<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
ELECTRONIC DATA SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[EDS LOGO]
Lester M. Alberthal, Jr.
Chairman of the Board and Chief Executive Officer
April 6, 1998
Dear Stockholder:
On behalf of your Board of Directors and your management, I cordially invite you
to attend the 1998 Annual Meeting of Stockholders of EDS. The meeting will be
held on Wednesday, May 20, 1998 at 1:00 p.m. local time, at The Plano Convention
Centre, 2000 E. Spring Creek Parkway, Plano, Texas 75074. If you plan to attend,
please see the directions on the back of the enclosed proxy card, which will
also serve as your admission ticket to the meeting.
You will find information regarding the matters to be voted on at the meeting in
the following pages. The 1997 Annual Report to Stockholders is also enclosed
with these materials.
We are pleased to offer the options of telephone or internet voting this year to
our record holders of Common Stock (those who do not hold through a bank or
broker). Whether or not you plan to attend the meeting, please either complete
and return the enclosed proxy card in the accompanying envelope or vote through
the telephone or internet voting procedures described on the proxy card. Please
note that your completed proxy, or your telephone or internet vote, will not
prevent you from attending the meeting and voting in person should you so
choose.
We look forward to seeing you at the meeting.
Sincerely,
/s/ LESTER M. ALBERTHAL, JR.
Lester M. Alberthal, Jr.
ANY STOCKHOLDER HAVING A DISABILITY REQUIRING SPECIAL ASSISTANCE WHO WOULD
LIKE TO ATTEND THE ANNUAL MEETING SHOULD CALL EDS INVESTOR RELATIONS AT (972)
605-8933 AND REASONABLE EFFORTS WILL BE MADE TO ACCOMMODATE SUCH NEEDS. ANY
STOCKHOLDER HAVING A DISABILITY REQUIRING SPECIAL ASSISTANCE WHO WOULD LIKE
TO ATTEND THE ANNUAL MEETING SHOULD CALL EDS INVESTOR RELATIONS AT (972)
605-8933 AND REASONABLE EFFORTS WILL BE MADE TO ACCOMMODATE SUCH NEEDS.
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
The Annual Meeting of Stockholders of Electronic Data Systems Corporation
("EDS") will be held at The Plano Convention Centre, 2000 E. Spring Creek
Parkway, Plano, Texas 75074 on Wednesday, May 20, 1998 at 1:00 p.m. local time.
The purpose of the meeting is to vote on the following proposals (in the case of
the stockholder proposal, if presented at the meeting) described in the
accompanying Proxy Statement, and any other business that may properly be
presented at the meeting or any adjournment of the meeting:
PROPOSAL 1. Election of four directors for a three-year term;
PROPOSAL 2. Ratification of the appointment of KPMG Peat Marwick
LLP as independent auditors; and
PROPOSAL 3. A stockholder proposal relating to the appointment of
an independent Chairperson.
The record date for the annual meeting is March 24, 1998. Only stockholders of
record at the close of business on that date can vote at the meeting.
/s/ D. GILBERT FRIEDLANDER
D. Gilbert Friedlander
Senior Vice President, Secretary
and General Counsel
April 6, 1998
<PAGE> 4
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
The Board of Directors of Electronic Data Systems Corporation is soliciting
proxies to be used at the 1998 Annual Meeting of Stockholders (the "Meeting").
This proxy statement and the form of proxy will be mailed to stockholders
beginning April 6, 1998. References in this Proxy Statement to "EDS" or "we"
shall mean Electronic Data Systems Corporation. The mailing address of EDS'
principal executive offices is 5400 Legacy Drive, Plano, Texas 75024-3199.
WHO CAN VOTE
Record holders of EDS common stock at the close of business on March 24, 1998
may vote at the Meeting. On that date, 491,582,039 shares of common stock were
outstanding. Each share is entitled to cast one vote.
HOW YOU CAN VOTE
If you return your signed proxy, or vote through the telephone or internet
voting procedures which may be available to you, before the Meeting, we will
vote your shares as you direct. You can specify whether your shares should be
voted for all, some, or none of the nominees for director. You can also specify
whether you approve, disapprove, or abstain from each of the other proposals.
Proposals 1 and 2 will be presented at the Meeting by management. Proposal 3 may
be presented by a stockholder.
If you participate in the EDS Stock Purchase Plan, the EDS common stock fund
under any EDS Deferred Compensation Plan, the EDS 1996 Incentive Plan, or the
EDS Dividend Reinvestment Plan, you will receive one proxy with respect to all
shares registered in the same name. If your accounts are not registered in the
same name, you will receive a separate proxy with respect to your individual
plan shares. Generally, shares in these plans cannot be voted unless the proxy
card is signed and returned, although shares held in a Deferred Compensation
Plan may be voted in the discretion of the trustee administering the plan.
IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR SHARES, WE
WILL VOTE THEM "FOR" THE ELECTION OF ALL NOMINEES FOR DIRECTOR AS SET FORTH
UNDER "ELECTION OF DIRECTORS" BELOW; "FOR" THE RATIFICATION OF KPMG PEAT MARWICK
LLP AS INDEPENDENT AUDITORS, AND "AGAINST" PROPOSAL 3.
REVOCATION OF PROXIES
You can revoke your proxy at any time before it is exercised in any of the
following three ways:
1. by submitting written notice of revocation to the Secretary of EDS;
2. by submitting another proxy that is properly signed and later dated;
or
3. by voting in person at the Meeting.
REQUIRED VOTES
The holders of a majority of the shares entitled to vote who are either present
in person or represented by proxy at the Meeting will constitute a quorum for
the transaction of business at the Meeting. With the exception of the election
of directors which requires a plurality of the votes cast, the affirmative vote
of a majority of the votes cast at the Meeting is required to approve each
proposal.
<PAGE> 5
Abstentions and broker non-votes are counted for purposes of determining whether
a quorum is present at the Meeting. For the purpose of determining whether a
proposal (except for the election of directors) has received a majority vote,
abstentions will be included in the vote totals with the result that an
abstention will have the same effect as a vote "against" that proposal. Proxies
submitted by brokers that do not indicate a vote for some or all of the
proposals because they do not have discretionary voting authority and haven't
received instructions as to how to vote on those proposals ("broker non-votes")
are not considered "shares present" and will not affect the outcome of the vote.
OTHER MATTERS TO BE ACTED UPON AT THE MEETING
We do not know of any other matters to be presented or acted upon at the
Meeting. Under our By-laws, no business besides that stated in the meeting
notice may be transacted at any meeting of stockholders. If any other matter is
presented at the Meeting on which a vote may properly be taken, the shares
represented by proxies in the accompanying form will be voted in accordance with
the judgment of the person or persons voting those shares.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be paid by EDS. In addition to solicitation
by mail, proxies may be solicited in person or by telephone, facsimile
transmission or other means of electronic communication by directors, officers
or employees of EDS, without extra compensation. We have retained D.F. King &
Co., Inc. to assist in the solicitation of proxies for a fee of $13,000 plus
reimbursement of expenses. We may also reimburse brokerage firms, nominees,
custodians and fiduciaries for their out-of-pocket expenses for forwarding proxy
materials to beneficial owners and obtaining their instructions.
