to the separate consolidated net income of EDS, excluding
the effects of purchase accounting adjustments arising from the acquisition of
EDS, multiplied by a fraction, the numerator of which is a number equal to the
weighted average number of shares of GM Class E common stock outstanding during
the first quarter of 1996. The comparable denominator for the first quarter of
1996 and 1995 was 484.4 million and 482.4 million, respectively.
The denominator used in determining the Available Separate Consolidated Net
Income of EDS is adjusted as deemed appropriate by the GM Board of Directors to
reflect subdivisions or combinations of the GM Class E common stock and to
reflect certain transfers of capital to or from EDS. The GM Board's discretion
to make such adjustments is limited by criteria set forth in GM's Certificate of
Incorporation. In 1988, EDS initiated a program to repurchase 11.0 million
shares of GM Class E common stock in order to meet certain future requirements
of EDS' employee benefit plans. As of December 31, 1989, the Company had
purchased 11.0 million shares of GM Class E common stock to be distributed to
key employees under the provisions of the 1984 plan. The GM Board has generally
caused the denominator
6
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
used in calculating the Available Separate Consolidated Net Income of EDS to
decrease as shares are purchased and to increase as shares are used for the
employee benefit plans.
The current GM Board policy is to pay quarterly cash dividends on the GM
Class E common stock, when, as, and if declared by the GM Board in its sole
discretion, at an annual rate approximately equal to 30% of the Available
Separated Consolidated Net Income of EDS for the prior year.
NOTE 3.
Property and equipment is stated net of accumulated depreciation of $3,410.4
million and $3,319.4 million at March 31, 1996 and December 31, 1995,
respectively. Additionally, software, goodwill, and other intangibles are
stated net of accumulated amortization of $1,001.8 million and $908.1 million at
March 31, 1996 and December 31, 1995, respectively.
NOTE 4.
Effective January 1, 1996, EDS adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The effects of
initially adopting SFAS No. 121 were not material to EDS' Consolidated Financial
Statements.
7
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
EDS is a provider of information technology ("IT") services using computer
and communication technologies to meet the business needs of its clients. EDS
offers its clients a continuum of services, including the management and
operation of computers, networks, information systems, information processing
facilities, business operations, and related personnel, as well as management
consulting services.
PROPOSED SPLIT-OFF OF EDS
The GM Board of Directors has approved a split-off (the "Split-Off") of EDS
to the holders of General Motors' Class E Common Stock in a transaction that is
tax-free for U.S. federal income tax purposes. The Split-Off has been submitted
for approval by the common stockholders of GM and, if approved, is expected to
be consummated in the second quarter of 1996.
The Split-Off is intended to accomplish three principal objectives from the
perspective of EDS and the holders of Class E Common Stock: (i) to remove
limitations on EDS' ability to participate in major strategic alliances
(including mergers and acquisitions which can be effected using EDS Common
Stock); (ii) to remove limitations on EDS' ability to obtain additional business
from and establish new customer relationships with companies that compete with
GM or its subsidiaries; and (iii) to enhance EDS' access to the capital
necessary for investment in its future growth.
In connection with the Split-Off, the GM Board of Directors approved a
Master Services Agreement (the "Master Services Agreement") to be entered into
between EDS and GM with respect to IT services to be provided after the Split-
Off, as well as a special payment to be made by EDS to GM (the "Special Inter-
Company Payment"). If the Split-Off is not consummated, EDS will continue as an
indirect wholly owned subsidiary of GM and no Special Inter-Company Payment will
be made. Under such circumstances, the existing agreements and arrangements
between GM and EDS with respect to IT services (the "Existing IT Services
Agreements") will continue with such changes as GM and EDS may from time to time
agree upon or as the GM Board of Directors, upon recommendation of its Capital
Stock Committee, may from time to time determine to be fair to all classes of GM
common stockholders. No agreement has been reached between GM and EDS regarding
any changes to the Existing IT Services Agreements, which would take effect if
the Split-Off is not approved by GM stockholders or is not consummated for any
other reason. GM management has advised EDS management that in such an
eventuality it would seek substantial changes in the Existing IT Services
Agreements, including implementation of substantially all of the changes
provided for by the Master Services Agreement. Neither the GM Board of
Directors nor its Capital Stock Committee has determined whether to require such
changes to the Existing IT Services Agreements if the Split-Off is not
consummated, but they anticipate considering such changes if such circumstances
arise. In this regard, EDS management believes that substantial changes would
be made to the Existing IT Services Agreements in 1996 even in the absence of
the Split-Off.
The Master Services Agreement and certain related agreements between GM and
EDS with respect to IT services to be provided after the Split-Off
(collectively, the "IT Services Agreements") contemplate that EDS would continue
to serve as GM's principal supplier of IT services for a term of ten years,
which may be extended by agreement of the parties, and that the IT services to
be provided by EDS after the Split-Off will generally be similar to those
provided to GM under the Existing IT Services Agreements. Certain of the
existing service arrangements applicable to particular units, sectors or other
8
<PAGE>
organizations within GM will be extended for additional terms of between
approximately one and three years beyond their current expiration dates. In
addition, under the IT Services Agreements, EDS will provide certain plant floor
automation services in North America that it has not previously provided. The
IT Services Agreements also provide that certain significant changes will be
made to the pricing and terms under which EDS will provide IT services to GM
after the Split-Off. Among other things, the IT Services Agreements provide
that the rates charged by EDS to GM for certain information processing
activities and communications services will be reduced and that the parties will
work together to achieve increased targets for structural cost reductions. GM
will also be given the right to competitively bid and, subject to certain
restrictions, outsource a limited portion of its IT service requirements to
third party providers. In addition, beginning in 1997, the payment terms
relating to IT services provided by EDS will be revised over a two-year period
to extend the due dates for payments from GM. The GM Board of Directors
believes that the changes reflected in the IT Services Agreements are necessary
(i) in light of the fact that, after the Split-Off, EDS will no longer be a
subsidiary of GM and the Capital Stock Committee of the GM Board of Directors
will no longer be able to monitor the IT service arrangements between the
parties; (ii) to reflect the evolutionary nature of the GM-EDS customer
relationship and the IT services industry; and (iii) to provide additional
assurances to GM, as EDS' largest customer, that the IT services performed by
EDS will remain competitive.
