<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1996
REGISTRATION STATEMENT NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ELECTRONIC DATA SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2548221
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5400 LEGACY DRIVE,
PLANO, TEXAS 75024-3105
(214) 604-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOSEPH M. GRANT
CHIEF FINANCIAL OFFICER
ELECTRONIC DATA SYSTEMS CORPORATION
5400 LEGACY DRIVE
PLANO, TEXAS 75024-3105
(214) 604-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ANDREW M. JAMES F. CAREY D. GILBERT MATTHEW J. MICHAEL D.
BAKER JONES, DAY, FRIEDLANDER MALLOW WORTLEY
BAKER & BOTTS, REAVIS & POGUE ELECTRONIC SKADDEN, ARPS, VINSON &
L.L.P. 2300 TRAMMELL DATA SYSTEMS SLATE, ELKINS L.L.P.
800 TRAMMELL CROW CNTR. CORPORATION MEAGHER & FLOM 3700 TRAMMELL
CROW CNTR. 2001 ROSS 5400 LEGACY 919 THIRD CROW CNTR.
2001 ROSS AVENUE DRIVE AVENUE 2001 ROSS
AVENUE DALLAS, TX PLANO, TX NEW YORK, NY AVENUE
DALLAS, TX 75201-2958 75024-3105 10022-3897 DALLAS, TX
75201-2916 75201-2975
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share(1)..... 34,500,000 shares $53.938(2) $1,860,861,000.00(2) $641,676.21
</TABLE>
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(1) There are also being registered hereunder an equal number of Series A
Junior Participating Preferred Stock purchase rights, which are currently
attached to and transferable only with shares of Common Stock registered
hereby.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of
determining the registration fee, on the basis of the average of the high
and low sales prices reported on the New York Stock Exchange Composite
Tape on June 20, 1996 for Common Stock of Electronic Data Systems
Corporation.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 24, 1996
PROSPECTUS
LOGO
[LOGO OF EDS APPEARS HERE]
30,000,000 SHARES
ELECTRONIC DATA SYSTEMS CORPORATION
COMMON STOCK
-----------
This Prospectus covers the resale of 30,000,000 shares of Common Stock, par
value $0.01 per share ("Common Stock"), of Electronic Data Systems Corporation,
a Delaware corporation (together with its subsidiaries and predecessors, "EDS"
or the "Company"), by the General Motors Special Hourly Employees Pension Trust
(together with any sub-trusts thereunder, the "Hourly Plan Special Trust" or
the "Selling Stockholder") under the General Motors Hourly-Rate Employees
Pension Plan (the "Hourly Plan"). See "Selling Stockholder." Of the 30,000,000
shares of Common Stock offered hereby, 25,500,000 are being offered in the
United States and Canada by the U.S. Underwriters (the "U.S. Offering") and
4,500,000 are being offered internationally outside the United States and
Canada by the International Underwriters (the "International Offering" and
together with the U.S. Offering, the "Offerings"). See "Underwriting."
EDS will not receive any of the proceeds from the sale of the shares offered
hereby. See "Selling Stockholder" and "Underwriting." The Common Stock is
listed in the United States on the New York Stock Exchange (the "NYSE") under
the symbol "EDS." The last reported sale price of the Common Stock on the NYSE
on June 21, 1996 was $53 5/8 per share. See "Price Range of Common Stock and
Dividends."
United States Trust Company of New York is the trustee for the Hourly Plan
Special Trust and U.S. Trust Company of California, N.A., an affiliate of
United States Trust Company of New York, is the trustee for a sub-trust under
the Hourly Plan Special Trust (together, the "Hourly Plan Trustee").
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIESAND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HASTHE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIESCOMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THISPROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC DISCOUNT(1) SELLING STOCKHOLDER(2)
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<S> <C> <C> <C>
Per Share......................... $ $ $
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Total(3).......................... $ $ $
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</TABLE>
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(1) EDS and, to the extent permitted by applicable law, the Selling
Stockholder, have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) The expenses of the Offerings, estimated to be $1,045,000, are payable by
EDS.
(3) The Selling Stockholder has granted the U.S. Underwriters and International
Underwriters an option, exercisable within 30 days after the date hereof,
to purchase up to an aggregate of 4,500,000 additional shares of Common
Stock at the Price to Public less the Underwriting Discount for the purpose
of covering overallotments, if any. If the Underwriters exercise such
option in full, the total Price to Public, Underwriting Discount and
Proceeds to Selling Stockholder will be $ , $ and $ , respectively.
-----------
Advisor to United States Trust Company of New York
WASSERSTEIN PERELLA & CO.
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the
certificates for the shares of Common Stock will be made on or about ,
1996, in New York, New York.
-----------
MERRILL LYNCH & CO. MORGAN STANLEY & CO. GOLDMAN, SACHS & CO.
INCORPORATED
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
SALOMON BROTHERS INC
FURMAN SELZ
-----------
Global Coordinators
MERRILL LYNCH & CO. MORGAN STANLEY & CO. GOLDMAN, SACHS & CO.
INCORPORATED
-----------
The date of this Prospectus is , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
AVAILABLE INFORMATION
In connection with the Split-Off described in this Prospectus, EDS became
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by EDS with the Commission can be inspected, and
copies may be obtained, at the Public Reference Section of the Commission,
Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549, at prescribed
rates, as well as at the following Regional Offices of the Commission: Seven
World Trade Center, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Such reports, proxy
statements and other information may also be obtained from the web site that
the Commission maintains at http://www.sec.gov. Reports, proxy statements and
other information concerning EDS can also be inspected at the offices of the
New York Stock Exchange, Inc., 11 Wall Street, New York, New York 10005, where
the Common Stock is listed.
Reports, proxy statements, and other information concerning EDS can also be
obtained electronically through a variety of databases, including, among
others, the Commission's Electronic Data Gathering And Retrieval ("EDGAR")
program, Knight-Ridder Information, Inc., Federal Filings/Dow Jones and
Lexis/Nexis.
EDS has filed with the Commission a Registration Statement on Form S-3 (as
amended and including exhibits, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), covering the resale
of the shares of Common Stock offered hereby. Pursuant to the rules and
regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement. Such information can be inspected at
and obtained from the Commission and the NYSE in the manner set forth above.
For further information pertaining to EDS and the Common Stock, reference is
hereby made to the Registration Statement. Statements contained herein
concerning any document filed as an exhibit to the Registration Statement are
not necessarily complete and, in each instance, reference is made to the copy
of such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or, where so stated, portions thereof, which have
been filed by EDS with the Commission, are incorporated herein by reference:
1. Current Reports on Form 8-K dated April 23, 1996, June 7, 1996 and June
18, 1996;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
(the"EDS First Quarter 1996 Form 10-Q"); and
3. The section entitled "Description of Registrant's Securities to be
Registered" contained in the Registration Statement on Form 8-A dated
May 29, 1996.
All documents filed by EDS with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offerings made hereunder shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
EDS will provide without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon the written or oral request
of such person, a copy of any and all of the documents which have been or may
be incorporated by reference in this Prospectus, other than exhibits to such
documents not specifically described above. Requests for such documents should
be directed to Electronic Data Systems Corporation, EDS Investor Relations,
Mail Stop H3-6F-47, 5400 Legacy Drive, Plano, Texas, 75024-3105 (Telephone
Number: (214) 604-6000).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) contained
elsewhere or incorporated by reference in this Prospectus. Unless otherwise
indicated, the information presented in this Prospectus assumes the
Underwriters' over-allotment option will not be exercised.
THE COMPANY
EDS is a world leader in applying information technology ("IT"), with over 30
years of experience in using advanced computer and communications technologies
to meet its clients' business needs. EDS' total revenues grew from $786 million
in its 1984 fiscal year (the last full fiscal year before the acquisition of
EDS by its former parent corporation, General Motors Corporation ("General
Motors" or "GM")) to $12.4 billion in 1995. Although revenues attributable to
General Motors and its affiliates have increased from 1985 to 1995, they have
decreased as a percentage of total revenues from approximately 70% in 1985 to
approximately 31% in 1995 as a result of the rapid revenue growth of EDS' non-
General Motors business. As of December 31, 1995, EDS employed approximately
96,000 persons and served clients in the United States and approximately 40
other countries. EDS' principal executive offices are located at 5400 Legacy
Drive, Plano, Texas 75024-3105 (Telephone Number (214) 604-6000).
STRATEGY
EDS' strategy is to offer a full range of IT services to enterprises,
government entities and individuals worldwide. These services include
management consulting, systems development, systems integration, systems
management and process management. EDS' organizational structure is designed to
offer the full range of services on a global basis through business units that
focus along the lines of specified industries, such as manufacturing, financial
services, government, communications, health, travel and transportation, and
energy, as well as geographically, such as on the Americas, Europe, and
Asia/Pacific and Japan. Each business unit is further organized into separate,
more focused business units within the relevant industry or geography. EDS
seeks to leverage its knowledge and resources for its individual customers by
drawing from the many industries and skill sets available across a wide range
of geographies. EDS believes its organizational structure enables it to better
focus on and use the knowledge gained from the industries and geographies in
which its customers operate and therefore better serve its customers and its
customers' customers.
EDS seeks to continue its leadership position in the IT industry through
increased globalization and expanded product and service offerings. The
percentage of EDS' revenues outside the United States has increased from 18% in
1990 to 30% in 1995, and the number of countries in which EDS operates has
increased from 28 in 1990 to 40 in 1995. EDS believes that corporations are
becoming increasingly globalized because other companies enter their markets
from other geographies or they desire to expand into additional geographies.
This trend is fostered by advancements in communications technology which
compress time and distance. EDS intends to continue to capitalize on the
general trend toward convergence of the world's markets by enhancing its
capability through expanded service offerings as well as through strategic
alliances with global partners and distributors. The acquisition of A.T.
Kearney in 1995, which expanded EDS' capabilities along a range of industries,
skill sets and regions, is an example of such strategic growth.
SPLIT-OFF OF THE COMPANY FROM GENERAL MOTORS
On June 7, 1996, General Motors, formerly the holder of all of the
outstanding shares of capital stock of the Company, effected a split-off (the
"Split-Off") of the Company from General Motors. As a result of the Split-Off,
(i) the Company became an independent, publicly held company with approximately
485.7 million shares of Common Stock outstanding and listed for trading on the
NYSE and the London Stock Exchange and (ii) each
3
<PAGE>
outstanding share of Class E Common Stock, par value $0.10 per share ("Class E
Common Stock"), of General Motors was converted into one share of Common Stock
of the Company. In connection with the Split-Off, EDS effected a payment (the
"Special Inter-Company Payment") to General Motors in the amount of $500.0
million in cash and General Motors provided EDS a $50.0 million allowance
relating to the resolution of various uncertain, contingent or other matters
arising out of the separation of General Motors and EDS.
The Split-Off was intended to accomplish at least three business objectives:
(i) the removal of limitations on EDS' ability to participate in major
strategic alliances (including mergers and acquisitions which can be effected
using Common Stock); (ii) the removal of limitations on EDS' ability to obtain
additional business from and establish new customer relationships with
companies that compete with General Motors or its subsidiaries, such as Hughes
Electronics Corporation ("Hughes") and General Motors Acceptance Corporation
("GMAC"); and (iii) the enhancement of EDS' access to the capital necessary for
investment in its future growth.
Immediately prior to the Split-Off, EDS and General Motors entered into a new
Master Service Agreement (the "Master Service Agreement") that serves as a
framework for the negotiation and operation of service agreements between GM
and EDS related to certain "in-scope" IT services to be provided by EDS to
General Motors on a worldwide basis (collectively, together with the Master
Service Agreement, the "IT Services Agreements"). The IT Services Agreements
replaced the Master Agreement (the "Prior Master Agreement") that, prior to the
Split-Off, served as a framework for individual services agreements between GM
and EDS (collectively, together with the Prior Master Agreement, the "Prior IT
Services Agreements").
Although General Motors has no continuing equity interest in EDS, GM has an
indirect stake in EDS' financial performance as a result of the Hourly Plan
Special Trust's holdings of Common Stock. On June 21, 1996, the Selling
Stockholder had beneficial ownership of approximately 149.5 million shares of
Common Stock, representing approximately 31% of the Common Stock outstanding.
Immediately following the consummation of the Offerings, the Selling
Stockholder will have beneficial ownership of approximately 119.5 million
shares (or, if the Underwriters' over-allotment option is exercised in full,
approximately 115.0 million shares) of Common Stock. Such shares will represent
approximately 24.6% (or, if the Underwriters' over-allotment option is
exercised in full, 23.7%) of the Common Stock outstanding.
RECENT DEVELOPMENTS
On April 1, 1996, EDS announced that it was taking certain actions and
considering others to maintain and improve operating efficiencies and
accelerate the Company's move toward "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 designed to both reduce labor costs and change the
skill mix of the Company's workforce. It is expected that substantially all of
these workforce reductions will be completed by December 1996. As part of its
overall goal to improve operating efficiencies, EDS also announced at such time
that it was in the process of evaluating certain aspects of its business to
identify any redundant facilities and related assets that were no longer
consistent with its long-term strategic objectives.
In connection with the foregoing, EDS announced on June 18, 1996 that it
estimates it will incur a one-time pre-tax charge in the second quarter of 1996
of approximately $850 million ($1.12 per share, after tax). This represents an
increase from the previous estimate for the second-quarter charge, which the
Company earlier had indicated could reach $750 million. The $850 million charge
includes the employee-related actions discussed above, the write-down of assets
in connection with the refreshment of information technology assets and the
consolidation of certain facilities, the revision of estimates associated with
certain customer contracts, and the decision to exit certain activities.
EDS currently expects that the charge will be classified into three major
categories: employee-related, $277 million; technology refreshment, asset
write-downs and facility consolidations, $513 million; and cost of revenues,
$60 million. Of the total $850 million charge, EDS expects to make cash
expenditures of
4
<PAGE>
approximately $277 million, a substantial portion of which will be incurred in
1996 and 1997. Such cash expenditures, which will be made in connection with
the employee-related actions, will be funded from operations. EDS expects that
the actions identified above will result in savings commencing in the second
half of 1996.
EDS expects its earnings per share in the second quarter of 1996, before the
$850 million charge and Split-Off transaction costs of approximately $40
million, to be generally in the range of $0.49 to $0.52 per share.
Statements about the effect of EDS' actions, the amount of charges that may
be incurred by EDS, expected earnings per share results and savings from the
charges are forward-looking statements which by their nature are subject to
numerous uncertainties that could cause actual results to vary.
THE OFFERINGS
<TABLE>
<C> <S>
Common Stock Offered Hereby(a)
U.S. Offering.............................. 25,500,000 shares
International Offering..................... 4,500,000 shares
-----------------
Total...................................... 30,000,000 shares
=================
Common Stock Outstanding after the Offerings.. 485,732,594 shares(b)
NYSE Symbol................................... EDS
</TABLE>
- --------
(a) Without giving effect to the over-allotment option granted by the Hourly
Plan Special Trust to the Underwriters.
(b) The consummation of the Offerings will not change the number of shares of
Common Stock outstanding.
5
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
The following summary consolidated historical financial information for the
years ended December 31, 1995, 1994, 1993, 1992 and 1991 have been derived from
EDS' Consolidated Financial Statements, which have been audited by KPMG Peat
Marwick LLP, independent auditors. The summary consolidated historical
financial information for the three months ended March 31, 1996 and 1995 have
been derived from unaudited consolidated financial statements, which, in the
opinion of management, reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the results of
operations of EDS for those periods. Interim results are not necessarily
indicative of the results which may be expected for any other interim period or
for the full year. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the EDS Consolidated Financial Statements, which are included in
this Prospectus, and the EDS First Quarter 1996 Form 10-Q which is incorporated
herein by reference. See "Selected Consolidated Financial Information."
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Systems and other
contracts revenues
Outside customers...... $ 2,404.7 $ 1,878.3 $ 8,531.0 $6,412.9 $5,183.6 $4,806.7 $3,666.3
General Motors and
affiliates............ 962.2 898.0 3,891.1 3,547.2 3,323.7 3,348.5 3,362.2
--------- --------- --------- -------- -------- -------- --------
Total revenues......... 3,366.9 2,776.3 12,422.1 9,960.1 8,507.3 8,155.2 7,028.5
--------- --------- --------- -------- -------- -------- --------
Costs and expenses
Cost of revenues....... 2,698.1 2,176.1 9,601.6 7,529.4 6,390.6 6,205.8 5,415.1
Selling, general, and
administrative........ 309.9 281.0 1,291.5 1,187.1 1,005.4 969.3 761.9
--------- --------- --------- -------- -------- -------- --------
Total costs and
expenses.............. 3,008.0 2,457.1 10,893.1 8,716.5 7,396.0 7,175.1 6,177.0
--------- --------- --------- -------- -------- -------- --------
Operating income........ 358.9 319.2 1,529.0 1,243.6 1,111.3 980.1 851.5
Interest and other
income, net............ (17.0) (11.7) (62.0) 40.6 20.0 20.7 42.2
--------- --------- --------- -------- -------- -------- --------
Income before income
taxes.................. 341.9 307.5 1,467.0 1,284.2 1,131.3 1,000.8 893.7
Provision for income
taxes.................. 123.1 110.7 528.1 462.3 407.3 365.3 330.7
Cumulative effect of
accounting change(a)... -- -- -- -- -- -- (15.5)
--------- --------- --------- -------- -------- -------- --------
Separate Consolidated
Net Income(b).......... $ 218.8 $ 196.8 $ 938.9 $ 821.9 $ 724.0 $ 635.5 $ 547.5
========= ========= ========= ======== ======== ======== ========
Average number of shares
of Class E Common Stock
outstanding
(Numerator)(b)......... 463.2 300.0 404.6 260.3 243.0 209.1 195.3
Class E Dividend Base
(Denominator)(b)....... 484.4 482.4 483.7 481.7 480.6 479.3 478.1
Available Separate
Consolidated Net
Income(b).............. $ 209.2 $ 122.4 $ 795.5 $ 444.4 $ 367.2 $ 278.4 $ 223.6
Earnings per share
attributable to Class E
Common Stock(b)........ 0.45 0.42 1.96 1.71 1.51 1.33 1.14
Dividends per share of
Class E Common
Stock(b)............... 0.15 0.13 0.52 0.48 0.40 0.36 0.32
</TABLE>
- --------
(a) Effective January 1, 1991, EDS adopted SFAS No. 109, "Accounting for Income
Taxes." The cumulative effect of this accounting change at January 1, 1991
was a charge of $15.5 million, of which $0.03 per share was attributable to
Class E Common Stock.
(b) Calculated for purposes related to the Class E Common Stock, which were
converted into Common Stock on a one-for-one basis pursuant to the Split-
Off.
6
<PAGE>
RISK FACTORS
Prospective purchasers of Common Stock should consider carefully the
following factors relating to the business of the Company and the Offerings,
together with the information and financial data set forth elsewhere in this
Prospectus, prior to purchasing any shares of Common Stock offered hereby.
DIVIDEND POLICY
The payment of dividends on the Common Stock is subject to the policies and
practices of the Board of Directors of the Company (the "EDS Board") and may
be changed from time to time by the EDS Board. Under Delaware law and the
Restated Certificate of Incorporation of EDS (the "Certificate of
Incorporation"), the EDS Board is not required to declare dividends on the
Common Stock. The EDS Board has adopted a policy to continue to pay quarterly
dividends through 1996 in an amount equal to $0.15 per share. However, the EDS
Board will be free, during or after 1996, to change its dividend policies and
practices from time to time and to decrease or increase the dividends paid on
the Common Stock on the basis of EDS' financial condition, earnings and
capital requirements and other factors the EDS Board may deem relevant. The
dividend policy of the EDS Board with respect to the Common Stock may be
different than the policy of the Board of Directors of General Motors (the "GM
Board") with respect to the Class E Common Stock. See "Price Range of Common
Stock and Dividends--Dividend Policy."
INCREASED LEVERAGE; NO ASSURANCE OF ACCESS TO CAPITAL
EDS expects that over time it may incur substantially more debt than it did
while a subsidiary of GM. EDS borrowed approximately $500 million under its
existing commercial paper facilities to finance the Special Inter-Company
Payment. In addition, EDS' financial leverage is expected to increase in the
future as it borrows additional funds to meet its growing capital needs. EDS
management believes that EDS' stable revenues should permit it to sustain a
higher debt-to-equity ratio than that which it maintained prior to the Split-
Off as a subsidiary of GM and that such a higher level of debt will be
necessary to provide EDS with the capital it needs to fund future growth. The
degree to which EDS is leveraged, however, could under certain circumstances
limit its financial and operating flexibility. To the extent that EDS becomes
more highly leveraged, it may also be required to pay higher interest rates on
its outstanding borrowings. Furthermore, although EDS believes that the Split-
Off will enhance EDS' access to the capital necessary for investment in its
business growth, there can be no assurance in this regard. See "Split-Off of
the Company from General Motors--Purposes of the Split-Off" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
DEPENDENCE ON MAJOR CUSTOMER; RECENT CHANGES IN PRICING AND TERMS
Although the percentage of EDS' total revenues attributable to GM and its
affiliates has decreased significantly in recent years as a result of the
revenue growth of EDS' non-GM business, General Motors continues to account
for a substantial portion of EDS' revenues. During the year ended December 31,
1995, the portion of EDS' revenues (excluding interest and other income)
attributable to the performance of IT and other services on behalf of General
Motors and its affiliates was approximately 31%. The loss of General Motors as
an ongoing major customer of EDS would have a material adverse effect on EDS.
Immediately prior to the Split-Off, General Motors and EDS entered into the
Master Service Agreement and certain other related IT Services Agreements. The
IT services provided by EDS under the IT Services Agreements are generally
similar to those provided to General Motors under the Prior IT Services
Agreements. However, unlike the Prior Master Agreement (which did not have a
fixed term, but provided that it may be terminated by either party in the
event of the sale of all or substantially all of the assets or stock of EDS to
a non-GM entity), the Master Service Agreement provides for an initial term of
10 years from the date upon which
7
<PAGE>
the Split-Off was consummated, which may be extended by agreement of the
parties. Furthermore, the Master Service Agreement provides General Motors
with termination rights under certain circumstances, including upon the
occurrence of certain changes in control of EDS. See "Relationship Between the
Company and General Motors--IT Services Agreements."
In addition, the IT Services Agreements made certain significant changes to
the pricing and terms of services provided by EDS. Among other things, the
parties have agreed that the rates charged by EDS to General Motors for
certain information processing activities and communication services will be
reduced and that the parties will work together to achieve targets for
increased structural cost reductions. General Motors also has been 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, commencing 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 General Motors. See "Relationship Between the Company and
General Motors--IT Services Agreements."
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 General Motors in 1996 would be
slightly lower than those generated from such services in 1995. Additionally,
EDS expects that the changes reflected in the IT Services Agreements could
reduce its 1996 earnings per share by as much as $0.07 to $0.14 (including
$0.03 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 General Motors.
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 will not have a
material adverse effect in the long term on the results of operations of EDS.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business--Revenues."
SIGNIFICANT STOCKHOLDER
On June 21, 1996, the Hourly Plan Special Trust owned approximately 149.5
million shares, or 31% of the outstanding shares, of Common Stock and, upon
consummation of the offerings contemplated hereby, will own approximately
24.6% (or, if the Underwriters' over-allotment option is exercised in full,
23.7%) of the outstanding Common Stock. The Hourly Plan Trustee, as the
independent trustee of the Hourly Plan Special Trust, has the authority and
discretion to cause the Hourly Plan Special Trust to hold such shares of
Common Stock or to sell all or any portion thereof from time to time as such
Trustee deems appropriate. The shares owned by the Hourly Plan Special Trust
are subject to certain agreements that restrict the transferability of such
shares and that provide certain registration rights with respect thereto. The
Hourly Plan Special Trust has agreed not to offer, sell or otherwise dispose
of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock (other than transfers to or for
the benefit of employee benefit plans of EDS or any of its affiliates) for 90
days following the date of this Prospectus without the prior written consent
of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co. (the "Global Coordinators") on behalf of
the Underwriters. See "Underwriting." Additionally, the Hourly Plan Special
Trust has agreed to certain transfer restrictions intended to preserve the
tax-free status of the Split-Off. Such restrictions generally terminate by
June 7, 1998 and do not apply to sales pursuant to public offerings meeting
certain criteria. See "Selling Stockholder." EDS has been advised that, in
order to discharge its fiduciary duties, the Hourly Plan Trustee continually
looks for attractive opportunities to sell a portion of its holdings of Common
Stock. There can be no assurance as to the timing or size of any offerings of
shares owned by the Hourly Plan Special Trust since, subject to the terms of
the agreements referred to above, the Hourly Plan Trustee has the right to
sell such shares at any time. The sale of shares by the Hourly Plan Special
Trust will depend on, among other things, market conditions, the price of such
shares, the level of and any changes in the demand for such shares, and other
factors outside the control of EDS. Although the Hourly Plan Trustee has
notified EDS and made public statements of its intent to manage the
disposition of shares of Common Stock in a
8
<PAGE>
manner consistent with maintaining an orderly market for the Common Stock,
there can be no assurance in this regard and sales of substantial amounts of
Common Stock by the Hourly Plan Special Trust could adversely affect the then
prevailing market price for the Common Stock and could impair EDS' ability to
raise additional capital through the sale of equity securities. See "Selling
Stockholder."
The Hourly Plan Trustee has the authority and discretion to direct the
voting and exercise of all other rights relating to the shares of Common Stock
held by the Hourly Plan Special Trust. Although the Hourly Plan Trustee has
stated that such stock was not acquired for such purpose, the level of such
ownership will give the Hourly Plan Special Trust sufficient voting power to
influence the direction and policies of EDS, the election of the EDS Board and
the outcome of any other corporate action requiring stockholder approval. As
described under "--Certain Limitations on Changes in Control of the Company,"
the Hourly Plan Special Trust is a party to certain agreements which restrict
its ability to transfer shares of Common Stock and to vote in favor of certain
business combinations involving EDS.
NO ASSURANCE OF STRATEGIC ALLIANCES AND OTHER BUSINESS OPPORTUNITIES
The Split-Off was intended, among other things, to remove limitations on
EDS' ability to participate in major strategic alliances and to obtain
additional business that are believed to have resulted from EDS' prior status
as a subsidiary of General Motors. EDS is not currently a party to any
agreement or understanding with respect to any material strategic alliance or
business combination. Although EDS believes that the Split-Off has enhanced
EDS' ability to enter into major strategic alliances and take advantage of
other growth opportunities, no assurance can be given in this regard.
Furthermore, there can be no assurance as to whether and to what extent any of
the business objectives of the Split-Off will be achieved. See "Split-Off of
the Company from General Motors." The ability of EDS to enter into and
consummate business combinations is limited by the matters described under "--
Certain Limitations on Changes in Control of the Company."
TERMINATION OF SUBSIDIARY RELATIONSHIP WITH GENERAL MOTORS
As a subsidiary of General Motors, EDS was able to benefit from 1984 through
the time of the Split-Off from General Motors' extensive network of business
relationships with companies and government contacts around the world. EDS has
drawn on this resource in developing its own contacts and relationships. As a
result of the Split-Off, EDS became a stand-alone, public company and thus is
no longer able to benefit from General Motors' relationships to the same
extent that it could as a wholly owned subsidiary of GM.
CERTAIN LIMITATIONS ON CHANGES IN CONTROL OF THE COMPANY
The Certificate of Incorporation and the Amended and Restated Bylaws of EDS
(the "Bylaws") contain certain provisions, such as a "fair price" provision
applicable to certain business combinations, a provision prohibiting
stockholder action by written consent unless such action is unanimous, and
provisions limiting the ability of stockholders to call special stockholder
meetings, which could have the effect of delaying, deferring or preventing a
change in control of EDS, even if such a change would be favorable to the
interests of EDS' stockholders, and of limiting any opportunity to realize
premiums over prevailing market prices for Common Stock in connection
therewith. The Rights Agreement (as hereinafter defined) could have the same
effect. See "Description of Capital Stock--Rights Agreement."
On June 21, 1996, the Hourly Plan Special Trust owned approximately 31% of
the outstanding Common Stock. The Hourly Plan Special Trust is a party to the
Registration Rights Agreement (as hereinafter defined), which contains certain
restrictions on its ability to transfer the shares of Common Stock held by it
(including by tendering into any tender offer). General Motors and the Hourly
Plan Special Trust are also parties to the Transfer Agreement (as hereinafter
defined), which is intended to preserve the tax-free status of the Split-Off
and which contains restrictions on the ability of the Hourly Plan Special
Trust to transfer Common Stock and to vote in favor of certain business
combinations involving EDS, which restrictions will apply to the Common Stock
9
<PAGE>
generally until June 7, 1998. See "Background of the Offerings" and "Selling
Stockholder." The contractual restrictions to which the shares of Common Stock
owned by the Hourly Plan Special Trust are subject could have the effect of
making more difficult or discouraging certain change in control transactions
involving EDS, including tender offers for Common Stock, that could give the
holders of Common Stock the opportunity to realize a premium over the then
prevailing market price of such stock.
In addition, in order to preserve the tax-free status of the Split-Off, under
the Separation Agreement (as hereinafter defined), EDS is prohibited, until
after June 7, 1998 and unless certain conditions are satisfied, from entering
into (i) certain secondary capital stock transactions whereby a person would
acquire, from holders of outstanding shares of EDS capital stock, a number of
shares of EDS capital stock that would comprise more than 15% of the number of
issued and outstanding shares of Common Stock; or (ii) any other transaction
that would be reasonably likely to jeopardize the tax-free status of the Split-
Off. In addition, the Separation Agreement will prohibit EDS, until after
December 7, 1998, from entering into any transaction that would result in any
person acquiring from EDS a number of shares of EDS capital stock that, when
aggregated with all other shares of EDS capital stock then owned by such
person, would constitute more than 20% of the total combined voting power of
EDS voting stock or 20% of the total number of outstanding shares of any class
or series of EDS non-voting stock. See "Relationship Between the Company and
General Motors--Separation Agreement." The Master Service Agreement also
provides General Motors with certain termination rights upon the occurrence of
certain changes in control of EDS. See "Relationship Between the Company and
General Motors--IT Services Agreements."
LIMITED PRIOR PUBLIC MARKET FOR COMMON STOCK; NO ASSURANCE AS TO MARKET PRICE
The Class E Common Stock (which was a stock of General Motors designed to
provide holders with financial returns based on the performance of EDS) was
traded publicly from its initial issuance in 1984 until the consummation of the
Split-Off. There was no public market for the Common Stock prior to the Split-
Off. Because, among other things, the Common Stock is a security of EDS (rather
than a security of GM), with different terms than the Class E Common Stock,
there can be no assurance that the public market for Common Stock will be
similar to the public market for Class E Common Stock. Ultimately, the value of
each share of Common Stock will be principally determined in the trading market
and could be influenced by many factors, including the operations of EDS, the
growth and expansion of EDS' business, investors' expectations of EDS'
prospects, trends and uncertainties affecting the IT industry as a whole,
issuances and repurchases of Common Stock, and general economic and other
conditions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." There can be no assurance that the trading value of
each share of Common Stock will be consistent with the trading value of each
share of Class E Common Stock prior to the Split-Off. The trading value of
Common Stock could be higher or lower than the trading value of Class E Common
Stock, and EDS is unable to estimate whether such difference (whether favorable
or unfavorable) will be material to holders of Common Stock.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Prospectus contains certain forward-looking statements and information
relating to EDS that are based on the beliefs of EDS management as well as
assumptions made by and information currently available to EDS management. When
used in this document, the words "anticipate," "believe," "estimate," "expect"
and similar expressions, as they relate to EDS or EDS management, are intended
to identify forward-looking statements. Such statements reflect the current
views of EDS with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in this
Prospectus. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated or
expected. EDS does not intend to update these forward-looking statements.
10
<PAGE>
SPLIT-OFF OF THE COMPANY FROM GENERAL MOTORS
GENERAL
On June 7, 1996, General Motors, formerly the holder of all of the
outstanding shares of capital stock of the Company, effected a Split-Off of
the Company from General Motors. As a result of the Split-Off, (i) the Company
became an independent, publicly held company with approximately 485.7 million
shares of Common Stock outstanding and listed for trading on the New York
Stock Exchange and the London Stock Exchange and (ii) each outstanding share
of Class E Common Stock of General Motors was converted into one share of
Common Stock of the Company.
PURPOSES OF THE SPLIT-OFF
The Split-Off of EDS from General Motors was intended to accomplish at least
three business objectives. First, converting EDS from a wholly owned
subsidiary of GM into an independent, publicly owned company was intended to
remove limitations on EDS' ability to participate in strategic alliances,
particularly in the rapidly growing and converging computing and software,
communication, media and entertainment, and electronic commerce industries,
which are increasingly important to EDS' continued competitiveness. Second,
separating General Motors and EDS was intended to remove limitations on EDS'
ability to obtain additional business and establish new customer relationships
that resulted from GM's ownership of EDS, its common ownership of EDS, Hughes
and GMAC, and the increasing overlap between EDS and the telecommunications
and certain other businesses of Hughes. Finally, causing EDS to become a
stand-alone, public company was intended to better position EDS to meet its
growing capital needs. Each of these business objectives is described in more
detail below. In addition, the Split-Off was intended to allow the EDS Board
and management of EDS to increase their focus on EDS' business operations.
STRATEGIC ALLIANCES
The first purpose of the Split-Off was to eliminate the impediments arising
from General Motors' ownership of EDS that prevented EDS from pursuing and
consummating strategic transactions that are important to its continued
competitiveness. During the decade in which EDS was a subsidiary of General
Motors, there had been an increasing convergence of the computing and
software, communication, media and entertainment, and electronic commerce
industries. Because the ability to offer integrated services within these
fields is widely viewed as necessary to remain competitive and grow, strategic
alliances among service providers in these industries have multiplied.
Consistent with this industry trend, EDS engaged in discussions with leading
telecommunications providers regarding potential strategic combinations on
numerous occasions during the last decade. While some of these negotiations
reached advanced stages (most notably the discussions with Sprint Corporation
in 1994), none resulted in a significant strategic transaction. In each case,
the difficulties associated with EDS' status as a subsidiary of GM, including
the complexities and control issues created by the nature of the Class E
Common Stock, prevented or hindered the consummation of a transaction. EDS
believed that these factors would continue to restrict EDS' ability to expand
into integrated worldwide markets so long as EDS remained a subsidiary of
General Motors.
CERTAIN ADDITIONAL GROWTH OPPORTUNITIES
A second purpose of the Split-Off was to remove certain limitations on EDS'
ability to obtain additional business and establish new customer relationships
that had arisen as a result of EDS' status as a subsidiary of GM. These
limitations had not been imposed by GM, but rather were a result of certain
reactions of potential EDS customers to EDS' affiliation with GM. Such
limitations had become increasingly significant during the 1990s as the
businesses of General Motors and GMAC and the telecommunications and certain
other businesses of Hughes expanded either to present conflicts that limited
EDS' ability to obtain business from certain parties or to overlap with EDS'
activities. In some cases, competitors of General Motors, Hughes or GMAC in
industries that are important target markets for EDS had been reluctant to
become customers or partners of EDS due to
11
<PAGE>
concerns relating to divulging confidential and proprietary information to an
affiliate of one of their competitors. For example, EDS believed that EDS'
affiliation with General Motors and GMAC had limited EDS' ability to expand
its business within the automotive, consumer finance and related industries,
despite EDS' extensive expertise in these important markets. Similarly, EDS
believed that common ownership of EDS and Hughes, which participates in the
direct to home satellite television services and wireless communications
industries, had caused EDS to lose or be disadvantaged in seeking certain
business opportunities with potential customers and partners, including in the
cable television industry, who were concerned by Hughes' competition in these
areas. EDS expected impediments and conflicts like these to intensify in
future years if the Split-Off did not occur.
CAPITAL NEEDS
A third purpose of the Split-Off was to afford EDS more flexible access to
capital markets to meet its growing capital needs without regard to competing
considerations of GM and its affiliates. As a wholly owned subsidiary of GM,
EDS' ability to sell equity and debt securities to meet its rising capital
needs was limited by factors relating to GM. EDS and the remainder of GM's
operations were in industries with different characteristics, and each of them
had substantially different goals and needs with respect to incurrence of debt
and financial leverage. General Motors, which is engaged principally in the
highly cyclical automotive industry, placed great importance on maintaining a
strong reserve of liquid assets and a high credit rating for itself and its
financial subsidiary, GMAC. In contrast, EDS has based its business on long-
term customer contracts, and as a result has experienced stable cash flow and
revenues that should permit it to sustain higher debt-to-equity ratios on a
stand-alone basis than those targeted by GM for GM and its consolidated
subsidiaries. These different business needs created conflicts that EDS
believed would have continued to grow. In addition, as EDS' business has
expanded and evolved in recent years, its capital requirements have increased
significantly. Driven in large part by the convergence among hardware,
software, communication, information content and service providers, EDS has
made tactical acquisitions and capital intensive investments to expand its IT,
hardware and telecommunications capacities. In addition, EDS' customers have
often insisted that EDS expend its own capital to acquire their IT operations,
hire their employees and, in some cases, acquire an equity stake in the
customers themselves. Accordingly, EDS believed that its capital requirements
were likely to continue to increase in the future.
Achievement of each of the foregoing business objectives is dependent on
numerous factors, many of which are beyond the control of EDS. Accordingly,
there can be no assurance as to whether and to what extent any of such
objectives will in fact be achieved.
EFFECTS OF THE SPLIT-OFF
As a result of the Split-Off, EDS became an independent, publicly owned
company rather than a wholly owned subsidiary of General Motors. In connection
with the Split-Off, each outstanding share of Class E Common Stock (which was
a security of General Motors designed to provide financial returns based on
the performance of EDS) was converted into one share of Common Stock.
Additionally, EDS made the Special Inter-Company Payment to General Motors in
the amount of $500.0 million in cash and General Motors provided EDS a $50.0
million allowance relating to the resolution of various uncertain, contingent
or other matters arising out of the separation of General Motors and EDS. EDS
funded the Special Inter-Company Payment through borrowings under its existing
commercial paper facilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
General Motors continues to have certain contractual relationships with EDS.
Immediately prior to the Split-Off, General Motors and EDS entered into the
Master Service Agreement and the Separation Agreement. The IT Services
Agreements provide for the continuation of a long-term customer-supplier
relationship and the Separation Agreement established certain transitional and
other arrangements deemed necessary in connection with the Split-Off. See
"Relationship Between the Company and General Motors--IT Services Agreements"
and "--Separation Agreement." Additionally, GM has an indirect stake in EDS'
financial performance as a result of the Hourly Plan Special Trust's holdings
of Common Stock. See "Selling Stockholder."
12
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
PRICE RANGE OF COMMON STOCK
The range of the reported per share sale prices on the NYSE Composite Tape
for the Common Stock for the period between June 10, 1996 (the first trading
day following consummation of the Split-Off) and June 21, 1996 was a high of
$58 3/8 and a low of $53 3/8. During such period there have been no dividends
paid on the Common Stock. As of June 7, 1996, there were approximately 265,000
holders of record of the Common Stock and 485.7 million shares of Common Stock
outstanding. A recent last reported sale price of the Common Stock, as
reported on the NYSE, is set forth on the cover page of this Prospectus.
The Class E Common Stock was listed and traded on the NYSE under the symbol
"GME." The table below shows the range of reported per share sale prices on
the NYSE Composite Tape for the Class E Common Stock for the periods
indicated. The last reported sale price of the Class E Common Stock on the
NYSE Composite Tape on June 7, 1996 (the date of the consummation of the
Split-Off) was $57.00 per share. See "Risk Factors--Limited Prior Public
Market for Common Stock; No Assurance as to Market Price."
<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW
- ------------- ------ ------
<S> <C> <C>
1994
First Quarter.................................................. $36.88 $27.50
Second Quarter................................................. 38.00 32.88
Third Quarter.................................................. 38.50 33.00
Fourth Quarter................................................. 39.50 34.75
1995
First Quarter.................................................. $41.38 $36.88
Second Quarter................................................. 45.25 38.38
Third Quarter.................................................. 47.50 41.50
Fourth Quarter................................................. 52.63 43.88
1996
First Quarter.................................................. $58.00 $50.00
Second Quarter (through June 7)................................ 58.63 52.25
</TABLE>
DIVIDEND POLICY
EDS' dividend policy is determined by the EDS Board. Under Delaware law and
the Certificate of Incorporation, the EDS Board will not be required to
declare dividends on any class of EDS capital stock. The EDS Board has adopted
a policy to continue to pay quarterly dividends through 1996 in an amount
equal to $0.15 per share. However, the EDS Board will be free, during or after
1996, to change its dividend policies and practices from time to time and to
decrease or increase the dividends paid on the EDS Common Stock on the basis
of EDS' financial condition, earnings and capital requirements and other
factors the EDS Board may deem relevant. The dividend policy of the EDS Board
with respect to the Common Stock may be different from the policy of the GM
Board with respect to the Class E Common Stock. See "Risk Factors--Dividend
Policy."
The payment of dividends on the Class E Common Stock was subject to the
policies and practices of the GM Board. Subject to the rights of the holders
of General Motors' preferred stock (if any) and General Motors' preference
stock, under General Motors' certificate of incorporation as in effect
immediately prior to the Split-Off, dividends on Class E Common Stock could be
declared and paid out of the assets of General Motors only to the extent of
the sum of (i) the paid in surplus of General Motors attributable to the Class
E Common Stock plus (ii) an allocated portion of the earnings of GM
attributable to EDS earned after General Motors' acquisition of EDS, then
referred to in General Motors' certificate of incorporation as the "Available
Separate Consolidated Net Income" of EDS. See "Selected Consolidated Financial
Information." Immediately prior to the Split-Off, the dividend policy of the
GM Board was to pay quarterly dividends on the Class E Common Stock, when, as
13
<PAGE>
and if declared by the GM Board, at an annual rate equal to approximately 30%
of the Available Separate Consolidated Net Income of EDS for the prior year.
Under this dividend practice of the GM Board, GM paid quarterly dividends on
the outstanding shares of Class E Common Stock in an amount equal to $0.13 per
share during 1995. In February 1996, the GM Board raised the quarterly
dividend on Class E Common Stock to $0.15 per share.
14
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CAPITALIZATION
The following table sets forth the short-term debt and consolidated
capitalization of EDS as of March 31, 1996 and on a pro forma basis after
giving effect to the Split-Off. This table should be read in conjunction with
EDS' Consolidated Financial Statements (including the notes thereto), which
are included in this Prospectus, and with the financial data set forth under
"Unaudited Pro Forma Condensed Consolidated Financial Statements." The pro
forma data are not necessarily indicative of EDS' future short-term debt and
consolidated capitalization or of what EDS' short-term debt and consolidated
capitalization would have been had the Split-Off been consummated as of March
31, 1996.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------
HISTORICAL PRO FORMA
---------- ---------
(IN MILLIONS)
<S> <C> <C>
Short-term debt:
Notes payable (current)................................. $ 238.7 $ 238.7
======== ========
Long-term debt:
Notes payable........................................... $2,109.2 $2,609.2
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value; 200 million shares
authorized;
no shares issued and outstanding....................... -- --
Common stock, without par value; one billion shares
authorized;
485.7 million shares issued and outstanding (a)........ 559.9 --
Common stock, $.01 par value; two billion shares
authorized;
487.5 million shares issued (a)........................ -- 4.9
Additional paid-in capital.............................. -- 555.0
Retained earnings....................................... 4,595.9 4,089.2
Less treasury stock, at cost, 1.8 million shares........ -- (19.6)
-------- --------
Total stockholders' equity............................ 5,155.8 4,629.5
-------- --------
Total capitalization.................................. $7,265.0 $7,238.7
======== ========
</TABLE>
- --------
(a) Excludes shares of Common Stock reserved for issuance under the Company's
incentive plans.
15
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements are based on EDS' Consolidated Financial Statements and give effect
to the Split-Off as if it had been consummated as of January 1, 1995 (in the
case of income statement data) or as of March 31, 1996 (in the case of balance
sheet data). The pro forma condensed consolidated financial statements are
based on the assumptions set forth in the accompanying notes and should be
read in conjunction with EDS' Consolidated Financial Statements (including the
notes thereto), which are included in this Prospectus. The pro forma condensed
consolidated financial statements are not necessarily indicative of EDS'
future consolidated financial position or results of operations or of what
EDS' consolidated financial position would have been had the Split-Off been
consummated as of March 31, 1996 or what the results of operations would have
been had the Split-Off been consummated as of January 1, 1995.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Systems and other contracts revenues
Outside customers................... $ 8,531.0 $ -- $ 8,531.0
GM and affiliates................... 3,891.1 (175.8)(a) 3,715.3
--------- ------- ---------
Total revenues.................... 12,422.1 (175.8) 12,246.3
--------- ------- ---------
Costs and expenses
Cost of revenues.................... 9,601.6 3.0 (c) 9,604.6
Selling, general, and
administrative..................... 1,291.5 7.5 (c) 1,299.0
--------- ------- ---------
Total costs and expenses.......... 10,893.1 10.5 10,903.6
--------- ------- ---------
Operating income...................... 1,529.0 (186.3) 1,342.7
Interest and other income, net........ (62.0) (35.0)(b) (97.0)
--------- ------- ---------
Income before income taxes............ 1,467.0 (221.3) 1,245.7
Provision for income taxes............ 528.1 2.3 (a)
(79.7)(d) 450.7
--------- ------- ---------
Separate Consolidated Net Income/Net
Income............................... $ 938.9 $(143.9) $ 795.0 (j)
========= ======= =========
Available Separate Consolidated Net
Income............................... $ 795.5 $ --
========= =========
Average number of shares of Class E
Common Stock outstanding............. 404.6 --
========= =========
Earnings per share attributable to
Class E Common Stock................. $ 1.96 $ --
========= =========
Weighted average number of EDS common
shares outstanding................... -- 483.6 (e)
========= =========
Net income per share.................. $ -- $ 1.64 (e)
========= =========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
16
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Systems and other contracts revenues
Outside customers...................... $2,404.7 $ -- $2,404.7
GM and affiliates...................... 962.2 -- 962.2
-------- ----- --------
Total revenues(a).................... 3,366.9 -- 3,366.9
-------- ----- --------
Costs and expenses
Cost of revenues....................... 2,698.1 0.8 (c) 2,698.9
Selling, general, and administrative... 309.9 1.9 (c) 311.8
-------- ----- --------
Total costs and expenses............. 3,008.0 2.7 3,010.7
-------- ----- --------
Operating income......................... 358.9 (2.7) 356.2
Interest and other income, net........... (17.0) (8.8)(b) (25.8)
-------- ----- --------
Income before income taxes............... 341.9 (11.5) 330.4
Provision for income taxes............... 123.1 0.6 (a)
(4.1)(d) 119.6
-------- ----- --------
Separate Consolidated Net Income/Net
Income.................................. $ 218.8 $(8.0) $ 210.8 (j)
======== ===== ========
Available Separate Consolidated Net
Income.................................. $ 209.2 --
======== ========
Average number of shares of Class E
Common Stock outstanding................ 463.2 --
======== ========
Earnings per share attributable to Class
E Common Stock.......................... $ 0.45 --
======== ========
Weighted average number of EDS common
shares outstanding...................... -- 484.4 (e)
======== ========
Net income per share..................... $ -- $ 0.44 (e)
======== ========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
17
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 935.9 $ $ 935.9
Accounts receivable................... 3,122.3 3,122.3
Other current assets.................. 676.3 (13.4)(h) 662.9
--------- ------- ---------
Total current assets................ 4,734.5 (13.4) 4,721.1
Property and equipment, net............. 3,262.0 3,262.0
Investment in leases and other.......... 1,516.9 (6.2)(h) 1,510.7
Software, goodwill, and other
intangibles, net....................... 1,496.6 1,496.6
Other assets............................ 105.8 105.8
--------- ------- ---------
Total assets........................ $11,115.8 $ (19.6) $11,096.2
========= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities................... $ 1,551.6 $ 40.0 (j) $ 1,591.6
Other current liabilities............. 1,550.2 1,550.2
--------- ------- ---------
Total current liabilities........... 3,101.8 40.0 3,141.8
Deferred income taxes................... 749.0 (33.3)(g) 715.7
Notes payable........................... 2,109.2 500.0 (f) 2,609.2
Stockholders' equity.................... 5,155.8(i) (500.0)(f)
33.3 (g)
(19.6)(h)
(40.0)(j) 4,629.5
--------- ------- ---------
Total liabilities and stockholders'
equity............................. $11,115.8 $ (19.6) $11,096.2
========= ======= =========
</TABLE>
The accompanying notes are an integral part of the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONCLUDED)
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements relate to the individual adjustments required to reflect the Split-
Off as if it had occurred on January 1, 1995 (in the case of income statement
data) or as of March 31, 1996 (in the case of balance sheet data). Adjustments
to EDS' consolidated balance sheet are based on EDS' carryover basis as
reported in the Consolidated Financial Statements included in this Prospectus.