PROPOSAL 1: ELECTION OF DIRECTORS
Our Certificate of Incorporation provides for three classes of directors to be
as equal in number as possible. Each class serves a three year term, with one
class elected each year. Currently, the Board of Directors is comprised of 11
members. The four Class II directors whose terms expire at this Meeting are
Richard B. Cheney, Gary J. Fernandes, C. Robert Kidder, and Enrique J. Sosa. The
Board of Directors has nominated these persons for election as Class II
directors. If elected, each director will serve until the annual meeting in 2001
or until he is succeeded by another qualified director who has been elected. All
other directors will continue in office until the expiration of the terms of
their classes at the annual meeting in 1999 or 2000, as the case may be.
We will vote your shares as you specify on the enclosed proxy form. If you sign,
date and return the proxy form but do not specify how you want your shares
voted, we will vote them FOR the election of the four nominees listed below. If
due to unforeseen circumstances (such as death or disability) a nominee should
become unavailable for election, the Board may either reduce the number of
directors or substitute another person for the nominee, in which event your
shares will be voted for that other person.
The Board of Directors held six meetings in 1997. All directors attended at
least 75% of the meetings of the Board of Directors and the committees thereof
of which they are members.
The following information regarding the nominees for director and each current
director continuing in office is as of March 31, 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTOR.
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NOMINEES FOR DIRECTORS FOR THREE-YEAR TERM EXPIRING IN 2001
RICHARD B. CHENEY, 57
Chairman of the Board and Chief Executive Officer of Halliburton
Company since 1995. Mr. Cheney was a Senior Fellow at the
American Enterprise Institute, a policy think tank, from January
1993 to October 1995. He served as United States Secretary of
Defense from January 1989 to January 1993. Mr. Cheney was a
Member of Congress from Wyoming from 1978 to 1989 and served as
Assistant to the President and Chief of Staff for President
Gerald Ford from 1975 to 1977. He is a director of Halliburton
Company, Union Pacific Corporation and The Procter & Gamble
Company. Mr. Cheney has been a director of EDS since the
consummation of the split-off (the "Split-Off") from General
Motors Corporation ("GM") on June 7, 1996.
GARY J. FERNANDES, 54
Vice Chairman of EDS since June 1996, a director of EDS since
1981 and a member of the company's Office of the Chairman. Mr.
Fernandes had been a Senior Vice President of EDS from October
1984 until June 1996. He 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 and of
EDS Australia. Mr. Fernandes joined EDS in 1969 and has served in
numerous management capacities in the United States, Europe and
Japan. He is a director of The Southland Corporation and John
Wiley & Sons, Inc.
C. ROBERT KIDDER, 53
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. He is a director of Borden, Inc., Morgan Stanley,
Dean Witter, Discover & Co. and AEP Industries Inc. Mr. Kidder
has been a director of EDS since the consummation of the
Split-Off.
ENRIQUE J. SOSA, 58
Executive Vice President of Amoco Corporation, heading its
chemicals sector, since October 1995. 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. He has been a director
of EDS since the consummation of the Split-Off.
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MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1999
LESTER M. ALBERTHAL, JR., 54
Chief Executive Officer of EDS since December 1986, Chairman of
the Board since June 1989 and a member of the company's Office of
the Chairman. Mr. Alberthal has been a director of EDS since
1981. He joined EDS in 1968, became responsible for its health
care division in 1974 and was named Senior Vice President with
responsibility for the insurance group in 1979. Following the
acquisition of EDS by GM in 1984, Mr. Alberthal led all non-GM
North American operating groups. He served as President of EDS
from April 1986 until June 1996. Mr. Alberthal is a director of
Baker Hughes Incorporated.
JAMES A. BAKER, III, 67
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. 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 Secretary of State from January 1989 to
August 1992, as Secretary of the Treasury from 1985 to 1988, and
as White House Chief of Staff from 1981 to 1985. He is a director
of Houston Industries Incorporated as well as Princeton
University, Rice University, Howard Hughes Medical Institute and
The Woodrow Wilson International Center for Scholars. Mr. Baker
has been a director of EDS since the consummation of the
Split-Off.
JUDITH RODIN, 53
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. She is a director of AMR Corporation and AETNA,
Inc. Dr. Rodin has been a director of EDS since the consummation
of the Split-Off.
TERM EXPIRING IN 2000
WILLIAM H. GRAY, III, 56
President and Chief Executive Officer of The College Fund/UNCF
since September 1991. Mr. Gray has also served as the Senior
Minister of the Bright Hope Baptist Church in Philadelphia since
1972. Mr. Gray served as a Congressman from the Second District
of Pennsylvania from 1979 to 1991. During his tenure, he was
Chairman of the House Budget Committee, a member of the
Appropriations Committee, Chairman of the House Democratic Caucus
and Majority Whip. Mr. Gray is a director of The Chase Manhattan
Corporation, The Prudential Insurance Company of America,
Municipal Bond Investors Assurance Corporation, Rockwell
International Corporation, Union Pacific Corporation, CBS
Corporation and Warner-Lambert Company. Mr. Gray has been a
director of EDS since February 1997.
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<PAGE> 8
RAY J. GROVES, 62
Chairman of Legg Mason Merchant Banking, Inc. since March 1995.
Mr. Groves retired as Chairman and Chief Executive Officer of
Ernst & Young LLP in September 1994, which position he had held
since 1977. He is a director of Consolidated Natural Gas Company,
Marsh & McLennan Companies, Inc., RJR Nabisco Holdings Corp., RJR
Nabisco, Inc. and LAI Inc. Mr. Groves has been a director of EDS
since the consummation of the Split-Off.
JEFFREY M. HELLER, 58
President and Chief Operating Officer of EDS since June 1996, a
director of EDS since 1983 and a member of the company's Office
of the Chairman. Mr. Heller was a Senior Vice President of EDS
from 1984 until June 1996. Mr. Heller joined EDS in 1968 and has
served in numerous technical and management capacities. Mr.
Heller is a director of Trammell Crow Company.
RAY L. HUNT, 55
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. He has been a director of EDS since
the consummation of the Split-Off.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
Members: Ray J. Groves
Ray L. Hunt
Enrique J. Sosa
Number of Meetings
in 1997: 5
Principal Functions: Recommends to the Board the appointment of independent
auditors and reviews the scope and cost of proposed
audit and non-audit services as well as the
qualifications and independence of the independent
auditors.
Reviews with independent auditors and internal audit
staff the results of audits, any recommendations
therefrom and the status of management's actions for
implementing such recommendations, as well as the
quality and adequacy of EDS' internal financial
controls and internal audit staff.
Reviews EDS' Form 10-K filed with the Securities and
Exchange Commission (the "SEC"), programs established
to monitor compliance with EDS' Code of Conduct, and
status of material pending litigation or regulatory
proceedings.
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<PAGE> 9
COMPENSATION AND BENEFITS COMMITTEE
Members: William H. Gray, III
Ray J. Groves
C. Robert Kidder
Number of Meetings
in 1997: 6
Principal Functions: Establishes the compensation of EDS' executive officers
and reviews recommendations made by the Chief Executive
Officer with respect to the stock-based compensation of
certain other corporate officers.