Based on currently available information and assuming that the IT Services
Agreements had been effective as of January 1, 1996, EDS believes that revenues
generated from services performed for GM in 1996 would be slightly lower than
those generated from such services in 1995. In addition, EDS expects that the
contemplated changes in its arrangements with GM could reduce its 1996 earnings
per share by as much as $.07 to $.14 (including $.03 in the first quarter of
1996). The long-term impact of the terms of the IT Services Agreements cannot
be precisely quantified at present, although such terms may have an adverse
effect on operating margins unless EDS is able to effect reductions in the costs
of providing services to GM. Although EDS plans to implement certain cost
reduction measures, there can be no assurance as to the extent, if any, to which
such measures will mitigate the possible adverse impact on its operating
margins. In general, there can be no assurance that the terms of the IT
Services Agreements would not have a material adverse effect in the long-term on
the results of operations of EDS.
The Special Inter-Company Payment will be paid by EDS to GM at such time, if
any, as the Split-Off occurs. The amount of the Special Inter-Company Payment
will be $500.0 million. Interest costs related to the Special Inter-Company
Payment are expected to be approximately $.03 per share in 1996. In addition to
the Special Inter-Company Payment, EDS expects to incur approximately $35.0
million, or approximately $.05 per share in 1996, of one-time costs in
connection with the formulation and implementation of the Split-Off. Certain of
these costs will be incurred only if the Split-Off is consummated. In arriving
at the amount of the $500.0 million Special Inter-Company Payment, the parties
took into account the fact that GM would provide EDS an allowance of $50.0
million relating to the resolution of various uncertain, contingent or other
matters arising out of the separation of GM and EDS.
Statements about the effect of the proposed Split-Off and the impact of the
agreement relating to IT Services after the proposed Split-Off are forward-
looking statements, which by their nature are subject to numerous uncertainties
that could cause actual results to vary. Further information about the terms of
the proposed Split-Off is set forth in a joint solicitation statement and
prospectus of GM and EDS filed with and declared effective by the Securities and
Exchange Commission, which has been distributed to GM common stockholders in
connection with the submission of the Split-Off for approval by such
stockholders.
RESTRUCTURING ACTIVITIES
On April 1, 1996, EDS announced that it is taking certain actions and
considering others to maintain and improve operating efficiencies and accelerate
EDS' move towards "user-centered" computing. In connection therewith, EDS also
announced the implementation of a voluntary early retirement offer and
involuntary severance arrangements affecting between 4,000 and 5,000 employees
and
9
<PAGE>
designed to both reduce labor costs and change the skill mix of EDS' workforce.
Communication of the terms of these arrangements to employees began on April 1
and will continue during the second quarter of 1996. It is expected that
substantially all of these workforce reductions would be completed by December
1996.
As part of its overall goal to improve operating efficiencies, EDS is also
in the process of evaluating certain aspects of its business to identify any
redundant facilities and related assets that may no longer fit its long-term
strategic objectives. Accordingly, the actions under consideration could
include the elimination by EDS of certain business functions and consolidation
of certain related facilities.
EDS will incur a pre-tax non-recurring charge in the second quarter of 1996
in connection with the restructuring actions discussed above. The amount of the
aggregate charge (including the employee related actions, asset writedowns, and
other actions being considered) will depend on the number of employees who elect
to accept early retirement offers and the determination of which EDS business
functions and related facilities would be eliminated or consolidated. EDS has
estimated that all such actions could result in an aggregate pre-tax non-
recurring charge in the second quarter of 1996 in the range of $500.0 million to
$750.0 million (between $.66 and $.99 per share, after tax). Although EDS is
continuing to evaluate these matters, it is currently considering actions which,
including those that may be taken after the proposed Split-Off, may result in an
aggregate charge at the higher end of this range. A portion of the contemplated
charge will be of a non-cash nature, the amount of which has not yet been
determined. EDS expects that any restructuring actions implemented by it will
result in savings commencing in the second half of 1996. The restructuring
activities discussed above are not contingent upon the approval or consummation
of the Split-Off.
Statements about the effect of EDS' actions and the possible amount of a
non-recurring charge are forward-looking statements which by their nature are
subject to numerous uncertainties that could cause actual results to vary.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which became
effective for fiscal years beginning in 1996. The Statement requires that long-
lived assets and certain identifiable intangibles to be held and used be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable, and for the
measurement of loss to be based on the fair value of the asset. In addition,
long-lived assets and certain identifiable intangibles to be disposed of are
generally to be reported at the lower of the carrying amount or fair value less
selling costs.
As discussed above, EDS is in the process of evaluating certain aspects of
its business to identify any redundant facilities and related assets which may
no longer fit its long-term strategic objectives. This evaluation is expected
to be completed in the second quarter of 1996. The effects of initially
adopting SFAS No. 121 as of January 1, 1996, were not material to its
consolidated financial statements.
RESULTS OF OPERATIONS
Revenues. Total systems and other contracts revenues for the quarter ended
March 31, 1996, rose $590.6 million, or 21%, over the corresponding quarter in
1995 to $3,366.9 million. Revenues from outside customers (systems and other
contracts revenues not attributable to GM and its affiliates) for the quarter
ended March 31, 1996, rose 28% to $2,404.7 million compared to $1,878.3 million
for the same period in 1995.