EDS' Consolidated Financial Statements exclude the effects of purchase
accounting adjustments arising from the acquisition of EDS by GM in 1984,
including GM's remaining carrying value of such purchase adjustments and the
accumulated amortization of all such adjustments. The remaining carrying value
of such adjustments would be immaterial to EDS' Consolidated Financial
Statements.
(a) Reflects the reductions in revenues from GM and its affiliates, which
represent the effects of reduced unit billings as provided for under the
terms of the IT Services Agreements as applied to actual usage for certain
communications and compute activities for the year ended December 31,
1995, as well as certain reduced tax credits. Systems and other contracts
revenues for the three months ended March 31, 1996, include the first
quarter impact of these reductions due to their retroactive nature.
(b) Reflects additional interest expense attributable to $500.0 million of
debt incurred to make the Special Inter-Company Payment, calculated based
on the borrowing rate expected to be incurred for such debt, which
approximates EDS' average long-term borrowing rate for the year ended
December 31, 1995 and the three months ended March 31, 1996.
(c) Reflects additional costs as a result of operating as a separate public
company, rather than a subsidiary of General Motors. These costs include,
among other items, additional insurance coverages, NYSE fees and transfer
agent fees.
(d) Reflects the tax impact of pretax income statement adjustments at EDS'
effective tax rate of 36%.
(e) Reflects the conversion of each outstanding share of Class E Common Stock
into one share of Common Stock. Pro forma earnings per share have been
calculated based on the weighted average shares of Class E Common Stock
outstanding for the year ended December 31, 1995, and for the three months
ended March 31, 1996, adjusted for the following: (i) GM's contribution of
approximately 173.2 million shares of Class E Common Stock to the Hourly
Plan on March 13, 1995; and (ii) GM's issuance of approximately 44.7
million shares of Class E Common Stock between January 1 and February 22,
1996, to satisfy conversion privileges associated with General Motors'
Series C Preference Stock. For purposes of computing pro forma earnings
per share for 1995 and 1996, each of these transactions was treated as if
it occurred on January 1, 1995.
(f) Reflects payment of the Special Inter-Company Payment and incurrence of
additional debt for the financing thereof.
(g) Reflects the net deferred tax benefits previously allocated to GM.
(h) Reflects the reclassification to EDS treasury stock for Class E Common
Stock held by EDS as an asset prior to the Split-Off. These shares, which
are used to satisfy restricted stock awards as they vest, were converted
to Common Stock in the Split-Off.
(i) General Motors' equity in its then indirect wholly owned subsidiary, EDS
(excluding the effects of purchase accounting adjustments relating to
General Motors' 1984 acquisition of EDS).
(j) The pro forma balance sheet includes, and the pro forma income statements
exclude, the one-time charges of approximately $40.0 million associated
with the formulation and implementation of the Split-Off. These charges
will be included in EDS' consolidated financial statements for the year
ended December 31, 1996. These expenses could impact EDS' effective tax
rate to the extent that they are non-deductible for tax purposes.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated historical financial data as of and for
the years ended December 31, 1995, 1994, 1993, 1992 and 1991 have been derived
from EDS' Consolidated Financial Statements, which have been audited by KPMG
Peat Marwick LLP, independent auditors. The selected consolidated historical
financial data as of and for the three months ended March 31, 1996 and 1995
have been derived from unaudited consolidated financial statements which, in
the opinion of management, reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the financial
position and results of operations of EDS for those periods. Interim results
are not necessarily indicative of the results which may be expected for any
other interim period or for the full year. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the EDS Consolidated Financial Statements,
which are included in this Prospectus, and the EDS First Quarter 1996 Form 10-
Q, which is incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED
MARCH 31, AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- -------- --------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Systems and other
contracts revenues
Outside customers...... $ 2,404.7 $1,878.3 $ 8,531.0 $6,412.9 $5,183.6 $4,806.7 $3,666.3
General Motors and
affiliates............ 962.2 898.0 3,891.1 3,547.2 3,323.7 3,348.5 3,362.2
--------- -------- --------- -------- -------- -------- --------
Total revenues......... 3,366.9 2,776.3 12,422.1 9,960.1 8,507.3 8,155.2 7,028.5
--------- -------- --------- -------- -------- -------- --------
Costs and expenses
Cost of revenues....... 2,698.1 2,176.1 9,601.6 7,529.4 6,390.6 6,205.8 5,415.1
Selling, general, and
administrative........ 309.9 281.0 1,291.5 1,187.1 1,005.4 969.3 761.9
--------- -------- --------- -------- -------- -------- --------
Total costs and
expenses.............. 3,008.0 2,457.1 10,893.1 8,716.5 7,396.0 7,175.1 6,177.0
--------- -------- --------- -------- -------- -------- --------
Operating income........ 358.9 319.2 1,529.0 1,243.6 1,111.3 980.1 851.5
Interest and other
income, net............ (17.0) (11.7) (62.0) 40.6 20.0 20.7 42.2
--------- -------- --------- -------- -------- -------- --------
Income before income
taxes.................. 341.9 307.5 1,467.0 1,284.2 1,131.3 1,000.8 893.7
Provision for income
taxes.................. 123.1 110.7 528.1 462.3 407.3 365.3 330.7
Cumulative effect of
accounting change(a)... -- -- -- -- -- -- (15.5)
--------- -------- --------- -------- -------- -------- --------
Separate Consolidated
Net Income(b).......... $ 218.8 $ 196.8 $ 938.9 $ 821.9 $ 724.0 $ 635.5 $ 547.5
========= ======== ========= ======== ======== ======== ========
Average number of shares
of Class E Common Stock
outstanding
(Numerator)(b)......... 463.2 300.0 404.6 260.3 243.0 209.1 195.3
Class E Dividend Base
(Denominator)(b)....... 484.4 482.4 483.7 481.7 480.6 479.3 478.1
Available Separate
Consolidated Net
Income(b).............. $ 209.2 $ 122.4 $ 795.5 $ 444.4 $ 367.2 $ 278.4 $ 223.6
Earnings per share
attributable to Class E
Common Stock(b)........ 0.45 0.42 1.96 1.71 1.51 1.33 1.14
Dividends per share of
Class E Common
Stock(b)............... 0.15 0.13 0.52 0.48 0.40 0.36 0.32
BALANCE SHEET DATA
Cash and marketable
securities............. $ 1,020.6 $ 641.0 $ 638.6 $ 757.8 $ 607.5 $ 587.9 $ 415.8
Current assets.......... 4,734.5 3,465.5 4,381.5 3,354.1 2,506.8 2,157.0 1,945.6
Total assets(c)......... 11,115.8 9,158.0 10,832.4 8,786.5 6,942.1 6,123.5 5,703.2
Current liabilities..... 3,101.8 2,832.2 3,261.4 2,873.2 2,160.4 1,903.1 2,396.7
Long-term debt.......... 2,109.2 1,198.4 1,852.8 1,021.0 522.8 561.1 281.9
Stockholder's
equity(c)(d)........... 5,155.8 4,414.5 4,978.5 4,232.5 3,617.4 3,063.4 2,610.3
OTHER DATA
Depreciation and
amortization........... $ 282.7 $ 231.0 $ 1,107.8 $ 771.1 $ 626.8 $ 603.2 $ 524.4
Expenditures for
property and
equipment.............. 244.4 259.3 1,261.5 1,186.0 816.4 639.0 673.2
</TABLE>
- --------
(a) Effective January 1, 1991, EDS adopted SFAS No. 109, "Accounting for
Income Taxes." The cumulative effect of this accounting change at January
1, 1991 was a charge of $15.5 million, of which $0.03 per share was
attributable to Class E Common Stock.
20
<PAGE>
(b) Calculated for purposes related to the Class E Common Stock, which was
converted into Common Stock on a one-for-one basis pursuant to the Split-
Off.
(c) Holders of Class E Common Stock, which was converted into Common Stock in
the Split-Off, had no direct rights in the equity or assets of EDS, but
rather had rights in the equity and assets of General Motors (which
included 100% of the stock of EDS).
(d) General Motors' equity in its then indirect wholly owned subsidiary, EDS
(excluding the effects of purchase accounting adjustments relating to
General Motors' 1984 acquisition of EDS).
The portion of EDS' earnings that was included in the amount available for
the payment of dividends on Class E Common Stock (which amount was also used
to calculate earnings per share of Class E Common Stock) was determined by a
fraction, the numerator of which was a number equal to the weighted average
number of shares of Class E Common Stock outstanding (463.2 million for the
first quarter of 1996) and the denominator of which was 484.4 million for the
first quarter of 1996; provided, that such fraction could never be greater
than one. The amount so allocated was referred to in General Motors'
certificate of incorporation as the "Available Separate Consolidated Net
Income" of EDS. For purposes of determining the approximate earnings per share
attributable to Class E Common Stock for financial reporting purposes, an
investor may divide the quarterly EDS earnings allocated to Class E Common
Stock (the "Available Separate Consolidated Net Income of EDS") by the
weighted average number of shares of Class E Common Stock outstanding during
such quarter, which is the numerator of the fraction described above.
Approximately the same mathematical result may be obtained by dividing the
quarterly EDS earnings used for computation of Available Separate Consolidated
Net Income (i.e., net income) by the denominator of the fraction described
above.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
EDS is a provider of 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.
EFFECT OF THE SPLIT-OFF
In connection with the Split-Off, the Master Service Agreement was entered
into between EDS and General Motors with respect to IT services to be provided
to GM after the Split-Off and the Special Inter-Company Payment was made by
EDS.
The IT Services Agreements contemplate that EDS will continue to serve as
General Motors' principal supplier of IT services for an initial 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 General Motors under the Prior IT Services Agreements.
Under the terms of the IT Services Agreements, certain of the Prior IT
Services Agreements applicable to particular units, sectors or other
organizations within General Motors have been extended for additional terms of
between approximately one and three years beyond their current expiration
dates. In addition, EDS will provide certain plant floor automation services
in North America to GM that it has not previously provided. The IT Services
Agreements also made certain significant changes to the pricing and terms
under which EDS will provide IT services to General Motors after the Split-
Off. Among other things, the IT Services Agreements provide that the rates
charged by EDS to General Motors 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. General
Motors has also been 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 General Motors. See
"Relationship Between the Company and General Motors--IT Services Agreements."
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 General Motors 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 $0.07 to $0.14 (including
$0.03 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 General Motors.
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 will not have a
material adverse effect in the long term on the results of operations of EDS.
For additional information regarding the IT Services Agreements, see
"Relationship Between the Company and General Motors--IT Services Agreements"
and "Business--Revenues."
The Special Inter-Company Payment was paid by EDS to GM at the time the
Split-Off occurred. The amount of the Special Inter-Company Payment was $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 $40.0
million, or approximately $.05 per share in 1996, of one-time costs in
connection with the formulation and implementation of the Split-Off. In
arriving at the amount of the $500.0 million Special Inter-Company Payment,
the parties took into account the fact that in the
22
<PAGE>
Separation Agreement GM would provide EDS an allowance of $50 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 Split-Off and the impact of the IT
Services Agreements after the Split-Off are forward-looking statements which
by their nature are subject to numerous uncertainties that could cause actual
results to vary.
RESTRUCTURING ACTIVITIES
On April 1, 1996, EDS announced that it was taking certain actions and
considering others to maintain and improve operating efficiencies and
accelerate the Company's move toward "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 designed to both reduce labor costs and change
the skill mix of the Company's workforce. It is expected that substantially
all of these workforce reductions will be completed by December 1996. As part
of its overall goal to improve operating efficiencies, EDS also announced at
such time that it was in the process of evaluating certain aspects of its
business to identify any redundant facilities and related assets that were no
longer consistent with its long-term strategic objectives.
In connection with the foregoing, EDS announced on June 18, 1996 that it
estimates it will incur a one-time pre-tax charge in the second quarter of
1996 of approximately $850 million ($1.12 per share, after tax). This
represents an increase from the previous estimate for the second-quarter
charge, which the Company earlier had indicated could reach $750 million. The
$850 million charge includes the employee-related actions discussed above, the
write-down of assets in connection with the refreshment of information
technology assets and the consolidation of certain facilities, the revision of
estimates associated with certain customer contracts, and the decision to exit
certain activities.
EDS currently expects that the charge will be classified into three major
categories: employee-related, $277 million; technology refreshment, asset
write-downs and facility consolidations, $513 million; and cost of revenues,
$60 million. Of the total $850 million charge, EDS expects to make cash
expenditures of approximately $277 million, a substantial portion of which
will be incurred in 1996 and 1997. Such cash expenditures, which will be made
in connection with the employee-related actions, will be funded from
operations. EDS expects that the actions identified above will result in
savings commencing in the second half of 1996.
EDS expects its earnings per share in the second quarter of 1996, before the
$850 million charge and Split-Off transaction costs of approximately $40
million, to be generally in the range of $0.49 to $0.52 per share.
Statements about the effect of EDS' actions, the amount of charges that may
be incurred by EDS, expected earnings per share results and savings from the
charges are forward-looking statements which by their nature are subject to
numerous uncertainties that could cause actual results to vary. See "Risk
Factors--Forward-Looking Information May Prove Inaccurate."
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
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 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.
23
<PAGE>
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. This environment 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.
Operating Income. Operating income increased $39.7 million for the quarter
ended March 31, 1996 compared to the first quarter of 1995. Operating margins
declined from 11.5% for the first quarter of 1995 to 10.7% for the
corresponding period in 1996 due to the aforementioned changes in costs and
expenses.
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 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 when compared to net
income of $196.8 million for the respective period of last year. Earnings per
share of 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 1 to EDS' Consolidated Financial
Statements. Earnings per share for the first quarter of 1996 were reduced $.03
per share as a result of the new Master Service Agreement with GM, a portion of
which is retroactive to January 1, 1996.
THREE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Revenues. EDS conducts its sales, marketing and service activities on a
global basis through business units that focus both geographically and
vertically along the lines of specified industries. The following table
summarizes EDS' systems and other contracts revenues in each geographic
operating segment for each of the years ended December 31, 1995, 1994 and 1993:
SYSTEMS AND OTHER CONTRACTS REVENUES
(IN MILLIONS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Outside Customers:
United States.................................. $ 5,794.9 $4,611.2 $4,004.5
Europe......................................... 2,001.5 1,308.1 911.6
Other.......................................... 734.6 493.6 267.5
--------- -------- --------
Total Outside Customers...................... 8,531.0 6,412.9 5,183.6
--------- -------- --------
GM and Affiliates:
United States.................................. 2,926.1 2,764.4 2,574.5
Europe......................................... 659.2 523.4 511.2
Other.......................................... 305.8 259.4 238.0
--------- -------- --------
Total GM and Affiliates...................... 3,891.1 3,547.2 3,323.7
--------- -------- --------
Total Systems and Other Contracts Revenues....... $12,422.1 $9,960.1 $8,507.3
========= ======== ========
Percentage of Total Revenues:
Outside Customers.............................. 69% 64% 61%
GM and Affiliates.............................. 31 36 39
--------- -------- --------
Total........................................ 100% 100% 100%
========= ======== ========
</TABLE>
24
<PAGE>
Total revenues increased 25% in 1995 to $12,422.1 million from $9,960.1
million in 1994, which represented a 17% increase over 1993 total revenues of
$8,507.3 million. Revenues from customers other than General Motors and its
affiliates (outside customers) grew 33% in 1995 to $8,531.0 million, compared
to a 24% increase in 1994 from $5,183.6 million in 1993. Total revenues
related to GM and its affiliates were $3,891.1 million, $3,547.2 million, and
$3,323.7 million in 1995, 1994 and 1993, respectively. The percentage of EDS'
total revenues generated from GM and its affiliates declined to 31% in 1995
from 36% in 1994 and 39% in 1993. EDS expects this trend to continue as
revenues from outside customers continue to grow.
Total domestic revenues from outside customers increased 26% from $4,611.2
million in 1994 to $5,794.9 million for 1995. This compares with growth rates
of 15% in 1994 and 8% in 1993. The increase in 1995 was attributable to full-
year revenues on contracts which began in late 1994 and to revenues related to
acquisitions, primarily the A.T. Kearney acquisition in August 1995. Domestic
revenues from outside customers in 1994 increased over 1993 results due to
revenues associated with new contracts signed in 1993 and 1994.
During 1995, non-U.S. revenues from outside customers increased $934.4
million compared with an increase of $622.6 million in 1994 from $1,179.1
million in 1993. Growth in revenues from outside customers in Europe increased
$693.4 million in 1995 from revenues associated with new contracts signed
during 1994 and 1995, as well as certain acquisitions which occurred in late
1994 or 1995. In 1994, non-U.S. revenues from outside customers in Europe
increased $396.5 million, or 43%, to $1,308.1 million.
Other non-U.S. revenues from outside customers grew $241.0 million over
1994, to $734.6 million, due to new contracts signed in Asia/Pacific and
Canada, as well as full-year revenues from acquisitions in New Zealand which
occurred in 1994. Other non-U.S. revenues from outside customers in 1994 was
up $226.1 million over 1993 due in part to business in Japan and New Zealand.
The following summary table sets forth the percentage of revenues for each
of the years in the three-year period ended December 31, 1995, derived from
EDS' principal industry areas.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
INDUSTRY AREA 1995 1994 1993
------------- ------- ------- -------
<S> <C> <C> <C>
Manufacturing................................. 47% 49% 51%
Financial Services............................ 14 14 15
Government.................................... 12 10 10
All others individually less than 10%......... 27 27 24
------- ------- -------
100% 100% 100%
======= ======= =======
</TABLE>
Other than General Motors, no one client accounted for more than 5% of EDS'
total revenues in 1995, 1994, or 1993. GM business, which has historically
grown at a slower rate than business from outside customers, is included in
the Manufacturing industry area. The Government industry area has grown due
to, among other reasons, EDS' success in selling to newly privatized sectors
in Europe.
Costs and Expenses. Cost of revenues as a percentage of systems and other
contracts revenues was 77% in 1995, compared with 76% in 1994 and 75% in 1993.
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. See "--
Restructuring Activities" and "Business." Selling, general and administrative
expenses increased 9% in 1995 to $1,291.5 million from $1,187.1 million in
1994, which increased 18% from 1993.
25
<PAGE>
Selling, general and administrative expenses were 10% of systems and other
contracts revenues in 1995, down from 12% in 1994 and 1993 due to the fixed
nature of certain of these costs.
Operating Income. Operating income increased $285.4 million to $1,529.0
million in 1995. Operating income was $1,243.6 million and $1,111.3 million
for 1994 and 1993, respectively. Operating margins declined from 12.5% in 1994
to 12.3% in 1995 due to the aforementioned changes in costs and expenses, as
well as increased reserves for certain customer receivables. The 1993
operating margin was 13.1%.
Interest and Other Income, net. Interest and other income, net, decreased
$102.6 million in 1995 to $(62.0) million, compared with $40.6 million in 1994
and $20.0 million in 1993. The primary reason for the decrease in 1995 was due
to increased interest expense. Interest expense increased to $120.8 million in
1995, compared with $51.7 million in 1994 and $34.5 million in 1993. The
increase in 1995 resulted from interest associated with the issuance of the
Five-year Notes and the Ten-year Notes, as well as from other borrowings.
These borrowings 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. Interest and other income decreased from $92.3 million in
1994 to $58.8 million in 1995 primarily due to lower interest income on notes
receivable and the recognition of other than temporary declines in the fair
value of certain investment securities.
Income Taxes. The effective income tax rate was 36% in 1995, 1994 and 1993.
Net Income. EDS' separate consolidated net income increased 14% to $938.9
million in 1995, compared with $821.9 million for 1994 and $724.0 million in
1993. Earnings per share attributable to Class E Common Stock increased 15% to
$1.96 per share in 1995 and 13% to $1.71 per share in 1994, based on EDS'
Available Separate Consolidated Net Income as described in Note 1 to EDS'
Consolidated Financial Statements.
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. EDS believes that inflation generally had
little effect on its results of operations for each of the years ended
December 31, 1995, 1994, and 1993.
FINANCIAL POSITION
Assets. During the three months ended March 31, 1996, EDS' total assets
increased $283.4 million to $11,115.8 million, due primarily to increases in
cash and accounts receivable from GM. In 1995, EDS' total assets increased to
$10,832.4 million, a 23% increase over total assets of $8,786.5 million at
December 31, 1994. This change represents increases in accounts receivable and
property and equipment for contract-related investments and an increase in
intangible assets related to acquisitions, primarily the acquisition of A.T.
Kearney. Accounts receivable from outside customers increased $789.9 million
due to more competitive contract terms, receivables acquired in the A.T.
Kearney acquisition ($149.3 million), and an increase in unbilled receivables
on newer contracts.
At March 31, 1996, EDS had cash and cash equivalents of $935.9 million,
working capital of $1,632.7 million and a current ratio of 1.5-to-1. This
compares with cash and cash equivalents of $548.9 million, working capital of
$1,120.1 million and a current ratio of 1.3-to-1 at December 31, 1995. At
December 31, 1994, the Company had $480.9 million in working capital and a
1.2-to-1 current ratio.
26
<PAGE>
On August 31, 1995, EDS acquired A.T. Kearney, a Chicago-based international
management consulting firm. At the acquisition date, EDS paid approximately
$113 million in cash and $162 million in short and long-term notes to A.T.
Kearney shareholders in connection with this acquisition. Additionally, the
terms included restricted stock grants of approximately 6.6 million shares of
Class E Common Stock (which was converted into Common Stock in connection with
the Split-Off), which will vest over a ten-year period for certain A.T.
Kearney personnel remaining with EDS. Prior to December 31, 1995, EDS retired
$80.9 million of short-term notes related to the acquisition. After the
acquisition, EDS' Management Consulting Services unit was combined with A.T.
Kearney to create a new wholly owned subsidiary operating under the A.T.
Kearney brand.
Return on assets was 9.5% and 10.3% for the twelve month period ended March
31, 1996 and 1995, respectively. For the years ended December 31, 1995, 1994,
and 1993, return on assets was 9.6%, 10.5% and 11.1%, respectively. 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. Additionally, EDS'
results for the year ended December 31, 1995, include the results of A.T.
Kearney's operations only since the acquisition date.
Liabilities and Stockholder's Equity. Total liabilities increased in 1996
and 1995 to support business growth as a result of additional commercial paper
borrowings and the issuance of EDS' Five-year and Ten-year Notes.
Additionally, EDS revised its agreement with a syndicate of banks, which
increased EDS' committed lines of credit to $2,500.0 million. Total debt was
$2,347.9 million, $2,100.6 million and $1,224.4 million at March 31, 1996,
December 31, 1995 and 1994, respectively, which consisted of short- and long-
term notes payable. The total debt-to-capital ratio (which includes current
notes payable as a component of capital) was 31% at March 31, 1996, 30% at
December 31, 1995, and 22% at December 31, 1994. The ratio of noncurrent debt-
to-capital was 29% at March 31, 1996, 27% at December 31, 1995, and 19% at
December 31, 1994. At December 31, 1995, EDS had unused uncommitted short-term
lines of credit totaling $728.2 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.
Stockholder's equity was $5,155.8 million at March 31, 1996, $4,978.5
million at December 31, 1995, and $4,232.5 million at December 31, 1994.
Return on stockholder's equity was 20.0% for the twelve month period ended
March 31, 1996, compared with 20.7% for the corresponding period in 1995.
Return on stockholder's equity was 20.4%, 20.9% and 21.7% for the years ended
December 31, 1995, 1994 and 1993, respectively.
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.
This 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. The effects of initially
adopting SFAS No. 121 as of January 1, 1996 were not material to EDS'
consolidated financial statements.
Foreign Exchange Risk Management. The translation effects of changes in
exchange rates on EDS' Consolidated Financial Statements can be found in the
consolidated stockholder's equity currency translation adjustment in Note 10
and in the effect of exchange rate changes on cash and cash equivalents in the
EDS consolidated statements of cash flows. The disclosure of nonfunctional
currency transactions gains (losses) is contained in the "Summary of
Significant Accounting Policies" in Note 1. All other effects of changes in
27
<PAGE>
exchange rates on EDS' consolidated financial statements are immaterial due to
the general nature of EDS' business and its risk management strategies
described below. EDS' foreign subsidiaries conduct nearly all aspects of their
respective operations using their respective functional currencies.
Accordingly, such operations are not expected to yield significant currency
risks.
EDS hedges predominantly all its transaction risk associated with material
monetary assets and liabilities denominated in currencies other than the U.S.
dollar. EDS does not hedge the foreign exchange risk related to either the
translation of foreign earnings into U.S. dollars or the translation of its
net investment in foreign subsidiaries into U.S. dollars. EDS has no material
unhedged monetary assets or liabilities denominated in currencies other than
its foreign operations' functional currencies.
EDS conducts business in the United States and approximately 40 other
countries. EDS' most significant foreign currency transaction exposures relate
to Canada, Western European countries (primarily Germany, the United Kingdom,
Italy, the Netherlands and Switzerland) and New Zealand. EDS manages the
foreign exchange transaction exposure resulting from its multinational
operations primarily by utilizing short-term forward contracts which are used
to hedge the aggregate net exposure in each currency. Derivatives involve, to
varying degrees, elements of credit risk in the event a counterparty should
default and market risk as the instruments are subject to rate and price
fluctuations. Credit risk is managed by dealing solely with major commercial
banks with high quality credit and, therefore, EDS management does not expect
to incur any cost due to counterparty default. Market risk is inherently
limited by the fact that EDS holds offsetting asset or liability positions.
Pursuant to its prescribed policies, EDS does not hold or issue financial
instruments for trading purposes.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1996, net cash provided by operating
activities was $512.1 million, up $384.2 million from the same period in 1995
due to a decrease in accounts receivable. For the year ended December 31,
1995, net cash provided by operating activities was $1,259.0 million, down
$273.5 million from the same period in 1994 due to increases in accounts
receivable, including an increase in receivables from GM and its affiliates.
For the year ended December 31, 1994, net cash provided by operating
activities was $1,532.5 million, up $111.5 million from 1993, due in part to
increases in accounts payable and accrued liabilities. Net cash provided by
operating activities for 1993 consisted of depreciation and amortization as
well as increases in working capital items.
For the three months ended March 31, 1996, net cash used in investing
activities decreased $73.6 million, to $313.4 million, when compared to the
same period in 1995. For the year ended December 31, 1995, net cash used in
investing activities increased $241.8 million, to $1,781.5 million when
compared to the same period for 1994. Net cash used in investing activities
increased $472.0 million, to $1,539.7 million in 1994, from $1,067.7 million
in 1993. Consistent with the increasing capital intensity of EDS' business,
cash used in investing activities consisted largely of payments for purchases
of property and equipment of $1,261.5 million, $1,186.0 million, and $816.4
million in 1995, 1994, and 1993, respectively. Additionally, EDS used cash for
investments in leases and other assets and for payments related to
acquisitions.
Net cash provided by financing activities was $195.6 million for the three
months ended March 31, 1996, up $26.1 million compared to the corresponding
period in 1995 due to an increase in commercial paper borrowings. Net cash
provided by financing activities was $465.1 million for the year ended
December 31, 1995, up $258.6 million from the corresponding period in 1994 due
in part to the issuance of long-term debt and notes payable, particularly the
issuance of the Five-year Notes and the Ten-year Notes. For the year ended
December 31, 1994, net cash provided by financing activities was $206.5
million, compared with cash used in financing activities of $378.2 million in
1993. EDS paid cash dividends to GM totaling $72.6 million, $251.3 million,
$231.1 million, and $192.1 million in the three months ended March 31, 1996
and in each of the years ended December 31, 1995, 1994, and 1993,
respectively.
28
<PAGE>
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. 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 to $1,700.0 million. However, actual capital
expenditures will depend to a significant extent on the level of 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 Prior IT Services Agreements provided 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. See "Relationship Between
General Motors and EDS-IT Services Agreements." These revised payment terms
are expected to result in an increase in EDS' working capital requirements.
EDS obtained the funds for the Special Inter-Company Payment, and will obtain
the funds for this working capital impact, 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 require investments in computers and telecommunications equipment,
software, and other property, plant and equipment. For these reasons, EDS'
ability to continue to access the capital markets on an efficient basis will
become increasingly important to its ability to compete effectively.
The Split-Off was 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. EDS may over time incur
substantially more debt than it did while a subsidiary of GM. As a result,
EDS' financial leverage may increase in the future. To the extent that EDS
becomes more highly leveraged, 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.
29
<PAGE>
BUSINESS
GENERAL
EDS is a world leader in applying IT, with over 30 years of experience in
using advanced computer and communications technologies to meet its clients'
business needs. EDS' total revenues grew from $786 million in its 1984 fiscal
year to $12.4 billion in 1995. Although revenues attributable to General
Motors and its affiliates have increased from 1985 to 1995, they have
decreased as a percentage of total revenues from approximately 70% in 1985 to
approximately 31% in 1995 as a result of the rapid revenue growth of EDS' non-
General Motors business. As of December 31, 1995, EDS employed approximately
96,000 persons and served clients in the United States and approximately 40
other countries. Unless the context otherwise requires, references herein to
EDS include its predecessors and subsidiaries.
STRATEGY
EDS' strategy is to offer a full range of IT services to enterprises,
government entities and individuals worldwide. These services include
management consulting, systems development, systems integration, systems
management and process management. EDS' organizational structure is designed
to offer the full range of services on a global basis through business units
that focus along the lines of specified industries, such as manufacturing,
financial services, government, communications, health, travel and
transportation, and energy, as well as geographically, such as on the
Americas, Europe, and Asia/Pacific and Japan. Each business unit is further
organized into separate, more focused business units within the relevant
industry or geography. EDS seeks to leverage its knowledge and resources for
its individual customers by drawing from the many industries and skill sets
available across a wide range of geographies. EDS believes its organizational
structure enables it to better focus on and use the knowledge gained from the
industries and geographies in which its customers operate and therefore better
serve its customers and its customers' customers.
EDS seeks to continue its leadership position in the IT industry through
increased globalization and expanded product and service offerings. The
percentage of EDS' revenues outside the United States has increased from 18%
in 1990 to 30% in 1995, and the number of countries in which EDS operates has
increased from 28 in 1990 to 40 in 1995. EDS believes that corporations are
becoming increasingly globalized because other companies enter their markets
from other geographies or they desire to expand into additional geographies.
This trend is fostered by advancements in communications technology which
compress time and distance. EDS intends to continue to capitalize on the
general trend toward convergence of the world's markets by enhancing its
capability through expanded service offerings as well as through strategic
alliances with global partners and distributors. The acquisition of A.T.
Kearney in 1995, which expanded EDS' capabilities along a range of industries,
skill sets and regions, is an example of such strategic growth.
EDS seeks to create value by imbedding more information content into the
products and services it delivers. By creating "smart" systems, or systems
with built-in flexibility, EDS can enhance the quantity and type of
information available to a customer, increase the value of that information to
the customer and better enable the customer to take full advantage of that
information for its business needs.
EDS believes that as the trend toward the individualization of products and
services accelerates, the ability to customize the delivery of information to
the individual consumer will become increasingly important. This trend is
evidenced by the growth of the internet and electronic commerce markets. EDS
anticipates building the tools, capabilities and offerings to be a significant
participant in the internet and electronic commerce markets. EDS' delivery of
services to these markets, which include the home banking and home shopping
markets, is generally to the consumer through EDS' customer.
30
<PAGE>
SERVICES
EDS offers its clients a continuum of services worldwide, including the
management of computers, networks, information systems, information processing
facilities, business operations and related personnel, providing to its
clients advantages in cost-effectiveness, speed of implementation and state-
of-the-art technology. In delivering this continuum of services, EDS generally
performs one or more of five basic functions:
. MANAGEMENT CONSULTING SERVICES. Through its A.T. Kearney subsidiary, EDS
offers management consulting services, including business and market
strategy, benchmarking and best practices analysis, business process
reengineering, manufacturing and operations improvement, organizational
effectiveness, global sourcing and logistics and supply change
management.
. CREATION OF IT SYSTEMS--SYSTEMS DEVELOPMENT. EDS designs, develops and
implements information systems or adds features that may increase the
capabilities of existing systems.
. ASSEMBLY OF IT PLATFORMS--SYSTEMS INTEGRATION. EDS selects technologies
and assembles integrated systems that may include software, hardware,
telecommunications and systems support and maintenance.
. MANAGEMENT OF IT OPERATIONS--SYSTEMS MANAGEMENT. EDS assumes and manages
the operation of part or all of a client's IT operations, which may
include equipment, personnel, information processing systems and
communications networks.
. MANAGEMENT OF BUSINESS OPERATIONS--PROCESS MANAGEMENT. EDS manages an
entire business function within the client's enterprise, which may
include IT operations as well as other activities such as remittance
processing, marketing, sales, customer service and training.
EDS is able to leverage its extensive technical infrastructure and other
numerous resources to offer IT services at clients' sites or through large
scale information processing centers or specialized distributed service
centers located worldwide. EDS' digital telecommunications network,
EDSNET (R), is capable of worldwide transmission of clients' voice, digital
and video data using the integrated fiber optic, microwave and satellite
facilities of what EDS believes is one of the world's largest digital
telecommunications networks, excluding government networks and common
carriers. EDS constantly examines and tests computer hardware and software
offered by suppliers worldwide as part of its efforts to assess and use in its
operations, and offer to EDS' clients, the technological changes that
continuously occur within the computer industry, including developments in
distributed computing and client/server architecture. EDS has developed
computer-aided software engineering ("CASE") tools to assist in generating new
software to keep pace with rapidly evolving strategies involving hardware
technologies and information processing theories and to facilitate the rapid
deployment of its products and services to the market.
BUSINESS AREAS
EDS conducts its sales, marketing and service activities on a global basis
through business units that focus both geographically and vertically along the
lines of specified industries. By combining the skills of an industry-focused
business unit with a geographic business unit, EDS is able to respond to a
client's requirements with people who are knowledgeable about a specific
industry and the client's business.
Additionally, certain services provided by EDS to all clients are
concentrated in specific service units. These service units provide electronic
transfer, microcomputer technology, computer assisted design, manufacturing
and engineering ("CAD," "CAM" and "CAE") and other services to EDS' clients in
coordination with the business units having primary responsibility for a
particular client.
The industry areas to which EDS provides IT services can be broadly
categorized as follows:
. MANUFACTURING. EDS assists numerous manufacturing companies in their
worldwide operations and in their implementation of global competitive
strategies, providing them with advanced capabilities in information
processing, information management and telecommunications. EDS offers
manufacturing
31
<PAGE>
clients expertise in electronic data interchange, engineering
information systems, integrated document processing, inventory control,
materials handling, process control, synchronous manufacturing,
artificial intelligence techniques and capabilities in CAD/CAM/CAE on an
integrated basis.
. FINANCIAL SERVICES. EDS offers a full range of IT services to the global
financial services industry. The industry's expansion of products and
services has led to an unprecedented dependence on IT and its
integration with a financial institution's business processes and
strategy. Through strategic alliances and acquisitions, EDS has
positioned itself to support a wide range of industry segments,
including commercial banks, consumer finance companies, commercial
insurance companies, investment banks, regional and community banks,
credit unions, brokerage and securities firms, thrifts and mortgage
lenders. EDS' services are augmented by a full range of industry-
specific products and services, including data processing, automated
teller machines ("ATMs"), debit and credit card services, voice and
teller automation, item and remittance processing, crossborder funds
transfer and currency exchange, consumer asset management, customer
service technology, remote/home banking and business-process
improvement.
. GOVERNMENT. EDS performs IT services for national, state and local
governments in the U.S. and around the world. At the national level, EDS
targets its services at both civil and defense organizations with
complex, large-scale information needs. Within state and local
governments, key markets of EDS include human services, transportation,
public safety and administration and finance. EDS' core competency for
managing complexity and its proven ability to leverage process
performance improvement techniques and technologies from the private
sector into the public sector has allowed EDS to expand its government
presence worldwide.
. COMMUNICATIONS. EDS offers a full spectrum of IT services to the global
communications market in addition to industry specific technology
platforms tailored to the information needs of each industry segment.
These services include clearinghouse, roaming and billing services and
systems for the wireless industry, information management and billing
systems for the cable television industry, and operational support
systems and billing systems for the telecommunications industry. EDS
also offers multimedia-based services designed to satisfy the predicted
demand of emerging full service network operators within the interactive
multimedia segment.
. HEALTH. EDS offers IT services to companies in the health care industry,
providing the management of information required in this highly
regulated industry in a rapidly-changing, record-intensive environment.
EDS' services go beyond traditional outsourcing and include solution
sets to improve specific business areas, including sales and marketing,
customer service and claims management.
. TRAVEL AND TRANSPORTATION. EDS' travel and transportation group offers
IT services to customers worldwide in the air transportation, freight,
computer reservation system, vehicle rental, travel agency, cruise line
and hospitality industries. EDS' IT services to these industries are
designed to meet customer requirements for reducing operating costs,
improving quality and increasing responsiveness to rapidly changing
market conditions.
. ENERGY. EDS provides IT services on a global basis to companies in the
petroleum, natural gas, chemical, pharmaceutical, mining and utility
industries. EDS' services in the energy industry are intended to improve
inventory control, reduce time to market, lower product cost, improve
rate case approval, improve capacity planning and increase efficiency in
regulatory and environmental compliance.
In certain of these markets, EDS provides services, such as ATM and travel
related services, directly to individual consumers.
ACQUISITIONS AND STRATEGIC ALLIANCES
From time to time EDS has made acquisitions and entered into strategic
alliances in an effort to obtain a competitive advantage or a new or expanded
presence in targeted geographic or service markets. For example,
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<PAGE>
EDS acquired the domestic and international management consulting business of
A.T. Kearney in August 1995. A.T. Kearney is one of the world's leading
international management consulting and executive search firms serving clients
throughout the world.
EDS believes that a convergence of the computing and software,
communication, media and entertainment and electronic commerce industries is
occurring and will continue. As a result, acquisitions, joint ventures and
strategic alliances are expected to be increasingly important to EDS' ability
to compete effectively. See "Risk Factors--No Assurance of Strategic Alliances
and Other Business Opportunities" and "--Competition."
REVENUES
EDS receives fees for all aspects of its continuum of services. The fees are
generally paid pursuant to predetermined rates set forth in contracts. EDS'
customer contracts generally have terms of one to 10 years.
EDS' total revenues grew from $786 million in its 1984 fiscal year (the last
full fiscal year before General Motors' acquisition of EDS) to $12.4 billion
in 1995. Although revenues attributable to General Motors and its affiliates
have increased from 1985 to 1995, they have decreased as a percentage of total
revenues from approximately 70% in 1985 to approximately 31% in 1995 as a
result of the rapid revenue growth of EDS' non-General Motors business. As a
percentage of total revenues, revenues attributable to EDS' non-General Motors
business have increased from approximately 30% in 1985 to approximately 69% in
1995.
The following table sets forth the percentage of revenues for each of the
years in the three-year period ended December 31, 1995 derived by EDS from the
identified principal business areas.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
FOR THE YEARS ENDED
BUSINESS AREA DECEMBER 31,
------------- ---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Manufacturing.............................. 47% 49% 51%
Financial Services......................... 14 14 15
Government................................. 12 10 10
Communications............................. 8 7 6
Health..................................... 7 8 8
Travel and Transportation.................. 4 4 5
Energy..................................... 3 4 4
Other...................................... 5 4 1
------- ------- -------
Total.................................... 100% 100% 100%
======= ======= =======
</TABLE>
Other than General Motors, no one client accounted for more than 5% of EDS'
total revenues in 1995, 1994 or 1993. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Revenues."
SERVICES FOR GENERAL MOTORS
Approximately 31% of EDS' total revenues in 1995 was attributable to General
Motors and its affiliates. EDS provides substantially all of the worldwide
data processing and telecommunications activities for General Motors and its
affiliates (other than Hughes, with the exception of its subsidiary, Delco
Electronics Corporation ("Delco")), including integrated information systems
for payroll, health and benefits, office automation, communications and plant
automation functions. The loss of General Motors as an ongoing major customer
of EDS would have a material adverse effect on EDS. See "Risk Factors--
Dependence on Major Customer; Recent Changes in Pricing and Terms." The IT
services to be provided by EDS under the IT Services Agreements will generally
be similar to those provided to General Motors under the Existing IT Services
Agreements. See "Relationship Between the Company and General Motors--IT
Services Agreements."
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BACKLOG
EDS' backlog represents an estimate of the remaining future revenue from
existing signed contracts. Using the best available information, EDS
determines this estimate on an annual basis as of December 31 of each year.
The estimate includes contracts with non-GM customers which have a term of 12
months or longer and is calculated for each of the next ten years plus a
summary amount for contracts with terms extending beyond such ten-year period.
EDS historically has not included estimates for future revenues from General
Motors and its subsidiaries because of the intercompany relationships with
these entities. The EDS backlog estimate includes revenues expected under
current terms of executed contracts, revenues from government contracts in
which quantities are not definite but estimable, and a risk-adjusted estimate
of renewals and extensions for those contracts which contain renewal or
extension provisions.
Changes in the backlog calculation from year to year result from (i)
additional revenue from the signing of new contracts, (ii) reduction in
revenue from fulfilling contracts during the most recent year, (iii) reduction
in revenue from early termination of contracts, and (iv) adjustments to
estimates of previously included contracts. On an annual basis, EDS reviews
each contract included in the calculation and adjusts estimates for those
contracts based on the latest available information.
At December 31, 1995 and 1994, EDS' firm backlog for services (excluding
services for General Motors) was approximately $39.8 billion and $34.5
billion, respectively.
COMPETITION
EDS experiences competition in the IT industry and in the broader
information industry, which includes the computing, communications and
media/entertainment industries. Today, EDS' principal competitors in the IT
services industry include International Business Machines Corporation,
Andersen Consulting LLP, Computer Sciences Corporation, AT&T Corp. ("AT&T"),
MCI Communications Corporation/SHL Systemhouse Inc. ("MCI") and Cap Gemini
Sogeti S.A.
EDS has historically faced competition principally from other companies
providing information technology systems and services. As the markets for IT
services have grown and as the services demanded by customers have expanded
and increased in complexity, EDS' competitors have expanded from niche-
oriented, geographically-focused companies to include broader-based, global
competitors.
EDS believes that a long-term trend of convergence is occurring in the
computing, communications and media/entertainment sectors of the information
industry. As this trend continues, companies historically involved in the
communications and media/entertainment sectors of the information industry, as
well as companies principally involved in other portions of the IT industry,
will increasingly seek to compete in the businesses in which EDS has
traditionally operated. For example, AT&T and MCI now offer services that
combine computing with communications. Similarly, EDS' strategy includes
continuing to leverage its expertise into other parts of the information
industry. The ability of EDS to remain competitive will depend in part upon
its continued ability to finance and acquire the resources necessary to offer
broad-based services and products on an efficient basis.
In addition, technology in the IT industry is in a rapid and continuing
state of change as new technologies continue to be developed, introduced and
implemented. EDS management believes that its ability to continue to compete
effectively also will depend upon its ability to develop and market services
and products that meet changing user needs and respond to technological
changes on a timely and cost-effective basis.
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RELATIONSHIP BETWEEN THE COMPANY AND GENERAL MOTORS
GENERAL
General Motors continues to have certain contractual relationships with EDS.
The IT Services Agreements provide for the continuation of a long-term
customer-supplier relationship and the Separation Agreement established
certain transitional and other arrangements deemed necessary in connection
with the Split-Off, in each case as described below. Additionally, GM has an
indirect stake in EDS' financial performance as a result of the Hourly Plan
Special Trust's holdings of Common Stock. See "Selling Stockholder."
IT SERVICES AGREEMENTS
Immediately prior to the consummation of the Split-Off, General Motors and
EDS entered into the Master Service Agreement and certain related agreements
pursuant to which EDS will continue to serve as General Motors' principal
supplier of IT services on a worldwide basis for an initial term of 10 years
following the Split-Off, which term may be extended by mutual agreement of the
parties. In addition, GM and EDS implemented certain contractual changes which
modified or otherwise affected the provisions of several existing Service
Agreements (as hereinafter defined). GM and EDS also entered into agreements
whereby the rates charged by EDS for certain information processing activities
and communications services were reduced.
The terms of the Master Service Agreement are applicable to all IT Services
Agreements between and among GM and its affiliates, on the one hand, and EDS
and its affiliates, on the other hand, which relate to certain "in-scope"
services as defined in the Master Service Agreement ("MSA Services"). Under
the IT Service Agreements, EDS will provide to General Motors certain plant
floor automation services in North America which had previously been provided
by EDS and other vendors under a variety of agreements. IT services that are
considered to be MSA Services after the Split-Off accounted for approximately
$3.4 billion of the approximately $3.9 billion of revenues in the aggregate
received by EDS from GM in 1995. The balance of EDS' 1995 revenues from GM was
attributable to goods and services provided to GM by EDS which would have been
outside the scope of the Master Service Agreement. The parties expect that EDS
will continue to provide "out-of-scope" goods and services to GM under various
types of contractual agreements other than the Master Service Agreement.
Set forth below is a summary description of certain of the principal
provisions of the IT Services Agreements. Such description does not purport to
be complete, and to the extent it relates to the Master Service Agreement, is
qualified in its entirety by reference to the Master Service Agreement, a copy
of which has been filed with the Commission. For a discussion of certain
financial effects on EDS of the terms of the IT Services Agreements, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
TERM
The term of the Master Service Agreement commenced on June 7, 1996, the date
of consummation of the Split-Off, and will continue until the expiration of
ten years thereafter. The term of the Master Service Agreement may be extended
for an additional period or periods by mutual agreement between General Motors
and EDS. Prior to the Split-Off, the Prior Master Agreement remained in effect
indefinitely, subject to termination by either General Motors or EDS in the
event of the sale of all or substantially all of the assets or stock of EDS to
a non-GM entity. The change in the term of the Master Service Agreement was
deemed appropriate in connection with the Split-Off because GM and EDS desired
to continue the customer-supplier relationship after the Split-Off and
independent IT service providers generally do not have contracts with their
customers for indefinite terms. The length of EDS' largest customer contracts
generally ranges from 8 to 12 years. Although EDS has historically been able
to achieve high renewal rates with its customers upon the expiration of long-
term contracts, there can be no assurance as to whether or to what extent EDS
will continue to provide IT services to GM after the initial term of the
Master Service Agreement.