Oversees EDS' employee benefit plans, reviews new
employee benefit plans and significant amendments to
existing plans, and administers all EDS stock based
plans.
GOVERNANCE COMMITTEE
Members: James A. Baker, III
Richard B. Cheney
Judith Rodin
Number of Meetings
in 1997: 3
Principal Functions: Determines criteria for qualification of directors;
recommends to the Board candidates for director and for
committee memberships; reviews management succession
and development plans; recommends to the Board the
election of the Chairman and the Chief Executive
Officer; and reviews the Chief Executive Officer's
recommendations regarding the election of other
principal officers.
Reviews Board processes and policies and makes
recommendations regarding stockholder proposals.
Considers nominees for the Board of Directors
recommended by stockholders. Any such recommendation
must be made in accordance with the procedures
described below under "Stockholder Proposals for 1999
Annual Meeting."
DIRECTOR COMPENSATION
A director who is also an employee of EDS is not entitled to any additional
compensation for serving as a director. Each non-employee director of EDS
receives annual cash compensation in the amount of $35,000, as well as $5,000
for serving as a committee chairman and $2,500 for attendance at each meeting of
the Board or a Board committee. In addition, pursuant to the 1996 EDS Incentive
Plan each non-employee director receives, on an annual basis (i) options to
purchase 1,500 shares of Common Stock at an exercise price equal to the fair
market value of the shares at the date of grant and (ii) 500 shares of Common
Stock. Such options and stock are subject to restrictions on sale which
generally expire ratably over a three-year period. A director may elect each
year to receive, in lieu of all or part of the fees he or she would otherwise
receive in the next year, (i) non-qualified options to purchase Common Stock
and/or (ii) a restricted stock award covering shares of Common Stock.
Under the EDS Deferred Compensation Plan for Non-employee Directors, a director
may elect annually to defer all or a portion of his or her director's fees and
to have such deferred fees treated as if they had been invested either in cash
or common stock. Fees deferred in cash earn interest at a rate, adjusted as of
January 1 of each year, equal to 120% of the applicable federal long-term rate
published by the Internal Revenue Service, compounded monthly. Fees deferred and
treated as if they had been invested in common stock are deemed to have
purchased shares of common stock on the effective date of the deferral at the
then fair market value of the stock. All amounts
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accumulated in the account, including any interest or deemed dividends, are paid
to the director in either a lump sum or in annual installments commencing upon
(i) the date of termination of his or her status as a director or (ii) the
expiration of five years after such date. All non-employee directors currently
participate in this plan.
MANAGEMENT STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Common Stock and Common Stock equivalents as of March 17, 1998 by
each director and nominee for director, the executive officers named in the
Summary Compensation table below, and by all directors and executive officers as
a group. Each of the individuals/groups listed below is the owner of less than
one percent of the outstanding Common Stock.
<TABLE>
<CAPTION>
Shares
Beneficially Share
Name Owned(a) Equivalents(b)
- ---- ------------ -------------
<S> <C> <C>
Lester M. Alberthal, Jr .............................................. 37,673 --
Gary J. Fernandes .................................................... 12,000 --
Jeffrey M. Heller .................................................... 265,287 --
John R. Castle, Jr ................................................... 28,218 --
Paul J. Chiapparone .................................................. 102,778 --
James A. Baker, III .................................................. 3,640 1,265
Richard B. Cheney .................................................... 1,000 1,169
William H. Gray, III ................................................. 700 152
Ray J. Groves ........................................................ 2,004 1,765
Ray L. Hunt .......................................................... 23,100 1,445
C. Robert Kidder ..................................................... 2,300 3,022
Judith Rodin ......................................................... 1,300 1,387
Enrique J. Sosa ...................................................... 2,509 1,204
Directors and executive officers of EDS as a group (20 persons) ...... 684,642 11,409
</TABLE>
- ---------------------
(a) Excludes units granted under the 1996 Incentive Plan (including its
predecessor plan) to Messrs. Alberthal, Fernandes, Heller, Castle and
Chiapparone and all directors and executive officers as a group
representing 741,000, 414,000, 464,000, 189,000, and 189,000 shares of
unvested restricted Common Stock, respectively. All such units are
scheduled to vest (subject to earlier vesting based on the achievement of
performance goals by EDS) during the period from 1999 through the earlier
of normal retirement or 2009.
(b) Represents director fee deferrals treated as invested in Common Stock
pursuant to the Non-Employee Director Deferred Compensation Plan. See
"Director Compensation."
As of March 17, 1998, the General Motors Special Hourly Employees Pension Trust
under the General Motors Hourly Rate Employees Pension Plan, c/o United States
Trust Company of New York, 114 West 47th Street, New York, NY 10036, owned
126,537,219 shares of Common Stock, or approximately 25.7% of the outstanding
Common Stock.
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EXECUTIVE COMPENSATION
REPORT OF COMPENSATION AND BENEFITS COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board of Directors (the
"Committee"), which is comprised entirely of non-employee directors, is
responsible for the establishment and administration of the compensation
programs for EDS' executive officers, including the Chief Executive Officer. In
fulfilling these responsibilities, the Committee administers all compensation
and benefit components for the executive officers including the establishment of
performance targets and the payout of cash and equity awards under the executive
short term and long term incentive plans. The Committee met six times in 1997
and routinely reported to the Board on its activities. Prior to the Split-off on
June 7, 1996, the compensation of the executive officers was administered by GM
and its Incentive and Compensation Committee.
Compensation Philosophy. The Committee has adopted a compensation philosophy
based on the premise that executive officers should receive competitive
compensation determined by reference to both EDS' performance and the
individual's contribution to that performance. Compensation plans and programs
are intended by the Committee to motivate and reward the executive officers for
long-term strategic management and the enhancement of stockholder value, support
a performance-oriented environment that rewards achievement of internal business
goals, and attract and retain the executive officers whose abilities are
critical to the long-term success and competitiveness of EDS.
The Committee resolved that in determining compensation levels it should first
evaluate executive officer compensation against independent survey data of
comparator companies, with a key determinant being the compensation levels and
pay practices in the technology industry. Because the Committee believes the
market for EDS' executive officer talent is broader than the information
technology services industry, the group of comparator companies, which consists
of approximately 25 large global corporations, includes a few companies outside
of the technology industry. The Committee's policy is to compensate the
executive officers above the 50th percentile of the comparator group when EDS
achieves its performance goals. EDS employs the services of an independent third
party consultant to provide comparator group data.
The Committee has established three principal components of EDS' executive
compensation structure: base salary; annual incentive compensation; and
long-term incentive compensation. By allocating a significant portion of the
total executive officer compensation package to annual and long-term incentive
compensation, the Committee seeks to tie the executive officer's compensation to
EDS' performance and link the executive officers' goals with the interests of
the company's stockholders. In order to achieve the goal of compensating the
executive officers above the 50th percentile of the comparator group when EDS
achieves its goals, the Committee has adopted the following approach to base
salary, annual incentive compensation and long-term incentive compensation.