Revenues from outside customers comprised 71% and 68% of total revenues for
the three months ended March 31, 1996 and 1995, respectively. While it is
anticipated that GM will continue to contribute a
10
<PAGE>
significant portion of total systems and other contracts revenues, EDS expects
the percentage of revenues from GM and its affiliates to continue to decline as
revenues from outside customers continue to increase.
Costs and Expenses. Cost of revenues as a percentage of systems and other
contracts revenues increased to 80% for the three months ended March 31, 1996,
compared with 78% for the corresponding period in 1995. Cost as a percentage of
revenues has increased due to higher labor costs for skilled workforce and
pricing pressures as a result of the increasingly competitive environment in
which EDS operates. The increasingly competitive environment in which EDS
operates results in part from a long-term trend of convergence occurring in the
computing, communications and media/entertainment sectors of the information
industry. EDS is addressing this environment in part through expected
efficiencies to be gained from its restructuring activities described above and
its value-added business approach. Selling, general and administrative expenses
as a percentage of systems and other contracts revenues were 9% for the three
months ended March 31, 1996, down from 10% in the corresponding period in 1995
due to the fixed nature of certain of these costs.
Interest and other income, net. Interest and other income, net decreased
$5.3 million in the first quarter of 1996 to $(17.0) million, compared with
$(11.7) million in 1995. The primary reason for the decrease in 1996 was
interest associated with the issuance in May, 1995, of $350.0 million of 6.85%
notes due May 15, 2000 (the "Five-year Notes") and $300.0 million of 7.125%
notes due May 15, 2005 (the "Ten-year Notes"), as well as from other borrowings.
These notes were issued in May 1995 and were used for general corporate
purposes, including the repayment of outstanding commercial paper borrowings,
property and equipment expenditures, acquisitions, and other contract-related
investments to support business growth.
Net Income. For the three month period ended March 31, 1996, EDS' separate
consolidated net income increased 11% to $218.8 million from net income of
$196.8 million for the corresponding period of the prior year. Earnings per
share of GM Class E common stock rose from $.42 to $.45 for the first quarter of
1996 compared to the first quarter of 1995, based on EDS' Available Separate
Consolidated Net Income as described in Note 2 to EDS' Consolidated Financial
Statements. Earnings per share for the first quarter of 1996 were negatively
impacted by $.03 per share as a result of certain rate adjustments retroactive
to January 1, 1996, under the terms of the new 10-year Master Services Agreement
to be entered into by EDS and GM in connection with the Split-Off.
Return on assets decreased to 9.5% for the twelve-month period ended March
31, 1996, compared with 10.3% for the corresponding period in 1995. Return on
assets has declined due to the increasing capital intensity of EDS' business and
increased contract-related investments in computers and telecommunications
equipment, software, and other property and equipment. Return on stockholder's
equity decreased to 20.0% for the twelve-month period ended March 31, 1996,
compared to 20.7% for the comparable period in 1995. EDS' effective tax rate
remained constant at 36% for the three months ended March 31, 1996 and 1995.
EDS and its customers may, from time to time, modify their contractual
arrangements. For customer contracts accounted for under the percentage of
completion method, such changes would be reflected in results of operations as a
cumulative change in accounting estimate in the period the revisions are
determined.
Seasonality and Inflation. EDS' revenues vary over the calendar year, with
the fourth quarter generally reflecting the highest revenues for the year due to
certain EDS services that are purchased more heavily in the fourth quarter as a
result of the spending patterns of several customers. In addition, revenues
have generally increased from quarter to quarter as a result of new business
added throughout the year.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, EDS held cash and cash equivalents of $935.9 million, had
working capital of $1,632.7 million, and a current ratio of 1.5-to-1. This
compares to cash equivalents of $548.9 million, $1,120.1 million in working
capital and a current ratio of 1.3-to-1 at December 31, 1995. The increase in
working capital was primarily in the area of cash and cash equivalents, as well
as decreases in accounts payable and accrued liabilities.
In May 1995, EDS issued Five-year and Ten-year notes. In addition, during
the first quarter of 1996, EDS issued $265.0 million of commercial paper. EDS'
capitalization at March 31, 1996, consisted of $2,109.2 million in noncurrent
notes payable and $5,155.8 million in stockholder's equity (GM's equity in its
indirectly wholly owned subsidiary, EDS). Total debt was $2,347.9 million at
March 31, 1996, which consisted of short- and long-term notes payable. This
compared with total debt of $2,100.6 million at December 31, 1995. The total
debt-to-capital ratio (which includes current notes payable as a component of
capital) was 31% at March 31, 1996, and 30% at December 31, 1995. The ratio of
non-current debt to capital was 29% at March 31, 1996 and 27% at December 31,
1995. At March 31, 1996, EDS had unused uncommitted short-term lines of credit
totaling $768.1 million and unused committed lines of credit of $2,500.0
million. The unused committed lines of credit of $2,500.0 million serve as a
backup facility for EDS' commercial paper borrowings. At March 31, 1996, and
December 31, 1995, EDS had total committed lines of credit of $2,515.5 million.
Cash flows from operations increased $384.2 million during the first quarter
of 1996 to $512.1 million compared with the first quarter of 1995 due primarily
to a decrease in accounts receivable. Cash used in investing activities during
the first quarter of 1996 was $313.4 million compared with $387.0 million in the
corresponding period of last year. Net cash provided by financing activities
was $195.6 million in the first quarter of 1996 compared with $169.5 million in
the corresponding period of last year.
EDS paid cash dividends to GM totaling $72.6 million for the first three
months of 1996, and $62.6 million for the same period in 1995.