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SERVICE AGREEMENTS
Pursuant to the Prior Master Agreement, GM business units and EDS had
entered into a number of Service Agreements ("Service Agreements") setting
forth the terms and provisions applicable to specific services or projects
undertaken by EDS on behalf of various GM organizations. Such Service
Agreements remain in effect after the Split-Off and, in many cases, were
extended or otherwise modified as provided in the Master Service Agreement. In
addition, it is contemplated that, under the Master Service Agreement, GM
business units and EDS will continue to negotiate and enter into additional
Service Agreements providing for the performance of IT services on mutually
agreed terms. Each future Service Agreement will set forth provisions with
respect to, among other things, (i) the period of time for which EDS will
perform services pursuant thereto, (ii) the nature and scope of the respective
obligations of the parties thereunder and (iii) the pricing structure, method
and amounts of payments to be made to EDS in accordance therewith. In
negotiating future Service Agreements, the parties will endeavor to agree upon
fixed-price service arrangements which meet the standards of competitiveness
described below. See "--Competitiveness" and "--Pricing of Services" below.
The provisions of the Master Service Agreement will apply to all Service
Agreements, whether entered into prior to or after the consummation of the
Split-Off.
In connection with the execution of the Master Service Agreement, the terms
of the largest domestic Service Agreements (accounting for approximately $2.5
billion in annual revenues in 1995) then in effect were extended for
additional terms of between one and three years. In particular, the Service
Agreement with Delphi Automotive Systems was extended through December 31,
1998 and the Service Agreements with GM's North American Operations ("NAO"),
General Motors Acceptance Corporation (U.S. and Canada) and Motors Insurance
Corporation (U.S. and Canada) were each extended through December 31, 1999.
Each other Service Agreement entered into prior to the Split-Off will continue
in effect for the duration of its agreed term.
SCOPE OF SERVICES
The Master Service Agreement established a contractual framework for the
provision on a worldwide basis of the MSA Services by EDS to General Motors
and all entities (i) in which General Motors owns 65% or more of the
outstanding equity and over which it exercises management control (if EDS was
providing services in support of the business operations of that entity as of
August 1, 1995) or (ii) in which General Motors owns 80% or more of the
outstanding equity (if EDS was not providing services in support of the
business operations of that entity as of August 1, 1995). The Master Service
Agreement contains a flexible description of the MSA Services that is based on
functional service categories so as to take into account possible future
changes in business operations or technologies that result in the replacement
of existing processes and technologies. The MSA Services to be provided by EDS
include IT goods and services related to the following functional service
categories: (i) computing and communications infrastructure; (ii) development
of application software and implementation of commercial off-the-shelf
application software; (iii) data management; (iv) cross-functional IT-related
services; and (v) certain services related to specified plant floor
operations.
Under the Master Service Agreement, services for certain GM units or
operations or in certain geographic areas were specifically excluded from the
scope of work to be performed by EDS. In particular, such agreement provides
that General Motors will not be required to obtain from EDS any MSA Services
(i) for Hughes, with the exception of its subsidiary, Delco, (ii) for any
other business or entity acquired by General Motors after January 1, 1985
(other than (x) GMAC Mortgage Corporation, with the exception of its
subsidiary, Residential Funding Corporation, and (y) any other entity which
executed a Service Agreement prior to August 1, 1995), (iii) in any country
where the provision of such services by EDS would violate any national law of
that country, (iv) in specified emerging geographic markets outside of North
America and Western Europe where, as of August 1, 1995, EDS has not previously
provided such services for the same GM business function and line of business
in that emerging market, and (v) with respect to any plant floor services
other than pursuant to the agreement described in "--Plant Floor Agreement"
below or certain other arrangements currently in effect between the parties.
Furthermore, the provisions of the Master Service Agreement relating to the
scope of services to be
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provided by EDS are subject to General Motors' right, under certain
circumstances, to competitively bid and award a portion of such services to
third party service providers. See "--Market Testing and Outsourcing" below.
IT STRATEGY AND DIRECTION
The Master Service Agreement provides that General Motors is responsible
for, and will decide and direct, its IT strategies and requirements, including
its computing and communications architecture. EDS is responsible for the
performance of IT services pursuant to the Master Service Agreement in
furtherance of General Motors' IT strategies and requirements.
COMPETITIVENESS
In accordance with the Master Service Agreement, the MSA Services to be
provided by EDS will be competitive with respect to quality, service, price
and technology giving due consideration to General Motors' requirements and
other relevant factors. The provisions of the Master Service Agreement with
respect to competitiveness apply to the negotiation or renegotiation of (i)
new or replacement Service Agreements, (ii) the terms and conditions
applicable to new or replacement MSA Services and (iii) the pricing of any MSA
Services when such negotiation or renegotiation is contractually provided for
in a Service Agreement. When the applicable EDS and GM organizations reach a
mutually acceptable agreement as to the competitiveness of any services, the
standards of competitiveness provided for in the Master Service Agreement will
be deemed satisfied for the term of such agreement.
In situations where the applicable GM and EDS organizations are unable to
reach a mutually acceptable agreement as to the competitiveness of any MSA
Services, the Master Service Agreement provides a procedure whereby the
negotiating impasse will be escalated to senior management, the services of a
standing neutral mediator may (and, in some cases, must) be utilized, and, in
the absence of an agreement, (i) any impasse as to uniform published rates for
applicable items will be resolved by binding arbitration and (ii) any impasse
as to any other services will be resolved by EDS providing the services on the
basis of the standard terms and conditions provided in the Master Service
Agreement and a modified cost-plus pricing methodology.
PRICING OF SERVICES
In general, under the Master Service Agreement, the same methods of pricing
are available as were provided for under the Prior Master Agreement. As a
result, depending on the type of services to be provided by EDS, the parties
may utilize (i) fixed-price arrangements, (ii) cost-based pricing methods or
(iii) uniform published rates for off-the-shelf, commercially available
products and services. However, the parties have agreed to endeavor to
incorporate fixed-price arrangements into new Service Agreements entered into
under the Master Service Agreement to the extent practicable.
With respect to certain information processing services to be performed by
EDS, the parties have agreed to annual reductions in the rates to be charged
by EDS to all GM organizations worldwide, which reduced rates were applied
retroactively as of January 1, 1996 and will be in effect through December 31,
2000. In addition, with respect to certain communication services to be
performed by EDS, the parties have agreed to annual reductions in the rates to
be charged by EDS to all GM organizations in the United States, which reduced
rates were applied retroactively as of January 1, 1996 and will be in effect
through December 31, 1998. During the respective periods that these reduced
rates are in effect, the information processing and communications services to
which the reduced charges apply will not be subject to the provisions of the
Master Service Agreement relating to market testing or outsourcing. See "--
Market Testing and Outsourcing" below.
MARKET TESTING AND OUTSOURCING
The Master Service Agreement provides for certain market testing procedures
in order to test the competitiveness of the MSA Services provided by EDS given
that after the Split-Off the Capital Stock
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Committee of the GM Board no longer has the ability to monitor and ensure the
continued fairness of the arrangements between GM and EDS. Under these
procedures, EDS will have the opportunity to bid on any and all MSA Services
and any bid submitted by EDS will be evaluated on the same criteria as bids
submitted by other service providers. In each of 1996 and 1997, GM's
International Operations unit ("GMIO") may expose to competitive bidding MSA
Services that would otherwise be provided by EDS so long as the revenues that
would be reasonably paid to EDS by GM for such MSA Services during each such
year do not exceed $30 million. Following such competitive bidding, GMIO may
award contracts to one or more third party service providers with respect to
any or all of the MSA Services exposed to competitive bidding. Thereafter,
during each year beginning in 1998, GM will be permitted to expose to
competitive bidding specified percentages of the prior year's revenues paid to
EDS for MSA Services. In each year from 1998 through 2000, GM may expose to
competitive bidding and award to third parties contracts for MSA Services for
which GM would otherwise have reasonably paid EDS up to an average of
approximately 6% of the prior year's revenues paid to EDS for MSA Services.
For the years 2001 through 2006, GM may expose to competitive bidding and
award to third parties contracts for MSA Services for which GM would otherwise
have reasonably paid EDS up to an average of approximately 2.4% of the prior
year's revenues paid to EDS for MSA Services. Subject to certain limitations,
GM will select the MSA Services to be exposed to competitive bidding after
consultation with EDS. In addition to the aforementioned annual limitations,
the following aggregate limitations apply: through the year 2000, in no single
calendar year may the amount paid to third parties for MSA Services exceed 15%
of the aggregate amount of revenue paid to EDS for MSA Services performed
during the prior year; and after the year 2000, in no single calendar year may
the amount paid to third parties for MSA Services exceed 25% of the aggregate
amount of revenue paid to EDS for MSA Services performed during the prior
year. Although EDS may bid on any and all of such MSA Services, it is expected
that third party service providers will be awarded some portion of the MSA
Services exposed to competitive bidding. Accordingly, there can be no
assurance as to whether or to what extent EDS will be successful in bidding on
such MSA Services.
STRUCTURAL COST REDUCTIONS
The Master Service Agreement established specified structural cost reduction
targets for the first four years of the Master Service Agreement. In each of
the years 1996 through 1998, the annual cost reduction targets are $100
million. In 1999, the target is $50 million. These cost reduction targets are
generally somewhat higher than the cost reduction targets that were set forth
in the preexisting Service Agreements, which they are intended to replace.
Unlike the cost reduction targets in the preexisting Service Agreements,
however, the targets under the Master Service Agreement are not intended to be
performance guarantees, but rather simply represent firm good faith business
commitments on the part of General Motors and EDS. As such, the Master Service
Agreement does not provide for any gain sharing or similar incentives in the
event that the targets are exceeded and does not impose any penalties or other
liabilities in the event that they are not met. No assurance can be given that
any of the specific targets for structural cost reductions will be achieved.
PAYMENT TERMS
The Prior IT Services Agreements provided for GM to pay EDS on the 15th day
of the month in which services were provided with respect to a substantial
portion of services, especially in North America. International payment terms
in the Prior IT Services Agreements were often more favorable to GM and were
generally governed by the commercial standards prevailing in each particular
country. Under the IT Services Agreements, there will be a transition of
payment terms to the 20th day of the month following service for all
agreements which do not have payment terms at least that favorable to GM
(principally in North America). The transition will be accomplished as
follows: (i) through 1996, no change; (ii) beginning in 1997, payment on the
30th day of the month when services are provided; (iii) beginning in 1998,
payment on the 20th day of the month following service for certain business
units; and (iv) beginning in 1999, payment on the 20th day of the month
following service for all remaining business units, including NAO.
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TERMINATION
The Master Service Agreement provides that it may be terminated (i) by
either party, if the other party defaults in any material respect in the
performance of its obligations thereunder and such default is not cured as
provided therein after notice thereof, (ii) by EDS, if General Motors defaults
in the payment when due of any material amount owing to EDS thereunder and
such default is not cured as provided therein after notice thereof, (iii) by
either party, if the other party becomes insolvent or (iv) by General Motors,
if there occurs a "change of control" of EDS and certain additional conditions
are met.
For purposes of the termination provisions of the Master Service Agreement,
a "change of control" means the occurrence of any of the following events: (i)
any person files (or is required to file) a Schedule 13D or 14D-1 under the
Exchange Act disclosing that such person has become the beneficial owner of
Common Stock representing 50% or more of the aggregate voting power of the
outstanding shares of Common Stock; (ii) any person files (or is required to
file) a Schedule 13D or 14D-1 under the Exchange Act disclosing that such
person has become the beneficial owner of Common Stock representing 30% or
more of the aggregate voting power of the outstanding shares of Common Stock,
or commences a proxy solicitation subject to Rule 14a-11 of the Exchange Act
with respect to the election or removal of members of the EDS Board, and,
within two years, individuals who constituted a majority of the members of the
EDS Board at the time of such acquisition or solicitation (as applicable),
together with certain persons elected, recommended or nominated by such
directors, cease to constitute a majority of the EDS Board; or (iii) there is
consummated any transaction (or transactions) resulting in a number of shares
of Common Stock which represents 50% or more of the aggregate voting power of
the outstanding shares of Common Stock being beneficially owned by persons who
did not either own such securities as Common Stock immediately prior to such
transaction or receive such securities in respect of the conversion or
exchange of Common Stock in such transaction.
In the event of a change of control, GM may elect to terminate the Master
Service Agreement if the GM Board determines that there is substantial
uncertainty about EDS' ability to perform its obligations under the IT
Services Agreements in all material respects or any other significant threat
to the business relationship between EDS and the GM units that are provided
MSA Services by EDS. GM may also terminate the Master Service Agreement in the
event of a change of control in which EDS is acquired by a manufacturer of
cars or trucks that competes with GM (a "core competitor") and as a result of
which GM determines that there is a reasonable likelihood of a significant
competitive threat to GM. In addition, if there is a change of control in
which EDS is acquired by a competitor of GM (other than a core competitor) and
there is a reasonable likelihood of a significant competitive threat to one or
more significant GM units that contract with EDS for MSA Services under the
Master Service Agreement, GM may terminate the Service Agreements between EDS
and such units; provided, that EDS may instead elect to terminate the Master
Service Agreement if the revenues associated with those Service Agreements
accounted for more than 60% of the revenues paid to EDS for MSA Services
during the preceding year.
In the event that General Motors elects to terminate the Master Service
Agreement or any Service Agreement as a result of a change in control of EDS,
then General Motors (i) will be obligated to pay EDS for transition services
in accordance with the provisions therefor in the Master Service Agreement,
and (ii) may, under certain circumstances, be obligated to pay for all or a
portion (depending on the status of the party acquiring control of EDS) of
certain cancellation charges intended to reimburse EDS for certain wind-down
expenses, losses relating to capital assets and long-term leases, and
personnel expenses.
PLANT FLOOR AGREEMENT
GM and EDS have also entered into an agreement (the "Plant Floor Agreement")
which covers plant floor systems services for NAO and Delphi North American
entities (excluding Saturn) for an initial term of five years and for
additional renewal periods under the Master Service Agreement (subject to
possible termination at the end of a 2.5 year probationary period). The Plant
Floor Agreement, which is subject to the Master Service Agreement, is expected
to account for approximately $200 million in revenue in 1997. Prior to the
Plant Floor Agreement, GM procured plant floor services from EDS and other
vendors under a variety of agreements.
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SEPARATION AGREEMENT
General Motors and EDS also entered into the Separation Agreement (the
"Separation Agreement"), which established certain arrangements between
General Motors and EDS deemed necessary in order to deal with various
business, legal and regulatory issues following the Split-Off. Set forth below
is a summary description of certain of the principal provisions of the
Separation Agreement. Such description does not purport to be complete and is
qualified in its entirety by reference to such agreement, a copy of which has
been filed with the Commission.
The Separation Agreement contains covenants intended to protect the tax-free
status of the Split-Off. EDS has agreed with General Motors that, until after
June 7, 1998, EDS will not (i) enter into certain secondary capital stock
transactions, or permit such transactions to occur, whereby a person would
acquire, from holders of outstanding shares of EDS capital stock, a number of
shares of EDS capital stock that would comprise more than 15% of the number of
issued and outstanding shares of Common Stock, unless either (a) General
Motors has determined that any such proposed transaction would constitute a
tax-free reorganization under the Internal Revenue Code of 1986, as amended
(the "Code"), or would not otherwise jeopardize the tax-free status of the
Split-Off or (b) the IRS has issued a ruling to the effect that any such
proposed transaction would constitute a tax-free reorganization under the
Code; (ii) fail to continue the active conduct of the trade or business
conducted by EDS on the date of the Split-Off (or liquidate, dispose of, or
otherwise discontinue the conduct of any material portion of such trade or
business); (iii) voluntarily dissolve or liquidate or, except in the ordinary
course of business, sell or otherwise dispose of more than 60% of the gross
assets of EDS or more than 60% of the consolidated gross assets of EDS and its
subsidiaries, unless General Motors determines that such transaction would not
jeopardize the tax-free status of the Split-Off; or (iv) take any other action
or enter into any transaction that would be reasonably likely to jeopardize
the tax-free status of the Split-Off, unless GM has determined that such
action or transaction would not jeopardize the tax-free status of the Split-
Off. In addition, EDS has agreed with General Motors that, until after
December 7, 1996, EDS will not enter into any transaction that would result in
any person acquiring from EDS a number of shares of EDS capital stock that,
when aggregated with all other shares of EDS capital stock then owned by such
person, would constitute more than 20% of the total combined voting power of
the voting stock of EDS or 20% of the total number of outstanding shares of
any class or series of non-voting stock of EDS. EDS will indemnify General
Motors and its affiliates from and against tax-related losses incurred by
General Motors to the extent caused by EDS' breach of any of the
representations, warranties or covenants made by EDS in the Separation
Agreement with respect to protecting the tax-free status of the Split-Off.
Under the Separation Agreement, each of General Motors and EDS have agreed
to indemnify the other and its affiliates and their respective directors,
officers and employees from and against losses arising out of (i) breaches of
the provisions of the Separation Agreement, (ii) certain misstatements or
omissions, or alleged misstatements or omissions, in certain filings under the
securities laws, (iii) certain administrative actions in connection with stock
records and the exchange of stock certificates by former holders of Class E
Common Stock and (iv) the conduct of its respective business.
The Separation Agreement provides EDS a $50.0 million allowance relating to
the resolution of various uncertain, contingent or other matters arising out
of the separation of GM and EDS. As of June 7, 1996, the parties had agreed to
the application of $40.7 million of the allowance, principally to various tax,
employee benefit and insurance matters. The remaining $9.3 million of the
allowance will be available to EDS until generally June 7, 1998 for
application against any amounts that are or may become payable by EDS and its
affiliates to GM and its affiliates in connection with any uncertain,
contingent or other matters arising prior to the Split-Off and out of the
separation of GM and EDS. Such allowance generally may not be utilized for
items provided for in the Separation Agreement.
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BOARD OF DIRECTORS AND MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The EDS Board currently has 10 members. A majority of the members of the EDS
Board consists of independent directors. Each of the independent directors was
initially elected to the EDS Board effective immediately following the Split-
Off.
Set forth below are the names, ages and positions with EDS of the directors
and executive officers of EDS.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Chairman of the Board and Chief Executive
Lester M. Alberthal, Jr. ........ 52 Officer
Gary J. Fernandes................ 52 Vice Chairman and Director
President, Chief Operating Officer and
Jeffrey M. Heller................ 56 Director
Hartmut W. Burger................ 53 Executive Vice President
John R. Castle, Jr............... 53 Executive Vice President
Paul J. Chiapparone.............. 57 Executive Vice President
Joseph M. Grant.................. 57 Executive Vice President and Chief
Financial Officer
Dean Linderman................... 52 Executive Vice President
G. Stuart Reeves................. 56 Executive Vice President
James A. Baker, III.............. 66 Director
Richard B. Cheney................ 55 Director
Ray J. Groves.................... 60 Director
Ray L. Hunt...................... 53 Director
C. Robert Kidder................. 51 Director
Judith Rodin..................... 51 Director
Enrique J. Sosa.................. 56 Director
</TABLE>
The EDS Board is divided into three classes serving staggered terms.
Directors in each class are elected to serve for three-year terms and until
their successors are elected and qualified. Each year, the directors of one
class stand for election as their terms of office expire. Messrs. Groves,
Heller and Hunt are designated as Class I directors, with their terms of
office expiring in 1997; Messrs. Cheney, Fernandes, Kidder and Sosa are
designated as Class II directors, with their terms of office expiring in 1998;
and Messrs. Alberthal and Baker and Dr. Rodin are designated as Class III
directors, with their terms of office expiring in 1999.
The EDS Board has established three standing committees, an Audit Committee,
a Compensation and Benefits Committee and a Governance Committee. The Audit
Committee consists of Messrs. Groves, Hunt and Sosa. The Compensation and
Benefits Committee consists of Messrs. Groves, Hunt and Kidder, who are
"disinterested persons" within the meanings of Rule 16b-3 under the Exchange
Act and section 162(m) of the Code. The Governance Committee consists of
Messrs. Baker and Cheney and Dr. Rodin, with the Chairman of the Board being
an ex-officio, non-voting member.
The Audit Committee recommends to the EDS Board the independent public
accountants to be selected to audit EDS' annual financial statements. The
Audit Committee also reviews the planned scope of the annual external and
internal audits, the independent accountants' and internal auditors' reports
to management and management's responses thereto, possible violations of EDS'
business ethics and conflicts of interest policies and the effectiveness of
EDS' internal audit staff.
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The Compensation and Benefits Committee establishes remuneration levels for
senior executives of EDS, reviews the performance of the Chief Executive
Officer, reviews significant employee benefit programs and establishes and
administers executive compensation programs, including bonus plans, stock
option and other equity-based programs, deferred compensation plans and any
other cash or stock incentive programs.
The Governance Committee recommends to the EDS Board the slate of nominees
to be elected to the EDS Board and to be selected for membership on the
various EDS Board committees and recommends a successor to the Chief Executive
Officer when a vacancy occurs through retirement or otherwise.
The EDS Board may, from time to time, establish other committees to
facilitate the management of EDS or for other purposes it may deem
appropriate.
Executive officers serve at the discretion of the EDS Board.
Set forth below is a description of the backgrounds of the directors and
executive officers of EDS.
Mr. Alberthal has been Chief Executive Officer since December 1986 and
Chairman of the Board since June 1989. Mr. Alberthal is chair of EDS'
Executive Council, the Company's chief policy making and strategy group. Mr.
Alberthal joined EDS in 1968. He became responsible for EDS' health care
division in 1974 and was named Senior Vice President with responsibility for
EDS' insurance group in 1979. Following the acquisition of EDS by General
Motors in 1984, Mr. Alberthal led all non-General Motors North American
operating groups. He served as President of EDS from April 1986 through the
consummation of the Split-Off. Mr. Alberthal is on the Board of Directors of
Baker Hughes Incorporated.
Mr. Fernandes has been the Vice Chairman of EDS since the consummation of
the Split-Off and a director of EDS since 1981. Mr. Fernandes had been a
Senior Vice President of EDS from October 1984 until the consummation of the
Split-Off. Mr. Fernandes has oversight responsibility for EDS' worldwide
business development and corporate development (including marketing and
strategic planning) and is Chairman of its A.T. Kearney management consulting
services subsidiary. Mr. Fernandes joined EDS in 1969 and has served in
numerous management capacities in the United States, Europe and Japan. Mr.
Fernandes is a director of The Southland Corporation, Amtech Corporation and
John Wiley & Sons, Inc.
Mr. Heller has been the President and Chief Operating Officer and a director
of EDS since the consummation of the Split-Off and prior to that time had been
a Senior Vice President since October 1984. Mr. Heller is chair of EDS' Global
Operations Council, which is responsible for EDS' operating strategies and
other business issues. Mr. Heller joined EDS in 1968 and has served in
numerous technical management positions.
Mr. Burger has been an Executive Vice President of EDS since the
consummation of the Split-Off and prior to that time had been a Vice President
since October 1992. Mr. Burger has responsibility for EDS' technical
infrastructure and internal information functions as well as for EDS' business
units serving customers in the communications industry. Prior to assuming his
current responsibilities, Mr. Burger was responsible for EDS' business units
serving customers in the manufacturing and commercial services industries.
Mr. Castle has been an Executive Vice President of EDS since the
consummation of the Split-Off and prior to that time had been a Senior Vice
President since October 1988. He has oversight responsibility for EDS'
government affairs, communications and public relations groups and EDS' legal
department. Prior to joining EDS in 1988, Mr. Castle was a partner in the
Dallas law firm of Hughes & Luce.
Mr. Chiapparone has been an Executive Vice President of EDS since the
consummation of the Split-Off and prior to that time had been a Senior Vice
President since April 1986. He has responsibility for business units serving
customers in the manufacturing industry (including General Motors) and the
financial services and travel and transportation industries and for EDS'
Asia/Pacific operations. Mr. Chiapparone joined EDS in 1966 and has served in
numerous management capacities. Mr. Chiapparone is a director of St. Jude
Medical, Inc.
Mr. Grant has been Chief Financial Officer of EDS since December 1990 and an
Executive Vice President since the consummation of the Split-Off. Prior to
that time he had been a Senior Vice President since February 1992. Mr. Grant
has oversight responsibility for EDS' administration and corporate finance
groups. Prior to joining EDS in December 1990, Mr. Grant served as executive
vice president and chief systems officer for
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American General Corporation from 1989 to 1990 and as chairman of the board
and chief executive officer of Texas American Bancshares Inc. from 1986 to
1989. Mr. Grant is a director of Heritage Media Corporation, American Eagle
Group, Inc. and NorAm Energy Corp.
Mr. Linderman has been an Executive Vice President of EDS since the
consummation of the Split-Off and prior to that time had been a Senior Vice
President since April 1986. He has responsibility for EDS' global employee
development units, including the technical and leadership development, sales
leadership, quality and industry leadership and global diversity groups. Mr.
Linderman joined EDS in 1970 and has served in numerous management positions.
Mr. Reeves has been an Executive Vice President since the consummation of
the Split-Off and prior to that time had been a Senior Vice President since
February 1987. Mr. Reeves has responsibility for EDS' business units serving
customers in government and in the energy and healthcare industries as well as
EDS' European, Canadian, Mexican and Central and South American operations.
Mr. Reeves joined EDS in 1967, and has held numerous technical and management
positions.
Mr. Baker has been a director of EDS since the consummation of the Split-
Off. Mr. Baker has been a Senior Partner of Baker & Botts, L.L.P. since March
1993 and a Senior Counselor of The Carlyle Group, a merchant banking firm,
since 1993. He is a director of Houston Industries Incorporated, Princeton
University and Rice University, as well as the Howard Hughes Medical
Institute. Mr. Baker served as Senior Counselor to the President of the United
States and White House Chief of Staff from August 1992 to January 1993, as
United States Secretary of State from January 1989 to August 1992, as United
States Secretary of the Treasury from 1985 to 1988, and as White House Chief
of Staff from 1981 to 1985.
Mr. Cheney has been a director of EDS since the consummation of the Split-
Off. Mr. Cheney has been the President and Chief Executive Officer of
Halliburton Company since October 1995 and its Chairman of the Board since
January 1996. Mr. Cheney was a Senior Fellow at the American Enterprise
Institute, a policy think tank, from January 1993 to October 1995. Mr. Cheney
served as United States Secretary of Defense from January 1989 to January
1993. Mr. Cheney is a director of Halliburton Company, Union Pacific
Corporation and The Procter & Gamble Company.
Mr. Groves has been a director of EDS since the consummation of the Split-
Off. Mr. Groves retired as Chairman and Chief Executive Officer of Ernst &
Young L.L.P. in September 1994, which position he had held since October 1977,
and has served as Chairman of Legg Mason Merchant Banking, Inc. since March
1995. Mr. Groves is a director of Consolidated Natural Gas Company, Marsh &
McLennan Companies, Inc., RJR Nabisco Holdings Corp. and RJR Nabisco, Inc.
Mr. Hunt has been a director of EDS since the consummation of the Split-Off.
Mr. Hunt has been the Chairman of the Board, President and Chief Executive
Officer of Hunt Consolidated Inc. and the Chairman of the Board and Chief
Executive Officer of Hunt Oil Company for more than five years. Mr. Hunt is a
director of Dresser Industries, Inc., Pepsico, Inc., and Ergo Science
Corporation.
Mr. Kidder has been a director of EDS since the consummation of the Split-
Off. Mr. Kidder has been Chairman and Chief Executive Officer of Borden, Inc.
since January 1995. Mr. Kidder was Chairman and Chief Executive Officer of
Duracell International, Inc. from August 1991 through October 1994 and its
President and Chief Executive Officer from June 1988 to August 1991. Mr.
Kidder is a director of Borden, Inc., Duracell International, Inc., and Dean
Witter, Discover & Co.
Dr. Rodin has been a director of EDS since the consummation of the Split-
Off. Dr. Rodin has been President of the University of Pennsylvania, as well
as a professor of psychology and of medicine and psychiatry at the university,
since 1994. Dr. Rodin was Provost of Yale University from 1992 to 1994 and
held various professorial and other positions at Yale from 1972 to 1994,
including Dean of the Graduate School of Arts and Sciences and Chair of the
Department of Psychology. Dr. Rodin is a director of AETNA Life and Casualty
Company and Air Products and Chemicals, Inc.
Mr. Sosa has been a director of EDS since the consummation of the Split-Off.
Since October 1995, Mr. Sosa has been an Executive Vice President of Amoco
Corporation, heading its chemicals sector. For greater than five years prior
to that time, Mr. Sosa was with The Dow Chemical Company, most recently
serving as a Senior Vice President and a director, as well as President of Dow
North America.
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BACKGROUND OF THE OFFERINGS
On March 13, 1995, General Motors contributed to the Hourly Plan
approximately 173 million shares of Class E Common Stock. In connection with
making such contribution, General Motors and the Pension Benefit Guaranty
Corporation (the "PBGC") entered into an agreement under which the PBGC agreed
to release EDS and its subsidiaries from all liabilities or obligations, if
any, arising under Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), with respect to GM's U.S. pension plans if a
transaction such as the Split-Off were to occur.
All of the above-referenced shares of Class E Common Stock contributed by
General Motors to the Hourly Plan, together with an additional approximately
16.9 million shares of Class E Common Stock then held by the Hourly Plan,
became subject to the restrictions on transfer in and other terms of a
Registration Rights Agreement dated March 12, 1995 between General Motors and
the Hourly Plan Trustee (including the exhibits thereto, the "Registration
Rights Agreement"). Pursuant to the Registration Rights Agreement, on June 12,
1995, General Motors registered under the Securities Act an underwritten
public offering of 42,550,000 shares (including an over-allotment option of
5,550,000 shares, which was exercised in full) of Class E Common Stock owned
by the Hourly Plan Special Trust. The Hourly Plan Special Trust sold all of
such shares to the public.
Upon consummation of the Split-Off, EDS succeeded to all of the rights and
obligations of General Motors under the Registration Rights Agreement (with
the exception of certain indemnification provisions relating to prior
offerings under the Registration Rights Agreement) and all of the provisions
of the Registration Rights Agreement applicable to the Class E Common Stock
held by the GM Hourly Plan Special Trust became applicable to the Common Stock
into which such Class E Common Stock was converted.
Under the Registration Rights Agreement, the Hourly Plan Special Trust may
only transfer such shares of Common Stock in certain types of transactions and
under certain circumstances, including "demand transfers" (which are defined
under the Registration Rights Agreement to include public offerings and
negotiated transactions, whether registered or not) and certain transfers to
employee benefit plans maintained by General Motors and its subsidiaries. The
Registration Rights Agreement provides that any underwritten public offering
to be effected thereunder by the Hourly Plan Special Trust must be reasonably
designed to achieve a broad public distribution of the securities being
offered. Subject to certain limitations, EDS may postpone the filing or
effectiveness of any registration statement requested by the Hourly Plan
Special Trust or the making of any demand transfer at any time EDS determines
that such action would interfere with any proposal or plan by EDS to engage in
any material acquisition, merger, tender offer, securities offering or other
material transaction or would require EDS to make a public disclosure of
previously non-public material information. The Registration Rights Agreement
prohibits the Hourly Plan Special Trust from making a negotiated transfer (i)
of more than 2% of the shares of Common Stock then outstanding to any person
and (ii) to any person who is then required to file or has filed a Schedule
13D under the Exchange Act with respect to the Common Stock. The Hourly Plan
Special Trust is permitted two demand transfers in any twelve-month period.
Restrictions on the Hourly Plan Special Trust's transfer of shares of Common
Stock under the Registration Rights Agreement will terminate when the Hourly
Plan Special Trust owns less than 2% of the shares of Common Stock then
outstanding.
The Registration Rights Agreement also imposes certain restrictions on the
ability of the Hourly Plan Special Trust to tender its shares of Common Stock
in a third-party tender offer until such Trust owns 7.5% or less of the Common
Stock on a fully diluted basis (after which time it may freely tender into any
tender offer for Common Stock). Until such time, in the event of a tender
offer for Common Stock, the right of the Hourly Plan Special Trust to tender
its shares of Common Stock will depend on whether EDS has in effect a
stockholders rights plan (such as the Rights Agreement, as described under
"Description of Capital Stock"). In general, the Hourly Plan Special Trust may
tender its shares in a tender offer if a stockholders rights plan is in effect
during the pendency of such tender offer, but the rights thereunder have been
redeemed, revoked or invalidated by the EDS Board, or by a final and non-
appealable court order, in connection with such tender offer. The Hourly Plan
Special Trust will also be able to tender its shares in a tender offer if both
(i) a stockholders rights plan is in
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effect during the pendency of such tender offer, but the rights thereunder
have been redeemed, revoked or invalidated for any other reason, and (ii)
either the EDS Board, or a majority of EDS' Independent Directors (as defined
in the Registration Rights Agreement), has not recommended rejection of the
tender offer, or there are then fewer than two Independent Directors on the
EDS Board. Additionally, if (i) a stockholders rights plan is in effect during
the pendency of a tender offer, but the rights thereunder have been redeemed,
revoked or invalidated for any reason other than that described above and
other than as a result of a proposal publicly or privately initiated,
recommended, endorsed, supported or voted for by the Hourly Plan Special
Trust, and (ii) the Hourly Plan Special Trust makes a good faith determination
that the tender offer will likely result in the purchase of shares
representing more than 50% of EDS' total voting power (without giving effect
to any securities tendered or to be tendered by the Hourly Plan Special
Trust), then the Hourly Plan Special Trust may tender shares in such tender
offer, unless EDS gives notice to the Hourly Plan Special Trust. If EDS gives
any such notice and the tender offer then results in the purchase of shares
constituting more than 50% of the total voting power of EDS, then the Hourly
Plan Special Trust will have the option to cause EDS to purchase the number of
shares that would have been purchased from the Hourly Plan Special Trust in
the tender offer if the Hourly Plan Special Trust had been permitted to
tender, at the price per share, payable in cash, offered in the tender offer.
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SELLING STOCKHOLDER
The Hourly Plan Special Trust is the owner of all of the shares of Common
Stock offered hereby. The Finance Committee of the GM Board is the named
fiduciary of the Hourly Plan pursuant to the provisions of ERISA, and a
portion of the assets of the Hourly Plan (not including the shares of Common
Stock owned by the Hourly Plan Special Trust) is subject to management by or
under the supervision of General Motors Investment Management Corporation, a
wholly owned subsidiary of General Motors.
Prior to General Motors' contribution of approximately 173 million shares of
Class E Common Stock to the Hourly Plan Special Trust as described under
"Background of the Offerings," the Hourly Plan Trustee was appointed to have
ongoing responsibility, as a fiduciary within the meaning of ERISA, to manage
the shares of Class E Common Stock owned by the Hourly Plan Special Trust. The
Hourly Plan Trustee retained Wasserstein Perella & Co., Inc. (the "Financial
Advisor") to serve as its investment advisor regarding the management and
disposition of such shares of Class E Common Stock, and the Financial Advisor
continues to serve in such capacity after the Split-Off with respect to the
Common Stock.
The Hourly Plan Trustee has responsibility to manage prudently the shares of
Common Stock held by the Hourly Plan Special Trust in a manner consistent with
maximizing the value of its investment in Common Stock and in accordance with
its determination of the extent to which it may prudently continue to hold
such shares consistent with the diversification and related fiduciary
requirements of ERISA. In accordance with the foregoing and in a manner
consistent with the limitations and terms of the Registration Rights
Agreement, the Hourly Plan Trustee has the authority and discretion to cause
the Hourly Plan Trust to hold such shares or sell all or any portion thereof
from time to time as it may deem appropriate, and to direct the voting of and
the exercise of all other rights relating to such shares. The Hourly Plan
Trustee intends to manage the disposition of such shares in a manner
consistent with maintaining an orderly market for the Common Stock. The
Department of Labor exemption obtained at the time of the contribution by
General Motors of the shares of Class E Common Stock to the Hourly Plan
Special Trust as described above does not impose any time constraints on the
Hourly Plan Special Trust for any dispositions of such shares. The
compensation of the Hourly Plan Trustee and the Financial Advisor is not
contingent in any way on the sale or continued holding of shares of Common
Stock by the Hourly Plan Special Trust.
The Hourly Plan Special Trust agreed, pursuant to a Transfer Agreement dated
as of March 12, 1995 (the "Transfer Agreement") between General Motors and the
Hourly Plan Trustee, that until generally June 7, 1998, it will vote against
any merger of EDS that would not be a tax-free reorganization under Section
368 of the Code. In the Transfer Agreement, the Hourly Plan Special Trust
additionally agreed to certain transfer restrictions intended to preserve the
tax-free status of the Split-Off. The Hourly Plan Special Trust has agreed
that it will not (i) prior to June 7, 1997, make any transfer of Common Stock
to (a) any person or group of related persons if such shares of Common Stock
constitute more than 2% of the Common Stock then outstanding or (b) any person
or group of related persons if such person or group is then, or as a result of
such transfer will become, to the knowledge of the Hourly Plan Special Trust
after reasonable inquiry, the beneficial owner of 5% of the Common Stock then
outstanding; or (ii) prior to December 9, 1996, make any transfer of Common
Stock to any person or group of related persons if, as a result of such
transfer, such person or group would have acquired shares of Common Stock that
(when aggregated with all other shares so acquired at any time by such person
and counted on a fully diluted basis) would constitute 40% or more of the
total number of shares of Common Stock then outstanding. Such restrictions are
generally inapplicable to transfers pursuant to an underwritten public
offering reasonably designed to achieve a broad public distribution of the
securities being offered; provided that the Hourly Plan causes the lead
underwriter and co-managers of such offering to agree to use their reasonable
best efforts (i) to effect a broad public distribution of such securities and
(ii) not to make any transfer to any one person or group of related persons if
(a) such transfer is of more than 2% of the Common Stock then outstanding or
(b) such person or group of related persons is the beneficial owner of 5% or
more of the Common Stock or, at any time prior to such transfer, has been
designated by General Motors as the beneficial owner of 2% or more of the
total voting power or total value of the Common Stock then outstanding. In
addition, the Hourly Plan Special Trust has agreed that it will not, prior to
June 7, 1998, make any transfer of Common Stock if, after giving effect
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to such transfer, the number of shares of Common Stock that would be owned
directly by the Hourly Plan Special Trust would constitute less than 50% of
the number of shares of Common Stock (or Class E Common Stock) owned directly
by the Hourly Plan Special Trust at the time of the initial public
announcement by GM that it intended to effect a Split-Off. The Transfer
Agreement could have the effect of delaying, deterring or preventing a change
in control of EDS. The Separation Agreement provides that General Motors will
not (i) amend or modify the Transfer Agreement in any material respect or (ii)
waive the benefit of any material term of the Transfer Agreement, without the
prior written consent of EDS. See "Relationship Between General Motors and
EDS--Post Split-Off Arrangements--Separation Agreement."
On June 21, 1996, the Hourly Plan Special Trust had beneficial ownership of
approximately 149.5 million shares of Common Stock, representing approximately
31% of the Common Stock outstanding. Immediately following the consummation of
the Offerings, the Hourly Plan Special Trust will have beneficial ownership of
approximately 119.5 million shares (or, if the Underwriters' over-allotment
option is exercised in full, approximately 115.0 million shares) of Common
Stock. Such shares will represent approximately 24.6% (or, if the
Underwriters' over-allotment option is exercised in full, 23.7%) of the Common
Stock outstanding.
The Selling Stockholder has agreed not to offer, sell or otherwise dispose
of any shares of Common Stock or any securities convertible into or
exchangeable for Common Stock (other than transfers to or for the benefit of
employee benefit plans of EDS or any of its affiliates) for 90 days following
the date of this Prospectus without the prior written consent of the Global
Coordinators on behalf of the Representatives (as hereinafter defined). See
"Underwriting."
EDS will not receive any of the proceeds of the sale of any of the shares of
Common Stock offered hereby. All of such proceeds will be for the account of
the Selling Stockholder and for the benefit of employees and retirees of GM
and their beneficiaries participating in the Hourly Plan.
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DESCRIPTION OF CAPITAL STOCK
Under the Certificate of Incorporation, the authorized capital stock of EDS
is 2,200,000,000 shares, of which 2,000,000,000 shares are Common Stock, par
value $0.01 per share, and 200,000,000 shares are preferred stock, par value
$0.01 per share (the "Preferred Stock").
The following descriptions are summaries and do not purport to be complete.
Reference is made to the more detailed provisions of, and such descriptions
are qualified in their entirety by reference to, the Certificate of
Incorporation and the Bylaws, copies of which are filed with the Commission.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share with respect to
each matter submitted to a vote of stockholders of EDS, subject to voting
rights that may be established for shares of Preferred Stock, if any. Except
as may be provided in connection with any Preferred Stock or as may otherwise
be required by law or the Certificate of Incorporation, the Common Stock is
the only capital stock of EDS entitled to vote in the election of directors.
The Common Stock does not have cumulative voting rights.
Subject to the prior rights of holders of Preferred Stock, if any, holders
of Common Stock are entitled to receive such dividends as may be lawfully
declared from time to time by the EDS Board. Upon any liquidation, dissolution
or winding up of EDS, whether voluntary or involuntary, holders of Common
Stock will be entitled to receive such assets as are available for
distribution to stockholders after there shall have been paid or set apart for
payment the full amounts necessary to satisfy any preferential or
participating rights to which the holders of each outstanding series of
Preferred Stock are entitled by the express terms of such series.
The outstanding shares of Common Stock are fully paid and nonassessable. The
Common Stock does not have any preemptive, subscription or conversion rights.
Additional shares of authorized Common Stock may be issued, as authorized by
the EDS Board from time to time, without stockholder approval, except as may
be required by applicable stock exchange requirements.
PREFERRED STOCK
The EDS Board is empowered, without approval of the stockholders, to cause
shares of Preferred Stock to be issued in one or more series, with the numbers
of shares of each series and the powers, preferences, rights and limitations
of each series to be determined by it. Among the specific matters that may be
determined by the EDS Board are the rate of dividends, if any; rights and
terms of conversion or exchange, if any; the terms of redemption, if any; the
amount payable in the event of any voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets, dissolution or winding
up of the affairs of EDS; the terms of a sinking or purchase fund, if any; and
voting rights, if any. The Series A Preferred Stock described under "Rights
Agreement" below is a series of Preferred Stock that has been authorized by
the EDS Board.
Although EDS has no current plans to issue Preferred Stock, the issuance of
shares of Preferred Stock, or the issuance of rights to purchase such shares,
could be used to discourage an unsolicited acquisition proposal. For example,
a business combination could be impeded by the issuance of a series of
Preferred Stock containing class voting rights that would enable the holder or
holders of such series to block any such transaction. Alternatively, a
business combination could be facilitated by the issuance of a series of
Preferred Stock having sufficient voting rights to provide a required
percentage vote of the stockholders. In addition, under certain circumstances,
the issuance of Preferred Stock could adversely affect the voting power of the
holders of the Common Stock. Although the EDS Board is required to make any
determination to issue any such stock based on its judgment as to the best
interests of the stockholders of EDS, the EDS Board could act in a manner that
would discourage an acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best interests or
in which stockholders might receive a premium for their stock over
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prevailing market prices of such stock. The EDS Board does not at present
intend to seek stockholder approval prior to any issuance of currently
authorized stock, unless otherwise required by law or applicable stock
exchange requirements.
RIGHTS AGREEMENT
There is attached to each share of Common Stock offered hereby one right (a
"Right") to purchase from EDS a unit consisting of one one-hundredth of a
share (a "Unit") of Series A Junior Participating Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock"), at a purchase price of $200
per Unit, subject to adjustment in certain events (the "Purchase Price"). The
following description of the Rights is a summary and does not purport to be
complete. Reference is made to the more detailed provisions of, and such
description is qualified in its entirety by reference to, the Rights
Agreement, dated as of March 12, 1996 (the "Rights Agreement"), by and between
EDS and The Bank of New York, as Rights Agent, a copy of which is filed with
the Commission.
Initially, the Rights will be attached to all certificates representing
outstanding shares of Common Stock, including the shares of Common Stock sold
pursuant to this Prospectus, and no separate certificates for the Rights
("Rights Certificates") will be distributed. The Rights will separate from the
Common Stock and a "Distribution Date" will occur upon the earlier of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the date of the announcement being the "Stock Acquisition
Date"), or (ii) ten business days (or such later date as may be determined by
the EDS Board before the Distribution Date occurs) following the commencement
of a tender offer or exchange offer that would result in a person's becoming
an Acquiring Person. The GM Hourly Plan, and any trustee of or other fiduciary
with respect to such plan (when acting in such capacity), may become an
Acquiring Person if it purchases or otherwise becomes the beneficial owner of
additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock unless the Hourly Plan is not then the
beneficial owner of 10% or more of the then outstanding shares of Common
Stock. Until the Distribution Date, (a) the Rights will be evidenced by the
certificates representing Common Stock and will be transferred with and only
with such certificates, (b) certificates representing Common Stock will
contain a notation incorporating the Rights Agreement by reference and (c) the
surrender for transfer of any certificate for Common Stock will also
constitute the transfer of the Rights associated with the stock represented by
such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on March 12, 2006, unless earlier redeemed or
exchanged by EDS as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of Common Stock as of the close of business on
the Distribution Date and, from and after the Distribution Date, the separate
Rights Certificates alone will represent the Rights. All shares of Common
Stock issued prior to the Distribution Date will be issued with Rights. Shares
of Common Stock issued after the Distribution Date in connection with certain
employee benefit plans or upon conversion of certain securities will be issued
with Rights. Except as otherwise determined by the EDS Board, no other shares
of Common Stock issued after the Distribution Date will be issued with Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that a majority of the directors of EDS
who are not officers or employees of EDS and who are not representatives,
nominees, affiliates or associates of the Acquiring Person determines to be
fair to and otherwise in the best interests of EDS and its stockholders (a
"Permitted Offer")), each holder of a Right will thereafter have the right to
receive, upon exercise of such Right, a number of shares of Common Stock (or,
in certain circumstances, cash, property or other securities of EDS) having a
Current Market Price (as defined in the Rights Agreement) equal to two times
the Purchase Price of the Right. Notwithstanding the foregoing, following the
occurrence of any Flip-In Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned
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by any Acquiring Person (or by certain related parties) will be null and void
in the circumstances set forth in the Rights Agreement. However, the Rights
are not exercisable following the occurrence of any Flip-In Event until such
time as the Rights are no longer redeemable by EDS as set forth below.
In the event (a "Flip-Over Event") that, at any time on or after the Stock
Acquisition Date, (i) EDS is acquired in a merger or other business
combination transaction (other than certain mergers that follow a Permitted
Offer), or (ii) 50% or more of EDS' assets or earning power is sold or
transferred, each holder of a Right (except Rights that previously have become
void as set forth above) shall thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring company having a
Current Market Price equal to two times the Purchase Price of the Right. Flip-
In Events and Flip-Over Events are collectively referred to as "Triggering
Events."
The Purchase Price payable, and the number of Units of Series A Preferred
Stock or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A Preferred Stock, (ii) if holders of the
Series A Preferred Stock are granted certain rights or warrants to subscribe
for Series A Preferred Stock or certain convertible securities at less than
the current market price of the Series A Preferred Stock, or (iii) upon the
distribution to holders of the Series A Preferred Stock of evidences of
indebtedness, cash or assets (excluding regular quarterly cash dividends) or
of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Series A Preferred Stock
on the last trading date prior to the date of exercise. Pursuant to the Rights
Agreement, EDS reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Series A Preferred Stock will be
issued.