Base Salary. Consistent with the compensation philosophy described above, the
Committee targets the executive officers' base salaries at average rates paid by
the comparator group. The Committee also reviews specific job responsibilities
and the executive officers' contributions to organizational and corporate goals.
Salary levels for executive officers are reviewed by the Committee on an annual
basis, although they may or may not be adjusted each year. In 1997, the
Committee increased base salaries for a limited number of the executive
officers. The Committee did not increase the base salary for the Chief Executive
Officer, Vice Chairman or Chief Operating Officer in 1997.
Annual Incentive Compensation. Annual incentive compensation, payable in the
form of cash bonuses, reflects the Committee's policy that a significant portion
of each executive officer's annual compensation be contingent upon the current
performance of EDS. The Committee has approved an Executive Bonus Plan under the
Incentive Plan pursuant to which demanding performance goals are established by
the Committee at the beginning of each fiscal year and only if such targets are
met will cash bonuses be made to the executive officers in respect of a
performance year. Each year, the Committee determines the maximum amount of all
bonuses under the Executive Bonus Plan for that year and establishes the
performance objectives which must be obtained in order for such bonuses to be
paid. It also determines the maximum amount of the bonus for each executive
officer. These amounts are established consistent with the Committee's policy of
compensating executive officers above the average levels of
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the comparator group when EDS achieves the performance goals established by the
Committee. In establishing the amount of the bonus, if any, which will be paid
to an executive officer at the end of each year, the Committee considers not
only whether EDS has achieved the performance goals established by the Committee
at the beginning of the year, but also the individual's performance for that
year. No cash bonuses were paid to the Chief Executive Officer or any other
executive officer in respect of 1997 because EDS did not meet the performance
goals established by the Committee at the beginning of the year.
Long-Term Incentive Compensation. The Committee has determined to utilize both
stock options and restricted stock as long-term incentive compensation because
such awards link management and stockholder interests and motivate the executive
officers to make long-term decisions that are in the best interest of EDS and
its stockholders. Historically, EDS has used restricted stock grants as part of
its long-term incentive program, with such grants made from time to time at two
or three year intervals. All such grants vest over a period of time, normally
ten years. Prior to 1997, the most recent grant of restricted stock to executive
officers occurred in 1994 (other than a grant of restricted stock to the Chief
Executive Officer in December 1996). The Committee approved a grant of
restricted stock units to the senior leadership of EDS in January 1997,
including the executive officers. In determining the number of shares of
restricted stock awarded to each executive officer, the Committee considered the
long-term incentive compensation paid by the comparator group, the executive's
job responsibilities, the executive's expected role in EDS' future long-term
performance, the number of unvested shares subject to previously granted
restricted stock awards, and the Committee's goal of linking a significant
portion of the compensation of EDS' executive officers to the future performance
of the Common Stock. These restricted stock awards will vest with respect to
each executive officer ratably over an extended period of time, subject to the
executive's continued employment, although the Committee may defer a scheduled
vesting if EDS has not achieved the performance goals established at the
beginning of a year. At year end, as a result of not meeting performance goals
in 1997, the Committee decided to exclude the 1996 and 1997 grants for executive
officers from the scheduled vesting in 1998.
Chief Executive Officer Compensation. The process of administering the
compensation of the Chief Executive Officer generally takes into consideration
the same factors used for other executive officers but also includes a formal
evaluation by the Board of Directors. The Chief Executive Officer has a higher
percentage of compensation at risk compared to the other executive officers. No
adjustments were made to the salary of the Chief Executive Officer in 1997 even
though the committee determined that the current salary level was lower than
that of comparable positions in the comparator group. As stated above, no annual
incentive bonus was paid to the Chief Executive Officer in respect of 1997
because EDS did not meet the performance goals set by the Committee at the
beginning of the year. In addition, as discussed above, because EDS did not meet
the performance targets established by the Committee at the beginning of 1997,
the Committee has determined that none of the shares covered by the 1996 or 1997
restricted stock grants to the Chief Executive Officer would vest in 1998.
Section 162(m). Section 162(m) of the Internal Revenue Code generally limits the
deductibility of compensation to the Chief Executive Officer and the four other
most highly compensated officers in excess of $1 million per year, provided,
however, that certain "performance-based" compensation may be excluded from such
$1 million limitation. The Committee intends to structure annual cash bonus
awards and stock option grants under the Incentive Plan in a manner designed to
make such awards "performance-based" compensation to the extent practicable,
although restricted stock awards under the Incentive Plan will not qualify as
"performance-based compensation" and will therefore be subject to the $1 million
limitation. The Committee anticipates that the $1 million level will be exceeded
in every year with respect to the Chief Executive Officer and other executive
officers.
COMPENSATION AND BENEFITS COMMITTEE
C. Robert Kidder, Chairman
William H. Gray, III
Ray J. Groves
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<PAGE> 13
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Benefits Committee is composed of C. Robert Kidder, William
H. Gray, III, and Ray J. Groves, none of whom are employees or current or former
officers of EDS.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on Common
Stock, including reinvestment of dividends, for the last five fiscal years with
the cumulative total return of the Standard & Poor's 500 Stock Index and the
Goldman Sachs Technology Services Index assuming an investment of $100 on
January 1, 1993. As a result of the Split-off, each share of GM Class E Common
Stock was converted into one share of EDS Common Stock effective June 7, 1996.
Accordingly, the return on Common Stock in the following graph assumes an
investment of $100 in the GM Class E Common Stock on January 1, 1993.
THIS GRAPH IS PRESENTED IN ACCORDANCE WITH SEC REQUIREMENTS. YOU ARE CAUTIONED
AGAINST DRAWING ANY CONCLUSIONS FROM THIS INFORMATION, AS PAST RESULTS ARE NOT
NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THIS GRAPH IN NO WAY REFLECTS A
FORECAST OF FUTURE FINANCIAL PERFORMANCE.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
EDS COMMON STOCK
(GM CLASS E COMMON GOLDMAN SACHS TECHNOLOGY
STOCK PRIOR TO SPLIT-OFF) S&P 500 SERVICES INDEX
------------------------- ------- -----------------------
<S> <C> <C> <C>
1/1/93 100 100 100
1/1/94 89 110 110
1/1/95 120 112 134
1/1/96 164 153 190
6/7/96 181 169 226
1/1/97 138 188 216
1/1/98 143 251 249
</TABLE>
Notwithstanding any statement in any of EDS' filings with the SEC that might
incorporate part or all of any future filings with the SEC by reference,
including this Proxy Statement, the foregoing Report of the Compensation and
Benefits Committee on Executive Compensation and Performance Graph are not
incorporated by reference into any such filings.