EDS expects that its principal uses of funds for the foreseeable future will
be for capital expenditures, debt repayment, working capital and costs
associated with the Split-Off, as well as the payment of the Special Inter-
Company Payment to GM. Capital expenditures may consist of purchases of
computer and telecommunications equipment, buildings and facilities, land, and
software, as well as acquisitions. EDS' projected capital expenditures for 1996
are approximately $1,400.0 million to $1,700.0 million. However, actual capital
expenditures are somewhat dependent on acquisition and joint venture activities
by EDS, as well as capital requirements for new business. EDS anticipates that
cash flows from operations and unused borrowing capacity under its existing
lines of credit will provide sufficient funds to meet its needs for at least the
next year.
The Existing IT Services Agreements provide for GM to pay EDS on the 15th
day of the month in which services are provided with respect to a substantial
portion of services. Under the IT Services Agreements, there will be a
transition over a two-year period, beginning in 1997, to payment on the 20th day
of the month following service for all agreements which do not already have
payment terms at least that favorable to GM. These revised payment terms are
expected to result in an increase in EDS' working capital requirements. EDS
will obtain the funds for this working capital impact and for the Special Inter-
Company Payment through borrowings under its existing commercial paper or bank
credit facilities. EDS currently anticipates that it may seek to refinance such
commercial paper or bank borrowings as part of its general plan to extend
maturities of its indebtedness.
The competitive environment and changing market forces are increasing the
capital intensity of EDS' business. Increasing amounts of capital will be
required by EDS in order to make investments in acquisitions, joint ventures,
and strategic alliances in other parts of the information industry and in new
product development. In addition, information technology customer contracts
frequently now require
12
<PAGE>
front-end investments in computers and telecommunications equipment, software,
and other property and equipment. For these reasons, EDS' ability to continue to
access the capital markets on an efficient basis will become increasingly
important to EDS' ability to compete effectively.
The Split-Off is intended, among other things, to afford EDS more flexible
access to capital markets to meet its growing needs without regard to competing
considerations of GM and its affiliates. Following the Split-Off, EDS may over
time incur substantially more debt than it has while a subsidiary of GM. As a
result, EDS' financial leverage may increase in the future. To the extent that
EDS would become more highly leveraged following the Split-Off, EDS may be
required to pay higher interest rates on its outstanding borrowings. In order
to provide the funds necessary for EDS' future acquisition and expansion goals,
EDS expects that it might incur, from time to time, additional bank financing
and/or issue equity or debt securities, depending on market and other
conditions.
13
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Two suits, Stephen A. Solomon v. General Motors Corporation, et al. and TRV
Holding Company v. General Motors Corporation, et al., (collectively
"Solomon/TRV"), were filed in Delaware Chancery Court on May 13 and 18, 1994,
respectively. Such actions have been consolidated, and a consolidated amended
complaint was filed on April 2, 1996. In addition, on May 10, 1996, a second
amended and supplemental consolidated complaint (the "Second Amended Complaint")
was filed by plaintiffs in this action. Another lawsuit, Ward et al., as
Trustees for the Eisenberg Children's Irrevocable Trust II v. General Motors
Corporation, et al. ("Ward"), was filed in Delaware Chancery Court on November
15, 1995. On May 17, 1996, Solomon/TRV and Ward (collectively,
"Solomon/TRV/Ward") were consolidated and the Second Amended Complaint was
adopted as the complaint for the consolidated action.
Solomon/TRV/Ward purports to be a class action brought on behalf of holders
of Class E common stock, $.10 par value per share (the "Class E Common Stock"),
of General Motors Corporation, a Delaware corporation ("General Motors"),
against certain present and former directors of General Motors, as well as a
double derivative action brought on behalf of EDS against certain present and
former directors of General Motors and certain former directors of EDS (all of
whom are also directors or officers of General Motors). EDS is named in the
complaint only as a nominal defendant with respect to the double derivative
action. The Second Amended Complaint alleges that defendants have breached and
are continuing to breach their fiduciary duties in connection with their conduct
with respect to EDS and the proposed split-off of EDS from General Motors (the
"Split-Off"). In particular, the complaint alleges that the process of
establishing terms for the Split-Off, including the consideration of
alternatives to such transaction and the negotiating process in connection
therewith, was unfairly dominated and controlled by General Motors and that the
resulting terms unfairly benefit General Motors and its continuing shareholders
(including the holders of the common stock, $1 2/3 par value per share (the "$1
2/3 Common Stock"), and the Class H common stock, $.10 par value per share (the
"Class H Common Stock"), of General Motors) to the detriment of EDS and the
holders of Class E Common Stock. The complaint also alleges that the Split-Off
would unfairly effect a disposition of EDS because it would not provide for a
recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120%
exchange ratio, as currently provided in the General Motors Certificate of
Incorporation upon a disposition by General Motors of substantially all of the
business of EDS. Furthermore, the complaint alleges that the solicitation of
consents by General Motors with respect to the proposed Split-Off is wrongfully
coercive and the solicitation statement being used in connection therewith is
materially deficient. The Second Amended Complaint seeks monetary damages from
the defendants, as well as an injunction against further action in connection
with the Split-Off. In addition, the complaint seeks an order appointing
independent representatives to act on behalf of and protect the interests of EDS
and the holders of Class E Common Stock. The complaint also seeks an order
requiring the defendants to disseminate completely all material information to
the holders of Class E Common Stock in connection with the Split-Off.