At any time until ten days following the Stock Acquisition Date, EDS may
redeem the Rights in whole, but not in part, at a price of $.01 per Right,
payable, at the option of EDS, in cash, shares of Common Stock or such other
consideration as the EDS Board may determine. Immediately upon the
effectiveness of the action of the EDS Board ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a person's
becoming the beneficial owner of 50% or more or the shares of Common Stock
then outstanding, EDS may, at its option, exchange the Rights (other than
Rights owned by an Acquiring Person or an affiliate or an associate of an
Acquiring Person, which will have become void), in whole or in part, at an
exchange ratio of one share of Common Stock and/or other equity securities
deemed to have the same value as one share of Common Stock, per Right, subject
to adjustment.
Other than certain provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by
the EDS Board prior to the Distribution Date. Thereafter, the provisions of
the Rights Agreement may be amended by the EDS Board in order to cure any
ambiguity, defect or inconsistency, to make changes that do not materially
adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to lengthen the time
period governing redemption shall be made at such time as the Rights are not
redeemable. Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of EDS, including, without limitation, the right to
vote or to receive dividends.
Any shares of Series A Preferred Stock that may be issued upon exercise of
the Rights will be entitled to receive, when, as and if declared, preferential
quarterly dividends in cash in an amount per share equal to the greater of
$1.00 per quarter and 100 times the aggregate per share cash dividend paid on
the Common Stock, and noncash dividends payable in kind in an amount per share
equal to 100 times any noncash dividend or other
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distribution declared on the Common Stock. In the event of the liquidation,
dissolution or winding up of EDS, holders of any such Series A Preferred Stock
will be entitled to receive (after satisfaction of or provision for
liabilities and any preferential amounts payable with respect to any Preferred
Stock ranking senior to the Series A Preferred Stock) liquidation payments per
share in an amount equal to accrued but unpaid dividends plus the greater of
$100.00 or 100 times the per share amount distributed to holders of Common
Stock. In the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, holders of shares of Series A Preferred
Stock will be entitled to receive a per share amount and type of consideration
equal to 100 times the per share amount received by holders of Common Stock.
Any Series A Preferred Stock will be redeemable at the option of EDS in whole
at any time or in part from time to time, for cash in an amount per share
equal to 100 times the market price of the Common Stock (determined on the
basis of an average closing price over a specified ten trading day period).
Holders of Series A Preferred Stock will have 100 votes per share and, except
as otherwise provided in the Certificate of Incorporation or required by law,
shall vote together with holders of Common Stock as a single class. The rights
of the Series A Preferred Stock as to dividends, liquidation and voting are
protected by anti-dilution provisions. Whenever dividend payments on the
Series A Preferred Stock are in arrears, EDS will not (i) purchase or redeem
any shares of Series A Preferred Stock or shares ranking on a parity with the
Series A Preferred Stock except in accordance with a purchase offer to all
holders, (ii) declare or pay dividends on or purchase or redeem any shares of
stock ranking junior to the Series A Preferred Stock or (iii) declare or pay
dividends on or purchase or redeem any shares of stock ranking on a parity
with the Series A Preferred Stock except dividends paid ratably on the Series
A Preferred Stock and all such parity stock and except purchases or
redemptions of such parity stock in exchange for junior stock. If dividend
payments on any Series A Preferred Stock are in arrears for six quarters, the
holders of the Series A Preferred Stock (together with holders of any other
Preferred Stock with similar rights) will have the right to elect two
directors of EDS.
The Rights will have certain antitakeover effects. The Rights will cause
substantial dilution to any person or group that attempts to acquire EDS
without the approval of the EDS Board. As a result, the overall effect of the
Rights may be to render more difficult or discourage any attempt to acquire
EDS even if such acquisition may be favorable to the interests of EDS'
stockholders. Because the EDS Board can redeem the Rights or approve a
Permitted Offer, the Rights should not interfere with a merger or other
business combination approved by the EDS Board. The Rights have been
distributed to protect EDS' stockholders from coercive or abusive takeover
tactics and to give the EDS Board more negotiating leverage in dealing with
prospective acquirors.
LIMITATION ON DIRECTORS' LIABILITY
The Certificate of Incorporation provides, as authorized by Section
102(b)(7) of the DGCL, that a director of EDS will not be personally liable to
EDS or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to EDS or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
The inclusion of this provision in the Certificate of Incorporation may have
the effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from
bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefited EDS and
its stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
EDS is a Delaware corporation and subject to Section 203 of the DGCL.
Generally, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the time such stockholder became an interested
stockholder, unless (i) prior to such time, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the
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transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, or (iii)
at or subsequent to such time, the business combination is approved by the
board of directors and authorized by the affirmative vote of at least 66 2/3%
of the outstanding voting stock that is not owned by the interested
stockholder. A "business combination" includes (a) any merger or consolidation
of the corporation with the interested stockholder, (b) any sale, lease,
exchange or other disposition, except proportionately as a stockholder of such
corporation, to or with the interested stockholder of assets of the
corporation having an aggregate market value equal to 10% or more of either
the aggregate market value of all the assets of the corporation or the
aggregate market value of all the outstanding stock of the corporation, (c)
certain transactions resulting in the issuance or transfer by the corporation
of stock of the corporation to the interested stockholder, (d) certain
transactions involving the corporation which have the effect of increasing the
proportionate share of the stock of any class or series of the corporation
which is owned by the interested stockholder or (e) certain transactions in
which the interested stockholder receives financial benefits provided by the
corporation. An "interested stockholder" generally is (i) any person that owns
15% or more of the outstanding voting stock of the corporation, (ii) any
person that is an affiliate or associate of the corporation and was the owner
of 15% or more of the outstanding voting stock of the corporation at any time
within the three-year period prior to the date on which it is sought to be
determined whether such person is an interested stockholder and (iii) the
affiliates or associates of any such person. The EDS Board has approved the
distribution of EDS Common Stock to the GM Hourly Plan Special Trust pursuant
to the Split-Off for purposes of Section 203 so long as the GM Hourly Plan
Special Trust does not purchase or otherwise become the owner of additional
shares of capital stock constituting 1% or more of the aggregate voting power
of the outstanding capital stock of EDS at any time that it is the owner of
15% or more of the outstanding voting stock of EDS. The EDS Board further
provided that such approval would not apply to any transferee of EDS capital
stock from the GM Hourly Plan Special Trust.
LIMITATIONS ON CHANGES IN CONTROL
The Bylaws contain provisions requiring that advance notice be delivered to
EDS of any business to be brought by a stockholder before an annual meeting of
stockholders and providing for certain procedures to be followed by
stockholders in nominating persons for election to the EDS Board. Generally,
such advance notice provisions provide that the stockholder must give written
notice to the Secretary of EDS not less than 90 days nor more than 270 days
before the scheduled date of the annual meeting of stockholders of EDS. The
notice must set forth specific information regarding such stockholder and such
business or director nominee, as described in the Bylaws. Such requirement is
in addition to those set forth in the regulations adopted by the Commission
under the Exchange Act. The 1997 Annual Meeting of Stockholders will be held
on June 5, 1997. In addition to compliance with other applicable legal
requirements, proposals of stockholders to be presented at the 1997 Annual
Meeting should be received at EDS' principal executive offices not later than
December 10, 1996.
The Certificate of Incorporation provides that, except as may be provided by
the Certificate of Incorporation or in the resolution or resolutions providing
for the issuance of any series of Preferred Stock, the number of directors
shall not be fewer than three nor more than fifteen and provides for a
classified Board of Directors, consisting of three classes as nearly equal in
size as practicable. Each class holds office until the third annual
stockholders' meeting for election of directors following the most recent
election of such class, except that the initial terms of the three classes
expire in 1997, 1998 and 1999, respectively. See "Board of Directors and
Management." A director of EDS may be removed only for cause.
The Certificate of Incorporation provides that stockholders may not act by
written consent in lieu of a meeting, unless such written consent is
unanimous. Special meetings of the stockholders may be called by the Chairman
of the EDS Board or by the EDS Board, but may not be called by stockholders.
The Bylaws may be amended by the EDS Board or by the affirmative vote of the
holders of at least 66 2/3% of the aggregate voting power of the outstanding
capital stock of EDS entitled to vote in the election of directors.
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The Certificate of Incorporation also contains a "fair price" provision that
applies to certain business combination transactions involving any person or
group that beneficially owns at least 10% of the aggregate voting power of the
outstanding capital stock of EDS (a "Related Person"). The "fair price"
provision requires the affirmative vote of the holders of (i) at least 80% of
the voting stock of EDS and (ii) at least 66 2/3% of the voting stock of EDS
not beneficially owned by the Related Person, to approve certain transactions
between the Related Person and EDS or its subsidiaries, including any merger,
consolidation or share exchange, any sale, lease, exchange, pledge or other
disposition of assets of EDS or its subsidiaries having a fair market value of
at least $10 million, any transfer or issuance of securities of EDS or any of
its subsidiaries, any adoption of a plan or proposal by EDS of voluntary
liquidation or dissolution of EDS, certain reclassifications of securities or
recapitalizations of EDS or certain other transactions, in each case involving
the Related Person. This voting requirement will not apply to certain
transactions, including (a) any transaction in which the consideration to be
received by the holders of each class of capital stock of EDS is (x) the same
in form and amount as that paid in a tender offer in which the Related Person
acquired at least 50% of the outstanding shares of such class and which was
consummated not more than one year earlier or (y) not less in amount than the
highest per share price paid by the Related Person for shares of such class or
(b) any transaction approved by EDS' continuing directors (as defined in the
Certificate of Incorporation). The GM Hourly Plan, and any trustee of or other
fiduciary with respect to such plan (when acting in such capacity), may become
a Related Person if it purchases or otherwise becomes the beneficial owner of
additional shares of capital stock constituting 1% or more of the aggregate
voting power of the outstanding capital stock of EDS unless the GM Hourly Plan
is not then the beneficial owner of 10% or more of the aggregate voting power
of the outstanding capital stock of EDS. This provision could have the effect
of delaying or preventing a change in control of EDS in a transaction or
series of transactions that did not satisfy the "fair price" criteria.
The provisions of the Certificate of Incorporation relating to the EDS
Board, the limitation of actions taken by written consent, the calling of
special meetings, the amendment of the Bylaws and the "fair price" provision
may be amended only by the affirmative vote of the holders of at least 80% of
the aggregate voting power of the outstanding capital stock of EDS entitled to
vote for the election of directors.
The foregoing provisions of the Certificate of Incorporation and the Bylaws,
together with the Rights Agreement and the provisions of Section 203 of the
DGCL, could have the effect of delaying, deferring or preventing a change in
control of EDS or the removal of existing management, of deterring potential
acquirors from making an offer to stockholders of EDS and of limiting any
opportunity to realize premiums over prevailing market prices for Common Stock
in connection therewith. For a description of certain other factors that could
limit such changes in control and offers, see "Risk Factors--Certain
Limitations on Changes in Control of the Company." This could be the case
notwithstanding that a majority of EDS' stockholders might benefit from such a
change in control or offer.
TRANSFER AGENT AND REGISTRAR
The Bank of New York serves as the Transfer Agent and Registrar for the
Common Stock.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
This is a general discussion of certain U.S. federal income and estate tax
consequences of the purchase, ownership and disposition of Common Stock by a
"Non-U.S. Holder." A "Non-U.S. Holder" is a person or entity that, for U.S.
federal income tax purposes, is a nonresident alien individual, a foreign
corporation, a foreign partnership, or a nonresident fiduciary of a foreign
estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which may be changed either retroactively or prospectively. This discussion
does not address all aspects of U.S. federal income and estate taxation that
may be relevant to Non-U.S. Holders under their particular circumstances (such
as, for example, the direct or indirect ownership of more than 5% of the
outstanding Common Stock) and does not address any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
The following summary does not constitute, and should not be considered as,
legal or tax advice to prospective investors. Prospective holders should
consult their tax advisers about the particular tax consequences to them of
holding and disposing of Common Stock.
DIVIDENDS
Subject to the discussion below, dividends paid to a Non-U.S. Holder of
Common Stock generally will be subject to the withholding of U.S. income tax
at a rate of 30% of the amount of the dividend or such lower rate as may be
specified by an applicable income tax treaty. For purposes of determining
whether tax is to be withheld at a 30% rate or at a reduced rate as specified
by an income tax treaty, EDS ordinarily will presume, pursuant to currently
applicable law, that dividends paid to an address in a foreign country are
paid to a resident of such country absent actual knowledge that such
presumption is not warranted. However, under proposed U.S. Treasury
regulations which have not yet been put into effect, the benefits of a tax
treaty may be claimed by a Non-U.S. Holder of Common Stock only upon filing
prescribed forms that must include a taxpayer identification number obtained
from the Internal Revenue Service and may be required to include a
certification of residence in the treaty country by a competent authority of
the treaty country.
If a Non-U.S. Holder files an Internal Revenue Service Form 4224 with EDS,
no withholding tax will be withheld on dividends that are effectively
connected with the Non-U.S. Holder's conduct of a trade or business within the
United States. Instead, the effectively connected dividends will be subject to
regular U.S. income tax in the same manner as if the Non-U.S. Holder were a
U.S. resident. Effectively connected dividends received by a non-U.S.
corporation may be subject to an additional "branch profits tax" at a rate of
30% (or such lower rate as may be specified by an applicable treaty) of its
effectively connected earnings and profits, subject to certain adjustments.
Generally, EDS must report to the U.S. Internal Revenue Service the amount
of dividends paid, the name and address of the recipient, and the amount, if
any, of tax withheld. A similar report is sent to the Non-U.S. Holder.
Pursuant to tax treaties or other agreements, the U.S. Internal Revenue
Service may make its reports available to tax authorities in the recipient's
country of residence. U.S. backup withholding tax generally will not apply to
dividends paid to Non-U.S. Holders at a residence outside the United States
unless the payor has knowledge that the payee is a United States person.
GAIN ON DISPOSITION
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of such
holder in the United States (ii) in the case of certain Non-U.S. Holders who
are nonresident alien individuals and hold Common Stock as a capital asset,
such individuals are present in the United States for 183 or more days in the
taxable year of the disposition, (iii) such holder is subject to tax pursuant
to the provision of
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the Code applicable to certain United States expatriates or (iv) EDS is or has
been a "United States real property holding corporation" for United States
federal income tax purposes (which EDS does not believe it is or is likely to
become) and the Non-U.S. Holder holds or has held, directly or indirectly, at
any time during the five year period ending on the date of the disposition,
more than five percent of the Common Stock.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
If the proceeds of a disposition of Common Stock are paid over by or through
a U.S. office of a broker, the payment is subject to information reporting and
to backup withholding at a rate of 31% unless the disposing holder certifies
as to his name, address, and non-U.S. status under penalty of perjury or
otherwise establishes an exemption. Generally, U.S. information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
payment is made outside the United States through a non-U.S. office of a non-
U.S. broker. However, U.S. information reporting requirements (but not back-up
withholding) will apply to a payment of disposition proceeds outside the
United States if (A) the payment is made through an office outside the United
States of a broker that is either (i) a U.S. person, (ii) a foreign person
which derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States or (iii) a "controlled
foreign corporation" for U.S. federal income tax purposes and (B) the broker
fails to maintain documentary evidence that the holder is a Non-U.S. Holder
and that certain conditions are met, or that the holder otherwise is entitled
to an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who is treated as the owner of or has made
certain lifetime transfers of an interest in Common Stock will be required to
include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax (even though the
individual at the time of death is neither a citizen of nor domiciled in the
United States) unless an applicable estate tax treaty provides otherwise.
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UNDERWRITING
The U.S. Underwriters named below, acting through their U.S.
Representatives, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co. Inc.,
Lehman Brothers Inc., J.P. Morgan Securities Inc., Salomon Brothers Inc and
Furman Selz LLC (the "U.S. Representatives"), have severally agreed, subject
to the terms and conditions of the U.S. Purchase Agreement with EDS and the
Selling Stockholder (the "U.S. Purchase Agreement"), to purchase from the
Selling Stockholder the aggregate number of shares of Common Stock set forth
below opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF U.S. SHARES
U.S. UNDERWRITER OF COMMON STOCK
---------------- ---------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................
Morgan Stanley & Co. Incorporated.........................
Goldman, Sachs & Co. .....................................
Bear, Stearns & Co. Inc. .................................
Lehman Brothers Inc. .....................................
J.P. Morgan Securities Inc. ..............................
Salomon Brothers Inc......................................
Furman Selz LLC...........................................
----------
Total............................................ 25,500,000
==========
</TABLE>
This offering is part of a worldwide offering that consists of the U.S.
Offering and the International Offering. Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. are
acting as Global Coordinators for the Offerings.
In the U.S. Purchase Agreement, the U.S. Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the shares
of Common Stock being sold pursuant to such Agreement if any of the shares of
Common Stock being sold pursuant to such Agreement are purchased. Under
certain circumstances under such Agreement, the commitments of non-defaulting
U.S. Underwriters may be increased.
The U.S. Representatives have advised EDS and the Selling Stockholder that
they propose initially to offer the shares to the public at the Price to
Public set forth on the cover page of this Prospectus, and to certain dealers
at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
EDS and the Selling Stockholder have also entered into an International
Purchase Agreement (the "International Purchase Agreement") with certain
underwriters (the "International Underwriters") for whom Merrill Lynch
International, Morgan Stanley & Co. International Limited, Goldman Sachs
International, Bear, Stearns International Limited, Lehman Brothers
International (Europe), J.P. Morgan Securities Ltd., Salomon Brothers
International Limited and Furman Selz LLC are acting as representatives (the
"International Representatives") providing for a concurrent International
Offering. The U.S. Underwriters and the International Underwriters are
collectively referred to as the "Underwriters" and the U.S. Representatives
and the International Representatives are collectively referred to as the
"Representatives." The International Underwriters have agreed, subject to the
terms and conditions set forth in the International Purchase Agreement,
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to purchase all of the shares of Common Stock being offered in the
International Offering (other than shares subject to the Underwriters' over-
allotment option) if any are purchased. The closing of each of the Offerings is
a condition to the closing of each of the U.S. Offering and the International
Offering.
The Underwriters have entered into an intersyndicate agreement (the
"Intersyndicate Agreement") that provides for the coordination of their
activities. Under the terms of the Intersyndicate Agreement, the Underwriters
in each geographic area have agreed not to offer to sell any shares of Common
Stock in the other geographic area until the completion of the distribution of
the shares of Common Stock in both of the Offerings. Pursuant to the
Intersyndicate Agreement, each of the U.S. Underwriters has agreed or will
agree that, as part of the distribution of the U.S. shares of Common Stock,
subject to certain exceptions, (i) it is not purchasing any shares of Common
Stock for the account of anyone other than a U.S. Person (as hereinafter
defined) or Canadian Person (as hereinafter defined) and (ii) it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute any prospectus relating to the shares of Common
Stock to any person outside the United States or Canada or to anyone other than
a U.S. Person or Canadian Person, or to any dealer who does not so agree. Each
of the International Underwriters has agreed or will agree that, as part of the
distribution of the shares of Common Stock in the International Offering,
subject to certain exceptions, (i) it is not purchasing any shares of Common
Stock for the account of any U.S. Person or Canadian Person and (ii) it has not
offered or sold, and will not offer or sell, directly or indirectly, any shares
of Common Stock or distribute any prospectus relating to the shares of Common
Stock in the United States or Canada or to any U.S. Person or Canadian Person
or to any dealer who does not so agree. The foregoing limitations do not apply
to stabilization transactions or to transactions between the U.S. Underwriters
and the International Underwriters pursuant to the Intersyndicate Agreement. As
used in this section, "United States" means the United States of America, its
territories, possessions and other areas subject to its jurisdiction; "Canada"
means Canada, its provinces, territories, possessions and other areas subject
to its jurisdiction; and "U.S. Person" and "Canadian Person" mean (i) a citizen
or resident of the United States or Canada, respectively, (ii) a corporation,
partnership, trust or other entity created or organized in or under the laws of
the United States or Canada, respectively (other than a foreign branch of such
an entity), or (iii) an estate or trust, the income of which is subject to
United States federal income taxation or Canadian federal income taxation,
respectively, regardless of its source of income, and includes any United
States or Canadian branch of a person not included in any of clauses (i), (ii)
and (iii) of this sentence.
The Hourly Plan Special Trust has granted the Underwriters an option,
exercisable for 30 days after the date hereof, to purchase up to an additional
4,500,000 shares of Common Stock at the Price to Public less the Underwriting
Discount for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, each of the Underwriters will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage thereof which the number of shares of Common Stock to be
purchased by it shown opposite their respective names in the table under
"Underwriting" in the relevant Prospectus is of the 30,000,000 shares of Common
Stock initially offered by the Underwriters hereunder.
EDS and (to the extent permitted under applicable law) the Selling
Stockholder have agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act.
EDS has agreed not to sell or otherwise dispose of or transfer any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock for a period of 90 days after the date of this Prospectus,
without the prior written consent of the Global Coordinators on behalf of the
Representatives, provided that EDS may issue and deliver such securities under
specified exceptions in connection with (i) the conversion, exercise or
exchange of options, warrants or other securities pursuant to their terms, (ii)
any agreement to issue shares of such securities in effect on the date of the
initial filing of the Registration Statement of which this Prospectus is a part
with the Commission, including any such agreement in connection with any
previously disclosed acquisition or other business combination and (iii)
dividend reinvestment plans or employee benefit plans.
The Selling Stockholder has agreed not to offer, sell or otherwise dispose of
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for Common Stock (other than transfers to or for the benefit of
employee benefit plans of EDS or any of its affiliates) for a period of 90 days
after the date of this Prospectus without the prior written consent of the
Global Coordinators on behalf of the Representatives.
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Any prospective purchaser of shares of Common Stock offered hereby that is an
employee benefit plan subject to Title I of ERISA or Section 4975 of the Code
should purchase such shares pursuant to the U.S. Offering unless, upon the
advice of counsel, it concludes that such plan is permitted to purchase such
shares in the International Offering. Accordingly, all such plans are advised
to consult with counsel before purchasing shares of Common Stock outside the
United States and Canada.
Certain of the Underwriters or their affiliates have rendered, and are
expected to continue to render, various investment banking and other advisory
services to EDS, the Selling Stockholder and the Hourly Plan. They have
received, and will continue to receive, customary compensation for such
services.
In connection with the Split-Off, certain of the Underwriters provided
financial advisory services to EDS or General Motors and received fees in
compensation for such services. Pursuant to an engagement letter dated December
13, 1995 between General Motors and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Merrill Lynch Engagement Letter"), Merrill Lynch, Pierce,
Fenner & Smith Incorporated is entitled to a fee of $12,500,000 in connection
with the Split-Off. In addition, under certain circumstances, General Motors
would be obligated to pay Merrill Lynch, Pierce, Fenner & Smith Incorporated an
additional fee of $10,000,000 in connection with a Business Combination (as
defined below) between EDS and any third party entered into after the Split-Off
but that was agreed to, proposed or as to which substantive discussions were
held prior to consummation of the Split-Off. A fee of $2,500,000 would become
payable upon execution of a definitive agreement with respect to any such
Business Combination, but would be credited against the first to be paid of the
other fees described above. A "Business Combination" is defined in the Merrill
Lynch Engagement Letter as a merger or other business combination pursuant to
which all or a substantial portion of the business of EDS would be combined
with that of another business entity the value of which exceeds $2.5 billion. A
fee in line with compensation paid to major investment banking firms for
similar services would be payable for transactions, other than a Business
Combination, between EDS and a third party. The Merrill Lynch Engagement Letter
also provides that General Motors will reimburse Merrill Lynch, Pierce, Fenner
& Smith Incorporated for its reasonable out-of-pocket expenses (including
reasonable fees and disbursements of its legal counsel) and will indemnify
Merrill Lynch, Pierce, Fenner & Smith Incorporated and certain related persons
against certain liabilities arising out of its engagement.
Pursuant to separate engagement letters between General Motors and each of
Morgan Stanley & Co. Incorporated and Lehman Brothers Inc., each of Morgan
Stanley & Co. Incorporated and Lehman Brothers Inc. is entitled to a fee of
$7,500,000 in connection with the Split-Off. The engagement letters also
provide for reimbursement of Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc. for certain out-of-pocket expenses, including certain fees and
expenses of legal counsel, and indemnification of Morgan Stanley & Co.
Incorporated and Lehman Brothers Inc. against certain expenses and liabilities
(and EDS has agreed to exculpate Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc.) in connection with their services as financial advisors,
including those arising under the federal securities laws. Under the Separation
Agreement, EDS is obligated to pay the fees and expenses of Morgan Stanley &
Co. Incorporated and Lehman Brothers Inc.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for EDS by Baker & Botts, L.L.P. Mr. James A. Baker, III, a director of EDS, is
a member of Baker & Botts, L.L.P. and is the beneficial owner of shares,
including shares subject to options, of Common Stock. Certain legal matters in
connection with the sale of the shares of Common Stock offered hereby will be
passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom and
Vinson & Elkins L.L.P.
EXPERTS
The consolidated financial statements and financial statement schedule of EDS
as of December 31, 1995 and 1994 and for each of the years in the three-year
period ended December 31, 1995, included in the Current Report on Form 8-K
incorporated herein by reference, and in this Registration Statement, have been
audited by KPMG Peat Marwick LLP, independent auditors, as stated in their
reports appearing therein, and have been so included in reliance upon such
reports given upon the authority of that firm as experts in accounting and
auditing.
58
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX PAGE
----- ----
<S> <C>
Independent Auditors' Report............................................... F-2
Consolidated Statements of Income.......................................... F-3
Consolidated Balance Sheets................................................ F-4
Consolidated Statements of Cash Flows...................................... F-5
Notes to Consolidated Financial Statements................................. F-6
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Electronic Data Systems Corporation:
We have audited the accompanying consolidated balance sheets of Electronic
Data Systems Corporation and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income and cash flows for each of
the years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Electronic
Data Systems Corporation and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
January 24, 1996
F-2
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- ----------------------------
1996 1995 1995 1994 1993
--------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Systems and other contracts
revenues.................. $ 3,366.9 $ 2,776.3 $12,422.1 $9,960.1 $8,507.3
--------- --------- --------- -------- --------
Costs and expenses
Cost of revenues......... 2,698.1 2,176.1 9,601.6 7,529.4 6,390.6
Selling, general, and ad-
ministrative............ 309.9 281.0 1,291.5 1,187.1 1,005.4
--------- --------- --------- -------- --------
Total costs and ex-
penses................ 3,008.0 2,457.1 10,893.1 8,716.5 7,396.0
--------- --------- --------- -------- --------
Operating income........... 358.9 319.2 1,529.0 1,243.6 1,111.3
Interest and other income,
net (Note 20)............. (17.0) (11.7) (62.0) 40.6 20.0
--------- --------- --------- -------- --------
Income before income tax-
es........................ 341.9 307.5 1,467.0 1,284.2 1,131.3
Provision for income taxes
(Note 11)................. 123.1 110.7 528.1 462.3 407.3
--------- --------- --------- -------- --------
Separate Consolidated Net
Income.................... $ 218.8 $ 196.8 $ 938.9 $ 821.9 $ 724.0
========= ========= ========= ======== ========
Earnings Per Share
Attributable to GM Class E
Common Stock.............. $ 0.45 $ 0.42 $ 1.96 $ 1.71 $ 1.51
========= ========= ========= ======== ========
</TABLE>
Revenues related to GM and affiliates amounted to $962.2 million, $898.0
million, $3,891.1 million, $3,547.2 million, and $3,323.7 million for the three
month periods ended March 31, 1996 and 1995 and the years ended December 31,
1995, 1994, and 1993, respectively.
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
MARCH 31,
1996 1995 1994
----------- --------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents..................... $ 935.9 $ 548.9 $ 608.2
Marketable securities (Note 3)................ 84.7 89.7 149.6
Accounts receivable, net...................... 2,779.2 2,872.0 2,082.1
Accounts receivable from GM and affiliates.... 343.1 297.0 65.4
Inventories................................... 184.9 181.2 137.8
Prepaids and other............................ 406.7 392.7 311.0
--------- --------- --------
Total current assets........................ 4,734.5 4,381.5 3,354.1
--------- --------- --------
Property and equipment, at cost less accumulated
depreciation (Note 4).......................... 3,262.0 3,242.4 2,756.6
--------- --------- --------
Operating and other assets
Land held for development, at cost (Note 5)... 105.8 105.1 97.4
Investment in leases and other (Note 6)....... 1,516.9 1,573.5 1,308.8
Software, goodwill, and other intangibles, net
(Notes 7 and 19)............................. 1,496.6 1,529.9 1,269.6
--------- --------- --------
Total operating and other assets............ 3,119.3 3,208.5 2,675.8
--------- --------- --------
Total Assets................................ $11,115.8 $10,832.4 $8,786.5
========= ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable.............................. $ 530.9 $ 603.9 $ 571.1
Accrued liabilities (Note 8).................. 1,551.6 1,704.5 1,451.0
Deferred revenue.............................. 633.7 629.3 536.7
Income taxes (Note 11)........................ 146.9 75.9 111.0
Notes payable (Note 9)........................ 238.7 247.8 203.4
--------- --------- --------
Total current liabilities................... 3,101.8 3,261.4 2,873.2
--------- --------- --------
Deferred income taxes (Note 11)................. 749.0 739.7 659.8
--------- --------- --------
Notes payable (Note 9).......................... 2,109.2 1,852.8 1,021.0
--------- --------- --------
Commitments and contingent liabilities (Notes 17
and 18)
Stockholder's equity (Notes 10 and 12)
Common stock, without par value; authorized
1,000.0 shares. Issued and outstanding 485.7,
483.7 and 481.7 shares at March 31, 1996,
December 31, 1995 and 1994, respectively..... 559.9 517.7 455.1
Retained earnings............................. 4,595.9 4,460.8 3,777.4
--------- --------- --------
Total stockholder's equity.................. 5,155.8 4,978.5 4,232.5
--------- --------- --------
Total Liabilities and Stockholder's Equity.. $11,115.8 $10,832.4 $8,786.5
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------ -----------------------------
1996 1995 1995 1994 1993
-------- -------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income................ $ 218.8 $ 196.8 $ 938.9 $ 821.9 $ 724.0
-------- -------- -------- --------- --------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amorti-
zation................. 282.7 231.0 1,107.8 771.1 626.8
Deferred compensation... 11.0 14.7 58.8 62.0 33.8
Other................... 9.3 (2.4) 33.0 30.9 (17.7)
Changes in assets and
liabilities, net of
effects of acquired
companies:
(Increase) decrease in
accounts receivable.... 143.2 (62.4) (611.5) (605.4) (200.8)
(Increase) decrease in
accounts receivable
from GM and affili-
ates................... (47.2) (123.1) (227.8) 51.1 (56.0)
(Increase) decrease in
inventories............ (4.2) 0.2 (41.9) (1.9) (15.5)
(Increase) in prepaids
and other.............. (18.9) (65.3) (59.7) (57.0) (26.8)
Increase (decrease) in
accounts payable and
accrued liabilities.... (169.8) (176.2) (76.0) 453.2 27.4
Increase in deferred
revenue................ 7.9 68.0 81.0 79.1 137.1
Increase (decrease) in
taxes payable.......... 79.3 46.6 56.4 (72.5) 188.7
-------- -------- -------- --------- --------
Total adjustments..... 293.3 (68.9) 320.1 710.6 697.0
-------- -------- -------- --------- --------
Net cash provided by oper-
ating activities......... 512.1 127.9 1,259.0 1,532.5 1,421.0
-------- -------- -------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sales of
marketable securities.... 26.0 42.7 163.6 370.0 234.2
Proceeds from investments
in leases and other
assets................... 80.8 5.8 87.8 134.6 217.3
Payments for purchases of
property and equipment... (244.4) (259.3) (1,261.5) (1,186.0) (816.4)
Payments for investments
in leases and other
assets................... (90.4) (130.9) (356.3) (395.7) (170.6)
Payments related to
acquisitions, net of cash
acquired................. (38.0) (40.9) (234.9) (186.6) (122.1)
Payments for purchases of
software and other
intangibles.............. (29.5) 4.0 (92.0) (77.0) (119.0)
Payments for purchases of
marketable securities.... (21.7) (10.8) (100.9) (248.9) (292.5)
Other..................... 3.8 2.4 12.7 49.9 1.4
-------- -------- -------- --------- --------
Net cash used in investing
activities............... (313.4) (387.0) (1,781.5) (1,539.7) (1,067.7)
-------- -------- -------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from notes pay-
able..................... 1,484.9 1,752.5 7,466.7 10,821.0 2,527.7
Payments on notes pay-
able..................... (1,236.8) (1,583.9) (6,776.3) (10,300.7) (2,648.7)
Net decrease in current
notes payable with matu-
rities less than 90
days..................... -- 48.8 -- (102.9) (99.0)
Employee stock
transactions and related
tax benefit.............. 20.1 14.7 26.0 20.2 33.9
Dividends paid to GM...... (72.6) (62.6) (251.3) (231.1) (192.1)
-------- -------- -------- --------- --------
Net cash provided by (used
in) financing activi-
ties..................... 195.6 169.5 465.1 206.5 (378.2)
-------- -------- -------- --------- --------
Effect of Exchange Rate
Changes on Cash and Cash
Equivalents................ (7.3) 3.1 (1.9) 25.5 (13.6)
-------- -------- -------- --------- --------
Net Increase (Decrease) in
Cash and Cash Equivalents.. 387.0 (86.5) (59.3) 224.8 (38.5)
Cash and Cash Equivalents at
Beginning of Period........ 548.9 608.2 608.2 383.4 421.9
-------- -------- -------- --------- --------
Cash and Cash Equivalents at
End of Period.............. $ 935.9 $ 521.7 $ 548.9 $ 608.2 $ 383.4
======== ======== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 AND
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Electronic Data Systems Corporation is a provider of information technology
using advanced computer and communications technologies to meet the business
needs of its clients. As used herein, the terms "EDS" and the "Company" refer
to Electronic Data Systems Corporation and its consolidated subsidiaries. EDS
offers its clients a continuum of services in over 40 countries worldwide.
This continuum includes the management of computers, networks, information
systems, information processing facilities, business operations, and related
personnel, as well as management consulting services. (See Note 14 for
geographic segment information.)
General Motors Corporation (GM) acquired all of the capital stock of EDS in
October 1984. Prior to that time, EDS had been an independent, publicly held
corporation. Electronic Data Systems Holding Corporation was incorporated in
Delaware in 1994 for the purpose of holding the capital stock of EDS, which
was incorporated in Texas in 1962. (See Note 21.)
INTERIM FINANCIAL INFORMATION
In the opinion of management, the unaudited interim consolidated financial
statements as of March 31, 1996 and for the three months ended March 31, 1996
and 1995, reflect all adjustments, consisting of only normal recurring items,
which are necessary for a fair presentation of the results for the interim
periods presented. 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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EDS and all
majority-owned subsidiaries. The Company's investments in companies in which
it has the ability to exercise significant influence over operating and
financial policies are accounted for under the equity method, with the
remaining investments carried at cost.
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 percent 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, which are not reflected in the accompanying consolidated
financial statements, multiplied by a fraction, the numerator of which is the
weighted average number of shares of GM Class E common stock outstanding
during the quarter, and the denominator of which was 483.7 million EDS common
shares at December 31, 1995 (the Class E Dividend Base). The effects of
purchase accounting adjustments reflected in General Motors' Consolidated
Financial Statements that are applicable to EDS were not material to EDS'
Consolidated Statements of Income for the three months ended March 31, 1996
and 1995, and for each of the three years in the period ended December 31,
1995. At March 31, 1996 and December 31, 1995, the remaining carrying value of
such purchase accounting adjustments would not be material to EDS'
Consolidated Financial Statements.
GM Series C depositary shares represent ownership of one-tenth of a share of
GM Series C convertible preference stock. GM Series C depositary shares and GM
Series C preference stock are convertible into GM
F-6
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Class E common stock and are common stock equivalents for purposes of
computing Earnings Attributable to GM Class E Common Stock on a Per Share
Basis. On November 2, 1992, GM Series E-II and E-III preference stocks,
previously held by the GM pension plans, were converted to GM Class E common
stock. In 1993 and 1992, GM Series E-I preference stock was converted to GM
Class E common stock, or redeemed by GM. The issuances and conversions of such
preference stocks have no dilutive effect on the GM Class E common stock
because, to the extent that shares of GM Class E common stock deemed to be
outstanding would increase, such increased shares would increase the numerator
of the fraction used to determine Available Separate Consolidated Net Income,
but would have no effect on the denominator. Additionally, unvested units in
the Company's stock incentive plan would have no material dilutive effect on
the denominator.
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 purchase 11.0 million
shares of GM Class E common stock in order to meet certain future requirements
of the Company's 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 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.
In March 1995, GM contributed 173 million newly issued shares of GM Class E
common stock to the General Motors Hourly-Rate Employees Pension Plan.
Prior to the Split-Off, the GM Board policy was that the cash dividends on
the GM Class E common stock, when, as, and if declared by the GM Board in its
sole discretion, would equal approximately 30 percent of the prior year's
Available Separate Consolidated Net Income of EDS.
The following table summarizes certain amounts discussed above (in millions,
except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------- --------------------------
1996 1995 1995 1994 1993
------ ------ -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Separate Consolidated Net Income..... $218.8 $196.8 $ 938.9 $ 821.9 $ 724.0
Available Separate Consolidated Net
Income.............................. 209.2 122.4 795.5 444.4 367.2
Average Number of Shares of GM Class
E Common Stock Outstanding
(Numerator)......................... 463.2 300.0 404.6 260.3 243.0
Class E Dividend Base (Denominator).. 484.4 482.4 483.7 481.7 480.6
Earnings Attributable to GM Class E
Common Stock on a Per Share Basis... $ 0.45 $ 0.42 $ 1.96 $ 1.71 $ 1.51
Cash Dividends Per Share of GM Class
E Common Stock...................... $ 0.15 $ 0.13 $ 0.52 $ 0.48 $ 0.40
</TABLE>
DEBT AND MARKETABLE EQUITY SECURITIES
Marketable securities at December 31, 1995 and 1994, consist of securities
issued by the U.S. Treasury, states, and political subdivisions, as well as
mortgage-backed debt, corporate debt and corporate equity securities. The
Company adopted the provisions of Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities, effective January 1, 1994. Pursuant to SFAS No. 115, the
provisions of the Statement were not applied retroactively. The change had no
material cumulative
F-7
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
effect on the Company's financial position or results of operations. Under
SFAS No. 115, the Company classifies all of its debt and marketable equity
securities as available-for-sale. Management determines the appropriate
classification of all securities at the time of purchase and reevaluates such
designation as of each balance sheet date. Noncurrent available-for-sale
securities are reported within the balance sheet classification "Investment in
Leases and Other." The Company's available-for-sale securities are recorded at
fair value. Unrealized holding gains and losses, net of the related tax
effect, are excluded from earnings and are reported as a separate component of
stockholder's equity until realized. A decline in the fair value of any
available-for-sale security below cost that is deemed other than temporary is
charged to earnings, resulting in the establishment of a new cost basis for
the security (see Note 3).
INVENTORY VALUATION
Inventories are stated principally at the lower of cost or market using the
first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation of property and
equipment is calculated using the straight-line method over the lesser of the
asset's estimated useful life, the life of the related customer contract or
the term of the lease in the case of leasehold improvements. The ranges of
estimated useful lives are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings........................................................... 20-40
Facilities.......................................................... 5-20
Computer equipment.................................................. 3-7
Other equipment and furniture....................................... 3-15
</TABLE>
SOFTWARE, GOODWILL, AND OTHER INTANGIBLES
Software purchased by the Company and utilized in designing, installing, and
operating business information and communications systems is capitalized and
amortized on a straight-line basis over a five- to eight-year period. Costs of
developing and maintaining software systems are incurred primarily in
connection with customer contracts and are considered contract costs. Software
development costs that meet the capitalization and recoverability requirements
of SFAS No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed, are capitalized and generally amortized on a
straight-line basis over three years. Such amounts were not significant.
The cost of acquired companies is allocated first to identifiable assets
based on estimated fair values. The excess of the purchase price over the fair
value of identifiable assets acquired, net of liabilities assumed, is recorded
as goodwill and amortized on a straight-line basis over the useful life which
is determined based on the individual characteristics of the acquired entity,
generally five to 40 years. Costs allocated to identifiable intangible assets
are amortized on a straight-line basis over the remaining estimated useful
lives of the assets as determined by underlying contract terms or independent
appraisals. Such lives range from five to ten years.
The Company periodically evaluates the carrying amounts of goodwill and
other intangibles, as well as the related amortization periods, to determine
whether adjustments to these amounts or useful lives are required based on
current events and circumstances. The evaluation is based on the Company's
projection of the undiscounted future operating cash flows of the acquired
operation over the remaining useful lives of the related intangible assets. To
the extent such projections indicate that future undiscounted cash flows are
not sufficient to recover the carrying amounts of related intangibles, the
underlying assets are written down by charges to expense so that the carrying
amount is equal to future undiscounted cash flows. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
F-8
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
REVENUE RECOGNITION
The Company provides services under level-of-effort and fixed-price
contracts, with the length of the Company's contracts ranging up to ten years.
For level-of-effort types of contracts, revenue is earned based on the agreed-
upon billing amounts as services are provided to the customer. For certain
fixed-price contracts, revenue is recognized on the percentage-of-completion
method. Revenue earned is based on the percentage that incurred contract costs
to date bear to total estimated contract costs after giving effect to the most
recent estimates of total cost. Changes to total estimated contract costs, if
any, are recognized in the period they are determined. Deferred revenue of
$633.7 million, $629.3 million and $536.7 million at March 31, 1996, December
31, 1995 and 1994, respectively, represents billings in excess of costs and
related profits on certain contracts. Included in accounts receivable are
unbilled receivables of $734.5 million, $622.2 million and $448.5 million at
March 31, 1996, December 31, 1995 and 1994, respectively. Such unbilled
receivables for certain contracts in progress represent costs and related
profits in excess of billings, and such amounts were not billable at the
balance sheet date but are recoverable over the remaining life of the
contract. These billings on fixed-price contracts will be made in the future
in accordance with contractual agreements. Of the unbilled receivables at
December 31, 1995, billings to such customers amounting to $108.3 million are
expected to be collected in 1997 and thereafter.
CURRENCY TRANSLATION
Assets and liabilities of non-U.S. subsidiaries whose functional currency is
not the U.S. dollar are translated at current exchange rates. Revenue and
expense accounts are translated using an average rate for the period.
Translation gains (losses) are not included in determining net income but are
reflected as a separate component of stockholder's equity. Nonfunctional
currency transaction gains (losses) are included in determining net income and
were $(3.8) million, $4.5 million, and $(3.7) million, net of income taxes,
for the years ended December 31, 1995, 1994, and 1993, respectively.
INCOME TAXES
The Company provides for deferred taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered. Prior to the Split-Off,
the Company was included in the consolidated federal tax returns filed by GM.
Current federal income taxes were calculated on a separate return basis and
remitted to GM. The deferral method is used to account for investment tax
credits.
STATEMENT OF CASH FLOWS
The Company uses the indirect method to present cash flows from operating
activities and considers certificates of deposit, as well as the following
items with original maturities of three months or less, to be cash
equivalents: commercial paper, repurchase agreements, and money market funds.
(See Note 20.)
F-9
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments as defined under SFAS No. 107, Disclosures
about Fair Value of Financial Instruments, at December 31, 1995 and 1994 (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Available-for-sale marketable securities
(Notes 3 and 6)........................... $ 93.5 $ 93.5 $ 153.6 $ 153.6
Investment in joint ventures and
partnerships, under the cost method of
accounting (Note 6)....................... 215.1 271.4 149.6 172.0
Other long-term securities (Note 6)........ 263.2 307.4 201.2 192.6
Non-current notes receivable (Note 6)...... 89.6 86.0 158.1 154.4
Notes payable (Note 9)..................... 2,100.6 2,168.4 1,224.4 1,230.3
Foreign exchange forward contracts, net li-
ability (Note 15)......................... (5.4) (5.4) (0.9) (0.9)
</TABLE>
The carrying value of other financial instruments such as cash equivalents,
accounts receivable, and accounts payable approximate their fair value.
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers comprising the Company's customer base
and their dispersion across different industry and geographic areas. Accounts
receivable are shown net of allowances of $99.5 million and $57.9 million as
of December 31, 1995 and 1994, respectively.
DERIVATIVES
Derivative financial instruments are used by the Company in the management
of its interest rate and foreign currency exposures. Net payments or receipts
under the Company's interest rate swap agreements are recorded as adjustments
to interest expense. Foreign exchange forward contracts are recorded in the
Company's Consolidated Balance Sheets at fair value at the reporting date.
Realized and unrealized changes in fair value are recognized in income, as
other income (expense), in the period in which the changes occur.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Because of the use of estimates inherent
in the financial reporting process, actual results could differ from those
estimates.
SIGNIFICANT CUSTOMERS
The percentage of EDS' total revenues attributable to GM and its affiliates
has decreased significantly since GM's acquisition of EDS in 1984 as a result
of the revenue growth of EDS' non-GM business. During the three months ended
March 31, 1996 and the year ended December 31, 1995, the portion of EDS'
revenues attributable to GM was approximately 28% and 31%, respectively. On
August 7, 1995, GM announced that it intends to pursue a split-off (the
"Split-Off") of EDS to its GM Class E stockholders in a tax-free exchange.
Immediately before the Split-Off, GM and EDS will enter into a new master
services agreement and certain related agreements which would significantly
change the pricing and terms of the services currently provided by EDS. In
addition, it is also expected that at the time of the Split-Off, a Special
Inter-Company Payment will be made to GM by EDS to ensure the fairness of the
Split-Off to all classes of GM common stock. Therefore, EDS does not
anticipate the loss of GM as an ongoing major customer in the near future.
(See Note 21.)
Other than General Motors, no single customer accounted for more than 5% of
the Company's revenues in 1995, 1994, or 1993.
F-10
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 and 1993 consolidated
financial statements to conform to the 1995 presentation.
NOTE 2: NATIONAL HERITAGE INSURANCE COMPANY
National Heritage Insurance Company (NHIC), a wholly owned subsidiary of
EDS, acts as underwriter for claims benefit payments for the Medicaid welfare
program contract for the state of Texas.
The contract provides that payments from the state be deposited in trust
accounts that are not included in the consolidated financial statements. In
accordance with contractual provisions, these funds will be returned to the
state if total benefit claims are less than the amounts received. Of such
payments received for the years ended December 31, 1995, 1994, and 1993,
$3,440.1 million, $4,188.7 million, and $4,453.4 million, respectively, were
designated for the payment of benefit claims or to be returned to the state.
At December 31, 1995 and 1994, $664.7 million and $983.5 million,
respectively, of such designated funds at amortized cost remained in the trust
accounts. Approximate market values of these invested funds at December 31,
1995 and 1994 were $663.3 million and $975.2 million, respectively. These
investments primarily consist of corporate and government bonds. NHIC has the
ability and intent to hold these investments until their full face value can
be realized. Gains and losses from the sale of these investments held in trust
accounts are combined with gains and losses from the Company's other
investments.