10
<PAGE> 14
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the compensation for
the last three years of the Chief Executive Officer and each of the four other
most highly compensated executive officers of EDS as of the end of 1997.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------- ------------------------
NAME AND RESTRICTED ALL
PRINCIPAL POSITION DURING OTHER ANNUAL STOCK OPTIONS/ OTHER
1997 YEAR SALARY(a) BONUS(b) COMPENSATION(c) AWARDS(d) SARS (#) COMPENSATION (e)
- ------------------------------ ---- ---------- ---------- --------------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lester M. Alberthal, Jr., .... 1997 $ 850,000 -0- $ 19,318 $12,918,750 -0- $ 56,107
Chairman of the Board 1996 733,333 $1,000,000 207,298 6,750,000 950,000 33,785
and Chief Executive Officer 1995 675,000 1,000,000 10,902 -0- -0- 33,126
Gary J. Fernandes, ........... 1997 500,000 -0- 11,919 10,765,625 -0- 33,732
Vice Chairman 1996 386,667 575,000 67,064 -0- 500,000 17,935
1995 330,000 575,000 2,113 -0- -0- 9,026
Jeffrey M. Heller, ........... 1997 500,000 -0- 15,466 10,765,625 -0- 64,994
President and Chief 1996 423,333 550,000 66,523 -0- 500,000 39,282
Operating Officer 1995 385,000 550,000 11,498 -0- -0- 48,588
John R. Castle, Jr., ......... 1997 445,000 -0- 5,822 4,306,250 -0- 19,532
Executive Vice President 1996 386,667 300,000 64,803 -0- 160,000 20,468
1995 370,000 450,000 1,592 -0- -0- 8,048
Paul J. Chiapparone, ......... 1997 425,000 -0- 11,114 4,306,250 -0- 51,454
Executive Vice President 1996 346,667 400,000 88,947 -0- 200,000 34,655
1995 320,000 460,000 2,725 -0- -0- 21,231
</TABLE>
- ----------------------------
(a) The increase in salary for Messrs. Alberthal, Fernandes and Heller in 1997
compared to 1996 is due to increases which became effective in the latter
part of 1996. Such persons did not receive salary increases in 1997.
(b) Represents bonuses earned by the named executives with respect to the year
indicated. Of the amount reported for any year, 50% is paid during the
following year and 25% is paid during each of the next two following years,
subject to certain conditions regarding the continuation of the named
executive's employment.
(c) Amount for 1996 includes for Mr. Alberthal $53,096 for personal use of
corporate aircraft and $83,845 for security services and equipment provided
at his residence; for Mr. Chiapparone $23,566 for security services and
equipment provided at his residence; and for each of the named executive
officers approximately $42,000 in respect of one-time awards in connection
with the Split-Off.
(d) The amounts set forth for 1997 represent awards of the following number of
shares of restricted stock to the named executive officers on January 3,
1997: Mr. Alberthal, 300,000 shares; Mr. Fernandes, 250,000 shares; Mr.
Heller, 250,000 shares; Mr. Castle, 100,000 shares; and Mr. Chiapparone,
100,000 shares. Such shares will vest ratably over each of the following 10
years (or 5 years with respect to Mr. Chiapparone's shares) subject to the
achievement by EDS of performance goals. Shares which do not vest in any
year due to failure to achieve such goals will vest not later than 2007. As
of December 31, 1997, the number and fair market value of the aggregate
units representing shares of unvested restricted Common Stock held by the
named executive officers were: Mr. Alberthal, 799,000 shares, $35,106,063;
Mr. Fernandes, 446,000 shares, $19,596,125; Mr. Heller, 506,000 shares,
$22,232,375; Mr. Castle, 211,000 shares, $9,270,813; and Mr. Chiapparone,
231,000 shares, $10,149,563. All such restricted stock units have been
granted pursuant to the Incentive Plan (or its predecessor)
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<PAGE> 15
and are scheduled to vest (subject to earlier vesting based on the
achievement of performance goals by EDS) during the period from 1998
through the earlier of normal retirement or 2009. Dividend equivalents are
paid to the named executive officers with respect to such restricted stock
units in the amount and at the time of the payment of dividends on the
Common Stock.
(e) Consists of (i) payments by EDS of premiums under certain life insurance
policies the proceeds of which may be applied toward the continuation of
salary payments for the benefit of the named executives' surviving spouse
and (ii) the imputed value of outstanding non-interest bearing loans to the
named executives during 1997 for the payment of withholding taxes required
as a result of the vesting of restricted stock units under the Incentive
Plan. See "Certain Transactions."
EDS RETIREMENT PLAN
The following table indicates the estimated annual benefits payable to the named
executive officers upon normal retirement for the specified compensation and
years of service classifications under the combined formulas of the Amended and
Restated EDS Retirement Plan (the "Retirement Plan") and the EDS Supplemental
Executive Retirement Plan (the "Supplemental Plan"). The Supplemental Plan is a
non-qualified, unfunded retirement plan intended to pay benefits to certain
executive level employees whose benefits under the Retirement Plan are limited
under the Internal Revenue Code. Benefits under the Supplemental Plan can be
reduced, suspended or eliminated at any time by the Compensation and Benefits
Committee.
PROJECTED TOTAL ANNUAL RETIREMENT BENEFITS
UNDER THE EDS RETIREMENT PLAN AND THE
EDS SUPPLEMENTAL PLAN
<TABLE>
<CAPTION>
YEARS OF SERVICE
- ----------------------------------------------------------------------------------------------
FINAL AVERAGE
EARNINGS 5 10 15 20 25 30
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 600,000 $ 48,936 $ 97,873 $ 146,809 $ 195,745 $ 244,682 $ 293,618
$ 800,000 $ 65,636 $ 131,273 $ 196,909 $ 262,545 $ 328,182 $ 393,818
$1,000,000 $ 82,336 $ 164,673 $ 247,009 $ 329,345 $ 411,682 $ 494,018
$1,200,000 $ 99,036 $ 198,073 $ 297,109 $ 396,145 $ 495,182 $ 594,218
$1,400,000 $ 115,736 $ 231,473 $ 347,209 $ 462,945 $ 578,682 $ 694,418
$1,600,000 $ 132,436 $ 264,873 $ 397,309 $ 529,745 $ 662,182 $ 794,618
</TABLE>
As of December 31, 1997, the final average earnings for the highest five
consecutive years over the last 10-year period and the eligible years of
credited service for each of the named executive officers were as follows: Mr.
Alberthal, $1,451,167--30 years; Mr. Fernandes, $766,750--29 years; Mr. Heller,
$819,083--30 years; Mr. Castle, $725,833--9 years; and Mr. Chiapparone,
$708,879--31 years. The total annual benefit for an executive may not exceed the
executive's highest annual salary. The salary for the most recent year
considered in the calculation of the sum of the averages of salary and bonus
income, which is reported here as final average earnings, is found in the
Summary Compensation Table above under the column labeled "Salary" and the bonus
received for the most recent year considered in such calculation is as follows:
Mr. Alberthal--$970,000; Mr. Fernandes--$550,000; Mr.
Heller--$531,250; Mr. Castle--$368,750; and Mr. Chiapparone--$421,250.
"Earnings" under the Retirement Plan generally refer to total annual cash
compensation (up to $160,000 for 1997 as limited by the Internal Revenue Code),
together with any salary reduction contributions to the EDS Deferred
Compensation Plan and EDS Flexible Benefits Plan, and excludes benefits under
the Incentive Plan and extraordinary compensation (such as moving allowances).