On May 10, 1996, the plaintiffs in the consolidated action filed a motion
for expedited proceedings, including a request for a hearing on their
application for a preliminary injunction against further action in connection
with the Split-Off. As a result of such application, a hearing on the
plaintiffs' application for a preliminary injunction has been scheduled for May
30, 1996. On May 23, 1996, after limited discovery, the plaintiffs' counsel
informed the court that plaintiffs had concluded that adequate relief could be
afforded to the plaintiff class members after the Split-Off is consummated and
were withdrawing their application for expedited proceedings including a
preliminary injunction hearing. Accordingly, in these proceedings plaintiffs are
no longer pursuing an injunction to prevent consummation of the Split-Off.
EDS and GM believe that the action described above is without merit and, to
the extent that they are parties thereto, they intend to defend against this
action vigorously.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
-------------------------------------------------------------- -------
10(c) 1996 Electronic Data Systems Corporation Stock Purchase
Plan.............................................. 17
27 Financial Data Schedule (for SEC information only)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant during the quarter
for which this report is filed.
15
<PAGE>
ELECTRONIC DATA SYSTEMS HOLDING CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ELECTRONIC DATA SYSTEMS
HOLDING CORPORATION
------------------------------------------------
(Registrant)
By /s/ Joseph M. Grant
----------------------------------------------
(Joseph M. Grant, Senior Vice President and
Date May 29, 1996 Chief Financial Officer)
- ------------------
By /s/ H. Paulett Eberhart
----------------------------------------------
(H. Paulett Eberhart, Vice President and
Date May 29, 1996 Controller)
- ------------------
16
<PAGE>
EXHIBIT 10(C)
1996 ELECTRONIC DATA SYSTEMS CORPORATION
STOCK PURCHASE PLAN
WHEREAS, General Motors Corporation ("GM") established the 1984 Electronic
Data Systems Stock Purchase Plan as a plan for the employees of Electronic Data
Systems Corporation, a Texas corporation (the "Predecessor Company"), and
certain of its subsidiaries to purchase at a discount under the requirements of
Section 423 of the Internal Revenue Code shares of General Motors Corporation
Class E Common Stock; and
WHEREAS, in connection with the merger of the Predecessor Company into
Electronic Data Systems Corporation, a Delaware Corporation ("EDS"), and the
split-off of EDS from GM, the Board of Directors of EDS has determined it in the
best interests of the employees of EDS and its subsidiaries to adopt and
establish the Plan immediately after such split-off without lapse, suspension or
interruption in participation.
NOW, THEREFORE, effective as of the consummation of the split-off of EDS
from GM, EDS hereby adopts and establishes this, the 1996 Electronic Data
Systems Corporation Stock Purchase Plan.
1. Purpose of Plan. The purpose of the Plan is to provide employees of
Electronic Data Systems Corporation, a Delaware corporation ("EDS"), and
its subsidiaries (collectively, the "Company") with a strong incentive for
individual creativity and contribution to ensure the future growth of the
Company by enabling such employees to acquire shares of common stock, $.01
par value per share (the "EDS Stock"), of EDS, in the manner contemplated
by the Plan. Rights to purchase EDS Stock offered pursuant to the Plan are
a matter of separate inducement and not in lieu of any salary or other
compensation for the services of any employee. The Plan is intended to
qualify as an employee stock purchase plan within the meaning of Section
423 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Amount of Stock Subject to the Plan: Payment for Shares. The total number
of shares of EDS Stock that may be issued pursuant to rights of purchase
granted under the Plan shall not exceed 57,500,000 shares of the authorized
EDS Stock. In the discretion of the Board of Directors of EDS (the "Board
of Directors") or its delegate, such shares may be: (i) treasury shares,
including shares acquired by EDS in open market transactions; or (ii)
authorized but unissued shares. If a right of purchase under the Plan
expires or is terminated unexercised for any reason, the shares as to which
such right so expired or terminated again may be made subject to a right of
purchase under the Plan.
3. Administration. The Compensation and Benefits Committee of the Board of
Directors (the "Committee") shall appoint or engage any person or persons
as an administrator (the "Administrator") of the Plan, who may be, but
shall not be required to be, a member of the Committee. Any person engaged
or delegated to be the Administrator who is not an employee of EDS, shall
be required to be bonded and insured for errors and omissions
17
<PAGE>
insurance in such amounts and by such carrier as is deemed suitable and
appropriate by the Committee. The Committee and the Administrator shall
administer the Plan all as provided herein. The Committee shall hold
meetings at such times and places as it may determine and may take action
by unanimous written consent or by means of a meeting held by conference
telephone call or similar communications equipment pursuant to which all
persons participating in the meeting can hear each other. The Committee may
request advice or assistance or employ such other persons as it deems
necessary for proper administration of the Plan. Subject to the express
provisions of the Plan and the requirements of applicable law, the
Committee shall have authority, in its discretion, to determine when each
offering hereunder of rights to purchase shares (hereinafter "offering")
shall be made, the duration of each offering, the dates on which the
purchase period for each offering shall begin and end, the total number of
shares subject to each offering, the purchase price of shares subject to
each offering and the exclusion of any classes of employees pursuant to
Section 4(ii). Subject to the express provisions of the Plan, the Committee
has authority (a) to construe offerings, the Plan and the respective rights
to purchase shares, (b) to prescribe, amend and rescind rules and
regulations relating to the Plan and (c) to make all other determinations
necessary or advisable for administering the Plan. The determination of the
Committee with respect to matters referred to in this Section 3 as within
its province shall be conclusive, except that, to the extent required by
law or by the Certificate of Incorporation or By-Laws of EDS, the terms of
any offering shall be subject to ratification by the Board of Directors or
the Committee prior to the effective date of such offering.
4. Eligibility. No right to purchase shares shall be granted hereunder to a
person who is not an employee of EDS or a subsidiary corporation, now
existing or hereafter formed or acquired. As used in the Plan, the terms
"parent corporation" and "subsidiary corporation" shall have the meanings
respectively given to such terms in Sections 424(e) and 424(f) of the Code.