NOTE 3: DEBT AND MARKETABLE EQUITY SECURITIES
Following is a summary of available-for-sale securities (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Current:
U.S. government and agency obliga-
tions................................. $33.2 $0.1 $0.1 $33.2
Other debt securities.................. 35.6 0.1 1.8 33.9
----- ---- ---- -----
Total debt securities................ 68.8 0.2 1.9 67.1
Equity securities...................... 23.4 -- 0.8 22.6
----- ---- ---- -----
Total current available-for-sale se-
curities............................ $92.2 $0.2 $2.7 $89.7
===== ==== ==== =====
Noncurrent (Note 6):
Other debt securities.................. $ 0.6 $-- $-- $ 0.6
Equity securities...................... 5.7 -- 2.5 3.2
----- ---- ---- -----
Total noncurrent available-for-sale
securities.......................... $ 6.3 $-- $2.5 $ 3.8
===== ==== ==== =====
</TABLE>
F-11
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Current:
U.S. government and agency obliga-
tions................................ $ 31.9 $-- $0.6 $ 31.3
Other debt securities................. 94.9 0.2 4.7 90.4
------ ---- ---- ------
Total debt securities............... 126.8 0.2 5.3 121.7
Equity securities..................... 29.2 -- 1.3 27.9
------ ---- ---- ------
Total current available-for-sale se-
curities........................... $156.0 $0.2 $6.6 $149.6
====== ==== ==== ======
Noncurrent (Note 6):
Other debt securities................. $ 0.6 $-- $-- $ 0.6
Equity securities..................... 5.8 -- 2.4 3.4
------ ---- ---- ------
Total noncurrent available-for-sale
securities......................... $ 6.4 $-- $2.4 $ 4.0
====== ==== ==== ======
</TABLE>
The amortized cost and estimated fair value of debt securities at December
31, 1995, by contractual maturity, are shown below (in millions). Expected
maturities will differ from contractual maturities because the issuers of the
securities may have the right to repay obligations without prepayment
penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------
AMORTIZED FAIR
COST VALUE
---------- --------
<S> <C> <C>
Debt securities
Due in one year or less............................... $ 18.1 $ 18.1
Due after one year through five years................. 30.7 30.7
Due after five years through ten years................ 2.0 2.0
Due after ten years................................... 0.7 0.7
Mortgage-backed securities............................ 17.9 16.2
-------- --------
Total debt securities............................... $ 69.4 $ 67.7
======== ========
</TABLE>
The following table summarizes sales of available-for-sale securities (in
millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1995 1994
------ ------
<S> <C> <C>
Proceeds from sales.......................................... $162.5 $374.4
Gross realized gains......................................... $ 0.7 $ 17.4
Gross realized losses........................................ $ (1.1) $ (4.1)
</TABLE>
Specific identification was used to determine cost in computing realized
gain or loss.
F-12
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4: PROPERTY AND EQUIPMENT (IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------
ACCUMULATED
COST DEPRECIATION NET
-------- ------------ --------
<S> <C> <C> <C>
Land...................................... $ 136.9 $ -- $ 136.9
Buildings and facilities.................. 925.1 383.5 541.6
Computer equipment........................ 4,836.2 2,571.3 2,264.9
Other equipment and furniture............. 663.6 364.6 299.0
-------- -------- --------
Total................................... $6,561.8 $3,319.4 $3,242.4
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------------
ACCUMULATED
COST DEPRECIATION NET
-------- ------------ --------
<S> <C> <C> <C>
Land...................................... $ 125.3 $ -- $ 125.3
Buildings and facilities.................. 878.7 319.5 559.2
Computer equipment........................ 3,967.6 2,096.6 1,871.0
Other equipment and furniture............. 465.9 264.8 201.1
-------- -------- --------
Total................................... $5,437.5 $2,680.9 $2,756.6
======== ======== ========
</TABLE>
NOTE 5: LAND HELD FOR DEVELOPMENT
Land held for development at December 31, 1995, consists of approximately
2,260 acres located throughout the Dallas metropolitan area. Approximately
1,590 acres of land, site of a commercial real estate development, are located
in Plano, Texas. The carrying value of land is periodically compared to
current sales, market analysis and appraisals to determine whether an
adjustment is required.
NOTE 6: INVESTMENT IN LEASES AND OTHER (IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Lease contracts receivable (net of principal and inter-
est on nonrecourse debt)............................... $ 385.9 $ 384.5
Estimated residual values of leased assets (not guaran-
teed).................................................. 335.3 339.0
Unearned income, including deferred investment tax cred-
its.................................................... (246.8) (260.6)
-------- --------
Investment in leveraged leases (excluding deferred taxes
of $303.0 and $284.7 at December 31, 1995 and 1994, re-
spectively)............................................ 474.4 462.9
Investment in securities, joint ventures and partner-
ships.................................................. 602.8 357.2
Investment in direct financing leases, net of unearned
income................................................. 148.2 153.8
Noncurrent notes receivable............................. 89.6 158.1
GM Class E common stock held for benefit plans.......... 33.2 54.7
Investment in tax benefit transfers..................... 36.2 38.6
Long-term prepaid software license fees................. 43.4 16.6
Other................................................... 145.7 66.9
-------- --------
Total................................................. $1,573.5 $1,308.8
======== ========
</TABLE>
The fair values of certain long-term investments are estimated based on
quoted market prices for these or similar investments. For other investments,
a variety of methods is used to estimate fair value, including external
valuations and discounted cash flows. At December 31, 1995, the fair values of
investments in joint ventures and partnerships (accounted for using the cost
method), long-term securities, and noncurrent notes receivable were
F-13
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
estimated to be $271.4 million, $307.4 million, and $86.0 million,
respectively, with carrying amounts of $215.1 million, $263.2 million, and
$89.6 million, respectively. At December 31, 1994, the fair values of
investments in joint ventures and partnerships (accounted for using the cost
method), long-term securities, and noncurrent notes receivable were estimated
to be $172.0 million, $192.6 million, and $154.4 million, respectively, with
carrying amounts of $149.6 million, $201.2 million, and $158.1 million,
respectively. The carrying amount of securities, joint ventures and
partnerships also includes investments accounted for under the equity method,
none of which is material to the Company's consolidated financial statements.
A decline in the market value of any of these investments which is deemed to
be other than temporary would be charged to earnings. At December 31, 1995 and
1994, "Investment in Leases and Other" was net of an allowance of $26.6
million and $17.5 million, respectively. Long-term securities include GM Class
E common stock and other securities. The carrying value of the GM Class E
common stock, which was less than the market value, was utilized as the
investment's fair value shown above, because the stock will be used to satisfy
future benefit plan obligations.
Financing leases that are financed with nonrecourse borrowings at lease
inception are accounted for as leveraged leases. Such borrowings are secured
by substantially all of the lessor's rights under the lease plus the residual
value of the asset. For federal income tax purposes, the Company receives the
investment tax credit (if available) at lease inception and has the benefit of
tax deductions for depreciation on the leased asset and for interest on the
nonrecourse debt. A portion of the Company's leveraged lease portfolio is
concentrated within the airline industry. The Company historically has not
experienced credit losses from these transactions, and the portfolio is
diversified among unrelated lessees.
NOTE 7: SOFTWARE, GOODWILL, AND OTHER INTANGIBLES (IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------
ACCUMULATED
COST AMORTIZATION NET
-------- ------------ --------
<S> <C> <C> <C>
Software...................................... $ 966.6 $606.8 $ 359.8
Goodwill...................................... 1,225.6 129.6 1,096.0
Other intangibles............................. 245.8 171.7 74.1
-------- ------ --------
Total....................................... $2,438.0 $908.1 $1,529.9
======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------------
ACCUMULATED
COST AMORTIZATION NET
-------- ------------ --------
<S> <C> <C> <C>
Software...................................... $ 876.0 $462.1 $ 413.9
Goodwill...................................... 833.9 80.4 753.5
Other intangibles............................. 312.8 210.6 102.2
-------- ------ --------
Total....................................... $2,022.7 $753.1 $1,269.6
======== ====== ========
</TABLE>
NOTE 8: ACCRUED LIABILITIES (IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Contract related.......................................... $1,044.8 $ 880.9
Payroll related........................................... 291.4 196.4
Operating expenses........................................ 157.7 196.1
Property, sales, and franchise taxes...................... 135.1 100.1
Other..................................................... 75.5 77.5
-------- --------
Total................................................... $1,704.5 $1,451.0
======== ========
</TABLE>
F-14
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9: NOTES PAYABLE (IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Commercial paper, 5.6% to 5.9%............................ $1,078.0 $ 933.0
Lines of credit, variable rate, 5.9% to 9.6%, due 1996.... 118.9 48.7
Notes, variable rate, 3.0% to 11.2%, due 1996 to 2006..... 9.3 91.1
Notes to Banks, fixed rate, 4.9% to 11.7%, due 1996 to
2003..................................................... 121.6 107.2
Notes Payable, fixed rate, 6.85% to 7.125%, due 2000 to
2005, net of discount.................................... 645.8 --
Notes Payable, fixed rate, 1.2% to 10.4%, due 1996 to
2004..................................................... 127.0 44.4
-------- --------
Total................................................... 2,100.6 1,224.4
Less current maturities classified as notes payable..... (247.8) (203.4)
-------- --------
Noncurrent notes payable................................ $1,852.8 $1,021.0
======== ========
</TABLE>
Commercial paper is classified as noncurrent debt, as it is intended to be
maintained on a long-term basis with ongoing credit availability provided by
the Company's revolving, committed lines of credit. During 1995, the Company
revised its agreement with a syndicate of banks, which increased to $2,500.0
million its committed lines of credit, of which $1,250.0 million expires in
1996 with the option to convert any outstanding amounts under these lines into
term loans that mature in 1998. The remaining $1,250.0 million expires in
2000. Upon expiration of the commitment periods, the lenders and EDS have the
option to extend the commitment.
In addition, as of December 31, 1995, the Company had available and had used
another $15.5 million in committed lines of credit. The Company also had
available $831.6 million in uncommitted short-term lines of credit, of which
$728.2 million remained unused at December 31, 1995.
In May 1995, EDS issued $350.0 million of its 6.85% five-year notes and
$300.0 million of its 7.125% ten-year notes in a private placement to
investment banks.
Notes payable relate to land held for development, property and equipment,
acquisitions, and other items. Notes payable are generally unsecured, with
certain notes secured by assets of a majority-owned subsidiary.
Maturities of notes payable for years subsequent to December 31, 1995, are
as follows (in millions):
<TABLE>
<S> <C>
1996.......................................... $ 247.8
1997.......................................... 60.6
1998.......................................... 35.5
1999.......................................... 6.9
2000.......................................... 1,433.1
Thereafter.................................... 316.7
--------
$2,100.6
========
</TABLE>
The Company's credit facilities and the indenture governing its medium term
notes contain certain financial and other covenants, including the maintenance
of a minimum net worth and restrictions on mergers, consolidations and sales
of substantially all of the assets of the Company. As of December 31, 1995,
the Company was in compliance with all of these covenants.
For the years ended December 31, 1994 and 1993, interest costs of $1.2
million and $5.4 million, respectively, were capitalized, which, if charged to
expense, would have resulted in reductions in net income of $0.7 million and
$3.5 million, respectively. During 1995, the Company capitalized no interest
costs.
F-15
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The fair value of notes payable is estimated based on the current rates
offered to the Company for the same remaining maturities. At December 31, 1995
and 1994, the estimated fair value was $2,168.4 million and $1,230.3 million,
respectively.
NOTE 10: CONSOLIDATED STOCKHOLDER'S EQUITY (IN MILLIONS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------
CURRENCY MARKET CONSOLIDATED
TRANSLATION VALUE RETAINED STOCKHOLDER'S
SHARES AMOUNT ADJUSTMENT ADJUSTMENT EARNINGS EQUITY
------ ------ ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992................... 479.3 $365.9 $ (52.7) $ -- $2,750.2 $3,063.4
Net income............ -- -- -- -- 724.0 724.0
Dividends declared.... -- -- -- -- (192.1) (192.1)
Stock award transac-
tions................ 1.6 55.3 -- -- -- 55.3
Currency translation
adjustment........... -- -- (33.2) -- -- (33.2)
----- ------ ------- ----- -------- --------
Balance at December 31,
1993................... 480.9 421.2 (85.9) -- 3,282.1 3,617.4
Net income............ -- -- -- -- 821.9 821.9
Dividends declared.... -- -- -- -- (231.1) (231.1)
Stock award transac-
tions................ 0.8 33.9 -- -- -- 33.9
Currency translation
adjustment........... -- -- (3.0) -- -- (3.0)
Unrealized loss on se-
curities, net (Note
3)................... -- -- -- (6.6) -- (6.6)
----- ------ ------- ----- -------- --------
Balance at December 31,
1994................... 481.7 455.1 (88.9) (6.6) 3,872.9 4,232.5
Net income............ -- -- -- -- 938.9 938.9
Dividends declared.... -- -- -- -- (251.3) (251.3)
Stock award transac-
tions................ 2.0 62.6 -- -- -- 62.6
Currency translation
adjustment........... -- -- (6.6) -- -- (6.6)
Unrealized gain on se-
curities, net (Note
3)................... -- -- -- 2.4 -- 2.4
----- ------ ------- ----- -------- --------
Balance at December 31,
1995................... 483.7 517.7 (95.5) (4.2) 4,560.5 4,978.5
Net income............ -- -- -- -- 218.8 218.8
Dividends declared.... -- -- -- -- (72.6) (72.6)
Stock award transac-
tions................ 2.0 42.2 -- -- -- 42.2
Currency translation
adjustment........... (10.6) -- -- (10.6)
Unrealized loss on se-
curities, net (Note
3)................... -- -- -- (0.5) -- (0.5)
----- ------ ------- ----- -------- --------
Balance at March 31,
1996 (unaudited)....... 485.7 $559.9 $(106.1) $(4.7) $4,706.7 $5,155.8
===== ====== ======= ===== ======== ========
</TABLE>
NOTE 11: INCOME TAXES
The current and deferred income tax liabilities (assets) are summarized as
follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1994
------ ------
<S> <C> <C>
Current payable............................................... $ 4.3 $ 49.3
Current deferred.............................................. 71.6 61.7
------ ------
Total income taxes--current................................. 75.9 111.0
Noncurrent deferred........................................... 739.7 659.8
------ ------
Total current and noncurrent income taxes................... $815.6 $770.8
====== ======
</TABLE>
F-16
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision for income tax expense is summarized as follows (in millions):
<TABLE>
<CAPTION>
U.S. NON-
FEDERAL U.S. STATE TOTAL
------- ------ ----- ------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995
Current.................................... $310.3 $117.3 $35.4 $463.0
Deferred................................... 44.5 20.6 -- 65.1
------ ------ ----- ------
Total.................................... $354.8 $137.9 $35.4 $528.1
====== ====== ===== ======
Year Ended December 31, 1994
Current.................................... $279.0 $167.9 $32.6 $479.5
Deferred................................... 15.8 (33.0) -- (17.2)
------ ------ ----- ------
Total.................................... $294.8 $134.9 $32.6 $462.3
====== ====== ===== ======
Year Ended December 31, 1993
Current.................................... $130.1 $ 77.8 $17.0 $224.9
Deferred................................... 161.0 21.4 -- 182.4
------ ------ ----- ------
Total.................................... $291.1 $ 99.2 $17.0 $407.3
====== ====== ===== ======
</TABLE>
Income before income taxes included the following components (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S. income....................................... $1,131.6 $ 963.5 $ 886.1
Non-U.S. income................................... 335.4 320.7 245.2
-------- -------- --------
Total........................................... $1,467.0 $1,284.2 $1,131.3
======== ======== ========
</TABLE>
A reconciliation of income tax expense using the statutory federal income
tax rate of 35.0 percent for 1995, 1994, and 1993 to the actual income tax
expense follows (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income before income taxes..................... $1,467.0 $1,284.2 $1,131.3
Statutory federal income tax................... 513.4 449.5 395.9
Non-U.S. taxes, net of credit.................. 4.1 18.9 13.4
State income tax, net.......................... 23.0 21.2 11.1
Investment tax credit-leveraged leases......... (3.0) (3.1) (4.4)
Research and experimentation credits........... (7.5) (11.3) (8.8)
Other.......................................... (1.9) (12.9) 0.1
-------- -------- --------
Total........................................ $ 528.1 $ 462.3 $ 407.3
======== ======== ========
Effective income tax rate...................... 36.0% 36.0% 36.0%
======== ======== ========
</TABLE>
F-17
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences and carryforwards, which result in
a significant portion of the deferred tax assets and liabilities, are as
follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1995 1994
------------------- -------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Basis differences attributable to leasing
activities.............................. $ 1.6 $ 488.4 $ 2.5 $ 504.8
Adjustments necessary to convert accruals
to a tax basis.......................... 129.9 246.8 111.9 215.1
Employee benefit plans................... 27.1 57.8 32.0 25.9
Accumulated tax depreciation/amortization
versus accumulated financial statement
depreciation/amortization............... 12.0 259.5 18.7 211.2
Effect on deferred taxes of
carryforwards........................... 122.3 -- 102.9 --
Unpaid claims and unearned premiums
related to NHIC......................... 12.1 72.8 27.6 52.7
Employee related compensation............ 94.0 -- 69.5 --
Allowance for doubtful accounts.......... 19.3 -- 4.8 --
Adjustments from conversion from cash to
accrual basis on open tax years......... 43.5 -- 43.5 --
Book to tax differences on securities.... 17.0 -- 15.0 --
Effect of lower tax rate on distributable
foreign earnings........................ 31.7 -- 29.6 --
Other.................................... 87.6 157.8 42.1 100.8
------ -------- ------ --------
Subtotal............................... 598.1 1,283.1 500.1 1,110.5
Less valuation allowance............... (126.3) -- (111.1) --
------ -------- ------ --------
Total deferred taxes................... $471.8 $1,283.1 $389.0 $1,110.5
====== ======== ====== ========
</TABLE>
The net changes in the total valuation allowance for the years ended
December 31, 1995 and 1994 were increases of $15.2 million and $18.8 million,
respectively. Certain of the Company's foreign subsidiaries have net operating
loss carryforwards which expire over an indefinite period. A majority of such
carryforwards are included in the valuation allowance. In assessing the
realizability of deferred tax assets, the Company considers whether it is more
likely than not that some portion or all of the deferred tax assets will not
be realized.
NOTE 12: STOCK PURCHASE AND INCENTIVE PLANS
The 1984 Electronic Data Systems Corporation Employee Stock Purchase Plan
(Purchase Plan) enables EDS employees to purchase up to 80.0 million shares of
GM Class E common stock at 85 percent of the quoted market price through
payroll deductions of up to 10 percent of their compensation. Shares of GM
Class E common stock purchased under the Purchase Plan may not be sold or
transferred within two years of the date of purchase unless they are first
offered to GM or EDS at the lesser of the original purchase price or the fair
market value on the date of sale. The number of shares available for future
sale under the Purchase Plan was 58.1 million shares at December 31, 1995.
The 1984 Electronic Data Systems Corporation Stock Incentive Plan (1984
Plan) covers up to 160.0 million shares of GM Class E common stock and expires
on October 17, 2004. The 1984 Plan permits shares and rights or options to
acquire shares, which may be subject to restrictions, to be granted or sold.
The maximum number of shares for which additional shares, rights or options
may be granted or sold under the provisions of the 1984 Plan was 93.3 million
shares at December 31, 1995.
The EDS Incentive and Compensation Committee (the Committee) granted the
right to purchase a total of 27.6 million shares of GM Class E common stock,
at prices of $0.0125 and $0.025 per share, to key employees under the
provisions of the 1984 Plan. As of December 31, 1995, substantially all of
these shares have vested.
F-18
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The difference between the quoted market price as of the date of grant and the
purchase price of shares granted has been charged to operations over the
vesting period. Expense for these awards amounted to $1.6 million, $13.3
million and $16.3 million for the years ended December 31, 1995, 1994 and
1993, respectively.
In 1995, 1994, 1991 and 1988, the Committee approved restricted stock unit
grants. The 1995 grant, related to the acquisition of A. T. Kearney (see Note
19), totals 6.6 million shares of GM Class E common stock. The 1995 grant and
the 1994 grant, which totaled 9.5 million shares, will be distributed to key
employees under the provisions of the 1984 Plan. The right to receive shares
is a restricted stock unit. All units granted are generally scheduled to vest
over a period of 10 years. The 1995 units are scheduled to vest beginning
September 1996. The 1994, 1991, and 1988 grants began vesting in March 1995,
March 1992, and March 1989, respectively. The quoted market price as of the
date of grant is charged to operations over the vesting period. The total
unvested number of units as of December 31, 1995 was 19.8 million.
The Company has a bonus plan under which awards are granted to key
executives and employees. Bonus expense amounted to $96.9 million, $86.6
million and $49.8 million for the years ended December 31, 1995, 1994, and
1993, respectively. Included in bonus expense is $57.2 million, $48.7 million
and $17.5 million relating to the restricted stock unit grants for the years
ended December 31, 1995, 1994, and 1993, respectively.
NOTE 13: DEFERRED COMPENSATION PLAN
The EDS Deferred Compensation Plan (Plan) provides a long-term savings
program for participants. The Plan allows eligible employees to contribute a
percentage of their compensation to a savings program and to defer income
taxes until the time of distribution.
NOTE 14: SEGMENT INFORMATION
INDUSTRY SEGMENTS
The Company's business involves operations in principally one industry
segment: designing, installing, and operating business information and
communications systems. Revenues from GM contributed approximately 31 percent,
36 percent, and 39 percent of total revenues for the years ended December 31,
1995, 1994, and 1993, respectively.
GEOGRAPHIC SEGMENTS
The following presents information about the Company's operations in
different geographic areas (in millions):
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------------------------
U.S. EUROPE OTHER TOTAL
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Systems and other contracts revenues
Outside customers................... $5,794.9 $2,001.5 $ 734.6 $ 8,531.0
GM and affiliates................... 2,926.1 659.2 305.8 3,891.1
-------- -------- -------- ---------
Total systems and other contracts
revenues......................... $8,721.0 $2,660.7 $1,040.4 $12,422.1
======== ======== ======== =========
Operating income...................... $1,164.0 $ 271.5 $ 93.5 $ 1,529.0
======== ======== ======== =========
Identifiable assets................... $7,566.8 $2,490.1 $ 775.5 $10,832.4
======== ======== ======== =========
</TABLE>
F-19
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1994
---------------------------------
U.S. EUROPE OTHER TOTAL
-------- -------- ------ --------
<S> <C> <C> <C> <C>
Systems and other contracts revenues
Outside customers...................... $4,611.2 $1,308.1 $493.6 $6,412.9
GM and affiliates...................... 2,764.4 523.4 259.4 3,547.2
-------- -------- ------ --------
Total systems and other contracts
revenues............................ $7,375.6 $1,831.5 $753.0 $9,960.1
======== ======== ====== ========
Operating income......................... $1,008.6 $ 168.3 $ 66.7 $1,243.6
======== ======== ====== ========
Identifiable assets...................... $6,618.0 $1,573.8 $594.7 $8,786.5
======== ======== ====== ========
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1993
---------------------------------
U.S. EUROPE OTHER TOTAL
-------- -------- ------ --------
<S> <C> <C> <C> <C>
Systems and other contracts revenues
Outside customers...................... $4,004.5 $ 911.6 $267.5 $5,183.6
GM and affiliates...................... 2,574.5 511.2 238.0 3,323.7
-------- -------- ------ --------
Total systems and other contracts
revenues............................ $6,579.0 $1,422.8 $505.5 $8,507.3
======== ======== ====== ========
Operating income......................... $ 906.5 $ 148.7 $ 56.1 $1,111.3
======== ======== ====== ========
Identifiable assets...................... $5,350.6 $1,185.9 $405.6 $6,942.1
======== ======== ====== ========
</TABLE>
NOTE 15: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company operates on a global basis receiving revenues and incurring
expenses in many different countries. As a result of these activities, the
Company has exposure to market risks arising from changes in interest rates
and foreign exchange rates. Derivative financial instruments are used by the
Company for the purpose of hedging against these risks, to which the Company
is exposed in the normal course of business, by creating offsetting market
exposures. The Company's use of such instruments in relation to such risks is
explained below. The Company does not hold or issue financial instruments for
trading purposes.
The notional amounts of derivatives contracts are summarized below as part
of the description of the instruments utilized. The notional amounts do not
represent the amounts exchanged by the parties, and thus are not a measure of
the exposure of the Company through its use of derivatives. The amounts
exchanged by the parties are normally based upon the notional amounts and the
other terms of the derivatives. The Company is not a party to leveraged
derivatives.
INTEREST RISK MANAGEMENT
The Company has historically entered into interest rate swap agreements in
order to reduce the impact of changes in interest rates upon its floating-rate
debt. As of December 31, 1995 and 1994, the Company had no outstanding
interest rate swap agreements.
FOREIGN EXCHANGE RISK MANAGEMENT
The Company uses derivative financial instruments, particularly foreign
exchange forward contracts, to hedge transactions denominated in different
currencies on a continuing basis. The purpose of the Company's hedging
activities is to reduce the levels of risk to which it is exposed resulting
from exchange-rate movements. At December 31, 1995 and 1994, the Company had
forward exchange contracts maturing in the following year
F-20
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to purchase various foreign currencies in the amount of $651.9 million and
$289.0 million, respectively, and to sell $1,380.1 million and $766.5 million,
respectively. The estimated fair value of forward exchange contracts is based
on quoted market prices. At December 31, 1995, the estimated fair value of
outstanding contracts in a gain position was $5.5 million and the estimated
fair value of outstanding contracts in a loss position was $(10.9) million. At
December 31, 1994, the estimated fair value of outstanding contracts in a gain
position was $3.3 million and the estimated fair value of outstanding
contracts in a loss position was $(4.2) million. The Company recognizes
realized and unrealized gains and losses on foreign exchange contracts by
marking to market all outstanding forward exchange contracts. Fair value
represents the cash required to settle foreign exchange forward contracts.
The Company is exposed to credit risk in the event of nonperformance by
counterparties to foreign exchange contracts, but because the Company deals
only with major commercial banks with high quality credit, the Company does
not anticipate nonperformance by any of these counterparties.
NOTE 16: RETIREMENT PLANS
The Company has pension plans (the Plans) covering substantially all of its
employees, the majority of which are noncontributory. In general, employees
become fully vested upon attaining five years of service, and benefits are
based on years of service and earnings. The actuarial cost method currently
used is the projected unit credit cost method. The Company's U.S. funding
policy is to contribute amounts that fall within the range of deductible
contributions for federal income tax purposes.
The weighted average assumptions used for the Plans using a measurement date
of October 1 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Discount rate.............................. 8.0% 8.9% 7.7%
Rate of increase in compensation levels.... 5.4% 5.7% 5.9%
Long-term rate of return on assets......... 9.9% 10.0% 9.8%
</TABLE>
Net pension cost consisted of the following components (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost of the current period........ $ 87.6 $ 96.1 $ 72.6
Interest cost on projected benefit
obligation............................... 97.5 82.3 69.8
Actual return on assets................... (158.6) (22.3) (121.3)
Net amortization and deferral............. 59.9 (37.9) 75.2
-------- -------- --------
Net pension cost.......................... $ 86.4 $ 118.2 $ 96.3
======== ======== ========
</TABLE>
At December 31, 1995 and 1994, the Plans' assets consisted primarily of
equity and fixed income securities, commingled pension trust funds, and U.S.
Government obligations. Accrued and/or prepaid pension cost is included in
Accrued Liabilities or Investment in Leases and Other in the Company's
Consolidated Balance Sheets.
F-21
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of the funded status of the Plans (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------ -----------------
ASSETS ACCUM. ASSETS ACCUM.
EXCEED BENEFITS EXCEED BENEFITS
ACCUM. EXCEED ACCUM. EXCEED
BENEFITS ASSETS BENEFITS ASSETS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Plans' assets at fair value............. $1,242.0 $ 8.2 $918.3 $ --
-------- ------- ------ -------
Actuarial present value of benefit
obligation
Vested benefits....................... 750.7 81.2 485.9 56.1
Nonvested benefits.................... 78.4 13.3 57.6 11.2
-------- ------- ------ -------
Accumulated benefit obligation.......... 829.1 94.5 543.5 67.3
Effect of projected future salary
increases.............................. 462.9 57.9 326.4 25.5
-------- ------- ------ -------
Projected benefit obligation............ 1,292.0 152.4 869.9 92.8
-------- ------- ------ -------
Excess (deficiency) of Plans' assets
over projected benefit obligation...... (50.0) (144.2) 48.4 (92.8)
Unrecognized net (gain) loss............ 126.7 (19.7) (28.3) (35.3)
Unrecognized net (asset) obligation at
date of adoption....................... (3.1) 26.0 (9.6) 23.4
Unrecognized prior service cost......... 11.4 (0.8) 12.8 (1.0)
Additional minimum liability............ -- (0.1) -- --
-------- ------- ------ -------
Net prepaid (accrued) pension cost...... $ 85.0 $(138.8) $ 23.3 $(105.7)
======== ======= ====== =======
</TABLE>
NOTE 17: COMMITMENTS AND RENTAL EXPENSE
Commitments for rental payments under noncancelable operating leases for
each of the next five years ending December 31 and thereafter for computer
equipment, software and facilities are as follows (in millions):
<TABLE>
<S> <C>
1996.................................. $371.5
1997.................................. 273.7
1998.................................. 193.1
1999.................................. 168.7
2000.................................. 142.9
Thereafter............................ 646.5
</TABLE>
Total rentals under cancelable and noncancelable leases, principally
computer equipment, leased facilities, and other leased assets, included in
costs and charged to expenses were $676.1 million, $524.3 million, and $564.9
million for the years ended December 31, 1995, 1994, and 1993, respectively.
Total rentals under cancelable and noncancelable leases for software included
in costs and charged to expenses were $306.8 million, $220.2 million, and
$129.3 million for the years ended December 31, 1995, 1994, and 1993,
respectively.
At December 31, 1995 and 1994, the Company had $43.9 million and $51.5
million, respectively, outstanding under standby letters of credit related to
payment and performance guarantees.
NOTE 18: CONTINGENT LIABILITIES
There are various claims and pending actions against the Company arising in
the ordinary course of the conduct of its business. Certain of these actions
seek damages in significant amounts. The amount of liability on these claims
and actions at March 31, 1996 and December 31, 1995 was not determinable, but
in the opinion of management, the ultimate liability, if any, will not have a
material adverse effect on the Company's consolidated results of operations or
financial position.
F-22
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19: ACQUISITIONS
On August 31, 1995, the Company acquired A.T. Kearney, a Chicago-based
international management consulting firm. At the acquisition date, the Company
paid approximately $112.7 million in cash and issued $162.3 million in short
and long-term notes to A.T. Kearney shareholders and principals. The terms of
the acquisition agreement also include a restricted stock grant of
approximately 6.6 million shares of GM Class E common stock, which will vest
over a ten-year period for certain A.T. Kearney personnel remaining with the
Company (see Note 12). Prior to December 31, 1995, $80.9 million of short-term
notes related to the acquisition were retired.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the excess purchase price over net assets acquired, based upon
the fair value of such assets and liabilities at the date of acquisition, was
$252.1 million and is being amortized to expense over a ten-year period. The
Consolidated Statements of Income include the operations of A.T. Kearney since
the date of acquisition. Pro forma disclosure relating to A.T. Kearney's
results of operations is not presented, as the impact is immaterial to EDS.
In conjunction with acquisitions made during the years ended December 31,
1995 and 1994, assets were acquired and liabilities were assumed as follows
(in millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1995 1994
------- -------
<S> <C> <C>
Fair value of assets acquired......................... $ 674.7 $ 427.8
Less:
Cash paid for stock and assets, net of cash
acquired........................................... (234.9) (186.6)
Debt issued for stock and assets.................... (184.9) (94.9)
------- -------
Liabilities assumed................................... $ 254.9 $ 146.3
======= =======
</TABLE>
NOTE 20: SUPPLEMENTARY FINANCIAL INFORMATION
The following summarizes certain costs charged to expense for the years
indicated (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Depreciation of property and equipment........... $ 808.1 $ 577.5 $ 465.6
======== ======== ========
Amortization..................................... $ 299.7 $ 193.6 $ 161.2
======== ======== ========
</TABLE>
The components of Interest and other income, net, are presented below (in
millions):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------- ---------------------------
1996 1995 1995 1994 1993
------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest and other income..... $ 18.5 $ 8.7 $ 58.8 $ 92.3 $ 54.5
Interest expense.............. (35.5) (20.4) (120.8) (51.7) (34.5)
------- ------- -------- ------- -------
Total....................... $ (17.0) $ (11.7) $ (62.0) $ 40.6 $ 20.0
======= ======= ======== ======= =======
</TABLE>
F-23
<PAGE>
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Supplemental cash flow information is presented below (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash paid for:
Income taxes, net of refunds................... $ 407.8 $ 465.6 $ 183.8
======== ======== ========
Interest, net of amount capitalized............ $ 108.3 $ 49.7 $ 40.2
======== ======== ========
</TABLE>
NOTE 21: SUBSEQUENT EVENTS (UNAUDITED)
On June 7, 1996, GM effected a split-off (the "Split-Off") of the Company.
As a result of the Split-Off, (i) the Company became an independent, publicly
held company with approximately 485.7 million shares of Common Stock
outstanding and listed for trading on the NYSE and the London Stock Exchange
and (ii) each outstanding share of Class E common stock of GM was converted
into one share of Common Stock of the Company. In connection with the Split-
Off, EDS paid GM a "Special Inter-Company Payment" in the amount of $500.0
million in cash and GM provided EDS a $50.0 million allowance relating to the
resolution of various uncertain, contingent or other matters arising out of
the separation of GM and EDS. The Special Inter-Company Payment was included
as one of the terms of the Split-Off in order to enable the GM Board to
determine that the Split-Off was fair to all classes of GM common
stockholders.
Immediately prior to the Split-Off, EDS and GM entered into a new Master
Service Agreement that serves as a framework for the negotiation and operation
of service agreements between GM and EDS related to certain "in-scope" IT
services to be provided by EDS to GM on a worldwide basis (collectively,
together with the Master Service Agreement, the "IT Services Agreements"). The
IT Services Agreements replaced the master agreement that, prior to the Split-
Off, served as a framework for individual services agreements between GM and
EDS.
NOTE 22: QUARTERLY FINANCIAL DATA (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Systems and other contracts
revenues....................... $2,776.3 $2,950.1 $3,073.7 $3,622.0 $12,422.1
Gross profit from operations.... 600.2 654.9 687.6 877.8 2,820.5
Income before income taxes...... 307.5 354.5 384.0 421.0 1,467.0
Separate Consolidated Net
Income......................... 196.8 226.9 245.7 269.5 938.9
Earnings Attributable to GM
Class E Common Stock on a Per
Share Basis.................... 0.42 0.47 0.51 0.56 1.96
Stock price range of GM Class E
common.........................
High.......................... 41.38 45.25 47.50 52.63 52.63
Low........................... 36.88 38.38 41.50 43.88 36.88
Cash dividends per share of GM
Class E common................. 0.13 0.13 0.13 0.13 0.52
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Systems and other contracts
revenues....................... $2,217.2 $2,309.5 $2,522.8 $2,910.6 $ 9,960.1
Gross profit from operations.... 506.6 584.1 602.1 737.9 2,430.7
Income before income taxes...... 268.3 308.2 338.1 369.6 1,284.2
Separate Consolidated Net
Income......................... 171.7 197.3 216.4 236.5 821.9
Earnings Attributable to GM
Class E Common Stock on a Per
Share Basis.................... 0.36 0.41 0.45 0.49 1.71
Stock price range of GM Class E
common
High.......................... 36.88 38.00 38.50 39.50 39.50
Low........................... 27.50 32.88 33.00 34.75 27.50
Cash dividends per share of GM
Class E common................. 0.12 0.12 0.12 0.12 0.48
</TABLE>
F-24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION SET FORTH IN THIS PROSPECTUS IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Split-Off of the Company from General Motors............................. 11
Price Range of Common Stock and Dividends................................ 13
Unaudited Pro Forma Consolidated Capitalization.......................... 15
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 16
Selected Consolidated Financial Information.............................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 30
Relationship Between the Company and General Motors...................... 35
Board of Directors and Management........................................ 41
Background of the Offerings.............................................. 44
Selling Stockholder...................................................... 46
Description of Capital Stock............................................. 48
Certain United States Federal Tax Considerations for Non-U.S. Holders.... 54
Underwriting............................................................. 56
Legal Matters............................................................ 58
Experts.................................................................. 58
Consolidated Financial Statements........................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
30,000,000 SHARES
ELECTRONIC DATA
SYSTEMS CORPORATION
COMMON STOCK
LOGO
-------------
P R O S P E C T U S
-------------
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
J.P. MORGAN & CO.
SALOMON BROTHERS INC
FURMAN SELZ
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 24, 1996
PROSPECTUS
LOGO
[LOGO OF EDS APPEARS HERE]
30,000,000 SHARES
ELECTRONIC DATA SYSTEMS CORPORATION
COMMON STOCK
----------
This Prospectus covers the resale of 30,000,000 shares of Common Stock, par
value $0.01 per share ("Common Stock"), of Electronic Data Systems Corporation,
a Delaware corporation (together with its subsidiaries and predecessors, "EDS"
or the "Company"), by the General Motors Special Hourly Employees Pension Trust
(together with any sub-trusts thereunder, the "Hourly Plan Special Trust" or
the "Selling Stockholder") under the General Motors Hourly-Rate Employees
Pension Plan (the "Hourly Plan"). See "Selling Stockholder." Of the 30,000,000
shares of Common Stock offered hereby, 4,500,000 shares are being offered
outside the United States and Canada by the International Underwriters (the
"International Offering") and 25,500,000 are being offered in the United States
and Canada by the U.S. Underwriters (the "U.S. Offering" and together with the
International Offering, the "Offerings"). See "Underwriting."
EDS will not receive any of the proceeds from the sale of the shares offered
hereby. See "Selling Stockholder" and "Underwriting." The Common Stock is
listed in the United States on the New York Stock Exchange (the "NYSE") under
the symbol "EDS." The last reported sale price of the Common Stock on the NYSE
on June 21, 1996 was $53 5/8 per share. See "Price Range of Common Stock and
Dividends."
United States Trust Company of New York is the trustee for the Hourly Plan
Special Trust and U.S. Trust Company of California, N.A., an affiliate of
United States Trust Company of New York, is the trustee for a sub-trust under
the Hourly Plan Special Trust (together, the "Hourly Plan Trustee").
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIESAND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HASTHE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIESCOMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THISPROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC DISCOUNT(1) SELLING STOCKHOLDER(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- --------------------------------------------------------------------------------
Total(3).......................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) EDS and, to the extent permitted by applicable law, the Selling
Stockholder, have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) The expenses of the Offerings, estimated to be $1,045,000, are payable by
EDS.
(3) The Selling Stockholder has granted the International Underwriters and U.S.
Underwriters an option, exercisable within 30 days after the date hereof,
to purchase up to an aggregate 4,500,000 of additional shares of the Common
Stock at the Price to Public less the Underwriting Discount for the purpose
of covering overallotments, if any. If the Underwriters exercise such
option in full, the total Price to Public, Underwriting Discount and
Proceeds to Selling Stockholder will be $ , $ and $ , respectively.
----------
Advisor to United States Trust Company of New York
WASSERSTEIN PERELLA & CO.
----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the
certificates for the shares of Common Stock will be made on or about ,
1996, in New York, New York.
----------
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
LEHMAN BROTHERS
J.P. MORGAN SECURITIES LTD.
SALOMON BROTHERS INTERNATIONAL LIMITED
FURMAN SELZ
----------
Global Coordinators
MERRILL LYNCH & CO. MORGAN STANLEY & CO. GOLDMAN, SACHS & CO.
INCORPORATED
----------
The date of this Prospectus is , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
The International Underwriters named below, acting through their
International Representatives, Merrill Lynch International, Morgan Stanley &
Co. International Limited, Goldman Sachs International, Bear, Stearns
International Limited, Lehman Brothers International (Europe), J.P. Morgan
Securities Ltd., Salomon Brothers International Limited and Furman Selz LLC
(the "International Representatives"), have severally agreed, subject to the
terms and conditions of the International Purchase Agreement with EDS and the
Selling Stockholder (the "International Purchase Agreement"), to purchase from
the Selling Stockholder the aggregate number of shares of Common Stock set
forth below opposite their respective names.
<TABLE>
<CAPTION>
NUMBER OF INTERNATIONAL SHARES OF
INTERNATIONAL UNDERWRITER COMMON STOCK
------------------------- ---------------------------------
<S> <C>
Merrill Lynch International..............
Morgan Stanley & Co. International Limit-
ed......................................
Goldman Sachs International..............
Bear, Stearns International Limited......
Lehman Brothers International (Europe)...
J.P. Morgan Securities Ltd. .............
Salomon Brothers International Limited...
Furman Selz LLC..........................
---------
Total............................. 4,500,000
=========
</TABLE>
This offering is part of a worldwide offering that consists of the U.S.
Offering and the International Offering (collectively, the "Offerings").
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and Goldman, Sachs & Co. are acting as Global Coordinators for
the Offerings.
In the International Purchase Agreement, the International Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the shares of Common Stock being sold pursuant to such Agreement if any of
the shares of Common Stock being sold pursuant to such Agreement are
purchased. Under certain circumstances under such Agreement, the commitments
of non-defaulting International Underwriters may be increased.
The International Representatives have advised EDS and the Selling
Stockholder that they propose initially to offer the shares to the public at
the Price to Public set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of $ per
share. The International Underwriters may allow, and such dealers may reallow,
a discount not in excess of $ per share on sales to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
EDS and the Selling Stockholder have also entered into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") with certain underwriters (the "U.S.
Underwriters") for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co.
Inc., Lehman Brothers Inc., J.P. Morgan Securities Inc., Salomon Brothers Inc
and Furman Selz LLC are acting as representatives (the "U.S. Representatives")
providing for a concurrent U.S. Offering. The U.S. Underwriters and the
International Underwriters are collectively referred to as the "Underwriters,"
and the U.S. Representatives and the International Representatives are
collectively referred to as the "Representatives." The U.S. Underwriters have
agreed, subject to the terms and conditions set forth in the U.S. Purchase
Agreement, to
56
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
purchase all of the shares of Common Stock being offered in the U.S. Offering
(other than shares subject to the Underwriters' over-allotment option) if any
are purchased. The closing of each of the Offerings is a condition to the
closing of each of the U.S. Offering and the International Offering.
The Underwriters have entered into an intersyndicate agreement (the
"Intersyndicate Agreement") that provides for the coordination of their
activities. Under the terms of the Intersyndicate Agreement, the Underwriters
in each geographic area have agreed not to offer to sell any shares of Common
Stock in the other geographic area until the completion of the distribution of
the shares of Common Stock in both of the Offerings. Pursuant to the
Intersyndicate Agreement, each of the U.S. Underwriters has agreed or will
agree that, as part of the distribution of the U.S. shares of Common Stock,
subject to certain exceptions, (i) it is not purchasing any shares of Common
Stock for the account of anyone other than a U.S. Person (as hereinafter
defined) or Canadian Person (as hereinafter defined) and (ii) it has not
offered or sold, and will not offer or sell, directly or indirectly, any
shares of Common Stock or distribute any prospectus relating to the shares of
Common Stock to any person outside the United States or Canada or to anyone
other than a U.S. Person or Canadian Person, or to any dealer who does not so
agree. Each of the International Underwriters has agreed or will agree that,
as part of the distribution of the shares of Common Stock in the International
Offering, subject to certain exceptions, (i) it is not purchasing any shares
of Common Stock for the account of any U.S. Person or Canadian Person and (ii)
it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of Common Stock or distribute any prospectus relating
to the shares of Common Stock in the United States or Canada or to any U.S.
Person or Canadian Person or to any dealer who does not so agree. The
foregoing limitations do not apply to stabilization transactions or to
transactions between the U.S. Underwriters and the International Underwriters
pursuant to the Intersyndicate Agreement. As used in this section, "United
States" means the United States of America, its territories, possessions and
other areas subject to its jurisdiction; "Canada" means Canada, its provinces,
territories, possessions and other areas subject to its jurisdiction; and
"U.S. Person" and "Canadian Person" mean (i) a citizen or resident of the
United States or Canada, respectively, (ii) a corporation, partnership, trust
or other entity created or organized in or under the laws of the United States
or Canada, respectively (other than a foreign branch of such an entity), or
(iii) an estate or trust, the income of which is subject to United States
federal income taxation or Canadian federal income taxation, respectively,
regardless of its source of income, and includes any United States or Canadian
branch of a person not included in any of clauses (i), (ii) and (iii) of this
sentence.
The Hourly Plan Special Trust has granted the Underwriters an option,
exercisable for 30 days after the date hereof, to purchase up to an additional
4,500,000 shares of Common Stock at the Price to Public less the Underwriting
Discount for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, each of the Underwriters will have
a firm commitment, subject to certain conditions, to purchase approximately
the same percentage thereof which the number of shares of Common Stock to be
purchased by it shown opposite their respective names in the table under
"Underwriting" in the relevant Prospectus is of the 30,000,000 shares of
Common Stock initially offered by the Underwriters hereunder.
EDS and (to the extent permitted under applicable law) the Selling
Stockholder have agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act.
EDS has agreed not to offer, sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock for a period of 90 days after the date of this Prospectus,
without the prior written consent of the Global Coordinators on behalf of the
Representatives, provided that EDS may issue and deliver such securities under
specified exceptions in connection with (i) the conversion, exercise or
exchange of options, warrants or other securities pursuant to the terms, (ii)
any agreement to issue shares of such securities in effect on the date of the
initial filing of the Registration Statement of which this Prospectus is a
part with the Commission, including any such agreement in connection with any
previously disclosed acquisition or other business combination and (iii)
dividend reinvestment plans or employee benefit plans.
The Selling Stockholder has agreed not to offer, sell or otherwise dispose
of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock (other than transfers to or
57
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
for the benefit of employee benefit plans of EDS or any of its affiliates) for
a period of 90 days after the date of this Prospectus without the prior written
consent of the Global Coordinators on behalf of the Representatives.
Any prospective purchaser of shares of Common Stock offered hereby that is an
employee benefit plan subject to Title I of ERISA or Section 4975 of the Code
should purchase such shares pursuant to the U.S. Offering unless, upon the
advice of counsel, it concludes that such plan is permitted to purchase such
shares in the International Offering. Accordingly, all such plans are advised
to consult with counsel before purchasing shares of Common Stock outside the
United States or Canada.
Certain of the Underwriters or their affiliates have rendered, and are
expected to render, various investment banking and other advisory services to
EDS, the Selling Stockholder and the Hourly Plan. They have received, and will
continue to receive, customary compensation for such services.
In connection with the Split-Off, certain of the Underwriters provided
financial advisory services to EDS or General Motors and received fees in
compensation for such services. Pursuant to an engagement letter dated December
13, 1995 between General Motors and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Merrill Lynch Engagement Letter"), Merrill Lynch, Pierce,
Fenner & Smith Incorporated is entitled to a fee of $12,500,000 in connection
with the Split-Off. In addition, under certain circumstances, General Motors
would be obligated to pay Merrill Lynch, Pierce, Fenner & Smith Incorporated an
additional fee of $10,000,000 in connection with a Business Combination (as
defined below) between EDS and any third party entered into after the Split-Off
but that was agreed to, proposed or as to which substantive discussions were
held prior to consummation of the Split-Off. A fee of $2,500,000 would become
payable upon execution of a definitive agreement with respect to any such
Business Combination, but would be credited against the first to be paid of the
other fees described above. A "Business Combination" is defined in the Merrill
Lynch Engagement Letter as a merger or other business combination pursuant to
which all or a substantial portion of the business of EDS would be combined
with that of another business entity the value of which exceeds $2.5 billion. A
fee in line with compensation paid to major investment banking firms for
similar services would be payable for transactions, other than a Business
Combination, between EDS and a third party. The Merrill Lynch Engagement Letter
also provides that General Motors will reimburse Merrill Lynch, Pierce, Fenner
& Smith Incorporated for its reasonable out-of-pocket expenses (including
reasonable fees and disbursements of its legal counsel) and will indemnify
Merrill Lynch, Pierce, Fenner & Smith Incorporated and certain related persons
against certain liabilities arising out of its engagement.