Benefits under the Retirement Plan generally equal (i) 55% of the participant's
final average earnings (based on the highest five consecutive years of
includible earnings within the last ten years of employment), less the maximum
offset allowance that can be deducted from final average earnings as determined
under the Internal Revenue Code, multiplied by (ii) the participant's years of
credited benefit service (not to exceed 30), divided by 30. Benefits are payable
in the form of a single or joint survivor life annuity, unless otherwise
elected. The benefit payable under the Supplemental Plan for normal retirement,
together with the benefit payable under the Retirement Plan, will generally
equal (i) 50% of the average
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<PAGE> 16
of the participant's total compensation (based on the highest five consecutive
years within the last ten years of employment) less (ii) the maximum offset
allowance that can be deducted from final average earnings. Such benefits are
payable in the form of a single or joint survivor life annuity.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
EDS has entered into change of control employment agreements ("Employment
Agreements") with each of its executive officers (each, an "Executive") and
certain of its other officers. These agreements generally provide that, upon the
occurrence of certain triggering events involving an actual or potential change
of control of EDS, the employment of each Executive will be continued for a
period of five years (the "Employment Period").
The employment rights of an Executive under the Employment Agreements are
triggered by either a "Change of Control" or a "Potential Change of Control."
Following a Potential Change of Control, the employment period may terminate
(but the agreement will remain in full force and a new employment period will
apply to any future Change of Control or Potential Change of Control) if either
(a) the EDS Board of Directors determines that a Change of Control is not likely
or (b) the Executive elects to terminate his Employment Period as of any
anniversary of the Potential Change of Control. A "Change of Control" generally
includes the occurrence of any of the following: (i) any person, other than
exempt persons (including employee benefit plans), becomes a beneficial owner of
15% or more of EDS' voting stock; (ii) a change in the identity of a majority of
the persons serving as members of the EDS Board, unless such change was approved
by a majority of the incumbent board members; (iii) the approval by stockholders
of a reorganization, merger or consolidation in which (x) existing EDS
stockholders would not own more than 85% of the common stock and voting stock of
the resulting company, (y) a person (other than exempt persons) would own 15% or
more of the common stock or voting stock of the resulting company or (z) less
than a majority of the board of the resulting company would consist of the then
incumbent members of the EDS Board; or (iv) the approval by stockholders of a
liquidation or dissolution of EDS, except as part of a plan involving a sale to
a company of which following such transaction (x) more than 85% of the common
stock and voting stock would be owned by existing EDS stockholders, (y) no
person (other than exempt persons) would own more than 15% of the common stock
or voting stock of such company and (z) at least a majority of its board of
directors would consist of the then incumbent members of the EDS Board. A
"Potential Change of Control" generally includes any of the following: (i) the
commencement of a tender or exchange offer for EDS stock that, if consummated,
would result in a Change of Control; (ii) EDS entering into an agreement which,
if consummated, would constitute a Change of Control; (iii) the commencement of
an election contest subject to certain proxy rules; or (iv) the occurrence of
any other event that the EDS Board determines could result in a Change of
Control.
Throughout the Employment Period, each Executive's position, authority and
responsibilities will not be diminished from the most significant held by the
Executive at any time during the 90-day period immediately prior to the
commencement of the Employment Period, and the Executive's compensation will
continue on a basis no less favorable than it had been during the same period.
The Employment Agreements provide that an Executive's Employment Period
terminates (i) automatically upon the Executive's death or after 180 days of his
or her continuing "Disability", (ii) at EDS' option if the Executive is
terminated for "Cause" and (iii) at the Executive's option at any time for "Good
Reason" (as such terms are defined in the Employment Agreements) or for any
reason during the 180-day period beginning 60 days after a Change of Control (a
"Window Period"). If an Executive's employment is terminated for any reason
during a Window Period or for Good Reason at any time, the Executive will be
entitled to receive the following: (i) the employee benefits earned as of the
date of termination; (ii) his or her then current salary and bonus throughout
the remainder of the Employment Period; (iii) the cash value of his or her
retirement and 401(k) benefits to the end of the Employment Period; (iv) under
certain circumstances, a pro rata portion of the options, restricted stock and
other compensatory awards the Executive would have received had his or her
employment continued; and (v) continued coverage under welfare benefit plans
until the end of the Employment Period. In addition, all options, restricted
stock and other compensatory awards held by the Executive will immediately vest
and become exercisable and their term will be extended for up to one year
following termination of employment. The Executive may also elect to cash out
equity-based compensatory awards at the highest price per share paid by
specified persons during the Employment Period or the six-month period prior to
the date upon which such period commenced. Upon the death of an Executive (other
than during a Window Period), his or her legal representatives will be entitled
to receive the following:
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<PAGE> 17
(i) the employee benefits earned as of the date of death, (ii) the Executive's
then current salary for one year from the date of death, and (iii) the
continuation of welfare benefits until the end of the Employment Period. In
addition, all options, restricted stock and other compensatory awards will
immediately vest and become exercisable and the term thereof will be extended
for up to one year following death. The Executive's legal representatives may
elect to cash out equity-based awards at the highest price per share of Common
Stock paid by specified persons during the Employment Period or the six-month
period prior to the date upon which such period commenced. Upon termination of
employment due to Disability, the Executive will be entitled to receive the same
amounts and benefits as would be provided upon termination by reason of death.
If an Executive's employment is terminated, other than during a Window Period,
(i) by EDS for Cause or (ii) by the Executive other than for Good Reason, the
Executive will be entitled to receive only the compensation and benefits earned
as of the date of termination.
CERTAIN TRANSACTIONS
Prior to 1998, upon the vesting of restricted stock units granted to executive
officers under the Incentive Plan, EDS advanced on their behalf the applicable
withholding taxes payable in respect of such vesting. The officers had up to 60
days to repay EDS for such amounts, although that period was extended by EDS for
as long as the officer was in possession of material insider information
regarding EDS and restricted from selling Common Stock in market transactions.
No interest accrued on the amounts advanced. The largest amount payable to EDS
by its executive officers at any time since January 1, 1997 in respect of these
advances is as follows: Lester M. Alberthal, Jr. -- $959,371; Hartmut Burger --
$183,989; John R. Castle, Jr. -- $289,125; Paul J. Chiapparone -- $551,967; J.
Coley Clark -- $264,304; Gary J. Fernandes -- $591,907; Joseph M. Grant --
$236,557; Jeffrey M. Heller -- $768,064; Dean Linderman -- $551,967; Gary B.
Moore -- $151,134; G. Stuart Reeves -- $473,114; and Edward V. Yang -- $190,942.
This policy of advancing amounts in respect of withholding taxes has been
discontinued and no such amounts were outstanding at March 31, 1998. Messrs.
Linderman and Grant resigned as officers of EDS effective January 24, 1998 and
March 31, 1998, respectively.
James A. Baker, III, a director of EDS, is a senior partner of the law firm of
Baker & Botts, L.L.P. EDS retained Baker & Botts, L.L.P. to provide various
legal services to EDS during 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
EDS' directors and executive officers are required under the Exchange Act to
file with the SEC and the New York Stock Exchange reports of ownership and
changes in ownership in their holdings of Common Stock. Copies of these reports
must also be furnished to EDS. Based on an examination of these reports and on
written representations provided to EDS, EDS believes that all such reports were
timely filed in 1997.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed KPMG Peat Marwick LLP as EDS' independent auditors for the year ending
December 31, 1998. Although not required to do so, the Board of Directors is
submitting the appointment of that firm for ratification at the Annual Meeting.