Each offering shall be made to all employees of EDS and to all employees of
any subsidiary corporations as is designated by the Committee to
participate in the Plan, excluding: (i) employees whose customary
employment is 20 hours or less per week or not more than five months in any
calendar year; (ii) in the discretion of the Committee, as specified in the
terms of any offering, highly compensated employees within the meaning of
Section 414(q) of the Code; and (iii) any employee who, immediately after
the grant of a right to purchase stock pursuant to an offering, owns stock
possessing 5% or more of the total combined voting power or value of all
classes of stock of the employee's employer or of any subsidiary or parent
corporation of the employee's employer (in determining stock ownership of
an individual, the rules of Section 424(d) of the Code shall be applied;
shares that the employee may purchase under outstanding rights of purchase
and options shall be treated as stock owned by him; and the Committee and
the Administrator may rely on representations of fact made to them by the
employee and believed by them to be true).
18
<PAGE>
5. Offerings. The Committee may make grants to all eligible employees of EDS
and to all eligible employees of any subsidiary corporation as is
designated by the Committee to participate in the Plan of rights to
purchase shares under the terms hereinafter set forth. The terms and
conditions of each offering shall state its effective date, shall define
the duration of such offering and the purchase period thereunder, shall
specify the number of shares that may be purchased thereunder, shall
specify the purchase price for such shares and shall specify what class of
employees, if any, are excluded pursuant to Section 4(ii). During the
purchase period specified in the terms of an offering (or during such
portion thereof as an eligible employee may elect to participate), payroll
deductions shall be made from such employee's compensation pursuant to
Sections 6 and 7. Any stated purchase period shall end no later than 27
months from the effective date of any offering hereunder. The measure of an
employee's participation in an offering shall be such employee's total
compensation for the purchase period specified in such offering (or for
such portion thereof as the employee is eligible to participate), subject
to appropriate adjustments that would exclude items such as reimbursement
of moving, travel, trade or business expenses.
6. Participation. An employee eligible on the effective date of an offering or
thereafter during the offering may participate in such offering by
enrolling through the Corporate Administrative System or, if unavailable to
the eligible employee, then by completing a payroll deduction authorization
form and forwarding it to the Administrator at any time prior to the
beginning of the next payroll period in which payroll deductions will be
made. The employee must authorize a regular payroll deduction from the
employee's compensation and must specify the date on which such employee's
deduction and participation in the Plan is to commence, which may not be
retroactive. An employee shall be considered a "Participant" in the Plan as
of the payroll date of the first payroll deduction.
7. Deductions. The Administrator will maintain a payroll deduction account for
each participating employee. With respect to any offering made under the
Plan, an employee may authorize a payroll deduction of any whole percentage
up to a maximum of 10% of the total compensation receives during the
purchase period specified in an offering (or during such portion thereof as
he/she may be eligible or elect to participate).
8. Deduction Changes. At any time prior to the end of the applicable purchase
period, a Participant may change or temporarily discontinue payroll
deductions by filing a new payroll deduction authorization form.
Notwithstanding, no participant shall be entitled to change a payroll
deduction more than twice or to temporarily discontinue a payroll deduction
more than once during any purchase period. In addition, no such change or
discontinuance shall become effective sooner than the next payroll period
after the Participant properly registered a change to the payroll deduction
authorization information then on file with the Administrator.
9. Withdrawal of Funds. A Participant may at any time and for any reason
withdraw the entire cash balance then accumulated in such Participant's
payroll deduction account and thereby withdraw from participating in an
offering. Upon withdrawal of the cash balance in a
19
<PAGE>
payroll deduction account, such Participant shall cease to be eligible to
participate in the offering pursuant to which the withdrawn funds were
withheld. Partial withdrawals shall not be permitted. Any cash balance
withdrawn in accordance with this Section 9 may not be transferred to any
payroll deduction account maintained for the employee pursuant to another
offering, whether under the Plan or under another such plan.
10. Right of Purchase--Option for a Maximum Number of Shares. The right of an
employee to purchase stock pursuant to an offering under the Plan shall be
an "option" (and an offering shall be the "grant" of such option) to
purchase a maximum number of shares determined by dividing: (i) 15% of the
employee's monthly base salary, determined as of the date of the offering
or the commencement of such Participant's eligibility to participate in the
offering, whichever is later, multiplied by the number of months in the
purchase period or the number of months such Participant is eligible to
participate in the offering, whichever is less; by (ii) the fair market
value of a share determined as of the date of the offering in the manner
set forth in Section 12.
11. Maximum Allotment of Rights of Purchase. Any right to purchase shares under
the Plan shall be subject to the limitations of Section 423(b)(8) of the
Code (generally limiting accrual of the right of any employee to purchase
shares under all employee stock purchase plans of EDS and any subsidiary or
parent corporation, qualified under Section 423 of the Code, to an annual
rate of $25,000 in fair market value).