Pursuant to separate engagement letters between General Motors and each of
Morgan Stanley & Co. Incorporated and Lehman Brothers Inc., each of Morgan
Stanley & Co. Incorporated and Lehman Brothers Inc. received a fee of
$7,500,000 in connection with the Split-Off. The engagement letters also
provide for reimbursement of Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc. for certain out-of-pocket expenses, including certain fees and
expenses of legal counsel, and indemnification of Morgan Stanley & Co.
Incorporated and Lehman Brothers Inc. against certain expenses and liabilities
(and EDS has agreed to exculpate Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc.) in connection with their services as financial advisors,
including those arising under the federal securities laws. Under the Separation
Agreement, EDS has agreed to pay the fees and expenses of the Morgan Stanley &
Co. Incorporated and Lehman Brothers Inc.
SELLING RESTRICTIONS
GENERAL
No action has been or will be taken in any jurisdiction (except in the United
States) that would permit a public offering of any shares of Common Stock or
the possession, circulation or distribution of this Prospectus or any other
material relating to EDS or the Common Stock in any jurisdiction where action
for such purpose is required. Accordingly, no shares of Common Stock may be
offered or sold, directly or indirectly, and neither this Prospectus nor any
other offering material or advertisements in connection with the shares of
Common Stock may be distributed or published, in or from any country or
jurisdiction, except in compliance with any applicable rules and regulations of
any such country or jurisdiction.
58
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNITED KINGDOM
Each International Underwriter has agreed that (i) it has not offered or
sold, and will not offer or sell, in the United Kingdom by means of any
document, any shares of Common Stock offered hereby, other than to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995 (the "Regulations"), (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Regulations with respect to anything done by it in
relation to the Common Stock in, from or otherwise involving the United
Kingdom, and (iii) it has only issued or passed on and will only issue or pass
on to any person in the United Kingdom any document received by it in
connection with the issuance of Common Stock if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements)(Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.
THE NETHERLANDS
The shares of Common Stock offered hereby may not be offered, distributed,
transferred, sold or delivered, directly or indirectly, to any person in the
Netherlands other than professional or institutional investors such as
investment banks, pension funds, insurance companies, security firms,
investment institutions and other similar entities, including treasuries and
finance companies of large enterprises who or which are active on a regular
and professional basis in the financial markets for their own account.
JAPAN
Each International Underwriter has acknowledged and agreed that the shares
of Common Stock have not been registered under the Securities and Exchange Law
of Japan and are not being offered or sold, and will not be offered or sold,
directly or indirectly, in Japan or to or for the account of residents of
Japan or to any persons for reoffering or resale, directly or indirectly, in
Japan or to any resident of Japan except pursuant to an exemption from the
registration requirements of the Securities and Exchange Law and in compliance
with the other relevant laws of Japan.
HONG KONG
Each International Underwriter has acknowledged and agreed that (i) it has
not offered or sold and will not offer or sell in Hong Kong, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures whether as principal or
agent, or in circumstances which do not constitute an offer to the public
within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong and (ii)
unless it is a person permitted to do so under the securities laws of Hong
Kong, it has not issued or had in its possession for the purpose of issue and
will not issue or have in its possession the purpose of issue any invitation,
document or advertisement relating to the shares of Common Stock in Hong Kong
other than with respect to shares of Common Stock intended to be disposed of
to persons outside Hong Kong or to be disposed of in Hong Kong only to persons
whose business involves the acquisition, disposal, or holding of securities,
whether as principal or agent.
SINGAPORE
Each International Underwriter has agreed that the shares of Common Stock
may not be offered or sold, nor may any document or other material in
connection with the shares of Common Stock be distributed, either directly or
indirectly, (i) to persons in Singapore other than in circumstances in which
such offer or sale does not constitute an offer or sale of the shares of
Common Stock to the public in Singapore or (ii) to the public or any
59
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
member of the public in Singapore other than pursuant to, and in accordance
with the conditions of, an exemption invoked under Division 5A of Part IV of
the Companies Act, Chapter 50 of Singapore and to persons to whom the shares
of Common Stock may be offered or sold under such exemption.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for EDS by Baker & Botts, L.L.P. Mr. James A. Baker, III, a director of
EDS, is a member of Baker & Botts, L.L.P. and is the beneficial owner of
shares, including shares subject to options, of Common Stock. Certain legal
matters in connection with the sale of the shares of Common Stock offered
hereby will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom and Vinson & Elkins L.L.P.
EXPERTS
The consolidated financial statements and financial statement schedule of
EDS as of December 31, 1995 and 1994 and for each of the years in the three-
year period ended December 31, 1995, included in the Current Report on Form 8-
K incorporated herein by reference, and in this Registration Statement, have
been audited by KPMG Peat Marwick LLP, independent auditors, as stated in
their reports appearing therein, and have been so included in reliance upon
such reports given upon the authority of that firm as experts in accounting
and auditing.
60
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION SET FORTH IN THIS PROSPECTUS IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Split-Off of the Company from General Motors............................. 11
Price Range of Common Stock and Dividends................................ 13
Unaudited Pro Forma Consolidated Capitalization.......................... 15
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 16
Selected Consolidated Financial Information.............................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 30
Relationship Between the Company and General Motors...................... 35
Board of Directors and Management........................................ 41
Background of the Offerings.............................................. 44
Selling Stockholder...................................................... 46
Description of Capital Stock............................................. 48
Certain United States Federal Tax Considerations for Non-U.S. Holders.... 54
Underwriting............................................................. 56
Legal Matters............................................................ 60
Experts.................................................................. 60
Consolidated Financial Statements........................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
30,000,000 SHARES
ELECTRONIC DATA
SYSTEMS CORPORATION
COMMON STOCK
LOGO
---------
P R O S P E C T U S
---------
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
LEHMAN BROTHERS
J.P. MORGAN SECURITIES LTD.
SALOMON BROTHERS INTERNATIONAL LIMITED
FURMAN SELZ
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses of the issuance and distribution of
the securities being registered payable by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $ 641,676
NASD filing fee................................................ 30,500
Printing expenses.............................................. 75,000
Accounting fees and expenses................................... 50,000
Blue Sky fees and expenses..................................... 15,000
Counsel fees................................................... 225,000
Miscellaneous.................................................. 7,824
----------
Total........................................................ 1,045,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware General Corporation Law
Section 145(a) of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 145(b) of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Section 145(a) and (b), or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
II-1
<PAGE>
Section 145(d) of the DGCL provides that any indemnification under Section
145(a) and (b) (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 145(a) and (b). Such determination shall be made (1) by a majority
vote of the directors who were not parties to such action, suit or proceeding,
even though less than a quorum, or (2) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion,
or (3) by the stockholders.
Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized in Section
145. Such expenses (including attorneys' fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 145(f) of the DGCL provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his capacity as such, whether or not the
corporation would have the power to indemnify him against such liability under
Section 145.
Restated Certificate of Incorporation
Article Seventh of the Restated Certificate of Incorporation of the Company
provides that no director of the Company shall be personally liable to the
Company or any of its stockholders for monetary damages for breach of
fiduciary duty as a director involving any act or omission of any such
director; provided, however, that such Article Seventh does not eliminate or
limit the liability of a director (1) for any breach of such director's duty
of loyalty to the Company or its stockholders, (2) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (3) under Section 174 of the DGCL (which relates to certain unlawful
dividend payments or stock purchases or redemptions), as the same exists or
may hereafter be amended, supplemented or replaced, or (4) for a transaction
from which the director derived an improper personal benefit. If the DGCL is
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Company, in addition to the
limitation on personal liability described above, shall be limited to the
fullest extent permitted by the DGCL, as so amended. Furthermore, any repeal
or modification of Article Seventh of the Restated Certificate of
Incorporation by the stockholders of the Company shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Company existing at the time of such repeal or modification.
Bylaws
Article VI of the Amended and Restated Bylaws of the Company provides that
each person who at any time shall serve or shall have served as a director,
officer, employee or agent of the Company, or any person who, while a
director, officer, employee or agent of the Company, is or was serving at the
written request of the Company (in accordance with written procedures adopted
from time to time by the Board of Directors of the Company) as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of
II-2
<PAGE>
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, shall be
entitled to (a) indemnification and (b) the advancement of expenses incurred
by such person from the Company as, and to the fullest extent, permitted by
Section 145 of the DGCL or any successor statutory provision, as from time to
time amended.
Indemnification Agreements
The Company has entered into Indemnification Agreements (the
"Indemnification Agreements") with its directors and certain of its officers
(the "Indemnitees"). Under the terms of the Indemnification Agreements, the
Company has generally agreed to indemnify, and advance expenses to, each
Indemnitee to the fullest extent permitted by applicable law on the date of
such agreements and to such greater extent as applicable law may thereafter
permit. In addition, the Indemnification Agreements contain specific
provisions pursuant to which the Company has agreed to indemnify each
Indemnitee (i) if such person is, by reason of his or her status as a
director, nominee for director, officer, agent or fiduciary of the Company or
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise with which such person was serving at the request of
the Company (any such status being hereinafter referred to as a "Corporate
Status"), made or threatened to be made a party to any threatened, pending or
completed action, suit, arbitration, alternative dispute resolution mechanism,
investigation or other proceeding (each, a "Proceeding"), other than a
Proceeding by or in the right of the Company, (ii) if such person is, by
reason of his or her Corporate Status, made or threatened to be made a party
to any Proceeding brought by or in the right of the Company to procure a
judgment in its favor, except that no indemnification shall be made in respect
of any claim, issue or matter in such Proceeding as to which such Indemnitee
shall have been adjudged to be liable to the Company if applicable law
prohibits such indemnification (unless and only to the extent that a court
shall otherwise determine), (iii) against expenses actually and reasonably
incurred by such person or on his or her behalf in connection with any
Proceeding to which such Indemnitee was or is a party by reason of his or her
Corporate Status and in which such Indemnitee is successful, on the merits or
otherwise, (iv) against expenses actually and reasonably incurred by such
person or on his or her behalf in connection with a Proceeding to the extent
that such Indemnitee is, by reason of his or her Corporate Status, a witness
or otherwise participates in any Proceeding at a time when such person is not
a party in the Proceeding and (v) against expenses actually and reasonably
incurred by such person in any judicial adjudication of or any award in
arbitration to enforce his or her rights under the Indemnification Agreements.
Furthermore, under the terms of the Indemnification Agreements, the Company
has agreed to pay all reasonable expenses incurred by or on behalf of an
Indemnitee in connection with any Proceeding, whether brought by or in the
right of the Company or otherwise, in advance of any determination with
respect to entitlement to indemnification and within 15 days after the receipt
by the Company of a written request from such Indemnitee for such payment. In
the Indemnification Agreements, each Indemnitee has agreed that he or she will
reimburse and repay the Company for any expenses so advanced to the extent
that it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company against such expenses.
The Indemnification Agreements also include provisions that specify the
procedures and presumptions which are to be employed to determine whether an
Indemnitee is entitled to indemnification thereunder. In some cases, the
nature of the procedures specified in the Indemnification Agreements varies
depending on whether there has occurred a "Change in Control" (as defined in
the Indemnification Agreements) of the Company.
Insurance
The Company has obtained and intends to maintain in effect directors' and
officers' liability insurance policies providing customary coverage for its
directors and officers against losses resulting from wrongful acts committed
by them in their capacities as directors and officers of the Company.
The above discussion of the Company's Bylaws and of Section 145 of the DGCL
is not intended to be exhaustive and is respectively qualified in its entirety
by such statute and the Bylaws.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
The following documents are exhibits to the Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1(a) Form of U.S. Purchase Agreement.
1(b) Form of International Purchase Agreement.
5 Opinion of Baker & Botts, L.L.P.
23(a) Consent of KPMG Peat Marwick LLP, independent auditors.
23(b) Consent of Baker & Botts, L.L.P. (included in Exhibit 5 to this
Registration Statement).
24 Powers of Attorney (filed herewith as Exhibit 24 with respect to
non-employee directors and included in the signature page to this
Registration Statement with respect to all other signatories
hereto).
99 Form of Change of Control Agreement entered into by EDS and each
of its executive officers.
</TABLE>
FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report
Schedule II--Allowances
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
1. That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
2. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
3. That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
4. That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF PLANO, STATE OF TEXAS, ON THE 21ST DAY OF JUNE,
1996.
Electronic Data Systems Corporation
/s/ Lester M. Alberthal, Jr.
By: _________________________________
LESTER M. ALBERTHAL, JR. CHAIRMAN
OF THE BOARD AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Lester M. Alberthal, Jr., Gary J.
Fernandes and Joseph M. Grant, Jeffrey M. Heller, and each of them, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including pre- or post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-
fact and agents and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
his or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON JUNE 21,
1996 IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Lester M. Alberthal, Jr. Chairman of the Board, Chief Executive
- ------------------------------------- Officer and Director (Principal
LESTER M. ALBERTHAL, JR. Executive Officer)
/s/ Gary J. Fernandes Vice Chairman and Director
- -------------------------------------
GARY J. FERNANDES
/s/ Jeffrey M. Heller President, Chief Operating Officer and
- ------------------------------------- Director
JEFFREY M. HELLER
/s/ Joseph M. Grant Executive Vice President and Chief
- ------------------------------------- Financial Officer (Principal
JOSEPH M. GRANT Financial Officer)
/s/ H. Paulett Eberhart Vice President and Controller
- ------------------------------------- (Principal Accounting Officer)
H. PAULETT EBERHART
II-5
<PAGE>
SIGNATURE TITLE
* Director
- -------------------------------------
JAMES A. BAKER, III
* Director
- -------------------------------------
RICHARD B. CHENEY
* Director
- -------------------------------------
RAY J. GROVES
* Director
- -------------------------------------
RAY L. HUNT
* Director
- -------------------------------------
C. ROBERT KIDDER
* Director
- -------------------------------------
JUDITH RODIN
* Director
- -------------------------------------
ENRIQUE J. SOSA
/s/ Lester M. Alberthal, Jr.
_____________________________________
*By Lester M. Alberthal, Jr., as
Attorney-in-Fact
II-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Electronic Data Systems Corporation:
Under date of January 24, 1996, we reported on the consolidated balance
sheets of Electronic Data Systems Corporation and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income and cash
flows for each of the years in the three-year period ended December 31, 1995,
which are included in the registration statement. In connection with our
audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule included in the
registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statement schedule based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
January 24, 1996
<PAGE>
SCHEDULE II
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE II--ALLOWANCES
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS TO OTHER BALANCE AT
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1995
Allowances Deducted
from Assets
Lease contracts
receivable.......... $288.7 $ 0.3 $31.3 $ 44.2(a) $276.1
Accounts and notes
receivable.......... 57.9 124.6 -- 83.0(b) 99.5
Inventories.......... 13.7 19.1 -- 13.3(c) 19.5
Valuation allowance
for deferred taxes.. 111.1 20.8 -- 5.6 126.3
------ ------ ----- ------ ------
Total Allowances
Deducted from
Assets............ $471.4 $164.8 $31.3 $146.1 $521.4
====== ====== ===== ====== ======
FOR THE YEAR ENDED
DECEMBER 31, 1994
Allowances Deducted
from Assets
Lease contracts
receivable.......... $301.8 $ -- $21.4 $ 34.5(a) $288.7
Accounts and notes
receivable.......... 53.0 50.6 -- 45.7(b) 57.9
Inventories.......... 15.0 28.2 -- 29.5(c) 13.7
Valuation allowance
for deferred taxes.. 92.3 18.8 -- -- 111.1
------ ------ ----- ------ ------
Total Allowances
Deducted from
Assets............ $462.1 $ 97.6 $21.4 $109.7 $471.4
====== ====== ===== ====== ======
FOR THE YEAR ENDED
DECEMBER 31, 1993
Allowances Deducted
from Assets
Lease contracts
receivable.......... $331.6 $ -- $15.1 $ 44.9(a) $301.8
Accounts and notes
receivable.......... 51.9 74.7 -- 73.6(b) 53.0
Inventories.......... 9.7 20.0 -- 14.7(c) 15.0
Valuation allowance
for deferred taxes.. 48.6 50.2 -- 6.5 92.3
------ ------ ----- ------ ------
Total Allowances
Deducted from
Assets............ $441.8 $144.9 $15.1 $139.7 $462.1
====== ====== ===== ====== ======
</TABLE>
- --------
(a) Recognition of lease income
(b) Accounts written off
(c) Obsolete parts disposed of, etc.
<PAGE>
EXHIBIT 1(a)
DRAFT OF JUNE 20, 1996
25,500,000 Shares
ELECTRONIC DATA SYSTEMS CORPORATION
(a Delaware corporation)
Common Stock
(Par Value $0.01 Per Share)
U.S. PURCHASE AGREEMENT
-----------------------
, 1996
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
FURMAN SELZ LLC
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Electronic Data Systems Corporation, a Delaware corporation (the
"Company"), and United States Trust Company of New York (the "Trustee"), as
trustee of the General Motors Hourly Plan Special Trust established under the
General Motors Hourly-Rate Employees Pension Plan (the
1
<PAGE>
"Hourly Plan"), for the account and on behalf of the Hourly Plan (the "Selling
Stockholder"), confirm their respective agreements with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of
the other underwriters named in Schedule A hereto (collectively, the "U.S.
Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Article VIII), for whom Merrill Lynch, Morgan Stanley &
Co. Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Lehman
Brothers Inc., J.P. Morgan Securities Inc., Salomon Brothers Inc, and Furman
Selz LLC are acting as representatives (in such capacity, the "U.S.
Representatives"), with respect to the sale by the Selling Stockholder of
25,500,000 shares of Common Stock, par value $0.01 per share, of the Company
("Common Stock"), and the purchase by the U.S. Underwriters, acting severally
and not jointly, of the respective number of shares of Common Stock set forth
opposite their names in Schedule A hereto (the "Initial U.S. Securities"), and
with respect to the grant by the Selling Stockholder to the U.S. Underwriters,
acting severally and not jointly, of the option described in Article I hereto to
purchase all or any part of the respective number of additional shares set forth
opposite their names in Schedule A hereto of Common Stock (the "Option U.S.
Securities") to cover over-allotments, if any, in each case except as may
otherwise be provided in the U.S. Pricing Agreement, as hereinafter defined.
The aggregate number of Initial U.S. Securities and all or any part of the
Option U.S. Securities are collectively hereinafter called the "U.S.
Securities."
It is understood that the Company and the Selling Stockholder are
concurrently entering into an agreement dated the date hereof (the
"International Purchase Agreement") providing for the offering by the Selling
Stockholder of 4,500,000 shares of Common Stock (the "Initial International
Securities" and, together with any additional shares of Common Stock offered
subject to over-allotments, the "International Securities") through arrangements
with certain underwriters internationally outside the United States and Canada
(the "International Managers") for which Merrill Lynch International, Morgan
Stanley & Co. International Limited, Goldman Sachs International, Bear, Stearns
International Limited, Lehman Brothers International (Europe), J.P. Morgan
Securities Ltd., Salomon Brothers International Limited, and Furman Selz LLC are
acting as lead managers (the "International Lead Managers"). It is understood
that the Selling Stockholder is not obligated to sell, and the U.S. Underwriters
are not obligated to purchase, any Initial U.S. Securities unless all of the
Initial International Securities are contemporaneously purchased by the
International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," and the U.S. Securities and the
International Securities are hereinafter collectively called the "Securities."
Prior to the purchase and public offering of the U.S. Securities by the
several U.S. Underwriters, the Selling Stockholder and the U.S. Representatives,
acting on behalf of the several U.S. Underwriters, shall enter into an agreement
substantially in the form of Exhibit A hereto (the "U.S. Pricing Agreement").
The U.S. Pricing Agreement may take the form of an exchange of any standard form
of written communication among the Selling Stockholder and the U.S.
Representatives and shall specify such applicable information as is indicated in
Exhibit A hereto.
2
<PAGE>
The offering of the U.S. Securities will be governed by this Agreement, as
supplemented by the U.S. Pricing Agreement. From and after the date of the
execution and delivery of the U.S. Pricing Agreement, this Agreement shall be
deemed to incorporate the U.S. Pricing Agreement. The date of the U.S. Pricing
Agreement is referred to as the "Representation Date." The initial public
offering price and the purchase price with respect to the International
Securities shall be set forth in a separate instrument (the "International
Pricing Agreement"), the form of which is attached to the International Purchase
Agreement.
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch, Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. (in
such capacity, the "Global Coordinators").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333- ) and related
preliminary prospectuses for the registration of the Securities under the
Securities Act of 1933, as amended (the "1933 Act"), has filed such amendments
thereto, if any, and such amended preliminary prospectuses as may have been
required to the date hereof, and will file such additional amendments thereto
and such amended prospectuses as may hereinafter be required. Such registration
statement (as amended, if applicable), the prospectus constituting part of the
Registration Statement which relates to the U.S. Securities and the prospectus
also constituting part of the Registration Statement which relates to the
International Securities (including in each case the information, if any, deemed
to be part thereof pursuant to Rule 430A(b) of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations") and all documents, if
any, incorporated by reference thereafter), as from time to time amended or
supplemented pursuant to the 1933 Act, are hereinafter referred to as the
"Registration Statement," the "U.S. Prospectus" and the "International
Prospectus," respectively, and the U.S. Prospectus and the International
Prospectus are hereinafter together called "Prospectuses" and, each
individually, a "Prospectus," except that if any revised prospectuses shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Securities which differs from the Prospectuses on file at the
Commission at the time the Registration Statement becomes effective (whether or
not such revised prospectus is required to be or is filed by the Company
pursuant to Rule 424(b) of the 1933 Act Regulations), the term "U.S. Prospectus"
and "International Prospectus" shall refer to each such revised prospectus from
and after the time it is first provided to the U.S. Underwriters or the
International Managers, as the case may be, for such use. Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the U.S. Prospectus, the International
Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system.
3
<PAGE>
I.
On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Selling
Stockholder agrees to sell to each U.S. Underwriter, severally and not jointly,
and each U.S. Underwriter, severally and not jointly, agrees to purchase from
the Selling Stockholder, at the price per share set forth in the U.S. Pricing
Agreement, the number of Initial U.S. Securities set forth in Schedule A
opposite the name of such U.S. Underwriter, plus any additional number of
Initial U.S. Securities which such U.S. Underwriter may become obligated to
purchase pursuant to the provisions of Article VIII hereof.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Selling
Stockholder hereby grants an option to the U.S. Underwriters, severally and not
jointly, to purchase up to the aggregate number of Option U.S. Securities set
forth opposite their respective names in Schedule A hereto at the price per
share set forth in Paragraph (2) of the U.S. Pricing Agreement. If the option
is exercised as to all or any portion of the Option U.S. Securities, the Selling
Stockholder will sell and each of the U.S. Underwriters, acting severally and
not jointly, will purchase from the Selling Stockholder the number of Option
U.S. Securities which bears the same proportion to the total number of Option
U.S. Securities to be purchased from the Selling Stockholder as the number of
Initial U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter bears to the total number of Initial U.S. Securities. The option
hereby granted will expire 30 days after the Representation Date, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial U.S. Securities upon notice by the U.S.
Representatives to the Selling Stockholder and the Company setting forth the
number of Option U.S. Securities as to which the several U.S. Underwriters are
then exercising the option and the time, date and place of payment and delivery
for such Option U.S. Securities. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the U.S. Representatives but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to Closing Time, as hereinafter defined, unless otherwise agreed
upon by you, the Selling Stockholder and the Company.
The purchase price per share to be paid by the several U.S.
Underwriters for the U.S. Securities shall be an amount equal to the initial
public offering price, less an amount per share to be determined by agreement
between the U.S. Representatives and the Selling Stockholder. The initial
public offering price per share of the U.S. Securities shall be a fixed price to
be determined by agreement between the U.S. Representatives and the Selling
Stockholder. The initial public offering price and the purchase price, when so
determined, shall be set forth in the U.S. Pricing Agreement. The price per
share for the International Securities to be purchased by the International
Managers pursuant to the International Purchase Agreement shall be identical to
the price per share for the U.S. Securities to be purchased by the U.S.
Underwriters hereunder.
4
<PAGE>
II.
The Company and the Selling Stockholder understand that the U.S.
Underwriters propose to make a public offering of the U.S. Securities upon the
terms set forth in the Prospectus as soon as the U.S. Representatives deem
advisable after the Registration Statement becomes effective and the U.S.
Pricing Agreement has been executed and delivered.
In accordance with the Selling Stockholder's obligations to the
Company under Section 3(g) of that certain Registration Rights Agreement, dated
March 12, 1995, between General Motors Corporation ("GM") and the Selling
Stockholder, as succeeded to by the Company pursuant to that certain Succession
Agreement, dated June 7, 1996, between GM and the Company, and Section 1(d) of
that certain Transfer Agreement dated March 12, 1995, between the Selling
Stockholder and GM, each Underwriter severally covenants that it will,
collectively with the other Underwriters, use its reasonable best efforts (i) to
effect a broad public distribution of the Securities and (ii) not to sell to any
one Person (or group of related Persons acting pursuant to a plan or
arrangement) (whether such Person (or group of related Persons acting pursuant
to a plan or arrangement) is buying for its own account or as a fiduciary on
behalf of one or more accounts) if (A) such sale is of Securities constituting
more than 2% of the Common Stock outstanding as of the date hereof or (B) such
Person (or group of related Persons acting pursuant to a plan or arrangement) is
a 5% Person, or, at any time prior to the time of such sale, has been designated
in a written list provided by GM to the U.S. Representatives as, to the
reasonable belief of GM, beneficially owning (as defined in Rule 13d-3 ("Rule
13d-3") of the Securities Exchange Act of 1934, as amended (the "1934 Act")) 2%
or more of the total voting power or total value of the Common Stock then
outstanding. As used herein, the term "5% Person" shall mean any Person (or
group of related Persons acting pursuant to a plan or arrangement) that,
directly or indirectly, beneficially owns (as defined in Rule 13d-3) shares of
Common Stock that constitute 5% or more of the total voting power or total value
of the Common Stock then outstanding. As used herein, the term "Person" shall
mean an individual, a partnership, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision thereof.
Each U.S. Underwriter acknowledges that pursuant to the International
Purchase Agreement, each of the International Managers has agreed to the
undertakings set forth in the immediately preceding paragraph. The U.S.
Underwriters agree to cooperate with the International Managers, as necessary or
appropriate, such that the distribution of the Securities is made in a manner
consistent with the purposes and intent of this Article II.
III.
Payment of the purchase price for, and delivery of certificates for,
or evidence of book-entry transfer of, the Initial U.S. Securities shall be made
at the offices of Vinson & Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross
Avenue, Dallas, Texas, or at such other place as shall be agreed upon by the
U.S. Representatives, the Company and the Selling Stockholder, at 9:00
5
<PAGE>
a.m. (Central time) on a date no later than the fourth business day (unless
postponed in accordance with Article VIII herein) following the Representation
Date, or such other time not later than ten business days after such date as
shall be agreed upon by the U.S. Representatives, the Company and the Selling
Stockholder (such time and date of payment and delivery being herein called
"Closing Time"). In addition, in the event that any or all of the Option U.S.
Securities are purchased by the U.S. Underwriters, payment of the purchase price
for, and delivery of certificates for, or evidence of book-entry transfer of,
such Option U.S. Securities shall be made at the above mentioned offices, or at
such other place as shall be agreed upon by the U.S. Representatives, the
Company and the Selling Stockholder, on each Date of Delivery as specified in
the notice from you to the Company and the Selling Stockholder. The Selling
Stockholder shall not be obligated to deliver any of the U.S. Securities to be
delivered at Closing Time or on a Date of Delivery except upon payment for all
the Securities to be purchased at such time or on such date as provided herein.
Payment shall be made to the Selling Stockholder by wire transfer of
immediately available funds to a bank account designated by the Selling
Stockholder, against delivery to the U.S. Representatives for the respective
accounts of the U.S. Underwriters of certificates for the U.S. Securities to be
purchased by them. Certificates for the Initial U.S. Securities and the Option
U.S. Securities shall be in such denominations and registered in such names as
the U.S. Representatives may request in writing at least one full business day
before Closing Time or the Date of Delivery, as the case may be. It is
understood that each U.S. Underwriter has authorized the U.S. Representatives,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the U.S. Securities which it has agreed to purchase. The
U.S. Representatives, individually and not as representatives of the U.S.
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the U.S. Securities to be purchased by any U.S. Underwriter whose
funds have not been received by Closing Time or the Date of Delivery, as the
case may be, but such payment shall not relieve such U.S. Underwriter from its
obligations hereunder. The certificates for the U.S. Securities will be made
available for examination and packaging by the U.S. Representatives not later
than 10:00 a.m. (Eastern time) on the last business day prior to Closing Time or
the Date of Delivery, as the case may be.
IV.
The several obligations of the Company and the Selling Stockholder and
the several obligations of the U.S. Underwriters hereunder are subject to the
condition that the Registration Statement, including any Rule 462(b)
Registration Statement, shall have become effective not later than the date
hereof.
The several obligations of the U.S. Underwriters hereunder are subject
to the following further conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for such
purpose shall be pending before or threatened by the Commission, and
there shall have been no material adverse change, or
6
<PAGE>
development involving in the current reasonable view of the Company's
management a prospective material adverse change, in the condition of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Registration Statement; and you shall have received, at
Closing Time, a certificate of an officer of the Company (acting on
behalf of the Company and without personal liability), dated the
Closing Time, to the foregoing effect. Such certificate will also
provide that the representations and warranties of the Company
contained herein are true and correct as of the Closing Time. The
officer may rely upon the best of his knowledge in making such
certification. You shall also have received, at Closing Time, a
certificate of an authorized agent of the Selling Stockholder (acting
on behalf of the Selling Stockholder and without personal liability),
dated the Closing Time, providing that the representations and
warranties of the Selling Stockholder contained herein are true and
correct as of the Closing Time; such authorized agent may rely upon
the best of his knowledge in making such certification.
(b) You shall have received the favorable opinion, dated as
of the Closing Time, of D. Gilbert Friedlander, General Counsel of the
Company, to the effect that:
(i) The Company is a corporation validly
existing and in good standing under the laws of the State
of Delaware, is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property
requires such qualification and has all requisite
corporate power and authority to own, lease and operate
its properties and to carry on its business as now being
conducted, except where the failure to be so qualified or
in good standing would not have a materially adverse
effect on the financial position of the Company and its
subsidiaries taken as a whole,
(ii) the authorized, issued and outstanding
capital stock of the Company conforms as to legal matters
to the description thereof contained in the U.S.
Prospectus,
(iii) the outstanding shares of Common Stock,
including without limitation the U.S. Securities sold by
the Selling Stockholder hereunder, have been duly
authorized and validly issued and are fully paid and
nonassessable,
(iv) this Agreement has been duly authorized,
executed and delivered by the Company,
(v) the execution, delivery and performance of
this Agreement will not contravene any provision of
applicable law or the Restated Certificate of
Incorporation or the Amended and Restated Bylaws of the
Company or any agreement or other instrument known to such
counsel and binding upon the Company, and no consent,
approval or authorization of any governmental body or
agency is required for the performance of this Agreement
other than the registration
7
<PAGE>
of the U.S. Securities under the 1933 Act and compliance
with the securities or Blue Sky Laws of various foreign
and state jurisdictions (as to which no opinion is
expressed),
(vi) the statements in the U.S. Prospectus in
the second and third paragraphs under "Risk Factors--
Dependence on Major Customer; Recent Changes in Pricing
and Terms," the statements in the U.S. Prospectus under
"Relationship Between the Company and General Motors," and
the statements in the U.S. Prospectus under "Description
of Capital Stock" and "Underwriting" (other than as to the
description of intersyndicate agreements and arrangements,
including the appointment of the Global Coordinators), if
applicable, insofar as such statements constitute a
summary of the legal matters or documents referred to
therein, fairly summarize the information called for with
respect to such legal matters and documents, and
(vii) after due inquiry, such counsel does not
know of any legal or governmental proceeding or
investigation pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of
the properties of the Company is subject which is required
to be described in the Registration Statement or the U.S.
Prospectus and is not so described or of any contract or
other document which is required to be described in the
Registration Statement or the U.S. Prospectus or to be
filed as an exhibit to the Registration Statement which is
not described or filed as required.
(c) You shall have received the favorable opinion, dated
as of the Closing Time, of Baker & Botts, L.L.P., counsel for the
Company, covering the matters referred to in (ii) (as to the number
and class of authorized capital stock only), (iii) (as to U.S.
Securities only), (iv), and (vi) (as to "Description of Capital Stock"
and "Underwriting" only) in (b) above.
(d) You shall have received the favorable opinion, dated
as of the Closing Time, of each of Vinson & Elkins L.L.P. and Skadden,
Arps, Slate, Meagher & Flom, counsels for the Underwriters, covering
the matters referred to in (ii) (as to the number and class of
authorized capital stock only), (iv) and (vi) (as to "Description of
Capital Stock" and "Underwriting" only) in (b) above.
(e) You shall have received the favorable opinion, dated
as of the Closing Time, of Jones, Day, Reavis & Pogue, counsel for the
Trustee, to the effect that:
(i) the Trustee has been appointed by the named
fiduciary of the Selling Stockholder (the "Named
Fiduciary") (as determined in accordance with Section
402(a) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), to manage the Securities
held by the Selling Stockholder and
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to exercise all rights, powers and privileges appurtenant
to such Securities (subject to the authority of the Named
Fiduciary to terminate such appointment and appoint one or
more other investment managers for any such Securities);
(ii) the Trustee has full power and authority to
execute and deliver this Agreement for the account and on
behalf of the Selling Stockholder and to so bind the
Selling Stockholder; and
(iii) upon the delivery of and payment for the
U.S. Securities as herein contemplated, each of the U.S.
Underwriters who has acquired U.S. Securities from the
Selling Stockholder in good faith and without notice of
any adverse claim within the meaning of the New York
Uniform Commercial Code will acquire such U.S. Securities
free of any adverse claim.
(f) Each counsel referred to in (b), (c) and (d) above
shall additionally state that, based upon the participation of such
counsel in the preparation of the Registration Statement and U.S.
Prospectus and any amendments or supplements thereto (but not
including, with respect to counsel referred to in (d) above, documents
incorporated therein by reference) and review and discussion of the
contents thereof (including documents incorporated therein by
reference), nothing has come to the attention of such counsel that
would lead such counsel to believe that the Registration Statement, at
the time it became effective or at the Representation Date, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the U.S. Prospectus, at the
Representation Date (unless the term "U.S. Prospectus" refers to a
prospectus which has been provided to the U.S. Underwriters by the
Company for use in connection with the offering of the U.S. Securities
which differs from the U.S. Prospectus on file at the Commission at
the Representation Date, in which case at the time it is first
provided to the U.S. Underwriters for such use) or at Closing Time,
included an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that such counsel need not make such
statement with respect to the financial statements and supporting
schedules and other financial information contained or incorporated by
reference into or omitted from the Registration Statement and the U.S.
Prospectus.
(g) You shall have received the favorable opinion, dated
as of the Closing Time, of Baker & Botts, L.L.P., to the effect that
the discussion set forth under the caption "Certain United States
Federal Tax Considerations for Non-U.S. Holders" in the U.S.
Prospectus accurately reflects such counsel's views on the matters
discussed therein and is based on reasonable interpretations of
existing law.
(h) You shall have received on the date of this Agreement
a letter dated such date and also at the Closing Time a letter dated
as of the Closing Time, in each case in
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form and substance satisfactory to you, from KPMG Peat Marwick LLP,
independent auditors, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the historical and pro forma financial
statements and certain historical and pro forma financial information
contained in or incorporated by reference into the Registration
Statement and the U.S. Prospectus.
(i) At Closing Time counsels for the Underwriters shall
have been furnished with such documents and opinions as they may
reasonably require for the purpose of enabling them to pass upon the
sale of the U.S. Securities as contemplated herein and related
proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and the Selling Stockholder in connection with the sale of the U.S.
Securities as herein contemplated shall be reasonably satisfactory in
form and substance to you and your counsel.
(j) In the event the U.S. Underwriters exercise their
option provided in Article I hereof to purchase all or any portion of
the Option U.S. Securities, the representations and warranties of the
Company contained herein and the statements in any certificates
furnished by the Company hereunder shall be true and correct as of
each Date of Delivery, and you shall have received:
(i) A certificate, dated such Date of Delivery,
of an officer of the Company (acting on behalf of the
Company and without personal liability) confirming that
the certificate of an officer of the Company delivered at
Closing Time pursuant to Article IV(a) hereof remains true
and correct as of such Date of Delivery, and a
certificate, dated such Date of Delivery, of an authorized
agent of the Selling Stockholder (acting on behalf of the
Selling Stockholder and without personal liability)
confirming that the certificate of an authorized agent of
the Selling Stockholder delivered at Closing Time pursuant
to Article IV(a) hereof remains true and correct as of
such Date of Delivery,
(ii) The favorable opinion of D. Gilbert
Friedlander, General Counsel of the Company, in form and
substance satisfactory to counsel for the Underwriters,
dated such Date of Delivery, relating to the Option U.S.
Securities and otherwise to the same effect as the opinion
required by Article IV(b) and (f) hereof,
(iii) The favorable opinion of Baker & Botts,
L.L.P., counsel for the Company, dated such Date of
Delivery, relating to the Option U.S. Securities and
otherwise to the same effect as the opinion required by
Article IV(c), (f) and (g) hereof,
(iv) The favorable opinion of each of Vinson &
Elkins L.L.P. and Skadden, Arps, Slate, Meagher & Flom,
counsels for the Underwriters, dated such
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Date of Delivery, relating to the Option U.S. Securities
and otherwise to the same effect as the opinion required
by Article IV(d) and (f) hereof, and
(v) The favorable opinion of Jones, Day, Reavis
& Pogue, counsel for the Trustee, dated such Date of
Delivery, relating to the Option U.S. Securities and
otherwise to the same effect as the opinion required by
Article IV(e) hereof, and
(vi) The letter from KPMG Peat Marwick LLP, in
form and substance satisfactory to you and dated such Date
of Delivery, substantially the same in scope and substance
as the letter furnished to you pursuant to Article IV(h)
hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not
more than five days prior to such Date of Delivery.
If any condition specified in this Article shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by you by notice to the Company and the Selling Stockholder at any time at or
prior to Closing Time or the Delivery Date of the Option U.S. Securities, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided in Article VIII.
V.
In further consideration of the agreements of the U.S. Underwriters
herein contained, the Company covenants as follows:
(a) To furnish you, without charge, three copies of the
Registration Statement as filed with the Commission (including
exhibits thereto and documents incorporated therein by reference) and
to each other U.S. Underwriter and the Selling Stockholder a copy of
the Registration Statement (without exhibits thereto but including
documents incorporated therein by reference) and, during the period
mentioned in paragraph (c), any supplements and amendments thereto as
you may reasonably request. The terms "supplement" and "amendment" or
"amend" as used in this Agreement shall include all documents
subsequently filed by the Company with the Commission pursuant to the
1934 Act, which are deemed to be incorporated by reference in the U.S.
Prospectus.
(b) Before amending or supplementing the Registration
Statement or the U.S. Prospectus, to furnish you and the Selling
Stockholder (or their respective counsel) a copy of each such proposed
amendment or supplement, unless otherwise directed by you or the
Selling Stockholder.
(c) If, during such period after the first date of the
public offering of the U.S. Securities as in the opinion of your
counsel the U.S. Prospectus is required by law to be delivered in
connection with sales by a U.S. Underwriter or dealer, any event shall
occur as a result of which it is necessary to amend or supplement the
U.S. Prospectus in order to
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<PAGE>
make the statements therein, in the light of the circumstances when
the U.S. Prospectus is delivered to a purchaser, not misleading, or if
it is necessary to amend or supplement the U.S. Prospectus to comply
with law, forthwith to prepare and furnish, at its own expense, to the
U.S. Underwriters and to the dealers (whose names and addresses you
will furnish to the Company) to which U.S. Securities may have been
sold by you on behalf of the U.S. Underwriters and to any other
dealers upon request, either amendments or supplements to the U.S.
Prospectus so that the statements in the U.S. Prospectus as so amended
or supplemented will not, in the light of the circumstances when the
U.S. Prospectus is delivered to a purchaser, be misleading or so that
the U.S. Prospectus will comply with law.
(d) To endeavor to qualify the Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions as
you shall reasonably request and to pay all expenses (including
reasonable fees and disbursements of counsel) in connection therewith.
(e) To make generally available to the Company's security
holders as soon as practicable an earnings statement covering the
twelve month period ending December 31, 1996, which shall satisfy the
provisions of Section 11(a) of the 1933 Act and the 1933 Act
Regulations.
(f) Not to sell, transfer or otherwise dispose of or
transfer (including any pledge and any disposition upon the
foreclosure of any pledge or any agreement to do any of the
foregoing), without the prior written consent of the Global
Coordinators acting on your behalf, any shares of Common Stock (or
securities convertible into or exchangeable or exercisable for such
shares) for 90 days following the date of the U.S. Prospectus,
provided that the Company shall not be precluded from (i) the issuance
of shares of Common Stock upon the conversion, exercise or exchange,
by the holder thereof, of options, warrants or other securities
convertible into or exercisable for the Common Stock pursuant to the
terms of such options, warrants or other securities, (ii) transfers
pursuant to the terms of any other agreement to issue shares of Common
Stock (or any securities convertible into or exchangeable or
exercisable for the Common Stock) in effect on the date of the
original filing of the Registration Statement with the Commission,
including any such agreement in connection with any previously
disclosed acquisition, merger, consolidation or other business
combination and (iii) transfers (including grants or issuances) under
or in connection with dividend reinvestment plans or employee benefit
plans of the Company (or a subsidiary of the Company).
In further consideration of the agreements of the Underwriters herein
contained, the Selling Stockholder covenants not to offer or sell, or solicit
offers to purchase, or transfer or otherwise dispose of (including any pledge
and any disposition upon the foreclosure of any pledge or any agreement to do
any of the foregoing), any shares of Common Stock (or securities convertible
into or exchangeable for such shares) (other than transfers to or for the
benefit of employee benefit plans of the Company or any of its affiliates) for
90 days following the date of the U.S. Prospectus,
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<PAGE>
without the prior written consent of the Global Coordinators acting on your
behalf; provided, that nothing contained in this Article V shall prevent the
sale of the Securities hereunder.
VI.
The Company represents and warrants to each U.S. Underwriter and the
Selling Stockholder that (i) this Agreement has been duly authorized, executed
and delivered by the Company, (ii) each document filed or to be filed pursuant
to the 1934 Act and incorporated by reference in the U.S. Prospectus complied or
will comply when so filed in all material respects with the 1934 Act and the
rules and regulations of the Commission thereunder, (iii) each Preliminary U.S.
Prospectus filed as part of the Registration Statement as originally filed or as
part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act and the 1933
Act Regulations, (iv) the Registration Statement and U.S. Prospectus complied on
the date the Registration Statement became effective, and will comply on the
Representation Date, in all material respects with the 1933 Act and the 1933 Act
Regulations and, as of such dates did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(v) none of the Company or any material subsidiary does business with the
government of Cuba or with any person or affiliate located in Cuba and the
Company and each material subsidiary has complied to the extent necessary with
all provisions of Section 517.075 of the Florida Securities and Investor
Protection Act; except that these representations and warranties do not apply to
statements or omissions in the Registration Statement or the U.S. Prospectus or
any preliminary U.S. Prospectus based upon information furnished to the Company
in writing by the Selling Stockholder or by any Underwriter through you
expressly for use therein.
The Selling Stockholder represents and warrants to the Company and
each U.S. Underwriter that (i) this Agreement and the U.S. Pricing Agreement
have been duly authorized, executed and delivered by the Selling Stockholder,
(ii) the Selling Stockholder has good and marketable title to the U.S.
Securities to be sold by the Selling Stockholder hereunder and full power, right
and authority to sell the U.S. Securities, and upon the delivery of and payment
for the U.S. Securities as herein contemplated, each of the U.S. Underwriters
will receive good and marketable title to the U.S. Securities purchased by it
from the Selling Stockholder, free and clear of any mortgage, pledge, lien,
security interest, encumbrance, claim or equity, (iii) any written information
furnished to the Company by the Selling Stockholder for use in the Registration
Statement, the U.S. Prospectus, any amendments or supplements thereto, or any
preliminary U.S. Prospectus does not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading and (iv) the Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock.
The Trustee represents and warrants to the Company and each U.S.
Underwriter that (i) the Trustee has been appointed by the named fiduciary of
the Selling Stockholder (the "Named Fiduciary") (as determined in accordance
with Section 402(a) of ERISA) to manage the Securities
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<PAGE>
held by the Selling Stockholder as described herein and to exercise all rights,
powers and privileges appurtenant to such Securities (subject to the authority
of the Named Fiduciary to terminate such appointment and appoint one or more
other investment managers for any such Securities); and (ii) the Trustee has
full power and authority to execute and deliver this Agreement for the account
and on behalf of the Selling Stockholder and to so bind the Selling Stockholder.
The Company agrees to indemnify and hold harmless each U.S.
Underwriter, the directors, partners and each person, if any, who controls any
U.S. Underwriter within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against (i) any and all losses, claims,
damages, liabilities and reasonable expenses arising out of any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the U.S. Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
U.S. Prospectus, or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any and all losses, claims, damages,
liabilities and reasonable expenses whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, provided that any such settlement is
effected with the written consent of the Company, and (iii) any and all expenses
whatsoever, as incurred (including the fees and disbursements of counsel chosen
by Merrill Lynch), reasonably incurred in investigating, preparing and defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under the preceding
clauses (i) or (ii), promptly after receipt of adequate documentation relating
thereto; provided, however, that this indemnity shall not apply to any such
losses, claims, damages, liabilities or expenses arising out of any such untrue
statement or omission or alleged untrue statement or omission that is based upon
information furnished to the Company in writing by any U.S. Underwriter through
the U.S. Representatives expressly for use therein; and provided that the
foregoing indemnity agreement with respect to any preliminary prospectuses shall
not inure to the benefit of any U.S. Underwriter from whom the person asserting
any such losses, claims, damages, liabilities or expenses purchased U.S.
Securities, or any person controlling such U.S. Underwriter, if it shall be
established that a copy of the U.S. Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of such U.S. Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the U.S. Securities to such person, and if the U.S.
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability, and if the Company had previously
furnished copies thereof to such U.S. Underwriter in the quantities reasonably
requested by such U.S. Underwriter. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
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<PAGE>
The Selling Stockholder agrees, to the extent permitted under
applicable law, to indemnify and hold harmless the U.S. Underwriters, their
directors, partners and each person, if any, who controls the U.S. Underwriters
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act to the same extent as the foregoing indemnity from the Company to each
U.S. Underwriter, but only with reference to information furnished to the
Company in writing by the Selling Stockholder expressly for use in the
Registration Statement, the U.S. Prospectus, any amendment or supplement
thereto, or any preliminary prospectuses. This indemnity agreement will be in
addition to any liability which the Selling Stockholder may otherwise have. No
claim against the assets of the Selling Stockholder shall be created by this
paragraph, except as and to the extent permitted by applicable law.