KPMG Peat Marwick LLP has been EDS' auditors since 1984. If the appointment is
not approved, the Board of Directors will reconsider its appointment. A
representative of KPMG Peat Marwick LLP is expected to be present at the Annual
Meeting, will be available to respond to questions and will have the opportunity
to make a statement, should he or she so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR 1998.
14
<PAGE> 18
PROPOSAL 3: STOCKHOLDER PROPOSAL RELATING TO
APPOINTMENT OF INDEPENDENT CHAIRPERSON
The California Public Employees Retirement System, P.O. Box 942707, Sacramento,
California 94229, the owner of approximately 2,394,740 shares of Common Stock,
has advised EDS that it intends to present the following resolution at the
Meeting. In accordance with applicable proxy regulations, the proposed
resolution and supporting statement, for which the Board of Directors and EDS
accept no responsibility, are set forth below.
PROPOSAL FOR INDEPENDENT CHAIRPERSON
RESOLVED, that the stockholders of Electronic Data Systems Corporation (the
"Company") recommend that the Board of Directors take steps necessary to amend
the Company's Bylaws to require that the Board's Chairperson be an Independent
Director. For purposes of this proposal, the term "Independent Director" means a
director who: has not been employed by the Company in an executive capacity
within the last five years; is not, and is not affiliated with a company that
is, an advisor or consultant to the Company; is not affiliated with a
significant customer or supplier of the Company; has no personal services
contract(s) with the Company or the Company's senior management; is not
affiliated with a not-for-profit entity that receives significant contributions
from the Company; within the last five years, has not had any business
relationship with the Company (other than service as a director) for which the
Company has been required to make disclosure under Regulation S-K of the
Securities and Exchange Commission; is not employed by a public company at which
an executive officer of the Company serves as a director; has not had a
relationship described above with any affiliate of the Company; and is not a
member of the immediate family of any person described above. This provision may
only be amended by the affirmative vote of the holders of the outstanding common
stock of the Company.
SUPPORTING STATEMENT
How important is the Board of Directors? As a trust fund with approximately
1,049,000 participants, and as owner of some 2,394,000 shares of the Company's
stock, we believe that the Board - and most particularly its Chairperson - is of
paramount importance. Therefore, we are sponsoring this proposal which urges the
Board to amend the Company's bylaws so that the Board's leader will be a person
who is independent of the Company and its officers. This proposal seeks to
promote strong, objective leadership on the Board.
A Board must formulate corporate policies and monitor management's
implementations of those policies. The Chairperson is responsible for leading
the Board in these tasks, and ensuring that directors are given the information
necessary to perform their duties. When the Board's Chairperson is also an
officer, employee or otherwise closely related to the Company's management, it
is difficult to objectively perform this monitoring and evaluation function. An
independent Chairperson would best ensure that the interests of stockholders are
served, rather than the interests of management.
The benefits of independent directors are generally well accepted. The New York
Stock Exchange requires that at least two members of the board of a listed
company, and all members of the company's audit committee, must meet the
Exchange's standards of independence. The Investment Company Act of 1940 (the
law that governs the activities of investment companies) also includes an
independent director provision, generally requiring investment company boards to
be comprised of at least 40 percent "disinterested" directors.
Please VOTE FOR THIS PROPOSAL.
-----------------
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
The purpose of the this proposal is to promote effective Board oversight of
management. Your Board, which includes eight non-management directors among its
eleven members, strongly believes that the active involvement and leadership of
ALL non-management directors is essential to effective corporate oversight.
Consistent with this
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<PAGE> 19
belief, the Board has for some time followed a practice through which all
non-management directors meet separately without any members of management
present at each regularly scheduled Board meeting. It is the Board's experience
in these meetings that leads it to the conclusion that management oversight is
more effectively accomplished through means other than by promoting one
non-management director to a position of greater prominence than all others.
The Board believes that the functions performed by the three Committees of the
Board, each of which is composed exclusively of non-management directors, also
serve as effective means of exercising management oversight and make a
non-management Chairman unnecessary. The Governance Committee, in conjunction
with the Compensation and Benefits Committee, leads the annual evaluation of the
Chief Executive Officer's performance in which all non-management Board members
participate; the Governance Committee also recommends candidates for Board and
Committee membership and monitors and recommends improvement of the company's
governance practices. The Compensation and Benefits Committee establishes
executive compensation, including the compensation of the Chief Executive
Officer, and provides oversight of employee compensation practices and employee
benefits. The Audit Committee provides oversight of the company's accounting and
financial reporting practices. The duties of these Committees are described in
greater detail elsewhere in this Proxy Statement.
The Board believes that no meaningful additional measure of oversight would be
provided by a non-executive Chairman. In fact, the Board believes that the
separation of the positions of Chairman and Chief Executive Officer would have a
detrimental impact on the company by undermining the effectiveness of the Chief
Executive Officer and creating confusion among EDS' customers and its employees
regarding the company's management and strategic direction. This could be
particularly disadvantageous for a professional services business such as EDS,
whose customers and potential customers enter into long-term contracts for the
critical business services EDS offers and are thus particularly interested in
the strategic direction and stability of their service provider.
It is for the foregoing reasons that the practice of separating the positions of
Chairman and Chief Executive Officer is not widespread. Indeed, some well known
companies who formerly had non-executive Chairmen have since abandoned this
approach and re-combined the offices of Chairman and Chief Executive Officer.
As part of its proposal that the Chairman be an "independent director," the
proponent has further proposed a definition of independence which would result
in a mechanical application of rigid and formulistic rules. Earlier this year,
your Board formally adopted a definition of director independence which is
modeled after the New York Stock Exchange's definition and ensures that a
determination of director independence is based upon a careful consideration of
all relevant facts and circumstances.
The Board believes that the interests of EDS and its stockholders are best
served at this time through the experienced leadership and ability for decisive
action afforded by a full-time Chairman and Chief Executive Officer, subject to
effective oversight by all non-management directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Under SEC rules, stockholder proposals intended to be presented at the 1999
Annual Meeting and included in the proxy materials for that meeting must be
received no later than December 7, 1998. Proposals may be mailed to the
Secretary of EDS at 5400 Legacy Drive, Mail Stop H2-8W-40, Plano, Texas
75024-3199.
Our By-laws provide for certain procedures which stockholders must follow to
nominate persons for election as directors or to introduce an item of business
at an annual meeting. Generally, the stockholder must notify the Secretary of
EDS of the proposal not less than 90 days nor more than 270 days before the
scheduled meeting date. The notice must include the name and address of the
stockholder and of any other stockholders known by such stockholder to be in
favor of the proposal. If the notice relates to a nomination for director, it
must also set forth the name, age, principal occupation and business and
residence address of any nominee(s), the number of shares of Common Stock
beneficially owned by the nominee(s), and such other information regarding each
nominee as would
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<PAGE> 20
have been required to be included in a proxy statement filed pursuant to the
SEC's proxy rules (including the written consent of each nominee). Notice of an
item of business shall include a description of the proposed business and the
reason for conducting the proposed business at the annual meeting. Copies of our
Bylaws are available from the Secretary of EDS.