12. Purchase Price. The purchase price for each share under each right of
purchase granted pursuant to an offering shall not be less than the lesser
of: (i) an amount equal to 85% of the fair market value (defined below) of
such share at the time the right of purchase is granted; or (ii) an amount
which under the terms of the option is not less than 85% of the fair market
value of such share at the time the right to purchase is exercised. The
"fair market value" of a share of EDS Stock on any given date shall be the
mean between the high and low sale prices on the New York Stock Exchange
Composite Tape for EDS Stock, as reported by the Dow Jones News/Retrieval
Service of Dow Jones and Company, Inc., on such date or on the date
immediately prior thereto on which such prices for EDS Stock are so
reported or, if not so reported, as reported in a newspaper of national
circulation selected by the Committee or, in case no such sales take place
on such date, the mean of the closing bid and asked prices (regular way) on
the New York Stock Exchange Composite Tape on such date or, if the EDS
Stock is not then listed or admitted to trading on the New York Stock
Exchange, the mean between the high and low sale prices on such date or, in
case no sales take place on such date, the mean of the closing bid and
asked prices (regular way) on the largest principal national securities
exchange on which such stock is then listed or admitted to trading, or if
not listed or admitted to trading on any principal national securities
exchange, then the last reported sales prices for such shares in the over-
the-counter market, as reported on the National Association of Securities
Dealers Automated Quotations System or, if such sale prices shall not be
reported thereon, the mean of the closing bid and asked prices as reported
thereon, or if such prices shall not be reported thereon, as the same shall
be reported by the National Quotation Bureau Incorporated, or, in all other
cases, the mean
20
<PAGE>
of two appraisals of fair market value, each of which shall be furnished by
a New York Stock Exchange member firm selected by the Committee for that
purpose. In the event the funds in the payroll deduction account of a
participating employee are in a currency other than United States dollars
on any investment date (as defined below), for purposes of determining the
maximum whole number of shares that may be purchased pursuant to Section
13, such funds shall be deemed to have been converted into United States
dollars based upon the foreign exchange selling rates, as reported by the
Dow Jones News/Retrieval Service of Dow Jones and Company, Inc., on such
date, or if not so reported on such date, as reported on the next preceding
date on which such rates are reported.
13. Method of Payment. As of the last Friday in each calendar month, except the
last calendar month of a purchase period, and as of the last day of the
purchase period (each of such dates being known as an "investment date"),
the payroll deduction account of each Participant shall be totaled. If on
an investment date, the payroll deduction account of a Participant has at
least Three Hundred and 00/100 Dollars ($300.00) or an amount equal to the
purchase price of ten (10) shares of EDS stock then, on such investment
date such Participant shall purchase without any further action, the
maximum whole number of shares (subject to the limitation provided in
Section 10) possible at the then fair market value of such shares as
determined in accordance with Section 12 together with any fees or charges
associated with such purchase that can be purchased with the funds in such
Participant's payroll deduction account, provided that fractional shares
may not be purchased. The Participant's payroll deduction account shall be
charged for the amount of the purchase and a stock certificate shall be
issued for the benefit of the Participant as soon thereafter as practicable
for the shares so purchased, which certificate may be issued in nominee
name. Participant's payroll deduction account at the end of each purchase
period shall be refunded to such Participant. All funds in payroll
deduction accounts may be used by EDS for its general corporate purposes as
the board of directors of EDS shall determine. However, the last purchase
on the last investment date of a grant year shall be for the maximum whole
number of shares (subject to the limitation provided in Section 10)
possible that can be purchased with the funds available in such
Participant's payroll deduction account, and all cash remaining in such
Participant's payroll deduction account thereafter shall be returned to the
Participant.
14. Issuance of Certificates and Payment of Expenses. Upon request and after
expiration of applicable restrictions, certificates representing shares
purchased under the Plan may be issued in the name of the employee or, if
he/she so indicates on an appropriate form: (i) in such Participant's name
jointly with a member of such Participant's family, with right of
survivorship; (ii) in the name of a fiduciary for the employee (in the
event the employee is under a legal disability to have certificates issued
in such Participant's name); or (iii) in a manner giving effect to the
status of such shares as community property in jurisdictions where
applicable. Upon termination of employment, certificates representing both
restricted and nonrestricted shares purchased under the Plan will be issued
in the name of the employee and forwarded to such Participant's account
address on file with the Plan's transfer agent of record. In the event of a
final non-appealable court-ordered account
21
<PAGE>
distribution, certificates representing both restricted and nonrestricted
shares purchased under the Plan will be issued in the name and to the
address specified in the court documents provided to the office of the
Administrator. EDS shall pay all issue or initial transfer taxes of EDS
with respect to the issuance or initial transfer of shares, as well as all
fees and expenses necessarily incurred by EDS in connection with such
issuance or initial transfer.
15. Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any shares covered by a right of purchase until
a stock certificate for such shares is issued to the benefit of such
Participant, which stock certificate may be issued in nominee name. No
adjustment will be made for dividends (ordinary or extraordinary, whether
in cash or in other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued,
except as provided in Section 18.
16. Sale of Stock. Shares of stock purchased under the Plan may not be sold or
transferred within two years of the date of purchase unless they are first
offered to EDS (as designated by the Committee) at the lesser of: (i) the
price originally paid for the shares; or (ii) the fair market value (as
determined in accordance with Section 12) per share of EDS Stock on the
date the shares are offered to EDS. EDS must accept or reject this offer at
the office of the Administrator within five business days of receipt of the
offer. Shares issued under the Plan will carry a restrictive legend to this
effect.
17. Rights Not Transferable. Rights to purchase shares under the Plan are not
transferable by a participating employee and may be exercised only by such
Participant during such Participant's lifetime.
18. Adjustment of Shares. If any change is made in the number, class or rights
of shares subject to the Plan or subject to any offering under the Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination of shares, exchange of shares, issuance of
rights to subscribe or other change in capital structure), appropriate
adjustments shall be made as to the maximum number of shares subject to the
Plan and the number of shares and price per share subject to outstanding
rights of purchase as shall be equitable to prevent dilution or enlargement
of such rights; provided, however, that any such adjustment shall comply
with the rules of Section 424(a) of the Code if the transaction is one
described in said Section 424(a); provided further that in no event shall
any adjustment be made that would render any offering other than an
offering pursuant to an employee stock purchase plan within the meaning of
Section 423 of the Code; and provided further that the issuance by EDS of
up to 120,000,000 shares of the EDS Stock, either pursuant to or outside
the ambit of the Plan, shall not require adjustment pursuant to this
Section.