Each U.S. Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, each of its officers who sign the
Registration Statement, the Selling Stockholder, its trustees (including the
Trustee) and directors and each person, if any, who controls the Company or the
Selling Stockholder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act to the same extent as the foregoing indemnity from
the Company to each U.S. Underwriter, but only with reference to information
furnished to the Company in writing by such U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement, the U.S.
Prospectus, any amendment or supplement thereto, or any preliminary
prospectuses. This indemnity agreement will be in addition to any liability
which any U.S. Underwriter may otherwise have.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to any of the three preceding paragraphs, such person
(hereinafter called the indemnified party) shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the indemnifying
party) in writing; provided, however, that the omission so to notify the
indemnifying party shall not relieve the indemnifying party of any liability
which it may have to such indemnified party except to the extent that the
indemnifying party was materially prejudiced by such failure to notify and in
any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. The indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party shall have agreed in
writing to pay such fees and expenses, (ii) the indemnifying party shall have
failed to take reasonable steps necessary to defend diligently any claim within
ten calendar days after receiving written notice from the indemnified party that
the indemnified party believes the indemnifying party has failed to take such
steps or (iii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
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proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred after receipt of adequate documentation thereof.
In the case of any such separate firm for the U.S. Underwriters and such control
persons of U.S. Underwriters, such firm shall be designated in writing by
Merrill Lynch. In the case of any such separate firm for the Selling
Stockholder and such control persons of the Selling Stockholder, such firm shall
be designated in writing by the named fiduciary of the Selling Stockholder. In
the case of any such separate firm for the Company, and such directors, officers
and control persons of the Company, such firm shall be designated in writing by
the Company. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution could be sought
under this Article VI (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
If in any circumstance in which the fees and expenses of counsel are
at the expense of the indemnifying party and at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, such indemnifying party agrees that it shall
be liable for any settlement of the nature contemplated by clause (ii) of the
fourth paragraph of this Article VI effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by the
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into, and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
If the indemnification provided for in the fourth, fifth or sixth
paragraph of this Article VI is unavailable to an indemnified party in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholder on the one hand and
the U.S. Underwriters on the other from the offering of the U.S. Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and of the Selling Stockholder on the one hand and of the U.S.
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholder on the one hand and the U.S. Underwriters on
the other shall be deemed to be in the same proportions as the net proceeds from
the offering (before deducting expenses) received by the Company and the Selling
Stockholder bear
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to the total underwriting discounts and commissions received by the U.S.
Underwriters, in each case as set forth in the table on the cover of the U.S.
Prospectus. The relative fault of the Company, the Selling Stockholder and the
U.S. Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, by the Selling Stockholder or by the U.S. Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the U.S. Underwriters agree
that it would not be just and equitable if contribution pursuant to this Article
VI were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Article VI, the
aggregate contribution of the Selling Stockholder under this Article VI, will
not exceed the proceeds received by the Selling Stockholder from the U.S.
Securities sold by it and the Selling Stockholder shall not be required to
contribute under this Article VI in respect of any costs, expenses, losses,
damages or other liabilities unless the same arise with reference to any
information furnished to the Company in writing by the Trustee acting on behalf
of the Selling Stockholder expressly for use in the Registration Statement.
Notwithstanding the provisions of this Article VI, no U.S. Underwriter shall be
required to contribute any amount in excess of the underwriting discount or
commission applicable to the Securities purchased by such U.S. Underwriter
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The U.S.
Underwriters' obligations to contribute pursuant to this Article VI are several
in proportion to the respective number of U.S. Securities purchased by each
Underwriter, and not joint. No party contributing pursuant to this Article VI
shall be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent such contributing party agrees
to contribute to that amount paid or payable by the indemnified party as a
result of any loss or liability by reason of such settlement.
As between the Company and the Selling Stockholder on the one hand and
the U.S. Underwriters on the other, the Company will pay all expenses incident
to the performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters (but excluding any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the
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Securities to the U.S. Underwriters and the transfer of the Securities between
the U.S. Underwriters and the International Managers), (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under U.S. state securities or blue sky laws and
foreign securities laws in accordance with the provisions hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of
the Blue Sky Memorandum and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus and of the
Prospectuses and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Memorandum
and any supplement thereto, (viii) the fees and expenses of any transfer agent
or registrar for the Securities, and (ix) the filing fees incident to the review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the Securities. This paragraph does not supersede any agreement between the
Company and the Selling Stockholder with respect to the allocation between them
of any such expenses. The Selling Stockholder will pay all stock or other
transfer taxes and any stamp or other duties payable upon the sale, issuance or
delivery of the Securities to the U.S. Underwriters and the transfer of the
Securities between the U.S. Underwriters and the International Managers.
The representations, warranties and agreements in this Article VI
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any U.S. Underwriter or any person controlling any U.S. Underwriter or by on
behalf of the Company, its officers and directors or any other person
controlling the Company and (iii) acceptance of any payment for any of the
Securities.
VII.
This Agreement shall be subject to termination in your absolute
discretion, by notice given to the Company and the Selling Stockholder, if prior
to the Closing Time (i) there has been, since the Representation Time or since
the respective dates as of which information is given in the U.S. Prospectus,
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, otherwise than as set forth or contemplated in the
U.S. Prospectus, the effect of which is such as to make it, in the judgment of
the U.S. Representatives, impracticable to market the Securities or to enforce
contracts for the sale of Securities, (ii) trading in securities generally or
trading in the Common Stock on the New York Stock Exchange or the London Stock
Exchange shall have been suspended or materially limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices have been
required, by any of such exchanges or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority,
(iii) a general moratorium on commercial banking activities in New York or
London shall have been declared by either Federal, New York State or British
authorities, as applicable, or (iv) there shall have occurred any material
outbreak or escalation of hostilities or other calamity the effect of which on
the financial markets of the United States or London is such as to make it, in
your reasonable judgment, impracticable to market the Securities or enforce
contracts for the sale of the Securities.
18
<PAGE>
VIII.
This Agreement shall become effective when notification of the
effectiveness of the Registration Statement has been released by the Commission
and you and the Selling Stockholder shall have agreed upon the public offering
price. If the public offering price and the purchase price of the U.S.
Securities shall not have been agreed upon, the U.S. Pricing Agreement shall not
have been executed and delivered by all parties thereto, or the International
Pricing Agreement shall not have been executed and delivered by all parties
thereto, prior to 5:00 p.m., New York Time, on the seventh full business day
after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability on the part of the U.S.
Underwriters, the Company or the Selling Stockholder, except as set forth
herein.
If as of the Closing Time, any one or more of the U.S. Underwriters
shall fail or refuse to purchase the Initial U.S. Securities which it or they
have agreed to purchase hereunder on such date, and the aggregate number of the
Initial U.S. Securities which such defaulting U.S. Underwriter or U.S.
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Initial U.S. Securities to be purchased on such
date, the other U.S. Underwriters shall be obligated severally in the
proportions which the number of Initial U.S. Securities set forth opposite their
names in Schedule A bear to the aggregate number of Initial U.S. Securities set
forth opposite the names of all such non-defaulting U.S. Underwriters, or in
such other proportions as you may specify, to purchase the Initial U.S.
Securities which such defaulting U.S. Underwriter or U.S. Underwriters agreed
but failed or refused to purchase on such date; provided that in no event shall
the number of Initial U.S. Securities which any U.S. Underwriter has agreed to
purchase pursuant to Schedule A be increased pursuant to this Article VIII by an
amount in excess of one-ninth of such number without the written consent of such
U.S. Underwriter. If, at the Closing Time, any U.S. Underwriter or U.S.
Underwriters shall fail or refuse to purchase the Initial U.S. Securities and
the aggregate number of the Initial U.S. Securities with respect to which such
default occurs is more than one-tenth of the aggregate number of the Initial
U.S. Securities to be purchased on such date, and arrangements satisfactory to
you and the Company and the Selling Stockholder for the purchase of such U.S.
Securities are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting U.S. Underwriter,
the Company or the Selling Stockholder. In any such case you or the Company and
the Selling Stockholder shall have the right to postpone the Closing Time, but
in no event for longer than seven days, in order that the required changes, if
any, in the Registration Statement and in the U.S. Prospectus or in any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting U.S. Underwriter from liability in
respect of any default of such U.S. Underwriter under this Agreement.
If this Agreement shall be terminated by the U.S. Underwriters, or any
of them, because of any failure or refusal on the part of the Company or the
Selling Stockholder to comply with the terms or to fulfill any of the conditions
of this Agreement to be complied with or fulfilled by the Company or the Selling
Stockholder, or if for any reason the Company or the Selling
19
<PAGE>
Stockholder shall be unable to perform its obligations under this Agreement, the
party who failed or refused to comply or fulfill any such condition will
reimburse the U.S. Underwriters or such U.S. Underwriters as have so terminated
this Agreement with respect to themselves, severally, for all out-of-pocket
expenses (including the fees and disbursements of their counsel) reasonably
incurred by such U.S. Underwriters in connection with this Agreement or the
offering contemplated hereunder; provided, that the provisions of Article VI
shall survive such termination.
20
<PAGE>
This Agreement may be signed in two or more counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
Very truly yours,
ELECTRONIC DATA SYSTEMS
CORPORATION
By:______________________________
Name:_________________________
Title:________________________
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: United States Trust Company
of New York, as Trustee
By:_____________________________
Name:________________________
Title:_______________________
21
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
FURMAN SELZ LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:_______________________________
Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A to
the U.S. Purchase Agreement.
22
<PAGE>
EXHIBIT A
25,500,000 Shares
ELECTRONIC DATA SYSTEMS CORPORATION
(a Delaware corporation)
Common Stock
(Par Value $0.01 Per Share)
PRICING AGREEMENT
-----------------
, 1996
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
FURMAN SELZ LLC
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Reference is made to the U.S. Purchase Agreement, dated
, 1996 (the "U.S. Purchase Agreement"), relating to the purchase by the several
U.S. Underwriters named in Schedule A thereto (the "U.S. Underwriters"), of the
above shares of Common Stock (the "Securities") of Electronic Data Systems
Corporation (the "Company").
A-1
<PAGE>
Pursuant to Article I of the U.S. Purchase Agreement, the Selling
Stockholder agrees with each U.S. Underwriter as follows:
(1) The public offering price per share for the Securities, determined
as provided in said Article I, shall be $ .
(2) The purchase price per share for the Initial U.S. Securities to be
paid by the several U.S. Underwriters, and the purchase price per share for the
Option U.S. Securities, shall be $ , being an amount equal to the
public offering price set forth above less $ per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Selling Stockholder a counterpart
hereof (with a copy to the Company), whereupon this instrument, along with all
counterparts, will become a binding agreement among the U.S. Underwriters and
the Selling Stockholder in accordance with its terms.
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: United States Trust Company
of New York, as Trustee
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
A-2
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
FURMAN SELZ LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:
----------------------------
Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A
to the U.S. Purchase Agreement.
A-3
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Name of Number of Initial Number of Option
U.S. Underwriter U.S. Securities U.S. Securities
- --------------------------------------- ----------------- ----------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Lehman Brothers Inc.
J.P. Morgan Securities Inc.
Salomon Brothers Inc
Furman Selz LLC
</TABLE>
A-4
<PAGE>
EXHIBIT 1(b)
4,500,000 Shares
ELECTRONIC DATA SYSTEMS CORPORATION
(a Delaware corporation)
Common Stock
(Par Value $0.01 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
, 1996
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
J.P. MORGAN SECURITIES LTD.
SALOMON BROTHERS INTERNATIONAL LIMITED
FURMAN SELZ LLC
as International Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Electronic Data Systems Corporation, a Delaware corporation (the
"Company"), and United States Trust Company of New York (the "Trustee"), as
trustee of the General Motors Hourly Plan Special Trust established under the
General Motors Hourly-Rate Employees Pension Plan (the "Hourly Plan"), for the
account and on behalf of the Hourly Plan (the "Selling Stockholder"), confirm
their respective agreements with Merrill Lynch International ("Merrill Lynch
International") and each of the other underwriters named in Schedule A hereto
(collectively, the "International
1
<PAGE>
Managers," which term shall also include any underwriter substituted as
hereinafter provided in Article VIII), for whom Merrill Lynch International,
Morgan Stanley & Co. International Limited, Goldman Sachs International, Bear,
Stearns International Limited, Lehman Brothers International (Europe), J.P.
Morgan Securities Ltd., Salomon Brothers International Limited, and Furman Selz
LLC are acting as Managers (in such capacity, the "International Lead
Managers"), with respect to the sale by the Selling Stockholder of 4,500,000
shares of Common Stock, par value $0.01 per share, of the Company ("Common
Stock"), and the purchase by the International Managers, acting severally and
not jointly, of the respective number of shares of Common Stock set forth
opposite their names in Schedule A hereto (the "Initial International
Securities"), and with respect to the grant by the Selling Stockholder to the
International Managers, acting severally and not jointly, of the option
described in Article I hereto to purchase all or any part of the respective
number of additional shares set forth opposite their names in Schedule A hereto
of Common Stock (the "Option International Securities") to cover over-
allotments, if any, in each case except as may otherwise be provided in the
International Pricing Agreement, as hereinafter defined. The aggregate number
of Initial International Securities and all or any part of the Option
International Securities are collectively hereinafter called the "International
Securities."
It is understood that the Company and the Selling Stockholder are
concurrently entering into an agreement dated the date hereof (the "U.S.
Purchase Agreement") providing for the offering by the Selling Stockholder of
25,500,000 shares of Common Stock (the "Initial U.S. Securities" and, together
with any additional shares of Common Stock offered subject to over-allotments,
the "U.S. Securities") through arrangements with certain underwriters in the
United States and Canada (the "U.S. Underwriters") for which Merrill Lynch &
Co., Merrill Lynch, Pierce Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Lehman Brothers
Inc., J.P. Morgan Securities Inc., Salomon Brothers Inc, and Furman Selz LLC are
acting as representatives (the "U.S. Representatives"). It is understood that
the Selling Stockholder is not obligated to sell, and the International
Underwriters are not obligated to purchase, any Initial International Securities
unless all of the Initial U.S. Securities are contemporaneously purchased by the
U.S. Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters," and the International Securities and the
U.S. Securities are hereinafter collectively called the "Securities."
Prior to the purchase and public offering of the International Securities
by the several International Managers, the Selling Stockholder and the
International Lead Managers, acting on behalf of the several International
Managers, shall enter into an agreement substantially in the form of Exhibit A
hereto (the "International Pricing Agreement"). The International Pricing
Agreement may take the form of an exchange of any standard form of written
communication among the Selling Stockholder and the International Lead Managers
and shall specify such applicable information as is indicated in Exhibit A
hereto. The offering of the International Securities will be governed by this
Agreement, as supplemented by the International Pricing Agreement. From and
after the date of the execution and delivery of the International Pricing
Agreement, this Agreement shall be deemed to
2
<PAGE>
incorporate the International Pricing Agreement. The date of the International
Pricing Agreement is referred to as the "Representation Date." The initial
public offering price and the purchase price with respect to the U.S. Securities
shall be set forth in a separate instrument (the "U.S. Pricing Agreement"), the
form of which is attached to the U.S. Purchase Agreement.
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. (in such capacity,
the "Global Coordinators").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333- ) and related
preliminary prospectuses for the registration of the Securities under the
Securities Act of 1933, as amended (the "1933 Act"), has filed such amendments
thereto, if any, and such amended preliminary prospectuses as may have been
required to the date hereof, and will file such additional amendments thereto
and such amended prospectuses as may hereinafter be required. Such registration
statement (as amended, if applicable), the prospectus constituting part of the
Registration Statement which relates to the International Securities and the
prospectus also constituting part of the Registration Statement which relates to
the U.S. Securities (including in each case the information, if any, deemed to
be part thereof pursuant to Rule 430A(b) of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations") and all documents, if
any, incorporated by reference thereafter), as from time to time amended or
supplemented pursuant to the 1933 Act, are hereinafter referred to as the
"Registration Statement," the "International Prospectus" and the "U.S.
Prospectus," respectively, and the International Prospectus and the U.S.
Prospectus are hereinafter together called "Prospectuses" and, each
individually, a "Prospectus," except that if any revised prospectuses shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Securities which differs from the Prospectuses on file at the
Commission at the time the Registration Statement becomes effective (whether or
not such revised prospectus is required to be or is filed by the Company
pursuant to Rule 424(b) of the 1933 Act Regulations), the term "International
Prospectus" and "U.S. Prospectus" shall refer to each such revised prospectus
from and after the time it is first provided to the International Managers or
the U.S. Underwriters, as the case may be, for such use. Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the International Prospectus, the U.S.
Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system.
3
<PAGE>
I.
On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Selling
Stockholder agrees to sell to each International Manager, severally and not
jointly, and each International Manager, severally and not jointly, agrees to
purchase from the Selling Stockholder, at the price per share set forth in the
International Pricing Agreement, the number of Initial International Securities
set forth in Schedule A opposite the name of such International Manager, plus
any additional number of Initial International Securities which such
International Manager may become obligated to purchase pursuant to the
provisions of Article VIII hereof.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Selling
Stockholder hereby grants an option to the International Managers, severally and
not jointly, to purchase up to the aggregate number of Option International
Securities set forth opposite their respective names in Schedule A hereto at the
price per share set forth in Paragraph (2) of the International Pricing
Agreement. If the option is exercised as to all or any portion of the Option
International Securities, the Selling Stockholder will sell and each of the
International Managers, acting severally and not jointly, will purchase from the
Selling Stockholder the number of Option International Securities which bears
the same proportion to the total number of Option International Securities to be
purchased from the Selling Stockholder as the number of Initial International
Securities set forth in Schedule A opposite the name of such International
Manager bears to the total number of Initial International Securities. The
option hereby granted will expire 30 days after the Representation Date, and may
be exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Initial International Securities upon notice by the
International Lead Managers to the Selling Stockholder and the Company setting
forth the number of Option International Securities as to which the several
International Managers are then exercising the option and the time, date and
place of payment and delivery for such Option International Securities. Any
such time and date of delivery (a "Date of Delivery") shall be determined by the
International Lead Managers but shall not be later than seven full business days
after the exercise of said option, nor in any event prior to Closing Time, as
hereinafter defined, unless otherwise agreed upon by you, the Selling
Stockholder and the Company.
The purchase price per share to be paid by the several International
Managers for the International Securities shall be an amount equal to the
initial public offering price, less an amount per share to be determined by
agreement between the International Lead Managers and the Selling Stockholder.
The initial public offering price per share of the International Securities
shall be a fixed price to be determined by agreement between the International
Lead Managers and the Selling Stockholder. The initial public offering price
and the purchase price, when so determined, shall be set forth in the
International Pricing Agreement. The price per share for the U.S. Securities to
be purchased by the U.S. Underwriters pursuant to the U.S. Purchase Agreement
shall be identical to the price per share for the International Securities to be
purchased by the International Managers hereunder.
4
<PAGE>
II.
The Company and the Selling Stockholder understand that the
International Managers propose to make a public offering of the International
Securities upon the terms set forth in the Prospectus as soon as the
International Lead Managers deem advisable after the Registration Statement
becomes effective and the International Pricing Agreement has been executed and
delivered.
In accordance with the Selling Stockholder's obligations to the
Company under Section 3(g) of that certain Registration Rights Agreement, dated
March 12, 1995, between General Motors Corporation ("GM") and the Selling
Stockholder, as succeeded to by the Company pursuant to that certain Succession
Agreement, dated June 7, 1996, between GM and the Company, and Section 1(d) of
that certain Transfer Agreement dated March 12, 1995, between the Selling
Stockholder and GM, each Underwriter severally covenants that it will,
collectively with the other Underwriters, use its reasonable best efforts (i) to
effect a broad public distribution of the Securities and (ii) not to sell to any
one Person (or group of related Persons acting pursuant to a plan or
arrangement) (whether such Person (or group of related Persons acting pursuant
to a plan or arrangement) is buying for its own account or as a fiduciary on
behalf of one or more accounts) if (A) such sale is of Securities constituting
more than 2% of the Common Stock outstanding as of the date hereof or (B) such
Person (or group of related Persons acting pursuant to a plan or arrangement) is
a 5% Person, or, at any time prior to the time of such sale, has been designated
in a written list provided by GM to the International Lead Managers as, to the
reasonable belief of GM, beneficially owning (as defined in Rule 13d-3 ("Rule
13d-3") of the Securities Exchange Act of 1934, as amended (the "1934 Act")) 2%
or more of the total voting power or total value of the Common Stock then
outstanding. As used herein, the term "5% Person" shall mean any Person (or
group of related Persons acting pursuant to a plan or arrangement) that,
directly or indirectly, beneficially owns (as defined in Rule 13d-3) shares of
Common Stock that constitute 5% or more of the total voting power or total value
of the Common Stock then outstanding. As used herein, the term "Person" shall
mean an individual, a partnership, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision thereof.
Each International Manager acknowledges that pursuant to the U.S.
Purchase Agreement, each of the U.S. Underwriters has agreed to the undertakings
set forth in the immediately preceding paragraph. The International Managers
agree to cooperate with the U.S. Underwriters, as necessary or appropriate, such
that the distribution of the Securities is made in a manner consistent with the
purposes and intent of this Article II.
III.
Payment of the purchase price for, and delivery of certificates for,
or evidence of book-entry transfer of, the Initial International Securities
shall be made at the offices of Vinson &
5
<PAGE>
Elkins L.L.P., 3700 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas, or at
such other place as shall be agreed upon by the International Lead Managers, the
Company and the Selling Stockholder, at 9:00 a.m. (Central time) on a date no
later than the fourth business day (unless postponed in accordance with Article
VIII herein) following the Representation Date, or such other time not later
than ten business days after such date as shall be agreed upon by the
International Lead Managers, the Company and the Selling Stockholder (such time
and date of payment and delivery being herein called "Closing Time"). In
addition, in the event that any or all of the Option International Securities
are purchased by the International Managers, payment of the purchase price for,
and delivery of certificates for, or evidence of book-entry transfer of, such
Option International Securities shall be made at the above mentioned offices, or
at such other place as shall be agreed upon by the International Lead Managers,
the Company and the Selling Stockholder, on each Date of Delivery as specified
in the notice from you to the Company and the Selling Stockholder. The Selling
Stockholder shall not be obligated to deliver any of the International
Securities to be delivered at Closing Time or on a Date of Delivery except upon
payment for all the Securities to be purchased at such time or on such date as
provided herein.
Payment shall be made to the Selling Stockholder by wire transfer of
immediately available funds to a bank account designated by the Selling
Stockholder, against delivery to the International Lead Managers for the
respective accounts of the International Managers of certificates for the
International Securities to be purchased by them. Certificates for the Initial
International Securities and the Option International Securities shall be in
such denominations and registered in such names as the International Lead
Managers may request in writing at least one full business day before Closing
Time or the Date of Delivery, as the case may be. It is understood that each
International Manager has authorized the International Lead Managers, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the International Securities which it has agreed to purchase. The
International Lead Managers, individually and not as representatives of the
International Managers, may (but shall not be obligated to) make payment of the
purchase price for the International Securities to be purchased by any
International Manager whose funds have not been received by Closing Time or the
Date of Delivery, as the case may be, but such payment shall not relieve such
International Manager from its obligations hereunder. The certificates for the
International Securities will be made available for examination and packaging by
the International Lead Managers not later than 10:00 a.m. (Eastern time) on the
last business day prior to Closing Time or the Date of Delivery, as the case may
be.
IV.
The several obligations of the Company and the Selling Stockholder and
the several obligations of the International Managers hereunder are subject to
the condition that the Registration Statement, including any Rule 462(b)
Registration Statement, shall have become effective not later than the date
hereof.
The several obligations of the International Managers hereunder are
subject to the following further conditions:
6
<PAGE>
(a) No stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for such purpose shall be
pending before or threatened by the Commission, and there shall have been
no material adverse change, or development involving in the current
reasonable view of the Company's management a prospective material adverse
change, in the condition of the Company and its subsidiaries, taken as a
whole, from that set forth in the Registration Statement; and you shall
have received, at Closing Time, a certificate of an officer of the Company
(acting on behalf of the Company and without personal liability), dated the
Closing Time, to the foregoing effect. Such certificate will also provide
that the representations and warranties of the Company contained herein are
true and correct as of the Closing Time. The officer may rely upon the best
of his knowledge in making such certification. You shall also have
received, at Closing Time, a certificate of an authorized agent of the
Selling Stockholder (acting on behalf of the Selling Stockholder and
without personal liability), dated the Closing Time, providing that the
representations and warranties of the Selling Stockholder contained herein
are true and correct as of the Closing Time; such authorized agent may rely
upon the best of his knowledge in making such certification.
(b) You shall have received the favorable opinion, dated as of the
Closing Time, of D. Gilbert Friedlander, General Counsel of the Company, to
the effect that:
(i) The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware, is duly qualified
to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification and has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, except where the
failure to be so qualified or in good standing would not have a
materially adverse effect on the financial position of the Company
and its subsidiaries taken as a whole,
(ii) the authorized, issued and outstanding capital stock of the
Company conforms as to legal matters to the description thereof
contained in the International Prospectus,
(iii) the outstanding shares of Common Stock, including without
limitation the International Securities sold by the Selling
Stockholder hereunder, have been duly authorized and validly issued
and are fully paid and nonassessable,
(iv) this Agreement has been duly authorized, executed and
delivered by the Company,
(v) the execution, delivery and performance of this Agreement
will not contravene any provision of applicable law or the Restated
Certificate of Incorporation or the Amended and Restated Bylaws of
the Company or any
7
<PAGE>
agreement or other instrument known to such counsel and binding upon
the Company, and no consent, approval or authorization of any
governmental body or agency is required for the performance of this
Agreement other than the registration of the International
Securities under the 1933 Act and compliance with the securities or
Blue Sky Laws of various foreign and state jurisdictions (as to
which no opinion is expressed),
(vi) the statements in the International Prospectus in the second
and third paragraphs under "Risk Factors--Dependence on Major
Customer; Recent Changes in Pricing and Terms," the statements in
the International Prospectus under "Relationship Between the Company
and General Motors," and the statements in the International
Prospectus under "Description of Capital Stock" and "Underwriting"
(other than as to the description of intersyndicate agreements and
arrangements, including the appointment of the Global Coordinators),
if applicable, insofar as such statements constitute a summary of
the legal matters or documents referred to therein, fairly summarize
the information called for with respect to such legal matters and
documents, and
(vii) after due inquiry, such counsel does not know of any legal
or governmental proceeding or investigation pending or threatened to
which the Company or any of its subsidiaries is a party or to which
any of the properties of the Company is subject which is required to
be described in the Registration Statement or the International
Prospectus and is not so described or of any contract or other
document which is required to be described in the Registration
Statement or the International Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or
filed as required.
(c) You shall have received the favorable opinion, dated as of the
Closing Time, of Baker & Botts, L.L.P., counsel for the Company, covering
the matters referred to in (ii) (as to the number and class of authorized
capital stock only), (iii) (as to International Securities only), (iv), and
(vi) (as to "Description of Capital Stock" and "Underwriting" only) in (b)
above.
(d) You shall have received the favorable opinion, dated as of the
Closing Time, of each of Vinson & Elkins L.L.P. and Skadden, Arps, Slate,
Meagher & Flom, counsels for the Underwriters, covering the matters
referred to in (ii) (as to the number and class of authorized capital stock
only), (iv) and (vi) (as to "Description of Capital Stock" and
"Underwriting" only) in (b) above.
(e) You shall have received the favorable opinion, dated as of the
Closing Time, of Jones, Day, Reavis & Pogue, counsel for the Trustee, to
the effect that:
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(i) the Trustee has been appointed by the named fiduciary of the
Selling Stockholder (the "Named Fiduciary") (as determined in
accordance with Section 402(a) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), to manage the
Securities held by the Selling Stockholder and to exercise all
rights, powers and privileges appurtenant to such Securities
(subject to the authority of the Named Fiduciary to terminate such
appointment and appoint one or more other investment managers for
any such Securities);
(ii) the Trustee has full power and authority to execute and
deliver this Agreement for the account and on behalf of the Selling
Stockholder and to so bind the Selling Stockholder; and
(iii) upon the delivery of and payment for the International
Securities as herein contemplated, each of the International
Managers who has acquired International Securities from the Selling
Stockholder in good faith and without notice of any adverse claim
within the meaning of the New York Uniform Commercial Code will
acquire such International Securities free of any adverse claim.
(f) Each counsel referred to in (b), (c) and (d) above shall
additionally state that, based upon the participation of such counsel in
the preparation of the Registration Statement and International Prospectus
and any amendments or supplements thereto (but not including, with respect
to counsel referred to in (d) above, documents incorporated therein by
reference) and review and discussion of the contents thereof (including
documents incorporated therein by reference), nothing has come to the
attention of such counsel that would lead such counsel to believe that the
Registration Statement, at the time it became effective or at the
Representation Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the International
Prospectus, at the Representation Date (unless the term "International
Prospectus" refers to a prospectus which has been provided to the
International Managers by the Company for use in connection with the
offering of the International Securities which differs from the
International Prospectus on file at the Commission at the Representation
Date, in which case at the time it is first provided to the International
Managers for such use) or at Closing Time, included an untrue statement of
a material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that such counsel need
not make such statement with respect to the financial statements and
supporting schedules and other financial information contained or
incorporated by reference into or omitted from the Registration Statement
and the International Prospectus.
(g) You shall have received the favorable opinion, dated as of the
Closing Time, of Baker & Botts, L.L.P., to the effect that the discussion
set forth under the caption
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"Certain United States Federal Tax Considerations for Non-U.S. Holders" in
the International Prospectus accurately reflects such counsel's views on
the matters discussed therein and is based on reasonable interpretations
of existing law.
(h) You shall have received on the date of this Agreement a letter
dated such date and also at the Closing Time a letter dated as of the
Closing Time, in each case in form and substance satisfactory to you, from
KPMG Peat Marwick LLP, independent auditors, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the historical and pro forma
financial statements and certain historical and pro forma financial
information contained in or incorporated by reference into the
Registration Statement and the International Prospectus.
(i) At Closing Time counsels for the Underwriters shall have been
furnished with such documents and opinions as they may reasonably require
for the purpose of enabling them to pass upon the sale of the
International Securities as contemplated herein and related proceedings,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company and the Selling Stockholder in
connection with the sale of the International Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you
and your counsel.
(j) In the event the International Managers exercise their option
provided in Article I hereof to purchase all or any portion of the Option
International Securities, the representations and warranties of the
Company contained herein and the statements in any certificates furnished
by the Company hereunder shall be true and correct as of each Date of
Delivery, and you shall have received:
(i) A certificate, dated such Date of Delivery, of an officer of
the Company (acting on behalf of the Company and without personal
liability) confirming that the certificate of an officer of the
Company delivered at Closing Time pursuant to Article IV(a) hereof
remains true and correct as of such Date of Delivery, and a
certificate, dated such Date of Delivery, of an authorized agent of
the Selling Stockholder (acting on behalf of the Selling Stockholder
and without personal liability) confirming that the certificate of an
authorized agent of the Selling Stockholder delivered at Closing Time
pursuant to Article IV(a) hereof remains true and correct as of such
Date of Delivery,
(ii) The favorable opinion of D. Gilbert Friedlander, General
Counsel of the Company, in form and substance satisfactory to counsel
for the Managers, dated such Date of Delivery, relating to the Option
International Securities and otherwise to the same effect as the
opinion required by Article IV(b) and (f) hereof,
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(iii) The favorable opinion of Baker & Botts, L.L.P., counsel for
the Company, dated such Date of Delivery, relating to the Option
International Securities and otherwise to the same effect as the
opinion required by Article IV(c), (f) and (g) hereof,
(iv) The favorable opinion of each of Vinson & Elkins L.L.P. and
Skadden, Arps, Slate, Meagher & Flom, counsels for the Underwriters,
dated such Date of Delivery, relating to the Option International
Securities and otherwise to the same effect as the opinion required
by Article IV(d) and (f) hereof, and
(v) The favorable opinion of Jones, Day, Reavis & Pogue, counsel
for the Trustee, dated such Date of Delivery, relating to the Option
International Securities and otherwise to the same effect as the
opinion required by Article IV(e) hereof, and
(vi) The letter from KPMG Peat Marwick LLP, in form and substance
satisfactory to you and dated such Date of Delivery, substantially
the same in scope and substance as the letter furnished to you
pursuant to Article IV(h) hereof, except that the "specified date" in
the letter furnished pursuant to this paragraph shall be a date not
more than five days prior to such Date of Delivery.
If any condition specified in this Article shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by you by notice to the Company and the Selling Stockholder at any time at or
prior to Closing Time or the Delivery Date of the Option International
Securities, as the case may be, and such termination shall be without liability
of any party to any other party except as provided in Article VIII.
V.
In further consideration of the agreements of the International
Managers herein contained, the Company covenants as follows:
(a) To furnish you, without charge, three copies of the
Registration Statement as filed with the Commission (including exhibits
thereto and documents incorporated therein by reference) and to each
other International Manager and the Selling Stockholder a copy of the
Registration Statement (without exhibits thereto but including documents
incorporated therein by reference) and, during the period mentioned in
paragraph (c), any supplements and amendments thereto as you may
reasonably request. The terms "supplement" and "amendment" or "amend" as
used in this Agreement shall include all documents subsequently filed by
the Company with the Commission pursuant to the 1934 Act, which are
deemed to be incorporated by reference in the International Prospectus.
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<PAGE>
(b) Before amending or supplementing the Registration Statement
or the International Prospectus, to furnish you and the Selling
Stockholder (or their respective counsel) a copy of each such proposed
amendment or supplement, unless otherwise directed by you or the Selling
Stockholder.
(c) If, during such period after the first date of the public
offering of the International Securities as in the opinion of your
counsel the International Prospectus is required by law to be delivered
in connection with sales by a International Manager or dealer, any event
shall occur as a result of which it is necessary to amend or supplement
the International Prospectus in order to make the statements therein, in
the light of the circumstances when the International Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to amend
or supplement the International Prospectus to comply with law, forthwith
to prepare and furnish, at its own expense, to the International Managers
and to the dealers (whose names and addresses you will furnish to the
Company) to which International Securities may have been sold by you on
behalf of the International Managers and to any other dealers upon
request, either amendments or supplements to the International Prospectus
so that the statements in the International Prospectus as so amended or
supplemented will not, in the light of the circumstances when the
International Prospectus is delivered to a purchaser, be misleading or so
that the International Prospectus will comply with law.
(d) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request and to pay all expenses (including reasonable fees and
disbursements of counsel) in connection therewith.
(e) To make generally available to the Company's security holders
as soon as practicable an earnings statement covering the twelve month
period ending December 31, 1996, which shall satisfy the provisions of
Section 11(a) of the 1933 Act and the 1933 Act Regulations.
(f) Not to sell, transfer or otherwise dispose of or transfer
(including any pledge and any disposition upon the foreclosure of any
pledge or any agreement to do any of the foregoing), without the prior
written consent of the Global Coordinators acting on your behalf, any
shares of Common Stock (or securities convertible into or exchangeable or
exercisable for such shares) for 90 days following the date of the
International Prospectus, provided that the Company shall not be
precluded from (i) the issuance of shares of Common Stock upon the
conversion, exercise or exchange, by the holder thereof, of options,
warrants or other securities convertible into or exercisable for the
Common Stock pursuant to the terms of such options, warrants or other
securities, (ii) transfers pursuant to the terms of any other agreement
to issue shares of Common Stock (or any securities convertible into or
exchangeable or exercisable for the Common Stock) in effect on the date
of the original filing of the Registration Statement with the Commission,
including any such agreement in connection with any previously disclosed
acquisition, merger, consolidation or other
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<PAGE>
business combination and (iii) transfers (including grants or issuances)
under or in connection with dividend reinvestment plans or employee
benefit plans of the Company (or a subsidiary of the Company).
In further consideration of the agreements of the Underwriters herein
contained, the Selling Stockholder covenants not to offer or sell, or solicit
offers to purchase, or transfer or otherwise dispose of (including any pledge
and any disposition upon the foreclosure of any pledge or any agreement to do
any of the foregoing), any shares of Common Stock (or securities convertible
into or exchangeable for such shares) (other than transfers to or for the
benefit of employee benefit plans of the Company or any of its affiliates) for
90 days following the date of the International Prospectus, without the prior
written consent of the Global Coordinators acting on your behalf; provided, that
nothing contained in this Article V shall prevent the sale of the Securities
hereunder.
VI.
The Company represents and warrants to each International Manager and
the Selling Stockholder that (i) this Agreement has been duly authorized,
executed and delivered by the Company, (ii) each document filed or to be filed
pursuant to the 1934 Act and incorporated by reference in the International
Prospectus complied or will comply when so filed in all material respects with
the 1934 Act and the rules and regulations of the Commission thereunder, (iii)
each Preliminary International Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the 1933 Act, complied when so filed in all material
respects with the 1933 Act and the 1933 Act Regulations, (iv) the Registration
Statement and International Prospectus complied on the date the Registration
Statement became effective, and will comply on the Representation Date, in all
material respects with the 1933 Act and the 1933 Act Regulations and, as of such
dates did not and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (v) none of the Company or any
material subsidiary does business with the government of Cuba or with any person
or affiliate located in Cuba and the Company and each material subsidiary has
complied to the extent necessary with all provisions of Section 517.075 of the
Florida Securities and Investor Protection Act; except that these
representations and warranties do not apply to statements or omissions in the
Registration Statement or the International Prospectus or any preliminary
International Prospectus based upon information furnished to the Company in
writing by the Selling Stockholder or by any Underwriter through you expressly
for use therein.
The Selling Stockholder represents and warrants to the Company and
each International Manager that (i) this Agreement and the International Pricing
Agreement have been duly authorized, executed and delivered by the Selling
Stockholder, (ii) the Selling Stockholder has good and marketable title to the
International Securities to be sold by the Selling Stockholder hereunder and
full power, right and authority to sell the International Securities, and upon
the delivery of and payment for the International Securities as herein
contemplated, each of the International Managers will receive good and
marketable title to the International Securities
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<PAGE>
purchased by it from the Selling Stockholder, free and clear of any mortgage,
pledge, lien, security interest, encumbrance, claim or equity, (iii) any written
information furnished to the Company by the Selling Stockholder for use in the
Registration Statement, the International Prospectus, any amendments or
supplements thereto, or any preliminary International Prospectus does not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading and (iv) the
Selling Stockholder has not taken and will not take, directly or indirectly, any
action designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock.
The Trustee represents and warrants to the Company and each
International Manager that (i) the Trustee has been appointed by the named
fiduciary of the Selling Stockholder (the "Named Fiduciary") (as determined in
accordance with Section 402(a) of ERISA) to manage the Securities held by the
Selling Stockholder as described herein and to exercise all rights, powers and
privileges appurtenant to such Securities (subject to the authority of the Named
Fiduciary to terminate such appointment and appoint one or more other investment
managers for any such Securities); and (ii) the Trustee has full power and
authority to execute and deliver this Agreement for the account and on behalf of
the Selling Stockholder and to so bind the Selling Stockholder.
The Company agrees to indemnify and hold harmless each International
Manager, the directors, partners and each person, if any, who controls any
International Manager within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against (i) any and all losses, claims,
damages, liabilities and reasonable expenses arising out of any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the International Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary International Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any and all
losses, claims, damages, liabilities and reasonable expenses whatsoever, as
incurred, to the extent of the aggregate amount paid in settlement of any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
provided that any such settlement is effected with the written consent of the
Company, and (iii) any and all expenses whatsoever, as incurred (including the
fees and disbursements of counsel chosen by the Global Coordinators), reasonably
incurred in investigating, preparing and defending against any litigation, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under the preceding clauses (i) or (ii), promptly
after receipt of adequate documentation relating thereto; provided, however,
that this indemnity shall not apply to any such losses, claims, damages,
liabilities or expenses arising out of any such untrue statement or omission or
alleged untrue statement or omission that is based upon information furnished to
the Company in writing by any International Manager through the International
Lead Managers expressly for use therein; and provided that the foregoing
indemnity agreement with respect to any preliminary prospectuses shall not inure
to the benefit of any
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International Manager from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased International Securities, or any
person controlling such International Manager, if it shall be established that a
copy of the International Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such International Manager to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the International Securities to such person, and if
the International Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage or liability, and if the
Company had previously furnished copies thereof to such International Manager in
the quantities reasonably requested by such International Manager. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
The Selling Stockholder agrees, to the extent permitted under
applicable law, to indemnify and hold harmless the International Managers, their
directors, partners and each person, if any, who controls the International
Managers within the meaning of either Section 15 of the 1933 Act or Section 20
of the 1934 Act to the same extent as the foregoing indemnity from the Company
to each International Manager, but only with reference to information furnished
to the Company in writing by the Selling Stockholder expressly for use in the
Registration Statement, the International Prospectus, any amendment or
supplement thereto, or any preliminary prospectuses. This indemnity agreement
will be in addition to any liability which the Selling Stockholder may otherwise
have. No claim against the assets of the Selling Stockholder shall be created by
this paragraph, except as and to the extent permitted by applicable law.
Each International Manager agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, each of its officers who
sign the Registration Statement, the Selling Stockholder, its trustees
(including the Trustee) and directors and each person, if any, who controls the
Company or the Selling Stockholder within the meaning of either Section 15 of
the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing
indemnity from the Company to each International Manager, but only with
reference to information furnished to the Company in writing by such
International Manager through the International Lead Managers expressly for use
in the Registration Statement, the International Prospectus, any amendment or
supplement thereto, or any preliminary prospectuses. This indemnity agreement
will be in addition to any liability which any International Manager may
otherwise have.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to any of the three preceding paragraphs, such person
(hereinafter called the indemnified party) shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the indemnifying
party) in writing; provided, however, that the omission so to notify the
indemnifying party shall not relieve the indemnifying party of any liability
which it may have to such indemnified party except to the extent that the
indemnifying party was materially prejudiced by such failure to notify and in
any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. The indemnifying party, upon
request of the indemnified party, shall retain
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counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
shall have agreed in writing to pay such fees and expenses, (ii) the
indemnifying party shall have failed to take reasonable steps necessary to
defend diligently any claim within ten calendar days after receiving written
notice from the indemnified party that the indemnified party believes the
indemnifying party has failed to take such steps or (iii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties, and that all such fees and expenses shall be reimbursed as they are
incurred after receipt of adequate documentation thereof. In the case of any
such separate firm for the International Managers and such control persons of
International Managers, such firm shall be designated in writing by the Global
Coordinators. In the case of any such separate firm for the Selling Stockholder
and such control persons of the Selling Stockholder, such firm shall be
designated in writing by the named fiduciary of the Selling Stockholder. In the
case of any such separate firm for the Company, and such directors, officers and
control persons of the Company, such firm shall be designated in writing by the
Company. No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution could be sought
under this Article VI (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
If in any circumstance in which the fees and expenses of counsel are
at the expense of the indemnifying party and at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, such indemnifying party agrees that it shall
be liable for any settlement of the nature contemplated by clause (ii) of the
fourth paragraph of this Article VI effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by the
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into, and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
If the indemnification provided for in the fourth, fifth or sixth
paragraph of this Article VI is unavailable to an indemnified party in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of
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<PAGE>
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholder on the one
hand and the International Managers on the other from the offering of the
International Securities or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company and of the Selling Stockholder on the one hand
and of the International Managers on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholder on the one hand and the
International Managers on the other shall be deemed to be in the same
proportions as the net proceeds from the offering (before deducting expenses)
received by the Company and the Selling Stockholder bear to the total
underwriting discounts and commissions received by the International Managers,
in each case as set forth in the table on the cover of the International
Prospectus. The relative fault of the Company, the Selling Stockholder and the
International Managers shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, by the Selling Stockholder or by the International
Managers and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the International Managers
agree that it would not be just and equitable if contribution pursuant to this
Article VI were determined by pro rata allocation (even if the International
Managers were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Article VI, the aggregate contribution of the Selling Stockholder under this
Article VI, will not exceed the proceeds received by the Selling Stockholder
from the International Securities sold by it and the Selling Stockholder shall
not be required to contribute under this Article VI in respect of any costs,
expenses, losses, damages or other liabilities unless the same arise with
reference to any information furnished to the Company in writing by the Trustee
acting on behalf of the Selling Stockholder expressly for use in the
Registration Statement. Notwithstanding the provisions of this Article VI, no
International Manager shall be required to contribute any amount in excess of
the underwriting discount or commission applicable to the Securities purchased
by such International Manager hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The International Managers' obligations to contribute
pursuant to this Article VI are several in proportion to the respective number
of International Securities purchased by each Manager, and not joint. No party
contributing pursuant to this Article VI shall be liable for any
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settlement of any proceeding effected without its written consent, but if
settled with such consent such contributing party agrees to contribute to that
amount paid or payable by the indemnified party as a result of any loss or
liability by reason of such settlement.
As between the Company and the Selling Stockholder on the one hand and
the International Managers on the other, the Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters (but excluding any stock or other transfer
taxes and any stamp or other duties payable upon the sale, issuance or delivery
of the Securities to the International Managers and the transfer of the
Securities between the International Managers and the U.S. Underwriters), (iv)
the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under U.S. state securities or
blue sky laws and foreign securities laws in accordance with the provisions
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Memorandum and any supplement thereto, (vi) the
printing and delivery to the Underwriters of copies of each preliminary
prospectus and of the Prospectuses and any amendments or supplements thereto,
(vii) the preparation, printing and delivery to the Managers of copies of the
Blue Sky Memorandum and any supplement thereto, (viii) the fees and expenses of
any transfer agent or registrar for the Securities, and (ix) the filing fees
incident to the review by the National Association of Securities Dealers, Inc.
of the terms of the sale of the Securities. This paragraph does not supersede
any agreement between the Company and the Selling Stockholder with respect to
the allocation between them of any such expenses. The Selling Stockholder will
pay all stock or other transfer taxes and any stamp or other duties payable upon
the sale, issuance or delivery of the Securities to the International Managers
and the transfer of the Securities between the International Managers and the
U.S. Underwriters.
The representations, warranties and agreements in this Article VI
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any International Manager or any person controlling any International Manager or
by on behalf of the Company, its officers and directors or any other person
controlling the Company and (iii) acceptance of any payment for any of the
Securities.
VII.
This Agreement shall be subject to termination in your absolute
discretion, by notice given to the Company and the Selling Stockholder, if prior
to the Closing Time (i) there has been, since the Representation Time or since
the respective dates as of which information is given in the International
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered
18
<PAGE>
as one enterprise, whether or not arising in the ordinary course of business,
otherwise than as set forth or contemplated in the International Prospectus, the
effect of which is such as to make it, in the judgment of the International Lead
Managers, impracticable to market the Securities or to enforce contracts for the
sale of Securities, (ii) trading in securities generally or trading in the
Common Stock on the New York Stock Exchange or the London Stock Exchange shall
have been suspended or materially limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by any
of such exchanges or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, (iii) a general
moratorium on commercial banking activities in New York , London or Hong Kong
shall have been declared by either Federal, New York State, British or Hong Kong
authorities, as applicable, or (iv) there shall have occurred any material
outbreak or escalation of hostilities or other calamity the effect of which on
the financial markets of the United States, London or Hong Kong is such as to
make it, in your reasonable judgment, impracticable to market the Securities or
enforce contracts for the sale of the Securities.
VIII.