We currently expect that the 1999 Annual Meeting will be held on May 25, 1999,
in which event any advance notice of nominations for directors and items of
business (other than proposals intended to be included in the proxy materials,
which as noted above must be received by December 7, 1998) must be given by
stockholders by February 24, 1999.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. However, if any other
matter calling for a vote of stockholders is properly presented at the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote in accordance with their best judgment on such matters.
A COPY OF EDS' ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) AS FILED WITH THE
SEC WILL BE SENT TO ANY STOCKHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST TO EDS
INVESTOR RELATIONS, 5400 LEGACY DRIVE, MAIL STOP H1-2D-05, PLANO, TEXAS
75024-3199. THE ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE ELECTRONICALLY ON
EDS' INTERNET WEB SITE AT HTTP://WWW.EDS.COM.
By order of the Board of Directors,
/s/ D. GILBERT FRIEDLANDER
D. Gilbert Friedlander
Senior Vice President, Secretary
and General Counsel
April 6, 1998
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<PAGE> 21
- --------------------------------------------------------------------------------
ADMISSION TICKET
EDS
1998 ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
THE PLANO CONVENTION CENTRE
2000 E. SPRING CREEK PARKWAY
PLANO, TEXAS 75074
[MAP]
TAKE CENTRAL EXPRESSWAY (U.S. INTERSTATE 75) TO EXIT 31 (SPRING CREEK PARKWAY).
HEAD EAST ON SPRING CREEK PARKWAY TO PLANO CONVENTION CENTRE, LOCATED ON THE
SOUTHWEST CORNER OF SPRING CREEK PARKWAY AND JUPITER ROAD.
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PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ELECTRONIC DATA
SYSTEMS CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 20, 1998
The undersigned hereby authorizes Lester M. Alberthal, Jr., Gary J.
Fernandes, Jeffrey M. Heller, and D. Gilbert Friedlander, and each or any of
them with power to appoint his substitute, to vote as Proxy for the undersigned
at the Annual Meeting of Stockholders to be held at The Plano Convention
Centre, 2000 E. Spring Creek Parkway, Plano, TX 75074 on May 20, 1998 at 1:00
PM, or any adjournment or postponement thereof, the number of shares which the
undersigned would be entitled to vote if personally present. The proxies shall
vote subject to the directions indicated on the reverse side of this card and
proxies are authorized to vote in their discretion upon such other business as
may properly come before the meeting and any adjournments or postponements
thereof. The proxies will vote as the Board of Directors recommends where the
undersigned does not specify a choice.
THIS CARD ALSO CONSTITUTES YOUR VOTING INSTRUCTIONS FOR SHARES HELD IN THE
EDS DEFERRED COMPENSATION PLAN, THE EDS STOCK PURCHASE PLAN, THE GM SAVINGS
STOCK PURCHASE PROGRAM, THE GM PERSONAL SAVINGS PLAN, PUERTO RICO SAVINGS PLAN,
AND THE SATURN PERSONAL CHOICES SAVINGS PLAN, AND THE UNDERSIGNED HEREBY
AUTHORIZES THE RESPECTIVE TRUSTEES/ADMINISTRATORS OF SUCH PLANS TO VOTE THE
SHARES HELD IN THE UNDERSIGNED'S ACCOUNTS.
ELECTRONIC DATA SYSTEMS CORPORATION
P.O. BOX 11198
NEW YORK, N.Y. 10203-0198
Address Change/Comments:
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(IF YOU HAVE WRITTEN IN THE ABOVE SPACE, PLEASE MARK THE BOXES FOR
"COMMENTS/CHANGE OF ADDRESS" ON THE REVERSE SIDE OF THIS CARD SO THAT YOUR
COMMENTS CAN BE DIRECTED TO THE APPROPRIATE GROUP FOR REVIEW.)
(CONTINUED, AND PLEASE SIGN ON REVERSE SIDE.)
<PAGE> 22
EDS
VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
Dear Stockholder:
Electronic Data System Corporation offers you the convenience of telephone or
internet voting. Your telephone or internet vote authorizes the proxies to
vote your shares in the same manner as if you marked, signed and returned your
proxy card.
VOTE BY PHONE: CALL TOLL-FREE FROM A TOUCH-TONE TELEPHONE 1-888-221-0695 (ONLY
AVAILABLE IN THE UNITED STATES) ANYTIME. THERE IS NO CHARGE FOR
THIS CALL. YOU WILL BE ASKED TO ENTER A CONTROL NUMBER WHICH IS
LOCATED IN THE BOX BELOW MARKED "CONTROL NUMBER."
OPTION 1: To vote as the Board of Directors recommends on ALL items, press
1.
OPTION 2: If you choose to vote on each item separately, press 0. You
will hear these instructions:
ITEM 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9. (to WITHHOLD FOR AN INDIVIDUAL nominee,
press 0 and follow the instructions.)
ITEM 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
ITEM 3: TO vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.
VOTE BY INTERNET: The web address is http://eds.proxyvoting.com
IF YOU HAVE SUBMITTED YOUR PROXY
BY TELEPHONE OR THE INTERNET
THERE IS NO NEED FOR YOU
TO MAIL BACK YOUR PROXY.
THANK YOU FOR VOTING!
NO TYPE HERE-- LABEL HERE
CONTROL NUMBER
YOUR VOTE IS IMPORTANT!!!
PLEASE VOTE BY TELEPHONE OR INTERNET OR RETURN
THE ATTACHED PROXY CARD.
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DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET
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[ ]
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.) (THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" ITEM 3.)
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1. Election of Directors. The Board of Directors recommends a FOR AGAINST ABSTAIN
vote "FOR" the nominees listed below: 3. Stockholders' Proposal
California Public Employees [ ] [ ] [ ]
Nominees: 01- Richard B. Cheney 02- Gary J. Fernandes Retirement System-
03- C. Robert Kidder 04- Enrique J. Sosa Appoint Independent Chairperson
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FOR [ ] WITHHOLD [ ] [ ] To include any comments If you do not want to
ALL FOR ALL EXCEPTIONS or change of address mark receive an Annual Report
this box and use the [ ] for this account, please [ ]
reverse side. mark this box.
EXCEPTIONS
----------------------------------------------------- If you are interested in I plan to attend the
INSTRUCTIONS: To withhold authority to vote for any individual accessing the Annual Report Annual Meeting. [ ]
nominee(s), mark the "exceptions" box and write the and Proxy Statement [ ]
name(s) in the space provided above. electronically in the future
please mark this box.
2. Directors' Proposal FOR AGAINST ABSTAIN
Ratification of appointment of
auditors [ ] [ ] [ ]
Please sign exactly as name or names appear on this proxy.
When signing as attorney, executor, administrator, trustee,
custodian, guardian or corporate officer, give full title.
If more than one trustee, all should sign.
Dated
---------------------------------------------, 1998
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Signature
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Signature
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