19. Retirement, Termination and Death. In the event of a Participant's
retirement or termination of employment, the amount in any Participant's
payroll deduction account shall be refunded to such Participant and the
restricted and nonrestricted shares of stock held for such
22
<PAGE>
Participant's benefit by the Plan shall be issued to such Participant, and
in the event of such Participant's death, such amount and stock shall be
paid and issued to such Participant's estate.
20. Amendment of the Plan. This Plan may be amended at any time by the
Committee, provided that, without the approval of the stockholders of EDS
entitled to vote thereon, no such amendment shall become effective if it
would: (i) increase the number of shares reserved for rights of purchase
under the Plan; or (ii) modify the requirements as to eligibility for
participation in the Plan.
21. Termination of the Plan. The Plan and all rights of employees hereunder
shall terminate: (i) on the investment date that participating employees
become entitled to purchase a number of shares greater than the number of
shares remain available for purchase under the Plan; or (ii) in the
discretion of the Committee, upon the completion of any purchase period. In
the event that the Plan terminates under circumstances described in (i)
above, shares remaining available for purchase under the Plan as of the
termination date shall be issued to Participants on a pro rata basis. Any
cash balances remaining in Participants' payroll deduction accounts upon
termination of the Plan shall be refunded as soon thereafter as
practicable. The powers of the Committee provided by Section 3 to construe
and administer any right to purchase shares granted prior to the
termination of the Plan shall nevertheless continue after such termination.
22. Listing of Shares and Related Matters. If at any time the Committee shall
determine, based on opinion of counsel, that the listing, registration or
qualification of the shares covered by the Plan upon any national
securities exchange or under any state or Federal law or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the sale or purchase of shares under
the Plan, no shares will be sold, issued or delivered unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to counsel.
23. Third Party Beneficiaries. None of the provisions of the Plan shall be for
the benefit of or enforceable by any creditor of a Participant. A
Participant may not create a lien on any portion of the cash balance
accumulated in such Participant's payroll deduction account or on any
shares covered by a right to purchase before a stock certificate for such
shares is issued for such Participant's benefit.
24. General Provisions. The Plan shall neither impose any obligation on EDS or
on any subsidiary corporation to continue the employment of any Participant
or eligible employee, nor impose any obligation on any Participant to
remain in the employ of EDS or of any subsidiary corporation. For purposes
of the Plan, an employment relationship shall be deemed to exist between an
individual and a corporation if, at the time of the determination, the
individual was an "employee" of such corporation within the meaning of
Section 423(a)(2) of the Code and the regulations and rulings interpreting
such Section. For
23
<PAGE>
purposes of the Plan, the transfer of an employee from employment with EDS
to employment with a subsidiary of EDS, or vice versa, shall not be deemed
a termination of employment of the employee. Subject to the specific terms
of the Plan, all employees granted rights to purchase shares hereunder
shall have the same rights and privileges.
25. Governing Law. Except where jurisdiction is exclusive to the federal courts
or except as governed by federal law, the Plan and rights to purchase
shares that may be granted hereunder shall be governed by and construed and
enforced in accordance with the laws of the State of Texas.
26. Effective Date. The Plan shall be deemed effective upon its approval by the
Board of Directors; provided, however, that no purchase period under the
Plan may begin until a Registration Statement under the Securities Act of
1993, as amended, covering the shares to be issued under the Plan has
become effective.
27. Dividend Reinvestment. Any employee or any employee who, upon separation
from EDS, was eligible for an early or normal retirement benefit from the
EDS Retirement Plan ("Retiree"), and who, pursuant to Sections 6 and 28,
has any shares to his benefit in the Plan for which certificates have not
been issued pursuant to Section 14, may elect to have any and all dividends
issued on such shares reinvested in additional shares at full fair market
value. The Administrator shall establish and communicate all procedures
necessary for employees or Retirees to reinvest dividends, including the
charging of any reasonable fee to participating employees or Retirees for
reinvesting dividends in accordance herewith.
28. Deposit of Certificated Shares. Any employee of EDS who holds EDS Stock
certificates issued in any manner specified in Section 14(i)-(iii)
representing shares of EDS Stock, may deposit the EDS Stock certificates
into the Plan by transferring such shares into nominee name. Any such
transfer of certificated shares shall be made pursuant to procedures
established by the Administrator. Any employee who elects to transfer
shares into nominee name pursuant to this Section is not required to
participate pursuant to Plan Sections 6 and 7, but shall be eligible to
invest dividends earned on such shares transferred pursuant to this Section
in accordance with Section 27.
29. Retirees. Notwithstanding anything to the contrary in Section 14 or
elsewhere in the Plan, Retirees who, by reason of Section 6 acquired shares
pursuant to the Plan, may continue to hold such shares in nominee name and
elect to invest the dividends earned therein in accordance with Section 27
but may not purchase any additional shares pursuant to Sections 6 and 7.
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 936
<SECURITIES> 85
<RECEIVABLES> 3,244
<ALLOWANCES> 122
<INVENTORY> 185
<CURRENT-ASSETS> 4,735
<PP&E> 6,672
<DEPRECIATION> 3,410
<TOTAL-ASSETS> 11,116
<CURRENT-LIABILITIES> 3,102
<BONDS> 2,109
0
0
<COMMON> 560
<OTHER-SE> 4,596
<TOTAL-LIABILITY-AND-EQUITY> 11,116
<SALES> 3,367
<TOTAL-REVENUES> 3,367
<CGS> 0
<TOTAL-COSTS> 2,698
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 11
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 342
<INCOME-TAX> 123
<INCOME-CONTINUING> 219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 219
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