This Agreement shall become effective when notification of the
effectiveness of the Registration Statement has been released by the Commission
and you and the Selling Stockholder shall have agreed upon the public offering
price. If the public offering price and the purchase price of the International
Securities shall not have been agreed upon, the International Pricing Agreement
shall not have been executed and delivered by all parties thereto, or the
International Pricing Agreement shall not have been executed and delivered by
all parties thereto, prior to 5:00 p.m., New York Time, on the seventh full
business day after the Registration Statement shall have become effective, this
Agreement shall thereupon terminate without liability on the part of the
International Managers, the Company or the Selling Stockholder, except as set
forth herein.
If as of the Closing Time, any one or more of the International
Managers shall fail or refuse to purchase the Initial International Securities
which it or they have agreed to purchase hereunder on such date, and the
aggregate number of the Initial International Securities which such defaulting
International Manager or International Managers agreed but failed or refused to
purchase is not more than one-tenth of the aggregate number of the Initial
International Securities to be purchased on such date, the other International
Managers shall be obligated severally in the proportions which the number of
Initial International Securities set forth opposite their names in Schedule A
bear to the aggregate number of Initial International Securities set forth
opposite the names of all such non-defaulting International Managers, or in such
other proportions as you may specify, to purchase the Initial International
Securities which such defaulting International Manager or International Managers
agreed but failed or refused to purchase on such date; provided that in no event
shall the number of Initial International Securities which any International
Manager has agreed to purchase pursuant to Schedule A be increased pursuant to
this Article VIII by an amount in excess of one-ninth of such number without the
written consent of such International Manager. If, at the Closing Time, any
International Manager or International Managers shall fail or refuse to purchase
the Initial International Securities and the aggregate number of the Initial
International Securities
19
<PAGE>
with respect to which such default occurs is more than one-tenth of the
aggregate number of the Initial International Securities to be purchased on such
date, and arrangements satisfactory to you and the Company and the Selling
Stockholder for the purchase of such International Securities are not made
within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting International Manager, the Company
or the Selling Stockholder. In any such case you or the Company and the Selling
Stockholder shall have the right to postpone the Closing Time, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the International Prospectus or in any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting International Manager from liability
in respect of any default of such International Manager under this Agreement.
If this Agreement shall be terminated by the International Managers,
or any of them, because of any failure or refusal on the part of the Company or
the Selling Stockholder to comply with the terms or to fulfill any of the
conditions of this Agreement to be complied with or fulfilled by the Company or
the Selling Stockholder, or if for any reason the Company or the Selling
Stockholder shall be unable to perform its obligations under this Agreement, the
party who failed or refused to comply or fulfill any such condition will
reimburse the International Managers or such International Managers as have so
terminated this Agreement with respect to themselves, severally, for all out-of-
pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such International Managers in connection with this
Agreement or the offering contemplated hereunder; provided, that the provisions
of Article VI shall survive such termination.
20
<PAGE>
This Agreement may be signed in two or more counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
Very truly yours,
ELECTRONIC DATA SYSTEMS
CORPORATION
By:
--------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: United States Trust Company
of New York, as Trustee
By:
--------------------------------------
Name:
----------------------------------
Title:
---------------------------------
21
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
J.P. MORGAN SECURITIES LTD.
SALOMON BROTHERS INTERNATIONAL LIMITED
FURMAN SELZ LLC
By: MERRILL LYNCH INTERNATIONAL LIMITED
By:
----------------------------------
Authorized Signatory
For themselves and as International Lead Managers of the
other International Managers named in Schedule A to
the International Purchase Agreement.
22
<PAGE>
EXHIBIT A
4,500,000 Shares
ELECTRONIC DATA SYSTEMS CORPORATION
(a Delaware corporation)
Common Stock
(Par Value $0.01 Per Share)
PRICING AGREEMENT
-----------------
, 1996
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
J.P. MORGAN SECURITIES LTD.
SALOMON BROTHERS INTERNATIONAL LIMITED
FURMAN SELZ LLC
as International Lead Managers of the
several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Reference is made to the International Purchase Agreement, dated
, 1996 (the "International Purchase Agreement"), relating to
the purchase by the several International Managers named in Schedule A thereto
(the "International Managers"), of the above shares of Common Stock (the
"Securities") of Electronic Data Systems Corporation (the "Company").
Pursuant to Article I of the International Purchase Agreement, the
Selling Stockholder agrees with each International Manager as follows:
A-1
<PAGE>
(1) The public offering price per share for the Securities, determined
as provided in said Article I, shall be $ .
(2) The purchase price per share for the Initial International
Securities to be paid by the several International Managers, and the purchase
price per share for the Option International Securities, shall be $ ,
being an amount equal to the public offering price set forth above less $
per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Selling Stockholder a counterpart
hereof (with a copy to the Company), whereupon this instrument, along with all
counterparts, will become a binding agreement among the International Managers
and the Selling Stockholder in accordance with its terms.
GENERAL MOTORS HOURLY-RATE
EMPLOYEES PENSION PLAN
By: United States Trust Company
of New York, as Trustee
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
A-2
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
J.P. MORGAN SECURITIES LTD.
SALOMON BROTHERS INTERNATIONAL LIMITED
FURMAN SELZ LLC
By: MERRILL LYNCH INTERNATIONAL
By:
--------------------------------
Authorized Signatory
For themselves and as International Lead Managers of the
other International Managers named in Schedule A
to the International Purchase Agreement.
A-3
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Name of Number of Initial Number of Option
International Manager International Securities International Securities
- --------------------- ------------------------ ------------------------
<S> <C> <C>
Merrill Lynch International
Morgan Stanley & Co. International
Limited
Goldman Sachs International
Bear, Stearns International Limited
Lehman Brothers International (Europe)
J.P. Morgan Securities Ltd.
Salomon Brothers International Limited
Furman Selz LLC
A-4
</TABLE>
<PAGE>
EXHIBIT 5
BAKER & BOTTS, L.L.P.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
June 21, 1996
Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75204-3105
Gentlemen:
As set forth in the Registration Statement on Form S-3 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the
"Commission") by Electronic Data Systems Corporation, a Delaware corporation
(the "Company"), under the Securities Act of 1933, as amended, relating to the
resale of up to 34,500,000 shares (the "Shares") of the Company's Common Stock,
par value $0.01 per share ("Common Stock"), by the General Motors Special Hourly
Employees Pension Trust established under the General Motors Hourly-Rate
Employees Pension Plan (the "Secondary Offering"), the validity of the Shares is
being passed upon for you by us. At your request, this opinion is being
furnished to you for filing as Exhibit 5 to the Registration Statement.
In our capacity as your counsel in connection with the matter referred to
above, we have familiarized ourselves with (i) the Restated Certificate of
Incorporation and the Amended and Restated Bylaws of the Company, each as
amended to date, (ii) the Agreement and Plan of Merger, dated as of April 15,
1996 (the "Interco Merger Agreement"), by and between the Company and Electronic
Data Systems Intermediate Corporation, a Delaware corporation ("Interco"), in
the form provided to us by the Company, pursuant to which Interco merged with
and into the Company and the issued and outstanding shares of the Company were
converted into 487,555,556 shares of Common Stock (the "Interco Merger"); (iii)
certain corporate records of the Company, including minutes of the Company as
furnished to us by representatives of the Company, (iv) certificates of public
officials and of representatives of the Company, and (v) statutes and other
instruments and documents pertaining to the Company, as a basis for the opinions
hereinafter expressed. In giving such opinions, we have relied upon certificates
of public officials and representatives of the Company with respect to the
accuracy of the material factual matters contained in such certificates.
Based on our examination of the foregoing, and subject to the assumptions,
limitations and qualifications hereinafter set forth, we are of the opinion
that:
<PAGE>
1. The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware.
2. The Shares to be sold in the Secondary Offering have been duly
authorized by the Company and are validly issued, fully paid and non-
assessable.
In giving this opinion, we have assumed that, immediately prior to
consummation of the Interco Merger, each of the parties thereto (i) was duly
organized, validly existing and in good standing under the laws of the State
of Delaware, (ii) had full corporate power and authority to enter into the
Interco Merger Agreement and perform its respective obligations thereunder,
(iii) had duly authorized the execution, delivery and performance of the Interco
Merger Agreement by all necessary corporate action (including all requisite
Board of Director and stockholder action), and (iv) had duly executed and
delivered the Interco Merger Agreement. We have also assumed that the Interco
Merger has become effective under the General Corporation Law of the State of
Delaware.
The opinions set forth above are limited to matters governed by the General
Corporation Law of the State of Delaware as in effect on the date hereof.
We hereby consent to the filing of this opinion of counsel with the
Commission as Exhibit 5 to the Registration Statement and to the reference to us
under the caption "Legal Matters" in the Prospectus forming a part of the
Registration Statement.
Very truly yours,
/s/ BAKER & BOTTS, L.L.P.
JWM/DGM
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
ELECTRONIC DATA SYSTEMS CORPORATION:
We consent to the use of our reports included and incorporated by reference
herein and to the reference to our firm under the headings "Summary
Consolidated Historical Financial Information," "Selected Consolidated
Financial Information," and "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
June 20, 1996
<PAGE>
EXHIBIT 24
<PAGE>
POWER OF ATTORNEY
The undersigned, a person elected as a director of Electronic Data
Systems Holding Corporation (to be renamed Electronic Data Systems Corporation)
(the "Company") effective immediately following the consummation of the split-
off of the Company from General Motors Corporation, hereby constitutes and
appoints Lester M. Alberthal, Jr., John R. Castle, Jr., Paul J. Chiapparone,
Gary J. Fernandes, and Joseph M. Grant, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement of the Company, and any and all
amendments thereto (including post-effective amendments), relating to the resale
of shares of common stock of the Company by a trust under the General Motors
Hourly Rate Employees Pension Plan, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Date: May 22, 1996 /s/ Judith Rodin
------------------
Dr. Judith Rodin
<PAGE>
POWER OF ATTORNEY
The undersigned, a person elected as a director of Electronic Data
Systems Holding Corporation (to be renamed Electronic Data Systems Corporation)
(the "Company") effective immediately following the consummation of the split-
off of the Company from General Motors Corporation, hereby constitutes and
appoints Lester M. Alberthal, Jr., John R. Castle, Jr., Paul J. Chiapparone,
Gary J. Fernandes, and Joseph M. Grant, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement of the Company, and any and all
amendments thereto (including post-effective amendments), relating to the resale
of shares of common stock of the Company by a trust under the General Motors
Hourly Rate Employees Pension Plan, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Date: 5/21, 1996 /s/ Enrique J. Sosa
---------------------
Enrique J. Sosa
<PAGE>
POWER OF ATTORNEY
The undersigned, a person elected as a director of Electronic Data
Systems Holding Corporation (to be renamed Electronic Data Systems Corporation)
(the "Company") effective immediately following the consummation of the split-
off of the Company from General Motors Corporation, hereby constitutes and
appoints Lester M. Alberthal, Jr., John R. Castle, Jr., Paul J. Chiapparone,
Gary J. Fernandes, and Joseph M. Grant, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement of the Company, and any and all
amendments thereto (including post-effective amendments), relating to the resale
of shares of common stock of the Company by a trust under the General Motors
Hourly Rate Employees Pension Plan, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Date: May 21, 1996 /s/ Ray L. Hunt
-----------------
Ray L. Hunt
<PAGE>
POWER OF ATTORNEY
The undersigned, a person elected as a director of Electronic Data
Systems Holding Corporation (to be renamed Electronic Data Systems Corporation)
(the "Company") effective immediately following the consummation of the split-
off of the Company from General Motors Corporation, hereby constitutes and
appoints Lester M. Alberthal, Jr., John R. Castle, Jr., Paul J. Chiapparone,
Gary J. Fernandes, and Joseph M. Grant, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement of the Company, and any and all
amendments thereto (including post-effective amendments), relating to the resale
of shares of common stock of the Company by a trust under the General Motors
Hourly Rate Employees Pension Plan, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Date: May 21, 1996 /s/ C. Robert Kidder
---------------------
C. Robert Kidder
<PAGE>
POWER OF ATTORNEY
The undersigned, a person elected as a director of Electronic Data
Systems Holding Corporation (to be renamed Electronic Data Systems Corporation)
(the "Company") effective immediately following the consummation of the split-
off of the Company from General Motors Corporation, hereby constitutes and
appoints Lester M. Alberthal, Jr., John R. Castle, Jr., Paul J. Chiapparone,
Gary J. Fernandes, and Joseph M. Grant, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement of the Company, and any and all
amendments thereto (including post-effective amendments), relating to the resale
of shares of common stock of the Company by a trust under the General Motors
Hourly Rate Employees Pension Plan, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Date: May 21, 1996 /s/ Ray J. Groves
-------------------
Ray J. Groves
<PAGE>
POWER OF ATTORNEY
The undersigned, a person elected as a director of Electronic Data
Systems Holding Corporation (to be renamed Electronic Data Systems Corporation)
(the "Company") effective immediately following the consummation of the split-
off of the Company from General Motors Corporation, hereby constitutes and
appoints Lester M. Alberthal, Jr., John R. Castle, Jr., Paul J. Chiapparone,
Gary J. Fernandes, and Joseph M. Grant, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement of the Company, and any and all
amendments thereto (including post-effective amendments), relating to the resale
of shares of common stock of the Company by a trust under the General Motors
Hourly Rate Employees Pension Plan, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Date: May 21, 1996 /s/ Richard B. Cheney
----------------------
Richard B. Cheney
<PAGE>
POWER OF ATTORNEY
The undersigned, a person elected as a director of Electronic Data
Systems Holding Corporation (to be renamed Electronic Data Systems Corporation)
(the "Company") effective immediately following the consummation of the split-
off of the Company from General Motors Corporation, hereby constitutes and
appoints Lester M. Alberthal, Jr., John R. Castle, Jr., Paul J. Chiapparone,
Gary J. Fernandes, and Joseph M. Grant, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement of the Company, and any and all
amendments thereto (including post-effective amendments), relating to the resale
of shares of common stock of the Company by a trust under the General Motors
Hourly Rate Employees Pension Plan, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Date: May 22, 1996 /s/ James A. Baker, III
------------------------
James A. Baker, III
<PAGE>
EXHIBIT 99
FORM OF
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Employment Period................................................. 1
2. Terms of Employment............................................... 2
(a) Position and Duties.......................................... 2
(b) Compensation................................................. 2
(i) Base Salary........................................ 2
(ii) Annual Bonus....................................... 3
(iii) Incentive, Savings and Retirement Plans............ 3
(iv) Welfare Benefit Plans.............................. 4
(v) Expenses 4
(vi) Fringe Benefits and Perquisites.................... 4
(vii) Office and Support Staff........................... 4
(viii) Vacation 4
(ix) Stock Option Grants................................ 4
(x) Restricted Stock Unit and Other Equity-Based Grants 5
(xi) Performance Grants................................. 5
3. Termination of Employment......................................... 5
(a) Death or Disability.......................................... 5
(b) Cause........................................................ 6
(c) Good Reason; Window Period................................... 6
(d) Notice of Termination........................................ 7
(e) Date of Termination.......................................... 7
4. Obligations of the Company Upon Termination....................... 7
(a) Good Reason or During a Window Period; Other than for
Cause, Death or Disability................................... 7
(b) Death........................................................ 11
(c) Disability................................................... 11
(d) Cause; Other than for Good Reason or During a Window Period.. 12
5. Non-exclusivity of Rights.......................................... 12
6. Full Settlement; Resolution of Disputes............................ 13
7. Certain Additional Payments by the Company......................... 13
8. Confidential Information........................................... 16
9. Change of Control; Potential Change of Control..................... 17
10. Successors......................................................... 22
11. Miscellaneous...................................................... 22
</TABLE>
i
<PAGE>
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
This AGREEMENT (the "Agreement") by and between Electronic
Data Systems Corporation, a Delaware corporation (the "Company"), and
_____________ (the "Executive"), dated as of the _____ day of _____________,
1996 and to be effective as of the Agreement Effective Date (as defined in
Section 11(h) hereof).
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to assure
that, in the event of a Change of Control or Potential Change of Control (in
each case as defined in Section 9 hereof), the Company will have the continued
services of the Executive and the Executive will be provided with compensation
and benefits arrangements which meet his expectations. Therefore, in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. Upon a Change of Control or Potential Change
-----------------
of Control, the Company hereby agrees to continue the Executive in its employ,
and the Executive hereby agrees to remain in the employ of the Company, in
accordance with, and subject to, the terms and provisions of this Agreement, for
the period (the "Employment Period") commencing on the date upon which there
occurs a Change of Control or a Potential Change of Control and ending on (i) if
a Change of Control has occurred, the fifth anniversary of the Employment
Effective Date or (ii) if a Potential Change of Control has occurred but a
Change of Control has not occurred, the earliest of (x) the date upon which the
Board determines in good faith that a Change of Control is unlikely to occur,
(y) any anniversary of the Potential Change of Control, if at least 30 days
prior to such anniversary the Executive notifies the Company in writing that he
elects to terminate his employment with the Company as of such anniversary and
(z) the fifth anniversary of the Employment Effective Date. If the Employment
Period commences by reason of a Potential Change in Control and the Employment
Period is thereafter terminated pursuant to clause (ii) (x) of the preceding
sentence, this Agreement shall nevertheless remain in effect and a new
Employment Period shall commence upon a subsequent Change of Control or
Potential Change of Control. The Company shall promptly notify the Executive in
writing of the occurrence of a Change of Control or Potential Change of Control
and of any determination made by the Board pursuant to clause (ii)(x) above that
a Change of Control is unlikely to occur. As used herein, the term "Employment
Effective Date" shall mean, with respect to any Employment Period, the date upon
which such Employment Period commences in accordance with this Section 1.
1
<PAGE>
2. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the Employment
Effective Date, which shall in any event include status as a member of the
Executive Council of the Company, and (B) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding the Employment Effective Date.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the
Employment Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to
the Employment Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive shall
-----------
receive an annual base salary equal to the base salary in effect
immediately prior to the Employment Effective Date ("Annual Base Salary"),
which shall be paid on a semimonthly basis. During the Employment Period,
the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the ordinary
course of business to executives of the
2
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Company and its affiliated companies. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any
such increase and the term "Annual Base Salary" as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall include, when used
with reference to the Company, any company controlled by, controlling or
under common control with the Company; provided, however, that (except for
purposes of Sections 5 and 8 hereof) such term shall not include A.T.
Kearney, Inc. or any of its direct or indirect subsidiaries.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year or portion thereof during the
Employment Period, an annual bonus (the "Annual Bonus") in cash equal to
the greater of (A) the highest annual bonus paid or awarded to or for the
benefit of the Executive in respect of any of the preceding three fiscal
years or (B) an amount comparable to the annual bonus awarded to other
Company executives taking into account Executive's position and
responsibilities with the Company, prorated in the case of either (A) or
(B) for any period consisting of less than twelve full months. The Annual
Bonus awarded for a particular fiscal year shall (unless the Executive
elects to defer receipt thereof) be paid no later than in accordance with
the following schedule: (x) 50% of such Annual Bonus shall be paid no
later than the last day of the third month after such year; (y) 25% of such
Annual Bonus shall be paid no later than the last day of the fifteenth
month after such year; and (z) 25% of such Annual Bonus shall be paid no
later than the last day of the twenty-seventh month after such year.
(iii) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans that are tax-qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended ("Code"), and all plans that
are supplemental to any such tax-qualified plans, in each case to the
extent that such plans are applicable generally to other executives of the
Company and its affiliated companies, but in no event shall such plans
provide the Executive with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the extent, if any,
that such distinction is applicable), savings opportunities and retirement
benefit opportunities that are, in each case, less favorable, in the
aggregate, than the most favorable plans of the Company and its affiliated
companies. As used in this Agreement, the term "most favorable" shall,
when used with reference to any plans, practices, policies or programs of
the Company and its affiliated companies, be deemed to refer to the most
favorable plans, practices, policies or programs of the Company and its
affiliated companies as in effect at any time during the three fiscal years
preceding the
3
<PAGE>
Employment Effective Date or, if more favorable to the Executive, provided
generally at any time after the Employment Effective Date to other
executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, vision, disability, salary continuance, group life
and supplemental group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to other executives
of the Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable such
plans, practices, policies and programs of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies.
(vi) Fringe Benefits and Perquisites. During the Employment Period,
-------------------------------
the Executive shall be entitled to fringe benefits and perquisites
(including, but not limited to, use of Company airplanes) in accordance
with the most favorable plans, practices, programs and policies of the
Company and its affiliated companies applicable to similarly situated
executives.
(vii) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at
any time during the three fiscal years preceding the Employment Effective
Date.
(viii) Vacation. During the Employment Period, the Executive shall
--------
be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies.
(ix) Stock Option Grants. During the Employment Period, the Executive
-------------------
shall be granted (x) stock options no less frequently than such grants were
made to Executive in the past and on the same terms and conditions as the
most recent prior stock option grant to Executive, including options on not
less
4
<PAGE>
than the number of shares than were the subject of the most recent prior
grant of stock options to Executive or (y) if more favorable to Executive,
stock options with similar terms and conditions and on a number of shares
as grants currently being granted to similarly situated executives of the
Company.
(x) Restricted Stock Unit and Other Equity-Based Grants. During the
---------------------------------------------------
Employment Period, the Executive shall be granted (x) restricted stock
and/or restricted stock units and/or other equity-based awards no less
frequently than such grants were made to Executive in the past and on the
same terms and conditions as the most recent prior grant of such an award
to Executive, including grants for a number of shares or units not less
than were the subject of the most recent prior grant of such an award to
Executive, or (y) if more favorable to Executive, equity-based grants with
similar terms and conditions, including the number of shares or units, as
grants currently being granted to similarly situated executives of the
Company.
(xi) Performance Grants. During the Employment Period, the Executive
------------------
shall be granted (x) performance awards no less frequently than such awards
were granted to Executive in the past and on the same terms and conditions
as the most recent prior performance award to Executive, including awards
that provide benefits no less favorable than and are subject to performance
criteria no more stringent than the most recent prior performance award to
Executive, or (y) if more favorable to Executive, performance awards with
similar terms and conditions, including benefits provided and performance
criteria, as awards currently being granted to similarly situated
executives of the Company.
3. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 11(d) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the
5
<PAGE>
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean (i) dishonesty by Executive which results in substantial personal
enrichment at the expense of the Company or (ii) demonstratively willful
repeated violations of Executive's obligations under this Agreement which are
intended to result and do result in material injury to the Company.
(c) Good Reason; Window Period. The Executive's employment may be
--------------------------
terminated during the Employment Period by the Executive for Good Reason or
during a Window Period by the Executive without any reason. For purposes of
this Agreement, "Window Period" shall mean the 180-day period commencing 60 days
after any Change of Control as defined in Section 9 of this Agreement. For
purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 2 of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties
or responsibilities excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of this Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than that described in Section 2(a)(i)(B) hereof;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
(v) any failure by the Company to comply with and satisfy the
requirements of Section 10 of this Agreement, provided that (A) the
successor described in Section 10(c) has received, at least ten days prior
to the Date of Termination (as defined in subparagraph (e) below), written
notice from the Company or the Executive of the requirements of such
provision and (B)
6
<PAGE>
such failure to be in compliance and satisfy the requirements of Section 10
shall continue as of the Date of Termination; or
(vi) in the event that the Executive is serving as a member of the
Board immediately prior to the Employment Effective Date, any failure to
reelect Executive as a member of the Board
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason or without any reason during a Window
Period, shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(d) of this Agreement. The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(e) Date of Termination. For purposes of this Agreement, the term
-------------------
"Date of Termination" means (i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive during a Window Period or for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
4. Obligations of the Company Upon Termination.
-------------------------------------------
(a) Good Reason or During a Window Period; Other than for Cause,
------------------------------------------------------------
Death or Disability. If, during the Employment Period, the Company shall
- -------------------
terminate the Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason or his employment shall be
terminated for any reason during a Window Period:
(i) the Company shall pay or provide to or in respect of the Executive
the following amounts and benefits:
A. in a lump sum in cash within 10 days after the Date of
Termination, an amount equal to the sum of (1) the Executive's Annual
Base Salary through the Date of Termination, (2) the product of (x)
the highest Annual Bonus paid or awarded to or for the benefit of
Executive
7
<PAGE>
during the three fiscal years preceding the Date of Termination and
(y) a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination and the
denominator of which is 365, (3) any deferred compensation previously
awarded to or earned by the Executive (together with any accrued
interest or earnings thereon) and (4) any compensation for unused
vacation time for which the Executive is eligible in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (1),
(2), (3) and (4) shall be hereinafter referred to as the "Accrued
Obligation").
B. in a lump sum in cash, undiscounted, within 10 days after
the Date of Termination, an amount equal to the sum of (1) the Annual
Salary that would have been paid to the Executive pursuant to this
Agreement for the period (the "Remaining Employment Period") beginning
on the Date of Termination and ending on the latest possible date of
termination of the Employment Period in accordance with the provisions
of Section 1 hereof (the "Final Expiration Date") if the Executive's
employment had not been terminated and (2) the Annual Bonus that would
have been paid or awarded to or for the benefit of the Executive
during the Remaining Employment Period if the Executive's employment
had not been terminated and if the amount of the Annual Bonus for each
fiscal year or portion thereof during such period were equal to the
highest Annual Bonus paid or awarded to or for the benefit of the
Executive in respect of any of the preceding three fiscal years,
prorated in the case of any period of less than a full fiscal year.
C. in a lump sum in cash, undiscounted, within 30 days after
the Date of Termination, an amount equal to the economic equivalent of
the benefits the Executive (and his dependents or beneficiaries) would
have received or become entitled to under Section 2(b)(iii) of this
Agreement for the Remaining Employment Period if Executive's
employment had not been terminated.
D. except in the case of a termination during a Window Period
by the Executive without Good Reason, effective as of the Date of
Termination, (1) if the Executive has not received a grant of stock
options during the 30-month period immediately preceding the Date of
Termination, a stock option grant covering the same number of shares
and on the same terms and conditions as the most recent prior stock
option grant to the Executive, if any, made during the five-year
period immediately preceding the Date of Termination, (2) if the
Executive has
8
<PAGE>
not received a grant of restricted stock and/or restricted stock units
and or other similar equity-based awards during the 30-month period
immediately preceding the Date of Termination, a grant covering the
same number of shares and on the same terms and conditions as the most
recent prior grant of such an award to the Executive, if any, made
during the five-year period immediately preceding the Date of
Termination and (3) if the Executive has not received a grant of a
performance award during the 30-month period immediately preceding the
Date of Termination, a grant that provides benefits no less favorable
than and is subject to the satisfaction of performance criteria no
more stringent than the most recent prior grant of such an award to
the Executive, if any, made during the five-year period immediately
preceding the Date of Termination; provided that any awards required
by (1), (2) or (3) shall be prorated based on the length of the
Remaining Employment Period as compared to the customary terms of such
awards for purposes of a recipient becoming entitled to full vesting
in such award.
E. effective as of the Date of Termination, (x) immediate
vesting and exercisability of, and termination of any restrictions on
sale or transfer (other than any such restriction arising by
operation of law) with respect to, each and every stock option,
restricted stock award, restricted stock unit award and other equity-
based award and performance award (each, a "Compensatory Award") that
is outstanding as of a time immediately prior to the Date of
Termination or is awarded effective as of the Date of Termination
pursuant to subparagraph D above, (y) the extension of the term during
which each and every Compensatory Award may be exercised by the
Executive until the earlier of (1) the first anniversary of the Date
of Termination or (2) the date upon which the right to exercise any
Compensatory Award would have expired if the Executive had continued
to be employed by the Company under the terms of this Agreement until
the Final Expiration Date and (z) at the sole election of Executive,
in exchange for any or all Compensatory Awards that are either
denominated in or payable in Common Stock, an amount in cash equal to
the excess of (i) the Highest Price Per Share (as defined below) over
(ii) the exercise or purchase price, if any, of such Compensatory
Awards. As used herein, the term "Highest Price Per Share" shall mean
the highest price per share that can be determined to have been paid
or agreed to be paid for any share of Common Stock by a Covered Person
(as defined below) at any time during the Employment Period or the
six-month period immediately preceding the Employment Effective Date.
As used herein, the term "Covered Person" shall mean any Person other
than an Exempt Person (in each case as defined in Section 9 hereof)
who (i) is the Beneficial Owner (as defined in Section 9
9
<PAGE>
hereof) of 10% or more of the outstanding shares of Common Stock or
10% or more of the combined voting power of the outstanding Voting
Stock (as defined in Section 9 hereof) of the Company at any time
during the Employment Period or the two-year period immediately prior
to the Employment Effective Date, (ii) is a Person who has any
material involvement in proposing or effectuating the Change of
Control or Potential Change of Control or (iii) is an assignee of or
has otherwise succeeded to any shares of Common Stock or Voting Stock
of the Company which were at any time during the Employment Period or
the two-year period immediately preceding the Employment Effective
Date "beneficially owned" (as defined in Section 9 hereof) by any
Person identified in clause (i) or (ii) of this definition, if such
assignment or succession shall have occurred in the course of a
privately negotiated transaction rather than an open market
transaction. For purposes of determining whether a Person is a Covered
Person, the number of shares of Common Stock or Voting Stock of the
Company deemed to be outstanding shall include shares of which the
Person is deemed the Beneficial Owner, but shall not include any other
shares which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercises of conversion rights, warrants or
options. In determining the Highest Price Per Share, the price paid or
agreed to be paid by a Covered Person will be appropriately adjusted
to take into account (W) distributions paid or payable in stock, (X)
subdivisions of outstanding stock, (Y) combinations of shares of stock
into a smaller number of shares and (Z) similar events.
(ii) for the Remaining Employment Period, or such longer period as any
plan, program, practice or policy may provide, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 2(b)(iv) of this
Agreement if the Executive's employment had not been terminated in
accordance with the most favorable plans, practices, programs or policies
of the Company and its affiliated companies (such continuation of such
benefits for the applicable period herein set forth shall be hereinafter
referred to as "Welfare Benefit Continuation"). For purposes of
determining eligibility of the Executive for retiree benefits pursuant to
such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until the Final Expiration Date and to
have retired on such date; and
(iii) for the Remaining Employment Period, to the extent not
theretofore paid or provided, the Company shall timely pay or provide to
the Executive and/or the Executive's family any other amounts or benefits
required to
10
<PAGE>
be paid or provided or which the Executive and/or the Executive's family is
eligible to receive pursuant to this Agreement and under any plan, program,
policy or practice or contract or agreement of the Company and its
affiliated companies as in effect and applicable generally to other
executives and their families on the Employment Effective Date or, if more
favorable to the Executive, as in effect generally thereafter with respect
to other executives of the Company and its affiliated companies and their
families (such other amounts and benefits shall be hereinafter referred to
as the "Other Benefits").
If termination of employment is by reason of death or Disability, the payments
and benefits provided pursuant to (B), (C) or (D) shall not be in lieu of but
shall be offset by the value of any death or disability benefits or payments, as
appropriate, to Executive pursuant to any individual agreement between the
Company and Executive.
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period and other than during a
Window Period in which event the provisions of Section 4(a) shall govern, this
Agreement shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than (1) the payment of Accrued
Obligations (which shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination),
(2) the payment of an amount equal to the Annual Salary that would have been
paid to the Executive pursuant to this Agreement for the period beginning on the
Date of Termination and ending on the first anniversary thereof if the
Executive's employment had not terminated by reason of death (which shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination), (3) the timely payment or
provision of the Welfare Benefit Continuation and Other Benefits and (4)
effective as of the Date of Termination, (x) immediate vesting and
exercisability of, and termination of any restrictions on sale or transfer
(other than any such restriction arising by operation of law) with respect to,
each and every Compensatory Award outstanding as of a time immediately prior to
the Date of Termination, (y) the extension of the term during which each and
every Compensatory Award may be exercised or purchased by the Executive until
the earlier of (I) the first anniversary of the Date of Termination or (II) the
date upon which the right to exercise or purchase any Compensatory Award would
have expired if the Executive had continued to be employed by the Company under
the terms of this Agreement until the Final Expiration Date and (z) at the sole
election of Executive, in exchange for any Compensatory Award that is either
denominated in or payable in Common Stock, an amount in cash equal to the excess
of (I) the Highest Price Per Share over (II) the exercise or purchase price, if
any, of such Compensatory Award.
(c) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability during the Employment Period and other than
during a Window Period in which event the provisions of Section 4(a) shall
govern, this
11
<PAGE>
Agreement shall terminate without further obligations to the Executive, other
than (1) the payment of Accrued Obligations (which shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination), (2)
the payment of an amount equal to the Annual Salary that would have been paid to
the Executive pursuant to this Agreement for the period beginning on the Date of
Termination and ending on the first anniversary thereof if the Executive's
employment had not terminated by reason of Disability (which shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of Termination),
(3) the timely payment or provision of the Welfare Benefit Continuation and
Other Benefits and (4) effective as of the Date of Termination, (x) immediate
vesting and exercisability of, and termination of any restrictions on sale or
transfer (other than any such restriction arising by operation of law) with
respect to, each and every Compensatory Award outstanding as of a time
immediately prior to the Date of Termination, (y) the extension of the term
during which each and every Compensatory Award may be exercised or purchased by
the Executive until the earlier of (I) the first anniversary of the Date of
Termination or (II) the date upon which the right to exercise or purchase any
Compensatory Award would have expired if the Executive had continued to be
employed by the Company under the terms of this Agreement until the Final
Expiration Date and (z) at the sole election of Executive, in exchange for any
Compensatory Award that is either denominated in or payable in Common Stock, an
amount in cash equal to the excess of (I) the Highest Price Per Share over (II)
the exercise or purchase price, if any, of such Compensatory Award.
(d) Cause; Other than for Good Reason or During a Window Period. If
-----------------------------------------------------------
the Executive's employment shall be terminated for Cause during the Employment
Period and other than during a Window Period in which event the provisions of
Section 4(a) shall govern, this Agreement shall terminate without further
obligations under this Agreement to the Executive other than for Accrued
Obligations. If the Executive terminates employment during the Employment
Period, excluding a termination during a Window Period, this Agreement shall
terminate without further obligations to the Executive, other than for the
payment of Accrued Obligations. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
5. Non-exclusivity of Rights. Except as provided in Section 4 of
-------------------------
this Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or
12
<PAGE>
program or contract or agreement except as such plan, policy, practice or
program is superseded by this Agreement.
6. Full Settlement; Resolution of Disputes.
---------------------------------------
(a) The Company's obligation to make payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense, mitigation or other
claim, right or action which the Company may have against the Executive or
others. The Company agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement (other than Section 8 hereof)
or any guarantee of performance thereof (including as a result of any contest by
the Executive about the amount of any such payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the Applicable Federal Rate
provided for in Section 7872(f)(2)(A) of the Code.
(b) If there shall be any dispute between the Company and the
Executive concerning (i) in the event of any termination of the Executive's
employment by the Company, whether such termination was for Cause, or (ii) in
the event of any termination of employment by the Executive, whether Good Reason
existed or whether such termination occurred during a Window Period, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith or that the termination by the Executive did not occur during a
Window Period, the Company shall pay all amounts, and provide all benefits, to
the Executive and/or the Executive's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to Section
4(a) hereof as though such termination were by the Company without Cause or by
the Executive with Good Reason or during a Window Period; provided, however,
that the Company shall not be required to pay any disputed amounts pursuant to
this paragraph except upon receipt of an undertaking by or on behalf of the
Executive to repay all such amounts to which the Executive is ultimately
adjudged by such court not to be entitled.
7. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the
13
<PAGE>
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including whether and when Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by KPMG Peat
Marwick LLP (the "Accounting Firm"); provided, however, that the Accounting Firm
shall not determine that no Excise Tax is payable by the Executive unless it
delivers to the Executive a written opinion (the "Accounting Opinion") that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. In the event that KPMG Peat Marwick LLP has served, at any time during
the two years immediately preceding a Change in Control Date, as accountant or
auditor for the individual, entity or group that is involved in effecting or has
any material interest in the Change in Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations and
perform the other functions specified in this Section 7 (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company, the Accounting
Firm shall make all determinations required under this Section 7, shall provide
to the Company and the Executive a written report setting forth such
determinations, together with detailed supporting calculations, and, if the
Accounting Firm determines that no Excise Tax is payable, shall deliver the
Accounting Opinion to the Executive. Any Gross-Up Payment, as determined
pursuant to this Section 7, shall be paid by the Company to the Executive within
five days of the receipt of the Accounting Firm's determination. Subject to the
remainder of this Section 7, any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance with the
procedures set forth in Section 7(c) that the Executive is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
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<PAGE>
(c) The Executive shall notify the Company in writing of any claims
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 30 days after the Executive actually receives
notice in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid; provided,
however, that the failure of the Executive to notify the Company of such claim
(or to provide any required information with respect thereto) shall not affect
any rights granted to the Executive under this Section 7 except to the extent
that the Company is materially prejudiced in the defense of such claim as a
direct result of such failure. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which he gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney selected by the Company and reasonably acceptable to
the Executive;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) if the Company elects not to assume and control the defense of
such claim, permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 7(c), the Company shall have the right, at its sole option, to
assume the defense of and control all proceedings in connection with such
contest, in which case it may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may either direct the Executive to pay the tax claimed
and sue for a refund or
15
<PAGE>
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's right to
assume the defense of and control the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 7(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 7(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 7(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 8 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
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<PAGE>
Also, within 14 days of the termination of Executive's employment for any
reason, Executive shall return to the Company all documents and other tangible
items of or containing Company information which are in Executive's possession,
custody or control.
9. Change of Control; Potential Change of Control.
----------------------------------------------
(a) As used in this Agreement, the terms set forth below shall have
the following respective meanings:
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
"Associate" shall mean, with reference to any Person, (i) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a subsidiary of the Company) of which
such Person is an officer or general partner (or officer or general partner of a
general partner) or is, directly or indirectly, the Beneficial Owner of 10% or
more of any class of equity securities, (ii) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity and (iii) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
"Beneficial Owner" shall mean, with reference to any securities, any
Person if:
(i) such Person or any of such Person's Affiliates and Associates,
directly or indirectly, is the "beneficial owner" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement) such securities
or otherwise has the right to vote or dispose of such securities, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under this
subsection (i) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or understanding: (x)
arises solely from a revocable proxy or consent given in response to a
public (i.e., not including a solicitation exempted by Rule 14a-2(b)(2) of
the General Rules and Regulations under the Exchange Act) proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act and
(y) is not then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report);
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<PAGE>
(ii) such Person or any of such Person's Affiliates and Associates,
directly or indirectly, has the right or obligation to acquire such
securities (whether such right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an
event) pursuant to any agreement, arrangement or understanding (whether or
not in writing) or upon the exercise of conversion rights, exchange rights,
other rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to "beneficially
own," (A) securities tendered pursuant to a tender or exchange offer made
by such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange or (B) securities
issuable upon exercise of Exempt Rights; or
(iii) such Person or any of such Person's Affiliates or Associates
(A) has any agreement, arrangement or understanding (whether or not in
writing) with any other Person (or any Affiliate or Associate thereof) that
beneficially owns such securities for the purpose of acquiring, holding,
voting (except as set forth in the proviso to subsection (i) of this
definition) or disposing of such securities or (B) is a member of a group
(as that term is used in Rule 13d-5(b) of the General Rules and Regulations
under the Exchange Act) that includes any other Person that beneficially
owns such securities;
provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the Beneficial Owner of, or to
"beneficially own," any securities acquired through such Person's participation
in good faith in a firm commitment underwriting until the expiration of forty
days after the date of such acquisition. For purposes hereof, "voting" a
security shall include voting, granting a proxy, consenting or making a request
or demand relating to corporate action (including, without limitation, a demand
for a stockholder list, to call a stockholder meeting or to inspect corporate
books and records) or otherwise giving an authorization (within the meaning of
Section 14(a) of the Exchange Act) in respect of such security.
The terms "beneficially own" and "beneficially owning" shall have
meanings that are correlative to this definition of the term "Beneficial Owner."
"Change of Control" shall mean any of the following occurring on or
after the Agreement Effective Date:
(i) Any Person (other than an Exempt Person) shall become the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding or 15% or more of the combined voting power of the Voting Stock
of the Company then outstanding; provided, however, that no Change of
Control shall be deemed to occur for purposes of this subsection (i) if
such Person shall become a Beneficial Owner of 15% or more of the shares of
Common Stock or
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<PAGE>
15% or more of the combined voting power of the Voting Stock of the Company
solely as a result of (x) an Exempt Transaction or (y) an acquisition by a
Person pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described in
clauses (x), (y) and (z) of subsection (iii) of this definition are
satisfied;
(ii) Individuals who, as of the Agreement Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Agreement Effective Date whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board; provided, further, that there shall be
excluded, for this purpose, any such individual whose initial assumption of
office occurs as a result of any actual or threatened election contest that
is subject to the provisions of Rule 14a-11 under the Exchange Act;
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (x) more than 85% of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of
the then outstanding Voting Stock of such corporation beneficially owned,
directly or indirectly, by all or substantially all of the Persons who were
the Beneficial Owners of the outstanding Common Stock immediately prior to
such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the outstanding Common Stock, (y) no Person
(excluding any Exempt Person or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 15% or more of the Common Stock then outstanding or 15% or more
of the combined voting power of the Voting Stock of the Company then
outstanding) beneficially owns, directly or indirectly, 15% or more of the
then outstanding shares of common stock of the corporation resulting from
such reorganization, merger or consolidation or the combined voting power
of the then outstanding Voting Stock of such corporation and (z) at least a
majority of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the initial agreement
or initial action by the Board providing for such reorganization, merger or
consolidation; or
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(iv) Approval by the shareholders of the Company of (x) a complete
liquidation or dissolution of the Company, unless such liquidation or
dissolution is approved as part of a plan of liquidation and dissolution
involving a sale or disposition of all or substantially all of the assets
of the Company to a corporation with respect to which, following such sale
or other disposition, all of the requirements of clauses (y)(A), (B) and
(C) of this subsection (iv) are satisfied, or (y) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which, following such sale or other
disposition, (A) more than 85% of the then outstanding shares of common
stock of such corporation and the combined voting power of the Voting Stock
of such corporation is then beneficially owned, directly or indirectly, by
all or substantially all of the Persons who were the Beneficial Owners of
the outstanding Common Stock immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the outstanding
Common Stock, (B) no Person (excluding any Exempt Person and any Person
beneficially owning, immediately prior to such sale or other disposition,
directly or indirectly, 15% or more of the Common Stock then outstanding or
15% or more of the combined voting power of the Voting Stock of the Company
then outstanding) beneficially owns, directly or indirectly, 15% or more of
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding Voting Stock of such
corporation and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or initial action of the
Board providing for such sale or other disposition of assets of the
Company.
"Common Stock" shall mean the common stock, par value $.01 per share,
of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exempt Person" shall mean any of the following:
(i) the Company, any subsidiary of the Company, any employee benefit
plan of the Company or any subsidiary of the Company, and any Person
organized, appointed or established by the Company for or pursuant to the
terms of any such plan; or
(ii) the General Motors Hourly-Rate Employees Pension Plan for its
Hourly Employees, or any trustee of or fiduciary with respect to such plan
(when acting in such capacity) (the "Hourly Plan"), unless and until, at
any time
20
<PAGE>
when the Hourly Plan, together with all Affiliates thereof, is the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding or 15% or more of the combined voting power of the Voting Stock
of the Company then outstanding, (A) the Hourly Plan shall purchase or
otherwise become the Beneficial Owner of any additional shares of Common
Stock constituting 1% or more of the then outstanding shares of Common
Stock or shares of Voting Stock of the Company representing 1% or more of
the combined voting power of the then outstanding shares of Voting Stock or
(B) any other Person or Persons who is or are the Beneficial Owner of any
shares of Common Stock constituting 1% or more of the then outstanding
shares of Common Stock or shares of Voting Stock of the Company
representing 1% or more of the combined voting power of the then
outstanding shares of Voting Stock of the Company shall become an Affiliate
of such Person.
"Exempt Rights" shall mean any rights to purchase shares of Common
Stock or other Voting Securities of the Company if at the time of the issuance
thereof such rights are not separable from such Common Stock or other Voting
Securities (i.e., are not transferable otherwise than in connection with a
transfer of the underlying Common Stock or other Voting Securities) except upon
the occurrence of a contingency, whether such rights exist as of the Agreement
Effective Date or are thereafter issued by the Company as a dividend on shares
of Common Stock or other Voting Securities or otherwise; provided, however, that
from and after the date (the "Separation Date") as of which such rights become
separable from the underlying shares of Common Stock or other Voting Securities,
such rights shall only constitute "Exempt Rights" pursuant to this definition to
the extent that they are beneficially owned by a Person that acquired such
rights prior to the Separation Date.
"Exempt Transaction" shall mean an increase in the percentage of the
outstanding shares of Common Stock or the percentage of the combined voting
power of the outstanding Voting Stock of the Company beneficially owned by any
Person solely as a result of a reduction in the number of shares of Common Stock
then outstanding due to the repurchase of Common Stock by the Company, unless
and until such time as (A) such Person or any Affiliate or Associate of such
Person shall purchase or otherwise become the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock or additional Voting Stock representing 1% or more of the combined
voting power of the then outstanding Voting Stock or (B) any other Person (or
Persons) who is (or collectively are) the Beneficial Owner of shares of Common
Stock constituting 1% or more of the then outstanding shares of Common Stock or
Voting Stock representing 1% or more of the combined voting power of the then
outstanding Voting Stock shall become an Affiliate or Associate of such Person.
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<PAGE>
"Person" shall mean any individual, firm, corporation, partnership, association,
trust, unincorporated organization or other entity.
"Potential Change of Control" shall mean any of the following:
(i) a tender offer or exchange offer is commenced by any Person which,
if consummated, would constitute a Change of Control;
(ii) an agreement is entered into by the Company providing for a
transaction which, if consummated, would constitute a Change of Control;
(iii) any election contest is commenced that is subject to the
provisions of Rule 14a-11 under the Exchange Act; or
(iv) any proposal is made, or any other event or transaction occurs or
is continuing, which the Board determines could result in a Change of
Control.
"Voting Stock" shall mean, with respect to a corporation, all
securities of such corporation of any class or series that are entitled to vote
generally in the election of directors of such corporation (excluding any class
or series that would be entitled so to vote by reason of the occurrence of any
contingency, so long as such continency has not occurred).
10. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's heirs,
executors and other legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and may only be assigned to a successor described in Section 10(c).
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
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11. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without reference to principles of conflict
of laws that would require the application of the laws of any other state or
jurisdiction.
(b) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and heirs, executors and other legal representatives.
(d) All notices and other communications hereunder shall be in
writing and shall be given, if by the Executive to the Company, by telecopy or
facsimile transmission at the telecommunications number set forth below and, if
by either the Company or the Executive, either by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
-------------------
------------------------------
------------------------------
If to the Company:
-----------------
Electronic Data Systems Corporation
5400 Legacy Drive, H3-1E-52
Plano, Texas 75024
Telecommunications Number: (214) 605-3451
Attention: Director, Corporate Compensation
With a Copy to:
--------------
Electronic Data Systems Corporation
5400 Legacy Drive, H3-GE-57
Plano, Texas 75024
Telecommunications Number: (214) 605-6148
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
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<PAGE>
(e) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(f) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(g) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason or during a Window Period pursuant to Section 3(c) of
this Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(h) This Agreement shall become effective as of June 18, 1996 (the
"Agreement Effective Date ").
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
ELECTRONIC DATA SYSTEMS
CORPORATION
By:
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Name:
---------------------------------------------
Title:
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24
